Daves Real Estate Market Report

Take a look inside New York’s most expensive penthouse by clicking on the picture above.

NEW YORK (CNNMoney) — An unnamed buyer paid more than $90 million for a Midtown Manhattan penthouse, the highest price ever paid for a New York apartment, according to the building’s developer.

The seller, the Extell Development Co., had been asking $98.5 million for the 10,923 square-foot condominium. Gary Barnett, Extell’s president, wouldn’t confirm the exact price the condominium went for or who the buyer was, but he would say the apartment sold for about $8,000 a square foot.

Located on the 89th and 90th floors of the One57 building on 57th street, the apartment features 23-foot ceilings, rosewood flooring, panoramic views of the city, Italian marble and custom hardware and light fixtures.

The building, which is still being constructed, includes a total of 95 condos and is built on top of a five-star Park Hyatt hotel. Prices start at $6.75 million and about half of the units have been already sold, said Barnett. Occupancy won’t begin until early next year.

The purchase follows two other recent blockbuster sales. In December, a Russian billionaire paid $88 billion for a home once owned by ex-Citigroup CEO Sanford Weill. Then, earlier this week, a Park Avenue co-op was sold for $52.5 million, a record for a co-op apartment.

“I call it the 10,000-square-foot trifecta,” said Jonathan Miller, president of Miller Samuel and one of New York’s best known appraisers. “I think it’s a statement about global economic instability.”

The Weill sale broke the ice. “When that happens, other high-end sales come in clusters,” he said.

Helping to drive up the sale price was a lack of competing properties on the market, said Miller. The apartment came to the market at a time when there weren’t many competing super high-end products.

It’s also in a prime location, near Central Park, the Midtown business district, theater and restaurants. It’s just down the block from Carnegie Hall.

Miller said many of the ultra-high-end purchases in New York and other expensive markets are done for investment purchases — at least in part. With the future of the eurozone in question and bond yields low, there’s not a lot of other attractive investing options.

“New York real estate is a hard asset, a safe haven for investors” he said. “Relative to other markets, it’s still seen as safe. I would not be surprised to see more of these sales.” 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/61id4cPBWaE/index.htm

NEW YORK (CNNMoney) — Buying a home has reached its most affordable level in more than two decades.

Nearly 78% of homes sold during the first quarter were affordable to those earning the national median income of $65,000, according to a report released Thursday by the National Association of Home Builders and Wells Fargo.

The reason: Home prices nationwide are off about 36% from their peak. Median income has risen by about 10%. And mortgage rates are below 4%.

There is one catch for home buyers, however: Mortgage availability.

“Homes in this year’s first quarter were more affordable than they have been at any time in more than 20 years, yet many potential sales are not happening,” said Barry Rutenberg, NAHB’s chairman and a homebuilder in Gainesville, Fla. He said that’s mainly due to overly tight lending conditions.

“Without this significant hurdle, the housing and economic recovery could be proceeding at a much stronger pace,” he said.

Most and least affordable markets: Among large metro areas, Indianapolis was America’s most affordable housing market with 96% of all homes sold easily afforded by the typical family, according to the report.

Wages in Indianapolis are reasonably high with the median family income at $66,900, nearly $2,000 above the national median. Meanwhile, the median price for homes sold there during the first three months of 2012 was a mere $102,000.

Other major markets that topped the most affordable list included Dayton, Ohio, where 94% of homes sold were considered comfortably affordable; Lakeland, Fla., with a 93% affordability score and Modesto, Calif. at 93%.

Decidedly unaffordable was New York, where only 31% of homes sold were affordable to median income families, who earned $69,200. The median home price in the metro area was $400,000.

Other least affordable large markets included San Francisco (40%), Honolulu (48%), and Los Angeles (50%).

In smaller markets, Cumberland, Md. topped even Indianapolis with 99% of homes sold affordable to median income families in the area. Homes sold for a median of $80,000 there, with local families typically earning about $53,000.

The least affordable small market was Ocean City, N.J., with an index rating of 46% for families earning the median income of $71,100. Other expensive housing markets in this category included Santa Cruz, Calif., San Luis Obispo, Calif., Santa Barbara, Calif. and Laredo, Texas.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/08Abc6KAzbQ/index.htm

George Lucas seeks to build low-income housing on Calif. property

NEW YORK (CNNMoney) — The film emperor may be striking back. For 25 years, filmmaker George Lucas tried to persuade his Marin County, Calif., neighbors to let him build a digital production studio on his ranch there, but the area’s residents thwarted the plan.

So Lucas has come up with an alternative for his Grady Ranch property: To build low-income housing on it.

In a letter posted online Lucasfilm wrote, “It is with great sadness that Skywalker Properties has decided to pull its application to build a studio facility.

Instead, the maker of some of the biggest box office successes of all time, including the “Star Wars” and “Indiana Jones” franchises, intends to sell the property to the Marin Community Foundation (MCF), a non-profit that has already funded more than 2,500 units of affordable housing and will explore options for developing Grady Ranch.

Lucas had applied to the county planning commission for permits to build a 260,000 square-foot compound that would be used as a digital media production studio. The company claimed the facilities would create about 600 high-paying jobs.

“The level of bitterness and anger expressed by the homeowners in Lucas Valley has convinced us that, even if we were to spend more time and acquire the necessary approvals, we would not be able to maintain a constructive relationship with our neighbors,” Lucasfilm said in its statement.

Opposition to the plan has come mainly from residents of nearby homes represented by the Lucas Valley Estates Homeowners Association, and from real estate developer Thomas Monahan, who owns a big property next to the Grady Ranch. The association did not respond to a request for comment and Monahan declined to comment.

The homeowners objected to several aspects of the project, according to Mary Feller, a member of a nearby homeowners association who attended many of the planning commission meetings. Among the concerns were traffic, noise, and an outdoor stage that would be lit until 11:00 p.m.

Feller said the Marin Conservation League also raised environmental objections, particularly when it came to plans for the disposal of dirt and rocks that would be excavated for the project. The conservation league did not respond to a request for comment.

Not all of Lucas Valley’s residents were voting against the filmmaker, however. “The loss of that project is a major blow to the community,” said Dale Miller, an area resident. “It would have provided a lot of jobs.”

Land to build on in the Lucas Valley area — which was named after a 19th century rancher, not the 20th century filmmaker — is rare thanks to strict “smart growth” policies that limits the building of new homes. These policies encourage building in higher density areas while keeping undeveloped land open. As a result, much of Marin has been set aside for parks and recreational areas.

With the housing supply artificially compressed, home prices are high there. The median home price has hovered around $700,000 lately, according to Fred Silverman, a spokesman for the MCF.

“Affordability is so bad that many people, even with moderate income, can’t afford to live here,” he said.

It may seem as if the affordable housing project is a way for Lucas to stick it to his opposition, but Tom Peters, the CEO of the Marin County Foundation disagrees. “I know Lucas and checked with him on that point personally and directly. It was essential that I was convinced that it was not done out of spite. I would not have accepted the project if I thought it was,” he said.

Back in the late 1970s, when Lucas was planning Skywalker Ranch, a studio about 10 miles west of Grady Ranch, he ran into similar opposition from homeowners. People, “feared helicopters landing with celebrities and tour buses coming down Lucas Valley Road,” said Lucasfilm in its letter. “None of their fears materialized.”

The company insists that Skywalker has been an exemplary neighbor and asset to the community, preserving 5,000 acres of woods and fields, establishing an 11-mile hiking trail, restoring a pond, helping wildlife to thrive and providing aid to the local fire and rescue squads, not to mention creating hundreds of jobs.

It’s still unclear how the community will react to the housing plan for Grady Ranch. Mary Feller said she believes the community will have no objection. Peters, on the other hand, expects a fight. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/H6Nx_BghJq8/index.htm

NEW YORK (CNNMoney) — A recent sale in New York’s famed 740 Park Avenue apartment building marked the highest price ever paid for a co-op in the city’s history.

Billionaire investor Howard Marks, the co-founder of Oaktree Capital Management, and his wife Nancy purchased the property for $52.5 million, according to public records.

The former owner was Courtney Sale Ross, the widow of Steven Ross, who was the co-chairman of Time Warner (TWX, Fortune 500) (the parent company of CNNMoney). The more than 20-room apartment, which was sold by real estate firm Brown Harris Stevens, was initially listed for $60 million a year ago.

The May 4th sale marks the highest co-op purchase price in the history of Manhattan real estate, according to Jonathan Miller, president and CEO of Miller Samuel, a New York appraisal firm.

With eight bedrooms, 10 bathrooms, formal and informal dining rooms and sweeping terraces, there is about 10,000 square feet of interior space — valued at about $5,250 per square foot, Miller said. The real estate taxes alone on the transaction came to nearly $1.5 million.

The Marks’ neighbors will include billionaire David Koch and Blackstone CEO Stephen Schwarzman. Jacqueline Kennedy Onassis and John D. Rockefeller Jr. have also lived in the 31-unit building.

“Up until the opening of 15 Central Park West, it was the trophiest piece of trophy real estate in the city,” said Michael Gross, author of 740 Park.

Sales at the very high end of the market have thrived in recent months, mostly due to foreign buyers seeking safe investments in the midst of global economic turmoil, Miller said.

In December, Citigroup founder Sanford Weill sold his penthouse condo in 15 Central Park West for $88 million to a Russian billionaire, making it the most expensive apartment ever sold in Manhattan. Prices for co-operatives, like the units in 740 Park, generally lag condominium prices because of the difficulty buyers often have getting the required board approval.

Activity in the very high end of the real estate market often happens in clusters, Miller said. “The market has a light switch; it’s either on or off.”

Overall, Manhattan home prices averaged just under $1.5 million in the first quarter of 2012, which included the $88 million sale at 15 Central Park West, according to Brown Harris Stevens’ most recent data. The median price, which measures the middle of the market and is less impacted by the very high end, rose 4% to $821,500. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/Z2IsVh0AP6U/index.htm

NEW YORK (CNNMoney) — Bank of America is offering some struggling homeowners payments of up to $30,000 if they sell their homes in a short sale and avoid ending up in foreclosure.

Under the plan, Bank of America (BAC, Fortune 500) will offer homeowners so-called relocation payments of between $2,500 and $30,000 if they sell their home in a short sale. In short sale deals, the sale price of the home is less than what the seller owes the bank.

The bank first tested the payments in a pilot program in Florida last fall. Under that initiative, Bank of America paid up to $20,000 to borrowers who sold their homes in short sales.

“This program can help customers make a planned transition from ownership when home retention options have been exhausted or they have made a decision not to keep the home,” said Bob Hora, an executive for the bank.

Chase (JPM, Fortune 500) started a similar initiative in late 2010 that pays as much as $35,000 to short sellers. Wells Fargo (WFC, Fortune 500) has also paid five-figure incentives to short sellers or to owners who turned over their deeds to the bank.

BofA said it has completed 200,000 short sales over the past two years. These sales are generally more cost effective for banks than foreclosures. By avoiding foreclosure, the lenders get distressed properties back from delinquent borrowers more quickly, which helps them to avoid property tax payments, maintenance expenses and legal fees that can build up for months, even years, as foreclosures work through the system.

In addition, the incentives help guarantee the homes will return to the lenders in better condition. Foreclosed properties are often poorly maintained, even sometimes sabotaged, by angry former owners, making them worth far less to the banks.

During the last three months of 2011, foreclosures sold for an average of about $150,000, according to RealtyTrac. Meanwhile, short sales sold for an average of about $185,000.

To qualify for Bank of America’s relocation payments, borrowers must obtain pre-approval on sale prices for their homes. The sale must begin by the end of 2012 and close by September 26, 2013.

The exact compensation is determined case-by-case based on a calculation that involves the home’s value, mortgage balance and other factors.

Borrowers can call 877-459-2852 to find out if they may be eligible for the program. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/WLiv5oLa5E8/index.htm

NEW YORK (CNNMoney) — Mortgage interest rates hit new lows this week as both the 30-year and the 15-year fixed-rates fell, according to a weekly survey by Freddie Mac. It was the second consecutive week that rates broke records.

The 30-year, the most popular mortgage product, fell by 0.01 percentage points to 3.83%. Last year at this time, it stood at 4.63%. The new lows can save borrowers $46 a month for every $100,000 borrowed. Over a 30-year term that comes to more than $16,000.

The 15-year fixed dropped by 0.02 percentage points to 3.03%, lowering borrowing costs to $692 a month for every $100,000 borrowed, a $38 savings compared with a year earlier. Borrowers would pay out only $24,565 in interest over the life of the loan.

Rates are tracking the downward trend in Treasury yields, according to Frank Nothaft, Freddie’s chief economist, which have fallen in response to election results in Europe and a weaker than expected U.S. employment report.

“The economy added just 115,000 jobs, below the market consensus forecast and less than in March,” he said. “And although the unemployment rate declined, it reflected fewer people actively seeking jobs.”

Mortgage rates will likely not fall much further, according to Bob Walters, the chief economist for Quicken Loans. The low rates have sparked refinancings, which have accounted for upwards of 70% of all mortgage applications lately.

That flood of refinancings strain the capacities of mortgage lenders, especially since many have exited the industry over the past few years. When the remaining banks have trouble handling all the applications, they raise rates to discourage any more.

That means that when Treasury yields rise again, mortgage rates will follow at a slower rate, said Walters. Fewer homeowners will seek to refinance their loans and the banks will be better able to handle the lower number of applications.

“The spread between yields and rates will reduce when capacity comes into line,” he said. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/A7RQHFkuNaw/index.htm

Richard Cordray, director of the Consumer Financial Protection Bureau, testifying on Capitol Hill in January.

NEW YORK (CNNMoney) — The federal government is considering a new set of rules on mortgage origination that it says would make the process simpler and more transparent for borrowers.

