President Obama unveiled his stimulus package this week. On the real estate and lending side, industry insiders have responded with mixed reviews. As we sort through the details, what’s in the package and how might it effect homeowners?
Tax Credit for Home buyers
First-time home buyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.
The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.
Additional Housing-Related Provisions
Tax Incentives to Spur Energy Savings and Green Jobs — This provision is designed to help promote energy-efficient investments in homes by extending and expanding tax credits through 2010 for purchases such as new furnaces, energy-efficient windows and doors, or insulation.
Landmark Energy Savings — This provision provides $5 Billion for energy efficient improvements for more than one million modest-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.
Repairing Public Housing and Making Key Energy Efficiency Retrofits To HUD-Assisted Housing —This provision provides a total of $6.3 Billion for increasing energy efficiency in federally supported housing programs. Specifically, it establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) to increase energy efficiency, including new insulation, windows, and frames.
Expanding Housing Assistance — This provision increases support for several critical housing programs. It includes $2 Billion for the Neighborhood Stabilization Program to help communities purchase and rehabilitate foreclosed, vacant properties.
More Help for Homeowners in the Future
Another thing to keep an eye on in the coming weeks is President Obama’s plan to help struggling borrowers before they are faced with a default on their mortgage.
According to reports, the Obama administration is discussing plans to help borrowers who are struggling to stay afloat, but who have not yet fallen behind on their payments. At this point, details are scarce; however, reports indicate that President Obama is looking to spend approximately $50 Billion to directly help homeowners before they face foreclosure and financial disaster.
While this is good news for individual homeowners, it will likely be good for the housing industry as a whole. That’s because, assisting struggling borrowers before they default should help stop the wave of foreclosures, which are estimated to top two million this year. That, in turn, will help stabilize home prices.
Of course, not all are encouraged by the latest attempt by government to spark the economy. One of the loudest critics to voice is opinion is CNBC’s Rick Santelli.
It’s still unclear how the lenders will react once the plan is implemented. Currently, guidelines remain strict and new lending hurdles are added everyday. That doesn’t change the fact that the Texas market is extremely attractive and presents some fantastic opportunities for home buyers and those seeking a refinance loan.
The Texas real estate market is offering some of the best prices and interest rates in years. The opportunities for new home buyers are excellent. Mortgage refinancing has seen a recent boom as home owners scrabble to secure lower monthly payments. It’s a snapshot in time that would suggest a strong market headed in a positive direction. However, the nation-wide realities are producing a much different picture. The government is actively pursuing another bailout to help stimulate the economy and the real estate market. Good idea? The opinions against the bailout option are in the minority, but quite vocal and are gaining strength. It’s an argument of saving and producing vs. borrowing and consuming. The opposition is basically saying the government created our current economic crisis and is only making it worse with their proposals.
It is a very interesting debate and one that may change the current real estate market landscape in ways unseen in years. Will the value of the United States dollar plunge? If so, will interest rates skyrocket? At what point will the government decide borrowing and spending will need to decrease? Are we on the verge of massive inflation?
Those who predicted the current economic and real estate problems are basically the same individuals who are so adamantly against the current bailout proposals. If their track record for predicting what may happen continues to be accurate, the real estate market will continue its struggles for months, if not years to come.
Timing is everything and today’s snapshot in time presents some excellent real estate opportunities. The advice from Alamo Premier Mortgage Group is don’t wait – take advantage of the current market and don’t gamble that rates will continue dropping. We are already at historic lows.
Additional Refinance and Home Purchase information is available HERE.
Be prepared and do not let the excellent opportunities today slither away.
A young father volunteered to coach his son’s basketball team. Every member of his young team was playing the sport for the first time. He concentrated on teaching the basics; dribble under control, pass accurately and aim for your target when shooting. During their first game, the team entered the final seconds trailing by one point. The coach instructed his players to be patient and take the best shot. His players nodded in agreement and took the court for the final play. The clock started, the players passed the ball very well and stayed patient. The clock continued to tick, tick, tick. The players continued to pass, pass, pass. The parents, in their excitement, were cheering at the top of their lungs. The coach soon realized that time was almost expired, so he started to scream “Shoot the ball! Shoot the ball!” No one did. His voice was lost amidst the noise and the game ended – a one point defeat.
The frustrated coach gathered his players around and asked why no one shot the ball. One player answered that he never had the best shot. Another said that he was waiting for a better shot. The coach’s son asked “how can we tell what the best shot is?” The coach patiently explained that when you only have a certain amount of time, the best shot is the one that becomes available. Finally understanding the concept, one player asked if they could go out on the court and do it again. ”No”, said the coach, “that time is over.”
