August 6, 2008 Newsletter

• Real Estate Bargains
   
• Lenders Becoming more restrictive
   
• Not to Late to Appeal Your Property Taxes
   
• Housing Assistance Act of 2008 - Something for everyone.
   
• Give me 5 minutes of your time

Contact me to get more information on any of these properties.

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Beware Lenders are becoming more Restrictive

• Lenders continue to change their guidelines. They are requiring additional down payments (What a novel concept - requiring people to put skin in the game).
   
• Chase recently dropped it's Non-Agency Loans, which means they are only funding loans that Freddie Mac and Fannie Mae would potentially buy from them. In early 2008, Congress authorized Fannie and Freddie to lend up to $729,750 till 12/31/08. The recently passed Housing Assistance Act of 2008 will allow Fannie and Freddie to buy loans up to $625,500 for 2009 and beyond. The drop in the loan limit in 2009 will impact homes priced higher than $781,250. The lower loan limit for 2009 will put pressure in higher priced neighborhoods.
  
  I don't expect it to impact areas like Palo Alto, Woodside, Atherton, but I do expect it to impact San Ramon, Pleasanton including Ruby Hills, Walnut Creek, Danville, Sunnyvale, and Mountain View. See example below.

	2007	2008	2009
Purchase Price	$  1,000,000	$  1,000,000	$  1,000,000
1st Loan	800,000	729,750	625,500
2nd Loan	100,000	20,250	124,500
max. LTV	90%	75%	75%  ??
Required Cash to Close	$     100,000	$     250,000	$     250,000

Even though the amount of cash required doesn't change much in 2008 vs. 2009, assuming a second loans continue to be available to 75% of total value, the monthly mortgage cost will increase because more of the loan will be priced on the higher interest that 2nd mortgages charge.

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It's Not to Late to Appeal Your Property Tax Assessment

• You should have received your property tax assessment by now. If the assessed value is higher than the value on January 1, 2008, read the instructions on the assessment notice on how to appeal or alternatively contact your county assessor's office for instructions on how to appeal (Alameda county,  Contra Costa County, other counties). To get an idea what your home value was on January 1, 2008 look to one of online valuation engines or call me.

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Housing Assistance Act of 2008 - Something for Everyone

FIRST-TIME HOMEBUYER TAX CREDIT
First-time homebuyers are eligible for a temporary refundable tax credit equal to 10% of the purchase price of a home up to $7,500. The tax credit is phase-out between Adjusted Gross Incomes of $75,000 to $95,000 Single ($150,000 to $170,000 Married Filing Jointly).

PROPERTY TAX DEDUCTION FOR NON-ITEMIZERS
For 2008 only, if you take the standard deduction you can add to that the lower of your actual property taxes paid or $500 Single ($1000 Married Filing Jointly).

This will benefit individuals with small or no mortgage.

REDUCED HOME SALE EXCLUSION
For homes sold after 12/31/08, you will not get full exclusion on the sale of primary residence if you rent it out after moving out. The examples I've seen go like this: You buy a home on 1/1/09, live in it for 2 years, and then rent it for two year, and then sell it. In this example if you had a gain of $400,000 and were married filing jointly, than 50% of the gain can be excluded and 50% would be subject to capital gains tax. However, I haven't seen an example of mixed period use prior to 1/1/09.

To get more detail on the Housing Assistance Act of 2008 check out: RIA   CCH 

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Sunil Sethi

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