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Great Video from CNN to Share with Clients

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As Lenders Hold Homes in Foreclosure, Sales Are Hurt

Joshua Lott for The New York Times

Jayson Meyerovitz, a broker in the Phoenix area, is concerned about bank-owned foreclosures: “If so many houses hit the market, what is going to happen then?”

By ERIC DASH

EL MIRAGE, Ariz. — The nation’s biggest banks and mortgage lenders have steadily amassed real estate empires, acquiring a glut of foreclosed homes that threatens to deepen the housing slump and create a further drag on the economic recovery.

All told, they own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider. In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.

Five years after the housing market started teetering, economists now worry that the rise in lender-owned homes could create another vicious circle, in which the growing inventory of distressed property further depresses home values and leads to even more distressed sales. With the spring home-selling season under way, real estate prices have been declining across the country in recent months.

“It remains a heavy weight on the banking system,” said Mark Zandi, the chief economist of Moody’s Analytics. “Housing prices are falling, and they are going to fall some more.”

Over all, economists project that it would take about three years for lenders to sell their backlog of foreclosed homes. As a result, home values nationally could fall 5 percent by the end of 2011, according to Moody’s, and rise only modestly over the following year. Regions that were hardest hit by the housing collapse and recession could take even longer to recover — dealing yet another blow to a still-struggling economy.

Although sales have picked up a bit in the last few weeks, banks and other lenders remain overwhelmed by the wave of foreclosures. In Atlanta, lenders are repossessing eight homes for each distressed home they sell, according to March data from RealtyTrac. In Minneapolis, they are bringing in at least six foreclosed homes for each they sell, and in once-hot markets like Chicago and Miami, the ratio still hovers close to two to one.

Before the housing implosion, the inflow and outflow figures were typically one-to-one.

The reasons for the backlog include inadequate staffs and delays imposed by the lenders because of investigations into foreclosure practices. The pileup could lead to $40 billion in additional losses for banks and other lenders as they sell houses at steep discounts over the next two years, according to Trepp, a real estate research firm.

“These shops are under siege; it’s just a tsunami of stuff coming in,” said Taj Bindra, who oversaw Washington Mutual’s servicing unit from 2004 to 2006 and now advises financial institutions on risk management. “Lenders have a strong incentive to clear out inventory in a controlled and timely manner, but if you had problems on the front end of the foreclosure process, it should be no surprise you are having problems on the back end.”

A drive through the sprawling subdivisions outside Phoenix shows the ravages of the real estate collapse. Here in this working-class neighborhood of El Mirage, northwest of Phoenix, rows of small stucco homes sprouted up during the boom. Now block after block is pockmarked by properties with overgrown shrubs, weeds and foreclosure notices tacked to the doors. About 116 lender-owned homes are on the market or under contract in El Mirage, according to local real estate listings.

But that’s just a small fraction of what is to come. An additional 491 houses are either sitting in the lenders’ inventory or are in the foreclosure process. On average, homes in El Mirage sell for $65,300, down 75 percent from the height of the boom in July 2006, according to the Cromford Report, a Phoenix-area real estate data provider. Real estate agents and market analysts say those ultra-cheap prices have recently started attracting first-time buyers as well as investors looking for several properties at once.

 

Lenders have also been more willing to let distressed borrowers sidestep foreclosure by selling homes for a loss. That has accelerated the pace of sales in the area and even caused prices to slowly rise in the last two months, but realty agents worry about all the distressed homes that are coming down the pike.

“My biggest fear right now is that the supply has been artificially restricted,” said Jayson Meyerovitz, a local broker. “They can’t just sit there forever. If so many houses hit the market, what is going to happen then?”

The major lenders say they are not deliberately holding back any foreclosed homes. They say that a long sales process can stigmatize a property and ratchet up maintenance and other costs. But they also do not want to unload properties in a fire sale.

“If we are out there undercutting prices, we are contributing to the downward spiral in market values,” said Eric Will, who oversees distressed home sales for Freddie Mac. “We want to make sure we are helping stabilize communities.”

The biggest reason for the backlog is that it takes longer to sell foreclosed homes, currently an average of 176 days — and that’s after the 400 days it takes for lenders to foreclose. After drawing government scrutiny over improper foreclosures practices last fall, many big lenders have slowed their operations in order to check the paperwork, and in two dozen or so states they halted them for months.

Conscious of their image, many lenders have recently started telling real estate agents to be more lenient to renters who happen to live in a foreclosed home and give them extra time to move out before changing the locks.

