How to make money in 2010 with Real Estate

Following three years of declining home prices, the end of the nationwide housing slump may be in sight. Home sales consistently have been rising, the surplus of houses is shrinking, and most economists believe home values nationwide will hit bottom in the second half of 2010—but not before declining an additional five to 10 percent. That’s good news for homeowners hoping to sell or rebuild lost equity.

MAKING SENSE FOR MY READERS

• Mortgage rates currently are below 5 percent, and should remain low for the next few months, partially due to the Federal Reserve’s ongoing purchase of mortgage-backed securities. However, if the economy quickly turns around and inflation fears resurface, rates could rise to as high as 6.5 percent, slowing demand and pushing down home values.


• According to one analyst, the market will remain tilted in favor of buyers over the next year, but that power gradually will be reduced as conditions in the housing market continue to improve.


• Buyers hoping to purchase or invest in a lower-priced, entry-level home should expect some competition from investors and other buyers. To remain competitive, buyers are advised to put down as much cash as possible, as many investors are offering to make all-cash deals. Another factor to keep in mind is that offers below listing price often are outbid by others.


• Some home sellers are postponing listing their homes until the market recovers. However, timing the market is difficult, so homeowners thinking of selling should carefully weigh their options. Congress recently expanded the federal tax credit to include some existing homeowners, but they must close before June 30, 2010 to qualify. Although existing homeowners are not required to sell their current home to qualify for the credit, those who plan to rent out their current residences should be aware that many lenders require borrowers to show they are financially capable of paying two mortgages, or show rental income for at least six months. Discretionary sellers should discuss their options with a REALTOR® before making a decision.

What is my house really worth!

It often is difficult for homeowners to objectively value their homes, which often reflects their sense of personal style. However, by consulting with a REALTOR®, using online resources, investigating neighborhood trends, and soliciting the opinion of friends, homeowners can arrive at a reasonably accurate appraisal.

MAKING SENSE FOR MY READERS

• REALTORS® and real estate appraisers are the best sources of information on current market conditions. Consumers should begin the home valuation process by consulting with their REALTOR® or a local real estate appraiser. REALTORS® can provide homeowners with a list of homes that recently have sold in the area, and use that data to help determine the most accurate and competitive price for the home.


• Homeowners also can contact their local tax assessor’s or county clerk’s office, many of which post real estate transactions on their Web site. The records will indicate what properties have recently sold in the neighborhood and the respective sales prices. Consumers should look for homes that have sold within the last six months for a more accurate picture of current market conditions.


• Online sites such as Zillow.com and Trulia.com also provide free online home value estimators. Consumers should be aware though that these sites derive some of their information from public records, including tax appraisals, and are subject to error.


• Some real estate experts recommend homeowners attend nearby open houses to see how their homes compare in size and amenities.


• Consumers also can consult the Marshall & Swift Residential Cost Handbook, which professional appraisers use to assess the value of features such as fireplaces, three-car garages, and the like. The handbook costs $300 and is available in some business school libraries. An online site, swiftestimator.com, enables homeowners to conduct an item-by-item calculation of the value of the home. Online sites and books only should be used as guidelines though, and homeowners are advised to contact a real estate professional to help determine the current value of their home.

1 in 4 Borrowers are upside down on their loans!

The proportion of U.S. homeowners who owe more on their mortgages than the properties are worth has swelled to about 23%, threatening prospects for a sustained housing recovery.

Nearly 10.7 million households had negative equity in their homes in the third quarter, according to First American CoreLogic, a real-estate information company based in Santa Ana, Calif.

These so-called underwater mortgages pose a roadblock to a housing recovery because the properties are more likely to fall into bank foreclosure and get dumped into an already saturated market. Economists from J.P. Morgan Chase & Co. said Monday they didn't expect U.S. home prices to hit bottom until early 2011, citing the prospect of oversupply.

Home prices have fallen so far that 5.3 million U.S. households are tied to mortgages that are at least 20% higher than their home's value, the First American report said. More than 520,000 of these borrowers have received a notice of default, according to First American.

Most U.S. homeowners still have some equity, and nearly 24 million owner-occupied homes don't have any mortgage, according to the Census Bureau.

But negative equity "is an outstanding risk hanging over the mortgage market," said Mark Fleming, chief economist of First American Core Logic. "It lowers homeowners' mobility because they can't sell, even if they want to move to get a new job." Borrowers who owe more than 120% of their home's value, he said, were more likely to default.

Mortgage troubles are not limited to the unemployed. About 588,000 borrowers defaulted on mortgages last year even though they could afford to pay -- more than double the number in 2007, according to a study by Experian and consulting firm Oliver Wyman. "The American consumer has had a long-held taboo against walking away from the home, and this crisis seems to be eroding that," the study said.

Just months after showing signs of leveling off, the housing market has thrown off conflicting signals in recent weeks. Jittery home builders and bad weather led to a 10.6% drop in new home starts in October, and applications for home-purchase mortgages have dropped sharply in recent weeks.

These same falling prices have boosted home sales from the depressed levels of last year. The National Association of Realtors reported Monday that sales of previously occupied homes in October jumped 10.1% from September to a seasonally adjusted annual rate of 6.1 million, the highest since February 2007.

The bump in sales was ahead of forecasts, spurred by falling prices, low mortgage rates and a federal tax credits for buyers. Congress recently expanded and extended the tax credits.

The latest First American data aren't comparable to previous estimates because the company revised its methodology. First American now accounts for payments made by homeowners that reduce principal, and it no longer assumes that home-equity lines of credit have been completely drawn down.

The changes reduced the total number of borrowers under water -- although both old and new methodology show increases from the previous quarter. Using the old methodology, the portion of underwater borrowers would have increased to 33.8% in the third quarter.

Homeowners in Nevada, Arizona, Florida and California are more likely to be deeply under water, according to the analysis. In Nevada, for example, nearly 30% of borrowers owe 50% or more on their mortgage than their home is worth, said First American.

More than 40% of borrowers who took out a mortgage in 2006 -- when home prices peaked -- are under water. Prices have dropped so much in some parts of the U.S. that some borrowers who took out loans more than five years ago owe more than their home's value.

Even recent bargain hunters have been hit: 11% of borrowers who took out mortgages in 2009 already owe more than their home's value.

Andrew Lunsford put 20% down when he bought his home in Las Vegas for $530,000 in 2004. Now, he said, his home was worth less than $300,000.

"I'm to the point where I feel I will never get my head above water," said Mr. Lunsford, a retired state trooper who works for an insurance company. He said his bank won't modify his loan because he can afford his payments, and he's unwilling to walk away, he said: "We're too honest."

Borrowers with negative equity are more likely to default if they live in a state where the bank can't pursue their assets in court, according to a study by the Federal Reserve Bank of Richmond.

But borrowers who are less than 20% under water are likely to maintain their mortgage if their loan is modified and the payments reduced, said Sanjiv Das, head of Citigroup's mortgage unit. "Beyond 120%, the most effective modification is a complete loan restructuring, including a principal reduction."