The Consumer Financial Protection Bureau, created as part of the Dodd-Frank financial reform law, said Wednesday that the new rules will focus on mortgage points and fees, the current complexity of which can make it difficult for home-buyers to assess different loan offers. The rules would also include new standards for officials in charge of mortgage origination.

“We want to bring greater transparency to the market so consumers can clearly see their options and choose the loan that is right for them,” CFPB head Richard Cordray said in a statement.

Mortgage origination is thought to have played a key role in the housing crisis, as so-called “predatory lenders” steered borrowers into complicated loans that they couldn’t afford, which later went bust in large numbers. Originators are a focus of the Obama administration’s mortgage crime task force, announced in January.

Among other things, the rules under consideration would prohibit incentive payments to mortgage originators who steer customers into higher-priced loans, following on a similar rule issued by the Federal Reserve Board in 2010.

Origination officials, such as mortgage brokers and loan officers, would be required under the new rules to go through training and undergo background checks. Origination charges that vary with the size of a borrower’s loan would be banned.

The rules will likely be proposed formally this summer before being finalized in January of next year, the CFPB said.

Last month, the bureau outlined a set of new rules under consideration for mortgage servicers. These regulations would require clearer mortgage statements for borrowers and better disclosures about any fees or changes in a loan’s interest rate.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/Bfz36PR-03o/index.htm

NEW YORK (CNNMoney) — Ten hard-hit housing markets will record double-digit price increases through 2013, according to a report Wednesday.

And with mortgage rates low, many house hunters have already started to pounce on bargains, said David Stiff, chief economist at Fiserv, a financial analytics company that prepared the forecast.

“Some markets may have overshot to the downside, and people are jumping in to try to catch the bottom,” Stiff said.

Nationwide, home prices will start rebounding late this year and gain an average of 4% a year over the next five years, Fiserv projects.

In a separate report released Wednesday by the National Association of Realtors, the national median home price declined by just 0.4% in the three months ended March 31 compared with the same period in 2011.

About half of the 146 metro-area markets surveyed by NAR showed a price increase, as buyers make inroads into the supply of homes for sale all across the country. National inventory has dropped by 22% compared to a year earlier.

“Given the steadily dwindling supply of inventory and notably higher listing prices that are being negotiated today, prices are expected to show further improvements in the near future,” said Lawrence Yun, NAR’s chief economist.

Home prices will also be driven higher as banks opt for short sales instead of repossessions. Repossessed homes sell for between 25% and 50% less than comparable homes sold by conventional sellers, according to Daren Blomquist, a spokesman for RealtyTrac, which markets foreclosed properties.

Bank repossessions often go through lengthy foreclosure processes and long periods of vacancy, during which they may deteriorate and lose value.

Fiserv’s Stiff forecasts that Madera, Calif., will produce the largest home price gain over the next two years. This market bubbled during the housing boom, with the median home price jumping above $300,000, according to the National Association of Home Builders.

Prices have since tumbled 53% off their peak, to about $125,000. Fiserv is projecting a price jump of 21.5% by the end of 2013 with 16.5% of that increase coming next year.

Other double-digit gainers will include Medford, Ore., with a 20.1% rise, Yuma, Ariz., with 16.7%, and Corvallis, Ore., with 11.4%. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/TqJWodiUIh8/index.htm

NEW YORK (CNNMoney) — When Internet millionaire Tom Gonzales was putting together his elaborate family compound on the shores of Lake Tahoe, he had one big concern: Where to put some of the most valuable cars in his 400-car collection.

The solution was to build a 12,000-square foot subterranean parking garage big enough to hold 30 cars, plus dozens of motorcycles.

How those cars get below ground is another matter. Gonzalez, who was co-founder of the once high-flying e-commerce company Commerce One, commissioned a massive 12-foot- by 60-foot custom-built aircraft elevator, the type used to lift planes up onto the flight decks of aircraft carriers. When the elevator isn’t moving cars, it’s camouflaged with rocks, plants and trees — both real and artificial.

Above ground is a three-bedroom, 2,100-square-foot home that Gonzales calls the Carriage House. The property is being sold as part of Gonzales’ $50 million compound, which includes three other homes, or as a separate parcel for $8.9 million.

Called the Sierra Star, the estate near Incline Village, Nev., includes the Carriage House, a main 10,000-square foot home and two other houses. The properties have expansive views of gorgeous Lake Tahoe, one of the most scenic landscapes in the nation.

“In summertime it’s heaven,” said Gonzales. “In winter too, if you’re a skier.”

After all, this is snow country, sometimes receiving 40 feet or more of the white stuff in a season. World-class ski resorts, like Heavenly, occupy many of the peaks around the lake.

The estate is a high-country dream. Ponderosa pines and cedars grace its four-plus acres, along with a man-made waterfall. In addition, the property has more than 330 feet of lake frontage, two piers with boat lifts, and a sandy beach with a bungalow.

Originally intended to be a gathering place for Gonzales’ family, the property is now too big for him. His son Tom, the other founder of Commerce One, died of cancer almost 10 years ago.

“I’ve enjoyed the property over the years, but now it’s just me,” he said.

He spends most of his time in Fort Lauderdale, Fla. now, where he enjoys the climate and the boating.

No longer in the software business — Commerce One filed for Chapter 11 bankruptcy protection in 2004 — Gonzales is now in the land development business, according to Susan Rindley of Sotheby’s International Realty, who represents him in his real estate dealings.

“He’s the kind of guy who, if he gets tired of something, he sells it,” she said.

Like the Carriage House, the other properties can also be sold separately. Gonzales is asking for $14.9 million for the seven-bedroom Main House; $9.3 million for the five-bedroom Lakeview house; and $6.3 million for four-bedroom Parkview house.

There’s also a lot with 100 feet of lake shore for $9.9 million. It’s ready for a house to be built on it — with or without an underground garage.

See all four houses on the Sierra Star compound

See more unique homes:

House made of hay: No heating required

Own a gold mine

For Sale: The Hunger Games’ ‘District 12′ 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/GkoFtP3BzrQ/index.htm

LOS ANGELES (CNNMoney) — People have been hyping the death of the mall for the last two decades, but it’s not happening anytime soon, said Simon Property Group CEO David Simon.

“Time Magazine 20 years ago had that exact headline,” Simon, who has been at the helm of the world’s largest mall operator since 1995, told CNNMoney at the Milken Institute Global Conference in Los Angeles. “If you look at our business and our profitability, it’s never been better.”

Investors appear to agree. Simon Property Group’s (SPG) shares are up 22% in 2012, compared to an 11.7% increase in the SP 500 (SPX).

Simon admits growth in the United States is limited, even going so far as to say some lower-end malls around the U.S. could close. Most of Simon Property Group’s malls serve higher-end consumers.

He thinks most of Simon Property Group’s growth will come from driving sales into its existing malls by refurbishing them and adding new stores.

Simon points to Roosevelt Field mall on Long Island in New York as one example. After years of battling local community boards for approval, Simon Property Group recently landed luxury retailer Neiman Marcus as a tenant. Simon hopes such retailers will draw more high-spending customers into his malls.

For much of Simon’s tenure, buying up competing real estate investment trusts, or REITs, has driven growth. He’s spent roughly $27 billion in 17 years buying competitors, most recently paying $2 billion for a 29% stake in Europe’s largest retailer Klepierre.

Simon says to expect fewer big acquisitions going forward, yet there is one new area where he’d consider buying: technology. Simon wants to make his mall more more technologically sophisticated, and he said that buying up a technology startup could help Simon Property compete more effectively with e-commerce sites

“Ideally what I’d love to do is know when our best customers are in the mall. If you show up I want to deliver a free latte to you [and] I know exactly what kind of latte you want,” said Simon.

While aggressively courting new and existing consumers, Simon doesn’t expect to fight battles with shareholders. Last year, Simon’s board awarded him roughly $120 million after he agreed to stay at the company for the next eight years. That makes him one of the most highly paid CEOs in the United States.

Simon said he deserves it. “Nobody has had better performance over 10 years, and I expect that to continue,” said Simon. “Our board took a serious look at what I contributed and the prospects for what it means to be part of the company for another eight years.”

The REIT’s returns have been exceptional. Since Simon joined as CEO in 1995, Simon Property has generated annual returns of 11.2% compared to roughly 6.7% for the SP 500.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/vJfBxD0wHuo/index.htm

The web startup has thrived by making it easy to list and find rooms to rent. But CEO Brian Chesky thinks the site can be an eBay for the social age.

Designing men: Airbnb founders (from left) Nathan Blecharczyk, Brian Chesky, and Joe Gebbia at the company’s San Francisco headquarters

FORTUNE — The house-sharing website Airbnb lists 4,881 apartments for rent in Paris, but CEO Brian Chesky is paying a lot of attention to listings like the one for a parking spot in Île-de-France for $20 a night. Strange things like that keep popping up on Airbnb lately. In San Francisco a guy named Mark will lend you his touring bike for $20 a night. In West Hollywood, Andrea will lend you her 2011 Audi Q5 for $114 a night. And Kay in Texas has 22 acres where you can park, well, anything you want for $135 a week.

Launched in 2008 to help people offer and find affordable places to crash for the night, Airbnb is starting to emerge as a listings site for rentals of all kinds, a sort of Craigslist for the social media set. The company so far has more than 1 million renters and hosts, and some 100,000 active listings in 192 countries, mostly for houses, apartments, villas, yurts, and the occasional tree house. But Chesky, a clean-cut and affable Rhode Island School of Design graduate, has even greater ambitions: Armed with $120 million in funding and investors such as LinkedIn (LNKD) founder Reid Hoffman and actor Ashton Kutcher, Chesky says he wants to build an online marketplace that small businesses and other entrepreneurs can use to enable what he calls the “sharing economy.” In other words, Airbnb could one day be the go-to destination to offer or locate anything you want to rent — and tap into a broad array of services that help you manage the transactions. In the words of Andreessen Horowitz partner Jeff Jordan: “It’s eBay all over again.”

Creating a so-called platform is a tall order for a young startup, but such expansive thinking has become de rigueur for social media companies these days. Ever since Facebook enabled third parties to build applications and even develop entire companies on the Facebook platform, a growing number of web entrepreneurs have been positioning their businesses as way more than one-hit wonders. “At some point in 2012 there should be enough scale for an ecosystem to make sense,” Chesky explains. “We will have millions of people. If you make something for Airbnb, you will have a market.”

Airbnb’s office, which features replicas (left) of some rooms on the site

Even if Chesky, 30, is able to transform Airbnb into a vibrant online emporium, he’ll face plenty of competition. There already are dozens of e-commerce sites, ranging from specialty sites such as Etsy for handmade goods to Amazon (AMZN), Yahoo (YHOO), and, of course, eBay (EBAY), all of which also offer digital storefronts for small businesses. And Airbnb copycats abound. There are Airbnb clones for bikes, baby clothes, office space, and ride shares — and two separate sites for dogs. “Airbnb should continue to be what it is and just do the best job of it — the market is plenty big enough,” says Stifel Nicolaus analyst Jordan Rohan.

Chesky’s edge may be Airbnb’s elegant and intuitive design. (What else would you expect from a design school graduate?) From Airbnb headquarters, he storyboards every element of the rental process for both visitors and renters. (After reading a Walt Disney biography, he named the process “Project Snow White” because Snow White was the first animated feature film. Before Snow White, cartoons were just shorts.) By paying attention to every aspect of the service Airbnb offers — from making it easy for anyone to upload photographs of his rental offerings to coming up with a simple way to handle the payment transactions — Chesky found instant success, especially among younger users looking for cheap accommodations or ways to supplement their incomes.

More: Renting rooms for fun and profit

Indeed, Airbnb got its start because Chesky and his roommate, Joe Gebbia, another RISD alum, were looking for a way to make some cash to help pay the rent on their San Francisco apartment. It was the fall of 2007, and the city was hosting the Industrial Designer Society of America Conference. Affordable hotel rooms were in short supply. So Chesky and Gebbia procured three air mattresses and ginned up a website for a service they called Airbed and Breakfast. For $80 a night per guest, they offered lodging, breakfast, and a bit of sightseeing advice. (Soon after, they recruited coder friend Nathan Blecharczyk as a third co-founder.)

Airbnb created and sold these cereals to raise cash during the Democratic convention in 2008.

The team soon decided to make the site available to other users, but had a hard time securing investors; no one wanted to fund a couple of designers. To raise some cash — and awareness of the company — they descended on the 2008 Democratic National Convention in Denver, where they enlisted a slew of locals to list spare bedrooms on Airbnb for visiting delegates. Chesky then found a small manufacturer to create 1,000 boxes of two Airbnb-branded cereals — Obama O’s and Cap’n McCain’s — which they gave out at the convention and sold online as collectors’ items. They raised $30,000 and got on the evening news.

A few months after the convention, Airbnb was accepted into YCombinator, the elite Silicon Valley incubator for startups. Sequoia Capital invested in a seed round, and by 2010 the company had attracted backers like Hoffman and angel investors such as Ron Conway and Yelp (YELP) founder Jeremy Stoppelman. By the time it raised its $112 million round, led by Andreessen Horowitz last July (which gave it a valuation of $1 billion), Airbnb had emerged as one of the “it” startups of San Francisco, complete with a spacious loft in the Potrero Hill neighborhood and a company chef hired away from Google (GOOG). On two separate visits to the office, Fortune encountered tour groups, including MBA students, designers, and teens from a city youth-development program.

Financiers insist that they were drawn to Airbnb’s revenue model and growth potential, not its glam factor: Unlike a number of the other social websites, Airbnb generated cash right from the start. It charges a commission of 6% to 12% on every transaction, landing it a reported $500 million in 2011 revenue. By contrast, a traditional agent might charge 15% to 20% to rent a property.

