Home Buyers Find Bidding Wars Again

Home buyers nationwide are being caught by surprise as the spring selling season swings into high gear. Bidding wars are back!

Many buyers are finding themselves competing for the same house. Unlike the bidding wars of the past, these recent bidding wars are the result of a shortage of inventory.

Sellers, meanwhile, are not seeing huge price increases or hefty profits, like some did during the boom years when prices were going through the roof. Competitive bidding in this current enviornment is being caused by tight inventories. More evidence that housing demand is starting to pick up again after a six-year slump.

According to a Wall Street Journal quarterly survey, the inventory of homes listed for sale declined sharply in all 28 markets they track. At the height of the housing crisis in 2008, there was an 11.1 months' supply of home for sale. In March, there was a 6.3 months' supply. Real estate agents normally consider a market to be balanced when there is a six month supply of homes for sale.

An index recently reported by the National Association of Realtors measuring the number of contracts signed to purchase previously owned homes rose in March to its highest level in nearly two years, up 12.8% from a year ago, and 4.1% from February.

Market inventory varies in different parts of the country, but the general consensus nationwide is, the number of houses for sale is edging down.

Inventories seem to be declinging for several reasons. Some sellers have taken their homes off the market to wait for prices to increase and market conditions to improve. Investors, meanwhile, have been outmaneuvering consumers for the best properties, often making cash offers that are quickly accepted by anxious sellers.

Improvements are obviously investments in your home, and most homeowners have a list of things they'd like to do to their home to make it their dream home. Things like: gutting the kitchen, reconfiguring the bathroom or repainting the entire outside of the home.

Some economists say inventory levels are artificially low because Fannie Mae, Freddie Mac, and the nation's largest banks have been slow to list hundreds of thousands of foreclosed homes they own. Lenders slowed down the foreclosures after record-keeping abuses came to light 18 months ago.

If those same banks and lenders step up their efforts to unload their properties, inventories could quickly rise, putting pressure on prices again.

Even with bidding wars popping up again, pushing prices higher in some areas, many homes are still selling for prices much lower than they were a few years ago. Meanwhile, rents are rising at a time when mortgage levels have fallen to or near record lows. Many renters are finding rates so low they can now afford a house that was out of their price range just a year or two ago.

Housing markets face another danger. More than 11 million homeowners owe more than their home is worth, causing the trade-up market to completely stall. When homeowners can't sell their home, let along come up with the down payment for their next home, move up buying tends to dry up.

Mortgage lending standards remain very tough. Many "deals" fall apart because homes won't appraise for the price buyers have agreed to pay, and sellers are not willing to come down even more than they already have.

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Mortgage Rates Remain Near Record Lows

Mortgage rates have dipped to near record lows again, keeping home buying and refinancing very affordable.

Last week, mortgage buyer Freddit Mac reported the rate on the 30-year fixed rate loan had dropped to 3.88%, down from 3.9% a week ago. The rate hit 3.87% back in February, the lowest long term mortgage rate in history.

The average on the 15-year fixed rate mortgage dipped to 3.12%, down from 3.13% the previous week. The national average hit an all-time low of 3.11% just two weeks ago. Average rates do not include extra fees, aka points, which most borrowers have to pay in order to get the lowest rates. One point equals 1 percent of the loan amount.

So far, record low mortgage rates have done very little to boost home sales. Analysts suspect that a record warm winter may have something to do with that, as many sales that would have normally taken place during the spring buying season, actually took place in January and February.

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Spring Cleaning For Your Finances

With Spring in full force most everywhere now, and tax season once again behind us, now is a good time to do some "spring cleaning for your finances" to help you eliminate some of the paper clutter, and get better organized.

Here are some tips on Spring Cleaning for Your Finances and your office record keeping…

We welcome your comments and suggestions below.

Ventura County home prices rose for the first time in 10 months, according to the S&P/Case Shiller composite index released recently, an encouraging sign the battered housing sector is starting to stabilize.

It was the first time home prices have gained since April 2011. That gain was itself an anomaly in a string of declines stretching back to May 2010.

Ventura County Home Prices Likely to Remain Weak

Yale economics professor Robert Shiller, the co-creator of the Standard & Poor's/Case-Shiller home price index, believes the Ventura County housing market is likely to remain weak and may take a generation or more to rebound.

Shiller, the co-creator of the Standard & Poor's/Case-Shiller home price index, told Reuters Insider a weak labor market, high gas prices and a general sense of unease among consumers was outweighing low mortgage rates and would likely keep a lid on home prices for the foreseeable future.

David Blitzer, chairman of the index committee at Standard & Poor's, cautioned that while there were some pieces of good news in the report, some areas saw home prices still continuing their decline.

