What's Cooking Today in Real Estate

Happy New Year

2011-01-03T10:50:00.000-08:00

Well it's finally here and it's time for me to take this blog to the next level.

This will be an exploration for me and hopefully for you as well. The first issue that I would like to tackle is the effect of the new tax proposal eliminatiing mortage interest as a tax write off.

This proposal along with others such as the elimination health care cost as a write off will have a direct impact on me and maybe you also. Stay tune as I bring this information to my blog.

Mortgage tax break in the crosshairs

2010-12-19T06:26:00.000-08:00

By Tami Luhby, senior writerDecember 2, 2010: 8:06 AM ET

NEW YORK (CNNMoney.com) -- Don't even think of touching the mortgage interest tax deduction in the midst of a fragile housing market.

That was the immediate response of the housing industry, which has come out with guns blazing against the presidential deficit commission's proposal to overhaul the coveted tax provision.

"We will fight this proposal," said Joe Stanton, chief lobbyist for the National Association of Home Builders. "From everything we've read, it will end up being a tax hike."

Charged with finding ways to reduce the nation's exploding federal debt, the bipartisan debt panel recommended Wednesday a wide range of controversial spending cuts and tax changes that would slash $4 trillion in deficits over the next 10 years.

Among the proposals was a major change to the mortgage interest deduction, which costs the Treasury Department an estimated $131 billion a year.

Currently, taxpayers who itemize their deductions can deduct the interest on mortgages of up to $1 million for their principal and second residences, plus on home equity loans of up to $100,000. The provision generally benefits higher-income Americans since they are more likely to itemize.

The panel recommends turning the deduction into a 12% non-refundable tax credit available to everyone. The mortgage size would be capped at $500,000. Interest on mortgages for second homes and on home equity loans would not be eligible.

That did not sit well with the trade associations for the real estate and home building industries, which have contributed a total of $51.2 million to Congress for 2010, according to the Center for Responsive Politics.

"It would immediately stop in its tracks any stabilization we are seeing in the housing market and would effectively increase the cost of homeownership for millions upon millions of people," said Michael Berman, chairman of the Mortgage Bankers Association.

Under the panel's proposal, a homeowner in the 25% income tax bracket would get a credit worth less than half the amount of the deduction, according to the home builders association.

The industry groups argue that the deduction makes owning a house more affordable. A recent study commissioned by the National Association of Realtors showed that nearly three-quarters of homeowners said the deduction was extremely or very important to them.

"Any changes to the [deduction] now or in the future could critically erode home prices and the value of homes by as much as 15%," said Ron Phipps, president of the Realtors' group.

Not everyone agrees, however.

Researchers have found that the deduction does not promote homeownership, according to a report by the Urban Institute, Tax Policy Center and What Works Collaborative. That's because the tax provision's main beneficiaries are not individuals on the margin between renting and owning. Wealthier taxpayers are likely to own homes regardless of the deduction.

The mortgage interest deduction has been the target of previous presidential commissions. In 2005, a panel appointed by then-President Bush recommended allowing homeowners to claim a mortgage interest credit of 15% on loans of up to about $412,000. The proposal went nowhere.

In the end, the trade associations may be able to hold their fire. The commission's recommendations may not even garner enough support among its 18 members to make official recommendations to Congress. The report itself said its aim is to offer a "starting point for a serious national conversation."

Five Things To Know About Home Insurance

2010-09-12T16:37:00.000-07:00

By Sarah Max, contributing writerSeptember 2, 2010: 3:14 PM ET

(MONEY Magazine) -- 1. Loyalty is overrated

Many insurers have been raising rates to make up for losses they suffered during the financial crisis, industry experts say. At the same time, insurers are competing hard for new customers, which means some of them are cutting better deals for new policy holders than for existing ones, says Deeia Beck, executive director of the Office of Public Insurance Counsel, a state consumer agency in Texas.

diggEmail Print CommentWhen your annual renewal statement lands in your mailbox, check InsWeb.com and NetQuote.com to see if you can snag a better deal elsewhere. Consider moving your auto policy too; bundling home and auto coverage with the same insurer can cut your total premiums by 5% to 15%.

2. You may have too much coverage

It's common for policies to contain inflation-protection provisions that automatically increase your coverage amount. "In most years, that's a good thing," says Scott Richardson, director of the South Carolina Department of Insurance. Now that construction costs have fallen? Not so much.

For now, pass on inflation protection and adjust your coverage amount to a more realistic figure. Lowering replacement value from, say, $300,000 to $250,000 might shave 10% off your premium.

3. A bad rep can cost you

Just as lenders check your credit history before figuring out what rate to charge you, insurers tap into national databases such as the Comprehensive Loss Underwriting Exchange (CLUE) to see what claims you've filed in the past. Those records can be full of errors, warns Doug Heller, executive director of Consumer Watchdog, an insurance advocacy group.

Check your insurance report for mistakes at choicetrust.com; it's free if you've been denied coverage ($19.50 otherwise).

4. Small claims can cost you, too

Go with the highest deductible you can afford and bank the savings to cover the cost of minor repairs. Filing a claim for every broken window or leaky pipe can drive up your premiums by 10% to 15%, says Don Griffin, a vice president at Property Casualty Insurers Association of America. (Some experts say that even inquiring about making a claim can raise a red flag.)

Increasing your deductible from, say, $500 to $1,000 can lower your annual premium by as much as 25%, according to the Insurance Information Institute.

5. A home's history matters

In the market for a new house? It may seem unfair, but claims associated with the property before you buy it can result in your paying more than you would otherwise. "Certain locations [such as those vulnerable to flooding] may be more prone to claims," explains Kiran Rasaretnam, CFO of InsWeb.

To get info on past claims, ask for a copy of the seller's CLUE disclosure report (see No. 3). Yes, you're stuck with the history of the house you buy, but you can use what you find to negotiate a lower price with the seller.

4 Big Money Mistakes of First-Time Homebuyers

2010-08-22T14:16:00.000-07:00

by Michele Lerner
Wednesday, August 18, 2010

First-time homebuyers almost always make a few mistakes when buying their home. Perhaps they pay too much, choose the wrong type of mortgage or neglect to budget for needed home improvement

Working with a trustworthy, experienced lender can help prevent such mistakes. But consumers also need to take responsibility for their budgets and choices.

"Before buying a home, consumers need to develop a short- and long-term perspective on their purchase," says Michael Harrison, area director for MetLife Home Loans in Southwest Ohio.

Following are the four biggest financial mistakes of first-time homebuyers:

1. Spending the Maximum on Housing

Lenders qualify buyers based on their incomes and debt-to-income ratios without considering how much the borrowers spend on items such as transportation, savings, food and other necessities

"A lot of first-time buyers are optimistic about the future and excited about buying a home, so they borrow the absolute maximum they can afford instead of allowing themselves wiggle room for a partial loss of income or for future expenses such as children," Harrison says.

Financial experts recommend that consumers decide how much they want to spend each month on housing before meeting with a lender.

"Every buyer should create their own budget and know their limits," says Stephen Adamo, president of Weichert Financial Services in Morris Plains, N.J.

Adamo says many first-time homebuyers experience a sizable change in their housing payments. Some new owners may go from $500 per month in rent to a monthly mortgage payment of $2,000, he says.

"You need to deal with payment shock," Adamo says.

2. Not Getting Prequalified Early Enough

Meeting with a lender for a buyer consultation and prequalification for a mortgage should be the first step toward homeownership. Yet many first-time homebuyers wait until they are ready to start house hunting before contacting a lender.

"It's never too early to set up a free buyer consultation with a lender," Adamo says. "Every buyer needs to get prequalified early enough in the process so that they can make some changes if they need to or correct errors on their credit report."

Some buyers may need to spend up to a year saving more money, increasing their incomes or cleaning up their credit before making an offer on a home.

A buyer consultation should include creating long-term financial goals and strategies for buying property, Adamo says.

3. Misunderstanding the Importance of a High Credit Score

While most consumers know it's important to have a high credit score, not everyone understands how costly a low score can be.

"All mortgage lending is done with a tier of interest rates and terms based on consumer credit scores," Harrison says. "A credit score of 720 or above will earn you the best rates and can potentially save you thousands of dollars."

A score of 680 to 720 can get you good mortgage rates, while a FICO score of 620 is usually about the lowest score to qualify for most loans, Harrison says.

Consumers should learn about credit scores the minute they start working, Harrison says.

Websites such as Bankrate provide information about how to improve your credit score.

Even after a mortgage approval, consumers must avoid applying for new credit or taking on new debt, Adamo says, because a second credit check is often required before settlement.

4. Choosing the Wrong Mortgage Product

First-time homebuyers today typically opt for a 30-year fixed-rate mortgage. Their conservatism is a reaction to stories about the dangers of interest-only mortgages and adjustable-rate mortgages.

But Harrison says home loan alternatives to a 30-year-fixed sometimes make more sense. For example, buyers certain they will be relocated by their companies within five years may find a 5/1 ARM "could be a much better mortgage," he says.

"There's no reason to pay a premium for a product you don't need like a 30-year loan," Harrison says.

Homebuyers eager to build equity in their homes or who are older and want to live mortgage-free in retirement should consider a 15-year fixed-rate loan or, if they can afford it, even a 10-year mortgage to reach their goals.

Copyrighted, Bankrate.com. All rights reserved.

Price Cuts Galore on Mega - Mansions

2010-07-25T15:45:00.000-07:00

By Les Christie, staff writerJuly 16, 2010: 6:23 AM ET

NEW YORK (CNNMoney.com) -- For deep-pocketed plutocrats purchasing trophy homes, times are good. There is a glut of mega-mansions on the market -- at deep discounts.

On Realtor.com alone there are currently 6,610 listings of houses with interiors larger than 10,000 square feet.

What's surprising is that these homes are starting to move again. "Maybe not quickly, but they're selling," Filice said.

The super-wealthy fled the mega-mansion market in the wake of the Lehman Brothers collapse in the fall of 2008. But with the stock market recovering and real estate markets stabilizing, they're ready to deal again. But only if the price is right.

The $100 million home
"The super wealthy were watching and waiting," said Jonathan Miller, a New York-based appraiser, who follows real estate in Manhattan and the Hamptons. "It's always been my feeling that the high-end market comes in waves. I looked at the Hamptons in 2009 and you just weren't seeing trophy property sales. Now you are -- but not at the prices you saw during the boom."

A 48,000-square-foot home in Bel Air, Calif., was recently reduced by $13 million to $72 million. A 16,000-square-foot nouveau Mediterranean in Las Vegas went to $11.9 million from $14 million. And a 15,000-square-foot Dallas domain is down to $15 million from $17.5 million after more than two years on the market.

Don't like those prices? There are plenty more to choose from. So many homes started during the boom, when owners were flush, were not completed until the bust, when owners' fortunes had changed. And they're ready to unload them.

"A number of people back in the 2003, 2004 and 2005 boom built very large homes," said Philip White, president of Sotheby's International Realty. "Then, with the adjustment in the economy, it proved to be too much house for some of them."

0:00 /3:09NYC's $60M apartment - view included
In Alpine, N.J., developer Richard Kurtz broke ground in October 2007 on a home for himself. He calls it Stone Mansion, a 30,000-square-foot spread with 12 bedrooms, 15 full baths, a screening room, wine grotto and indoor basketball court. The house was finished just a couple of months ago.

Between then and now, Kurtz decided to buy a house in Florida and sell the Stone Mansion. Asking price: $68 million.

A house near Orlando has been under construction for more than three years and is not done yet. Business has been slow for owner David Siegel, who also owns Westgate Resorts, so he is putting his house on the market.

The 67,000-square-foot house sits on 10 acres and is called Versailles because it incorporates many of the design features of the French palace. Siegel hopes to get $100 million if the buyer wants the 67,000-square-foot property finished.

Or he'll take $75 million as is.

Mortgage Market Specific Summary of the Financial Reform Bill

2010-07-18T15:44:00.000-07:00

by Adam Quinones

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After much ado our political "leaders" have finally come to an agreement on the broadest regulatory overhaul since the Glass Steagal Act of 1933.

By a vote of 60-39, the Senate yesterday passed HR 4173: WALL STREET REFORM AND CONSUMER PROTECTION ACT. The House already gave their seal of approval so the legislation heads to President Obama's desk where he is expected to sign it into law next week.

The bill includes several reforms aimed directly at the housing and mortgage industries. Instead of trying to translate the text into comprehensible English I chose to rely on the Mortgage Bankers Association's outlines. Once again they came through in the clutch...

HERE is an indepth summary of the text. Below are some excerpts from the MBA's overview.

Credit Risk Retention (Section 941) – Requires federal banking agencies and SEC to jointly prescribe rules requiring securitizers to retain economic interest of at least five percent of credit risk of assets they securitize. Regulations must include separate requirements for different asset classes, and may allocate the retention amount between originator and securitizer. HUD and the Federal Housing Finance Agency must participate in joint rulemaking process for residential mortgage backed securities (MBS) risk retention requirements. The statute requires an exemption for “qualified residential mortgages” which shall be defined by regulators based on statutory criteria to ensure sound underwriting and lower risk of default such as:

Documentation of borrower’s financial resources;
Debt- to-income standards;
Mitigating potential for payment shock on adjustable rate mortgages through product features and underwriting standards;
Mortgage insurance or other credit enhancements to reduce risk of default; and
Prohibiting use of loan features that have been demonstrated to exhibit a higher risk of borrower default.
Exempts loans insured or guaranteed by U.S. from risk retention requirements. For commercial MBS, regulators must give consideration to other types, forms and amounts of risk retention such as representations and warranties, underwriting criteria and first-loss positions. Within 90 days of enactment, requires FRB to complete study on combined impact of risk retention and accounting standards requiring securitizations to be brought on balance sheet.