The “Mushroom Dome” in Aptos, Calif., which is replicated in Airbnb’s offices.

But those agents, or middlemen, often help screen renters and provide other services. Last year Airbnb found itself in a PR nightmare when a San Francisco renter returned home to find her apartment had been vandalized. The incident magnified security concerns at a time when the customer support hotline still reached an answering machine checked every morning. Chesky’s security team disappeared into a windowless bunker inside the office to double down on new features. Within a few weeks Airbnb introduced a $50,000 physical-property guarantee, voice- and video-verification systems, and a 24-hour customer support hotline.

Airbnb has also begun to bump up against the systems that regulate the traditional hotel and rental industries. There are significant questions in some cities as to the legality of residents renting out their apartments for less than 30 days. (Co-op boards across New York City are taking note.) And in April the city of San Francisco raised the question whether Airbnb should be paying the hotel and tourism taxes that hotels pay.

All of which may help explain why Chesky is keen to expand into other categories. He’s already experimenting with services that Airbnb can offer budding entrepreneurs and freelancers to lure them to list their properties on the site. A number of years ago the team realized their listings needed better photos. He and Gebbia flew to Manhattan and rented a pricey camera to take pictures of dozens of listings in the city. The move helped jump-start bookings, but it wasn’t a model the founders could repeat in every market. So Chesky hired someone to build a database of 3,000 professional photographers that Airbnb users could contact to have their properties professionally photographed. Airbnb pays the photographers $60 a job. “We’re going to continue to provide more and more services,” says Chesky, “and maybe the ecosystem will provide them as well.”

Other listings on Airbnb include a sleek house in Pioneertown, Calif., for $350 a night.

Even as Airbnb broadens its mandate, Chesky and his co-founders say they will maintain a focus on the audience that made Airbnb what it is today: a community of independent, mostly young — average age is 35 — users who are passionate about the company. Chesky says Airbnb early on got distracted by larger vacation-rental companies that wanted to list multiple properties. These professional operations could help Airbnb expand its listings quickly, but Chesky soon found that his small team of product engineers was spending so much time designing services for those larger outfits that it was neglecting Airbnb’s core users, so he stopped catering to those companies. “We probably lost six months,” he says. “There are so many things we can do; the most challenging part of this is to figure out what not to do.”

Chesky believes that if he continues to focus on the user-driven design that has cemented the Airbnb community so far, everything will sort itself out. Chesky thinks of Airbnb as more than a company — to him it is a movement. His site invites users to return to a time when hitchhiking wasn’t dangerous — when it was just fine to share anything with strangers because no one was all that strange. Users come for the deals, but they stay for the trust and good will. It worked for Craigslist and it worked for eBay — and that was before Facebook mapped out a more social web. The opportunity, according to Chesky, is surely even larger.

This story is from the May 21, 2012 issue of Fortune.

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/n0RSu0pgPr8/

NEW YORK (CNNMoney) — Homeownership in the U.S. fell to its lowest rate in 15 years during the first quarter as more delinquent borrowers lost their homes to foreclosure, forcing many to rent.

The percentage of Americans who own their homes dropped a full percentage point over the past 12 months to 65.4% during the first three months of 2012, according to the latest Census Bureau data. That’s the lowest rate since 1997 and down from the peak of 69.2% reached in 2004.

“As foreclosures grew over the last six years, many homeowners became renters,” said Alex Villacorte, director of analytics for Clear Capital, a real estate valuation company.

The rental vacancy rate dropped to 8.8% during the first quarter, down from 9.7% a year earlier and from 9.4% in the last quarter of 2011, according to Census.

The growing demand has put pressure on the rental markets, said Villacorte. In many depressed housing markets, investors have been buying up distressed properties — foreclosures and short sales — fixing them up and renting them out.

The median asking rent last quarter was $721, up 5.6% from 12 months ago, according to Census.

Rents are highest in the Northeast, where the median is $932, followed by the West ($845), the South ($660) and the Midwest ($607).

Meanwhile, median home prices continue to fall. During the first quarter 2012, the median asking sales price for vacant units was $133,700. That’s down from $143,700 during the first quarter of 2011, according to Census.

Homeownership has fallen for all age groups, races and regions since the housing boom, Census reported.

It is lowest in the West, where it has dropped one percentage point over the past 12 months to 59.9%. The Midwest has the highest homeownership rate at 69.5%, down 0.9 point year-over-year; the South is second at 67.5% (down 0.9 point) and the Northeast is third at 62.5 (down 1.4 point). 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/oNIxfiiBlLg/index.htm

A barely noticed effect of the social network’s IPO is an already hyperventilating local real estate market that’s now going bonkers.

By David A. Kaplan, contributor

FORTUNE — Facebook’s looming public offering may mark high water in confidence around Silicon Valley these days. And it is surely is going to make a lot of techies very rich, likely in a few weeks. But there’s a smaller, barely noticed effect of the IPO: an already hyperventilating local real estate market that’s now going bonkers.

Though the number of actual prospective home buyers with Facebook connections is only a fraction of all buyers in the Valley, their psychological effect on the market is unmistakable. In Palo Alto, in particular — which Mark Zuckerberg calls home –sellers are either keeping their homes off the market until the IPO or ramping up expectations. For the first quarter of 2012, according to BrokerMetrics, the median price of a single-family P.A. home went up 11%, whereas inventory declined 57%.

One broker, Michael Dreyfus, tells a story. He had a client with a house in Old Palo Alto — one of the town’s best neighborhoods (where Steve Jobs lived) — and advised the client a few months ago the house would likely sell between $2.8 million and $3 million. Thinking that too conservative, the client priced it at $3.5 million. The unexceptional 3,500-square-foot home sold two months later for nearly $3.9 million. “The locals are all gaga over Facebook and how much their houses are going to be worth,” Dreyfus says. “And they’re holding their houses off the market.”

MORE: Facebook values itself at nearly $77 billion

That in turns generates an inventory problem, which drives prices up further. “Palo Alto Gold!” declared a post earlier this year on the website of Dreyfus’s boutique residential brokerage. “Every real estate agent in town has a long list of buyers and you can almost feel the preparation for a spring frenzy. The hordes of buyers are going to overwhelm our meager supply.”

But if the Facebook offering doesn’t perform as well as expected — and this week the company reported revenues were down — then the housing market could face “a great big crash,” according to Dreyfus. If the homeowners who are now waiting put their homes on the market anyway, worried over further declines, the market would go down more. If that happened, it could be the sign that the long-prognosticated bubble in the Valley may finally have appeared — and burst.

The Facebook effect may be creating another burgeoning phenomenon around the Valley: secret sales. The Multiple Listing Service (MLS) has always been the mainstream way to sell your house in the U.S. But many wealthy homeowners don’t want FOR SALE signs up on the front lawns or their addresses in public brokerage listings—or photos online of the master bedroom. So some brokers bypass MLS and use their own contacts to hunt for possible buyers. “Pssst…Have I got a house for you!” reads a recent unironically intended headline in the Palo Alto Weekly, The story comes complete with unprivate photos of that lovely 7,732-square-foot Colonial not far from Zuck’s new place (“just under $9 million”!) or the 1929 Mediterranean for $11.5 million just across the street from Jobs’s house.

MORE: Hastings’ Facebook rant draws FCC’s attention

One estate currently for sale by Dreyfus is on the private market for what he says will be the most expensive ever sold in Palo Alto — more than a record $15 million. He might want to tell you more about it, but he can’t. Even the price is private.

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/2moqIgwWdJc/

The real estate bubble in China may be coming to an end.

NEW YORK (CNNMoney) — The real estate market was on fire.

Buyers were snapping up sparkling new condos faster than developers could build them. Investors were grabbing two, three, four apartments each, hoping to cash in on skyrocketing prices.

But then the music ended. Prices started to slide. Developers were stuck with empty buildings. Homeowners saw their wealth begin to slip away.

Sound like the United States in 2007? Nope. It’s China in 2012.

After experiencing a red-hot growth in recent years, China’s real estate market is starting to falter. Developers are offering discounts to unload their unsold inventory. Spooked by falling prices, would-be buyers are staying on the sidelines, while investors mourn the decline in value.

But will a housing downturn plunge China into its own Great Recession, as it did in America? Experts say it will certainly hurt, but it’s not likely to spark the same kind of crisis it did in the U.S.

The Chinese, who have only been able to own homes since the late 1990s, have never experienced a sustained slide in real estate before. They have been pouring money into housing over the past decade since they had few other investments to park their savings in.

Also, in response to the global financial meltdown, China’s government loosened restrictions on lending to keep the economy growing at a nearly 10% clip. This prompted home prices to rise by 50% over the three years ending in 2010, said Nicholas Consonery, analyst at Eurasia Group, a political risk research and consulting firm.

Just like their American counterparts, the Chinese wanted a piece of the real estate riches. So they bought apartment after apartment, never intending to rent them out, said Patrick Chovanec, associate professor at Tsinghua University in Beijing. Instead, they just wanted to stash their cash and capture the appreciation.

Accurate statistics are hard to come by in China, but various estimates say there are between 10 and 65 million vacant units held for investment.

“Every city in China has a new development district with row upon row of condos that are sold, but empty,” Chovanec said.

The Chinese government, concerned by the steep run-up in prices and residents’ frustration with the lack of affordable housing, stepped in in 2010 with measures to rein in speculators. These included higher downpayments, tough qualifications for mortgages, residency requirements and limits on investment purchases, Chovanec said.

But developers continued to borrow and build, thinking the government would back down to maintain economic growth. The bubble expanded to new markets in second-tier and third-tier cities.

When officials didn’t budge, developers finally had to concede. Last summer, they started liquidating their inventories and slashing prices. That prompted recent homebuyers to protest and even riot in Shanghai, Chovanec said.

Sales collapsed, dropping close to 20% in the first quarter compared to the year prior, said Nicholas Lardy, senior fellow at the Peter G. Peterson Institute. And there is virtually no growth in housing starts these days.

Prices have also fallen, though the estimates vary widely. Official statistics show a drop of only a few percentage points in major cities, but experts have heard developers offering discounts of up to 40%.

There’s little debate that China’s real estate boom is fizzling, but experts are somewhat divided on how badly it will rock the country and the world.

There are several important differences between the U.S. and Chinese real estate markets that could cushion the blow for the Chinese. A primary one is that homebuyers in China always had to provide down payments of at least 20%. Owners have 40% to 50% equity in their homes, on average, Lardy said. Default rates are very low.

So they won’t be hurt as badly by falling prices as Americans were, though they will see their wealth diminish. Some 40% of wealth in China is in housing, compared to 32% in the United States at its peak a few years ago.

Developers, however, are hurting because they are overleveraged. A handful of small ones have already declared bankruptcy — a rare occurrence in China — and others are on life support.

“This is a classic real estate bubble,” said Susan Wachter, real estate professor at the University of Pennsylvania’s Wharton School, noting it’s more similar to America’s real estate problems of the early 1990s, which were due to overbuilding. “It will take time for absorption.”

Banks could also be in trouble because much of their collateral is real estate. And local governments are suffering because they rely on land sales to repay debt and cover up to 40% of their operating budgets.

The Chinese economy, however, may feel more of the sting as the housing market slows. Around 10% of economic growth in China last year was directly related to real estate development, so it will be hard for the country to keep up its blistering pace if housing investment cools. By comparison, residential real estate construction in the United States peaked at 6.1% of the economy in 2005.

“There’s a correction starting and if nothing else happens to offset that, economic growth could slow quite substantially,” Lardy said.

And if housing development stumbles, other sectors of the Chinese economy will feel the pinch. Companies that provide building materials, including steel, cement and copper, will experience diminished demand.

A slowdown in China’s economy will also be felt around the world. Manufacturers in Ohio, for instance, have been prospering recently as they try to supply China’s infrastructure needs.

And Chinese consumers have been spending money on traveling and buying products from America, Europe and elsewhere — boosting the economies of countries around the world.

Still, the future of China’s real estate market remains unclear.

“No one has hit the panic button yet,” Chovanec said. “Everyone is holding out hope that at some point it turns around somehow. But I also think that’s a triumph of hope over reason.” 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/7opDAOuQvfQ/index.htm

The Vallejos got a last-minute foreclosure reprieve from Bank of America.

NEW YORK (CNNMoney) — Tamera Hewlett-Vallejo and her husband, Tom, came within a whisker of losing their Sacramento, Calif., home in a foreclosure auction last month. But as a result of the $26 billion national mortgage settlement, the Vallejos were given a last-minute reprieve.

Their mortgage lender, Bank of America (BAC, Fortune 500), called off the auction, then offered to slash the couple’s mortgage by more than $85,000 and cut their interest rate to 4.6% from 6.7%. As a result, the couple’s mortgage payment would be $570 cheaper at about $2,100 a month.

The Vallejos are among the earliest recipients of one of the foreclosure settlement’s biggest windfalls. As part of the deal, which was struck between the nation’s five biggest mortgage lenders and the states’ attorneys general, roughly one million borrowers will have their mortgage principal slashed by as much as $100,000.

Early last month, Bank of America said it had identified more than 200,000 borrowers who pre-qualified for principal reductions. The bank has yet to reach out to these homeowners, however, saying it will begin to send out letters to this group within a week or two, according to spokesman Rick Simon. It aims to reach most eligible borrowers within six months.

But there is a small group of homeowners, including the Vallejos, who are either already in the mortgage modification pipeline or in danger of losing their home, who have already been contacted by the bank.

A last-minute reprieve. The Vallejo’s home was scheduled to be sold in a foreclosure auction at 9:30 a.m. on a Monday in early March. “We literally went to Church on Sunday praying for help,” said Hewlett-Vallejo.