“Wells Fargo has sent me back knocking on doors two or three times, offering to give renters money if they cooperate with us,” said Claude A. Worrell, a longtime real estate agent from Minneapolis who specializes in selling bank-owned property. “It’s a lot different than it used to be.”

Realty agents and buyers say the lenders are simply overwhelmed. Just as lenders were ill-prepared to handle the flood of foreclosures, they do not have the staff and infrastructure to manage and sell this much property.

Most of the major lenders outsourced almost every part of the process, be it sales or repairs. Some agents complain that lender-owned home listings are routinely out of date, that properties are overpriced by as much as 10 percent, and that lenders take days or longer to accept an offer.

The silver lining for home lenders, however, is that the number of new foreclosures and recent borrowers falling behind on their payments by three months or longer is shrinking.

“If they are able to manage through the next 12 to 18 months,” said Mr. Zandi, the Moody’s Analytics economist, “they will be in really good shape.

 

Excellent Video!

Great Tips For Using Facebook

RISMEDIA, January 4, 2011—A few years ago it was enough just to be on Facebook. That alone might have made you stand out. Nowadays, however, everyone—from your fiercest competition to your dear old Aunt Susie—is on the social networking giant, so it’s imperative that you maximize your presence. Here are seven ways to stand out among the sea of site users.

1. Most of us have a profile page on Facebook but it shouldn’t end there. You should have a page for your business as well. Having a business page will allow your existing clients to stay in touch with you and also refer you more easily to their friends and family. In addition, people who are interviewing you to choose you as their REALTOR® may also “check you out” on Facebook. It allows them to see you on a different level and connect with you more personally.

2. After you have created your business page, take the next step and create a page that is specific to a niche or specific target market or a specialty you service. For example, if you are experienced in working short sales, create a page like Knoxville Short Sales. On this page, post what is happening in the industry, the short sale process or learning about the HAFA program.

3. Invite your friends to “Like” your page. Once you have 25 friends, you can create a branded Facebook domain name. Just go to www.Facebook.com/Username to name your page. This will create an easy to remember name like www.Face-book.com/AvoidForeclosure.

4. Once you have your page created, convert it to work like an additional website.Create a welcome page that looks and feels like your brand and your website strategy. Include clickable sections and calls to action that get the visitor over to the lead generation elements in your website. Include buttons like “Search Properties Now,” “Hot Property Alerts” or “Foreclosure Deals.” New friends or leads that you send to your Facebook page will land on this page first, which is why it can be a powerful lead generator for your website.

5. Now that you have your page and an easy-to-remember domain name, focus on “waving the flag” and driving traffic to your Facebook page. Add your Facebook domain name to every single marketing element you use in your business. Whether it’s your business card, postcards, listing flyer, magazine ad or your website, don’t forget to include it with your contact information.

6. Ever notice the ads on the right-hand side of Facebook and also how those ads seem to relate to you? This is target marketing in action. Run Facebook ads that drive traffic to your main site or to specific landing pages that focus on lead capture. When running these ads, you can hyperfocus down so those ads will only appear to those who share certain interests or in a certain age bracket or a geographic area.

7. Track your lead generation and conversion stats on what works. When running ads on Facebook, you can see the percentages of “click throughs” and see which ads generate the most interest. Also look in the backend stats of your website and track how many hits are coming from Facebook. This will allow you to know where to focus and continue your marketing efforts.

Tricia Andreassen is CEO/founder of Pro Step Marketing. She is a leading industry Web strategy expert, a nationally recognized speaker with Broker Agent Speakers Bureau, and one of RISMedia’s Real Estate magazine’s monthly columnists. For two decades she has trained and coached real estate professionals on how to bridge technology, web strategy and traditional marketing into a cohesive marketing strategy. For more information, please visit www.ProStepMarketing.com or call 1-866-799-9888. Her company has created turnkey Web marketing systems and a short sale marketing system that pulls all these elements together so you can focus on real estate.

 

Pending Home Sales Surged Unexpectedly in October

Pending sales of existing U.S. homes unexpectedly surged in October, data from a real estate trade group showed on Thursday, despite concerns that problems in the foreclosure process might curtail activity.

The National Association of Realtors Pending Home Sales Index, based on contracts signed in October, jumped 10.4 percent to 89.3 from 80.9 in September.Economists polled by Reuters ahead of the report had expected a decline of 0.5 percent.

The index remains 20.5 percent below a cyclical peak of 112.4 notched in October 2009, when a government tax credit lured first-time home buyers.