Mortgage companies have been reluctant to reduce mortgage principal over worries about "moral contagion, with people not paying their mortgage or redefaulting because they believed the bank would reduce their principal," Mr. Das said.

Many borrowers are so deeply under water that they can't take advantage of lower rates and refinance their mortgage. "We're declining hundreds of loans each month," said Steve Walsh, a mortgage broker in Scottsdale, Ariz. "The only way we will make headway is if we allow for a streamlined refinance where the appraisal is irrelevant."

Realtors reported that home sales in October were up 24% from a year earlier. The number of homes listed for sale nationwide was 3.57 million at the end of October, down 3.7% from a month earlier, the trade group said. But that inventory could rebound next year as banks acquire more homes through foreclosure.

About 7.5 million households were 30 days or more behind on their mortgage payments or in foreclosure at the end of September, according to the Mortgage Bankers Association. Many of those homes will be lost to foreclosure, adding to the supply of homes for sale.

A recovery could pay off for the roughly 30% of underwater borrowers who owe 110% or less of their home's value and are able to endure the slump. "Most people prefer to stay in their home" even if the value of their property has declined, said John Burns, a real-estate consultant based in Irvine, Calif.

Source: Wall Street Journal, Ruth Simon and James Hagerty (11/24/09)

Has the Market Hit Bottom Yet?

A combination of low interest rates, tax incentives, and declining numbers of foreclosures on the market have driven up home prices in many previously hard-hit areas, but some skeptics insist that this is just the calm before another storm.

"We're entering the phase where the home owner has to earn his way out of this mess," says Mark Hanson, a highly regarded independent real estate and finance sector analyst. "This summer is shaping up as the gateway into the next move down."

Hanson says there will be a “wall of foreclosures” once mortgage servicers are no longer preoccupied by new mortgage-modification guidelines. He blames unemployment for continuing defaults.

"It took 10 years to create this problem," says Hanson. "Do people really believe we can correct it all in 36 months?"

Source: Fortune, Colin Barrr (09/01/2009)

Commercial Real Estate next to sink

NAR Chief Economist Lawrence Yun sounded a downbeat note on the state of the commercial real estate market over the next few years in an address Friday afternoon at the 2009 REALTORS® Conference & Expo.

Yun said the most immediate problem for this sector is simple: There aren’t nearly enough buyers.

"Who is buying? The answer is no one,” he explained. “The level of transactions is way down. We're looking at an almost 90 percent decline from peak to current levels."

One particularly hard-hit area of commercial is the office sector: Vacancy rates are getting precariously close to 20 percent and sales volume has fallen as far as 93 percent from its peak just a few years ago.

The industrial part of commercial is also performing well below the norm, due in large part to warehouses, Yun said. There's more space, but much less need for it. Rents fell more than 10 percent this year, and probably will again next year.

The prospects for retail and multifamily are somewhat better. Yun predicts that as housing prices rise, people will be more inclined to spend, which will benefit retail. In addition, young people and professionals who’ve fallen on hard times will be able to move out of their relatives’ households and into their own residences as the economy slowly recovers. This will boost both multifamily and housing, Yun said, but he added that the employment picture will have to improve first.

However, the overall commercial market will probably continue to move down—too many indicators point to more trouble. For instance, cap rates are starting to rise for the first time since the beginning of this decade. Issuance of commercial mortgage-backed securities (CMBS) actually fell to zero during a few recent months. Moreover, CMBS delinquency rates have skyrocketed over the past couple of years.

That isn’t even the worst part, though. The biggest concern in the coming years is defaults. Commercial real estate debt maturities will spike at $1.8 trillion in 2012, and much of that amount is comprised of poor-quality loans.

"The credit situation in the commercial market is very disconcerting,” Yun said. “On the residential side, there is more government backing. That's not the case for commercial real estate. In commercial, there will be another letdown before things improve."

However, he also expressed confidence that the federal government would try to prevent a large collapse in the commercial sector. The Federal Reserve and Treasury Department have extended the Term Asset-Backed Securities Loan Facility (TALF), a federal relief program intended to increase credit availability, through 2010.

Yun said he expected to see more relief efforts in the future.

"The policy makers clearly understand that commercial real estate is the next shoe to drop, so they're looking at things they can do. That doesn't mean they have the policy to implement yet," he said.

Source: Brian Summerfield, REALTOR® magazine

What is a Short Sale?

As more homeowners find themselves underwater -- owing more on their mortgage than their home is currently worth -- and unable to make the monthly mortgage payments, many are turning to short sales, which allow a homeowner to sell their home for less than owed on the mortgage. Short sales can be a win-win situation for all parties, because they enable home buyers to purchase properties in desirable neighborhoods and at favorable prices.

MAKING SENSE OF THE STORY FOR MY READERS

• Theoretically, short sales should be a win-win for the bank and the homeowner. Although the bank does not receive the full amount owed on the mortgage, it also does not incur the costs of foreclosure and/or eviction, if necessary. Many homeowners also prefer short sales because it is less damaging to their credit scores than a foreclosure. However, many real estate experts say that the majority of banks are reluctant to approve short sales, and often let properties go into foreclosure, even when there are reasonable offers on the property. In addition to considering the price, most lenders also take into consideration whether the homeowner can demonstrate financial hardship. If the homeowner is capable of making payments, many lenders will try to work out a loan modification, rather than a short sale.

• Unlike foreclosed properties, which may be run-down and vacant for many months, short-sale properties are likely to be better maintained, as most owners may still live in the home.

• Short sales often are more time intensive than traditional transactions and often require additional paperwork. Due to the large number of offers on short sales, many take as long as a few months to receive approval. If information or required forms are missing or incomplete, the bank may set the offer aside, which could delay the process and cause the property to go into foreclosure. To expedite the process, sellers should work closely with their REALTOR® to provide all of the necessary paperwork.

• Working with a REALTOR® who has experience with short sales can help both sellers and home buyers during the transaction. A seasoned REALTOR® will be able to serve as the mediator between the seller and the lender, and lead to a successful transaction.

• It is important to remember that in a short sale, although the seller may be anxious about selling the property and willing to accept any offer, it is ultimately up to the lender to determine if, and at what price, the property can be sold. Home buyers should work closely with their REALTOR® to submit realistic offers.

Landlord Tips

Landlord Tips: Never take a personal check from a tenant when the tenancy is commenced. Be sure to receive cash or a cashier's check.

Sellers Continue to Cut Prices

Nearly 25 percent of all U.S. homes for sale on Aug. 1 had a price cut in July, according to data compiled by the real estate Web site Trulia.com.

The percentage of price reductions has continued to increase month-over-month for the past three months. The total value slashed off active listings now totals $27.8 billion. The average reduction was 10 percent from the original price.

Cities showing significant increases in the percentage of listings with price cuts from June 1 to Aug. 1 were:

• Fresno, Calif.: 67 percent


• Colorado Springs, Colo.: 27 percent


• Kansas City, Mo.: 25 percent


• Oklahoma City, Okla.: 24 percent


• Albuquerque, N.M.: 22 percent.
  