The day of the auction, however, the Vallejos discovered their address wasn’t on the list of properties on the block. Later that day, a representative from Bank of America called to tell them they had qualified for a principal reduction under the settlement.

“I sat with tears running down my face,” said Hewlett-Vallejo.

Tamera, a real estate agent, and Tom, who is a teacher, had bought the three-bedroom wood-frame cottage in 2001 for less than $240,000. In the midst of the housing boom, when their home’s value had soared to more than $430,000, the couple refinanced in order to get a lower rate and take out extra cash for some home improvements.

Then, in 2009, a commercial real estate deal that Tamera invested in went sour and ended up in litigation. The couple soon fell behind on their mortgage.

By September 2010, the missed payments — and ensuing fees — brought their mortgage balance up to about $385,000. Meanwhile, their home’s value had plunged by more than 30% to about $300,000.

For two years, the Vallejos tried to get Bank of America to modify their mortgage. But the bank kept denying the request, saying it needed additional paperwork.

“Each time, we started over with a new person and some new requirements based on that person’s or the underwriter’s perspective,” she said.

By the day of the foreclosure auction, the Vallejos assumed they were out of luck.

“We didn’t know what we were going to do,” said Hewlett-Vallejo. They hadn’t even made new living arrangements.

A few days after finding out the auction was off, the Vallejos received the details of their modification from Bank of America. The bank offered to bring their balance to $300,000. They’d still be slightly underwater, but the principal reduction alone would save them about $400 a month.

Bank of America said its goal is to lower housing payments to no more than 31% of income. “If the payment is still above the affordable payment target, the second step is to lower the interest rate,” said Simon.

In this case, the bank also offered to reduce their interest rate, which would reduce their monthly payments by another $170 or so, and to keep the term of their loan to the existing 23 years that the Vallejos had left to pay.

But there is a catch. “We’re required to make three months of trial payments — April, May and June,” say Hewlett-Vallejo.

If they miss a payment, the deal is off and the Vallejo’s home heads back to the auction block. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/wRj28jAXfX0/index.htm

Looking to be a landlord? Buying property in college towns typically translates into stable rental returns, no matter how the economy is faring.

Not only do colleges provide a steady source of jobs for the local economy, but enrollments have swelled as the unemployed go back to school seeking new job skills.

Along with increased demand, rents have risen, too, by about 5% over the past 12 months, according to real estate website Trulia. And you can expect them to keep climbing. Steve Berkowitz, CEO of Realtor.com projects rents will rise by another 5% in the upcoming year.

Even developers who have cut back on other housing projects, are building in college towns. Erik Nelson, who handles construction loans for the Portland-based Bank of the West, said he arranged financing for residential housing projects in five college towns last year.

“The closer to the campus, the better,” he said.

For buyers, there are plenty of bargains out there. According to Coldwell Banker’s College Home Listing Report for 2011, the average three-bedroom, two-bath home sold for less than $200,000 in nearly two-thirds of the college markets it surveyed and less than $150,000 in nearly a quarter of the towns.

Here are some investors who have profited from being college-area landlords and are looking to buy more — while the deals last.

NEXT: Raleigh, N.C.

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/9Cy55GL4CCU/index.html

Good schools don’t come cheap.

Want to live in a good school district? It’ll cost you an extra $200k.

Home values are $205,000 higher, on average, in neighborhoods with high-scoring public schools versus schools with low scores, according to a new report issued by the Brookings Institution.

Homes in high-scoring neighborhoods typically have 1.5 additional rooms, and 30% fewer are rented, the study found. Housing costs average $11,000 more per year in areas with better schools.

Some of the areas with largest differences in housing costs also have the widest gaps in school test scores. The Bridgeport-Stamford-Norwalk metro area in Connecticut, for instance, has both the widest gap in test scores between higher-income and lower-income neighborhood schools and the largest difference in housing costs, at $25,000.

Not surprisingly, income has an impact on test scores. The average low-income student attends a school that scores at the 42nd percentile on state exams, while the average middle/high-income student goes to schools that score at the 61st percentile.

Poor students have become more concentrated in schools with other poor students since 1998, Brookings found. The average low-income student attends a school where 64% of fellow students are low-income, though they represent only 48% of all U.S. public school students. The percentage of economically integrated schools is less than 7%.

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/MpXqgpeyZa8/

Existing home sales dipped 2.6% on a monthly basis, but rose 5.2% year over year.

NEW YORK (CNNMoney) — The housing market continued to struggle in March, despite low home prices and record low interest rates, an industry report revealed Thursday.

Sales of existing homes fell 2.6% compared with a month earlier, to an annualized rate of 4.48 million homes, the National Association of Realtors said.

Gus Faucher, a senior economist at PNC Financial, called the report disappointing.

“We were expecting an increase,” he said. “We need a turnaround to help the economy recover.”

The Realtors’ group’s chief economist, Lawrence Yun, opted to look on the bright side of the report — sales were up 5.2% year-over-year.

“We have seen nine consecutive months of year-over-year sales increases,” he said. “Existing-home sales are moving up and down in a fairly narrow range that is well above the level of activity during the first half of last year.”

The choppy market stands in contrast to the continuing gains made in affordability.

Factoring in price declines that have averaged about 34% nationally, according to the SP/Case-Shiller home price index, and record low mortgage rates, homebuying is more affordable than ever.

“For buyers who can qualify for a mortgage, now is a very good time to become a homeowner,” said Realtors’ president Moe Veissi.

According to Yun, better economic conditions will push sales higher as the year goes on.

“With job growth, low interest rates, bargain home prices and an improving economy, the pent-up demand is coming to market and we expect housing to be notably better this year,” he said.

As the year goes on, buyers may find fewer properties to choose from.

The number of homes for sale dropped 1.3% in March to 2.37 million existing homes. That’s a 6.3-month supply at the current sales pace. Inventory declined 21.8% compared with March 2011 and is well below the record of 4.04 million in July 2007.

Ironically, the tighter supply may have cut into sales, with house hunters in some areas of the nation having trouble finding homes to suit their needs or tastes.

“We’re already seeing this in the Western states and in South Florida,” said Yun.

If the tightness in inventory spreads, it could signal a rebirth for home builders, who would have to step up development to fill the gap. And putting construction workers back on the job would be a shot in the arm for the overall economy as well as the housing market.

“Conditions are in place for a turnaround,” said Faucher. “We’re just waiting for more confidence among buyers. We expect that to happen over the next few months.” 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/33T7_bPscCE/index.htm

NEW YORK (CNNMoney) — Short sales are rising sharply, offering many struggling homeowners a better alternative to foreclosure in many of the nation’s hardest hit states.

In short sale deals, the sale price of the home is less than what the seller owes. Often, the bank that holds the mortgage takes so long to approve the sale that the deal falls through. But in recent months, the pace of short sales has increased, a trend that should gain momentum, according to RealtyTrac.

In January, short sales rose 33% compared with 12 months earlier, the company reported.

During the month, 32 states saw year-over-year percentage increases in short sales. Even more encouraging, short sale deals outnumbered foreclosures in 12 states, including some of the hardest hit like California, Arizona and Florida.

January’s numbers look to be just the beginning. “[W]e believe 2012 could be a record year for short sales,” said Daren Blomquist, vice president at RealtyTrac.

Banks are showing signs of being more open and willing to approve the deals — even if it means accepting less money. The average sales price for a short sale was $174,120 in January, down 4% from December and 10% year-over-year.

Typically, banks get about 20% less for a foreclosed home. Foreclosure can also take years to unload, during which expenses, like property taxes, insurance and other expenses, mount up.

Short sale process to speed up. One of the biggest roadblocks for short sales has been the time it takes to get deals approved. That time shrunk slightly during the first quarter — to 306 days from 308 days the previous quarter — but many deals still fall through because the buyer eventually walks away.

However, that could all change come June 1 when a set of new rules are put in place that will require lenders to make a decision about short sale requests within 60 days.

Earlier this week, the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae (FNMA, Fortune 500) and Freddie Mac (FRE), announced the new guidelines, which will also require lenders to review and respond to short sale requests within 30 days and provide weekly status updates to the borrower if the offer is still under review after that time.

Also helping to speed things along is the government’s Home Affordable Foreclosure Alternative program, which launched in late 2009, according to Charlie Engel, a spokesman for RealtyTrac,

The program pays incentives to those who sell their home in a short sale rather than let it fall into foreclosure. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/1AALB7omyLY/index.htm

Looking to be a landlord? Buying property in college towns typically translates into stable rental returns, no matter how the economy is faring.

Not only do colleges provide a steady source of jobs for the local economy, but enrollments have swelled as the unemployed go back to school seeking new job skills.

Along with increased demand, rents have risen, too, by about 5% over the past 12 months, according to real estate website Trulia. And you can expect them to keep climbing. Steve Berkowitz, CEO of Realtor.com projects rents will rise by another 5% in the upcoming year.

Even developers who have cut back on other housing projects, are building in college towns. Erik Nelson, who handles construction loans for the Portland-based Bank of the West, said he arranged financing for residential housing projects in five college towns last year.

“The closer to the campus, the better,” he said.

For buyers, there are plenty of bargains out there. According to Coldwell Banker’s College Home Listing Report for 2011, the average three-bedroom, two-bath home sold for less than $200,000 in nearly two-thirds of the college markets it surveyed and less than $150,000 in nearly a quarter of the towns.

Here are some investors who have profited from being college-area landlords and are looking to buy more — while the deals last.

NEXT: Raleigh, N.C.

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/9Cy55GL4CCU/index.html

NEW YORK (CNNMoney) — After a strong start to the year, home builders have pared back, according to a report from the Census Bureau.

The number of new homes that began construction in March fell 5.8% to an annualized rate of 654,000 compared with February, the bureau said Tuesday. Housing starts were up year over year, however, by 10.3%.

The decline in starts represented a “pause in what had been a fairly rapid build-up in builder confidence that started last September,” said David Crowe, chief economist for the National Association of Home Builders.

He cited two factors contributing to the slowdown: competition from foreclosures and tight credit conditions that made it difficult for builders to get construction loans and homebuyers to get mortgages.

The results fell short of analyst expectations. A panel of experts from Briefing.com had forecast that starts would clock in at 700,000.

The report contained some good news. Housing permits, a more forward looking market indicator, grew 4.5% in March to a 747,000 annual rate, compared with a month earlier. They were up 30.1% year over year.

“What we’re seeing is a mixed bag,” said Michael Larson, an analyst with Weiss Research. “While some numbers are a little bit better, you can’t really call the housing market recovery very healthy.”

Much of the rise in housing permits were for multi-family homes, but the Census Bureau report does not distinguish whether those developments are for rental apartments or condominiums.

Larson suspects more of the multi-family starts are intended as rentals. Many potential homebuyers are still waiting to buy, unwilling to invest in homes that are still falling in value or unable to get access to credit.

“People who can’t get a mortgage are still looking for a roof over their heads,” said Larson.

They’re more likely now to rent that roof than to own it. Homeownership has fallen from more than 69% in 2004 to about 66% today. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/2NVlpolqxJM/index.htm

NEW YORK (CNNMoney) — The golden age for foreclosure squatters may soon be coming to an end now that the $26 billion mortgage settlement has been approved.

The settlement, agreed to by the nation’s five largest mortgage lenders, is expected to speed up the foreclosure process by providing stricter guidelines for the banks to follow when repossessing homes.

The banks involved include Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citibank (C, Fortune 500), Wells Fargo (WFC, Fortune 500) and Ally Financial.

Many foreclosures have been in limbo since fall 2010 following the so-called robo-signing scandal, when banks allowed employees to sign off on thousands of foreclosure documents a month with little verification.

Lenders hit the pause button on foreclosures because they “were afraid that anything they did would be under a microscope,” said Eric Higgins, a professor of business at Kansas State University.

As a result, borrowers who were seriously delinquent on their loans have been able to stay in their homes for months or even years without making a single payment. Nationwide, the average time it takes to foreclose on a home — from the first missed payment to the final bank repossession — stretched to 370 days during the first quarter, almost twice as long as it took five years ago, according to Daren Blomquist, the marketing director at RealtyTrac.

In some states, delinquent borrowers have been squatting in their homes much longer. In Florida, the average time was 861 days, and in New York it was 1,056 days — close to three years.

“Perhaps a million foreclosures could have been pursued last year but weren’t,” said Rick Sharga, executive vice president for real estate investment company, Carrington Holdings.

But that’s all about to change, he said. “We’re going to see an increase in the speed of foreclosures and a higher number of foreclosure starts.”

In fact, there are indications that the pace of foreclosures are already starting to pick up.

While overall foreclosure activity was down during the first quarter, filings were up 10% in the 26 states where foreclosures must undergo court scrutiny, according to RealtyTrac.

It was in these judicial states that the processing of foreclosures slowed the most following news of the robo-signing scandal, said Blomquist.

Many banks in these states stopped filing foreclosures unless they were extremely confident it would pass muster in the court. (In non-judicial states, foreclosures are reviewed by a trustee, which is a third party such as a title company and less likely to parse every legal document).

But now lenders can move more confidently, said Brandon Moore, RealtyTrac’s CEO.

In the judicial state of Indiana, for example, foreclosure filings were up 45% year-over year. And in Florida, they were up by almost 26%, according to RealtyTrac.

“The dam may not burst in the next 30 to 45 days, but it will eventually burst, and everyone downstream should be prepared for that to happen — both in terms of new foreclosure activity and new short sale activity,” Moore said in a statement.

The resulting flood could bring home prices down even further — yet another impetus for the banks to clear out their foreclosure pipeline as quickly as possible, said Kansas State’s Higgins.

Then, industry thinking is, the housing market would be able to get back to normal and home prices could eventually find their true value. Some industry analysts, such as the chief economist for listing site Zillow, Stan Humphries, are predicting that could happen as soon as the end of the year.