Prohibition on Steering Incentives (Section 1403)

Prohibition: Prohibits mortgage originator from receiving from any person, or any person from paying mortgage originator, directly or indirectly, compensation that varies based on terms of loan (other than amount of the principal). With the exceptions below, generally prohibits a mortgage originator from receiving from any person other than consumer and any person other than consumer, who knows or has reason to know that a consumer has directly compensated or will directly compensate mortgage originator, from paying mortgage originator any fee or charge except bona fide third-party charges not retained by creditor, mortgage originator, or affiliate of creditor or mortgage originator. Intended to prohibit yield spread premiums or other similar compensation based on terms including rate that would cause originator to “steer” borrower to particular mortgage products.
Exceptions: Does not limit compensation to originator based on principal amount of loan. Also, does not restrict person other than consumer from receiving, or person other than consumer from paying, origination fee or charge if: (1) originator does not receive any compensation directly from consumer; and (2) consumer does not pay discount points, origination points or fees however denominated (other than bona fide third-party charges not retained by originator, creditor or affiliate of creditor or originator), except that Board may, by rule, waive or provide exemptions to restriction if Board determines waiver is in interest of consumers and public.
Regulations: Requires CFPB to prescribe regulations prohibiting mortgage originators from: (1) steering any consumer to loan that (a) consumer lacks reasonable ability to repay, or (b) has predatory characteristics or effects such as equity stripping, excessive fees or abusive terms; (2) steering any consumer from a “qualified mortgage” to “not qualified” mortgage when consumer qualifies for ”qualified mortgage;” (3) abusive or unfair lending practices that promote disparities among consumers of equal creditworthiness but of different race, ethnicity, gender, or age; (4) mischaracterizing the credit history of consumer or residential loans available to consumer, (5) mischaracterizing or inducing mischaracterization of appraised value of property securing extension of credit; or (6) if unable to suggest, offer or recommend to consumer loan that is not more expensive than loan for which consumer qualifies, discouraging consumer from seeking mortgage from another originator.
Rules of Construction: While expressly prohibiting any yield spread premium or similar compensation that would permit total amount of direct and indirect compensation from all sources to originator to vary based on loan terms other than amount of principal, expressly permits compensation to a creditor upon the sale of a consummated loan to a subsequent purchaser, i.e. compensation to lender from secondary market for sale of consummated loan. Also does not restrict: (1) consumer’s ability to finance at option of consumer through principal or rate, any origination fees or costs as long as fees or costs do not vary based on terms of loan or consumer’s decision to finance such fees; or (2) incentive
Definitions of Mortgage Originator (Section 1401) – Means any person who for direct or indirect compensation or gain: (i) takes residential mortgage loan application, (ii) assists consumer in obtaining or applying to obtain residential mortgage loan; or (iii) offers or negotiates terms of residential mortgage loan as well as any person who represents to the public that it will provide any of services in (i)-(iii). Does not include any person who: (1) performs purely administrative or clerical tasks; (2) is employee of manufactured home retailer who does not advise consumer on loan terms; (3) only performs real estate brokerage activities and is licensed or registered in accordance with applicable state law, unless such person or entity is compensated by lender, mortgage broker, or other originator or their agents; (4) person, estate or trust that provides mortgage financing for sale of 3 properties in any 12 month period provided loan is fully amortizing, where borrower has ability to repay and is either fixed or adjustable only after five years and meets other conditions; (5) is servicer or servicer employee, agent or contractor, including but not limited to those who offer or negotiate terms of residential mortgage loan for purposes of renegotiating, modifying, replacing and subordinating principal of existing mortgage where borrower is behind in payments, in default, or has reasonable likelihood of being in default or falling behind; and (6) Excludes creditor except the creditor in a table funded transaction under anti-steering provisions.

Consumer Financial Protection Bureau (CFPB) Established – Establishes CFPB as independent entity housed within FRB. Assigns CFPB broad authority to write rules to protect consumers from unfair or deceptive financial products, acts or practices and reassigns to CFPB responsibility for major consumer protection laws including RESPA, TILA, HOEPA, HMDA and more, detailed below.

Appraisals, AMCs and AVMs – Prohibits appraiser coercion and requires rulemaking by FRB, OCC, FDIC, NCUA, FHFA and the CFPB on appraiser independence. Requires: interim rules by CFPB within 90 days of enactment on appraiser independence to replace Home Valuation Code of Conduct (HVCC); physical appraisal for every subprime mortgage and two appraisals for subprime mortgage when there has been purchase or acquisition of property at lower price within 180 days; Appraisal Subcommittee of the Federal Financial Institutions Examination Council to monitor state and federal efforts to protect consumers from improper appraisal practices and unlicensed appraisers; FRB, OCC, FDIC, NCUA, FHFA and the CFPB to prescribe minimum requirements for appraisers, appraisal management companies and standards for AVMs.

CFPB Authority – Assigns CFPB regulatory and supervisory authority to examine and enforce consumer protection regulations respecting all mortgage-related businesses, large non-bank financial companies, and banks and credit unions with greater than $10 billion in assets. Makes CFPB primary regulator for nondepository lenders. Exclusions from CFPB authority for real estate brokers, persons regulated by state insurance regulators, auto dealers, accountants, tax preparers, and others.

CFPB Transfer Date – Requires Treasury, in consultation with FRB, FDIC, FTC, NCUA, OCC, OTS, HUD and OMB, to designate date for transfer of functions to CFPB within 60 days after enactment. Date generally must be between 180 days and 12 months of enactment. Authorizes Treasury to revise date after further consultation with agencies. If determined transfer of functions is not feasible within 12 months, Treasury must report to Congress.

Coverage of Mortgage Lending Provisions – Includes mortgage originators who take or assist applications and negotiate terms of mortgages. Excludes creditors (except creditor in table funded transaction for anti-steering provisions) servicer employees, agents and contractors, persons or entities performing real estate brokerage activities and certain employees of manufactured home retailers from “originator” definition.

Duty of Care – Requires loan originators to be qualified and licensed and registered, when required, and include on all loan documents the unique identifier of mortgage originator provided by the Nationwide Mortgage Licensing System and Registry (NMLSR).

Minimum Standards for Mortgages/Ability to Repay – Prohibits creditors from making residential mortgage loans unless creditor makes good faith determination, based on verified and documented information that, at time loan was consummated, consumer had reasonable ability to repay loan according to its terms, and all applicable taxes, insurance and assessments.

Presumption/Safe Harbor for Qualified Mortgages – Allows any creditor and any assignee or securitizer of “qualified mortgage” to be presumed to meet “Ability to Repay” requirements, although presumption may be rebuttable.

Qualified Mortgages – Includes loans that meet several requirements including that the income relied on to qualify borrowers is verified and documented, underwriting and ratios are consistent with statutory and regulatory requirements, and total points and fees payable in connection with loan do not exceed 3 percent of total loan amount.

3 Percent Limit – Applies definition in TILA with following exclusions: (1) up to and including 2 bona fide discount points depending on interest rate; (2) any government insurance premium and any private mortgage insurance (MI) premium up to amount of the FHA insurance premium, provided the MI premium is refundable on pro rata basis, and (3) any MI premium paid by the consumer after closing, e.g., monthly.

Liability for Mortgage Originators – Establishes mortgage originators are liable for violations of duty of care and anti-steering prohibitions up to greater of actual damages or amount equal to 3 times total amount of direct and indirect compensation or gain accruing to mortgage originator for loan involved, plus costs and reasonable attorney’s fees.

Discretionary Regulatory Authority – Grants broad discretionary regulatory authority to CFPB to prohibit or condition terms, acts or practices relating to residential mortgage loans found abusive, unfair, deceptive, predatory.

Prepayment Penalties – Prohibits prepayment penalties for “not qualified mortgages.” Restricts prepayment penalties to loans that are not adjustable and do not have APR that exceeds Average Prime Offer Rate (APOR) by 1.5 or more percentage points for first lien loans, 2.5 or more percentage points for jumbo loans, or 3.5 or more percentage points for subordinate lien loans. Also, requires three-year phase-out of prepayment penalties for qualified mortgages and prohibits offering loan with a prepayment penalty without offering loan that does not have prepayment penalty.

Average Prime Offer Rate (APOR) – Means the average prime offer rate for a comparable transaction as of the date on which the interest rate for the transaction is set, as published by FRB.

Arbitration – Prohibits mandatory arbitration for residential mortgages and open-end consumer credit secured by principal dwellings, except on reverse mortgages.

HOEPA Expansion – Expands coverage of HOEPA and its restrictions governing high-cost mortgages to purchase mortgages. Also lowers the APR triggers to cover loans with an APR more than 6.5 percent above comparable APOR for first lien loans (8.5 percent if the dwelling is personal property and transaction is less than $50,000) and 8.5 percent above for subordinate loans. Also, lowers point and fees trigger from 8 percent of the total loan amount to 5 percent (the lesser of 8 percent or $1000 for loans under $20,000).

Servicing – Requires escrows for certain mortgages and new escrow disclosures, shortens time frames for qualified written requests, establishes timelines for pay-off statements and crediting of payments, and limits late fees for high-cost mortgages. Requires monthly statements on ARM loans. Establishes new requirements for force-placed insurance including notices to borrower. Expands scope of Protecting Tenants at Foreclosure Act.

Counseling – Establishes Office of Housing Counseling within HUD headed by Director to carry out wide range of counseling related activities including research, public outreach and policy development as well as coordinating and administering HUD counseling related programs.

Reach of Bill – The bill directs certain provisions to all residential mortgage loans and other provisions to specified categories of mortgages, defined below, which include “qualified mortgages,” “not qualified mortgages,” “higher risk mortgages,” and “high-cost” or “HOEPA mortgages.”

Regulatory Authority – Provisions assign regulatory authority to FRB, CFPB, federal banking agencies – FRB, OCC, FDIC and NCUA--and other agencies under various sections of bill. Provisions assigned to FRB under title XIV are reassigned to CFPB, except for provisions relating to housing counseling and certain appraisal-related matters. Assigns HUD regulatory responsibility for housing counseling provisions.

Now we wait and see how lenders interpret these reforms....

Lenders Reprice For The Better. Rates At Record Lows Again

2010-06-27T14:32:00.000-07:00

by Victor Burek -

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Refinance RatesPurchase RatesRefinance Rates, June 27th Product: Today Last Week 30 yr Fixed Rate
15 yr Fixed Rate
5/1 ARM
Compare rates in your area: Refinance rates provided by Refinance RatesPurchase RatesPurchase Rates, June 27th Product: Today Last Week 30 yr Fixed Rate
15 yr Fixed Rate
5/1 ARM
Compare rates in your area: Refinance rates provided by Mortgage rates were priced at the most aggressive levels of our era on Wednesday following a steady stream of disappointing housing data that sent stock indexes lower. Rates did back up a few basis points yesterday for what seemed like no reason besides rally exhaustion, but we got those losses back today...

Consumer borrowing costs were influenced by two economic reports today. First out was the final revision to first quarter Gross Domestic Product (GDP).

GDP is the broadest measure of total economic activity. It reports on the output of every economic sector. It's basically our economic report card. A rapidly growing economy can lead to price inflation, the bond market prefers stable growth while stocks generally enjoy a faster pace of economic expansion.

6 housing trends in a still-shaky market

2010-04-18T08:19:00.001-07:00

By Amanda Gengler, writerApril 1, 2010: 10:37 AM ET

(Money Magazine) -- The drama is nearly over. After a decade of extremes -- the ebullient highs of the real estate boom, then the devastating lows of the bust -- calmer forces are beginning to prevail in the housing market.

The big fall-off in home values, which has taken the median price of a house down almost 30% since 2006, looks to be in its final stages in most places: Three-quarters of the nation's 384 metropolitan areas will see prices down less than 5% a year from now, according to projections from Fiserv and Moody's Economy.com; 10% seem poised for modest increases. Meanwhile, Uncle Sam is lending a steadying hand with programs designed to prop up the market -- at least for a while yet.

Facebook Digg Twitter Buzz Up! Email Print Comment on this story

In this quieter environment lie new challenges and opportunities for homebuyers, sellers, owners, and investors. For the first time in years you aren't completely at the mercy of market forces: You can really affect how much you make (or lose).

To come out on top, though, you need to understand the key trends shaping the shifting market. You'll find them outlined below, along with smart moves that should help you exploit them.

1. Distressed properties will keep prices under pressure.

For a while last year it might have seemed as if the long-awaited housing recovery was just about here. Home prices stopped falling in spring, and have stayed fairly stable since, according to the Case-Shiller housing index. Sales rose from their recessionary lows, and inventories came down from their highs.

But the pickup turned out to be short-lived. Sales of existing homes dropped sharply in January from the previous month, and inventories crept back up. Economists predict that the national median price for a single-family home will dip another 5% to 10% before finally bottoming by year-end or early 2011.

Place much of the blame squarely on the glut of distressed properties spilling onto the market. More than 3 million homes are expected to get foreclosure notices this year, according to RealtyTrac, a foreclosure listing website, as job losses strain with their mortgage payments.

In addition, one in every four homeowners with a mortgage now owes more on that loan than the house is worth. A growing number of these owners are making a strategic decision to default -- 18% of delinquent borrowers were purposely behind, according to a recent study by Experian and Oliver Wyman. They're choosing to walk away rather than pour money into a home that will take years to regain its value.

0:00 /3:10Homeowners walking away
Meanwhile, short sales -- when a lender agrees to let a homeowner sell for less than he owes -- are also expected to spike, reports Moody's Economy.com. Contributing to the jump: a streamlined approval process and a new government program that gives servicers financial incentives to arrange short sales instead of foreclosing on a troubled property.

Your move.

If you're in the market for a new home, you may be tempted by the low prices on bank-owned properties, which are going for about 30% less than seller-owned homes. But be prepared to come in with a hefty down payment (at least 20% to 25%) to compete with investors offering banks all-cash or significant cash deals.

Be aware too that many of these homes need serious repairs, and you don't always have a chance to check them out before bidding. If you can't get a thorough inspection, walk away. And don't focus on short sales if you have to move quickly. Last year such transactions often took as long as six months. While some banks have streamlined the process, you can't count on a speedy deal.

