Saturday, August 20, 2011

What does the Debt Ceiling have to do with buying a home?

I asked Marla Sarkozy, a Direct Lender with Blue Oak Mortgage, (A Stearns Lending Company) to help make sense of the Debt Ceiling impact on home buying. This is what she had to say:

After months of political grumbling back and forth, the Debt Ceiling was finally raised and the country took a step - albeit a small one - towards lowering our enormous budget deficit.

With the political stalemate behind us, it's time to focus on how the Debt Ceiling deal will impact Bonds and home loan rates.

First, shortly after the deal was announced, Fitch Ratings and Moody's both reaffirmed the United States' AAA rating, citing that the Debt Ceiling agreement virtually removes any threat of default. That was Bond friendly news and helped Bonds and home loan rates improve. But the ratings agencies did leave the door open for a future downgrade depending on how the debt and budget negotiations continue in the future. So the Debt Ceiling may be raised, but the issue of debt and credit ratings is far from over.

Beyond that, the deficit reduction program agreed to in the deal should help strengthen the value of US debt, because there will be less spending. At the same time, less government spending will also weigh on Gross Domestic Product (GDP). And just last month, we saw how weak the GDP already is when the 2nd Quarter GDP came in well below expectations and at the slowest growth rate in 2 years. Additionally, the 1st Quarter GDP was revised sharply lower than it was previously reported. Remember, a weak GDP would make Stocks LESS attractive and Bonds MORE attractive - as Bonds generally perform better during sluggish economic times.

Bottom line… be careful what you wish for. When rates moved sharply higher this past winter, it was due largely to the Fed's second round of Quantitative Easing (QE2). When that ended, the prevailing wisdom was that the only way rates could come back down to levels anywhere near where they were on the eve of QE2 was if the economy "endured more pain." That sure is what we are seeing of late as growing economic uncertainty, persistently high unemployment and rising consumer pessimism is helping Bonds move higher and trade within an earshot of the best levels - ever!

Though Bonds and home loan rates look very attractive right now, we can't be complacent and think rates will stay low or go even lower still. As fast as prices have moved higher, things can change in a heartbeat if the economy starts to see some good news.

And, although there isn't much, there is some good news out there. For example, the most recent reports for Housing Starts and Building Permits were both reported better than expected. While this is only one number and one number doesn't make a trend, this is a good figure, and I will be watching closely for follow through in future readings.

Marla can be reached at:

Marla Sarkozy
Direct Lender, Blue Oak Mortgage (A Stearns Lending Company)
NMLS #256557
408 718 8842 cell
408 521-0157 efax

Monday, August 15, 2011

Santa Clara County Real Estate Activity in July 2011 vs. July 2010

Santa Clara County Real Estate Activity in July 2011 vs. July 2010*

It seems that every time I read an article on real estate activity this year it contradicts the article I read the day before.

So I wanted to see what the numbers say about Santa Clara County real estate activity in July. It felt like there was less inventory this July compared to July last year. It also feels like there were less short sales and bank owned properties on the market.

What is interesting is that the numbers do reflect that there was less inventory for both Single Family Homes and townhouse/condos. However the inventory of bank owned townhouses/condos has increased in July 2011 by 5%.

What did you noticing in the market this July? How does it compare to last July?
1434 Single family homes were listed in July 2011 in Santa Clara County, of those 1434 homes,

• 121 homes (8%) were bank owned
• 271 homes (19%) were short sales

497 townhouse/condos were listed in July 2011 in Santa Clara County of those 497 townhouses/condos,

• 98 townhouse/condos (20%) were bank owned
• 138 (28%) townhouse/condos were short sales

How does that compare to July 2010?

1726 Single family homes were listed in July 2010 in Santa Clara County, of those 1726 homes,

• 160 homes (9%) were bank owned
• 375 homes (22%) were short sales

609 townhouse/condos were listed in July 2010 in Santa Clara County, of the 609 townhouse/condos listed,

• 94 townhouse/condos (15%) were bank owned
• 183 townhouse/condos (30%) were short sales

If I can answer any of your real estate questions please do not hesitate to ask.

Carla Dimond
Realtor-Lifestyle Neighborhood Specialist
Keller Williams Realty-Cupertino
Cell/Direct: (650) 388-8820
DRE # 01871201

*-Information from MLSListings, Inc, deemed reliable but not guaranteed

Monday, August 8, 2011

Recipe: Grown Up Pasta and Cheese

What grown up wants to have pasta and cheese for dinner?

