Home Buying in Orange County>Question Details

Karen Parson…, Real Estate Pro in Laguna Beach, CA

What is going to happen when the tax credit expires?

Asked by Karen Parsons-Fiddler, Laguna Beach, CA Sat Feb 20, 2010

Or perhaps the question is will it really expire this time? I'm wondering if our market is going to slow down? or doesn't anyone really use this as motivation. What do you think?

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Answers

124
oh living the dream baby!!! :)
4 votes Thank Flag Link Thu Feb 25, 2010
Bob,

There is a fine line between confidence and arrogance. Your comments and your tone make it hard to tell which side you come down on.

Nothing personal, honestly. I have no axe to grind with you.
3 votes Thank Flag Link Sun Feb 28, 2010
Look at the site below.
http://www.housingpredictor.com/california.html

In Orange County the supply of foreclosed properties is dropping as bargain hungry buyers with high down payments make purchases before the market makest its
long expected recovery. But another round of foreclosures projected to hit will lower home values as bankers slash prices to get properties sold. Orange County is forecast to sustain more modest deflation of 7.8% for the year.

The supply of foreclosed properties is dropping as bargain hungry buyers with high down payments make purchases before the market makest its long expected recovery. But another round of foreclosures projected to hit will lower home values as bankers slash prices to get properties sold. Orange County is forecast to sustain more modest deflation of 7.8% for the year.

Bob, gloom and doom huh? I just told someone that prices in their part of Texas were expected to go up by 3.9%. I can see reasons, trends, statistics, charts, and policies that are leading to lower prices. How many links to articles do you need for me to prove my point? Would a dozen be enough? I could do that easily.

Knowing that rates on mortgages will go up in april when the fed stops buying mbs is easy. Knowing just how much is hard.

Knowing that going from 5% to 6% interest rates takes away 11.9% of buying power
Knowing that going from 5% to 7% interest rates removes 23.9% of buying power

How can you expect prices to go up when less house will be able to be bought for the same payment?

I agree that a free $8k probably did not make a dent in a $600k and up housing market. But losing 23.9% of buying power sure will. They both happen just about the same time. Good government planning there.
3 votes Thank Flag Link Sun Feb 28, 2010
Gee Bob, I stand corrected.
Just keep talking the way you've been.
On a public forum.
As I just said to another agent on another thread who has a tendency to be openly disdainful and insulting of anyone who might disagree with him, its all in the delivery.
3 votes Thank Flag Link Sun Feb 28, 2010
"Are you comparing me with a rodent prognosticator?"

Well of course not Barbara, how wedickulous but just out of scientific curiosity, did you see your shadow when you woke up from your nap?

I do know I like the "rodent prognosticator" phrase and intend to steal and use it, it could come in handy on some threads when I need to make a point like "You you Rodent Prognosticator you"
2 votes Thank Flag Link Tue Mar 9, 2010
IRS site..."can claim a first-time homebuyer credit of 10% of the home's purchase price, up to $8,000"
http://www.irs.gov/taxtopics/tc612.html

"I think everything can easily be interpreted in a number of ways."

Apparently just two ways....What's really goin on and Bob' world
2 votes Thank Flag Link Mon Mar 8, 2010
Good morning all,

Just to clarify.....I was referring to things in general, not just Orange County. But let's be honest.....I want to have potential clients find me in Orange County, so that's where I posted it. I can see why it could be confusing....

Sorry if I wasn't clear,

Karen
2 votes Thank Flag Link Sun Feb 28, 2010
Bruce,

I agree that that price range should see softening as the result of tighter credit and higher interest rates. The $6500 tax credit did not affect it at all since you had to buy a home under $800,000 to qualify for that tax credit. I think it's interesting, though. I was out today looking in Stoneridge at homes between $775-900,000. All were equity sellers and all priced too high. One was listed at $770,000 and I sold that exact model on a better street for $620,000 in December, no way that's going to appraise that much higher.