Lesson learned.
Interestingly enough, we are seeing a similar circumstance in the lending industry. Media reports that rates were headed to 4.5% or lower stopped many homeowners in their tracks from pursuing wonderful refinance opportunities. Why? They’re looking for a better shot. The demand for mortgage applications reached a five year high at the end of December. However, many are still passing. Those who ignored the media noise were able to secure rates as low as 4.65%. Since that time, the market has returned to increased daily fluctuations. Is it wise to continue passing up the current reality for a better shot? Just be aware that when this window of opportunity expires, you may be left with no shot.
With 2009 upon us, I wanted to pass along some interesting market information, courtesy of Barry Habib. Barry is the founder of the Mortgage Market Guide and frequently appears on both Fox Business and CNBC. There an accounting scenario called “Mark to Market” that most reporters just do not understand. Barry explains how this practice created the present market conditions – and what to be watching for in 2009.
As expected, the November housing numbers in Texas returned with some disappointing news. Sales in the Lone Star State dropped an average of 32.9% from the previous year, with the average months on the market for a home checking in at 6.8. The four biggest housing markets produced the following figures; Houston – 32.1%/6.3; Dallas – 32.7%/6.3; San Antonio – 33.1%/8; Austin – 39.8%/5.7.
Despite the downturn, Texas continues to maintain its status as one of the most attractive real estate markets nationwide. In fact, Forbes Magazine ranks San Antonio as America’s third best, long-term housing city. The link to the article is provided HERE.
A strong economy and housing prices that were never over-inflated are the main ingredients for the Alamo city’s positive outlook. Texas markets consistently show up on the lists of most affordable places to purchase a home. Excess inventory, coupled with bargain sales prices and low interest rates make for an extremely favorable purchasing environment. If you subscribe to the “timing is everything” theory, then there’s no time like the present.
Pocketbook reality is producing a huge hurdle for most potential home buyers. A good rule of thumb for a purchase is to allocate roughly 28% of one’s pre-tax income towards a mortgage, taxes and insurance. If the bank account is pretty thin, and the ratios are high, trepidation sets in. Will we see increased strength in these areas? The massive Fed intervention in the form of bailouts and rates are producing mixed results. Consumer confidence is still shaky. The short-term outlook may be appealing, but there are many experts predicting an economy that will only get worse – thanks to government intervention.
We have discussed the unintended consequences of good intentions many times in previous posts. Reality currently provides these small real estate comforts; 1) Comparatively, our Texas real estate market is better yours; 2) Comparatvely, our Texas economy is better than yours; 3) The timing for considering a purchase or refinance is excellent.
Will it get worse before it gets better, or will we continue to witness slow, incremental improvement? Either way, Texas is well suited to weather the storm better than anyone else. It may not be comfortable and the opportunities may be sporadic – just be glad we live here and not in another state.
Interest rate information available HERE. Purchase information available HERE and refinance information available HERE.
So, the Fed cuts the funds rate to a historic low. WHY do it and WHAT might happen in Texas? Well this particular rate determines how much we pay for credit card debt, home equity lines of credit, car loans and it marks what it costs banks to borrow money. The video explains our recent timeline.
The Fed made a cut from 1% down to the 0% to .25% range – a move that displayed some unexpected aggressiveness, along with two very influential statements. First, the Fed said weak conditions likely warrant an exceptionally low Fed funds rate for some time. Second, the Fed said they will employ all available tools to promote a resumption of growth. Aggressive would be an understatement. In essence, the Fed is willing to step in and become the buyer of the bonds used to finance mortgages – snapping up government and mortgage debt. That’s the big news. It sent stocks soaring while driving down the bond market, along with interest rates. Optimism prevailed, dominating the headlines.
Want a better headline? Try “Government says risk is minimal! This is too good to pass up! Go ahead, Make Your Day!”
30 year fixed mortgages are tied directly to the bond market and there is a concentrated effort unfolding to drive it down. This creates some unbelievable refinance opportunities, but the main focus is home purchases. Homes sales have tanked, coupled with a time of the year where sales are always slow. But come springtime, the home buying season, the effort to create the best possible purchasing environment is well underway. Can potential home buyers really pass up fantastic rates AND remarkably priced homes?
As we have articulated for quite some time, the housing market in most of Texas is strong. Home values did not plummet as so many did nationwide. The inventory remains bloated, which in turn creates wonderful buying opportunities and now, great financing options.