Cities with significant declines in the percentage of listings with price reductions included:

• Dallas: -42 percent


• Las Vegas: -33 percent


• Louisville, Ky.: -33 percent


• Los Angeles: -19 percent


• Washington, D.C.: -17 percent

Source: Trulia.com (08/14/2009)

Landlord Tips

#Landlord Tips: Never enter into a lease where the tenant has to make repairs.

Banks Plan to Keep Lending Tight

Banks tightened standards for all types of loans in the second quarter, the Federal Reserve reported Monday.

About 35 percent of senior loan officials said they tightened standards somewhat and none of the 51 responding banks said they loosened standards for prime mortgages. The rest said their standards for mortgages remained the same or were substantially stronger.

Banks also told the Fed that they expected to maintain strict lending standards until at least the second half of 2010.

“Most banks have woken up to the fact that there is a lot more risk in their loan books than they ever thought possible,” says Joel Conn, president of Lakeshore Capital LLC in Birmingham, Ala. That has caused many banks to reconsider their requirements for future lending, Conn says.

Source: Bloomberg, Craig Torres (08/17/2009)

Buyers Shouldn't Wait on Falling Prices

Fear of overpaying for property is common these days, especially in places like New York where prices continue to be unstable.

If you encounter potential buyers who are frozen because they are concerned that they will pay too much, here are some factors to point out:

Waiting for the right time can be expensive. Some buyers would have more equity today, despite falling prices, if they had bought when they were first considering it, instead of continuing to pay rent.
Financing is fickle. Some people who were highly qualified last year can’t find financing this year because the credit market has tightened or their personal financial situation now makes them an undesirable borrower.
Interest rates are headed up. If prices decline by another 10 percent, but interest rates increase by 1 percentage point, the monthly payment will be the same.

Source: The Wall Street Journal, Douglas Heddings (07/27/2009)

Landlord Tips

#Landlord Tips: Your tenant should be required to put all service requests in writing. This should be part of the rental agreement.

What Has the Housing Crash Cost Americans?

How much real wealth have Americans lost so far in the real estate crash?

The Federal Reserve estimates that the total market value of U.S. homes fell 18 percent from $21.9 trillion to $17.9 trillion or about $13,000 per person from the end of 2006 through March 31, 2009.

The Fed also estimates that homeowner’s equity has declined 40 percent from the peak and now accounts for just 41.4 percent of real estate values. By comparison, after the last slump in the 1990s, home equity levels remained in the high 50s.

This collapse in equity makes it difficult for potential buyers to sell their homes and trade up, which many experts say will weigh heavily on the housing recovery.

Source: The Wall Street Journal, Brett Arends (08/20/2009)

Top 10 Cities With Most Price Reductions

Real estate research site Trulia.com says 24.6 percent of current homes on the market in the United States as of July 1, have had at least one price cut, totaling $27.1 billion in reductions.

The average price-reduced home has had a 10.4 percent reduction, down slightly from 10.6 percent as of June 1.

Some areas appear to be stabilizing quickly with the overall number and percentage of price reductions declining, including Las Vegas, Los Angeles, Dallas, Washington, D.C., and Baltimore.

“All real estate is local and we’re seeing glimmers of hope as price stabilization occurs in major cities across the nation, including some of the earliest hit cities that have experienced huge declines in the past few years,” says Trulia CEO Pete Flint.

The top-10 cities with the most price reductions as of July 1 are:

1. Jacksonville, Fla., 39 percent



2. Boston, 35 percent



3. Minneapolis, 33 percent



4. Milwaukee, 33 percent



5. Honolulu, 33 percent



6. Tucson, Ariz., 31 percent



7. Chicago, 31 percent



8. New York, 31 percent



9. Austin, Texas, 31 percent



10. Raleigh, N.C., 31 percent

Source: Trulia.com (07/10/2009)

Best Cities for Finding Opportunity

Where are the best cities to live in the United States if you want to work hard and get ahead?

Forbes magazine examined the nation’s 40 largest metropolitan statistical areas and based on the number of Forbes' 400 best big companies and 200 best small companies that are headquartered in each, it identified what it considered places with the most opportunity.

The magazine says it took this route because the best big companies provide opportunities for those who seek to be employees, and the rate of success of small businesses indicates how the area treats entrepreneurs.

Here are the top 10:

1. Houston



2. Dallas



3. Minneapolis



4. Pittsburgh



5. Boston



6. Washington, D.C.



7. Austin



8. St. Louis



9. Kansas City, Mo.



10. New York

Source: Forbes, Lauren Sherman (06/19/2009)

Landlord Tips

#Landlord Tips: Landlords, check your units at least once every 6 months, especially for water leaks.

10 Best Places for Condo Deals

Thanks to a huge inventory, many condominiums are bargains these days.

Forbes magazine took a look at the nationwide condo market to determine where the best deals could be found. Because financing can be hard to get, prices on luxury models have fallen the most.

The magazine suggested that the best deals come from paying cash or at least putting down enough cash so the property can be purchased with a federally-backed loan.

It also suggested that buyers bid low. Since these properties are moving so slowly, even a lowball offer might be accepted.

Here are the top 10 best places for condominium deals and their ZIP codes, as determined by Forbes:

1. Olympic Village, Calif., 96146
2. Tahoe City, Calif., 96145
3. Terra Linda, Calif., 94903
4. Fisher Island, Fla., 33109
5. Dallas, 75205
6. Malibu, Calif., 90265
7. Bal Harbour Fla., 33154
8. Key Biscayne, Fla., 33149
9. Lake Forest, Ill., 60045
10. New York (Upper West Side), 10069

Source: Forbes, Matthew Woolsey (07/29/2009)

Commercial Prices Continue to Drop...The Next Big Loser!

Commercial real estate prices fell 5.1 percent from June to July, according to Moody's/REAL Commercial Property Price Indices.

The index has been sliding steadily compared to last year and is down 30.8 percent compared to July 2008 and 38.7 percent below its peak in October 2007.

The volume of transactions also declined with sales during the first seven months of the year, averaging 375 per month, compared to 1,100 per month in 2008.

Source: The Associated Press (09/22/2009)

“2009 TAX OPPORTUNITIES SOON EXPIRING”

The year 2009 offers some unique tax planning and saving opportunities; most of which will expire at the end of the year. With less than 5 months left in the year, now is the time to seize these opportunities.

Reminder to Businesses of Loss Carry back Deadline Approaching

As a reminder, the American Recovery and Reinvestment Act of 2009 provides small businesses the opportunity to expand the carry back of their operating losses for a period of 5 years instead of the normal 2 year period. Eligible calendar year corporations have until September 15, 2009 to file and eligible individuals have until October 15, 2009 to file. The expanded carry back option allows many businesses the opportunity for special refund claims. The option is available for an eligible small business that has no more than an average of $15 million in gross receipts over a three-year period ending with the tax year of the net operating loss. The choice can be made for only one tax year. The carry back can result in tax refunds to you as a small business owner, so do not miss the opportunity.

Other Tax Opportunities and Items for Planning for 2009 Only

This past year has been a busy one for legislation; consequently, there are several tax incentives that are available only through the 2009 tax year:

• There is no required minimum distribution for 2009 from individual retirement plans.