But you don't have to take on the risks of a distressed property to nab a bargain. If you're shopping in an area with a growing number of foreclosures, use that fact to wring price concessions from owners anxious to sell. And ask the homeowner to fix anything wrong with the house flagged in the inspection, or to give you a discount to account for it.

Hoping to sell your house this year? Don't try to compete with repossessed properties on price. Instead, play up your advantages: a home in move-in condition (get your house inspected and do the repairs before you list it) and the possibility of a quick deal. To reassure prospective buyers that they're not getting a lemon, advises Pat Lashinsky, CEO of the online brokerage ZipRealty, toss in a one-year home warranty that will pay to fix problems like a broken furnace or hot-water heater. Cost: about $350.

2. Big homes are lagging small ones in the recovery.

Rushing to take advantage of what was then the expiring federal tax credit for first-time buyers, newcomers accounted for 50% of sales in October and November vs. 31% a few months earlier. That's helped stabilize prices on smaller, more affordable homes.

But the market for larger, more expensive homes is hurting. The inventory of homes for sale priced at $750,000 to $1 million is now 20 months, vs. 11 months for homes in the $100,000 to $250,000 range, the National Association of Realtors reports. Many people don't feel comfortable making a large financial commitment these days, and fewer can meet stricter standards for the jumbo loans often needed to buy these homes. Shifting tastes are also a factor.

"If you asked someone 10 or 15 years ago what they wanted in a house, the reply likely would have been 'space, space, space,' but not anymore," says Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard. In response to dwindling demand for bigger residences, the median size of a new home shrank to 2,100 square feet in 2009, down from 2,300 three years ago, the National Association of Home Builders says. Size typically dips in a recession, but Retsinas believes this time the trend will stick beyond the recovery.

"Americans now view their home primarily as a place to live, not as an investment," he says. "They're willing to give up some room for shorter commutes and lower energy bills."

Your move

Trade-up buyers who want bigger houses will find the best deals this year. The big question is when to make your move. Act swiftly if prices are already stabilizing in your area (go to cnnmoney.com/realestate2010 for price projections for the country's 384 metropolitan areas). Otherwise, hold off for a few months if you can, in anticipation of further price drops, since the high end of the market will be especially hard hit.

Whenever you make your move, base your bid on comparable sales over the prior 60 days rather than the home's list price. Coming in 5% to 10% lower than the comps is a smart starting point, says Ellen Klein, a realtor in Rockaway, N.J.

If you want to sell a big house, try to unload your property quickly before prices dip further. Setting the right price at the outset is key: If you go too high, many buyers won't even look, knowing you'll probably have to go lower later. "One price reduction is okay, but when you start to see multiple reductions, it raises a red flag," says Ken Shuman of Trulia.com.

Are homes in your area affordable?
You may be able to expedite a sale with aggressive pricing, listing your home for slightly below what comparable homes have sold for in the past couple of months. Another ploy to attract more traffic: Offer a larger cut -- say, 3.5% vs. 3% -- to the buyer's agent. True, you'll pay a little more in total commissions. But that's preferable to having to lower your price by 5% to 10% later if your house doesn't sell.

As for smaller homes, investors and first-time buyers will have a tougher time finding deals. Homes in good locations are getting multiple bids and are often selling above the listing price, says Alan Wagner, a Sacramento realtor. So if you find a house you love, don't bid less than similar homes have sold for in the past two months. You can find the median difference between listing and sales prices in your area at zillow.com under Market Reports.

3. Mortgage rates will rise as Uncle Sam exits the market.

Say goodbye to the lowest mortgage rates in about 50 years. For the past 16 months the Federal Reserve has helped keep rates low -- around 5% for a 30-year loan -- by purchasing mortgage-backed securities. But that program was scheduled to end in March, and private investors aren't expected to step in to fill the void at the same low rates. As a result, the consensus among economists is that rates will climb to between 5.3% and 6% by year-end. "It will be a gradual rise," says Mark Zandi, chief economist at Moody's Economy.com. "If rates spike, the Fed will get back into the market."

One exception to the rising-rate outlook: Rates on jumbo mortgages (typically loans larger than $417,000, but up to $729,750 in some high-cost areas) are expected to hold steady at 6% or so. That's because the government wasn't propping up the jumbo market, so these loans won't be affected much by the Fed's exit.

Your move

Here's the dilemma if you're in the market for a new home: Do you move quickly to lock in low rates, or would you be better off waiting?

For anyone who is house hunting in the majority of areas where prices are expected to drop 5% or less, locking in low rates now will probably be more valuable.

See home price forecasts in your state
Consider this: Taking out a $300,000 30-year loan at 5% today will cost $1,610 a month. Wait until the end of the year, and maybe you can land the house for $15,000 less. But by then rates may have climbed to 5.75%, so your monthly payment will be $50 more, and you'll pay almost $34,000 more in interest over the life of the loan.

For homeowners, the decision is much clearer. If today's rates are at least one point below your current loan, or you have an adjustable rate and plan to stay put for at least five years, refinance pronto. On a $300,000 30-year loan, shifting from a 6% rate to 5% could cut your payments by $300 a month.

4. Financing for condos, second homes, and jumbo loans are especially tough to get.

To qualify for a new mortgage at the lowest rates, however, you'll have to meet some stiff requirements. You'll need at least 10% down or 10% equity in your home and a credit score of 720 or higher; your mortgage, insurance, and property taxes shouldn't exceed 31% of your gross income; and no more than 41% can go to paying debts of any kind.

Exceptions: You usually need only 3.5% down for an FHA loan, and can refinance with less than 10% equity through the HARP program. (Makinghomeaffordable. gov has details.)

The standards are even more onerous for anyone buying a condo or a vacation or investment home, or who will need a jumbo. Many banks will approve a condo loan only if the building is at least 70% occupied by owners, which is often problematic for new construction. Meanwhile, jumbo borrowers and investors must often put 30% to 35% down. "These loans are often riskier, so lenders make you jump through more hoops to get one," says Keith Gumbinger of HSH Associates, a mortgage publishing website.

Your move

Don't even think about shopping for a new home without being pre-approved for a mortgage. You don't want to fall in love with a house only to discover you don't have enough cash for the down payment the bank requires or you fail to meet some other requirement. Plus, most sellers and realtors won't even work with you unless they're sure you'll qualify for financing.

If a bank turns you down, try other lenders. Local banks and credit unions may be more lenient about whom they approve and often offer better rates than national banks. Can't prove income because you're self-employed or rely heavily on commissions? Apply at the bank where you have business or personal accounts; familiarity may help the lender get to yes. Buyers in the market for a condo should also make sure to research the association's financial health and the building's occupancy rate.

5. Buyers, rushing to beat the tax-credit deadline, will set off a flurry of spring deals.

One more reason prospective buyers and sellers may be tempted to move quickly: the looming expiration of valuable tax credits that have been dangled by Uncle Sam to spur sales.

Homeowners who move can get up to $6,500, first-time buyers as much as $8,000, as long as they have a joint income of less than $245,000 (or $145,000 for singles). But there isn't much time left to act because buyers must be under contract on the new home by April 30 and close by June 30 to qualify for the credit.

Look for transactions to pick up as the deadline nears. When the credit for first-time buyers was originally set to expire last November, sales surged in the three months before the cutoff. Experts expect a similar pattern this spring.

Your move

If you're looking to buy a home in an area where prices are still expected to fall more than 5% over the next year, don't rush to purchase just to get the tax break -- a substantial drop in home prices in your desired town could more than offset the value of the credit. Otherwise, strictly from a price standpoint, there's no reason not to house hunt in earnest in case you find a place you love and can afford by the government deadline.

But homeowners hoping to buy have to consider another factor: how long it will take you to sell the place you live in now, since the cost of carrying two properties would quickly offset the credit. To avoid that double whammy, you'd need to unload your house in less time than the 110 days or so that the average home is now on the market. (Find out how long it's taking to sell homes in your area at zillow.com; click on Market Reports.)

Of course, the anticipated pickup in traffic among prospective buyers does enhance the prospect of a quick sale. But you'll have to move fast to get your house listed, and be prepared to negotiate a speedy deal.

6. Going green this year can save you more money.

Hoping to save the earth and a few extra bucks while you're at it? Well, the payback on energy-saving home improvements recently got a whole lot sweeter, thanks to a government program that extended and expanded tax breaks that had been scheduled to expire for those upgrades. You can get a federal credit for 30% of the cost of products like highly energy-efficient heating and air-conditioning systems, windows, and insulation up to $1,500 for 2009 and 2010 combined. (For details on the available tax credits, go to ase.org.)

Your move

To figure out which upgrades will save you the most, do an energy audit to identify your biggest leaks. Ask your utility company if it offers this service free (many do) or DIY using the kit at energysavers.gov. Sealing leaks and adding insulation, including in your attic and basement, typically provide the best bang for your buck.

And keep your eyes open for other incentives from Uncle Sam. In March, President Obama outlined an idea for a new program that would give homeowners even larger rebates right at the cash register for renovations that boost energy efficiency. More greenbacks for going green could be a deal you won't want to miss

From Robert Kiyosaki's book Conspiracy of The Rich

2010-03-14T04:46:00.000-07:00

The Root of All Evil
Is the love of money the root of all evil? Or, is it the ignorance of money?
What did you learn about money in school? Have you ever wondered why our school systems do not teach us much—if anything—about money? Is the lack of financial education in our schools simply an oversight by our educational leaders? Or is it part of a larger conspiracy? Regardless, whether we are rich or poor, educated or uneducated, child or adult, retired or working, we all use money. Like it or not, money has a tremendous impact on our lives in today's world.

Changing the Rules of Money
In 1971, President Richard Nixon changed the rules of money: Without the approval of Congress, he severed the U.S. dollar's relationship with gold. He made this unilateral decision during a quietly held two-day meeting on Minot Island in Maine, without consulting his State Department or the international monetary system.
President Nixon changed the rules because foreign countries being paid in U.S. dollars grew skeptical because the U.S. Treasury was printing more and more money to cover our debts, and they began exchanging their dollars directly for gold in earnest, depleting most of the U.S. gold reserves. The vault was being emptied because the government was importing more than it was exporting and because of the costly Vietnam War. As our economy grew, we were also importing more and more oil.

Duck! Watch out for falling home prices

2010-02-27T04:03:00.000-08:00

NEW YORK (CNNMoney.com) -- Despite signs that the real estate market might be lurching forward, prices are expected to fall further this year and next.

The average home price in the United States will fall by about 6% by September 2011, according to a joint report between Fiserv and Moody's Economy.com. And that's after plunging more than 27% in the past three years.

Most of the projected home price decline will occur during the usually slow summer months of 2010. After that, prices should begin to stabilize, according to Fiserv, and stay almost flat through fall of 2011.

The main reason for continued decline, according to Mark Zandi, economist and co-founder of Economy.com, is foreclosures -- the same thing that's plagued markets for the past three years.

"Foreclosure sales will pick up this spring as mortgage servicers figure out who can qualify for a modification and who can't," said Zandi.

He figures there are at least 4.5 million mortgage loans either in foreclosure or clearly headed in that direction. When that additional inventory hits the market, it will provide numerous choices for buyers and encourage sellers to drop their listing prices.

Check the home price forecast in your city
The end of two federal programs, which have been propping up markets, will also tamp down prices.

The Federal Reserve has been purchasing mortgage-backed securities since early 2009, scooping up as much as $1.25 trillion worth. That has dampened rate increases by providing a ready market for the securities. But the Fed's program lapses on March 31, when it cedes the playing field to private investors, who will almost surely demand higher rates.

Any resulting rise in rates will cause some buyers to withdraw from the market and others to look for lower priced homes. Either way, demand for homes drops and so do prices.

A month after the Fed bows out of the mortgage-buying market, the homebuyer tax credit will start to expire. To qualify for the $8,000 credit, homebuyers must sign a contract before April 30 and close by June 30. When the first date passes, many buyers are expected to vacate the market, weakening the demand for homes.

In a broader sense, home prices are ultimately decided by employment. "If [the job market] improvement is stronger than expected, prices will get better. If it's weaker than expected, prices will be worse," Zandi said.

Worst of the worst
The worst performing market will be Miami, Fla. Moody's projects prices there to drop a heart-stopping 29.2% by Sept. 30. That follows a 47.7% decline the metro area recorded in the past three years. Grand total: 64% drop.

Other disastrous performances will be turned in by the Hanford, Calif., metro area, where prices are projected to plummet 27.2% through Sept. 30, 2010 following their 36.9% drop for the previous 36 months. Ft. Lauderdale and West Palm will also register steep drops.

There's some good price news coming out of California's Central Valley for a change; prices will begin to emerge from their free fall toward the end of this year.

In Merced, for example, which crashed and burned by 71.8% in the past three years (through last September), they'll only fall only another 6.2% in the next six months before bouncing back with a rise of 10.1% by Sept. 30, 2011.

Web Site

2010-02-27T03:56:00.000-08:00

Check out current listings at www.fergusonsamk.georgiamls.com

Real Estate Looks Risky, but Less So for Bargain Hunters

2010-02-21T11:00:00.001-08:00

By PAUL SULLIVAN
Published: February 19, 2010
EVEN a cursory glance at recent events in commercial real estate would make you think the next big collapse is upon us.

Skip to next paragraph

Chester Higgins Jr./The New York Times
Thomas N. Bohjalian of Cohen & Steers sees opportunities in real estate investment trusts.

Wealth Matters
Paul Sullivan writes about strategies that the wealthy use to manage their money and their overall well-being.

Chester Higgins Jr./The New York Times
David Frame of J. P. Morgan Private Bank tells investors to be sure that “ ‘bad’ is priced in.”
First, there was the default last month by Tishman Speyer Properties and BlackRock Realty on billions of dollars in loans on Stuyvesant Town and Peter Cooper Village, the huge apartment complexes in Manhattan. When the deal was done, in 2006, it was the biggest of its kind in American history.