The Fed moves do not provide a solution to the foreclosure problem, but that is a topic for another day. We are now, officially, in the midst of a refinance boom and on the verge of a potential purchase boom.
The big questions we receive from our Alamo Premier Mortgage Group clients are pretty simple – how low will it go and when will it bounce? Remember, government does not set rates, the market sets rates. Everything moving forward is pure speculation. The Fed clearly stated that they are going to influence the market aggressively, for the near future. They are pulling out all of their stimulating gadgets. The market will bounce, so don’t get caught waiting for an additional eighth of a point here or a quarter point there. Exercise some patience, but start making your refinance and purchase plans now. There have already been too many unexpected economic turns to predict what will happen next with any clarity.
The Texas real estate market has just entered a new beginning. How to start? Just click HERE for home purchase information; click HERE for interest rate information and click HERE for refinance information.
Nothing sparks consumer confidence like a bevy of positive headlines and media reports. The housing market is ready for the good news.
Two more FANTASTIC homes with Christmas Lights set to music. The Trans Siberian Orchestra is an obvious favorite for these computerized programs. Enjoy!
The first video is from a home just outside of Jacksonville, Florida. The second is located in El Paso. There are two more Christmas Lights videos further down in the blog – the first video from a home in Perth, Australia and the second is located in Frisco, Texas. Texans know how to get into the holiday spirit.
We continue to see the increased trickle of good financial news; Low gas prices, GREAT interest rates for home buyers and refinancing, and preventing the sale of an Illinois senate seat (okay, that doesn’t really impact Texas).
Despite the bevy of recent, negative financial news, there are some positive aspects that warrant our attention. So, would you be surprised to learn that a program exists that provides 100% financing? Go ahead and say it again out- load – 100% FINANCING!
Who? How? Where? What?
The same government entity that oversees the beef industry is responsible for this program. It’s a USDA loan. Technically, it’s called a rural loan, but that term is misleading. Rural is defined by population density – 20,000 or less in a community. Outside the metro areas of the big Texas cities, there are countless homes that will qualify for this program. The features are fantastic. For example;
*No closing costs required *No down payment required *No minimum credit score required *Unlimited seller contributions *No gift limits *Financing up to 102% of appraised value *No first time home buyer requirements *Rates comparable to FHA
There are income limitations for this program, but the income limits increase with the number of people living in the home. Income limits are determined by each Texas County. For example, a couple may be limited to an income of $62,000, but a couple with two children could have an income limit of $84,000. The program is an excellent benefit for families.
It’s hard to believe that USDA has been in the lending business since 1991. Why haven’t more people heard about this program? Good question. The best answer is the government has not been active in promoting its features. Promotion has been left to the brokers and banks. In this regard, ignorance reigns supreme. Few know about the program, few know how to do it, few know where to do it. Alamo Premier is hoping to impact our corner of the lending world with the good news.
Where do these properties exist? Just click HERE to learn more and how to receive a link to the property finder. Or, just shoot me an email and make the request directly.
Hopefully, this will add to your increasing holiday cheer.
Yes Virginia, there is a 100% financing Santa Claus – and the gift will keep giving for all 12 months of the year!
The election is over, and on January 20, 2009, Barack Obama will be inaugurated as President of the United States. No matter where you fall in the political spectrum, no one knows for sure exactly what this will mean to the future of our country. With this in mind, let’s put all politics aside, and take a closer look at Obama’s plan for our future. And since a home is still the biggest, most important investment you’ll ever make, we’ll focus on Obama’s basic housing measures.
More Economic Stimulus – Since trouble in the economy won’t wait until January 20th, plans for another economic stimulus package are already in the works, so we might even see this happen, in one form or another, before Obama takes office.
Obama has also discussed a housing stimulus as well, to stem the tide of foreclosures, including a temporary 90–day freeze on foreclosures, as well as measures to address the demand side of the housing issue. This package includes $25 billion in state fiscal relief, which Mortgage Law Central says will help avoid “painful property tax increases.”
Obama also wants to “aggressively and comprehensively” implement the recently–passed rescue plan and the Hope for Homeowners Act. This means the Treasury, HUD, Fannie Mae and Freddie Mac, and all of the banks and loan servicers who benefit from the rescue bill will continue to coordinate broad mortgage restructurings and loan modifications for struggling homeowners. No one knows for sure exactly how this will be implemented or what it even looks like yet, but we’ll keep you updated as the details are released.