"It is welcoming to see a solid double-digit percentage gain, but activity needs to improve further to reach healthy, sustainable levels," Lawrence Yun, the NAR's chief economist, said in a statement.

Several major U.S. mortgage lenders temporarily halted foreclosures in October 2010 as attorneys general in all 50 states investigated whether banks had submitted faulty paperwork to back evictions.

 

Home Price Disconnect: Am I a Buyer or Seller?

Published: Tuesday, 30 Nov 2010 | 12:37 PM ET

By: Diana Olick
CNBC Real Estate Reporter

Fact: Home prices lag home sales. It happens on the way up and on the way down. Today's S&P Case Shiller home price report just confirmed what we've seen from umpteen other reports in the past few months, that home prices are taking a double dip. We knew it would happen.

"I would guess that by the end of today I would hear lots of double-dip forecasts and a few I told you so's. Things are rotten," opines S&P's David Blitzer. 

Home sales fell off dramatically in July after the expiration of the home buyer tax credit. Then they came back a few months later, and then turned for the worse again in October. Prices are much harder to gauge because there is so much emotion involved in pricing a home, not to mention so much uncertainty surrounding foreclosure sales, which can affect the price reports dramatically.

No question it is a buyer's market out there, but really only for the buyers who don't have to sell. Those who do have to sell, the move-up buyers, are stuck in this bizarre financial disconnect. It's all about math, that they apparently refuse to do. They expect a great discount on whatever house they're buying, but they are unwilling to take a loss on the home they're selling, even if it's a net gain in the end.

"The move-up buyer is putting all his ideas about wealth based on the house he owns," notes DC area real estate agent Donna Evers. They simply refuse to do the math. "In other words, in 2005, say the peak of the market, a real estate agent told me I should be able to get $700k for my house, and now it looks like it might be worth 10 percent less - $630K so I can't sell because I've lost $70K. Well if you were going to buy a house for 950K it is now worth 855K which is a $95K differential,. plus you've got a tremendous saving on your monthly payments because interest rates are much lower compared to what they were in 2005."

It all makes sense, but it somehow doesn't compute in the mind of the move-up buyer. Of course there's also the issue that banks are requiring larger down payments to get a mortgage, and some buyers don't have the equity cushion in their current home that would allow them to take a loss and still make a new down payment.

 

Great Article to Give Homeowners!

Are you the reason your home won't sell?

By Marilyn Kennedy Melia • Bankrate.com

Highlights

• The only way to sell at a loss is to research the housing market.
• Ask your agent to provide lots of recent prices on sales of comparable homes.
• Moody's Economy.com predicts prices will stabilize in mid-2010.

Many home sellers are losing money ... precisely because they're determined not to lose money. So why won't your home sell?

One reason homes are languishing on the market is because owners are suffering from "sunk cost fallacy" observes Ohio State University economist John Kagel.

A condition recognized not by physicians, but rather by behavioral finance experts, this fallacy describes the reluctance people have to selling for less than they've paid or put into a home, even when hanging on, waiting for the right price, will ultimately prove costly.

It can be hard to shake this faulty logic, even when homeowners' income has dropped precipitously or they're living off a limited amount of money, like a severance package, says financial planner William Suplee of Structured Asset Management, in Paoli, Pa.

Here are three questions to determine whether you could benefit by losing money on a home sale:

1. Will you slash your housing costs with a move?

Owners under financial pressure who could find relief on their monthly cash flow by moving to a lower-cost home that they either buy or rent are the ones grappling with the sunk cost fallacy.

Suplee tries to help owners get clear view of their best option by preparing spreadsheets that lay out the costs of different living arrangements.

Don't forget all the ancillary expenses, like commuting costs, that go along with a particular housing choice, adds Lexington, Ky., financial planner D. Scott Neal.

Laying out the annual costs of staying in a home that cost his client $800,000 several years ago was the only way to convince her that she would soon deplete her savings if she stayed put, says Rapid City, S.D., financial planner Rick Kahler.

Even though she'd probably sell for about $300,000 less than she paid, the monthly outlay was unsustainable, Kahler says. The pain of loss is softened, somewhat, he adds, because she can buy a home that is also valued less than it was several years ago. And, the recently passed tax credit of up to$6,500 for repeat buyers under certain income levels also applies to many in this position

2. Do you know what's a realistic price?

Recognizing that conditions dictate selling at a loss doesn't mean that you're ready to accept any offer, however.Indeed, experts stress that the only way to proceed confidently with selling at a loss is to thoroughlyresearch the housing market in your area.

