Weitz Law Firm - 520 Kirkland Way, Ste 103 - Kirkland, WA - (425) 889-9300

Monday, April 7, 2014

Seattle Housing Continues to soften

NWMLS Report: 
Market continues to soften around Seattle according to recent stats put out by the NWMLS. 
We'll use the year over year since since those are typically better indicators than the monthly fluctuations (although the monthly indicators indicate similar issues). 
1. Listings are up 9.6% which creates a large supply of homes. 
2. Closed Sales are down 2.9% yoy. 
3. Months of supply are up 12.9%
4. Median price is up 5.9%, but we would expect that number to decrease as the items 1-3 will likely create a drag on the market in the coming months. 
....Time will tell. 
For more information on your rights with Seattle Real Estate law, call us today at (425) 889-9300 or you can email us at help@weitzlawfirm.com. 

Wednesday, February 12, 2014

Seattle Update: Mortgage Debt Forgivess Act



AP - A recent article on the status of the Mortgage Debt Relief Program.

Foreclosures have been dropping dramatically over the past year, but without help from Congress they could begin to rise again. In 2007, Congress passed a tax exemption for mortgage debt forgiveness. That exemption expired at the end of 2013 and has not been extended, as some predicted it would be.


The recent foreclosure crisis was one of the most dire episodes in U.S. housing history, but it could have been even worse had the banks not forgiven billions of dollars in mortgage debt. Much of that was mandated by legal settlements with the federal government and state attorneys general. Since 2007, banks have approved approximately 2.8 million short sales, according to Black Knight Financial Services. A short sale is when the home is sold for less than the amount of the mortgage.
There is support in Congress for an extension, as well as among state attorneys general and housing advocates. Several bills are being considered that could extend the tax relief through 2015 or 2016, but with the much broader move to overhaul the entire tax code, they appear to be getting lost in the shuffle.

It is difficult to put an exact number on principal reduction mortgage modifications, but they number in the millions as well. All together, billions of dollars were expunged on paper and not taxed as income, as they would have been prior to 2007. These foreclosure alternatives helped and continue to help bring down the number of homes being lost today.
Loans in the foreclosures process are down nearly 28 percent from a year ago, according to Black Knight, but the pipeline, while no longer growing, is still large. More than 3 million borrowers are behind on their mortgage payments, and 1.24 million are in the foreclosure process. Many of those delinquent borrowers could avoid foreclosure through a short sale or principal reduction loan modification.

Even banks and investors could get hurt if borrowers can no longer afford short sales. Short sales have helped to clear much of the distress from the housing market, especially in states where the foreclosure process requires a judge. Those states have huge backlogs of delinquent loans.
"With fewer short sales, you're going to see longer liquidation timelines, so you're going to see more full foreclosures and REOs [bank repossessions]," said Sean Nelson of Fitch Ratings. "With longer timelines, you have more costs associated with liquidation of the properties. More costs translates to lower recoveries for investors.

Weitz - this article is pretty self-explanatory, but we still continue to believe the law will be extended...someday. Without it, foreclosures and bankruptcies would increase dramatically and that is not good for anyone.


For more information, consider contacting a Seattle Short Sale attorney.


Our Firm:


Weitz Law Firm, PLLC
520 Kirkland Way, Ste 103
Kirkland, WA 98033


425.889.9300



Tuesday, January 21, 2014

Extension of the Mortgage Debt Relief Act


Weitz - A great piece in the Washington Post today. Rumor has it their is something in writing to extend the law, but Congress hasn't put it to a vote yet. We'll let you know as we hear anything.
There’s a tax break for struggling homeowners that Congress should not have let expire just before the new year. If it’s not extended, some people selling their homes could get big tax bills.

As the housing crisis in the middle of the last decade drove people into foreclosure, many borrowers were not aware that forgiven debt — including on mortgages — is considered income.

In 2007, Congress passed the Mortgage Forgiveness Debt Relief Act to help people who were down on their luck financially because of the loss of their homes.

The concern was well placed. If people couldn’t afford to keep their homes, sending them a large tax bill just seemed cruel.

The tax exemption played an important role as borrowers who were unable to refinance their mortgages ended up selling them through so-called short sales, in which the lender allows the borrower to accept a price that is less than the amount owed. Often, borrowers trying to get out from under a mortgage can negotiate to have the remaining balance forgiven.