Reformed Bankruptcy Laws- Obama has promised to repeal the 2005 bankruptcy bill. A controversial measure, this will allow judges to alter mortgage terms during a bankruptcy, providing more protection for struggling homeowners.
New Mortgage Interest Tax Credit – Obama is expected to create a 10% universal mortgage interest credit for those who don’t currently itemize. This means about $500 in savings for 10 million American homeowners.
Protection Against Mortgage Fraud and Predatory Lending – During the campaign, Obama blamed the financial crisis on lax government regulations, so look for tougher regulations, new criminal penalties for mortgage fraud violators, more funding for enforcement programs, more detailed loan disclosure laws, new counseling programs and other consumer protections, including a new Home Obligation Made Explicit (HOME) score (kind of like a new APR calculation) to help borrowers better understand and compare mortgage costs during the mortgage process. This will go a long way in protecting new home buyers from the opportunists that have given good mortgage professionals like us a bad name in the last few years. And since so much of our business depends on referrals from satisfied clients, the good news is a lot of these people are now out of business.
We hope that any new measures introduced by the Obama administration will help keep a new breed of copycats from invading our industry as the real estate market begins to change for the better in 2009 and beyond. From now until the end of the year, you can expect volatility to continue in the financial and credit markets. This means mortgage rates, too, so if you or anyone you know is looking to buy or refinance a home, give us a call. Alamo Premier monitors the performance of mortgage–backed securities on a daily basis, which allows our clients to capitalize on changes that will help lock in the best rate for their individual goals and needs.
A change of pace for everyone. In order to help get into the holiday spirit, here are two amazing computerized Christmas lights shows. In fact, amazing is an understatement. Bless the families living next door.
Rumor has it that in order to pay for the electric bill, the home owners refinanced their homes and pulled out some cash from their equity. In a related story, interest rates are at their lowest levels in years. You can check interest rates HERE.
Tongue and cheek aside, Merry Christmas! Here’s wishing you and your family continued blesssings this holiday season.
I happened to catch a recent episode of the TV game show “Deal or No Deal”. Ironically enough, the premise of the show is to beat the banker. A contestant selects a suitcase with a hidden dollar value inside. There is a board that displays all of the dollar amounts that are hidden in all of the suitcases, ranging from $1 to $1,000,000. After each series of selections, the “banker” offers the contestant a certain amount of money to stop – take the money and go home a winner. The contestant is gambling that he has a one million dollar suitcase. Every time he eliminates a suitcase with a low dollar amount, the odds of winning the big money increase and the offers to stop from the banker increase.
Well this contestant gets down to two suitcases. One has one million dollars. The other has $1. The banker offers $603,000 to stop. The contestant says “NO DEAL!” and takes the chance that he has the big money suitcase.
He won one dollar. Sometimes, you roll the dice one too many times. It’s human nature to ignore what we have and focus on what may be even better. The art of speculating.
Today, interest rates have reached some of their lowest levels in six years. However, the big story in the last 24 hours has been reports that interest rates may drop even lower. Some reports say as low as 4.5%. Our phones at Alamo Premier Mortgage Group have been ringing off the hook with questions. It is interesting to note that these reports were quoting unnamed sources. Did not matter. Pure speculation entered the lending and financial dialogue and the topic made it’s way onto the cable news shows. Would this scenario jump start the housing market?
The speculation revolves around government intervention. Again. It is worth noting that the Treasury and the Fed do not set interest rates – markets set interest rates. It is also worth noting that the best intentions of government do not guarantee anything. In fact, they often produce unintended consequences. I found these comments from a Missouri mortgage broker very interesting and insightful.
Bottom line – interest rates are at the lowest levels in years. Could rates go lower? Sure, but it’s not guaranteed. Let’s hope they continue at these levels. If you are considering refinancing your home, check out our latest INTEREST RATES or just click HERE to get started. There’s no time like the present. The present reality is a great deal. If you wait, and speculate, you may end up with no deal.
Alamo Premier Mortgage Group was named one of the top ten most dependable brokers in Texas for 2007 & 2008 by Goldline Research. We broker loans throughout the state of Texas and offer programs that range from home purchases, refinance, commercial, debt consolidation, investment, FHA and home loans of all varieties.
We are interested in serving the needs of Texans from every region of the Lone Star state. This blog is dedicated to assisting your lending needs and providing quality and timely information. Many of our clients have requested a forum to express their thoughts and address immediate concerns. In this volatile and ever-changing financial market, we wish to provide as much clarity and pertinent information possible.