• Qualified individuals with small business income may base their estimated tax payments on 90 percent of the prior year's tax liability. The qualified individual's AGI for the preceding tax year must be less than $500,000 (or $250,000 for a married person filing separately) and more than 50 percent of the preceding tax year's gross income must be from a business which employed less than 500 employees.


• The percentage exclusion for qualified small business stock sold by an individual is increased to 75 percent for stock acquired after February 17, 2009 and before January 1, 2011. This results in a reduction in the effective tax on the entire gain to 7 percent of the regular tax and 12.88 percent under alternative minimum tax (AMT).


• Qualified charitable distributions from a traditional or Roth IRA of up to $100,000 per individual IRA owner (up to $200,000 for married individuals filing jointly) are excluded from gross income, and are not taken into account in determining the limit on charitable deductions. Qualified charitable distributions must be made directly by the IRA trustee to eligible organizations, and they are not deductible as a charitable contribution.

Estate and Gift Transfers at Discounted Values

You can reduce the size of your taxable estate by gifting family limited liability company interests to trusts set up for your family or children. You will pay 55% death taxes starting in 2011 on everything above $1million in assets. By using a family partnership to gift those assets on paper today to trusts for your children you can greatly reduce the death taxes. Currently valuation discounts on family partnerships allow for 30% to 50% more value to be transferred. Combined with the historic low asset values, this is a once in a lifetime opportunity to shift wealth to your family without 55% taxes. The Obama Administration is moving to change the law in 2010 to eliminate the 30% to 50% valuation discount law that currently exists. 2009 may be the last year for valuation discounts and substantial estate and gift tax savings.

Landlord Tips

#Landlord Tips: You need to run a credit check on all adult applicants that are applying to lease your unit. All adults should sign the rental agreement and complete a separate application.

Landlord Tips

#Landlord Tips: When leasing a unit, always have your tenant sign the rental agreement first. Thereafter you can give him your signed copy.

10 Most Undervalued U.S. Cities

Housing research organization IHS Global Insight estimates that the average U.S. home is undervalued by 12.2 percent, and many previously pricey communities are undervalued by considerably more.

A recent study released by IHS used home prices, interest rates, area incomes, population density, and historic premiums and discounts to analyze housing values. It examined 330 markets and found homes are underpriced in 248 of them.

Despite the high percentage of undervalued areas, IHS says "it is too early to call a bottoming," as "job losses continue, housing inventories remain elevated, and consumers remain wary in light of economic uncertainty."

Here are the 10 most undervalued areas:

1. Vero Beach, Fla., -42.5 percent



2. Houma, La., -41.4 percent



3. Las Vegas, -40.9 percent



4. Merced, Calif., -40.1 percent



5. Cape Coral, Fla., -39.1 percent



6. Houston, -36.9 percent



7. Midland, Texas, -34.8 percent



8. Lafayette, La., -34.4 percent



9. Vallejo, Calif., -34.3 percent



10. Stockton, Calif., -34.3 percent

Source: CNNMoney.com, Les Christie (06/04/2009)

Home Prices: There's No Quick Recovery Ahead

So, is our long national nightmare over? Has the housing market finally hit bottom?

There has been some muted -- albeit exhausted -- cheering from homeowners in recent weeks. But before we break out the champagne, look out for further potential problems just down the road.

The good news? According to the closely watched Case-Shiller Home Price Index, which tracks home prices across 20 major cities nationwide, the three-year housing slump slowed sharply in April and May.

May's decline was just 0.2%, the slowest in two years. And several cities actually saw prices rise -- among them Denver, Washington, D.C., Chicago, Boston, Cleveland and Dallas.

Even Miami only fell about 1% in May. That's a great month down there. Previously, prices had been falling 3% a month.

We'll get an even better picture of the situation when the Case-Shiller figures for June are released on Aug. 25.

But these data aren't the only hopeful signs.

Inventories of unsold homes have come down. According to the National Association of Realtors, there were about 3.8 million unsold homes on the market at the end of June. That's down a long way from 4.5 million a year ago.

And yes, housing affordability is dramatically better. People, obviously, need to live somewhere. At some point, housing gets cheap enough that the fundamentals start to look good.

The average home is about a third cheaper than it was at the peak three years ago, a plunge unprecedented since the Great Depression. In the hardest-hit places, such as Phoenix, Las Vegas and Miami, average prices have been halved or better from their bubble peaks.

Cheap Mortgages, Too
Factor in falling mortgage rates as well, and housing starts to look cheap by many measures. Thirty-year mortgage rates, at around 5.5%, are still low by historic standards. A few months ago, when they fell below 5%, they were very cheap.

There's some other good news for homeowners from the rest of the economy. July's job losses were better than feared: The unemployment rate, which was heading vertical a few months ago, eased to 9.4% last month from 9.5%.

Some are saying the worst is behind us, for the economy and the housing market. No wonder the iShares Dow Jones U.S. Home Construction exchange-traded fund (ITB), which tracks shares of home-building stocks, has bounced sharply since early July.

So, is that it? Not so fast.

Prices may -- may -- be nearing the bottom in many markets. But beyond the headlines, there are plenty of reasons to stay cautious. There may even be fresh dangers just ahead.

And even if prices have stopped falling, it may be years before they start rising sharply again.

First, late spring is traditionally the strongest season in the real-estate market.

And it's hardly a surprise the market saw some green shoots this time around. It's enjoying not one, but two, gigantic taxpayer subsidies -- an $8,000 refundable tax credit, or gift, for first-time buyers, as well as those cheap mortgage rates. The Federal Reserve has been spending billions of dollars to keep interest rates down.

Both are only short-term fixes. Any sustained economic upturn would be expected to send long-term mortgage rates rising again, dousing the real-estate market with fresh cold water.

Glut of Empty Houses
The picture on inventories isn't as good as it sounds, either. A lot of unsold homes have simply been put up for rent instead, especially in the most difficult markets like Miami. The result? A glut of empty rentals as well.

New waves of foreclosures and distressed sales may be coming, too. In states such as California, it can take many months for delinquencies to turn to foreclosures, which means last winter's bad news may still be coming down the pike. Meanwhile, vast tranches of teaser-rate mortgages are due to reset later this year and in 2010.

As for the economy: Both unemployment and household debt levels remain at extremely high levels by the standards of postwar history. Either is bad news for housing. The combination is very bad.

Dean Baker, co-director of the Center for Economic and Policy Research, argued in a recent paper that the fundamentals still aren't great. It still remains cheaper to rent than to own in many markets, he says.

The biggest bubbles usually produce the deepest busts. And the 2002-2006 bubble was a doozy. The bad news may have ended after three terrible years, but maybe not. Japanese housing prices still haven't recovered from the late 1980s bubble. Western U.S. markets took six or seven years to recover after the last big bubble burst there in the early 1990s.

Yes, there are some hopeful signs, but don't let them fool you into thinking it's all clear. It might not be. As ever, anyone making a major financial decision needs to think more about his or her own situation than what "the market" is doing. A real-estate purchase needs to make sense on its own terms. And measure it on cash flow today, not the hope for capital gains tomorrow. When you factor in all the costs, is the purchase cheaper than renting?