Zillow estimates that home values nationwide will fall another 3.7% by the end of 2012, and that price will likely bottom out by early 2013.

Should home prices hit a bottom then stabilize, it would push many potential buyers off the fence, according to Mike Fratantoni, a vice president at the Mortgage Bankers Association. House hunters would no longer be afraid of investing in assets that were losing money.

“The market is already on the verge of turning the corner on prices and this will help,” said Fratantoni.

Have you tried to qualify for a principal reduction or a modification under the foreclosure settlement? We want to hear from you. Send your story and contact information to Leslie Christie and you could be featured in an upcoming article on CNNMoney. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/djNJMS57KAo/index.htm

A TARP program that aims to help the nation’s most struggling homeowners is falling short, said a special inspector general for the bailout program.

WASHINGTON (CNNMoney) — A federal-state program aimed at helping homeowners in states hardest hit by the mortgage crisis is falling far short of its goals, a federal watchdog said in a report released Thursday.

In the report, the Special Inspector General for the Troubled Asset Relief Program (TARP) said that just 3% of $7.6 billion available in the Hardest Hit Housing Markets program — available for 18 states and the District of Columbia — had been tapped as of Dec. 31.

The money has gone to help 30,640 homeowners, or about 7% of the 458,000 homeowners officials estimated would be helped by the end of the program in 2017, according to the watchdog.

More than 75% of the program funds has gone to prop up state unemployment programs that pay mortgages of the unemployed — not efforts such as mortgage modifications or principal reductions that would force banks to take a hit, according to the report.

Christy Romero, the Special Inspector General for the Troubled Asset Relief Program, said the hardest hit fund has largely served to help the unemployed.

“It was supposed to be an innovative program intended to reach the unemployed and underwater homes,” Romero said in an interview with CNNMoney. “It is important to reach the unemployed, but it’s not reaching underwater homes like it was intended.”

Treasury defended the hardest hit program. The program gives states the opportunity to “leverage their unique understanding of the conditions in their communities to create effective, locally tailored programs,” Assistant Secretary for Financial Stability Timothy Massad said in a letter to Romero.

TARP is the $700 billion bailout program that Congress passed at the height of the financial crisis in the fall of 2008. In addition to keeping the big banks afloat, TARP gave money to programs to help struggling homeowners.

Other larger TARP-funded housing programs, including the Home Affordable Modification Program, have weathered criticism, especially from the special inspector general, for falling short in its goal of easing the national foreclosure crisis.

This new watchdog report focused on a different, smaller program, the Hardest Hit Housing Markets program. The hardest hit program was targeted to states with the largest numbers of homeowners drowning in negative equity and unemployment.

The money was supposed to give state housing officials incentives to come up with new and different ways to address the housing crisis in their states. But most states just used the money for programs that pay the mortgages, insurance and property taxes of the unemployed.

So far, the hardest hit program has kept up with mortgage payments for some 26,100 unemployed homeowners. These programs don’t hit mortgage servicers or banks’ bottom lines, Romero said.

When it comes to relieving housing woes, so far, only 436 homeowners in the program got the principal owed on their mortgage reduced. Another 170 homeowners got their second lien reduced.

A big problem, which the federal government faced with all its housing programs, was getting servicers on board, according to the watchdog. The states have far less leverage than the federal government in getting servicers to work with them on programs.

Treasury also took eight months to get the federal government-backed guarantors Freddie Mac and Fannie Mae to support the program, according to the SIGTARP report.

“Treasury failed to recognize the lack of bargaining power that states had for recruiting servicers,” the report said.

Treasury’s Massad disagreed with SIGTARP’s conclusion, saying Treasury “actively and consistently engaged with servicers” and the government-backed housing guarantors in the earliest stage of the program.

Rep. Darrell Issa, a California Republican, asked the watchdog to review the hardest hit program. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/MmWY2x7HGdU/index.htm

It remains to be seen whether Fannie, Freddie will offer principal reduction for mortgages.

NEW YORK (CNNMoney) — Allowing Fannie Mae and Freddie Mac to offer principal reductions may save money thanks to enhanced government incentives, a preliminary analysis released Tuesday shows.

But that doesn’t mean their regulator, Ed DeMarco of the Federal Housing Finance Agency, is warming up to the idea.

DeMarco is facing tremendous pressure to allow the government-controlled mortgage titans to allow principal reduction on the mortgages they back. Some advocates say the best way to stabilize the housing market is to lower the balances for borrowers who owe more than their homes are worth.

DeMarco, however, has steadfastly resisted it, saying previous studies showed principal reduction would be too costly.

The Obama administration sweetened the pot earlier this year by tripling the incentive payments for Fannie and Freddie if they forgive principal. This prompted the firms to take another look at their analysis.

Turns out the increased incentives would make it more beneficial for Fannie and Freddie to offer principal reduction to homeowners who are deeply underwater and behind in their payments.

But DeMarco isn’t backing down just yet. Speaking at the Brookings Institution Tuesday, he brought up several other concerns and costs to principal reduction.

His primary worry is that providing principal forgiveness could prompt many of the 2 million borrowers who are current with their payments to fall behind. Having them default will hurt the housing market more than offering principal reduction will help it, he said.

“The far larger group of underwater borrowers who today have remained faithful to paying their mortgage obligations are the much greater contingent risk to housing markets and to taxpayers,” he said, adding these homeowners can lower their monthly payments through the government’s refinance program.

Also, he pointed out that no more than 600,000 borrowers would be eligible for principal reduction under Fannie and Freddie. This is the universe of folks who are delinquent in their mortgages and whose balances are more than 115% of their homes’ value.

“This is not about some huge difference-making program that will rescue the housing market,” the regulator said.

DeMarco touted a principal forbearance program that Fannie and Freddie already offer. It calls for the companies to defer payment of the underwater portion of the mortgage until the borrower sells the home or refinances. The homeowner pays no interest on the deferred principal.

The regulator said a final decision should be made in the next few weeks.

At least one analyst doubts that Fannie and Freddie will opt to reduce principal significantly, noting that DeMarco praised principal forbearance and warned forgiveness would help relatively few people.

“We see this as a strong political attack against principal reduction,” said Jaret Seiberg, an analyst with Guggenheim Washington Research Group. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/bdZkCj8JRnw/index.htm

Versailles needs a buyer who is looking for a pad bigger than the White House.

FORTUNE — Versailles — no, not the one in France but this one in Windermere, Fla. — is for sale for $65 million, though half completed. Westgate Resorts founder David Siegel halted construction on his 90,000-square-foot dream house after the financial crisis buffeted his time-share biz. The home is the subject of a new documentary: The Queen of Versailles.
–Anne VanderMey

By the numbers:

22: The number of baths in the house, which also includes 10 kitchens, 13 bedrooms, a bowling alley, and a hall with a stained-glass dome that took three years to build.

$50 million: The amount Siegel has sunk into the house so far. BofA, which holds the mortgage, had threatened to foreclose, but Siegel says he is raising money and will finish the house.

10 acres: The size of this waterfront estate. The complex includes a baseball field, an underground 20-car garage, two movie theaters, and a roller-skating rink.

This story is from the April 9, 2012 issue of Fortune.

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/TOCdVhZDo3Q/

(MONEY Magazine) — The bursting bubbles of the 1990s and 2000s caught most of the experts by surprise. Not Robert Shiller.

The Yale economist isn’t so much a forecaster as a historian of financial data. His work on the history of stocks led him to advocate a market valuation tool now popularly known as the “Shiller P/E.”

Traditional price/earnings ratios compare today’s share prices with often overly bullish estimates of future profits and can sometimes make stocks look more reasonably priced than they really are. Shiller looked instead at the averaged 10-year history of earnings, which captures both the ups and the downs of the business cycle. This P/E flashed red warning lights as it reached new highs during the tech boom.

Next, Shiller’s research into home values led him to conclude in 2005 that real estate looked bubble-like. Today he still isn’t much of a stock market optimist. But in his new book, “Finance and the Good Society,” he argues that Wall Street can be a force for progress; his conversation with editor-at-large Penelope Wang has been edited.

You have become famous for your cyclically adjusted 10-year price/earnings ratio. What do the latest numbers say about future stock market returns?

When my former student and I did the original analysis — I was working with John Campbell, now economics department chairman at Harvard — we found a correlation between that ratio and the next 10 years’ return.

If you plug in today’s P/E of about 22, it would be predicting something like an annualized 4% return after inflation. Not so bad when you look at the 20-year Treasury bond yield of 2.8% and the likely capital losses if interest rates go up.

A real 4% return seems like a worthwhile investment.

Then again, I don’t know that I trust that number. It goes back to this whole academic literature on the outperformance of equities.

Why buy and hold doesn’t work anymore

My old friend Jeremy Siegel [Wharton professor and author of "Stocks for the Long Run"] makes the strongest claim about this. He has data going back 200 years showing that the market has had a real 7% return over that period.

But there’s no solid reason it should do so well. Things can go for 200 years and then change. I even worry about the 10-year P/E — even that relationship could break down. But I believe I’m on better ground thinking that the P/E forecasts returns than thinking one asset just always outperforms.

Are you saying that there’s no reason stocks should outperform bonds at all?

Oh, no. If you go back to textbook finance and make some assumptions about investors’ risk aversion and that assets should be priced to pay investors for added risk, you would get some outperformance for stocks. But not as much as it’s been; it looks as if past high returns were a historical anomaly.

So when I said the 10-year P/E predicts a 4% return, that’s conditional on past returns being a guide to future returns, and the truth is, we don’t know. Maybe it will be only 2%.

The SP Case-Shiller housing index, which you helped create, recently showed another drop. Are you surprised the housing decline has gone on this long?

I’m not surprised, no. There have been long periods when home prices declined, including the first half of the 20th century.

The National Association of Home Builders housing market index is sharply up. It’s a sign of a possible turning point. But there’s another side of me that says that the housing market decline hasn’t overshot yet, really. It could do that.

You’ve argued for changing the home mortgage deduction. Why?

There are good reasons to promote home ownership — it’s a way to stake people in citizenship. But I think it makes sense to phase out the home mortgage deduction and instead offer a tax credit [which would be worth the same amount to low- and high-income taxpayers].

Housing: The one bailout America could really use

Many low-income people don’t itemize and claim the mortgage deduction, even after they buy a home, because the standard deduction looks better to them. Even if they do use it, the benefit is smaller because they’re in a lower tax bracket.

So we’re giving a big incentive to high-income people and not much to lower-income people. Why do we give a tax incentive for people to build McMansions?

Your new book is called “Finance and the Good Society.” What’s one got to do with the other?

Finance has become unpopular today — a little like being on campus teaching ROTC a generation ago. I wanted to clarify what finance does and remind people it does have a social purpose.

The thing about stock markets, and why they have been so successful, is that they create a serious, playable game. It’s like gambling, but it’s not. Having a stock market provides excitement and lets people think about real things. It was a wonderful invention, behaviorally.

So how do you turn that invention to broader social ends?

One problem with philanthropy is that it’s unrewarding: You give away the money, and that’s it.

So as an example of ways to humanize finance, I have a notion of a different form of philanthropy that would have shareholders. You’re still basically giving away the money, but the shares you bought through your donation would pay dividends. And at your discretion you can reinvest them in that company or in another nonprofit.

You’re just back from an economic conference in Europe, where policymakers are pushing budget austerity. Any lessons we can take from that?

There’s a debate about the merits of austerity among economists. It’s like a medical judgment: We have to deal with the debt eventually. Do we let the patient rest before we do the surgery?

I think probably austerity is bad at this time. Confidence and market psychology are important in promoting consumer spending and growth. The only way we can collectively decide, “Okay, we need to spend,” is to tax and spend. The problem is, those words are loaded ideologically — and they raise fears that once spending goes up, it won’t come down. And that’s a legitimate fear.

Do you know a Money Hero? Money magazine is celebrating people, both famous and unsung, who have done extraordinary work to improve others’ financial well-being. To Nominate your Money Hero. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/LJewty5_QB4/index.htm

Richard Cordray, director of the Consumer Financial Protection Bureau, is set to announce new rules are under consideration for mortgage servicers.

WASHINGTON (CNNMoney) — The Consumer Financial Protection Bureau announced Tuesday that it’s considering new rules aimed at mortgage servicers to help protect consumers against “costly surprises.”

The bureau’s new rules will require servicers to issue mortgage statements that are more clear, as well as better disclosures about any fees or changes in a loan’s interest rate.

“We want to make sure that at all times consumers know how much they owe, what they are paying, and how their payments are being applied,” said Richard Cordray, director of the consumer bureau in a Tuesday speech.

This would be the federal government’s first major move to crack down on the entire mortgage servicing industry, including big banks that service mortgages, since the housing bust and resulting financial crisis.

Does mortgage principal reduction work?

The new rules coincide with new standards set forth by a large settlement deal between states attorneys general and the five largest mortgage servicing banks. Those standards only impact the five largest banks and are aimed at halting robosigning and other improper foreclosure practices on homeowners who are late with payments.

The Consumer Financial Protection Bureau’s rules would ask all servicers to ensure better transparency for all borrowers — not just those whose loans are delinquent. The rules would take effect next January, according to the bureau.

The bureau is considering a rule to require all mortgage servicers to spell out more details in monthly statements such as a breakdown of mortgage payments by principal, interest and fees. Servicers would also have to itemize fees and charges, and warn about possible late fees.

Another rule would target interest rate changes. Servicers would have to explain how a new rate is calculated and when it will kick in, while warning of future interest rate changes and penalty fees on mortgages paid off early.

What the foreclosure settlement means for you

The rules would also tackle so called “force-placed” insurance, which is property insurance that the bank takes out for homeowners who either miss an insurance payment, allow their property insurance to lapse or just don’t have as much insurance as the bank would like.