Blogging is a new venture for many of us in the lending industry. However, there are many trusted and well-qualified individuals who generate valuable lending information. Our goal is to provide as much valuable content and feedback for those with lending needs in Texas.
We welcome your comments and questions and will do our best to provide topics of interest. We provide free reports on our website and a free home search engine that you are encouraged to utilize. Whether your needs is a San Antonio Mortgage, a refinance in Houston, an investment property in Dallas or any other lending need from the Rio Grande Valley to West Texas, we hope this blog will service your needs.
We have experienced some recent, volatile periods in the lending and financial markets. Generally speaking the news has been anything but encouraging as the national media focus on all that is wrong. The recent election cycle certainly highlighted those concerns – most recently, the credit crunch. Again, generally speaking, the overall condition is poor. However, Texas is one of the few exceptions to this reality. There are few markets nationwide that are as healthy as the Lone Star state. Property values continue to climb in most areas, employment is plentiful, companies continue to relocate to Texas and real estate investors continue to target our state. Is it ideal? Absolutely not, but most real estate professionals would trade their current situation for what exists in Texas in a heartbeat.
Many of our clients have cited the current economic malaise as the reason for delaying their real estate decisions. A rapidly depleting 401K can have that effect. However, it is a buyer’s market and we have talked with a number of savvy clients who are seizing upon the opportunity. Builders have a serious surplus of inventory and are extending some unbelievable deals to new buyers. Prices for listed homes can be negotiated down quite easily. There is excellent value in many of these purchases and that value will continue to escalate.
Best advice? Do not let the constant, negative drumbeat from the media influence your decisions. Moving forward should be dictated by your current financial status, not the perception supplied by talking heads on television. It seems like simplistic advice, but the trepidation that currently exists is far reaching. Consult your financial advisor or a trusted mortgage broker to see if your desire to move ahead makes the best sense for you and your family. If good opportunities exist, it is in your best interest to consider those opportunities – and they exist in Texas.
We have seen that trepidation extend to the refinance market as well. It is not in anyone’s best interest to continue paying a higher monthly mortgage payment if the opportunity exists to lower your rate and payments. Waiting will not improve the situation, especially if you are sitting on an adjustable mortgage.
Bottom line – rates are strong and lenders ARE lending. Be proactive and clarify your options. Knowing what options are at your disposal will always be in your best interest.
The Federal Housing Finance Agency (FHFA) announced that conforming loan limits for 2009 will remain at the 2008 level, except in certain high-cost areas. The good news, however, is that mortgage interest rates have remained favorable as well. Combine this with lower home prices and an increase in inventory in many neighborhoods, and today’s real estate market presents a variety of great long-term opportunities. Entire neighborhoods that you may not have been able to afford in 2005 could now be open to you! Below is an excerpt from the press release;
Conforming Loan Limit Stays $417,000 in 2009; Different Limits in Some Areas
WASHINGTON, DC– The Federal Housing Finance Agency (FHFA) announced the conforming loan limit will remain $417,000 for 2009 for most areas in the U.S. but specified higher limits in certain cities and counties. The conforming loan limit is the maximum size of loans that Fannie Mae and Freddie Mac can purchase in 2009.
According to provisions of the Housing and Economic Recovery Act of 2008 (HERA), the national loan limit is set based on changes in average home prices over the previous year, but cannot decline from year to year. Loan limits for two-, three-, and four-unit properties in 2009 will remain at 2008 levels as well: $533,850, $645,300, and $801,950 respectively, for homes in the continental U.S.
These limits are set equal to 115 percent of local median house prices and cannot exceed 150 percent of the standard limit, which is $625,500 for one-unit homes in the continental U.S. The new limits affect loans purchased by an Enterprise in 2009, unless the loans were made permanently eligible for purchase under the Economic Stimulus Act enacted earlier in 2008 and has generally higher limits.
In calculating loan limits, FHFA used median house price estimates calculated by the Federal Housing Administration (FHA) of the Department of Housing and Urban Development (HUD). Those values have been estimated in a manner consistent with requirements of the National Housing Act. FHA has estimated median house prices for the purpose of setting its own loan limits.
Once again, we have more evidence that the Lone Star State’s economy and housing market remains solid, despite the turbulent events nationwide. Housing prices remain strong and jobs are still available and the economic growth of Texas continues to move ahead in a positive direction.
