Massachusetts approves advance on home buyer tax credit

First time home buyer credit can be used for closing costs and down payments via a loan from the state.
Governor Patrick says these loans will help home buyers achieve the stability of homeownership and stimulate economy.

Certain first-time home buyers in Massachusetts will be eligible for an advance on the $8,000 tax credit, giving them much needed closing costs up front, under a new program recently unveiled by Governor Deval Patrick.

According to the new plan, the state will loan the $8,000 to eligible borrowers who buy a home before Dec. 1 and finance it through the state’s affordable housing bank, MassHousing. The interest free loans need to be repaid by June 1, 2010.

MassHousing estimates it will be able to help between 650 to 1,000 peo ple by the end of November, using $5 million set aside for the program.

“These loans will both help prospective home buyers achieve the comfort and stability of homeownership for their families and also stimulate the Commonwealth’s economy through increased home sales,’’ Patrick said.

Massachusetts joins more than a dozen states nationwide that have developed their own bridge loans under a plan announced by the US Department of Housing and Urban Development in late May.

At that time, federal officials said home buyers could apply their tax credit toward new home purchases when financing through the Federal Housing Administration or through state and local housing finance agencies.

Borrowers with an FHA-insured loan are still required to provide a 3.5 percent down payment before they can use the tax credit for any additional payment or closing costs.

Under the Massachusetts program, the $8,000 can be used to cover an entire down payment. Borrowers can purchase a one- to four-family home and must use it as a primary residence.

“This article adopted from the Bosto Globe, written by Jenifer B. McKim”

Full article here:

U.S. Government to take over Fannie Mae and Freddie Mac

Uncle Sam together with Freddie and Fannie

This past Sunday, the U.S. government officially took over the gigantic mortgage companies Fannie Mae and Freddie Mac, in what will most likely prove to be the largest federal bailout our government has ever participated in. Bigger then the Savings and Loan crisis. Concerned over huge losses from the two companies, the government has stepped in to help reverse the prolonged housing and credit crisis, and is now responsible for roughly $6 trillion in outstanding mortgage debt.

One of the first items on the government’s ajenda, was to replace the existing management. Freddie Mac’s chief executive Richard Syron and Fannie Mae’s CEO, Daniel Muddy, were replaced by David Moffett, and Herb Allison, respectively. Second, with a pledge to shore up the finances of America’s largest lenders, the government committed up to $100 billion in support for each of the two behemoths. Additionally, the U.S. Treasury will take about a $1 billion equity stake in each institution, in the form of senior preferred stock with a guaranteed 10% rate of return. This stock will rank above both existing preferred and common shares and could give the government an ownership stake of up to 79.9 percent.

The treasury is to begin buying mortgage-backed securities issued by the two companies this month. And there will be a 15-month deadline for the move to make its impact before the mortgage agencies are reduced in size and their future decided in 2010. The clock is ticking.

In a very positive response, stocks sored as the Dow Jones climbed nearly 300 points on Monday, while the interest rate dropped from around 6.5 % on Friday, to 6% on Monday. Analysts believe it will eventually settle in at around 5.5%. This is good news.

At a time when it seemed interests rates had nowhere to go but up, thousands of potential home buyers just got some very good news. And with the price of oil dropping at the moment, could this be the turnaround we all have been hoping for? It certainly seems that way to me. 

Have something to say? Leave a comment at the Property Monger, or have a discussion at the Boston Real Estate Forum.

Zillow Zillow Zillow

You’d think that being on the East coast you’d have an advantage on being informed of late released hot topicsI recently learned that west coast bloggers don’t actually get any sleep.

Well Zillow actually got something right, finally, and in hindsight they’ve been getting it right all along.   I’m not talking about their Make Me Move, wikilistings for sale, or the fact that it all sums up to a move for market domination

How can you not be blown away by what is staring you right in the face as we speakThe amount of  publicity they’ve managed to receive is staggeringAnd they did it by embracing bloggers, keeping them informed, and rolling with the many punches they have received.

Simply marketing genious


Home Prices in Boston Cambridge Quincy MA


CNN reported on home prices across the country.  Hold onto your hats people, the bubble has popped, the sky is falling, housing prices fell a whopping …… 1.2% this quarter compared to a year ago. What does that mean?  Not too much because real estate is local. Fortunately, the article is kind enough to break it down by city, and by single family homes and condos.  These numbers were based on the median price of homes.

Cheers go to:

- Salem, Oregon where single family homes (median price $228k) saw a 24.7% increase from the third quarter last year.
- Knoxville, Tennessee where condos (median price $155.7k) saw a 29% increase over last year.
- other notable cheers go out to Seattle/Tacoma/Bellview WA (single family) and Honolulu HI (condos) that had both high median prices and good percentage increases over the last year.

And the Jeers:

- Detroit MI area single family homes ($154.1k median) lost 10.5% of their value  from last year.
- and Sarasota FL area condos ($275.6k median) lost 11% (ouch) of their value.

So where does that put Boston? Unfortunately we’re in the red.  For single family homes Boston / Cambridge / Quincy ($412.3k median) lost 4.3% from last year.  Strangely enough, Boston / Cambridge / Quincy condos  (median $300.8k) are doing a little better, having lost only 1.9% of their value over last year.

Realtors setting Commissions?

I was just reading about the CFA ragging on the Real Estate Industry. One of their claims was that NAR and Real Estate boards (led mostly by Agents and Brokers) have been trying to keep barriers to entry low. The low barriers to entry causes there to be too many licensed agents, which leads to an inefficient marketplace, where commission rates are kept high. Essentially they are saying that NAR and the Real Estate industry has complete control over commission rates.

Apparently the CFA claimed that there were 2.5 million licensees, and only about 7 million sales annually. Therefore, by most brokers completing only a handfull of sales each year it helped “support a system that keeps comission rates high.” And they claim that this is from an economists point of view.

I studied economics, and this couldn’t sound more wrong to me. Competition creates efficiency, and the most efficient market, is one that has perfect competition. In general, conditions for perfect competition require:

- A large number of buyers and sellers (check)
- goods or services offered are functionally identical (pseudo-check….nothing’s perfect)
- and freedom of entry and exit

The fact of the matter is, the more players that there are in a market, the more competative and efficient it becomes. One factor that could possibly effect comissions in an area, would be a market with a few large players that had a large majority of market share.

I think the better question comes if we take it to the extreme, and assume that the CFA is right, and the real estate industry and NAR do have a magical grasp of (negotiable by law) commission rates. What exactly would be their plan to deal with some of the new discount brokerages popping up, that are giving a percentage of the commission back to the buyers?

The easiest way to deal with that would be to snuff them out. These new discount business models are based on the going commission rates. Use the strength of numbers and the grasp of the market share and make the going comission rate lower. Lower the standard, and their model won’t survive.

However we don’t see that happening because the real estate industry and NAR cannot change commissions with the flick of a switch. The market sets the rates.