Ask your agent to provide lots of recent prices on sales of comparable homes. In some states, agents can also provide very recent sales data by getting the prices of homes under contract, says John Huggins, president of Coldwell Banker Legacy Real Estate Group, in Bowling Green, Ky. Home sellers can also ask to tour other properties for sales to get an idea of how their home compares with other properties being offered at various price levels, he says.

Homeowners who owe more in mortgage than they can likely net in a sale have to investigate whether they'll have to add in their own cash to pay off the loan, or whether the mortgage lender will agree to accept a lower amount. In cases where owners have to pay out of pocket to sell, that outlay could alter the advantage of moving, says Neal.

3. If you hold out, could you avoid a loss?

Going against the natural inclination to avoid loss means that you've analyzed the cost of holding the property and are reasonably confident prices won't spring back up.

The National Association of Realtors forecasts home prices nationwide will end 2010 up just under 4 percent from the end of this year.

Moody's Economy.com predicts prices will stabilize in mid-2010, but there will be no appreciation. Economy.com's housing economist Celia Chen expects some middle and higher-end housing at risk for further decline next year, and thinks that some homeowners will not see prices return to what they paid for at least several years.

Real estate trends are local, adds Huggins. He advises looking at prices for similar homes in your area and gauging demand against inventories.

When he prepares spreadsheets for homeowners to examine the costs of holding versus moving, Suplee asks: "What rate of appreciation does the house need for a holding strategy to make sense?" Then, he asks for an honest determination of how plausible it would be to see that appreciation.

Tax Credit Information

With only a few weeks left until the first-time homebuyer tax credit expires, the Senate voted yesterday to extend and expand it through April 2010. On Thursday, the House voted 403-12 in favor of the bill. It could go to President Obama’s desk for his signature as early as Friday.

Officially called S.A. 2712 – the Worker, Homeownership and Business Assistance Act of 2009, the bill also includes tax credits for buyers who already own homes.

NAR Frequently Asked Questions:

Q.  Existing homeowner credit:  Must the new house cost more than the old house?  

A.  No.  Thus, for example, individuals who move from a high cost area to a lower cost area who meet all eligibility requirements will qualify for the $6500 credit.  

Q. I am an existing homeowner. On October 25, 2009, I signed a contract to purchase a new home.  I have lived in my current  home for more than 5 consecutive years and am within the new income limits. I will go to settlement on November 20. If President Obama has signed the bill by the time I go to settlement, will I qualify for the new $6500 tax credit?

A.  Yes.  The existing homeowner credit goes into effect for purchases after the date of enactment (when the bill is signed).  There is no reference to the date of contract for the new credit. The provision looks solely to the date of purchase, which is generally the date of settlement.  

Q.  I am a first-time homebuyer but was not within the prior income limits at the time I entered into my contract to purchase on October 30, 2009. I will be covered, however, by the new income limits.  If the new rules have been signed into law by the time I go to settlement, will I be eligible for a credit?  

A.  Yes.  The new income limitations go into effect as soon as the President has signed the bill.  The income limit and other eligibility rules will look to your status as of the date of purchase, which is the settlement date. So if the new rules have been signed when you go to settlement, you should be eligible for the credit (or a portion of the credit if you’re within the phase-out range).

Q.  I am an eligible existing homeowner. I have a fair amount of equity in my home. I have found a home with a non-negotiable price of $825,000. Will I be able to use any of the $6500 tax credit?

A.  No. The $800,000 cap on the cost of the purchased home is firm at $800,000.  Any amount above $800,000 makes the home ineligible for any portion of the credit. The $800,000 is an absolute ceiling.   

Q.  I owned my home for 10 years, but sold it two years ago and have been renting since. If I purchase a home, will I be eligible for the $6500 tax credit if I meet all the other eligibility tests?

A.  Yes. Because you lived in the home for more than 5 consecutive years of the previous 8, you will qualify for the $6500 credit. For example, say John and his wife bought a home in 2000 and lived there until 2008 when he got a divorce. Whether John has been renting or bought in the interim, he WOULD INDEED be  eligible for the credit because he owned a home and occupied it as his principal residence for 5 consecutive years out of the last 8 years. The keyword here is “consecutive.” As long as he lived in that house for 5 years straight, what he did since 3 years doesn’t impact eligibility.

Q.  I am an eligible first-time homebuyer.  I entered into a contract to purchase on November 1, 2009.  Do I have to go to closing before December 1?  How does the extension date affect me?