And this week, Simon Properties tried to buy General Growth Properties, its shopping mall rival, for $10 billion, a price General Growth says is too low even though the company is in bankruptcy.

Yet in the midst of this, financial advisers are telling their wealthy clients that there is tremendous opportunity in real estate. What is equally intriguing is that these investors are looking again at something as illiquid as a building, which goes to show just how quickly people can reacquire their appetite for risk if it means higher returns.

“The trick with investing in commercial real estate is not knowing if something is bad, but knowing if that ‘bad’ is priced in,” said David Frame, global head of alternative investments at J.P. Morgan Private Bank.

The next few years are expected to be bad for commercial real estate largely because the rosy predictions made when the buildings were purchased in 2005 and 2006 have not come true. First, the values of those buildings have plummeted, as much as 45 percent in some instances. That is going to make it difficult for the owners to refinance their mortgages over the next few years. Second, the recession has reduced the rents and occupancy rates on which those inflated values were based.

But what’s bad for an owner may be good for an investor.

STATE OF PLAY The opportunities in commercial real estate run the gamut of risk, from buying undeveloped land to buying stock in real estate investment trusts, or REITs, which invest in property and mortgages.

Mike Ryan, head of wealth management research for the Americas at UBS Wealth Management, said while there were risks in commercial real estate, they would not be as bad as many bearish analysts had predicted and certainly not on the level of the residential real estate crash.

“The notion that the other shoe is about to drop and we’ll see a wholesale liquidation of property is overdone,” he said. But, he added, “We’re not saying people should plow in.”

Yet Mr. Frame said he saw the coming refinancing crisis in commercial real estate as a continuum of what has been happening with other securities in the last 18 months. “Our job has been to look through the capital markets and identify where there’s been a scarcity of capital,” he said, meaning where investors sold their positions quickly and fearfully. The first opportunities to take advantage of a turnaround were with convertible bonds and private equity. “Now,” Mr. Frame said, “we think the opportunity in real estate is much broader than it was 12 months ago.”

OPTIONS So how are people seeking to profit in commercial real estate? This depends on whether they are passive investors, who want to allocate some money to real estate, or entrepreneurs seeking to buy buildings.

Many investors who did not make their fortunes in real estate remain cautious. “You have to help them view real estate as private equity because you’re locking up your money for some period of time,” said Joanne Jensen, a private banker at Deutsche Bank Private Wealth Management.

But if they’re going to invest in real estate, they want the security of high-quality investments. “I’m speaking to a lot of real estate investors, and what they’ve been telling me is there’s been a bifurcation between the ‘A’ quality buildings and everything else,” Ms. Jensen said.

One intriguing strategy is to buy the underlying mortgage debt of buildings whose value was inflated. The debt is now trading at a deep discount. This may sound risky, particularly if the owner walks away from that debt, as happened with Stuyvesant Town. But Mr. Frame sees it as a way to make either a little or a lot of money.

He described one possibility: a building was purchased for $100 million in 2006. It is now worth less, but the underlying mortgage is still $50 million, and it is coming due next year. The owner is probably going to have a tough time refinancing the mortgage without putting in more money. That uncertainty is reflected in the price of the debt.

“Say it’s 70 cents on the dollar, or $40 million for the first-lien mortgage,” he said. “If, in the next year, I get paid off, I get a 12 percent return. If not, I own the building at 60 percent off the original purchase price.”

In many cases, he said, clients are hoping they do not get paid back because the return from owning the building could be far greater. But the risk is they may have to hold that property for at least several years.

Some of his other ideas carry the same caveat: they require time. In this category, he included buying land prepared for developments that have stalled or buying loans from the Federal Deposit Insurance Corporation. The agency acquired these from banks and has bundled them into packages to be sold off.

Hotels are one area in which the investment turnaround could come faster. Their occupancy rates plummeted in the recession, and many were further hurt by having too much debt. “The most upside can come from hotels, if we get an uptick in the economy,” Mr. Frame said. “But the risk is high.”

Still, he said he believed that all these seemingly risky investments were actually predicated on caution. “We’re not taking an optimistic view of the recovery,” he said. “As long as it doesn’t get dramatically worse, we’ll be O.K.”

REIT stocks are a more liquid alternative. They went through their own steep decline last year. In March 2009, REIT stocks were down 75 percent from their February 2007 high, according to the leading REIT index. The index had rebounded to half of its peak, but REIT stocks slid again after the Federal Reserve raised its lending rate to banks on Thursday. This is not necessarily a bad thing for long-term investors.

“We think REITs are trading roughly at the net-asset value” of the properties they own, said Thomas N. Bohjalian, a portfolio manager at Cohen & Steers, a real estate investment firm. “And that is not the ceiling; it’s the floor.”

What is more significant than stock price, he said, is Cohen & Steers’s prediction that dividends on REIT stocks will grow by an average of 12 percent over each of the next five years. REITs are legally required to pay out 90 percent of their taxable income annually. In flush times, they were paying out a good portion of their cash flow as well. As income from REIT-owned properties rebounds, so will the dividends.

CAUTION All these investment ideas are predicated upon patience and a healthy stomach for risk. With REITs, for example, Mr. Bohjalian said he did not expect double-digit dividend growth to start until 2011.

This patience works two ways. Ms. Jensen has several clients who have made their fortunes in real estate but have struggled to find properties at the discounts they expected. “They’re not willing to do a deal that doesn’t make sense,” she said.

That may be a good mantra for any investor.

Property owners were overcharged

2010-02-21T10:49:00.001-08:00

ByMichelle E. Shaw
Published: Feb 18, 2010

Briana Henry-Frisby and Rae Anne Harkness both own homes in DeKalb County, and both suspect they’re paying too much in property taxes. The fact that both work in the DeKalb tax commissioner’s office doesn’t actually help.

“Now is not the time to leave any money laying on the table, or anywhere,” Henry-Frisby said.

But she may well be leaving behind a tidy pile of cash when it comes to property taxes.

A report to be released today concludes that property owners in the five core metro Atlanta counties overpaid their property taxes by an average of $244 in 2009. And people who live in areas hard hit by foreclosures, as do Henry-Frisby and Harkness, overpaid by even more, says an analysis commissioned by the Atlanta Neighborhood Development Partnership.

AJC findings confirmed

The Atlanta Journal-Constitution in December reported that tens of thousands of homes across metro Atlanta were overvalued last year by county tax assessors, who didn’t adjust values sufficiently after the historic real estate collapse. Homeowners, the newspaper reported, were being taxed on values their property no longer held. The report today tends to confirm the AJC’s findings and also, for the first time, calculates an average overpayment.

John O’Callaghan, ANDP president, said the report focuses on property tax values from 2009 for neighborhoods with the highest foreclosure rates in metro Atlanta.

“What this does is give a picture of the average homeowner,” he said. “Some are underpaying and others are overpaying by a larger margin. We hope this data and research will lead to changes in the system.”

Calvin Hicks, chief assessor in DeKalb County, balks at the idea that people have “overpaid” taxes.

“County services still cost what they cost,” Hicks said. “So maybe it is that property [valuations] should have gone down, but the millage rate should have gone up. That still may have equaled the same amount of tax money, but coming from different directions.”

Hicks said foreclosures affect neighborhood values in different ways and said county officials are working on the best way to reflect those properties in future valuations.

ANDP’s report, prepared by Robert Charles Lesser & Co., breaks out the three ZIP codes with the most foreclosures in Clayton, Cobb, DeKalb, Fulton and Gwinnett counties and the average amount homeowners overpaid their taxes for 2009.

The study took sales values from the second half of 2008 and contrasted those numbers to the value the county set on the same property.

Analysts then calculated what the tax assessment would have been based on sales figures, compared to actual assessments on the same properties.

Ammo for appeals?

In the 15 ZIP codes with the most foreclosures, the average overpayment for 2009 was $491, the report says. Here are the ZIPs and the total estimated overpayment in each:

? Clayton: 30238, 30274 and 30296, $17 million overpayment.

? Cobb: 30168, 30127, and 30126, $8 million overpayment.

? DeKalb: 30038, 30058 and 30032, $16 million overpayment.

? Fulton: 30310, 30315 and 30331, $24 million overpayment.

? Gwinnett: 30039, 30045 and 30044, $17 million overpayment.

In DeKalb’s 30058, Henry-Frisby’s ZIP code, the average overpayment in 2009 was $391.

“There is a lot I can do with that money,” she said.

Harkness said she doesn’t have much hope of getting back the $513 ANDP’s report says was the average overpayment in her ZIP, 30032.

“But it is good to know, and it gives me something else to work with when I appeal this year,” she said.

Both said that working in the tax commissioner’s office does them no good when it comes to their own tax valuations.

“No, I only work for the county,” Henry-Frisby said. “When it comes to my house and things outside of the office, I’m in the same boat as everybody else. I’ve got to call the same people they do and I’ve got to wait for them to call me back, too.”

Said Harkness: “The only advantage I can think of is I know how the system works and who to call, but that doesn’t help change my situation at all.”

Charles Bowman, a DeKalb teacher who lives in Gwinnett’s 30039 ZIP code, said he wasn’t surprised to hear homeowners in his area overpaid by an average of $503 last year.

“This information makes me feel more inclined to act and appeal my assessment than before,” he said of the report. “That money, had we gotten a refund from our escrow account, could have been used to do some badly needed repair on our home.”

Bowman, who has two children with his wife, Tamiko, said that money could have gone to a number of other things, including his Ph.D. studies.

“I think everyone everywhere is trying to be smart about how and when they spend money,” he said. “And right now it just hurts to think there may have been some money that could have been used differently, if we’d had the chance.”

Nearly 75% of all U.S. homes are affordable

2010-02-21T10:47:00.000-08:00

By Les Christie, staff writerFebruary 17, 2010: 2:12 PM ET

NEW YORK (CNNMoney.com) -- An amazing turnabout in the U.S. housing market over the past four years has pushed home prices to near record levels of affordability.

The typical American family, who makes the nation's median income of $64,000 a year, could afford to buy 70.8% of all homes sold in the United States during the last three months of 2009, according a quarterly report from the National Association of Home Builders and Wells Fargo (WFC, Fortune 500).

That's off just a tad from the record 72.5% reached during the first three months of 2009, but up substantially from the second quarter of 2008 when only 55% of homes sold were affordable.

"Favorable mortgage rates and sliding house prices that have now started to stabilize nationally have both contributed to a record year for housing affordability in 2009," said NAHB chairman Bob Jones, a home builder from Bloomfield Hills, Mich.

The NAHB judges a home to be affordable if a family making the metro area's median income could devote no more than 28% of their take-home pay toward housing costs.

There was a huge variation in affordability around the nation. As a rule, Midwestern cities far outperformed coastal communities.

5 most - and least - affordable cities
All five of the most affordable major housing markets were in the Rust Belt, led by Indianapolis, which has been the nation's most affordable major metro area for more than four years. More than 95% of all home sold there were classed as within the budget.

Detroit was the second most affordable major market with 93.4%, followed by three Ohio cities, Dayton (93.2%), Youngstown (93%) and Akron (92.2%).

A few small cities surpassed even Indianapolis. In Kokomo, Ind., 98% of homes sold were priced low enough for median-income families to afford. Monroe (97.1%) and Flint (96.3%) both scored high as well.

New York was the least affordable market; less than 20% of homes met the criteria. San Francisco (22.3%), Honolulu (33.8%), Santa Ana, Calif.,. (34.5%) and Los Angeles (36.8%) filled out the bottom five.

The most unaffordable small market was San Luis Obispo in California, where only 32% of homes sold were attainable for median-income families.

Where's housing headed? Follow rents

2010-02-15T15:27:00.000-08:00

NEW YORK (Fortune) -- It may not be the most widespread measure of housing prices, but if you want to follow a powerful driver, look at rents.

Specifically, it's the rents Americans pay on condos, apartments or houses that are about the same size, and share the same neighborhood as your ranch or colonial, that in the end determine what your house is worth.

"If you look at the trend in rents to see where housing prices are headed, you're looking at the right measure," says Yale economist Robert Shiller.

In recent reports, Deutsche Bank demonstrates how steady or even falling rents have pulled down housing prices, to the point where in many markets it costs about the same amount to own as to lease. That's a golden mean that America hasn't seen in almost a decade. The DB research also offers convincing evidence that the wrenching adjustment in housing prices is finished for much of the nation, with a bit more pain to come in selected areas.

Housing outlook for 2010
Before we get to the numbers, let's examine why rents exercise a kind of gravitational pull over home prices.

In normal times, people won't pay much less to lease a house than to own it. After all, if you're paying rent instead of a mortgage and taxes, you still get to enjoy the same rec room, chef's kitchen, and casita for visiting grandparents. So the surest sign of a frenzy appears when owning becomes far more expensive than renting. That's precisely what happened during the last bubble.

And the surest sign that prices have fully adjusted arrives when the ratio of what people pay in rent versus what owners spend on the same property returns to its historic average.

That brings us to the Deutsche Bank studies. Its REIT research team first established a benchmark for a "normal" ratio of rents to ownership costs -- what it calls ATMP, or after-tax mortgage payment -- for 53 U.S. cities.

On average, DB found that families across America were spending about 87% as much to rent as to own in 1999. Hence, they were traditionally willing to pay a premium as homeowners, though not a big one.

Why we missed the housing crisis
But by mid-2006, with the craze in full swing, the figure fell below 60%. At that point, Americans were spending an incredible 66% more to own than to rent. It was far worse in the bubble markets: In Las Vegas, Phoenix and Miami, homeowners were paying twice as much as renters, and in San Francisco and Orange Country, owners' monthly payments were triple those of their neighbors with leases instead of mortgages.

So how did that happen? During the bubble, rents -- the real engine that drives values -- were inching along at more or less their usual pace. From 1999 to 2007, apartment rents increased only 32%. But home prices jumped more than three times as fast, around 105%.