If you get a cheap mortgage and you are aggressive on price, you may get a bargain. That's especially true if the owner has to sell. Foreclosures and other distressed sales are selling for about 20% below the rest of the market. There are opportunities out there. But you can afford to take your time to shop around.






(The Wall Street Journal, Brett Arends, 8/16/09)

Top 10 Best Places to Live

U.S. News & World Reportmagazine looked at areas with strong economies, low living costs, and plenty of fun things to do to identify this year's best places to live.

The editors reviewed more than 2,000 locations nationwide, considering such factors as sales taxes, housing prices, average number of children per square mile, proximity to healthcare, and the availability of educational institutions. Readers can use a database search to tailor the results to their own situation.

"Choosing where to live is a difficult decision for any family," says Brian Kelly, editor of U.S. News & World Report. "With U.S. News's Best Places to Live, we've crunched the most important geographic, economic, and educational data and provided the search tools to help make this decision a little easier for families."

The 10 cities honored as Best Places to Live are (listed alphabetically):

1. Albuquerque, N.M.



2. Auburn, Ala.



3. Austin, Texas



4. Boise, Idaho



5. Durham, N.C.



6. La Crosse, Wis.



7. Loveland, Colo.



8. San Luis Obispo, Calif.



9. St. Augustine, Fla.



10. Upper St. Clair, Pa.

Source: U.S. News & World Report (06/09/2010)

Many underwater homeowners are deliberately walking away from mortgages

A study finds that 26% of the defaults across the country are calculated economic decisions to bail out of loans by borrowers who could afford to make the monthly payments.

Reporting from Washington -- Would you, under any circumstances, default on your home mortgage, even if you could afford to make the monthly payments?

That's a trickier question than you might assume, according to new research from the University of Chicago's Booth School of Business and Northwestern University's Kellogg School of Management.

The study found that 26% of the record numbers of home mortgage defaults across the country are "strategic" -- that is, calculated economic decisions to bail out of loans by owners who actually have the money to make the payments but can't handle the negative equity they're carrying caused by local property value declines.

Nationwide, according to data from Zillow.com, 22% of all homeowners were underwater, with mortgage debts that exceeded their home values, in the first quarter of 2009.

In some parts of California and Nevada, more than half of all households have negative equity. In a few localities, the size of the equity deficit is staggering: In the Salinas, Calif., metropolitan area, for example, the median equity for people who bought their homes in 2006, near the peak of the boom, is now a negative $214,305, according to the study.
When researchers questioned two nationally representative statistical samples of households about strategic defaults, they found that moral and social beliefs play a constraining role, but negative equity and the frequency of defaults in local ZIP Codes have significant contrary effects.

Co-authors Paola Sapienza, Luigi Zingales and Luigi Guiso used interviews with 2,000 U.S. households in December and March to explore the "moral and social" dynamics of strategic defaults.

The two 1,000-person samples came from the Chicago Booth/Kellogg School Financial Trust Index, which monitors the level of trust households have in the financial system.

Their research not only represents the first attitudinal study of the phenomenon of widespread strategic walkaways from home loan commitments, but also has implications for federal policies seeking to limit the numbers of foreclosures -- which are on pace for a record 3.1 million filings this year, according to RealtyTrac Inc.

Among the study's sobering findings:

• Moral precepts keep large numbers of financially struggling homeowners out of default, but only to a point. Fully 81% of household heads said they believed intentional defaults on mortgages to be "morally wrong." But that high percentage begins to crumble as negative equity grows increasingly larger.
• When negative equity rose to $50,000, 7% of those who consider strategic defaults to be immoral said they'd walk away. At $100,000 negative equity, 22% would do so. At negative $200,000, 37% of those with moral objections would nonetheless default, and at $300,000, 38% said they would.
• Among those who had no moral reservations, the percentages were much higher. At $50,000 negative equity, 20% said they'd walk away. At negative $100,000, 41% would do so, as would 59% at negative $200,000 and 63% at $300,000.
• The researchers found that age, tenure of homeownership, the frequency of foreclosures in a person's ZIP Code and even politics influence an owner's willingness to bail out of a mortgage. Owners under age 35 are less likely to have moral problems with strategic defaults, as are self-described political independents, compared with Republicans and Democrats.
• An important factor in walkaways, according to the researchers, is the level of foreclosures owners observe in their local community and their personal acquaintance with owners who have defaulted. In the latter case, owners who know someone who defaulted strategically are 82% more likely to default themselves, compared with owners who do not know anyone in that situation.
• The higher the number of foreclosures in a given ZIP Code, the higher owners' willingness to walk away, the researchers found, suggesting what they call a "contagion effect that reduces the social stigma associated with default as defaults become more common."
• High numbers of foreclosures also appear to create a "vicious circle" that increases neighboring owners' negative equity and greatly raises the probability of additional defaults, foreclosures and equity destruction in the area.
• Although the authors offer no specific remedies -- they are behavioral researchers, not policy advisors -- they argue that the traditional assumption that borrowers default because they can't afford their monthly payments needs to be reexamined in light of accelerating foreclosures in some markets combined with plummeting equity.
• The Obama administration appeared to take a step in that direction July 1 when it allowed refinancings of Fannie Mae- and Freddie Mac-owned mortgages in which owners have as much as 25% negative equity. Previously the limit was 5%.

(Source: Kenneth R. Harney)

Underwater Mortgages to Skyrocket by 2011

A new report by Deutsche Bank estimates that by 2011 nearly 50 percent of U.S. home owners with mortgages will owe more than their homes are worth.

This estimate of 25 million borrowers is significantly higher than similar calculations by other economic and real estate analysts. For instance, Moody’s Economy.com projected that 17.5 million will be underwater by early 2010.

Currently, about 26 percent of home owners choose to walk away from their mortgages because their equity falls short of what they owe, according to a report by Paola Sapienza, a finance professor with Northwestern University, and Luigi Zingales, a finance professor at the University of Chicago. Their report suggests that situation could worsen if the percentage of underwater mortgage holders increases.

Not everybody agrees with Deutsche Bank’s analysis.

Tom Lawler, a well-respected independent housing economist, wrote that given the recent increase in home sales in many areas, “there is absolute[ly] no doubt that the DB ‘model’ forecast will show a huge miss to the down side on home prices.”

Source: CNNMoney.com, Les Christie (08/06/2009) and The Wall Street Journal, Nick Timiraos (08/07/2009)

Here come the taxes!

HERE COME THE TAXES – ARE YOU PREPARED?

The federal deficit for fiscal year 2009 is now projected for this year alone to be $1.8 Trillion dollars. The total federal deficit is currently $11.6 Trillion dollars (U.S. Department of Treasury). Every American household is now on the hook for $546,668 worth of debt (USA Today 5-29-09). This means an avalanche of new tax increases and taxes. Are you prepared for these?