The year to year housing comparisons state-wide from September 2007 to September 2008 display a serious drop in homes sold and an increase in time spent for sale. However, the average price and median price remain virtually unchanged. This week, Bizjournals released a study that display continued economic strength in Texas. The study focused on metropolitan growth centers. Three Texas cities ranked in the top ten and six displayed overall health;
4) Austin 6) McAllen-Edinburg 7) Houston 13) San Antonio 22) Dallas-Fort Worth 33) El Paso
A link to the story can be found HERE. A link to the ranking of the cities can be found HERE.
The methodology for the study is as follows;
Methodology for growth centers results
Goal: The study’s objective was to identify markets that posted excellent growth rates during the past half-decade in four demographic and economic categories: population, private sector employment, per capita income (PCI) and gross metropolitan product (GMP). PCI is the average amount of money received by each resident of a specified area during a given year, encompassing such diverse sources as salaries, interest payments, dividends, rental income and government checks (including Social Security and welfare). GMP is the total output of goods and services within a specified area during a given year.
Areas: The study covered the nation’s 100 largest metropolitan areas. They ranged from New York City, with a metropolitan population of 18.82 million as of 2007, to Daytona Beach, Fla., with 500,400 residents.
Sources: The population figures used in the study were estimates by the U.S. Census Bureau for the period of 2002-07. Employment figures were annual private-sector averages from the U.S. Bureau of Labor Statistics, also for 2002-07. PCI and GMP figures were for 2001-06 and came from the U.S. Bureau of Economic Analysis. All statistics were the latest available from official sources. All growth rates were calculated by bizjournals.
Factors: Bizjournals used a 20-part formula to analyze the consistency and strength of each market’s growth. The formula calculated each area’s growth rates for five time spans of different lengths in each of the four categories. All spans ended with the most recent year of data. The population spans, for example, ranged in length from five years (2002-07) to a single year (2006-07). Markets were awarded bonus points for acceleration within any category. Acceleration was defined as two to five consecutive years of improvement in annual growth rates, provided that the upswing extended through the most recent year of data.
Availability: Selected growth rates for each market are provided in chart form with this report. Space limitations prevented the publication of all data.
Formula: Each area’s rates were compared against the corresponding averages for the study group, a process that rewarded markets experiencing solid, steady growth. Above-average performances received positive scores, while below-average results were given negative scores. Each area’s 20 scores were totaled with any acceleration bonus points to determine its overall rank. Total scores ranged from 37.95 points for Las Vegas to minus-32.27 points for Detroit.
How many markets nationwide would be willing to trade their current economic and housing status for what exists in Texas? Texas mortgages, real estate and the economy are still leading the way nationwide.
Here’s some interesting information, courtesy of TexasRealEstate.com, regarding property taxes. We hear politicians constantly making proposals to lower property taxes or cap increases, but the rhetoric rarely matches action. In a state that continues to see property values increase, local governments have a convenient avenue to generate additional income. A great Texas mortgage doesn’t necessarily contain agreeable taxes. What recourse do homeowners have at their disposal?
Lowering your property taxes
Why are property taxes so high?
Very simply, Texas does not have an income tax from which to derive funding for local services – fiscal support for things like public schools, police service, fire protection, and road repairs must come from other sources. Property tax is the largest of these sources.
In mid-2007, the Texas Association of REALTORS® conducted a survey of Texas homeowners. Austin-based Baselice & Associates interviewed homeowners throughout Texas to find out what issues worry them. The results of the survey indicate over half of all Texas homeowners rate the issue of property tax and appraisals as a major concern.
In Texas, there are three main players in the property-tax game – the appraisal district, local taxing bodies, and an appraisal review board (ARB).
The appraisal district is responsible for assessing the value of your property. The local taxing bodies are school districts, counties, cities, and other special districts. These entities decide how much money they need to provide their services. Property tax rates are set according to these budgets. The ARB is a group of citizens authorized to resolve disputes between taxpayers and the appraisal district.
Each year between January 1 and April 30, the appraisal district makes value determinations for all taxable property within its boundaries. During this time, they also process exemption applications and other tax relief and property renderings.
The tax itself is calculated by multiplying the taxable value by the tax rate for a given entity. The taxable value may be different from the market (appraised) value if the property qualifies for an exemption or benefits from the appraisal cap.
As an example, let’s consider a homestead that was appraised at $100,000 last year. This year, the property has been reappraised at $140,000. However, Texas law states that the assessed value can only be increased 10% per year for homestead properties, for a maximum taxable value of $110,000.