A.  You do not have to close before December 1.  Once the legislation has been signed, it will be as if the Nov. 30 date had never existed. Therefore, so long as the contract settles before April 30 (or July 1, worst case), the purchaser will be eligible for the credit.

To  learn more, download this homebuyer tax credit changes chart from NAR.

Pending Home Sales Rise for Eighth Straight Month

Pending home sales rose for the eighth straight month in September as new home buyers rushed to take advantage of the $8,000 tax credit before it expires at the end of the month, according to an industry group.

The National Association of Realtors said Monday that pending home sales rose 6.1 percent to 110.1 from 103.8 in August. It was the largest annual increase on record and marked the longest streak of gains since the measurement began in 2001. It was also the highest level in nearly three years.

Analysts polled by Reuters had forecast pending home sales, which lead existing home sales by one to two months, to be flat.

"What we're witnessing is a rush of first-time buyers trying to beat the expiration of the tax credit at the end of this month," said NAR Chief Economist Lawrence Yun. "Home values will stabilize sooner rather than over-correcting. That, in turn, will mean wealth stabilization for the vast number of middle-class families and lay the foundation for a durable economic recovery."

The group estimates about 3 million renters are now financially well-qualified to buy a median-priced home, and Yun said if buyers stay within their budget, there will be a sizable pent-up demand.

In the Northeast, the index slipped 2.0 percent to 83.6 in September but remains 16.9 percent above September 2008. In the Midwest the index rose 8.1 percent to 98.2 in September and is 17.8 percent higher than a year ago.

In the South, pending home sales increased 4.9 percent to an index of 109.7 and is 22.8 percent above September 2008. In the West the index jumped 10.2 percent to 143.8 and is 23.7 percent above a year ago.

Congress is moving to extend the credit to buyers who sign sales agreements by April 30. Lawmakers also want to add a $6,500 credit for buyers moving into other homes as long as they have been living in their current residence at least five years.

"We're clearly not out of the woods because an excess of homes remains on the market despite recent improvements," he said. "Although current inventory is getting closer to price equilibrium, foreclosures will continue to enter the pipeline. An extended and expanded tax credit would help absorb this incoming inventory."

The index surged a record 21.2 percent in September from the same period a year-ago.

Pending Home Sales Up 6.7%, Biggest Gain in 7 Years

The number of U.S. homebuyers who agreed to purchase a previously occupied home in April posted the largest monthly jump in nearly eight years, a sign that sales are finally coming to life after a long and painful slump.

The National Association of Realtors said Tuesday its seasonally adjusted index of sales contracts signed in April surged 6.7 percent to 90.3, far exceeding analysts' forecasts. It was the biggest monthly jump since October 2001, when pending sales rose 9.2 percent.

• 
  

"This is yet another positive indication that the bottoming process is forming," Jennifer Lee, an economist at BMO Capital Markets, wrote in a note to clients. "Now if only prices would stabilize."

Economists surveyed by Thomson Reuters expected the index would edge up to 85 from a reading of 84.6 in March.

Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future existing home sales.

"The pronounced increase in April does indicate that actual existing home sales are poised to rise in the coming month or two," wrote Joshua Shapiro, chief U.S. economist with MFR.

Tax Credit Can Be Used for Down Payment

The Federal Housing Administration has issued formal guidelines allowing first-time homebuyers to apply a federal tax credit of up to $8,000 toward the purchase of a home with an FHA-backed mortgage.

The bad news, for those hoping that the initiative would allow homebuyers to buy a home with nothing down, is that the tax credit can't be used to meet the FHA's 3.5 percent minimum down-payment requirement.

But the tax credit can be used as an additional down payment and for other closing costs, which can help borrowers obtain a lower interest rate.

For the average FHA-insured mortgage of $182,000, buyers must bring to the closing table or finance about $8,600 in costs on top of their down payment -- about $5,460 in closing costs (typically around 3 percent of the sales price) and $3,185 for FHA's initial 1.75 percent mortgage-insurance premium.

In announcing the release of the guidelines, Secretary of Housing Shaun Donovan called them "another important step toward accelerating the recovery of the nation's housing market."

The ability to "monetize" the tax credit and apply it to a home purchase will not only help families purchase their first home, Donovan said, but "present an enormous benefit for communities struggling to deal with an oversupply of housing."

The National Association of Home Builders has estimated that the tax credit will generate 160,000 home sales -- 101,000 purchases by first-time buyers and 59,000 purchases by existing homeowners who will be able to sell their home and trade up. FHA's market share has grown from 1.9 percent in the fourth quarter of 2006 to 23.7 percent in the last three months of 2008.