I think some of the equity sellers in that price range see the increase activity of the lower price ranges and think we are back to the "ask whatever you want" stage.....or they are willing to "wait for their price" so we'll see. We can write an offer, but if it doesn't appraise? I'm not sure sellers understand that just because they can get a buyer to pay a certain price......unless it's cash...they are still subject to reality. Banks are not interested in over-lending.

I think I rambled, but it was on my mind this afternoon.

Karen
2 votes Thank Flag Link Sat Feb 27, 2010
@ James, you are exactly right. There was something about Bob that just rubbed me the wrong way, but this should be about ideas and not personalities. I stand corrected! "Bowing" with chivalry, I apologize Karen.
2 votes Thank Flag Link Fri Feb 26, 2010
Hi all,

Chivalry is running rampant on Trulia...and I am delighted to accept :)! I agree that we've gotten a bit off track, but interesting to see what people think of the tax credit. Seems the consensus is that the tax credit has made little difference. Regardless of whether we see a dip coming or not....the main reason we see that dip is interest rates? unemployment? Seasonal dips? Fair enough?

K
2 votes Thank Flag Link Fri Feb 26, 2010
>>>I would welcome you to my neighborhood any time as would most anyone would IMHO, but I'm thinkin Columbus OH. would be very angry at losing a good Broker....

Seriously? Shoot, they'd be lining up to buy me a bus ticket. And that's just my friends.....

Uh, that's ColumBUS. We're in the midwest, not S. America. And we're ColumbusITES and the only time we get mad is when the team up North beats us. So we haven't been mad much lately.

Hey, Dunes, I had fun watching my Buckeyes put a beat-down on your Duckies a few weeks ago. Made my scarlet and gray heart proud.

BTW, I could never live in Oregon anyway. You guys drink weird coffee, get way too much rain, and vote for really weird people for elected office. Wait, I'm thinking of Seattle. Ah, same difference. :)

2569 postings, seriously? You're up there but you got a long way to go to beat our Texas friend.

My apologies to Karen for going waaaaaaayyy off track. We'll it's Friday afternoon at 4:50 after a long week.

Remember: one of the good qualities in a Realtor is sense of humor!
2 votes Thank Flag Link Fri Feb 26, 2010
C'mon, people let's try to stay positive and respectful. If you kids can't play nice in sandbox I'm going to have to make you clean the chalk boards after school.

We can differ on opinions without getting personal. Also, you Realtors, we are held to a higher standard and that includes how we conduct ourselves on public forums. We all need to have thick skin now and then. "I'm rubber, you're glue it bounces off me an sticks to you!"

Let's just respectfully agree to disagree, o.k.? Passionately disagree but do it respectfully.
2 votes Thank Flag Link Fri Feb 26, 2010
Bob,

I really don't understand why you feel the need to prop up the real estate market's future, it gives you no credibility to speak about a boom. It's not a "doom and gloom" attitude, it's just the facts.

The tax credits are most likely going to expire and that's going to slow down the market. It's an emotion-driven market. The interest rates are going to go up, we have to since the government is borrowing at a much higher rate than they are charging, that's going to hurt new purchases. We are facing a long term recovery of jobs, so who is going to buy these homes?

This excited seller's market is a bubble. It doesn't mean it's going to drop through the floor, but certainly any reasonable person can predict a slower market to come and thus a dip in prices.

Bruce
2 votes Thank Flag Link Fri Feb 26, 2010
President Elizabeth Obama-Bush will address the Nation to explain why after 89 years there is no need for it any longer.
2 votes Thank Flag Link Thu Feb 25, 2010
I definitely think we are going to get another dip....that's not doom and gloom. The tax credit has propped up our market and the artificially low interest rates have helped too. The mindset of buyers is to buy....that's good, and we are seeing more and more equity sellers, also good. but this is all fake. We need to see what 's going to happen when reality sets in....I think we will see good activity through the summer and then a dip next fall.