DB reckoned that housing prices are more or less reasonable when the ratio returns to its 1999 level. Why 1999? Because the ratio was relatively stable throughout the 1990s, and it was the year the steep rise in prices began in earnest.. At the end of the third quarter of 2009, the overall number stood at 83%, meaning renting was just a tad more attractive than owning.

But the picture varies widely from city to city. In 15 of those 53 metro areas, including St Louis, Indianapolis, and remarkably, Phoenix and San Diego, it's now higher than in 1999, meaning that homeowners' costs actually dropped versus what renters pay, courtesy of the steep decline in prices. In California's San Bernadino and Riverside Counties, it now costs 10% less to own than to rent; in 2006, owners paid more than twice as much as renters.

In another 14 cities, a list encompassing Boston, San Jose, and Chicago, the cost of owning exceeds that of renting by 6% or less. In the remaining 24 markets, housing is still moderately to extremely overpriced. The biggest problem areas are Baltimore, Long Island, and Seattle, where the ratio is still between 24% and 32% above the 1999 benchmark.

What does that mean for future prices?

Given that analysis, it's likely that prices will fall another 5% or so nationwide. The drop could even be slightly greater. One reason: Rents, the force that govern housing prices, are still falling.

In 2009, apartment rents dropped 2.3%, and the fall continues. And enormous adjustments are needed in still-exorbitant markets such as New York and Baltimore. Thankfully, the improving economy and decline in the rate of job losses means that rents should soon stabilize and could even start increasing by the end of 2010.

But fortunately, for most of the U.S., the sudden, terrifying fall in prices worked its own black magic. The numbers are back in alignment, or close to it. It had to happen. That's what rents, housing's great master, were telling us all along.

Property tax legislation in works, Cagle says

2010-01-30T04:03:00.001-08:00

Property tax legislation in works, Cagle says

ByNancy Badertscher
Published: Jan 25, 2010

Local governments could see legislation later this week aimed at correcting inequities in the state’s property tax system, Lt. Gov. Casey Cagle said Monday.

The legislation -- the details of which have not been revealed -- will attempt to ensure “fairness and equity” in the tax system for cities, counties and the taxpayers, Cagle said at a breakfast kicking off the Georgia Municipal Association’s annual “Mayors Day” at the Capitol.

Legislators have said changes to the state’s property tax system are a priority for this session of the General Assembly. One of the goals, they have said, is an easier process for appealing the value that county tax appraisers put on a homeowner’s property.

The effort comes after The Atlanta Journal-Constitution reported that some county tax appraisers are setting values on residential properties higher than what the properties sold for.

An analysis showed assessors cut $4.2 billion in taxable value last year through adjustments to more than 450,000 parcels. But the AJC found that if tax appraisals had been lowered as much as sales dictated, the loss would have been nearly $25 billion.

Cagle and House Speaker David Ralston (R-Blue Ridge) told the mayors that they both have ruled out raising taxes as a means of solving the state’s current revenue problems.

Both predicted that legislators will have to make tough choices with this year’s budget.

“We have foundational and structural changes that need to occur,” Cagle said, adding that employee furloughs cannot continue to be a major solution.

Ralston said he is open to looking at all ideas, regardless of the political party they come from.

He also said he is committed to making the legislative process more open and transparent, a statement that brought applause from the audience.

Atlanta Mayor Kasim Reed stressed to the mayors and city officials the need to make sure Georgia's population is accurately counted in the upcoming U.S. census.

Because of Georgia's steady growth, an accurate population count could translate into more representation for the state and the city of Atlanta in Washington, Reed said.

It also could mean "billions of dollars to our citizens," said Reed, who suggested a nonpartisan "call to arms" to see that the census count is accurate.

© 2010 The Associated Press. All Rights Reserved.

The Rescue

2010-01-30T04:01:00.001-08:00

By Les Christie, staff writerJanuary 26, 2010: 12:40 PM ET

NEW YORK (CNNMoney.com) -- Home prices fell in November for the first time in seven months, according to a industry report released Tuesday.

The S&P/Case-Shiller 20-city home price index recorded a non-seasonally adjusted decline of 0.2% from October. Prices were down 5.3% compared with 12 months ago.

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The loss was unexpectedly large. Experts had forecast that prices would be off by only 5% compared with last November, according to Briefing.com. The lone good news is that the rate of year-over-year declines have continued to shrink.

"While we continue to see broad improvement in home prices as measured by the annual rate, the latest data show a far more mixed picture when you look at other details." said David M. Blitzer, spokesman for Standard & Poor's. "Only five of the markets saw price increases in November versus Ocotber."

Four markets covered by the index -- Charlotte, Las Vegas, Seattle and Tampa -- hit their lowest index levels in four years, according to Blitzer. Any gains they recorded in recent months have been erased.

The five markets that showed month-over-month gains were led by Phoenix, where prices rose 1.1%. Thirteen markets had declines, with Chicago being the biggest loser at 1.1% down. Miami and Dallas showed no change.

Blitzer cautioned, however, that November is a weak time of year for home sales so this might not be a harbinger. In fact, when the data are adjusted for seasonal variations, 14 of the markets recorded gains.

Several markets have been on a strong positive run. Prices have risen in Los Angeles, Phoenix, San Diego and San Francisco for at least six consecutive months. Year over year, Dallas, Denver, San Diego and San Francisco have all entered positive territory, something not seen in at least two years in most markets.

The report failed to stir much passion on the part of industry observers, one way or another. Stuart Hoffman, chief economist with PNC Financial Services called it "not disappointing, considering the big run-up in prices for months before."

He expects continued weakness in home prices through the slow winter months followed by some gains in the spring when the current homebuyer tax credit is scheduled to expire. That should bring out a rush of house hunters looking to beat the deadline. Overall, Hoffman forecasts a flat 2010 -- not a bad thing after the steep drops of the past three years.

"The furious ride down on home sales and prices is pretty much behind us," he said. "I don't think we're going up anytime soon. We've hit the flat part of the roller-coaster ride."

Pat Newport, a real estate analyst for IHS Global Insight pointed out the fall had very favorable buying conditions. Not only was the first-time homebuyer tax credit boosting demand for homes, but mortgage rates were at extreme lows with 30-year, fixed-rate loans available for under 5%.

"It was a good time to buy, and we saw that in the sales numbers," he said.

He doesn't believe we have hit the price bottom, yet. "Most experts think prices are going to drop more, 5% or so, by the end of 2010," he said

3 reasons home prices are heading lower

2010-01-03T12:10:00.001-08:00

By Les Christie, staff writerJanuary 1, 2010: 6:22 PM ET

NEW YORK (CNNMoney.com) -- After four months of gains, home prices flattened in October. Worse yet, industry insiders think that they'll soon start to fall.

Prices have risen more than 3% since May, according to S&P/Case-Shiller.

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But most forecasts predict price declines in 2010, with possible losses ranging from anywhere from 3% on up. Fiserv Lending Solutions, a financial analytics firm, forecasts that prices will fall in all but 39 of the 381 markets it covers, with an average drop of 11.3%.

"We've seen recent price stabilization because of low mortgage interest rates and the impact of the first-time homebuyers tax credit," said Pat Newport of IHS Global Research. "But there are really good reasons to think prices will now start going down."

There are three main reasons for the reversal: a coming flood of foreclosures, rising interest rates and the eventual end of the tax credits.

More foreclosures
For Gus Faucher, the director of macroeconomics for Moody's Economy.com, the huge number of foreclosures that remain in the pipeline is the big problem.

Moody's upped its estimate of defaults recently because of shortcomings of the government-led mortgage modification programs. Trial workouts are not being made permanent and completed modifications are redefaulting at high rates.

"There are going to be fewer [successful] modifications than we thought," said Faucher.

Even so, he added, much of the price decline has already occurred and Moody's forecast is for only another 8% drop. The worst-hit markets will be the ones suffering the most foreclosures, places like Arizona, California, Florida and Nevada. (See 7 tips for buying foreclosures)

Resetting option ARMs (adjustable rate mortgages) will also aggravate the foreclosure problem. These mortgages allow borrowers to pick their own payments, which can be so low they don't even cover the interest. Balances swell.

For many of the more than 350,000 option-ARM borrowers, it's time to pay the piper. Their loans will change into fully amortizing mortgages that will carry much higher monthly payments. A very large percentage of these homeowners will default, according to Shari Olefson, author of "Foreclosure Nation: Mortgaging the American Dream."

"We've still only seen the tip of the foreclosure iceberg," she said.

She also predicts more strategic defaults, people deliberately walking away from even fixed-rate mortgages as the value of their homes dips well below the amount they owe.

Olefson's forecast is for price declines of 5% to 15%, depending on the area, with a national median price drop of about 10% for 2010.

Rising interest rates
Also affecting prices will be higher interest rates. Some analysts, according to Newport, think rates for a 30-year mortgage will pass 6% next year as the government curtails housing market support.

The Federal Reserve has helped keep rates low through purchases of mortgage-backed securities. But that program is winding down and will end in March.

"The government is throwing everything at the market but the kitchen sink," said Peter Schiff, president of Euro pacific Capital. "It can't prop up housing markets forever."

Schiff is among the bigger bears. Though he gave no specific prediction, he thinks prices -- already down 29% from the peak -- are only halfway to the bottom.

The end of the tax credit
As a tool for supporting housing markets and prices, the tax credit for homebuyers is a two-edged sword. It reduces taxes dollar-for-dollar by up to $8,000 for new homebuyers and $6,500 for buyers who already own a home and should support home prices. But it ends at the end of April.

Many buyers will push their deals forward to get in before the deadline and then demand for homes could sink afterward.

One of the few bulls out there is NAR, whose chief economist, Lawrence Yun, is counting on the tax credit to provide temporary support for housing markets until the economy recovers enough to start fueling sales. He predicts price improvement in 2010 of more than 3%.

"The headwind we face is rising mortgage interest rates," Yun said, "but the compensating factors will be the homebuyers tax credit in the first half of the year and increased job creation in the second half."

Housing outlook for 2010

2009-12-20T16:20:00.001-08:00

This year the housing market showed signs of life. But with foreclosures and unemployment climbing, prices have further to fall.
By Beth Kowitt, reporter
December 15, 2009: 09:43 AM
(Fortune magazine) -- In a dour year for the economy, the housing market has offered some glimmers of hope. Home sales have improved, recently hitting their highest level in more than two years. There's been talk of bidding wars resuming in places like Silicon Valley and New York City. And cocktail party chatter everywhere has started to turn to talk of a bottom. So at least where housing's concerned, things are looking not so bad -- right?

If that's what you think, you may not want to invite Mark Zandi to your next cocktail party. The chief economist of Moody's Economy.com, Zandi has some sobering predictions: Home prices are going to fall 5% to 10% more -- and over 30% in places like Miami -- between now and this time next year. Then they might start turning around. (Emphasis on "might.")

At the top of Zandi's list of worries are foreclosures -- specifically, the millions of loans that are in foreclosure or headed there that can't or won't be modified. According to RealtyTrac, nearly 2 million housing units in the U.S. are in foreclosure or bank-owned, and millions more are likely to join them.

Zandi estimates that 2.4 million homes will find their way into foreclosure next year. He expects banks to start putting those properties on the market more aggressively during the first half of the year, resulting in a flood of cut-rate inventory that will drag prices down.

It would be one thing if banks could sell into a hungry real estate market. But that brings us to Zandi's second concern: skyhigh unemployment.

October's 10.2% figure was higher than what most economists forecast for the peak. A soft job market, especially one this soft, means potential buyers don't have money to pour into new homes or the confidence that they'll be able to hang on to their jobs and pay the mortgage on their existing home.

Another concern: Policymakers will pull their support from the market prematurely. Aggressive government moves, like the recently extended first-time-homebuyer tax credit and the Fed's purchase of mortgage-backed securities, have been propping up the market.

The purchase plan is set to expire in March, which Zandi says could bump mortgage rates up as much as a full point. "That raises the cost of buying a home, and in this fragile market people won't buy," he says. "And that's a problem."

All those factors are figured into Economy.com's housing price outlook for 2010 -- as are local figures for income, population, interest rates, and foreclosures.

The results are broken into 100 metropolitan areas. (Last year the projections were pretty accurate, forecasting a 14.5% decline in 2009; the actual figure is likely to come in around --13.2%.)

As the sea of red above shows, the numbers are negative across the country.

The weakest areas are Florida, California, Nevada, and Arizona -- what Zandi calls the "usual suspects" -- where foreclosures are highest and likely to rise. The worst market: Miami, where the 2009 median home price of $183,530 is expected to fall 33%.

But Zandi also points to less discussed regions where prices are still inflated relative to rents, like the Pacific Northwest and New York through Virginia.

If there's a bright spot, it's pockets of the Midwest -- states like the Dakotas, Kansas, and Nebraska, which have stronger economies based on agricultural and energy industries.

Then there's Pittsburgh, which didn't have much of a housing bubble to begin with and is the only market projected to grow next year, up 0.41%.

The good news? "It's clear we're closer to the end of this crash than the beginning," says Zandi. Housing is more affordable, and construction is still low, so sales will eat up excess inventory. "We're moving in the right direction, and that's reason for optimism," he says.

Another plus: He says there's almost zero possibility of another U.S. housing bubble anytime soon.

Home sales contracts soar

2009-12-06T05:49:00.001-08:00

Home sales contracts soar
National Association of Realtors index spikes 32% as buyers take advantage of first-time homebuyer tax credit.
By Les Christie, CNNMoney.com staff writer
December 2, 2009: 02:51 PM
NEW YORK (CNNMoney.com) -- Americans are inking a lot of deals to buy homes.

In October the National Association of Realtors recorded an unprecedented ninth consecutive month of increases in the number of signed contracts.

Although these are not closed sales, and some deals can fall through, signed contracts are a good indicator of where the housing market is headed.

Between September and October NAR's Pending Home Sales Index rose 3.7% to 114.1 from 110 in October. But the index is 31.8% higher than a year ago, when it was 86.6. That's the biggest year-over-year gain in the history of the index. The PHSI is also at its highest level since March 2006.