The tax break was supposed to end in 2009. But it was extended twice through Dec. 31, because many people still needed help. It was a decent thing to do. Up to $2 million of forgiven debt qualified for the exclusion ($1 million if married filing separately).

In addition to foreclosures or short sales, debt reduced because of a mortgage restructuring also qualified for relief.

It might not make sense to have to pay taxes on forgiven debt because it isn’t money that was earned. You aren’t taxed on borrowed money because you have an obligation to repay it. However, money you borrow that is then canceled as a result of a foreclosure or short sale counts as income.

If the debt is forgiven, the lender is required to report the amount because you no longer have an obligation to repay the money. Let’s say someone owes $200,000 on a home but can sell it for only $125,000. The difference, $75,000, would be considered taxable income.

Critics argue that it’s time to move on. Allowing the tax break means less revenue for the federal government. Additionally, some taxpayers may be able to still get around owing taxes on forgiven debt if they qualify under what’s called the insolvency exclusion. You may not have to include forgiven debts as income if you can show that your total liabilities exceed your total assets.
Weitz - an exception to the tax is either by filing bankruptcy or insolvency (debts exceed assets), or even foreclosure in some states (including Washington). The reality is that we will push many more clients toward bankruptcy or foreclosure (rather than short sale) which won't be good for the economy.

Yet let’s get real here, folks. This is a tax break that needs to be restored — and immediately.

Yes, things are a lot better than in the depths of the housing crisis. In many areas, as housing prices increase, fewer owners are underwater, meaning they owe more than the home it worth.

However, the housing market still hasn’t fully recovered. Things are better, but not great. In November, the number of properties that received a foreclosure filing was 37 percent lower than in the same month a year before, according to RealtyTrac. But there are still a lot of people who may lose their homes.

More than 1.2 million properties are in some stage of foreclosure, RealtyTrac reports. And some states hardest hit by the housing crisis are still seeing high foreclosure rates. RealtyTrac’s November foreclosure report found that five states posted year-over-year increases in bank repossessions: Delaware (179 percent), Maryland (41 percent), Connecticut (9 percent), Maine (6 percent), and Iowa (2 percent).
Weitz - more than 1.2 Million homes in foreclosure status...that is still staggering...and why we don't think this real estate rally will persist.

In a letter to congressional leaders in support of an extension, the National Association of Attorneys General pointed out that an estimated 7.1 million homes with mortgages, or 14.5 percent nationally, are still in negative equity.

“We continue to believe that this relief is crucial to both the homeowners struggling to regain their financial footing and to the battered housing market whose recovery is slow and still uncertain,” the attorneys general said.

As part of JPMorgan Chase’s $13 billion settlement with the Justice Department and other federal and state partners stemming from misrepresentations about mortgages that were sold, the bank agreed to include consumer aid in the form of forgiveness of portions of people’s principals. Certainly borrowers who might get some of their mortgage debt forgiven as part of that settlement or others because of misconduct by financial institutions shouldn’t face a tax bill.

Extending the mortgage forgiveness tax break is the right thing to do.
Weitz - Agreed! Wake up, Congress! Lets extend this law. We bailed out the banks with real government money. All you are doing is adding insult to injury for folks who lose their primary residence.  