The guidelines for monetizing the first-time homebuyer tax credit have been anxiously awaited for more than two weeks. After Donovan announced the initiative in a May 12 speech to members of the National Association of Realtors (see story), HUD released and abruptly withdrew a set of guidelines that were later described as a draft version.

The final guidelines for lenders, spelled out in Mortgagee Letter 2009-15, explain the conditions under which FHA-approved lenders and nonprofits, and federal, state and local government agencies may purchase the tax credits anticipated by homebuyers.

Those offering tax-credit advances with second liens can't charge more than 2.5 percent of the anticipated credit, which works out to $200 in fees and costs for the maximum $8,000 tax credit.

The second lien can't exceed the total amount needed for the down payment, closing costs and prepaid expenses, and can't result in cash back from the borrower.

The homebuyer's 3.5 percent minimum down payment can't come from the lender, the seller, or any other third party or person benefiting from the transaction.

But FHA does allow parents, employers and other governmental entities to contribute towards the 3.5 percent minimum down payment.

A number of state housing finance agencies offer down-payment assistance loans that can be used to meet FHA minimum down-payment requirements, some of which already incorporate the first-time homebuyer tax credit.

"This guidance will enable more housing finance agencies to go forward with programs they've been waiting to launch until the guidance came out," said Garth Rieman, director of housing advocacy and strategic initiatives for the National Council of State Housing Agencies.

Rieman said that the mortgagee letter appears to allow housing finance agencies to continue to offer second loans that incorporate the tax credit as one of many underwriting factors, and those loans can still be used to meet the FHA's 3.5 percent down-payment requirement.

But the letter does appear to prohibit borrowers who obtain second loans based solely on their eligibility for the first-time homebuyer tax credit from using those funds to meet FHA's minimum down-payment requirement, Rieman said.

"We think the guidelines are flexible enough to allow housing finance agencies that already have (down-payment assistance) programs to continue to use them, and to allow them to use them with FHA loans," Rieman said.

The process described as "purchases" of tax credits in the FHA's letter to mortgagees is a new approach, Rieman said.

"You want to make sure it's done responsibly," and HUD has done an "artful" job balancing the need to stimulate homebuying against risk to the FHA insurance fund, he said. "When you consider all the fees and costs homebuyers must come up with, this will be very valuable in helping them raise the funds to close."

The first-time homebuyer tax credit is equal to 10 percent of the purchase price of the home, up to $8,000, for first-time homebuyers purchasing a home before Dec. 1. A first-time homebuyer is anyone who hasn't owned a primary residence in the last three years.

Individuals making $95,000 or more and married couples earning $170,000 or more can't claim the credit. Lesser tax credits are available for individuals with a modified adjusted gross income of $75,000 or more but less than $95,000, and for married couples earning $150,000 or more but less than $170,000, and filing jointly.

The IRS has created a landing page with links to a Q&A and Form 5405, the form used to claim the credit after closing on a home purchase.

Economic Overview

Housing Market Bottom???

By Julie Haviv

NEW YORK (Reuters) - U.S. housing markets from Florida to California have suffered price drops of 50 percent or more from their peak, but now, at long last, a bottom is within sight, likely in the fourth quarter nationally, according to a report from Moody's Economy.com.

By the end of the housing downturn, nearly 62 percent of the nation's 381 metropolitan areas will have experienced double-digit-percent declines in house prices, peak-to-trough, says the report by chief economist Mark Zandi and a team that includes Celia Chen, senior director of housing economics.

The declines will exceed 20 percent in about 100 metro areas, according to the report, scheduled to be discussed in a Webcast on Thursday. An advance copy was given exclusively to Reuters.

Despite the gloomy data, the report, by an independent subsidiary of Moody's Corp, paints an improving picture of the housing market, which is in the midst of its worst downturn since the Great Depression and is both the source and a major casualty of the world credit crisis.

An improvement could portend a turnaround for the world's largest economy and help stanch losses at U.S. banks, hit hard by soured mortgage securities.

"Despite the darkening national economic outlook and the weak conditions in the housing market, some positive signs give hope that a bottom in the housing market is coming into view," the report said.

"More than three years since the market began correcting, inventories are flattening, prices are coming back down to earth, and sales are approaching stability," the report said.

The outlook, however, assumes stronger action by U.S. policymakers and says that even with further government intervention, the recession will keep the housing market from fully recovering until the end of this year.