K
2 votes Thank Flag Link Tue Feb 23, 2010
I think one of the shooters was me? oh wait....I'm digressing
1 vote Thank Flag Link Tue Mar 9, 2010
maybe I can log on as an alter ego and vote for all of my own answers. Hmmmm......
____________________________
I wouldn't put it past some folks to do exactly as you have suggested

I do that routinely... what, you think these "Mayor-badges" are easy to get...?
1 vote Thank Flag Link Tue Mar 9, 2010
Alan May, Real Estate Pro in 60201
MVP'08
Contact
And I'm usually wrong with my conspiracy theories ; )...(Actually there were 2 shooters and 1 holding an umbrella)

So when Barbara wakes up from her nap will the appearance or non-appearance of her shadow help us determine if the Tax Credit will be extended or not? Was there a shadow or not?
1 vote Thank Flag Link Tue Mar 9, 2010
Bob you crack me up! You didn't delete the comments because they were veering you deleted them because they were completely untrue..See you now say it's 10% instead of 1% like your deleted comment and the numbers being thrown around were in respose to another comment you deleted saying someone who bought a $300,000 home would get a $3000 Tax Rebate because that was 10% of $300,000.

"BUT, it maxes out at $8000, which is obviously 10% an $80k house".
It's obvious since I posted that for you

Wasn't Tonya and everyone else "nitpicking" just the other day when you sent your suggestions to everyone via email? lol

I'll let you get back to sharing the expertise of a Orange County Agent ;)
1 vote Thank Flag Link Mon Mar 8, 2010
Hey that delete this answer thing is pretty cool isn't it...ROTFLOL
1 vote Thank Flag Link Mon Mar 8, 2010
Bob,

Because of lending. Lending is taking a long time, so that's my assumption. I have checked with my RE attorney and CPA, so I am suggesting clients speak to their own, but I would not want to be in a position to tell them "it's fine" and then find out later they could not take the credit.

So that's how I'm proceeding.

K
1 vote Thank Flag Link Mon Mar 8, 2010
10% of $300,000 is $30,000....10% of $80,000 is $8000
1 vote Thank Flag Link Mon Mar 8, 2010
I will also add that one agent's slowdown does not constitute a countywide trend. Here is a more definitive portrait of the Orange County real estate market, from the preeminent source of current real estate data for our County, Steven Thomas - whose statistics are regularly cited in most Southern California media:

http://ochousing.blogspot.com/2010/03/orange-county-housing-…

Pay particular attention to his final paragraph. It seems to think that the tax credit has already had minimal impact on our local market. That has been my opinion, as well. Nice if you can get it, but not the most compelling reason to buy a house.
Web Reference: http://tr.im/FreeMLSSearch
1 vote Thank Flag Link Mon Mar 8, 2010
I agree that it should be that way, but both my CPA and attorney have read the IRS guidelines and they clearly state that "all signatures necessary to close" must be obtained before 4/30. So that's what I'm advising my buyers, the worst thing would be to have them expect a tax refund and find they didn't qualify.

K
1 vote Thank Flag Link Mon Mar 8, 2010
Hi all,

I will tell you anecdotally that I'm finding a slowdown with my first-time home buyers this past week. Especially by those who are looking in a price range that almost always has short sales. They are realizing they are probably too late to get anything approved...and if it's a short sale starting from scratch, they are right.

K

Hi Karen,

Are you saying that the tax credit is their sole motivation for taking the plunge, or is it that the sense of urgency is diminished?
1 vote Thank Flag Link Mon Mar 8, 2010
Bob just received your email....not interested in your opinion about anything... period.
1 vote Thank Flag Link Mon Mar 1, 2010
Bob - I just looked at the Home Path site to find that fannie has 148 properties listed in Orange County; about 60 are under contract, many are just recently listed and some say, "Coming soon."