There are also exemptions that can reduce the taxable value of your property. The most common exemption is called the homestead exemption, which is available to all Texas homeowners and further lowers the taxable value for school tax purposes (for homeowners’ primary residence only). Other statewide exemptions are available, as well, such as those for homeowners age 65 or older and homeowners with disabilities; each of these exemptions reduces the taxable value by $10,000, but you may only use one of them.
Local taxing entities may also offer exemptions, but this varies by county and entity.
Your rights
The Texas Constitution provides five basic rules for property tax:
Taxation must be equal and uniform – whether residential or commercial, no single property or type of property should pay more than its fair share of property tax.
Generally, all tangible property must be taxed on the basis of its current market value – market value is a hypothetical and is an amount considered by the appraiser to be a fair price to both would-be buyers and would-be sellers if neither were under pressure to buy or sell. As an exception, farms, ranches and commercial timberland can be valued on its capacity to produce instead of its market value.
All property is taxable unless a federal or state law exempts it from the tax - exemptions may exclude all or part of a property’s value from taxation.
Property owners have a right to reasonable notice of increases in appraised property value
Each property in a county must have a single appraised value
Challenging your property appraisal
As a homeowner, you reserve the right to challenge your appraisal if you believe your property value is too high or if you were denied an exemption.
To start the process, you must file a notice of protest. Official forms are available, but you’re not required to use one. This notice must include your name, the property in question, and that you are not satisfied with the decision of the appraiser. The 2008 deadline was June 2, or 30 days after the notice of appraised value was mailed to you, whichever is later.
The ARB must notify you at least 15 days in advance to let you know the time and place of your hearing, but you can actually contact the appraisal district and attempt to resolve the issue without appearing before the ARB
When you appear before the board, keep your protest simple, emotionless, and fact-based. Provide specifics – pictures and other documents are excellent evidence. Remember that the ARB does not have any say in tax rates, inflation, or local politics – they may only consider the valuation of your property as reported by the chief appraiser. They are an independent, neutral body composed of your fellow citizens and are not beholden to the appraisal district. In fact, the chief appraiser has the burden of proof in these hearings, so if you present a solid case, you have a good shot at winning.
If you do not agree with the ARB’s decision, you may take your case to district court or, in the case of residential properties valued at less than $1,000,000, to binding arbitration.
Where are Texas Mortgages headed – and the economy in general – with the new Obama administration? Since 2006, Peter Schiff has consistently, and quite accurately, predicted the current financial and real estate conditions. There are many videos from a variety of financial programs where Schiff was dismissed as foolish and completely out of touch. However, his forecasts were easily the most accurate among the experts and talking heads. The following video from earlier this month contains his comments about the incoming Obama administration, and what he expects to unfold.
Schiff is predicting continued economic and financial distress. It’s interesting to watch the broadcasters disbelief with some of his comments. He is making a financial argument, but an argument that is impacted by politics. The broadcasters seem to indicate that he is advocating a political change contrary to our democratic process. Wrong focus. The two impact each other, but Schiff maintains that the political instincts to provide a quick solution will only make matters worse.
Making accurate predictions over the past two years does not mean Schiff’s current analysis is correct. He is certainly a provocative analyst. It is worth noting that his track record makes his opinion that much more relevant.
What effects the coasts will certainly impact Texas, especially if lenders raise interest rates across the board. Again, Schiff is in the minority, but if correct, we will see a dramatically different lending landscape one year from now.
Not a day goes by without one of our Alamo Premier clients asking about the future of the economy and the impact on the Texas Mortgage market. Everyone, to some degree, is a speculator. We have firm evidence that both entities remain strong in the Lone State State and are among the healthiest nationwide. In fact, both Texas Refinances and Home Purchases provide some of the best products and options available. But what is the worst case scenario in regards to the American economy?
Doom and gloom speculation will always receive an audience – especially if your opinions are in the minority. It makes for a provocotive interview in any media format. Enter Gerald Celente, who is among those predicting real economic pain in the upcoming years. It’s easy to dismiss these opinions, but in Celente’s case, he has been fairly accurate in predicting economic trends for the past few years. This does not mean his current outlook is accurate. It is wise to weigh his opinions and begin developing a proactive approach to your individual financial health. The following clip is one of his most recent interviews.
Again, no one can predict exactly what WILL happen next, or speculate with any certainty what the new administration will do and what kind of impact those policies will have on the economy. Perception drives the market and we have been living with negative perceptions for well over a year. Whatever happens will certainly impact Texas mortgages and homeowners everywhere. Best advice? Make sure your lending and financial decisions will meet your current budget. Consult your trusted advisors and fomulate a well thought-out plan of action. Can you save money by refinancing your home? Check out the numbers. Is it a good time to purchase a home? Absolutely, prices and values are excellent.
