According to an article in the WSJ this week, the Senate has reached a compromise aimed at continuing assistance to first-time home buyers in the form of a tax credit. The agreement still has to pass the full Senate and the House but if it is approved it will extend the existing $8,000 tax credit for first-time homebuyers as well as add a new credit of up to $6,500 for some existing homeowners. The reduced credit would be available to all homebuyers who have been in their current residence for a consecutive five-year period in the past eight years.
Housing-industry sources in Washington are saying the qualifying income limits will be raised to $125,000 for single taxpayers and $250,000 for joint taxpayers, from the current $75,000 and $150,000. Should this new agreement become law, buyers must have executed sales agreements by April 30, and be able to close escrow by June 30, 2010.
On Martha’s Vineyard, in an effort to stimulate home sales to first-time home buyers, the Martha’s Vineyard Land Bank has increased the credit amount of the “M” Exemption. The “M” Exemption is a credit given only to eligible first-time home buyers toward the Land Bank Fee of 2% of the purchase price of real estate on Martha’s Vineyard.
Prior to September 1, 2004, the “M” exemption was $100,000 and in order to qualify all parties on the deed may not have ever owned real property at any time, not just on Martha’s Vineyard but anywhere. Subsequently, it was increased to $300,000 and the exemption was available to first-time purchasers of real estate who will domicile on the property within two years and hold the property for at least five years from the date of transfer. In the case of spouses, either spouse can have owned or possessed an interest in real property prior to the time of purchase, but not both spouses. As of October 27, 2009, per a recent amendment to the land bank law, first time purchasers may now claim a $400,000 "M" exemption. All of the other requirements of the "M" exemption are unchanged.
To learn more about the Martha’s Vineyard Land Bank please follow this link > What is the Martha's Vineyard Land Bank?
Saturday, October 31, 2009
Tuesday, October 27, 2009
How long until we return to a balanced real estate market on Martha’s Vineyard?
My guess is 18 months. The unsold housing inventory of all properties and classifications on Martha’s Vineyard is just over 800 units. In any normal market, one that is balanced, the average time on market is about 90 days. When the inventory absorption rate or days on market (DOM) goes beyond 6 months we consider that to be a ‘buyer’s market’, and conversely when the average is less than 90 DOM we call that a ‘seller’s market’. When the inventory is high, buyers are in a better negotiating position --- as a rule. In order to thoroughly analyze the market you have to consider the various classifications and price lines as well as locations and the type of market. I think in our second home market the average time on market is a little longer. Buyers do not have to buy and sellers do not have to sell; they already have their primary residences.
As an example, taking only single family residences (SFR) on Martha’s Vineyard during the last 12 months, the average time on market was 317 days. Currently, the inventory of only SFR has increased to 516 units, so using the previous DOM rate we have about a 2 year supply of homes to absorb. I think it will be a lot less than that, as many more buyers are gaining confidence in our economic recovery and realizing the bottom of the market is here. Eager investors are entering into the market in increasing numbers to take advantage of the lower prices and attractive interest rates – below 5%!
Although the inventory is high, and actually increasing, in spite of all the recent sales, I attribute the increased inventory to more owners rushing their properties to market or re-listing their properties because they believe we have turned the corner and now is a better time to sell.
There are still those home owners who will be facing major loan adjustable rate resets before the end of the year and they want to get out now if they can in order to save their credit rating. Short sales continue to be a slippery slope for both sellers and buyers, but lenders are getting more assistance allowing them to be receptive to home owners applying for loan modifications. I do believe we will see more property loans in default even though a good majority of them will never go to auction, at least not on Martha’s Vineyard.
You still have time to take advantage of the many available and affordable opportunities in this market with the assurance that an investment made today will appreciate handsomely within the next five to seven years. Just remember, as the supply diminishes and demand increases those so-called good deals will become fewer and far between.
As an example, taking only single family residences (SFR) on Martha’s Vineyard during the last 12 months, the average time on market was 317 days. Currently, the inventory of only SFR has increased to 516 units, so using the previous DOM rate we have about a 2 year supply of homes to absorb. I think it will be a lot less than that, as many more buyers are gaining confidence in our economic recovery and realizing the bottom of the market is here. Eager investors are entering into the market in increasing numbers to take advantage of the lower prices and attractive interest rates – below 5%!
Although the inventory is high, and actually increasing, in spite of all the recent sales, I attribute the increased inventory to more owners rushing their properties to market or re-listing their properties because they believe we have turned the corner and now is a better time to sell.
There are still those home owners who will be facing major loan adjustable rate resets before the end of the year and they want to get out now if they can in order to save their credit rating. Short sales continue to be a slippery slope for both sellers and buyers, but lenders are getting more assistance allowing them to be receptive to home owners applying for loan modifications. I do believe we will see more property loans in default even though a good majority of them will never go to auction, at least not on Martha’s Vineyard.
You still have time to take advantage of the many available and affordable opportunities in this market with the assurance that an investment made today will appreciate handsomely within the next five to seven years. Just remember, as the supply diminishes and demand increases those so-called good deals will become fewer and far between.
Saturday, October 24, 2009
Martha's Vineyard Condos are getting cheaper, but are they a wise investment?
We all know prices have dropped during the last 4 – 5 years, and in some areas like Las Vegas the roll back has been crushing and as much as 60%. But for most of the country it has averaged 25-35%. On Martha’s Vineyard the roll back has been to 2003 and 2004 prices, or about 15-20%, and in some price lines and Island towns there has been practically no depreciation.