Do you think that the soon to expire tax credit in addition to deep discounts and the soon to expire 3.5% seller concessions for closing costs and/or appliances on many of these distressed properties may be helping to create a sense of urgency and fueling the fire in your area?
Web Reference: http://www.321advantage.com
1 vote Thank Flag Link Mon Mar 1, 2010
Bob, the question was about 4-30-2010. Wait, those interest rates will increase by May.
1 vote Thank Flag Link Sun Feb 28, 2010
Jumping back in. Existing home sales were down in January over 7% and mortgage rates inched up to an average of 5.5% for a 30 year fixed. And all this while there is still an "urgency" to use the tax credit. Not in all price points, I'm sure, but in the lower priced homes. So what do you think is going to happen when that urgency is removed? I think there is bound to be a further slowdown.

It's not doom and gloom to see what's going on. I spent some time this week with a OC Realtor who showed me some interesting comps and while some ares were going up in price the past 6 months, not all were and some of the higher end homes are still selling pretty low.

I wrote a couple of offers about 7-10% under asking for the equity sellers and one has already come back and wanted to talk. I'm worried about appraisals, and my agent is having an appraiser eyeball the comps for me before I do anything else. We'll see. My agent thinks we are still too high on these offers, so this might have been an exercise.

Bruce
1 vote Thank Flag Link Sun Feb 28, 2010
Bob, pay for that site? It is free. They even predicted that one place in the country would go up about 10% this year.

They put out a new prediction for 2010 and claimed they were about 80% correct for last year. That beats the NAR economist doesn't it?
1 vote Thank Flag Link Sun Feb 28, 2010
I'm sorry Bob. I don't know squat about Orange county I was just attempting to throw a little humor in the mix. I just like to play with Dunes;)

I have found the housing predictor Dan attached is very close in theory with the NAR's predictions for the 2010 year though.
1 vote Thank Flag Link Sun Feb 28, 2010
Dunes you trouble maker you, what will we ever do with you? Shall we all just move to orange county so we can have a piece of the peach pie?

Yum, peaches haven't had those in a while;)

Signed,
Never staying in her own back yard
1 vote Thank Flag Link Sun Feb 28, 2010
Don't know why I felt compelled to read all 60 something answers, especially since I think the tax credit was inconsequential for most people (until we pay the bill sometime in the future) but person with no life that I am, I did.
I think predicting trends is useless. There will always be highs and lows but regardless there will always be a segment of the population that wants/needs to move. There will always be agents who stick it out during hard times and those who don't.
Then there will be people like me who decide to get into this business during one of the worst downturns (in my area anyway) in recent memory. I'm not sure what that says about me, except maybe I am slightly insane.
Bob, just curious- you say how great things are in your area yet cite over 60% REOs and short sales. Does that not indicate something to you???
I am most definitely not an economist but gee, to me that spells out people buying over-priced houses that were way over their head. The market in good ol' sunny southern CA may be booming but apparently at huge cost to a significant segment of the population.
1 vote Thank Flag Link Sun Feb 28, 2010
Hi Karen: Your question is certainly on the minds of many of your fellow agents, including me. IN some ageas of the Country, the effect may be quite slight since values have already begun to stabilize. But in many markets, I'm afraid the lack of these incentives may add additional downward pressure to values. I'm torn on this. On one hand I'd like to see a further extension of incentives because I do believe they are helping to sell homes, but on the other, as a tax payer, it would be nice to "close the government's purse" and allow the markets to adjust by themselves.Good luck to us all!
1 vote Thank Flag Link Sun Feb 28, 2010
Hey Bob,

Certainly I don't have ANY credibility in Orange county, I'll give you that - I stay away from the left coast. I thought we were talking about the real estate market in the entire country, not just Orange County, Ca. My comments were about the general consensus of what's going on around the country. And in 2009 the country, in general, struggled in the area of real estate.

