DEAN GRAZIOSI: DEAN GRAZIOSI REAL ESTATE

Much of the current good news about the real estate marketplace stems from the terrific benefits provided by the 2009 First Time Homebuyers Tax Credit and revisions that have enabled the tax credit to be used towards the down payment requirement.  There has been speculation that a 2010 tax credit is under consideration but as of this date, there does not seem enough support or funding for the initiative.

Unlike the 2008 real estate tax credit program, the 2009 first time homebuyer program does not require repayment.  The program only applies to properties purchased as of November 30^th, 2009.  So, the rush is on.  First time homebuyers know a good deal when they see one and this is it.  Many of today’s upward sales trends are based on first time homebuyers rushing to capitalize on the government’s unique incentive programs.

On May 29, 2009, the U.S. Department of Housing and Urban Development (HUD) announced revisions to the tax credit that allowed borrowers to use the first time homebuyers tax credit for a down payment.  This reversed the agency’s previous stance and helped to trigger an immediate upswing in real estate sales.

Currently there are 11 state housing finance agencies (HFA’s) that provide products permitting buyers to monetize the tax credit for down payment purposes.  Generally, thee programs offer tax credit advances with second liens on the home being purchased until the credit is processed.  In some states, the second lien does not require monthly installments.

The eleven states currently offering these HFA programs are:

·                     Colorado

·                     Delaware

·                     Idaho

·                     Illinois

·                     Kentucky

·                     Missouri

·                     New Jersey

·                     New Mexico

·                     Ohio

·                     Pennsylvania

·                     Tennessee

·                     Virginia

Several other states are considering the initiative and buyers should check with their agents for availability.  There are many expanded proposals before Congress for a 2010 homebuyer tax credit that will not be limited to first time homebuyers, but as of this writing, no details have been released.

Currently the FHA requires a minimum down payment of 3.5%.  Of course, there are additional closing costs and the $8,000 tax credit goes a long way toward easing the up front cash requirement.

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The commercial real estate crisis is making some investors rich.  Apartment dwellers are consolidating and waiting for job security.  While they wait, apartment occupancy rates are dwindling.  Struggling apartment complex owners are throwing the kitchen sink at prospective tenants offering months of free rent and never-before-considered expensive upgrades.

On the retail scene, consumer confidence is low as tight-fisted consumers wait for better employment reports.  Look around any strip mall and you will see available space.

As lenders scrambled to keep mortgages performing and began to make powerful concessions, new players arrived on the commercial real estate scene.  These lenders see opportunity.  They also see falling prices, lower exposure and potential for big gains, just like savvy investors.

With vacant space, supply has increased and prices are climbing back to fair market value.  Existing property owners cannot get out from under their debt and are helping buyers negotiate favorable concessions at new, reduced prices.

In mid August 2009, insurance companies and securities sales by the Federal Reserve have opened doors for investors looking to acquire office space, retail space or apartment buildings.  Overall, the commercial real estate market is completely different than existed just two months ago.

As equity markets rebound, speculation is that the recovery is underway and that the current availability of commercial space will soon be challenged.  New construction for commercial space is recovering slowly, leading investors and lenders to take closer looks at their commercial portfolios.

The commercial real estate market in California has been struggling to find the floor since the recession began.  Analysts like Darrell Wheeler of Maguire Properties, Inc. project that the new infusion of investment capital will spur the commercial market recovery.

“These disposition options would not have existed just two months back, so market conditions are changing very quickly,” said Wheeler.  Opportunity is knocking on commercial real estate doors.  Walk on in.

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