Among other things, the servicer would be required to ask homeowners for proof of insurance before charging for force-placed insurance.

Last week, New York Financial Services Superintendent Benjamin Lawsky said he is looking into whether forced-place policies cost more than they should. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/It-xBcxJXP0/index.htm

It remains to be seen whether Fannie, Freddie will offer principal reduction for mortgages.

NEW YORK (CNNMoney) — Allowing Fannie Mae and Freddie Mac to offer principal reductions may save money thanks to enhanced government incentives, a preliminary analysis released Tuesday shows.

But that doesn’t mean their regulator, Ed DeMarco of the Federal Housing Finance Agency, is warming up to the idea.

DeMarco is facing tremendous pressure to allow the government-controlled mortgage titans to allow principal reduction on the mortgages they back. Some advocates say the best way to stabilize the housing market is to lower the balances for borrowers who owe more than their homes are worth.

DeMarco, however, has steadfastly resisted it, saying previous studies showed principal reduction would be too costly.

The Obama administration sweetened the pot earlier this year by tripling the incentive payments for Fannie and Freddie if they forgive principal. This prompted the firms to take another look at their analysis.

Turns out the increased incentives would make it more beneficial for Fannie and Freddie to offer principal reduction to homeowners who are deeply underwater and behind in their payments.

But DeMarco isn’t backing down just yet. Speaking at the Brookings Institution Tuesday, he brought up several other concerns and costs to principal reduction.

His primary worry is that providing principal forgiveness could prompt many of the 2 million borrowers who are current with their payments to fall behind. Having them default will hurt the housing market more than offering principal reduction will help it, he said.

“The far larger group of underwater borrowers who today have remained faithful to paying their mortgage obligations are the much greater contingent risk to housing markets and to taxpayers,” he said, adding these homeowners can lower their monthly payments through the government’s refinance program.

Also, he pointed out that no more than 600,000 borrowers would be eligible for principal reduction under Fannie and Freddie. This is the universe of folks who are delinquent in their mortgages and whose balances are more than 115% of their homes’ value.

“This is not about some huge difference-making program that will rescue the housing market,” the regulator said.

DeMarco touted a principal forbearance program that Fannie and Freddie already offer. It calls for the companies to defer payment of the underwater portion of the mortgage until the borrower sells the home or refinances. The homeowner pays no interest on the deferred principal.

The regulator said a final decision should be made in the next few weeks.

At least one analyst doubts that Fannie and Freddie will opt to reduce principal significantly, noting that DeMarco praised principal forbearance and warned forgiveness would help relatively few people.

“We see this as a strong political attack against principal reduction,” said Jaret Seiberg, an analyst with Guggenheim Washington Research Group. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/bdZkCj8JRnw/index.htm

NEW YORK (CNNMoney) — The world will only have to wait a few more weeks to find out whether Fannie Mae and Freddie Mac will allow principal reductions on mortgages they back.

The Federal Housing Finance Agency will decide this month whether Fannie and Freddie should allow write downs on the balances of borrowers who owe more than their homes are worth, said Ed DeMarco, acting director for the agency.

Fannie and Freddie have been at the center of a tug-of-war over fixing the housing market. They have long resisted calls to write down the balances on the loans in their portfolio, saying it would be too costly for taxpayers.

But the pressure has been building, especially in the wake of the $26 billion mortgage settlement that will reduce principal for 1 million borrowers whose loans aren’t backed by Fannie and Freddie.

The agency, which regulates the government-controlled companies, had decided against allowing principal reduction after internal studies showed that alternatives such as adjusting monthly payments or forbearing principal were more cost effective.

DeMarco has said his agency is charged with protecting taxpayers’ interests, and principal reduction would amount to an expensive taxpayer bailout of troubled homeowners.

Since then, however, the Obama administration has sweetened the pot. It tripled the incentives it will pay to Fannie and Freddie for reducing principal under the Home Affordable Mortgage Program, or HAMP. This has prompted the agency and the companies to redo their analysis.

But will it even matter if Fannie and Freddie start allowing principal reduction?

Together, Fannie and Freddie have about 3 million loans that are seriously underwater, according to company filings. But three-quarters of these homeowners are current on their payments and may not qualify.

“These borrowers are demonstrating a continued willingness to meet their mortgage obligations,” said DeMarco in a recent speech. “This should be recognized and encouraged, not dampened with incentives for people to not continue paying.”

In the end, the number of eligible underwater Fannie and Freddie loans could range from a few hundred thousand up to 750,000, according to estimates. That’s not that much considering there are 11 million underwater borrowers in the U.S., just over a quarter of whom are behind in their payments.

“The scheme would still be a useful way to tackle the foreclosure problem,” said Paul Diggle, property economist at Capital Economics. “And it certainly wouldn’t do any harm to the housing recovery.”

But experts still fear that allowing principal reduction will open a new wave of strategic defaults, where homeowners decide to stop paying their mortgages in order to benefit from modification programs. This so-called moral hazard has been one of the main concerns that has kept principal reductions at bay.

“Principal reduction will prevent more foreclosures for some borrowers who are delinquent,” said Susan Wachter, real estate professor at the University of Pennsylvania’s Wharton School. “But there is a potential for it to undermine borrowers’ incentive to keep current on their mortgages.”

Though part of that would be covered by the Obama administration, it’s still ultimately taxpayer money whether it comes from HAMP or from the open line of bailouts Treasury provides to Fannie and Freddie.

Not everyone is convinced that the benefits are worth the price.

“The question is at what cost will it have an effect?” said Ted Gayer, co-director of economic studies at the Brookings Institution. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/UezUpOWIF4U/index.htm

My home insurance premium rose 19%. Why would that be, and what can I do?
—Stan Prokop, North Attleborough, Mass.

There are several reasons premiums might go up. Sometimes it’s because you’ve made claims. At other times, increases are out of your hands, which looks like the case here: Massachusetts’ insurance regulator says hikes followed “unprecedented” disasters in 2011, including tornadoes and a tropical storm.

Your options: See if another insurer has a lower rate, making sure the coverage matches; your premium, based on different rate formulas, could easily vary by 10%. Ask your auto insurer if you can get a package deal. And if you have cash to cover a higher deductible, you can raise it in return for a lower premium.

“The more bumps and bruises you don’t pass on, the lower your rate,” says Kevin Alsup of Foundation Financial Group in Jacksonville.

—Kate Ashford

Got a question for the help desk? Send it to helpdesk@cnnmoney.com.

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/5GmykkfKriM/

The Moura family has found that living together helps ease the pain of the recession.

NEW YORK (CNNMoney) — As the economy continues to take a toll on consumers’ finances, a growing number of people are discovering that becoming roommates with mom and dad, or a 20- or 30-something son or daughter, helps to ease some of the financial pain in tough times.

As of 2010, 4.4 million U.S. homes held three generations or more under one roof, a 15% increase from 3.8 million households two years earlier, according to the latest data available from the Census Bureau.

When Alicia Moura’s father-in-law, Aecio D’Silva, retired from teaching at the University of Arizona in 2010 to pursue private-sector projects in aqua-culture and bio-fuel, he didn’t expect to wait long before his efforts paid off. But then the economy tanked, development funds dried up and his ventures languished.

Soon afterward, Alicia started experiencing some medical issues with her pregnancy and the family decided it would be best to move in together. Now everyone — Alicia, her husband, their two young daughters and the in-laws — live under one roof.

“We not only save money by having a joined household, but we save on stress, time and other resources by having in-home day care,” said Moura.

Foreclosure nightmares: 3 families fight for their homes

For multi-generational households, there is typically a nice payoff. Not only do they save money, but they are better able to avoid financial hardship.

The Pew Research Center reported that the poverty rate among those who live in multi-generational homes was 11.5% in 2009 (the most recent data available), compared to 14.6% for those who didn’t live with other adults other than their spouse or partner.

“It’s such an advantage to have multiple wage earners in the same household when the economy is still struggling.” said Nicolas Retsina, a lecturer at the Harvard Business School and one-time head of Harvard’s Joint Center for Housing Studies. Retsina said the multi-generational housing trend is one he expects will continue.

Freeing up finances. Leslie Bos, a mother of three who lives in Boston, asked her mother to move in with her when her mom had to leave her job as a social worker and go on disability due to health problems.

While Bos helped her mother out of a jam — her disability payments couldn’t even cover housing costs in Boston pricey real estate market — it has also saved Bos significantly over the years.

“The 10-year-olds still need minding after school so this has really cut my child care expenses,” said Bos, who works for a company that manages multi-family housing assets.

Census reported that “doubled up households,” those including at least one extra adult who is not enrolled in school and isn’t a spouse or partner, grew 10.7% to 21.8 million households in spring 2011, up from 19.7 million households four years earlier.

Many of those homes included adult children who flew back to the nest after being unable to find work. The number of 25- to 34-year olds living with their folks jumped by more than 25% between 2007 and 2001, Census reported.

Debby Bitticks’ adult daughter, Sandi Krul, moved back in so she could take a break from work and return to law school. Along with Sandi, came her husband and two young daughters. The entire clan live in the Bitticks’ Encino, Calif., home with Debby and her husband.

By combining the families, they are saving thousands of dollars a month in duplicate costs, giving Krul the opportunity to change the direction of her career without putting too much financial strain on her family.

Builders take note. “The recession caused doubling up to save money — and the story is still unfolding,” said Steve Melman, Director of Economic Services for the National Association of Home Builders.

The long-term impact, he said, is that more families will want bigger homes with more bedrooms to accommodate their extended families.

In fact, so many relatives are already moving in with one another that builders are starting to construct homes to accommodate them. Instead of offering a two-car garage, for instance, builders will design the house with a one-car garage and use the extra space for a guest room, explained Valerie Dolenga, a spokeswoman for Pulte Homes (PHM, Fortune 500).

Parents help their kids buy homes

Home builder Toll Brothers (TOL) has started incorporating multi-generational living arrangements directly into its designs — such as a guest suite with a kitchenette where a family room once may have been, according to Timothy Gehman, the company’s director of design. Previously, such accommodations were offered only as custom options.

When Rajendra Hariprashad, moved from Guyana to New York as a boy, he and his mom moved in with his grandparents. Now 34, Hariprashad lives in a four-bedroom home in Glen Oaks, N.Y., with his wife, 10-month-old son, parents, and his sister and brother-in-law and their two-year-old son.

All of the adults in the house are employed, making it easier to afford the four-bedroom, three-bath house, which cost about $600,000.

“But it’s more than a financial thing,” said Hariprashad. “Everyone thinks we should all have our own homes, but we’re so happy living together.”

Hariprashad said he envisions his family always staying together, even as the younger generation expands. “We’ll just need to buy a bigger house,” he said. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/CvWnnlJBfgE/index.htm

This home outside Mobile, Ala., sold for $180,000 but the appraisal was low at just $170,000. The buyer ultimately won an adjustment.

NEW YORK (CNNMoney) — You find the home of your dreams. You’re pre-approved for a mortgage. You’ve scheduled the closing. Then … the appraisal comes in too low and the deal blows up.

Even as some mortgage standards have eased, hitting a needed appraisal value is proving a frustrating blocker for buyers and sellers and those looking to refinance.

If a buyer commits to a $200,000 home, but the appraisal comes in at just $180,000, the bank will finance only on the lower value — and the buyer must come up with the difference.

Leslie Sellers, a real estate broker in Clinton, Tenn., has a client who recently went to contract on a Norris, Tenn., home. The appraisal came in 10% short.

“I explained to the appraiser that houses in Norris are older and sell for higher prices than other parts of the county,” said Sellers, past president of the Appraisal Institute, a trade group. “[The appraiser] told me he was going with his value. We lost the sale.”

The banks are one reason appraisals are coming in low. If they have to repossess a home, they don’t want to get stuck with one worth far less than the mortgage.

“It’s not like the lenders say, ‘We want you to come in low,’” Sellers said. “It’s more like, ‘We want you to account for everything.’ Some appraisers hear that and overcompensate.”

Multi-million dollar foreclosures

It’s particularly tricky if the home is in a falling market. There’s even a box to check on standard appraisal forms saying “declining value,” according to Gloria Shulman, the founder of Centek Capital Group, a Beverly Hills mortgage broker. That indicates falling home prices and banks will slash another 5% off the loan.

Foreclosures complicate appraisals too. These homes sell for about 30% less than similar non-foreclosure homes but appraisers often use them for comps.

In Alabama, Stephanie Young recently went to buy a three-bedroom, two-bath in Chunchula, outside Mobile. She was approved for an FHA loan and the sale price was $180,000.

Her agent, Josh Tanner of Better Homes and Gardens Real Estate Generations, said the appraiser told him there were no good comps.

“The appraiser had used a foreclosure sale that was right on a busy road,” said Tanner. “That pulled the whole value down.”

Young was stuck, needing $10,000 to make up the shortfall. The sellers couldn’t come down. They were nearly underwater on their mortgage and lowering the price would push it into short sale territory. That requires bank approval, which could take months.

Young ultimately won an adjustment from the appraiser and the deal is scheduled to close this week.

Another path buyers can take after a bad appraisal is to renegotiate the home’s sale price. Katie and Dave Dowling found a townhouse in Roxbury, N.J. The pair, who are teachers, liked the place better than other units in the complex.

“It came with a lot of upgrades,” said Katie. “It was just nicer.”

Unfortunately, the appraiser didn’t take notice of better cabinets and appliances or other features. He appraised the home 3% lower than they needed.

Their solution was to ask the sellers to come down. They consented to a 2% haircut and the Dowlings came up with the other 1% themselves.