Income Tax Problems
The current law provides for a rise in the top federal income tax bracket to 39.6%. The federal Health Care Surcharge tax is proposed to be up to 5.4% on top of the income tax bracket of 39.6%. That is a 45% federal income tax. To add insult to injury, they propose to reinstate the “itemized deduction phase out” for income earners with Adjusted Gross Incomes over $250,000. Thus, the few deductions still available to us on a Form 1040 will be phased out again.

Capital Gains Tax Problem
The current capital gains tax rate on long term gain is 15%. The proposals are to raise the capital gains rate to 20% and some suspect 28%.

Estate Tax Problem
The current law provides for the federal estate or death tax to rise from 45% to 55% at the end of 2010. The current law also provides for the federal estate tax exemption to be reduced from $3.5 million to $1 million at the end of 2010.


WHAT CAN YOU DO TO HELP YOURSELF?

You could do nothing. You could complain. Or you could establish a plan. If it is plan, consider these options:

Income Tax Options
If you are fortunate enough to be earning money in this recessionary economy, retirement plans are still the number one way to reduce federal and state income tax burdens. 401K Plans allow $16,500 or $22,000 per year of savings. Profit Sharing Plans allow $49,000 per year of savings. Defined Benefit Plans allow over $150,000 per year of savings. Cross Tested Plans allow owners 80% plus versus 20% to employees.

Capital Gains Tax Options
Even if your gains have been reduced by the market, deferral at the time of sale is critical to the continued compounding and growth of your assets and even more important now to recover the recessionary losses. Consider 1031 deferred real estate exchanges, family partnership and installment sale approaches, to allow for sale of assets and deferral of gains to regain lost ground.

Estate Tax Options
Seize the day now while market values are at all time historical lows and estate discounts are still allowed to shift wealth to beneficiaries and heirs using family partnerships and irrevocable “Dynasty” type trusts. It is possible to reduce your estate tax burden by over 50% given current law and conditions. Both will change soon.


GET PLANNING!

Can Buying Cheap Foreclosures Make You Rich?

Speculators are buying up an uncounted, but certainly significant percentage of homes for sale in cities where the meltdown has hit hardest.

Homes.com reports a 30- to 50-percent year-over-year increase in searches for homes in foreclosure-heavy states, including California, Michigan, and Florida. In these states, helping long-distance investors find and close on properties and close has become a burgeoning real estate specialty.

The investors run the gamut from international speculators seeking a house or two to venture capital firms that buy bundles of homes for 25 cents on the dollar — most in need of renovation and some with substantial tax liens.

Will these investments lead to riches? Possibly, if housing prices go back up and if investors are able to fix up and rent the properties out while they wait to sell, experts say.

Source: Smart Money, Anne Kadet (06/01/2009)

California Real Estate Fast Facts

(As of July 1, 2009)

• California median home price - May 09: $267,570 (Source: C.A.R.)


• California highest median home price by C.A.R. region April 09: Santa Barbara So. Coast $875,000 (Source: C.A.R.)


• California lowest median home price by C.A.R. region April 09: High Desert $106,210 (Source: C.A.R.)


• California First-time Buyer Affordability Index - First Quarter 2009: 69 percent (Source: C.A.R.)


• Mortgage rates - week ending 6/25/09 30-yr. fixed: 5.42% Fees/points: 0.7% 15-yr. fixed: 4.87% Fees/points: 0.7% 1-yr. adjustable: 4.93% Fees/points: 0.7% (Source: Freddie Mac)

Foreclosures Pose Problems for Neighborhood

Uninsured foreclosed properties, particularly condominiums, can be risky for property owners in nearby homes.

Vacant houses are vulnerable to vandalism, theft, and accidental fires. If the property has an adjoining wall, the damage can be significant.

Another issue is that insurers can be very reluctant to offer insurance in condominiums or neighborhoods where there are empty buildings.

"Some [condo] buildings have such a stigma from the number of vacant units that insurers will not insure occupied units for fear of increased claim and assessment costs if a loss were to occur," says Robert Friedman, a West Palm Beach, Fla., attorney specializing in property issues.

Source: South Florida Sun Sentinel, Julie Patel (06/12/2009)

Top 10 Places to Start Over

Some parts of the United States have been less affected than others by the economic downturn.

"If people are looking for a job and they're in Detroit, they're in the wrong place. They need to be considering geographic mobility," says Ernie Goss, professor of economics at Creighton University in Omaha.

BusinessWeek magazine, with help from staffing firm Manpower, has examined job opportunities all across the country, ranking metropolitan areas based on the percentage of companies planning to hire in the third quarter.

Here are the top 10 places it identified as offering the best opportunities for anyone looking for a fresh start:

1. Anchorage, Alaska
2. Provo-Orem, Utah
3. Kennewick-Richland-Pasco, Wash.
4. Yakima, Wash.
5. Omaha, Neb.-Council Bluffs, Iowa
6. Richmond, Va.
7. Winston-Salem, N.C.
8. Colorado Springs
9. Amarillo, Texas
10. Washington, D.C., Arlington-Alexandria, Va., plus areas in Maryland and West Virginia
    

Source: BusinessWeek, Prashant Gopal (06/09/2009)

Credit Crunch in Jumbo Loan Market Stalls Home Sales

Limited availability of jumbo loans and unusually high interest rates for these products are hurting the rest of the housing market, according to just-released research from the NATIONAL ASSOCIATION OF REALTORS®.

The ongoing credit crunch in the jumbo mortgage market has stalled home sales of high-priced homes, despite some recovery taking place in some mid- and low-priced home markets.

The national share of home sales above $750,000 has fallen from 4.4 percent in 2007 to approximately 2.3 percent in 2009, and the months’ supply of inventory has risen from 18.7 months to 41.1 months during that same period.

The mortgage market has three primary types of loans. Loans up to $417,000 are considered “conforming,” loans between $417,000 and $729,500 are “conforming jumbo,” and loans over $729,500 are “super-jumbo.” Although conforming mortgage rates are at 50-year lows, jumbo loans in general continue to remain very costly.

“Lenders are keeping credit standards overly stringent for borrowers at the higher end of the market, and are increasingly reluctant to make jumbo loans,” said NAR Chief Economist Lawrence Yun at the 2009 REALTORS® Midyear Legislative Meetings in Washington, D.C. “The interest rate spread between 10-year treasuries and jumbo loans has also substantially increased, making jumbo loans much more costly than has previously been the case.

Jumbo Loans Not Just for the Rich

He says many people believe that the jumbo market is for the very rich, but in reality, in many areas of the country, middle-class families need these loans to buy a median-priced home.

States that have the highest percentage of jumbo mortgages include Hawaii (43 percent of all loans are above $417,000), California (41 percent), the District of Columbia (30 percent) and New York (22 percent). In eight more states, jumbo mortgages comprise 10 percent or more of all loans in those states (New Jersey, Maryland, Massachusetts, Virginia, Connecticut, Washington, Nevada, and Florida).

“REALTORS® are telling us that some lenders are treating jumbo loan buyers who have very high credit scores and a substantial downpayment as higher risks than conforming loan buyers who have lower credit scores and less money for a downpayment,” said Yun.

As a result, more buyers of high-priced homes are resorting to cash purchases, while the bulk of potential buyers remain sidelined and unwilling to take out mortgages that carry interest rates much higher than those on conforming mortgages.