Yes, Bob, you have impressive credentials. And you've been in business longer that I have. But opinions and experience aside, nobody would argue that we shouldn't be concerned about what's been going on the past couple of years. What's important is now, not the past 33 years of history. I'm not a doomsday theorist, just trying to be realistic. If you're particular market is doing well then more power to you. However, nobody really knows how to predict anything these days. If we've learned anything in the last couple of years it's that the real estate market is unpredictible.

BTW, I didn't think that Karen was just asking for opinions from Orange County.
1 vote Thank Flag Link Sun Feb 28, 2010
Bob Said: "2010 is shaping up exactly like 2009 was"

Bob, for most people 2009 sucked, to put it lightly. Are you trying to be positive? 2009 was a bad year for real estate across the country. Either we have different data or you expect 2010 to be bad as well. Guess I'm not getting it.... Yeah, I know: low interest rates, cheap houses, etc. for 2009 but even with that it was a bad year for real estate. My hope is that 2010 is NOT like 2009 (although I actually did quite well in 2009 most did not).
1 vote Thank Flag Link Sat Feb 27, 2010
Dan, regarding cash for clunkers....

Agreed, but the motivations and the mechanics of buying a home are much different than buying a car. Not sure that is the best analogy but there is some truth (see my previous postings). And again, the end of the tax rebate will not be the market-killer, it will be a quick and dramatic rise in interest rates. That will be something the real estate market cannot quickly absorb.
1 vote Thank Flag Link Sat Feb 27, 2010
@Karen,
I'm wondering what you think of the price range from about $800-1,000,000 range will do in the coming months? This price range is not going to be affected by the tax credit, unless it's the move-up credit of $6500. It seems to have quite a bit of short sales and is still moving rather quickly.
1 vote Thank Flag Link Sat Feb 27, 2010
Eh, Ducks, Beavers. Whatever.... :)

BTW, Karen, I do think the tax credit has made a difference, and a big one, at least for me. Many of my buyers when asked why they were buying (or without prompting) have said "we want the rebate." I heard that all summer and fall and since then. The last (8) weeks have been the buisiest Jan/Feb I've ever had. So I'm sure it's had an effect. The only thing that will be hard for the statisticians to measure is "how many of these first-time buyers bought just because of the tax credit and how many of them just bought SOONER because of the tax credit." Buying sooner only gets the market moving more quickly but it doesn't really add anything to the economy in the long run if they were going to buy anyway. "Anyway" meaning in the near future, during the current "economic cycle." I'm also wondering if the tax credit is more appealing where real estate for first-timers is more affordable (like where I am) vs. the west and east coast and the large metro areas. I mean, 8K is 8K but it goes a lot further on a 100k purchase than a 300K purchase....
1 vote Thank Flag Link Fri Feb 26, 2010
"2569 postings, seriously?"

The correct score at this moment...
2,147 Answers and from that I have received 1,635 Thumbs up... 52 Best Answers

The rest of the contributions would be comments on Blogs and the 8 Blogs I've written...This was done over a 15 month period....

Oh and I've been chivalrous twice and chivalric once, not sure if those were counted as contributions.

@Bruce...Hope to see ya around the forum
1 vote Thank Flag Link Fri Feb 26, 2010
James

Just a note about the "your duckies"..... I'm from Benton County (Think Corvallis) please do some research before getting off the Bus and saying "your duckies" to anyone. lol
1 vote Thank Flag Link Fri Feb 26, 2010
Gee bob are you always such a nice guy? You know nothing about me, do these jabs really get you clients? I doubt that!!! Seems you don't read things either, I don't recall mentioning a "shadow inventory" where did THAT come from. Simple economics my friend, economics. No one wants to see dips, but it's coming.
1 vote Thank Flag Link Fri Feb 26, 2010
@bob
you are just drinking the Koolaid and thinking that your market doesn't apply. I see the trends in Orange County, Coto is it? Have you even bothered to look at the NOD filings? what do you think is going to happen. I would be very afraid to have you as my agent, you are just talking a "happy talk." doesn't mean we are going to collapse, but every reasonable person can see a decline coming, when and for how long is to be determined.
1 vote Thank Flag Link Fri Feb 26, 2010
@James
I think that's all any of us think too. I don't think it's going to be a horrible drop, but there is definately going to be a slow down in demand and that normally lowers housing prices.
1 vote Thank Flag Link Fri Feb 26, 2010
I'll be closing my doors and going to work down at the local UDF so I can keep my Porshe. Maybe I'll finally get to take a nice, long vacation. Unfortunately, since there will be no business I won't be able to pay for it.