Market Update

20 hours ago

Looking to Buy a House? Read This First

Posted By:Carlo Dellaverson

Topics:Interest Rates | Credit | Real Estate | Mortgages | Housing | Personal Finance

Is now a good time to buy a home? 

It’s a common question these days as potential homeowners wonder if it’s the time to capitalize on low prices, foreclosures and fairly low interest rates. But determining when it’s right to buy isn’t all about the market, Carmen said. It’s about you and the state of your money.

Marc Hedlund, CEO of community finance siteWesabe, said that he’s noticing a lot of people are holding off on buying, even with prices down. They will start the process, and many will even make an offer to a bank for a distressed property, but the bank will take up to 90 days to review it and in that time the offer will most likely go away. Buyers are also noticing that the requirements on them are much higher than they used to be. You need two appraisals instead of one and at least 20% down. Also, you need good credit.

VOTE:

Poll of the Day: Who's Fighting For the Consumer?!

John Ulzheimer said that while a 580 credit score would have gotten you a great mortgage just two years ago, now you need to be “well well well into” the 700s to get the best deal from a lender. His best advice? Start early and give yourself time to prepare. Give yourself 60 – 90 days to do things like pay off your credit card debt and then leaving your cards dormant for the duration of the underwriting process. And hold off on financing anything else, he said. Lenders get nervous when they see inquired on your credit report about any impending debt. So if you need a new car to go along with the new digs, wait until you’ve signed the dotted line on the mortgage first. 

Signs of Market Recovery

Former Federal Reserve chairman Alan Greenspan said the U.S. housing market will begin to recover in the first half of 2009, according to an article he wrote for Emerging Markets magazine published Friday.

Greenspan wrote that the recent slowing in the rate of decline in U.S. home prices is the first positive note in the year-long trauma and that eventually, frozen credit markets will thaw "as frightened investors take tentative steps towards reengagement with risk."

"More conclusive signs of pending home price stability are likely to become visible in the first half of 2009," he wrote.

Sneak Peak

For a preview of our new, UNFINISHED website, log on to http://beta.crossroadsrealtynj.com
Remember, the site is not complete!! To get a good idea of how the site will work, click Communities, South, Barnegat......If you see your community missing, please let me know. If you have photos of any adult community signs, I need them for the ones that are missing!! We're anticipating public release within 2 weeks. More info to come...

Cool Tip

From a recent tech tips article: "Every agent in every open house should replace the business cards from the broker tour scattered on the kitchen table with a property alert sign-up form" Use your own contact info and follow up with a drip email campaign....

Great Article by Bernice Ross

The question is how can you capitalize on today's market conditions to increase your income in 2008?

1. Target active market areas. Regardless of where you work, there are some locations and price ranges that are more active than others. Watch the sales board in your office as well as the MLS statistics. Focus your marketing efforts on those areas that have the most business. If you do face-to-face prospecting such as door knocking, calling on for-sale-by-owners, prospecting owners of expired listings, or holding open houses, make active areas your first priority.

If you normally work the $400,000+ area and the sales are currently active in the $250,000 to $300,000 price range, shift your efforts there. Also, be sure to carefully monitor activity each month. If you observe a shift, follow it.

2. Put pressure on buyers who are negotiating by doing a simultaneous price reduction. Whenever you issue a counteroffer with a lower price, ask the seller to reduce the list price. When the buyers realize that the seller is lowering the price, it places additional pressure on the buyers to take action.

3. The best buyer's market in 35 years: If you use print or Web marketing, use your marketing pieces to proclaim, "2008—the Best Year to Buy a Home in 35 Years!"

Here's how to back up this claim: In April of 1973, mortgage rates were about the same as they are today. Since that time, we have only had mortgage rates this low during 2001 and 2002, the height of the seller's markets where there was little inventory. In the last two major buyer's markets, one in the early 1980s and the other in the early 1990s, the rates were much higher. When I started in the business in 1978, interest rates were at 9.75 percent, en route to 18 to 21 percent in 1980. In the early 1990s, the rates were hovering in the 11 to 12 percent range. Thus, today's buyer's market, with exceptionally low mortgage rates plus a substantial supply of inventory, is the best time in decades to purchase.

4. Show first-time buyers the cost of waiting. There are several different ways that first time buyers lose money by waiting to purchase. The first is loss of tax deductions. In most cases, people who lack a mortgage pay more federal and state income taxes than those who qualify for a mortgage deduction. You can use a mortgage calculator to illustrate this point. For example, assume that a buyer is currently paying $1,500 per month on a rental. If the buyer purchases a $300,000 property with $30,000 down and a fixed-rate 30-year mortgage of $270,000 at 6.25 percent, the buyer actually nets $24,262 more, assuming that appreciation keeps pace with inflation, the buyer owns the property for eight years, and is in the 28 percent bracket.