Refinancing Also Impacted

The resulting increased inventory of homes for sale has already doubled defaults from one year ago and will hamper a broader housing market recovery, which in turn will limit economic recovery. This also affects refinancing activity.

“The inability of home owners to refinance their jumbo loans is holding back potential consumer spending for the overall economy,” Yun said. “If they had the opportunity to refinance into historically lower mortgage rates, many current jumbo mortgage holders could save $6,000 to $15,000 in annual interest costs.”

To resolve these issues in the jumbo mortgage market, NAR advocates that Congress and the administration make permanent the current rules for determining limits that apply in 2009, use the Term Asset-Backed Securities Loan Facility (TALF) to buy jumbo loans, and increase lender competition by loosening warehouse line of credit.

Source: NAR

Should you Buy a Foreclosed Properties?

Many households say that foreclosures are a bargain and are increasingly eager to buy them, according to a Harris Interactive survey conducted for Trulia.com and RealtyTrac.

The survey found that 55 percent of U.S. adults are at least somewhat likely to consider purchasing a foreclosed home, up from 47 percent who answered the same question in November 2008.

But buyers aren’t naïve about the hassles involved with purchasing foreclosed property. About 85 percent said that they could identify negative aspects, up from 80 percent who felt the same way last November.

• 71 percent were concerned about hidden costs;
• 46 percent believe the process is risky;
• 31 percent fear the property will lose value.

Buyers of foreclosures also expect hefty discounts – at least 25 percent.

Source: RealtyTrac.com and Trulia.com (05/20/2009)

California Real Estate Fast Facts

• California median home price - April 09: $256,700 (Source: C.A.R.)



• California highest median home price by C.A.R. region April 09: Santa Barbara So. Coast $840,000 (Source: C.A.R.)



• California lowest median home price by C.A.R. region April 09: High Desert $106,530 (Source: C.A.R.)



• California First-time Buyer Affordability Index - First Quarter 2009: 69 percent (Source: C.A.R.)



• Mortgage rates - week ending 6/4/09 30-yr. fixed: 5.29% Fees/points: 0.7% 15-yr. fixed: 4.79% Fees/points: 0.7% 1-yr. adjustable: 4.81% Fees/points: 0.6% (Source: Freddie Mac)
  
  

What steps to take before disputing a credit error?

Credit scores and reports continue to be one of the most important factors in determining whether consumers are extended lines of credit, and the amount they are offered. Credit reports provide lenders with a consumer’s credit history, including missed or late payments. Consumers concerned about errors in their credit reports should contact the three major credit bureaus to dispute the inaccuracies.

MAKING SENSE FOR MY READERS

• Not all lenders report to the three major credit bureaus – Equifax, Experian and TransUnion – which means a mistake could appear on one, two, or all three reports. Rather than calling or mailing a dispute letter to one central agency, the errors must be disputed separately with each bureau. Consumers may obtain free copies of their credit reports once a year at http://www.annualcreditreport.com/. This report will only show credit history, and not credit scores. To obtain a credit score, consumers can visit www.myfico.com.
• To dispute an error, consumers first should contact the lender that reported the information to the credit bureaus. Next, contact the credit bureaus using the numbers listed on the credit reports. This also can be done online at http://www.transunion.com/, http://www.equifax.com/, or http://www.experian.com/. If the report is more than 60 days old, consumers should obtain a new report, which may have a new phone number. Also, if the report was obtained from a third-party site rather than directly from the credit bureau, consumers may have to order a report from the bureau to begin the dispute process.
• Bureaus typically have 30 to 45 days to “resolve” disputes. If it’s a simple factual error that is acknowledged by the lender, it could take as little as two weeks. Either way, consumers are notified of the bureau’s decision via regular mail or e-mail.
  

Mortgage Rates Continue to Fall

Freddie Mac reports a drop in the 30-year fixed mortgage rate to 4.82 percent during the week ended May 21 from 4.86 percent the prior week. Meanwhile, the 15-year fixed mortgage rate dipped to 4.5 percent.

The Federal Reserve is working to hold down rates by purchasing upwards of $1.25 trillion in mortgage-backed securities and $300 billion in Treasuries. Mortgage rate premiums have declined substantially over the last couple of months even as Treasury yields climbed.

Source: Investor's Business Daily (05/22/09)

A battle plan for refinancing your mortgage

Homeowners seeking to refinance their mortgages may be surprised by the amount of paperwork required. During the “easy credit” years, some lenders did not require proof of income or documentation. Nowadays, most lenders require borrowers to provide pay stubs, banks statements, brokerage statements, and possibly tax returns. Self-employed individuals may be asked for a profit-and-loss statement. Those relying on bonus income should expect that most lenders will assume this year’s bonus will be a lot less than last year’s, which could make securing approval more difficult.

Determining the amount of equity in the home is key to being approved for a new loan. Homeowners whose mortgage obligations are less than 80 percent of the home’s value are more likely to have refinancing options available to them. Other homeowners who are current on their mortgages, owe 80 percent to 105 percent of the home’s value, and have a loan owned by Fannie Mae or Freddie Mac may be able to refinance under the government’s “Making Home Affordable” program.

Other factors to take into consideration when refinancing are the property’s appraised value, the homeowners’ credit score(s), whether or not the property has a second mortgage, and the length of the original loan.

UCLA forecast: Budget crisis will impact California's Recovery from recession

The UCLA Anderson Forecast (June 16, 2009) upgraded the condition of the national economy, moving it out of "intensive care" while noting that it is still "very sick." Nationally, the recovery will be slow due to recession-scarred consumers who will focus on their savings, and the dramatic adjustment in financial services, the automotive industry and the retail sector, according to the forecast. The recovery also will be inhibited by the financial excesses of 2003 to 2007 in the form of millions of foreclosed homes and a plague of "upside-down" mortgages.

“What we are perhaps most concerned about is not the timing of the recession's end, but rather the shape of the recovery to come," said UCLA Anderson Forecast Senior Economist David Shulman. "We are forecasting the weakest economic recovery of the postwar era with real growth on the order of 2–3 percent."

In California, the worst of the recession is beginning to ease, but any optimism must be tempered by the specter of a state government poised to contract at the worst possible time, the report said. According to UCLA Anderson Forecast Senior Economist Jerry Nickelsburg, there is nothing happening in California that will help pull the state out of recession in advance of the nation. "California is in for a continued rough ride for the balance of 2009 and is not going to see economic growth return until the end of the year, shortly after the U.S. economy begins to grow," he said. The dire conditions surrounding the state budget will contribute to prolonging tough conditions in California, according to the report.

Overall, the forecast for California is for a very weak first two quarters of 2009, to be followed by very little growth in the last six months of the year, according to the report. The economy will begin to pick up in 2010 and return to more normal levels of growth in 2011.

10 Most Undervalued U.S. Cities

Housing research organization IHS Global Insight estimates that the average U.S. home is undervalued by 12.2 percent, and many previously pricey communities are undervalued by considerably more.