Actually, I'm going to move next door to Dunes or Dan and hang out with them all day.

:)

No, I don't really have a Porshe. Not that there's anything wrong with that.

Honestly, I think the incentive is driving business for sure. I think there will be a lull after it expires (assuming it doesn't get renewed) but things will pick up eventually. If buyers get wind that it will be renewed "down the road" they will likely wait to see if that's true. I don't think the bottom will drop out of the market. There will still be sellers who want/need to sell and buyers who want to buy. People still relocate, get divorced, go bankrupt, grow bigger families, graduate, get married, and want good deals while they are around. However, I will say this: If interest rates take off like some have predicted we will be in some serious trouble. That will kill the market way more quickly than the lack of an incentive.
1 vote Thank Flag Link Fri Feb 26, 2010
Bob. I see house [rices falling this summer. Why wait until the fall?

The supports holding prices up high will go away before may. The prices will drop before september nationwide.
1 vote Thank Flag Link Thu Feb 25, 2010
If it's not one thing in our business, it's another...yet, we just keep on living the dream!:)
1 vote Thank Flag Link Tue Feb 23, 2010
Man, what a forum for doom & gloom! And spreading of half-baked and/or irrelevant theories.

In South Orange County, in the under $350k range for condos, or the $550k range for detached houses - which combined comprise over 75% of both listings and escrows - there are typically multiple offers for every listing.

So, perhaps there will be half as many offers? 5 or 10, instead of 10-20? Well, that would be a good thing, especially for the poor buyers who have lost out on about 5 or 10 properties in a row.

As for theories that 5mm of the "potential" 7mm properties as an alleged "shadow inventory", the foreclosure sites such as RealtyTrac and ForeclosureRadar are verifying that only 50% of NODs and NTSs actually become a foreclosure - meaning that half of that theoretical 7mm will be mitigated, or resolved.

They also predict - remember they are in the middle of this mess - that this 3.5mm "potential" foreclosures are going to be spread over the next 2 or 3 years, with little to no likely further downward pressure on prices.

Most of us ( Realtors and buyers.) in the trenches - here in Orange County, California - are seeing a repeat of 2009, both for this year and the next - with median prices continuing to gradually nudge upward, just like they did last year.

So people will stop buying because interest rates climb to 5.5 or 6%? Poppycock! Sure, fewer will qualify, but 2010 and 2011 will continue to be a great time to buy property in Orange County, California.

Things are gradually, slowly, but surely, getting better. The glass is half full, people, not half empty.
1 vote Thank Flag Link Tue Feb 23, 2010
Karen, the lack of free money. The increase in interest rates from the federal reserve no longer buying mbs and high unemployment will almost certainly cause house buying to crawl to a stop.

A lot of people have been using the $8k as a down payment. That is gone.
A lot of people have been able to pay (still) high prices due to low interest rates.
They will also be gone replaced with higher rates that make buying at todays prices even less affordable.

Add in more coming foreclosures, and I do not see a healthy re market for awhile yet. Maybe 2014 will be a good year.
1 vote Thank Flag Link Sat Feb 20, 2010
I'd say the new tax credit is a fair indicator the housing market remains on life support. I realize our state is governed by a collection of morons, but even they have to realize a state this pathetically broke shouldn't throw out a couple hundred million dollars unless the need is dire.
0 votes Thank Flag Link Sun Apr 11, 2010
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