Actually I am guessing it is probably a secret comfort food for many adults and I wanted to share my adult version. I used black truffle butter and truffle cheese to make this something worthy of serving as a side dish at your next dinner party.

With just a little tweaking of the classic dish you usually make for a 4 year old you can make something amazing. Serve this with a nice glass of red wine and be happy that you can make something so decadent in about 10 minutes

6 oz of dry pasta, cooked to instructions

1 tablespoon of truffle butter

3 Oz of grated Pecorino cheese with truffles

Fresh ground pepper

Drain pasta toss with butter and cheese season with pepper and serve!

Tuesday, August 2, 2011

Can you take money out of your 401K to buy a home?

Can you take money out of your 401K to buy a home?

I want to thank Jenny Barnes from JLB Tax Services for providing information on this subject. Jenny can be reached at or visit her website for additional information

Using Your IRA for a Home Down Payment

The IRS discourages you from withdrawing money from your retirement accounts early by charging a 10% penalty on withdrawals before you turn 59 1/2.

Roth IRA

Among the various kinds of retirement accounts, pulling money from a Roth IRA will cost you the least in taxes and penalties. This is because you can withdraw contributions at any time without penalty or tax. In addition, after you’ve held the account for five years, you can withdraw up to $10,000 in earnings without penalty or tax for the purchase, repair, or remodel of a first home. In other words, if you withdraw all of your contributions, you can still withdraw another $10,000 and not pay the 10% penalty or taxes on any of it.

There is one caveat however: you only have 120 days to spend withdrawn earnings or you may be liable for paying the penalty. Also, for your convenience, your financial services firm will automatically prioritize the withdrawal of all of your contributions from a Roth IRA before any earnings.

Traditional IRA

The next best choice is a traditional IRA. You’re still able to withdraw up to $10,000 for the purchase, repair, or remodel of a first home without paying a penalty, but you’ll have to pay regular income tax on the entire amount. SIMPLE and SEP IRAs follow the same rules.

With a traditional IRA, you must also use the money within 120 days for the purchase of a home or you’ll get hit with the 10% penalty. Alternatively, you can withdraw up to $10,000 penalty-free for the purchase of a home for your spouse, parents, children, or grandchildren.

Just like with a Roth IRA, your spouse can also withdraw $10,000 from his or her traditional IRA, so you can collectively obtain $20,000 penalty-free for a down payment if you’re married. The $10,000 limit is a lifetime limit for each individual.

Using Your 401k for a Down Payment

If you take money out of your 401K to buy your first home, you’ll be assessed a penalty of 10% on the amount withdrawn and you’ll have to pay income tax on it as well.

If possible, roll over the amount you want to withdraw to an IRA, so you can avoid paying the penalty. However, you can’t roll over a 401k that’s with an employer for whom you are still working. If you have an old 401k from a former employer, roll that. Since a rollover can take time to process, fill out the necessary paperwork as soon as possible.

Borrowing from Your 401k

Another option with a 401k is to take out a loan. Your loan can be up to $50,000 or half the value of the account, whichever is less. As long as you can handle the payments (yes, you have to pay back this loan), this is usually a less expensive option than a straight withdrawal. Though you will pay interest, you won’t pay taxes or penalties on the loan amount.

A few things to know about 401k loans:

Since you’re incurring debt and will need to make monthly payments on the loan, your ability to get a mortgage may be affected.
The interest rate on 401k loans is generally about two points above the prime rate. The interest you pay, however, isn’t paid to the company – it goes into your 401k account.
Many plans give you only five years to repay the loan. In other words, if you borrow a large amount, the payments could be substantial.
If you leave your company, you may be required to pay back the outstanding balance within 60 to 90 days or be forced to take it as a hardship withdrawal. This means you’ll be hit with taxes and penalties on the amount you still owe.
If payments are deducted from your paycheck, the principal payments will not be taxed but the interest payments will be taxed. Since you’ll be taxed again on withdrawals during retirement, the interest payments will end up being double-taxed.

Sometimes it makes sense to take a loan from your 401k to cover the down payment, like if you are getting an FHA loan and only need a small down payment. However, a large loan payment could have a big effect on your mortgage qualification.

Therefore, it is wise to run numbers and ask your mortgage broker how such a loan will affect your qualification before you take one out. Conversely, if the amount you need will have too adverse an effect on your qualification, it might make sense to withdraw the down payment amount and pay the taxes and penalties.

Carla Dimond

Lifesystle Neighborhood Specialist

Keller Willliams-Cupertino