Now that prices are dropping below $400,000 for a ‘habitable’ SFR, condo prices are also going down. As a result, more buyers who want to get a foothold on the Vineyard as home owners are turning to the less expensive condo market. However, there are growing concerns to be aware of when purchasing a condo in this economy and at this time.
All condo communities have associations and association dues that each owner is responsible for on a regular basis. The dues go toward day-to-day maintenance and taxes as well as maintaining a cash reserve for emergencies and major repairs like replacing roofs and siding. Because of the down turn in the economy -- loss of jobs, etc., many condo owners are unable to pay their fair share and that puts the burden on everyone else.
It is important to examine the homeowner’s association by contacting the association board and asking to review the financial documents, which you have a right to do before you close on a condo unit. You also want an inspector to examine the condition of not only the unit you are purchasing but also the common areas that the association is responsible for. You want to find out how dues are paid and what percentage of owners are current on their payments.
According to Leonard Baron, professor of finance at San Diego State University, in an interview for the WSJ, here are some important points to consider when purchasing a condo.
· The condo docs, master deed and financials can be voluminous and the information is tedious to go through, so don’t wait until the last minute to review them and do make sure you get all the documents. Prof. Baron advises that you request to review the condo docs the minute you are in escrow, and request at least three days to review them.
· About two-thirds of any condo association's budget should be operating expenses such as water, lights and landscaping. The remainder should be allocated as a reserve fund for items like roof and siding maintenance and road repair -- any items that are not considered routine and regular maintenance. “See if expenses exceed revenues due to foreclosures, unpaid dues or other reasons. If they do, ask the association what their plans are to make up the shortfall, and whether you should expect an assessment increase or higher dues. Ask also if there are plans to save costs by cutting pool hours, or the number of mowings or clubhouse cleanings. This could affect not only your comfort, but also the future marketability of your home.”
· Find out if a reserve study has been done. This is not required in every state, but it is becoming more common. A reserve study looks at all long-term anticipated maintenance and projected structural replacement items (i.e. roof) over a 30 year period. The costs are tallied and put together onto a payment and maintenance schedule. Your monthly dues should cover the monies that needs to be put away to establish the reserve fund account. Baron says "Many times the boards, under pressure by the owners, will hold the line on raising fees, to the long-term detriment of the property.” He estimates that most associations are only funded 50% or less, and you should have serious concern as to the health of the association if they are funded below 40%. "You could be hit with thousands of dollars in assessments if something expensive fails," he says.
In a number of markets where condo complexes range upwards of fifty to one hundred units, unless the association confirms adequate funding, many banks will not approve a mortgage. I have never been enthusiastic about condos on Martha’s Vineyard; it is not what I consider to be Vineyard lifestyle. Despite what you may think about upkeep on a home verses a condo, on Martha's Vineyard modest single family homes are very easy to take care of, and you own the dirt. Keep it simple; isn’t that why you want to be here?
Now that prices are dropping below $400,000 for a ‘habitable’ SFR, condo prices are also going down. As a result, more buyers who want to get a foothold on the Vineyard as home owners are turning to the less expensive condo market. However, there are growing concerns to be aware of when purchasing a condo in this economy and at this time.
All condo communities have associations and association dues that each owner is responsible for on a regular basis. The dues go toward day-to-day maintenance and taxes as well as maintaining a cash reserve for emergencies and major repairs like replacing roofs and siding. Because of the down turn in the economy -- loss of jobs, etc., many condo owners are unable to pay their fair share and that puts the burden on everyone else.
It is important to examine the homeowner’s association by contacting the association board and asking to review the financial documents, which you have a right to do before you close on a condo unit. You also want an inspector to examine the condition of not only the unit you are purchasing but also the common areas that the association is responsible for. You want to find out how dues are paid and what percentage of owners are current on their payments.
According to Leonard Baron, professor of finance at San Diego State University, in an interview for the WSJ, here are some important points to consider when purchasing a condo.
· The condo docs, master deed and financials can be voluminous and the information is tedious to go through, so don’t wait until the last minute to review them and do make sure you get all the documents. Prof. Baron advises that you request to review the condo docs the minute you are in escrow, and request at least three days to review them.
· About two-thirds of any condo association's budget should be operating expenses such as water, lights and landscaping. The remainder should be allocated as a reserve fund for items like roof and siding maintenance and road repair -- any items that are not considered routine and regular maintenance. “See if expenses exceed revenues due to foreclosures, unpaid dues or other reasons. If they do, ask the association what their plans are to make up the shortfall, and whether you should expect an assessment increase or higher dues. Ask also if there are plans to save costs by cutting pool hours, or the number of mowings or clubhouse cleanings. This could affect not only your comfort, but also the future marketability of your home.”
· Find out if a reserve study has been done. This is not required in every state, but it is becoming more common. A reserve study looks at all long-term anticipated maintenance and projected structural replacement items (i.e. roof) over a 30 year period. The costs are tallied and put together onto a payment and maintenance schedule. Your monthly dues should cover the monies that needs to be put away to establish the reserve fund account. Baron says "Many times the boards, under pressure by the owners, will hold the line on raising fees, to the long-term detriment of the property.” He estimates that most associations are only funded 50% or less, and you should have serious concern as to the health of the association if they are funded below 40%. "You could be hit with thousands of dollars in assessments if something expensive fails," he says.
In a number of markets where condo complexes range upwards of fifty to one hundred units, unless the association confirms adequate funding, many banks will not approve a mortgage. I have never been enthusiastic about condos on Martha’s Vineyard; it is not what I consider to be Vineyard lifestyle. Despite what you may think about upkeep on a home verses a condo, on Martha's Vineyard modest single family homes are very easy to take care of, and you own the dirt. Keep it simple; isn’t that why you want to be here?
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