What’s Labor Got to Do with It?

The Impact of the Job Market on the Housing Market

Being unemployed, under-employed, or afraid of losing a job is never easy. One of the first things many people do in these situations is batten down the hatches and minimize their spending. Certainly, the last thing on their minds is making a major purchase like a house. It’s just not a commitment that most people are willing to make when they lack confidence in their financial stability.

Although such decisions are made based on an individual’s job prospects, they have a ripple effect that impacts the broader economy, including the housing industry. Here are three key points that shed light on specific ways that the labor market influences the housing market.

Home Prices: A more secure employment market can help home prices stabilize, as fewer people are at risk of losing their homes to foreclosure. In addition, improvements in the labor market often open the door for more first-time homebuyers to join the ranks of homeowners. This can eventually help home prices improve.

Home Size: If you are running a business and need to hire someone, during a good healthy labor market you may need to entice your top pick. How will you do that? Perhaps by paying them a competitive salary. And when someone is paid a good salary, one of the things they often think about doing is purchasing a larger home.

Home Location: When the labor market is thriving, an employer may even have to lure in people who live outside the local area to take a job. This is one of the reasons housing markets are so localized. One state, city, or community might have a much better job market than a neighboring one. That’s why it’s very important to understand the labor
situation in your own state and city in order to really get a feel for the health of the housing market there.

The bottom line to remember in 2012 is that all real estate markets are local…and that means that there can be enormous variations across the country. In areas where employment is struggling, the housing market may continue to struggle as well. But employment is improving in many parts of the country, which also means the housing market in those areas will follow suit.

Reminder: Changes to HARP Program Announced

See If You Can Benefit

Just a note to remind you that in October, President Obama announced plans to open up refinancing
to more homeowners who are underwater. This proposal was a revision to the current Home Affordable Refinance Program (HARP).

So what does this mean to you?

This means that if your mortgage is owned or guaranteed by either Freddie Mac or Fannie Mae, you may be eligible to refinance your mortgage under the enhanced and expanded provisions of HARP.

You can determine whether your mortgage is owned by either Freddie Mac or Fannie Mae by checking the following websites:

• http://www.freddiemac.com/mymortgage
• http://www.fanniemae.com/loanlookup/

Fannie Mae and Freddie Mac have recently released details regarding how these changes will be run. If you have any questions at all about what these changes mean or how they could impact you, call or email me anytime. I’m always happy to help.

TIPS FOR BUYING ANOTHER HOME BEFORE YOURS GOES INTO FORECLOSURE

 If you are considering purchasing another home then letting your present home go into foreclosure here are some tips that will save you trouble later down the line as well as help the transaction run smoothly.

1. You need an excellent lender who can structure your new home loan properly; after all there will be questions by the new lender.

2. You need an excellent real estate agent who knows how to structure this deal. Your real estate agent also needs to know how to find the right home. This may seem strange but not all homes will help the transaction and some actually will hurt your chances of qualifying.

3. There are no longer 100% loans so you will need a down payment. If you don’t have a down payment there are other alternatives but again your agent must be aware of these other options and how to implement them.

4. Once your real estate agent has located a likely home you’ll have to qualify for a new mortgage, so you can’t have any mortgage lates and you’ll have to have sufficient income to qualify for your existing mortgage and the new one. This is where a savvy lender is most important.

Many people are concerned with the ramifications of the foreclosure. Can the foreclosed lender sue for the difference? Can he attach my new home? And what about the IRS? These questions are whirling around in everyone’s head as they consider this method so let me help you with the answers.

1. Can the original lender sue me for the difference between what my home is worth and what I owe on a foreclosure in California?

California is a non deficiency state which means if you are foreclosed on and the mortgage company sells using a trustee sale which is the most common in California, then the lender has no recourse after the sale. But you must have the original loan you bought your home with. This is called the Purchase Money Loan. You can have a first and a second but the second should not be a HELOC as this is considered a line of credit and is viewed differently than a mortgage.

2. Will the IRS tax me on the difference between what the home sells for and what is owed?

If you have lived in your home for two years or more and considered it your primary residence then you have no capital gains responsibility for amounts $250,000 and under for single people and $500,000 and under for married couples. If you have not lived in you home for two years yet, there are other alternatives and a tax professional should be consulted before you begin this process.

Thanks to Steve Shoen of Alain Pinel Realtors for sharing this article with my readers.

To “B” or not to “B”?

Bankruptcy is an uncomfortable subject for a variety of reasons. The most obvious is the potential havoc it can wreak on your finances. Running a close second is the negative stigma, which is often attached to the process. This negativity is important to mention because strong emotions can sometimes lead to unsound financial decisions with devastating results.

Bankruptcy becomes a viable option for someone who is “upside down” in terms of cash flow. In other words, when a person has more money going out each month than coming in, bankruptcy should be considered if no reversal of this negative cash flow is within sight. The longer someone waits to explore the various options available, the more serious his or her situation may become.

One of the worst things people can do in this situation is to borrow more money to try and pay off their debts. On paper, this is very common for individuals to pursue this strategy in an attempt to buy time and hold off on filing for bankruptcy. On the surface, this is certainly a noble notion; however it can often compound the problem and serves only to delay the inevitable.

For many homeowners in the midst of this upside down cash flow, speaking to a qualified mortgage professional is a much better option. Call or email me today for an objective look at your finances and to help you determine if restructuring your mortgage would not only help, but possibly even alleviate any need for bankruptcy.

If bankruptcy is the only option, seek out a reputable attorney and credit counselor.  Call me for a reference.  Reliable references are essential in this case because experiences professionals greatly increase the odds of a successful bankruptcy experience. It’s that simple.

When filing for bankruptcy, be completely honest and accurate regarding every aspect of your financial situation. This includes any changes to your income, which may occur throughout the process. Bankruptcy is a federal procedure, adjudicated by real judges and scrutinized by representatives who coordinate with the Department of Justice, the FBI and the IRS.