Another way renters lose money is through wealth accumulation, generally in the form of creating equity by paying down the loan and through appreciation. According to the Federal Reserve, the average homeowner between 1995 and 2004 had a net worth of $184,400, of which approximately $60,000 was due to home ownership appreciation. To account for the difference of $60,000 of wealth accumulation, a $200,000 house would have to decline by 30 percent. Thus, each year a buyer waits to purchase a median-priced home, they lose $6,000 in potential wealth accumulation.

An additional way that renters lose money is through increased interest rates. For example, on a $200,000 mortgage, assume that interest rates increase from six to seven percent. By waiting, the buyer's payments increase by $1,578 each year causing a total loss (in payments and wealth accumulation) of $7,578. If interest rates increase from six to eight percent on that same loan, they will pay an extra $3,221 per year resulting in a total loss of $9,221.

Vacation Home 1031

Daily Real Estate News  |  March 10, 2008

IRS Releases Vacation Home Ruling

The Internal Revenue Service recently issued a Revenue Procedure ruling that spells out how vacation properties can qualify for 1031 exchanges, which involve the exchange of investment properties.

The guidance aims to clear up the debate about whether vacation homes are investment or personal use properties. The ruling states that the property must be held by the taxpayer for 24 months. The holding period is broken into 12-month blocks, and during each the property must be rented at the fair market rate for no less than 14 days.

Additionally, the owner can use the property for 14 days or 10 percent of the days rented, whichever is greater, plus a "reasonable" number of days devoted to maintenance tasks. Because it is a safe harbor ruling, experts say failing to comply with all the rules does not mean the exchange will be denied or an audit will automatically occur.

However, they underscore the importance of keeping good records of the property's rental history and the dates the property was occupied by the owner for maintenance.

From Broker Agent News-Short Sale Questions

Number 10
I can't make my house payments, but I do have an ability to pay back all or part of the negative equity. Also, I want to preserve my credit score...is a short sale right for me?

Probably, not. In cases where the seller can pay back all or part of the negative equity (usually to the 2nd lien holder), it makes sense for them to work out a repayment plan. The lender will then release the lien and allow the home to close.

Number 9

If I pay mortgage insurance and default on my loan, why wouldn't that cover the deficiency amount?

The mortgage insurance is not there for your protection, just the mortgage lender's.

Number 8

Do I have to have my home "Approved" by the lender prior to offering it for sale as a short sale?

No. Technically speaking there is no such thing as being "Short Sale Approved." The actual approval only happens with an accepted offer.

Number 7

I just missed a payment and I know I will miss more...how long does the foreclosure process take and is there time to do a short sale?

The foreclosure process takes differing times depending on your state.  In the Midwest a foreclosure can take over a year. In California its taking 6+ months.  Generally speaking a well priced short sale being processed by an educated short sale listing agent will sell and close in less than 120 days.

Number 6

Will I still have to pay property taxes if I do a short sale?

Property taxes will always have to be paid as part of any accepted short sale. Whether it's you or the lender, it depends on their policies and the specific agreement you reach while negotiating the short sale.

Number 5

I owe more than my home is worth and I can't make the payment. Do I have to somehow qualify for a short sale?

The simple answer is NO. If someone can't make their payment and they are otherwise insolvent, they qualify for a short sale. Note: insolvent simply means their total debts are great than their assets.

Number 4

Do I have to pay income taxes...I have heard that I will get a 1099. Will the loss the bank takes be treated as a taxable gain to me...the seller...is this true?

It WAS true, now it's not. Consult your Tax Attorney or Qualified CPA.  Very recently the tax law was modified and now most people who do a short sale will have no taxes due.

Number 3

How do you, my listing agent get paid...who pays your commission?

The bank will pay the commission along with all the other usual closing costs.

Number 2

Do I have to miss a payment to do a Short Sale?

No. Late last year most major lenders started accepting short sale offers from sellers who have never missed a payment.

Number 1

I want to do a short sale and have a 2nd mortgage, does this make me ineligible?

No. Both of your lenders will need to be satisfied in some way to complete the short sale. If your first lender will be paid off by the sale, then you just negotiate the terms with the second lender. Most short sales do involve 1st and 2nd lien holders.