NAR's chief economist, Lawrence Yun, gives much of the credit for increased sales to the homebuyer's tax credit, which first-time homebuyers could claim to reduce their taxes by up to $8,000.

"The tax credit is helping unleash a pent-up demand from a large pool of financially qualified renters, much more than borrowing sales from the future," Yun said in a prepared statement.

The credit had be due top lapse on Dec. 1, so many October buyers may have acted to get in under the wire.

However, the credit has been extended through the middle of 2010 and expanded to include many move-up buyers. The housing industry hopes that will keep sales perking until the economy picks up and markets return to a more normal condition.

7 tips for buying foreclosures

2009-11-22T11:44:00.001-08:00

7 tips for buying foreclosures
There are a lot of great deals on the market, but buyers beware: Purchasing a foreclosure is rife with pitfalls.
By Les Christie, CNNMoney.com staff writer
November 19, 2009: 04:12 AM
NEW YORK (CNNMoney.com) -- Foreclosures are dominating the housing market. Right now, there are 1.5 million such homes for sale, and more are expected to be available soon. That provides both opportunities and pitfalls for bargain hunters.

Just because prices are low doesn't mean you should make snap decisions or buy something that isn't right. Here are 7 tips for making sure you don't get taken for a ride.

1. Don't get caught up in a feeding frenzy

"Everybody and their grandmas are trying to buy foreclosures," said Glenn Kelman, CEO of Redfin, an online, discount broker. But that doesn't mean you should lose your head.

Banks put repossessed homes back on the market at cut-rate prices because quick sales help avoid the expense of upkeep, such as property taxes, insurance, heat and electricity.

Those lowball prices represent golden opportunities, but they also attract dozens of buyers who may bid until homes are no longer bargains.

Don't get caught up in a bidding war. Instead, carefully calculate what you want to spend and do not exceed that price.

2. Contact lenders directly

Smart buyers establish relations with asset managers at banks. This may reward them with inside information or first crack at new foreclosures hitting the market.

In the case of a short sale, for example, it can give the inside edge. If a buyer is pursuing a short sale -- buying a home for less than what the current owner owes on the mortgage -- she should talk directly to the property's asset manager. That way, if the short sale falls through and the bank repossess the house, the asset manager knows she is still interested. It could lead to a quick sale without other bidders.

3. Get pre-approved from the lender you want to buy from

If you're trying to buy a property from, say Bank of America, it can help to get a pre-approved mortgage from Bank of America. Doing so may cause lenders to look more favorably on your bid if its similar to others.

Plus, you're not locked in if other lenders offer you better terms. You can always change your mind and get your mortgage from another source.

4. Consider fix-ups

Most REOs, the industry term for bank owned properties, are sold as is. "The conventional wisdom is that banks will do nothing to the houses before the sale," said Kelman.

That can be problematic today because so many foreclosed homes are in less-than-mint conditions. Often, the former owners were struggling to pay their bills and may have neglected routine maintenance. Or, they may have trashed the properties before leaving

In 25% of cases, homebuyers persuade lenders to fix some of the problems before the sale closes. Most of the time, banks would rather sell the house to the next available bidder -- one who doesn't ask the bank to pay for repairs.

So be willing to consider a home that needs some work -- but budget accordingly.

5. Hire a real estate attorney

Once banks agree to sales, they often want to move fast and load contracts up with legal mumbo jumbo. As a result, buyers often do not have the time or expertise to figure all the angles.

The solution is to hire a real estate attorney -- even in states where home sales are usually completed without one. Considering you're making a six-figure investment, the legal fees are cheap insurance against the risks.

6. Wait to make an offer

Homebuyers may be well served to wait before making an offer. Let the house sit on the market for a few days, giving others a chance to set the bidding tone. Then jump in.

"Talk to the agent selling the property," said Kelman. "The agent may tip his hand. Call up and ask, 'Should I make an offer? What should I come in at?'"

The agent may tell you he has offers at, say $300,000 and you should bid bit bit higher, giving you an advantage over earlier bidders.

7. Tour properties with contractors

With so many REOs in seriously deficient shape, it's essential to go over every inch with someone who can spot problems and tell you how much it will cost to remedy them.

A foundation crack can be a minor problem or a deal breaker, and most ordinary homebuyers have no way of telling the difference. Like an attorney, a contractor can be very worthwhile insurance.

Back to Business With F.H.A. Help, Easy Loans in Expensive Areas

2009-11-22T10:38:00.000-08:00

Back to Business
With F.H.A. Help, Easy Loans in Expensive Areas

LinkedinDiggFacebookMixxMySpaceYahoo! BuzzPermalinkBy DAVID STREITFELD
Published: November 19, 2009
SAN FRANCISCO — In January, Mike Rowland was so broke that he had to raid his retirement savings to move here from Boston.

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Policy changes in insurance, while introduced on a temporary basis, are becoming so popular that they could prove difficult to undo.

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Risky Incentives
This series examines the battles taking place to reshape the financial industry.

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U.S. Mortgage Delinquencies Reach a Record High (November 20, 2009)
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From left to right, Jordan Kurland, Mike Rowland and Michael Bedar, in front of the building they bought in San Francisco for nearly a million dollars, with help from the Federal Housing Administration.
A week ago, he and a couple of buddies bought a two-unit apartment building for nearly a million dollars. They had only a little cash to bring to the table but, with the federal government insuring the transaction, a large down payment was not necessary.

“It was kind of crazy we could get this big a loan,” said Mr. Rowland, 27. “If a government official came out here, I would slap him a high-five.”

In its efforts to prop up a shattered housing market, the government is greatly extending its traditional support of real estate, including guaranteeing the mortgages of middle-class and even upper-class buyers against default.

In 2007, the government did not insure a single mortgage in this city, one of the most expensive in the country. Buyers here, as well as in Manhattan, Santa Monica and every other wealthy area, were presumed to be able to handle the steep prices and correspondingly hefty down payments on their own.

Now the government is guaranteeing an average of six mortgages a week here. Real estate agents say the insurance is such a good deal that there will soon be many more.

Policy changes like the shift in insurance, while often introduced on a temporary basis, are becoming so popular that they could prove difficult to undo. With government finances already under great strain, the policy expansions are creating new risks for American taxpayers.

The Internal Revenue Service is giving tax rebates to first-time buyers, and soon to move-up buyers, in a program beset by accusations of fraud. And the government agency that issues mortgage insurance, the Federal Housing Administration, is underwriting loans at quadruple the rate of three years ago even as its reserves to cover defaults are dwindling. On Thursday, the Mortgage Bankers Association said more than one in six F.H.A. borrowers was behind on payments.

F.H.A. insurance was created for minority and low-income families who could not come up with the traditional down payment of 20 percent required by private lenders. Buyers receive loans from government-approved lenders and are required to document their income and assets. They must pay a substantial insurance premium of 1.75 percent of the loan. But in return, their down payment can be as low as 3.5 percent.

For decades, most F.H.A. loans were in low-cost states like Texas and Michigan. Under the agency’s loan limits, houses along the coasts were usually too expensive to qualify. In 2007, fewer than 4,400 F.H.A. loans were made in California, according to the research firm MDA DataQuick, and none were in San Francisco.

The Economic Stimulus Act of 2008 helped change that by temporarily doubling the maximum loan the F.H.A. insured, to $729,750. A two-unit property like the one bought by Mr. Rowland and his friends can be insured for up to $934,200.

“F.H.A. financing was a lost language in San Francisco, the real estate equivalent of Aramaic,” said Michael Ackerman, the agent who represented Mr. Rowland and his friends. “Once the limits were raised, smart buyers started calling.”

The F.H.A. has insured more than 107,000 loans so far this year in the state, according to DataQuick, about 270 of them in San Francisco.

Condominium buildings approved for F.H.A. financing — a relative handful — trumpet the news on their Web sites. The Soma Grand, a new 246-unit building downtown where one-bedrooms cost in excess of $500,000, received F.H.A. certification early in the summer. A half-dozen buyers since then used F.H.A. insurance.

At Guarantee Mortgage Corporation, which has 150 mortgage brokers in the Bay Area, Seattle and Portland, Ore., F.H.A. loans have grown to about 15 percent of its business, from less than 3 percent a few years ago.

“It sure has helped us put a lot of deals together,” said Guarantee’s chief sales officer, Bob Siefert. He predicts that a quarter of Guarantee’s deals will soon be guaranteed by the F.H.A.

Some F.H.A. borrowers here say they have the cash for a full down payment but would rather invest it in the stock market or use it for remodeling. Others, like Mr. Rowland and his friends, simply do not have the money required by private lenders — which would have been nearly $200,000, in their case.

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Louise Story contributed reporting.

Housing Agency’s Cash Reserves Down Sharply

2009-11-15T05:07:00.001-08:00

November 13, 2009
Housing Agency’s Cash Reserves Down Sharply
By DAVID STREITFELD
The Federal Housing Administration, the government agency whose loan-insurance programs have become a crucial source of support for the housing market, said on Thursday that its cash reserves had dwindled significantly in the last year as more borrowers defaulted on their mortgages.

The agency released an audit that spelled out the rapid deterioration of its finances. It is tightening loan standards in hopes it will not become another drain on the United States Treasury, but is reluctant to clamp down so much that it snuffs out the tentative recovery in housing.

How successfully the agency walks this tightrope could well determine whether the recovery gathers force, or whether home prices slide again — perhaps creating a fresh economic downturn.

As recently as a few weeks ago, the F.H.A. had said that even under the bleakest economic forecast, its cash cushion would quickly recover. On Thursday, it abandoned that position.

“There is a real risk. Nobody has a crystal ball,” Shaun Donovan, secretary of housing and urban development, said in an interview. “We recognize there is a possibility that the reserves go below zero and stay there.”

Still, Mr. Donovan stressed that the agency, which had a role in one out of five home purchases in the last year, would not need a direct taxpayer bailout.

“There is no extraordinary action that Congress or anyone else needs to take,” he said during a news conference in Washington.

Instead, the agency would borrow from the Treasury, under authority previously granted by Congress. In the worst case, involving a protracted recession, the audit said the F.H.A. would run out of capital in 2011 and have to borrow $1.6 billion from the Treasury to pay insurance claims, a relatively small sum.

That is not a situation the agency considers likely. In line with many analysts, the agency expects the housing market to turn down again over the next nine months and then to recover. Under this projection, foreclosures would be manageable and the reserves would quickly grow.

The F.H.A.’s annual audit was scheduled for release last week, but was mysteriously delayed at the last minute. On Thursday, as it released the document, the agency explained that it wanted its auditors to include more negative forecasts as a way of understanding the worst-case risk.

The audit showed reserves to be 0.53 percent of the total portfolio, far below the 2 percent minimum mandated by Congress and far less than the audit last year had forecast. In 2007, just before housing prices began their worst slump in decades, the reserves were above 6 percent.

Ann Schnare, a consultant who has analyzed the F.H.A. balance sheet, put the situation this way: “They’re running on empty.”

As the fortunes of the F.H.A. have deteriorated over the last few months, the agency has become a focal point for dissatisfaction over federal efforts to prop up the housing market.

It is drawing comparisons to Fannie Mae and Freddie Mac, the giant agencies created by Congress to keep the mortgage market supplied with cash by buying up pools of home loans. With borrowers defaulting in the downturn, Fannie and Freddie have required enormous bailouts.

The F.H.A.’s role differs from that of Fannie and Freddie. Through its insurance, it helps marginal buyers get loans if they do not have the 20 percent down payment a traditional bank loan requires. The agency requires a 3.5 percent down payment. Critics say it went overboard and insured too many loans to unqualified borrowers in 2007 and 2008, a position with which the agency itself now agrees.

Nearly one in five loans it insured in 2007 falls into the category of “seriously delinquent,” it said Thursday. These loanholders are at least three months behind in their payments. For 2008 loans, 12 percent of them were seriously delinquent.

The F.H.A. says it is insuring loans to more financially secure buyers with higher credit scores. The average credit score of new borrowers, it said, is 693, compared with 633 two years ago.

In a sense, the agency is bulking up and giving as many loans as it can to qualified buyers as a way to diminish the relative size of the pool of problem loans. It guaranteed more than $360 billion in mortgages in the last year, four times the amount of 2007.

Critics say this is only increasing the size of the ultimate peril.

“They keep saying they’re going to outrun their problems, but some way, somehow, the taxpayer is going to end up on the hook,” said Edward Pinto, a former executive with Fannie Mae.

During the news conference, Secretary Donovan and the agency’s commissioner, David H. Stevens, said that the cash reserve, the figure that has fallen to 0.53 percent of loans outstanding, was merely a supplement to a much larger fund that the F.H.A. was holding against expected losses. Between the two accounts, the agency has $31 billion to cover losses over the next 30 years.

The F.H.A.’s problems stem from its rapid transition from a wallflower to the most popular student in class.

During the housing boom, buyers flocked to private subprime lenders, who offered deals that required no money down and no documentation. The F.H.A., which required its token down payment and documentation of the borrower’s earning power, lost ground.

But as the market tumbled and the subprime outfits failed, F.H.A. loans became the next best thing. Brian Montgomery, who ran the F.H.A. for the Bush administration, said in a recent interview that the agency felt it had no choice but to open the doors to a broader group of applicants.

Citing pressure from Congress and the White House, Mr. Montgomery said: “We had to let these loans through.”

Mr. Montgomery, now a consultant, says that anyone dismayed by the possibility of yet another bailout should feel a different emotion toward the Department of Housing and Urban Development and, for that matter, himself: gratitude.

“They should be going over to the H.U.D. building and frankly thanking the career staff for saving them from a depression,” Mr. Montgomery said.

Louise Story contributed reporting.

Tax Credit Update

2009-11-09T14:32:00.000-08:00

NEW YORK (CNNMoney.com) -- President Obama signed an extension and expansion of the first-time homebuyers tax credit on Friday.