Is it a good idea to save money and plan for a rainy day? Without question.
The real estate trickle down theory is alive and well – the dominant theme of the day is generally accepted. The current theme is crystal clear in every headline or news report; Bad Economy! Dangerous Real Estate Market! Horrible times ahead!! Many of our Alamo Premier clients have expressed similar thoughts.
Today, The National Association of Realtors released statistics of existing home sales – falling by 3.1% and bringing U.S. home prices to levels we haven’t seen since 2004.
As discussed in previous posts, what is taking place nationwide is not the same reality in Texas. There are some excellent purchase and refinance opportunities. Why? Three very simple reasons;
1) Interest rates are very strong. The 30 year rates have been hovering around 6% for weeks. It’s a very attractive number for new home buyers and for those considering refinancing their home. Those with adjustable rates have some great options with FHA loans and on the conventional side.
2) Housing prices in Texas did NOT escalate in the outlandish manner witnessed in states like California, Florida, Arizona and Nevada. Values held steady and in some cases, increased slightly.
3) Although lending guidelines have experienced additional hurdles and constraints, the minimized risk works in the favor of the borrower. The increased scrutiny will produce fewer foreclosures, less volatility and a much healthier market.
The link below is a recent interview with Mark Dotzour, chief economist for the Real Estate Center at Texas A&M University. The Texas market, in his words, is quite strong.
It’s true that home sales are down, but so is the rate of foreclosures in the Lone Star State. Many investors are looking to Texas as a tremendous opportunity. That being said, there are just as many good opportunities for home purchases and lowering your monthly payments through a refinance program.
The Mortgage Bankers Association listed San Antonio and Houston among the top markets nationwide for U.S. home buyers in a report released this week. High employment, population growth and better than average price appreciation were among the key factors. David Kittle, the chairman for the Mortgage Bankers Association, called San Antonio the “benchmark for the rest of the country in lending and building.”
Population growth in Texas is expected to remain above 2 percent next year, compared with a negative projected growth rate for the United States. The biggest population growth area is targeted for the Denton-San Antonio-Houston triangle. Median home prices in San Antonio dipped just 1 % from October 2007 to October 2008 – versus an 11.3 percent drop nationwide. As the video clip confirms, the housing and financial markets in Texas remain strong;
The term “economic refugees” is becoming a common phrase in the Lone Star State. If jobs are available and housing prices remain strong, Texas is a magnet for those in economically depressed and higher-priced markets. The expectation is these “economic refugees” will continue flocking to Texas, which helps explain the projected population growth. It’s a situation that further clarifies the positive outlook in Texas and the state’s overall economic and housing stability.
Our Alamo Premier clients have enjoyed the recent positive turn in interest rates. Despite the negative news nationwide, the perception in Texas is beginning to reflect the positive reality that exists today; the home purchase market is very strong and good opportunities exist throughout Texas.
Home owners discovered an unexpected reason to give thanks over the Thanksgiving weekend – some of the best interest rates in years! Few predicted this glimmer of hope amidst the uncertainty and angst in the financial markets. With headlines screaming about the bailout, Citi’s difficulties and the recession debate, one of the biggest turn of events is progressing with little fanfare. It’s a great time to buy a home in Texas and an EXCELLENT opportunity to refinance.
Many of our Alamo Premier clients who were contacted with the good news were unaware it had even occurred. Nevertheless, many jumped at the chance to decrease their monthly payments. With property values remaining strong in the Lone Star State, the Texas refinance options are extremely appealing. Rates in the mid 5′s are the order of the day. Thankfully, this positive news is slowing making it’s way into the media and helping change the existing negative lending perceptions.
This clip is courtesy of a Maryland television station. The comments regarding training for loan officers is consistent with the requirements in Texas.
So, are these low rates the new reality or just a window of opportunity? Most likely, it’s the latter. The bond market has the greatest influence on these residential rates. The 10 year bond has been dropping and rates have followed. It’s just a matter of time before it changes course.
Is it a good time for YOU to refinance? A simple ten minute phone call to your local mortgage broker will provide the clarity needed. Home owners need to know their options, how much they will save each month, will they qualify and if the additional amount added to the loan will provide a financial benefit. The Texas FHA programs are also very strong right now and provide further lending options.
Please feel free to call me and discuss the best options for you and your family. Don’t waste a good opportunity – check it out and make sure it provides a real financial benefit. If so, REFINANCE!
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