They expect they’ll get the house, but they might not have if they didn’t have extra cash to bring to the closing — and a willing seller. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/JH3NlJE8mWY/index.htm

NEW YORK (CNNMoney) — Sales of investment properties and vacation homes soared last year as investors snapped up homes that were selling at beaten down prices.

Homes purchased by investors skyrocketed 64.5% to 1.23 million in 2011, up from 749,000 the year before, according to the National Association of Realtors.

Vacation home buyers also came out in larger numbers, with sales climbing 7% year-over-year to 502,000. Meanwhile, sales to ordinary home buyers, who plan on living in the home full-time, fell 15.5% to 2.78 million, NAR said.

“Investors have been swooping into the market to take advantage of bargain home prices,” said Lawrence Yun, NAR’s chief economist. “Rising rental income easily beat cash sitting in banks.”

Many investors were on a shopping spree, with 41% of buyers picking up more than one property during the year, compared with 34% in 2010, according to NAR. The median number of properties they bought rose to three from two during that time.

Buying much cheaper than renting

And almost half of all investors paid for the properties with cash. Even buyers who secured a mortgage to finance the purchase offered hefty down payments. The median down payment for both investment and vacation-home buyers was 27%.

“Clearly we’re looking at investors with financial resources who see real estate as a good investment and who aren’t hesitant to use cash,” said Yun.

Foreclosures have helped fuel the second-home sales surge. Half of the investment purchases made last year were distressed sales, either foreclosures or short sales, as were 39% of vacation home purchases.

According to NAR, the median home price for investment properties was $100,000, a bargain compared to 2005 when the median investment property sold for $150,000. Meanwhile, the median vacation home sold for $121,300, down 19% from 2010 and a significant decline from the median price of $200,000 six years earlier.

Most investors said they intend to hang on to the properties instead of flipping them for a quick profit. The typical investor said they plan to hold the home for 5 years, with half of them reporting that they purchased the property mainly to generate rental income.

A tycoon in the making buying vacation homes

In nearly every market in the nation right now, buying is more affordable than renting. Continued tight mortgage financing, however, makes it difficult for some buyers with less than stellar credit history to buy homes.

For real estate investors, that means a steady supply of bargain properties — and potential renters.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/Q7PusJHSkyY/index.htm

NEW YORK (CNNMoney) — The housing market started the new year with a thud. Home prices dropped for the fifth consecutive month in January, reaching their lowest point since the end of 2002.

The average home sold in that month lost 0.8% of its value, compared with a month earlier, and prices were down 3.8% from 12 months earlier, according to the SP/Case-Shiller home price index of 20 major markets.

Home prices have fallen a whopping 34.4% from the peak set in July 2006.

“Despite some positive economic signs, home prices continued to drop,” said David Blitzer, spokesman for SP. “Eight cities — Atlanta, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle and Tampa — made new lows.”

Only three of the 20 index cities registered gains in January, led by Phoenix, which climbed 0.9% month-over-month, Washington, up 0.7%, and Miami, which edged 0.6% higher.

Home buying much cheaper than renting

Housing market indicators have sent confusing signals so far this year, with existing home sales and new home sales down month-over-month in February, but up year-over-year.

Potential homebuyers lack confidence in the market, according to Michael Feder, CEO of Radar Logic, an analytics company that produces daily spot prices for real estate. A big problem looming is a massive number of potential foreclosures.

“People see that there are millions of homes underwater, and at elevated risk of foreclosure, and conclude that housing values are unlikely to appreciate in any meaningful way for many years,” he said.

On the other hand, home builders have turned more bullish and are gearing up for more new construction. Mortgage rates are also still very favorable and the economy is getting better with hiring on the rise.

Ken H. Johnson, a real estate professor at Florida International University, thinks all these factors are helping the housing market turn around, but the recovery will take time.

Readers on mortgage settlement: ‘This stinks’

“The housing market is like a large cruise ship that turns slowly, often temporarily losing ground due to currents and change in momentum,” he said. “While the ship is turning, drags on the housing market are also present and must be addressed before a full recovery is accomplished.”

Feder said there is some evidence that the housing market recovery is approaching. One clue is that regular sales, as opposed to bank sales of foreclosed homes, increased dramatically over the past few months.

That indicates that sellers have capitulated to the lower sales prices of foreclosures and have adjusted their expectations of the prices their homes can command in the market.

He called that a good thing, because it means the market bottom is near. Once it does turn, there could be a rapid increase in buying, said Feder, as there is a much pent-up demand for homes.

Despite the market current turmoil, home ownership is still the goal of most Americans, according to a survey released Tuesday by Fannie Mae.

It found that while financial constraints and employment concerns are keeping homebuyers on the sidelines right now, two-thirds of renters say they intend to buy someday.

Bernanke: Fed didn’t cause housing bubble

“Some Americans may not be financially positioned to own a home in the near future,” said Doug Duncan, chief economist for Fannie Mae.

“But they may begin to revisit that aspiration as employment and household balance sheets improve over the coming years,” he said.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/TvannDQzrUg/index.htm

Bank of America’s pilot program would let families facing foreclosure rent their homes.

NEW YORK (CNNMoney) — Bank of America has announced a program that will let homeowners facing foreclosures stay in their homes as renters.

The “Mortgage to Lease” program will start as a limited pilot program for up to 1,000 homeowners in Arizona, Nevada and New York selected by the bank.

The bank said if the effort succeeds, it could be expanded to the broader group of at-risk homeowners with BofA mortgages. Homeowners can not apply to be part of the program at this time. (Buying is cheaper than renting)

Those selected for this initial pilot program will be more than 60 days delinquent on their home loans, have high loan balances in relation to their current property value, have no other liens on their property, and have an income level high enough to afford the rent.

The homeowner will transfer title to their properties to the bank and have their outstanding mortgage debt forgiven. In exchange, they may lease their home for up to three years at or below the current market rental rate.

Multi-million dollar foreclosures

While Bank of America (BAC, Fortune 500) will retain ownership of the properties at first, homes in the pilot program will be transitioned to investor ownership. The bank will work with property management companies to oversee the rental properties.

“Our priority is designing a solution that helps our customer,” said Ron Sturzenegger, an executive with the bank, in a statement. “If this evolves from a pilot into a more broadly based program, we also see potential benefits from helping to stabilize housing prices in the surrounding community and curtail neighborhood blight by keeping a portion of distressed properties off the market.”

Bank of America is one of five major banks to participate in a $26 billion foreclosure deal with federal authorities and state attorneys general to settle charges over improper foreclosure actions.

The deal is supposed to lead to billions of dollars in principal reductions and refinancing for more than a million homeowners who owe more than their homes are worth. But critics of the deal say a growing number of borrowers are realizing that the deal will do little, if anything, to help them.

There are nearly 200,000 homes in Arizona, Nevada and New York for which the homeowner is 60 days or more delinquent on their home loans, according to figures from the Mortgage Bankers Association. That figure includes all lenders, not just Bank of America. It does not include homes in those states that are already in the foreclosure process. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/lnCsleHVauc/index.htm

NEW YORK (CNNMoney) — New home sales fell in February, dashing construction industry hopes that the long-overdue housing recovery may be finally arriving.

The Census Bureau reported Friday that new homes sold at an annualized pace of 313,000 during the month, adjusted for seasonal factors. That was a 1.6% decline compared with January’s 318,000 sales but 11.4% above last February’s 281,000.

Sales fell short of the 323,000 that analysts had expected.

There was a bit of good news for home builders in the report. The median price of new houses sold jumped to $233,700, well above the $217,000 median recorded in January.

The fake housing recovery

The supply of new homes available for sale dropped slightly during the month to 150,000, a 5.8-month supply.

New home sales remain very depressed compared with the mid-2000 boom years. In July. 2005, new homes sold at a 1.389 million annual pace.

New home sales data is eagerly anticipated because increases in construction translates into broad economic gains. All sorts of jobs, in construction, trucking, and furniture, appliance and carpet manufacturing, rise along with new home construction.

The one number to watch for a housing market recovery

Each new home built during a year supports about three jobs, according to David Crowe, chief economist for the National Association of Home Builders (NAHB).

The decline came as somewhat of a surprise to Crowe. He said NAHB members have reported a boost in shoppers looking for new homes as abnormally warm weather brought out more house hunters than usual this winter.

The increase in shoppers has not led to a rise in actual buying, he said, and tight credit has been one factor hurting sales.

“Many people come in pre-approved for mortgages but, ultimately, can’t pass the underwriting process,” he said. “They’re qualified but they can’t get a high-enough appraisal on a house.”

If the appraisal comes in low, mortgage banks won’t provide all the funds needed for buyers to complete their purchases. That has short-circuited many new home sales recently. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/Np7YDCVQoQI/index.htm

NEW YORK (CNNMoney) — The housing market slipped slightly in February compared with a month earlier, but improved substantially compared with the prior year, according to a report issued Wednesday.

Sales of existing homes fell 0.9% to an annual rate of 4.59 million last month from 4.63 million in January, according to the National Association of Realtors. But sales were 8.8% above the pace of 4.22 million of a year ago.

The median price of homes sold was $156,600, up slightly from last February but near 10-year lows and only a modest rise from the $154,700 reached in January.

“The market is trending up unevenly, with record high consumer buying power and sustained job gains giving buyers the confidence they need to get into the market,” said Lawrence Yun, NAR’s chief economist.

With home prices are at their lowest point since 2002 and mortgage rates hovering near historic lows for months, buying a home is cheaper than renting in almost every part of the United States.

That has been a boost for sales, which has cut into supplies of homes available.

The national inventory has shrunk nearly in half since peaking back in July 2007, when 4.04 million homes were on the market. Inventory came in at 2.43 million units in February, a six-month supply at the current pace of sales.

“Overall, the report has to be seen as a little disappointing,” said Mike Larson, a housing market analyst for Weiss Research.

With the improvement recorded by the economy in recent months and the warm winter providing a boost, more robust home sales could have been expected, he said.

Larson sees some trouble ahead. Mortgage rates are starting to move up and may rise by half a percentage point or more over the next few months, and that could cool off the market a bit.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/QbxlSTS5wRk/index.htm

If you’re waiting for home prices to go up, then you’re missing signs the troubled housing market has finally turned around.

FORTUNE – Over the past few months, many economists have concluded that that the U.S. housing market has reached a turning point and is healing. This may sound hard to believe, since home prices have continued their downward trend. In 2011, prices fell by 4% following nearly a 30% decline since the property bubble paeked in June 2006. They ended the year at a 10-year low.

Indeed, prices aren’t likely going to rise for a while. But this might not necessarily mean the housing market isn’t on the mend. Perhaps we’re looking at the recovery all wrong, says Paul Dales at Capital Economics. In a report to clients recently, the economist said higher prices won’t be the sign that tells us there’s a real recovery under way. Rather, the recent pick-up in sales is what we should pay attention to.

After all, prices tend to be a lagging indicator. It could take six months for any improvements to show in the market, if not longer.

“Even if the asking price is at the right level when the home is first listed, it may still take a few months to find a buyer and another month or so before the contract is closed,” Dales wrote to clients last week. “The selling price that is registered at the end of this process therefore relates to the market conditions somewhat earlier.”

Sales have risen recently, reaching a few milestones.

In 2011, existing home sales climbed to 4.26 million – higher than the 4.19 million sales in 2010. Needless to say, this is far below the market’s peak of 7.1 million sales amid the housing boom in 2005. But it’s worth noting that for the past two years, sales have crept up from the market’s low of 4.1 million sales when the market collapsed in 2008. In particular, in the past six months, total homes sales have risen by 13% as borrowing costs for home mortgages continue to fall to record lows and investors making up the bulk of sales find opportunities in heavily discounted properties after foreclosures and short sales.

And a series of home sales data released later this week is expected to show that home purchases probably climbed in February to their highest level in nearly two years, according to the forecasts in a Bloomberg survey. Sales of new and previously-owned properties combined are expected to rise to an annual rate of 4.93 million – the strongest since May 2010, and up from 4.89 million in January.

The evidence reminds us that perhaps we should change our expectations of what a housing recovery might look like, particularly following a crisis marked by record foreclosures and a financial crisis that sent the economy into one of the deepest recessions. The recovery we have been anticipating is defined more on the rate at which the glut of vacant properties comes off the market as opposed to any steady rise in prices, which some think won’t happen for another few years.

The inventory of unsold homes has dwindled, falling in January to 6.1 month’s worth of supply – its lowest level since March 2005. A supply of six months is generally considered ideal for a healthy housing market, but there continue to be several headwinds at play that could weigh down prices.

The most immediate threat is the $25 billion settlement that federal and state officials recently reached with five banks to end investigations into abusive foreclosures practices. The agreement, which had stalled pending foreclosures nationwide for more than a year, will probably add more properties into the market. Dales at Capital Economics estimates additional 3 million homeowners might succumb to foreclosure over the next few years.

And then there’s the longer-term threat to prices, which some experts say could arise when the Federal Reserve raises interest rates later. The inevitable move could potentially make the cost of home purchases more expensive relative to stagnant incomes.

So if anyone is looking at prices for signs of a recovery, it’s likely that they’ll miss it.

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/YCZWnw5YkDg/

An ETF of home builder stocks is trouncing the broader market. But that may not necessarily mean housing has bottomed. Many of the stocks in the ETF are NOT builders.

NEW YORK (CNNMoney) — When is a homebuilder not a homebuilder? When it’s in an index of homebuilder stocks, of course!

The SPDR SP Homebuilders (XHB) exchange traded fund has surged this year, leading many to speculate that the housing market has really, honestly, we’re not fooling around this time, cross our hearts and hope to die, bottomed.

The builders ETF is up a stunning 26% already this year. But here’s the thing. A big chunk of the companies in the fund that are doing well are not really builders.

Shares of Select Comfort (SCSS), manufacturer of the popular Sleep Number beds, is up more than 50% this year. It makes up 3.3% of the fund’s assets.