The $8,000 credit was scheduled to lapse on Dec. 1 but will now be in effect through the end of June. Homebuyers must sign a contract before April 30 and close by June 30. The income limits were also raised: Single buyers can now earn up to $125,000 and still get the full credit while a married couple can earn $225,000.

The bill also made more homeowners eligible to claim the credit on their taxes. First-time buyers -- those who have not owned a home in the past three years -- still qualify for an $8,000 rebate. But now people who want to trade up can also qualify. Those who have owned and occupied a residence for at least five years out of the past eight can claim a $6,500 tax credit if they close on a purchase by the end of June.

"The new version of the tax credit has the potential to stimulate the housing market even more than the old version due to the fact that more people will qualify under the new rules," said Gibran Nicholas, chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.

Who qualifies?

Nicholas provided four scenarios illustrating how the tax credit rules for existing homebuyers will apply:

• Harry owned a home in 2001 and 2002 but sold it to relocate for a job. He would qualify for the $8,000 first-time-buyer credit because he has not owned a home in the past three years.

• Sue purchased a home in 2004 and has lived there since. If she decides to buy a new home, she would qualify for the $6,500 tax credit because she has lived in the same residence for five consecutive years in the past eight.

• Jane purchased her home in 2002, lived there for five consecutive years before she rented it out in 2007. She would qualify because she was an owner/occupier for at least five consecutive years in the past eight.

• Mark purchased a home in 2006 and lived there for the past three years. He would not qualify because he is neither a first-time homebuyer nor someone who lived in the same primary residence for five consecutive years out of the past eight.

How it helps the economy

Legislators and industry experts expect that the credit will encourage buyers such as Jane and Sue to move up their purchase plans.

"This bill will shift demand from the second half of 2010 into the first half," said Pat Newport, a real estate analyst with IHS Global Research. "As a result, home sales and prices will get a boost in the first half of 2010, with payback in the second."

That's not a bad thing, according to Bill Kilmer, vice president of advocacy for the National Association of Home Builders. It's important to stabilize real estate markets quickly to help bring the economy out of its tailspin.

The original $8,000 tax credit appears to have helped accomplish that goal: Home prices have inched up the past few months, according to the S&P/Case-Shiller Home Price Index.

Would it have happened anyway?

But critics still see the program as being ineffectual because it rewards buyers who would have purchased a home anyway. Newport estimates that fewer than 400,000 of the 2 million who have claimed the original credit made their purchases solely because of the tax advantages.

Furthermore, buyers do not, in reality, receive the entire benefit. "The credit helped prices stabilize," said Newport. "So the credit has been split between seller and buyer. The sellers are getting higher prices and buyers paying more than they would have without it."

The housing industry, however, is pleased with the extension, although the credit has not been quite as effective as they hoped.

The industry thought the credit would provide a ripple effect, with sales to first timers triggering as many three additional "move-up" sales.

That did not happen, according to Lawrence Yun, NAR's chief economist.

"It did not have the chain reaction impact it was supposed to," he said. "Instead, many first-timers turned to vacant, foreclosed or other distressed properties the sellers of which were unlikely to be move-up buyers."

So, the tax credit helped prop up the low end of the market without having much impact on the rest of the spectrum. Expanding the benefit to existing homeowners should boost those segments. That should produce additional benefits, according to Yun.

"Preventing further price decline or even nudging prices up a bit stabilizes housing wealth, which makes homeowners more comfortable in their spending," said Yun. "They're more likely to go out to the stores or buy a new car. That provides a boost to the overall economy."

Tip of the Week: GA Hot in Foreclosures

2009-11-08T17:11:00.000-08:00

From: "Luther Ragsdale II Broker/C.E.O. Platinum Real Estate"

Platinum Real Estate

Tip of the Week:

Atlanta is Hot in Foreclosures

Now is the time to buy and take advantage of the great prices in our area on foreclosure homes. Georgia ranks #5 on the list of states that have the most savings when purchasing foreclosure properties.
Experts say that Georgia's foreclosures are up 7% from last month and 26% from last year at this time. This means it is a great opportunity to purchase properties at abnormally low prices. Buyers on average can save up to 46% when purchasing foreclosure properties, getting more house for less money. Research shows that the states with the largest percentage of savings based on September 09 average sales price verses the average foreclosure sales price, Georgia is 5th on the list at a 46% savings. Now is the time to purchase your dream home or investment property before these low prices start to disappear.

Now is also a great time to have your Platinum agent assist you in finding the property to fit your needs. With 6 locations in Cumberland, Gwinett, Buckhead, Perimeter, Decatur, and Old National Highway there is an agent in your area - north, south, east or west!

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www.PlatinumRealEstate.com
Office: 404-559-0332

Home prices continue rebound

2009-11-01T09:27:00.001-08:00

Case-Shiller index shows fourth straight month-over-month increase. Year-over-year decline moderates more than expected.
By Ben Rooney, CNNMoney.com staff reporter
October 27, 2009: 12:01 PM
NEW YORK (CNNMoney.com) -- Home prices rose for the fourth month in a row during August and suffered a smaller-than-expected annual drop, according to a report issued Tuesday.

Prices in the S&P Case-Shiller Home Price index of 20 cities rose a non-seasonally adjusted 1.2% in August. It was the fourth consecutive monthly increase and followed a 1.6% gain in July.

Prices were down 11.3% versus August 2008, but that drop was less severe than expected. Analysts surveyed by Briefing.com had forecast an 11.9% year-over-year drop.

"Broadly speaking, the rate of annual decline in home price values continues to improve" said David Blitzer, chairman of Standard & Poor's index committee.

While many U.S. markets remain down versus this time last year, the relative rate of decline "has shown some real improvement," Blitzer added.

Home prices improved on an annual basis in 19 of the 20 major metropolitan markets in the survey.

State by state. In California, home prices have recovered notably from depressed levels in recent months, according to the report.

Home prices rose 2.8% in San Francisco during August, while San Diego prices were up 2.5% and Los Angeles gained 1.8% in the month.

Minneapolis had the biggest increase, with home prices rising 3.2% from July to August.

But prices continued to slide in areas that have been hit hard by foreclosures. Prices dropped 0.5% in Cleveland and 0.3% in Las Vegas during August.

A shaky recovery. Overall, the housing market has been stabilizing as low home prices and attractive mortgage rates, as well as government tax credits, have revived anemic home sales.

However, the market remains hampered by unemployment, which rose to a 26-year high last month. And real estate analysts warn that the expiration of a popular new homebuyer tax credit next month could stifle the rebound in home sales.

The improvement in home prices could also be hindered by a "wall of supply" coming to market this spring from private sellers and foreclosures, warned Ian Shepherdson, chief U.S. economist at High Frequency Economics.

Given the long-term challenges facing the housing market, the outlook for home prices remains grim.

Home values are predicted to drop in 342 out of 381 markets during the next year, according to a recent study by financial information and analysis firm Fiserv.

Fiserv expects the national median home price to drop 11.3% by June 30, 2010.

What do investors look for?

2009-11-01T09:23:00.001-08:00

John Adams
Published: Yesterday

Last week we saw that some 35 percent of home sales during the past year were bank-owned foreclosures or government-owned resales. That is a huge increase from just a few years ago, when sales of these homes were not a significant part of the Atlanta market. Two factors cause these homes to sell at dramatic discounts:

● Lenders and government agencies are charged with disposal of these properties regardless of price. They do not have the luxury of waiting until the market improves; and

● These sellers have a policy of selling the properties in “as-is” condition, meaning no repairs and no disclosure statements. The buyer takes all the risk. The only potential buyers are investors looking for a bargain.

So, what are the specific characteristics investors look for in today’s market? There are many, but the main three are:

This is the most important part of the equation. The acquisition price needs to be low enough to cover all needed repairs, carrying costs, marketing expenses and still represent a bargain to the end consumer.

The price paid for the acquisition is critical to all later profitability. In the case of Atlanta’s post-foreclosure marketplace, investors have found a “market bottom.” Almost anything will sell very quickly if it is offered in the $30,000 to $40,000 range. Furthermore, the market is getting hotter.

While the uninitiated might think that the level of repairs necessary would be the most important consideration of an investor, such is not the case. Instead, price conquers all. Sometimes the best deals require cash for major systems as well as structural repairs.

That said, every investor hopes to minimize capital outlays for the rehab. Smart investors are experts at estimating overall repair costs.

Investors always look for pride of ownership in the neighborhood. Graffiti, junk cars, “boarded-up” or vacant homes are all indications of problems in the neighborhood. Wise investors try to avoid these signs.

The good news is that Atlanta’s investor community is working hard to absorb this glut of bank-owned homes. The question no one can answer is when the supply of these homes will begin to decline.

John Adams is a broker and investor. He answers real estate questions on radio station WGKA (920 AM) every Saturday at noon. For more real estate information, visit www.money99.com.

AP Mobile. © 2009 The Associated Press. All Rights Reserved.

NEW PLATINUM OFFICE LOCATIONS

2009-10-25T17:18:00.000-07:00

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What housing bust?

2009-10-25T17:01:00.000-07:00

What housing bust?

During the past three years, home prices grew in the beer-guzzling heartland and fell in the wine-sipping coastal states.

By Les Christie, CNNMoney.com staff writer

October 21, 2009: 10:49 PM

NEW YORK (CNNMoney.com) -- If you're a beef-eating, beer-guzzling, pick-up driving resident of heartland America, there's a good chance you escaped the housing bust. But pesto-chomping, chardonnay-sipping, hybrid-driving city-slickers were probably out of luck.

Over the past three years, 23 states recorded home price gains in the majority of their metro areas, according to analytics firm Fiserv. And where were most of those gainers? In much of the so-called heartland: the South, the Plains and most of the non-coastal West.

Meanwhile, the 16 states that posted declines were led by much of New England and the Northeast, plus California, Florida, Nevada and Arizona.

Most telling, however, was that the 12 remaining states -- those that posted mixed results in their metro areas -- were found in every region of America.

And even in the mixed results states, such as New York, the bust hit "blue" metro areas, like New York City and Long Island (both down 21.7%), and spared "red" upstate cities. Buffalo prices grew 8.3%, Syracuse climbed 8.4%, Utica gained 10.4%, and Binghamton was up 17.7%.

The states where metro markets rose generally share two characteristics, according to Mark Fleming, chief economist for First American CoreLogic: low prices and open space.

"In markets with a lot of developable land, volatility is much reduced," he said.

That lack of volatility meant house prices did not skyrocket during the boom, which left them less likely to crash after the bubble burst.

Foreclosure factor

In bubble markets, such as California and Florida, many homebuyers struggled to afford homes when prices were experiencing double-digit growth. As a result, they tapped exotic mortgage products -- sub-prime hybrid ARMs, interest-only loans, option ARMs -- to get in the door.

These mortgages often proved disastrous once home prices stopped growing. Defaults multiplied, bank repossessions soared and home prices, as a consequence, nose-dived.

In contrast, home prices remained more affordable in states where land was available. That's because the constant influx of supply kept demand -- and thus prices -- more in check. Homebuyers did not need to resort to toxic mortgages and there was little real estate speculation because price gains were too modest to make "flipping" profitable.

Texas is the poster child for these "steady Eddie" states. House prices during the past three years rose in all 26 metro areas with gains ranging from 2.8% for Dallas, the second largest metro area, to 9.7% in Houston, the largest, to a whopping 32.5% in Odessa.

Texas illustrates that housing markets show considerable "elasticity of supply," according to Fleming. When demand -- and prices -- for housing go up, developers can, quite quickly, build new homes to meet that need -- if there's land available. That quick response tends to prevent prices from running away as supply increases to meet demand. Texas real estate in a nutshell.

Of course, that also means sprawl. And a lot of it.

Some states, Illinois being a prime example, contain both types of markets. There, home prices in most markets rose while Chicago, the largest market -- and the the one most lacking developable land -- absorbed a 25.2% decline.

While places such as Manhattan and San Francisco have natural restrictions on growth -- both are essentially surrounded by water -- some cities, especially in the Northeast and the West Coast, have artificially restricted growth.

Those policies are meant to promote density in core areas, preserve nearby green space and eliminate sprawl. Urban planners of smart growth cities intend the policies to foster an exciting, more urban lifestyle, while facilitating easy access to outdoor recreation and nearby food sources.

Portland is the shining example of smart growth. In 1973, Oregon passed an urban growth boundary law, which required that each of the state's municipalities set a line in the sand on which open land could be developed.

The policy is credited with fostering Portland's excellent reputation as an attractive, livable city -- but it may have been too successful. Population growth has been so robust that some residents have complained about too much congestion in its core. And some building has been pushed out into nearby areas, such as in adjacent Washington, that have less strict policies.

Meanwhile, the home price in Portland recorded a more than 86% gain from 2000 through the middle of 2007. The median, at $255,000 during the second quarter of 2009, is well above the national average of $174,000.

In contrast, a Texas city like Dallas, for example, which is practically an anti-Portland, recorded only 26% appreciation over the same period.

The most notable exceptions to the Budweiser/Beaujolais divide are Midwestern cities where economic turmoil has played havoc with housing markets. Ohio and Michigan, the two states hit hardest by auto-industry job losses, both had many more cities record losses than gains.

In Ohio, only the smallest and least industrialized metro areas, Weirton-Steubenville and Lima gained over the 36 months. Meanwhile, the heavy industry cities of Toledo, Youngstown and Cleveland produced big losses.

All but one of Michigan's 15 metro areas lost home value, with Detroit falling 51.7%, the worst case.

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House approves Lee bill to modernize the FHA

2009-09-20T13:38:00.001-07:00

WASHINGTON—The House has unanimously approved a bill sponsored by Rep. Chris Lee, R-Clarence, and Rep. John Adler, D-N. J., aimed at modernizing the Federal Housing Administration.

The bill heightens oversight of lenders that offer FHA-insured loans, boosts the agency’s staff and technology, and provides the federal housing secretary the authority to work to minimize foreclosures on FHA loans.