The S&P/Case Shiller composite index of 20 metropolitan areas gained 0.2 percent in February on a seasonally adjusted basis, matching economists' forecasts. Seven of the cities saw home prices drop on a seasonally adjusted basis, while home prices in two cities were unchanged. On an unadjusted basis, 16 of the areas slumped further.

Home prices in the 20 cities fell 3.5 percent year over year, moderating from the previous month's decline of 3.8 percent.

"Looking forward, we think homes sales will continue to trend upward, which ultimately will result in a slower rate of home value depreciation," said Stan Humphries, chief economist at Zillow. "But any housing recovery will be dependent on job growth. Continued progress in this area is essential to keeping the housing recovery, such as it is, on track."

Selling a Ventura County home? Sellers need to be aware, with real estate prices continuing to tread along the bottom, it's a tough time to sell.

It's even more important not to make some of these dumb mistakes when trying to sell your Ventura County home

These are just a few of the mistakes you could make when selling a Ventura County home. If you'd like more home selling tips, we have those for you at this site under the "Home Selling Tips" category.

As always, if you have questions, please don't hesitate to contact us or post them using our comment form.

Tax advantages of owning a Ventura County home are probably not the number one motivating force behind buying a home. But the tax advantages associated with owning your own home are significant, and may be a factor in your decision to buy a home.

Mortgage Interest Deduction

If you itemize deductions you're generally able to deduct the interest you pay on debt resulting from a loan used to buy, build, or improve your principal residence, provided that the loan is secured by your Ventura County home.

The ability to deduct mortgage interest also generally applies to second homes, though special rules apply if you rent the home out for part of the year. Interest you pay on up to $1 million in mortgage debt ($500,000 if you're married and file a separate federal income tax return) can qualify for the deduction (different rules may apply if you incurred the debt prior to October 14, 1987).

Interest on qualifying home equity debt of up to $100,000 ($50,000 for married individuals filing separately) is generally deductible regardless of how the loan proceeds are used. If you're subject to the alternative minimum tax (AMT), the AMT calculation doesn't allow a deduction for interest on debt that's not used to buy, build, or improve your Ventura County home.

Qualified mortgage insurance premium payments made prior to 2012 can be deducted in the same manner as qualified mortgage interest, provided the mortgage insurance contract is issued after 2006. Congress is debating this tax deductible interest subject, and have been for several years. Each year, the possibility of this valuable deduction evaporating becomes more and more possible.

Could the mortgage interest deduction ultimately be eliminated? That seems unlikely, but elimination or reduction of the deduction has remained part of the ongoing debate, and was included among the recommendations contained in the National Commission on Fiscal Responsibility and Reform's December 2010 report.

Deduction for Property Taxes

If you itemize deductions, in most cases, you can deduct the real estate taxes you pay on your Ventura County home in the year you pay them to the taxing authority. If you pay your real estate taxes through an escrow account, you can only deduct the real estate taxes actually paid by your lender from the escrow account during the year. For purposes of calculating the AMT, however, no deduction for state and local taxes, including any real estate tax, is allowed.

Capital Gains on Your Ventura County Home

If you sell your Ventura County home at a gain, you may be able to exclude some or all of the gain from federal income tax. For the most part, capital gain (or loss) on the sale of your principal residence equals the sale price of the home less your adjusted basis in the property. Your adjusted basis is the cost of the property (i.e., what you paid for it), plus amounts paid for capital improvements, less any depreciation and casualty losses claimed for tax purposes.

If you meet all requirements, you can exclude from federal income tax up to $250,000 ($500,000 if you're married and file a joint federal income tax return) of any capital gain that results from the sale of your Ventura County home. This exclusion can be used only once every two years. To qualify for the exclusion, you must have owned and used the home as your principal residence for a total of two out of the five years before the sale. If you fail the two-out-of-five-year test, you might still be able to exclude part of your gain if your Ventura County home sale is due to a change in place of employment, health reasons, or certain other unforeseen circumstances.

Special rules apply in a number of situations, including one in which you maintained a home office for tax purposes or otherwise used your home for business purposes. Special rules may also apply if you are a member of the uniformed services. Check with a tax professional about current laws that may affect the tax advantages of owning a Ventura County home.

For more on current tax laws, visit the IRS website.

Thinking of selling your Ventura County home? The first big question you must answer is, what is your Ventura County home worth? The best way to determine the current value of your home is by having a comparitive market analysis (CMA) done on your home…

Pricing your Ventura County home properly before putting that "for sale" sign in the yard is critical to your success in selling your home.

Contact us for more information on getting a CMA done for your home.