A recent study released by IHS used home prices, interest rates, area incomes, population density, and historic premiums and discounts to analyze housing values. It examined 330 markets and found homes are underpriced in 248 of them.

Despite the high percentage of undervalued areas, IHS says "it is too early to call a bottoming," as "job losses continue, housing inventories remain elevated, and consumers remain wary in light of economic uncertainty."

Here are the 10 most undervalued areas:

1. Vero Beach, Fla., -42.5 percent
2. Houma, La., -41.4 percent
3. Las Vegas, -40.9 percent
4. Merced, Calif., -40.1 percent
5. Cape Coral, Fla., -39.1 percent
6. Houston, -36.9 percent
7. Midland, Texas, -34.8 percent
8. Lafayette, La., -34.4 percent
9. Vallejo, Calif., -34.3 percent
10. Stockton, Calif., -34.3 percent

Source: CNNMoney.com, Les Christie (06/04/2009)

Homes are most affordable in 200 Years!

According to several recent studies, homes are more affordable nationwide than they have been in many years, enabling many buyers who previously might have been priced out of the market to become homeowners.

MAKING SENSE FOR MY READERS

• Nearly 73 percent of all homes sold in the U.S. during the first three months of 2009 were considered affordable, according to a quarterly market analysis by the National Association of Homebuilders and Wells Fargo Bank. That was the highest percentage ever reported by the 18-year-old Housing Opportunity Index.
• According to the Index, a home is deemed affordable if a family making the median national income of $64,000 is able to purchase the property and devote no more than 28 percent of their income toward housing costs.
• The percentage of households that could afford to buy an entry-level home in California stood at 69 percent in the first quarter of 2009, compared with 46 percent for the same period a year ago, according to the CALIFORNIA ASSOCIATION OF REALTORS®’(C.A.R.) First-time Buyer Housing Affordability Index (FTB-HAI). The FTB-HAI measures the percentage of households that can afford to purchase an entry-level home in California.
• The minimum household income needed to purchase an entry-level home at $213,040 in California in the first quarter of 2009 was $38,090, based on an adjustable interest rate of 4.96 percent and assuming a 10 percent down payment. First-time buyers typically purchase a home equal to 85 percent of the prevailing median price. The monthly payment including taxes and insurance was $1,270 for the first quarter of 2009.
• At $38,090, the minimum qualifying income was 42 percent lower than a year earlier when households needed $65,030 to qualify for a loan on an entry-level home. Recent decreases in home prices and mortgage rates have brought affordability into better alignment with income levels of the typical California household, where the median household income is $61,030.
  

Forbes Names 10 Best Retirement Spots

With the economy in turmoil and lifestyle preferences changing, traditional retirement counties aren’t looking as attractive as they used to. With this in mind, Forbes magazine set out to identify the Best Places to Grow Old.

The magazine mined data from the U.S. Census Bureau to determine where people older than 65 live now. It examined housing costs, employment opportunities, and the availability of hospitals and eldercare facilities, among other things.

Of counties with populations greater than 500,000, here are Forbes' top picks of places in which to grow old gracefully:

1. Montgomery County, Pa.


2. Nassau County, N.Y.


3. Pima County, Ariz.


4. Palm Beach County, Fla.


5. Honolulu County, Hawaii


6. Brevard County, Fla.


7. Montgomery County, Md.


8. Ocean County, N.J.


9. Westchester County, N.Y.


10. Lancaster County, Pa.

Source: Forbes, Lauren Sherman (05/18/2009)

Cities Where Home Prices Could Fall More

With incomes falling and loans remaining hard to get, the best bargains are probably yet to come in some of the nation’s largest housing markets, predicts Forbes magazine.

To figure out which housing markets still haven’t hit bottom, Forbes calculated the spending power, unemployment, credit availability and housing stock over the last 27 years in the country’s 50 largest metropolitan statistical areas.

The projections determined how much each area’s home prices would have to change to bring that housing market into historical balance. Analysts said the employment rate is the great unknown. The more employment falls, the more likely home prices will follow.

Here are the 10 cities where Forbes believes prices are likely to continue to fall the most:

1. Orlando
2. Miami
3. Jacksonville, Fla.
4. Tampa
5. Los Angeles
6. Phoenix
7. Las Vegas
8. Oakland, Calif.
9. San Diego
10. New York

Source: Forbes, Matt Woolsey (04/17/2009)

With low rates should you refinance?

Borrowers with hybrid adjustable-rate mortgages – loans that carry a fixed-interest rate for a certain number of years and then reset annually to rates tied to market benchmarks – are questioning if they should refinance to lock in a low rate for the long term, or if they should keep their adjustable-rate mortgages, currently at interest rates lower than their initial fixed rates.

Some mortgage experts say it’s best to refinance out of adjustable-rate mortgages if the borrower plans to live in the home for more than two years. Adjustable-rate mortgages are tied to myriad indices, and today’s low rate could jump as the economy recovers and inflation kicks in. The increase would result in borrowers paying more in the long term for an adjustable-rate mortgage than they would if they refinanced into a fixed-rate mortgage.

2nd Largest Mall Owner Bankrupt

General Growth Properties Inc., the second-largest mall owner in the United States, declared bankruptcy Thursday. It was the largest real estate bankruptcy in U.S. history.

General Growth and 158 of its more than 200 malls will operate under Chapter 11 protection as it seeks to refinance $27 billion in debt and restructure the business.

General Growth said its properties would be open for business and operating as usual.

"Our core business remains sound and is performing well with stable cash flows," General Growth Chief Executive Adam Metz said in a statement. "While we have worked tirelessly in the past several months to address our maturing debts, the collapse of the credit markets has made it impossible for us to refinance maturing debt outside of Chapter 11."

The bankruptcy is seen as a warning sign of trouble ahead for other large commercial properties that are heavily leveraged.

Source: Reuters News (04/16/2009)

I need Foreclosure Help!

With all the dubious assistance programs and out-right scams preying on home owners facing foreclosure, it can be difficult to find legitimate help.

Here’s a list of programs that are either operated by the U.S. government or have its seal of approval:

• To find a counselor, contact the U.S. Department of Housing and Urban Development (HUD) at (800) 569-4287 or (877) 483-1515, or go to www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm
• Call (888) 995-HOPE, the Homeowner’s HOPE Hotline to reach a nonprofit, HUD-approved counselor through HOPE NOW, a cooperative effort of mortgage counselors and lenders to assist homeowners.
• Visit NeighborWorks America’s Web site at www.nw.org/network/home.asp
• Go to this Web site for information on federal mortgage modification and refinancing programs: www.makinghomeaffordable.gov
• The Controller of the Currency’s consumer information site for banking-related questions is www.helpwithmybank.gov
• OCC Customer Assistance Group and consumer assistance site: www.occ.gov/customer.htm
• Federal Trade Commission: www.ftc.gov/bcp/edu/pubs/consumer/homes/rea04.shtm
• Federal Reserve Board: www.federalreserve.gov/pubs/foreclosurescamtips/default.htm
• NeighborWorks America: http://www.nw.org
• HOPE NOW: www.hopenow.com

Source: Controller of the Currency (04/21/2009)