Friday, November 15, 2013

Seattle Housing Market- Regulation's future



Three Factors That Could Shape the Fate of Housing Overhaul


 At last month’s annual mortgage-industry trade show, most political and industry analysts agreed that there aren’t great odds that Congress will pass a bill addressing the future of Fannie Mae and Freddie Mac before 2014, let alone 2016.
Weitz - Congress CAN'T end Fannie or Freddie because they provide lending or guarantees for a majority of loans these days. Abolishing Fannie and Freddie would destroy the housing market and Congress knows it.
Several developments unfolding right now could make the next five or six months among the more consequential periods for housing-finance policy since the companies were taken over by the government five years ago. Here are three reasons why:
First, Fannie and Freddie are now reporting large profits. This could make it easier for the company’s defenders—who were silent when the firms were hemorrhaging cash during the bust—to more forcefully lobby in favor of less dramatic changes. By next February, when both companies report their fourth quarter earnings, both firms should be able to say that they’ve sent more in dividends to the U.S. Treasury than the amounts they were forced to borrow over the previous five years.
Rising profits could also trigger an important but obscure change in federal budgeting, where congressional accountants “score” the firms as revenue-generating entities. If that happens, Congress would either have to raise revenue or cut spending elsewhere as part of any overhaul.
Second, the Obama administration is moving ahead with plans to install a permanent director to the independent agency that oversees Fannie and Freddie, the Federal Housing Finance Agency. The director of the FHFA is an incredibly powerful job because it can stand in the shoes of the shareholders and board of directors of both companies, plotting long-term strategy and making day-to-day management decisions.
Third, the Senate Banking Committee is working in a bipartisan fashion towards constructing a comprehensive housing-finance overhaul bill that will address the future of Fannie and Freddie.
Bipartisan agreement is far from assured. It involves threading a needle between three general groups: the centrist supporters of the Corker-Warner bill, liberal Democrats who want to see a larger government role (particularly in affordable housing), and conservative Republicans who are wary of continued, heavy federal involvement in the mortgage market.
Whatever the committee produces will essentially mark the starting point for what, if anything, Congress is able to pass in 2015 or 2017. In other words, even if this is only the first inning, a number of key decisions could get made here that define the boundaries for the rest of the game.
House Republicans have advanced their own bill with no Democratic support, which should serve as one end point for any overhaul. How far the more-conservative House Republicans are willing to bend to support a greater federal role in housing could determine how soon a bill arrives on the president’s desk.
Lawmakers further out on the left, meanwhile, are likely to insist that this new system provides sufficient credit access to low- and moderate-income households. They’re wary of any market in which government guarantees mostly serve the borrowers that arguably need them the least. Among the key questions to unfold: what does the White House do if liberals decide that the centrist Senate bill doesn’t go far enough?
The upshot is that the next few months could show whether there’s any reasonable chance of getting legislation passed while Mr. Obama is in office, or whether these decisions will get kicked down the road beyond 2017.
Weitz - It will be interesting to watch, but our guess is much of this is classic congressional rhetoric that will not effectuate any materials changes for the indefinite future. Fannie and Freddie were a major reason why the market has recovered as they stepped in to fill the lending void when bank lending dried up. We simply don't see how that can be taken away and not lead a significant fall for Real Estate.
 
 
 
 
 

Monday, October 28, 2013

Seattle Real Estate Update


Tuesday's jobs report showed that construction employment is up strongly, but in many other ways, the report was bad for housing, according to a report by Trulia Chief Economist Jed Kolko.

 The reason: Young adults aren’t getting jobs, a factor that weighs on household formation — the single most important factor to long-term housing demand.

 About 75 percent of 25-to-34-year-olds were employed in September, about the same as September 2012 and closer to the depths of the recession than before the housing bubble started forming. Young people who don’t have a job are more likely to live with their parents and become “missing households” that aren’t renting or buying their own place.

That’s bad for the broader economy in all sorts of ways, such as lower spending on things such as furniture. These missing households are part of the reason why first-time homebuyers have been lagging in the housing recovery.
 
Weitz - this is an issue that will continue to linger over the economy. Most young graduates are entering the work force to find a very difficult job environment. I think 'under employment' is a huge problem as kids with degrees from great schools are being forced to work in jobs that do not utilize their education.

This coupled, with the huge increase in student loan debt over the past 10 years will be  a drag on the economy for years to come.

 The jobs report is just the latest piece of economic data to pour some cold water on this year’s housing recovery. Existing-home sales were down 1.9 percent in September from a month earlier, in part because of higher interest rates. The month-earlier pace was revised downward.

To be sure, housing is far better off than it was a year ago. The July/August sales pace was the best since 2009, and inventories, while up, remain low by historical standards.

 Still, it’s fair to say that housing has cooled off from the torrid pace seen in spring and summer. Online real-estate brokerage Redfin reported that its gauge of home bidding wars fell for the sixth month in a row in September.
 
Weitz - It will be interesting to see where the market goes from here. Based on inventory increasing, we anticipate that prices will lower, but much of it is interest rate driven and that is an unknown at the current time.
 
Our Firm:
 
520 Kirkland Way, Ste 103
Kirkland, WA 98033
(425) 889-9300