“This bipartisan legislation implements a number of smart, commonsense reforms that will help responsible borrowers gain access to safe, affordable mortgages,” Lee said. “We cannot keep the dream of homeownership within reach of working families unless we have an FHA that works better.”

Lee and Adler are colleagues on the House Financial Services Committee, which has jurisdiction over the FHA. They introduced the bill in July.

New home building increased in August

2009-09-20T11:25:00.001-07:00

NEW YORK (CNNMoney.com) -- New home building increased in August, a government report said Thursday, further signaling that home builders are regaining their confidence in the housing market recovery.

The Census Bureau reported Thursday that builders broke ground for 598,000 new homes during August, up 1.5% from a revised 589,000 in July. That was considerably higher than industry experts were predicting: The consensus analyst forecast compiled by Briefing.com was for 583,000 new starts.

Building permits rose 2.7% to 579,000 from a revised 564,000 in July.

On Wednesday, the National Association of Home Builders reported their index of homebuilder confidence had risen a point to 19, its highest level since May 2008.

Helping to boost demand for new homes has been the first-time homebuyer tax credit, which has enabled many builders to reduce their inventories of unsold homes.

"Many builders have not only reduced excess inventory, but now are actually reporting such low inventory that they need to start more homes to replace those they've just sold," said Brad Hunter, chief economist for Metrostudy, a real estate analytics firm.

Both starts and permits are still well off from their levels of a year ago. The number of starts is down 29.6% from 849,000 last August, and permits dropped 32.4% from 857,000 last year.

The housing starts report was the latest in a series of releases that indicate that the market may have bottomed. These include improvement in new home sales, existing home sales and housing prices.

There are some clouds on the horizon. Foreclosures continue to trouble many markets; another 76,000 homes were repossessed by banks in August. That was actually an improvement over recent months, but the expectation is that the rate of foreclosures will begin rising again.

That's because a great number of non-conventional mortgage loans, including interest-only mortgages and option ARMS, will reset over the next year or so, yielding substantial increases in the monthly mortgage payments for homeowners. Many people will not be able to afford the increases.

With interest-only loans, homeowners pay just the interest for a fixed number of months, usually 60, before they have to start paying off the mortgage at fully amortizing rates. There was an explosion of these mortgages issued in 2005, so many will reset in 2010.

Option ARMs are loans in which borrowers are permitted to make minimum payments every month, payments that are less than their monthly interest charges. Many borrowers use that option for as long as they can, but once the mortgage balance reaches between 110% and 125% of the original loan balance, the loans reset into a fully amortizing mortgage -- and payments rise steeply since the balances themselves have also gone up.

Real estate analysts predict a spike in these resetting loans, which might force another wave of homeowners into foreclosure.

The fear is that all these foreclosed homes will flood the market and drive down prices even more for existing homes, making it harder for new-home builders to compete.

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Housing recovery to depend on location

2009-09-20T11:22:00.001-07:00

By Michelle E. Shaw

Published: Sep 18, 2009

Metro Atlanta home prices may have hit bottom this summer after two years of decline, but how fast they’ll rebound - or if they ever will - is a trickier calculation.

Some local experts are optimistic.

“I think we can make up 70 percent of the difference in the next year and a half,” said Steve Palm, president of SmartNumbers, a real estate research firm in Marietta.

But some homeowners will do better than that, and some won’t. What happens with your house will depend on where you live, when you bought and whether there was a lot of new homebuilding near you when the market collapsed.

In the 30075 Zip code in Roswell, for instance, median resale prices were $315,000 in this year’s second quarter, compared to $373,000 in the same period of 2007 and $318,000 in 2005, according to data from SmartNumbers.

That contrasts sharply with the nosedive in the 30058 Zip code in Lithonia, where median prices were $51,448 in the second quarter, less than half the $129,900 median for the same period of 2007 or $131,600 for 2005.

Key factors in such wild swings of fortune include the amount of inventory in an area and the number of foreclosures and other distress sales. The latter skew median prices downward -- severely if the market for conventional sales is so slow it does not offset fire-sale foreclosures.

Areas that were on the suburban fringes of the housing boom in 2006 and 2007 are going to struggle longer with lowered home values and a slow resale market, one expert said.

“You don’t see as many problems in north Fulton because it was already built out and it was relatively expensive for builders to go in and buy large tracts of land and put a lot of homes there,” said Mark Vitner, managing director and senior economist for Wells Fargo in Charlotte.

“So essentially the areas that had the most problems are the areas where it was the easiest for builders to go and quickly put up a lot of homes.”

Clayton and Rockdale counties and south Fulton County, he said, are examples of such areas.

“These places are having very significant problems,” he said, “and that’s where most of the oversupply is.”

Two Riverdale Zip codes, 30296 and 30274, saw median prices plummet by more than two-thirds, according to the SmartNumbers data. The second quarter median price this year was $33,999, down from $106,500 in 2007 and $131,600 in 2005.

A wave of foreclosures in Clayton County - more than 7,400 homes have been listed this year alone, according to Equity Depot - has weighed down the median price. Real estate experts say prices will have a better chance at recovery once all of the distressed properties have been sold.

More than 130,000 homes were sold in 2006 at the height of the building boom, according to Metrostudy, a national real estate tracking firm with a office in Atlanta.

But by the end of 2007, shortly after the average home price reached its apex, closings had fallen to around 105,000. They fell again to about 80,000 in 2008. The number should be about steady or slightly up for this year, said Eugene James, director of Metrostudy’s Atlanta office.

On average, a home bought in 2006 or 2007 has lost about 20 percent of its value, according to an analysis by Prudential Georgia Realty.

The most recent Case Shiller home price index, a widely watched national measure, showed the Atlanta region with a 1 percent seasonally adjusted gain from May to June. It was the first monthly uptick since 2007 and gave real estate pros hope that battered home prices will begin rising.

Values in some stable and established areas have held up better - also explaining why places like Roswell, Peachtree City and Decatur have not been hit as hard.

Homes bought in 2005, 2004 and 2003 are estimated to have lost 16, 12 and 9 percent respectively.

Those bought before 2000 are likely to have seen an appreciation in values, the numbers say. In other words, home values are much like 401(k)s - many people who’ve been in homes for a few years or more still have booked gains, though they’ve been trimmed by price drops of the past couple years.

Those who bought closer to the market peak, however, have a much tougher hill to climb.

Eddie and Kimberly Morris, who bought their Douglas County home in 2002 for $250,000, fear they are in the latter group, even though they’ve been in the house for seven years.

The couple, who have three children, saw the seven-bedroom, five-bathroom home as “a steal at the time” because it appraised for about $390,000, Eddie Morris said.

Now the estimated appraisal is $100,000 less than the Morrises paid, and there are multiple foreclosures in the golf course community. A house nearby recently sold for less than $150,000, Morris said.

“This is not where we thought we’d be right now, as far as equity in the house goes,” he said. “We couldn’t move if we wanted to.”

Thirty miles east, Amy and Duffy Beigel want to move, but they can’t afford the loss they’d face on their Capitol View Manor home in southwest Atlanta. They bought it in 2005 for $147,000; the home was appraised for $110,000 a few weeks ago, said Amy Beigel.

The three-bedroom, one-bathroom home is now too small for the Beigels and their three children. The disappointing appraisal put on hold their plans to move closer to family in New York she said.

“We knew things were bad, but we were hoping things would be better than that,” Beigel said. “I guess now we just have to wait and see what happens.”

Palm, the real estate analyst who forecasts the region will make up most of its price declines in about 18 months, noted that inventory is steadily declining amid bargain-hunting by buyers and little new building activity.

“We have 30,000 fewer houses on the market than we did in 2007, so that helps,” he said. “And if we get any type of demand back, that price is coming back.”

How far and how fast is impossible to predict, said another expert.

“As far as prices returning to 2007 levels, it is a mixed bag,” said Alan Wexler, president of Databank Inc., a real estate analysis firm. “I don’t see prices ... in many areas - not all, but many - returning to the past normal for quite a while. There will be a ‘new normal.’ ”

Prudential Georgia Realty owner Dan Forsman thinks it could be three or four years before overall prices increase significantly. If the job market doesn’t get better, it could take longer, he said.

“I think the second half of 2010 will be a strong transaction market, but I don’t expect to see any increase in average sales price,” he said. “So as we roll into 2011, there isn’t going to be much inventory and there will be far fewer foreclosures. I think 2012 and 2013 will be seller’s markets.”

AP Mobile. © 2009 The Associated Press. All Rights Reserved.

Act fast! Homebuyer tax credit ends soon

2009-09-13T06:58:00.001-07:00

Act fast! Homebuyer tax credit ends soon

There's barely three months left before the $8,000 tax credit for first-time buyers ends -- and it can take that long to close on your new home.

By Les Christie, CNNMoney.com staff writer

Last Updated: August 27, 2009: 3:38 PM ET

NEW YORK (CNNMoney.com) -- Use any metaphor you want: the ticking clock, sands running through the hourglass or pages falling away from the calendar. The fact is, time is running out to claim the $8,000 first-time homebuyers tax credit.

Passed earlier this year as part of the economic stimulus package, the credit is good for up to $8,000, or 10% of the purchase price, and applies to people who have not owned a home in the previous three years. (There are some income restrictions.) The best part: Unlike a similar program from 2008, the credit does not have to be repaid.

The bad part: It ends on Dec. 1.

Because it usually takes around 90 days to close on a house after a contract is signed, buyers have very little time left to act. As of Thurs., Aug. 27, there were only 96 days left before the credit ends.

"Buyers have to get a home under contract very, very soon," said Tom Kunz, CEO of Century 21. "They probably should get out looking."

Sense of urgency

What they will find may surprise them: Many of the prime properties have already been snapped up. Home sales have been on the upswing, and inventories are so depleted in hot markets that first-time buyers are struggling to find homes in their price range. (Check prices in your city.)

In Whittier, Calif., for example, there are few repossessed homes for sale. Those are easy to buy because there isn't a lot of red tape and the bank wants to get rid of them as quickly as possible. Instead, most of the properties are short sales, where the sellers have to convince their lender to let them sell the house for less than they owe.

"That's why there's such a sense of urgency now," said Irma Tapper, a Century 21 real estate agent in Whittier. "The banks have to approve short sales, and they're taking three to six months to do that."

That means a first timer putting a bid on a short-sale might not get an answer form the bank until well after the Dec. 1 deadline for the tax credit. So when an actual repossession listing hits the markets, it creates a feeding frenzy.

Chuck Whitehead, who runs the Coldwell Banker agency in Temecula, Calif., said one recent listing hit the market on a Friday and by Monday there were 57 bids.

The National Association of Realtors attributes much of this activity to the first-time buyer tax credit. It estimates that 1.8 million buyers will file for the credit, and 350,000 of them wouldn't have been able to buy without it.

"It makes a big difference because most of these clients are in a lower price range," said Michelle Edmunds, an agent with Coldwell Banker in Temecula, Calf., who has closed sales for six first-time buyers. "The houses they buy need work and normally they wouldn't want to move in because of the [less than perfect] conditions the homes are in."

That is true for Wesley Forsythe. This June, the 30-year-old computer consultant and his girlfriend bought a row house in the Fishtown section of Philadelphia. Since he paid just $80,000 for the three-bedroom, two-bath place, the credit acted like a 10% discount.

"It allowed us to expand our price range and plan additional renovations," he said. "My mortgage is several hundred dollars less than what my new rent would have been."

Forsythe applied for the credit immediately after closing, filing an amended 2008 tax return. The IRS cut him a check in less than seven weeks. He's spending it now on new hardwood floors, repainting most of the interior and renovating a bathroom. He's stretching the cash by doing much of the work himself.

Cash for Clunkers effect

Of course, analysts worry that this frenzy will dry up once the tax credit expires. They argue that without the incentive, much of the pressure on homebuyers to act quickly will vanish, and the nascent housing recovery could slump.

In many ways the tax credit is similar to the Cash for Clunkers program that ended this week. Already, auto dealers are anticipating that car sales will evaporate after accelerating during the program

Housing starts, building permits dip

2009-08-23T17:13:00.000-07:00

By Catherine Clifford, CNNMoney.com staff writer

August 18, 2009: 09:34 AM EDT

Initial construction of U.S. homes edged lower in July following a surge in the previous month, according to government figures released Tuesday.

The report had some modest indications of stabilization. "A mixed bag this time around," said Mike Larson, real estate and interest rate analyst at Weiss Research, in a research note.

Housing starts fell to a seasonally adjusted annual rate of 581,000, down 1% from a revised 587,000 in June, the Commerce Department said.

Economists were expecting housing starts to increase to an annual rate of 599,000 units, according to a consensus estimate gathered by Briefing.com.

The recession has cut deeply into consumer demand and access to financing. Housing starts for July were 37.7% lower than the July 2008 rate of 933,000.

Meanwhile, applications for building permits, an indication of future construction activity, dipped 1.8% to a seasonally adjusted annual rate of 560,000 in July. Economists were looking for the forward-looking measure to increase to an annual rate of 577,000 units.

Building permits were 39.4% below the July 2008 rate of 924,000.

"Construction activity remains low, historically speaking," said Larson. "But evidence continues to mount that the worst of the declines for this cycle are behind us."

Single-family strength: One indication of strength was single-family housing starts, considered the core of the housing market, which managed to gain 1.7% in July after rising sharply the previous month. Single-family building permits rose 5.8% in July.

As the single-family segment showed signs of improvement, however, the multi-family segment continued to get hit hard, pulling topline numbers lower.

Going forward, Larson predicts the construction market will continue to struggle because of the oversupply of foreclosed properties available at bargain basement prices.

"Buyers still have plenty of homes to choose from, and distressed and foreclosed properties will continue to flood the market well into 2010," said Larson.

Regionally, the Midwest was the only part of the country with an increase in the rate of new homes being constructed, posting a 12.9% gain from June.

The Northeast suffered the most severe pullback, with housing starts down 16.3%. Starts dipped 1.4% in the South and 1.6% in the West.