The ETF, which tracks the SP Homebuilders Select Industry index, also includes many companies that have ties to the housing market, but whose fortunes may be improving for reasons beyond what’s going on with real estate in the U.S.

Consider Whirlpool (WHR, Fortune 500). The appliance manufacturer makes up about 3.5% of the ETF’s weighting. Shares are up more than 60% this year. But is it really because of optimism about the U.S. housing market?

Nearly half of Whirlpool’s revenue in the fourth quarter of 2011 were from outside of North America. What’s more, the company’s forecast of 0% to 3% growth in unit shipments in the U.S. is slightly below Whirlpool’s growth projections for Latin America and Asia. And on Monday, Whirlpool announced a distribution partnership with a leading retailer of home appliances in China.

Made in USA: Manufacturing is my future

Several other top-performing companies in the builder index that aren’t really builders also generate a decent chunk of change from outside the U.S.

Pillow and mattress maker Tempur-Pedic (TPX) had nearly 30% of its sales from international markets last year. The stock is up nearly 60% this year. Air conditioner and furnace maker Lennox International (LII) also generated about 30% of its total sales from outside the U.S. in 2011. Shares are up 24% in 2012.

“The funny thing about ETFs is that you do have to look and see what’s actually in them,” said Lance Roberts, CEO of Streettalk Advisors, an investment management firm in Houston.

There are also many retailers in the builders ETF. (You won’t find builders in any retailer ETF though.) And while some of these chains, like Home Depot (HD, Fortune 500) and Lowe’s (LOW, Fortune 500) in particular, benefit from new home construction and an increase in home buying in general, others aren’t that closely tied to the housing market.

In fact, some home retailers, such as Bed Bath and Beyond (BBBY, Fortune 500), Williams-Sonoma (WSM) and Pier 1 Imports (PIR), may be doing well when consumers want to spruce up their current abode — which may even be an apartment they are renting. Those three companies collectively make up more than 10% of the “builders” ETF.

Retailer Aaron’s (AAN), which leases furniture and electronics, is also in the builders ETF. If anything, Aaron’s is a countercyclical housing indicator. The company, which lets consumers rent goods until they can afford to own them, did pretty well during the housing bust and Great Recession.

Heck, even iRobot (IRBT), the maker of the Roomba vacuum, is a component of the builder ETF, making up about 3% of the fund’s weighting.

It is a huge stretch to put the company in this type of index. For one, 40% of its sales come from industrial and government contracts. And 70% of its home robot sales are in international markets.

Of course, there are many builders in the fund too. Ryland Group (RYL), Lennar (LEN), MDC Holding (MDC) and D.R. Horton (DHI, Fortune 500) are among the top ten holdings. Those stocks have done extremely well this year. But the jury is still out on whether the housing market really can sustain a turnaround.

Multi-million dollar foreclosures

Sure, building permits were up last month and builders are optimistic. But foreclosures made up nearly a quarter of all home sales in the fourth quarter of 2011 and housing prices hit a nine-year low that quarter as well. And keep in mind that this is despite the fact that mortgage rates are near record lows.

So if you track the homebuilders ETF closely in order to try and predict whether housing is on the mend, just be careful.

While you are getting exposure to real builders, many of the stocks in the ETF may also be beneficiaries of strength in emerging markets and increased demand for consumer goods with relatively small price tags

Just because more people in China are buying refrigerators and more U.S. consumers may be buying a new toaster oven at Bed Bath Beyond, does not mean that this is a new real estate renaissance.

“I’m not bearish but I am realistic. We may be bouncing off the lows but it’s hard to call this a rebound. Every year for the past few years, there have been hopes of a recovery. But housing is still near the bottom,” Roberts said.

Best of StockTwits: Diamonds are an investor’s best friend. For now. And don’t always bet on black … clothing.

retail_guru: China is 12% of Tiffany sales; well below other #luxe brands at 30%. That IS big $TIF opportunity as awareness is high, availability isn’t

RyanNinz: $TIF 71.5 up 4% misses on eps, higher costs, but optimistic abt 2012. Why wouldn’t it be “optimistic?” Everyone else is until they aren’t

Investors were clearly overlooking the earnings miss from Tiffany (TIF). The stock was up 7% on the jeweler’s healthy outlook. But as retail_guru points out, guidance is only healthy if Tiffany delivers in China. And as RyanNnz says, rising expenses could be a concern the company is underestimating.

activetrading: $KORS So they are selling 1 billion of insider stock while pumping up their forecasts? And they throw in ifs and buts? uh-huh…. no thanks.

firstadopter: Dear $KORS you’re 1st co ever that I’ve seen that raises guidance then later in same paragraph says “oops we might not hit guidance” Lame

Michael Kors (KORS) has been one of the hottest IPOs of the past few months. Shares have more than doubled since they debuted in December. So it’s only natural that insiders would sell a bit more. But this should serve as a reminder to any IPO investor. Always be prepared for an eventual secondary offering that could dilute the value of the shares owned by the people that bought early.

As for the hemming (ha!) and hawing on guidance, that’s a bit odd. Michael Kors wouldn’t tolerate a “hot mess” from one of the contestants on “Project Runway.” Why should Kors’ investors be expected to forgive the financial equivalent of a fashion train wreck?

The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/Q9rcu-u1VW0/index.htm

Builders are anticipating a strong housing construction season.

NEW YORK (CNNMoney) — Home builders are getting ready for a stronger construction season, filing for the most building permits in more than three years, in another sign of recovery in the long-battered housing market.

The government reported builders filed for permits at an seasonally adjusted annual rate of 717,000 in February, the strongest reading since October 2008, which was the month after the meltdown in financial markets. It marked a 5.1% rise from January and a 34.3% increase from year-earlier levels.

Actual starts of new homes slipped slightly from a very strong start to the building season in January, down 1.1% to 698,000. Still, that was 35% ahead of starts in February 2011.

The starts are more affected by weather factors. But the permits are generally seen as an indication of builders’ confidence in the market and the demand they are seeing. Mortgage rates near record lows and an improving jobs market both are feeding stronger demand.

The construction and permitting of apartments and condos continue to be particularly strong. Permits for buildings with more than one housing unit rose 61% from prior-year levels, and starts of buildings with five or more units jumped 29% from January and were more than double year-earlier levels.

Watch for a housing recovery

New home construction is still only a fraction of levels during the building boom in the middle of the last decade. But years of low building since the housing bubble burst have left inventories of new homes for sales at a record low, helping to spur more activity by builders.

Stocks of major home builders such as PulteGroup (PHM, Fortune 500), D.R. Horton (DHI, Fortune 500) and Toll Brothers (TOL) have all posted double-digit gains in the last three months. Home supply retailers such as Home Depot (HD, Fortune 500) and Lowe’s (LOW, Fortune 500) have also reported strong sales and profits, and their stocks have rallied as a result.

Boost your odds of landing a mortgage

The home construction industry is an important driver of the overall economy, creating demand not only for construction workers but also manufacturers of various goods used in new homes, from major appliances to furniture to general housewares.

That’s one of the reasons that housing and home construction have historically helped to lead the U.S. economy out of downturns. So the strong hopes for the building season ahead are seen as good news for the broader economy as well. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/uEZ4wJ3src8/index.htm

HUD Secretary Shaun Donovan led the $26 billion mortgage settlement deal that was filed in court on Monday.

WASHINGTON (CNNMoney) — Final details were filed in federal court Monday in the $26 billion settlement to help struggling homeowners and settle charges against big banks of abusive and negligent foreclosure practices.

The Department of Justice filed five separate consent agreements, each more than 300 pages, between 49 states, federal agencies and the largest bank servicers:Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM).

The deal finalizes the big Obama administration announcement, made more than a month ago, that banks would provide relief to homeowners who owe more than their homes are worth or are victims of improper foreclosures. The relief would come in the form of principal reductions, mortgage refinancings and small payouts.

But until Monday, the only details made public have been what officials have said, as well as a few short summaries and fact sheets.

“The unprecedented joint agreement is the largest federal-state civil settlement ever obtained,” according to a Department of Justice statement.

The deal, if it obtains final judicial approval, would settle charges of improper foreclosure practices dating back to 2008. The banks committed $26 billion to help homeowners with loans exceeding their home’s value — known as being “underwater” — and to compensate those who lost their homes. The banks also agreed to change the way they handle and approve foreclosures.

The deal had been in the works for 16 months.

During the announcement, officials touted that up to 1 million homeowners could see their principal reduced by an average $20,000, while another 750,000 could be able to refinance loans.

Last week, Bank of America confirmed that some 200,000 of its borrowers who qualify for help would, on average, get $100,000 in relief. That news means other borrowers at other banks will see much lower writedowns.

Those whose mortgages are owned by mortgage backers Fannie Mae and Freddie Mac won’t qualify for writedown relief.

Payments up to $2,000 will be made to those who lost their homes to foreclosure over the past three years.

The details also set forth tougher servicing standards by which the banks must abide.

The court records also make clear some facts omitted during the original announcement. For example, banks won a concession concerning second mortgages, which would be written down equally with first mortgages under the settlement.

Banks’ reticence to write down second liens played a role in stumping progress of Obama administration housing relief efforts. Usually in a foreclosure, second mortgages or second liens are losses borne entirely by the banks. Banks tend to own second liens, which accompany about half of all mortgages at risk for foreclosure, according to a 2010 Treasury report.

Critics, including author of the Naked Capitalism blog Yves Smith, have said the equal treatment of the liens will benefit banks over investors, who tend to own first mortgages.

Department of Housing and Urban Development Secretary Shaun Donovan said two weeks ago that the delay had been due to minor negotiations with some states about such issues as how they planned to use their piece of the settlement.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/mGNVfuvI1UY/index.htm

The “Oops!… I Did It Again” singer is trying to sell her Mediterranean-style estate one more time. It was first listed in Sept. 2008 for $7.9 million, then again in July 2009 for $6.4 million and again the following year for $4.8 million. Spears is now asking $2.9 million.

NEXT: The entry

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/w4wFyX85Ers/index.html

Dick Clark has listed his unique, one-bedroom Malibu home for $3.5 million, according to Coldwell Banker Residential Brokerage.

Whoever buys the place from the “world’s oldest teenager” will likely feel as if they are channeling another celebrity: Fred Flintstone.

The architect, Phillip Jon Brown, said the prehistoric design was dictated by circumstance. The 23-acre site is next to the Santa Monica Mountains National Recreational Area, which originally objected to Clark building a home on the property.

“[Clark] dug in his heels and said he was going to build a house there,” said Brown, “I came up with the idea that if the house looked like a rock formation, the park conservancy would let us build on top. They liked the concept.”

NEXT: The living room

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/_bpjEm37fUU/index.html

NEW YORK (CNNMoney) — Borrowers with some federally insured mortgages will be able to refinance into lower interest rate loans more easily and cheaply under a plan unveiled Tuesday by the Obama administration.

At a news conference, President Obama announced that the Federal Housing Administration will cut upfront fees for refinanced loans it already insures.

The new fees are for borrowers whose FHA loans were issued before June 1, 2009. An estimated 2 to 3 million borrowers could take advantage of the savings, which could reduce mortgage payments for the typical FHA borrower by about a thousand dollars a year, according to the administration.

“It’s like another tax cut in people’s pockets,” said President Obama.

Borrowers who refinance their existing FHA loans will pay an upfront insurance premium equal to 0.1%, the lowest allowable rate, of the mortgage amount — $100 for a $100,000 loan — plus an annual fee of 0.55%.

The new refinancing fees contrast sharply with the cost of obtaining a FHA loan, according to Jaret Seiberg, an analyst with the Washington Research Group. A borrower making a 3.5% down payment on a home purchase as of April 1 will pay a 1.75% upfront fee and a 1.25% annual fee. Those purchase fees were raised barely a week ago to improve the FHA’s capital reserve.

Has Obama’s housing policy failed?

Still, lowering refinancing fees “should be broadly positive for housing and the economy by reducing foreclosures and freeing up income for consumers to spend on other goods and services,” Seiberg said.

The new policy will also make it easier for the banks to refinance loans because it directs the FHA not to count the loans toward the lender’s “compare ratio.” That calculates the performance of loans issued by the lenders and compares it to the performance of other lenders.

Some lenders have not wanted to refinance FHA loans because many of them were made during years of high default rates, according to Seiberg.

Knowing that the FHA will not hold refinanced loans against them should they fail to perform could make lenders more willing to refinance loans for borrowers at a higher credit risk, according to Jay Brinkmann, chief economist for the Mortgage Bankers Association.

“They have not been accepting credit scores below a certain point,” he said. “Now, they may.”

The fee reduction is the latest in a long line of administration initiatives intended to jump-start the housing market and, by extension, the economy.

The latest move can be thought of as an extension of the Home Affordable Refinance Program, or HARP. That program enables borrowers with mortgages backed by Fannie Mae (FNMA, Fortune 500) or Freddie Mac (FRE) to refinance even when they owe far more than their homes are worth. By reducing mortgage payments, both HARP and the new FHA fees free up money that could now be spent on other things like consumer goods.

In addition to the new refinancing fees, President Obama also announced steps to provide relief to service members who were wrongfully foreclosed on or suffered financial during the housing meltdown. As part of the plan, mortgage lenders and servicers will be required to review the case of every service member who was foreclosed on since 2006.

Any member of the military who wrongfully lost their home to foreclosure during that period will be repaid for their lost equity, plus interest. They will also receive a flat fee of $116,785.

Arrived at in negotiations with the five major servicers, that payout represents compensation for economic loss and emotional distress, said Tom Perez, U.S. assistant attorney general in the civil rights division. “I want to emphasize that it’s a floor, not a ceiling and that overall compensation may be higher,” he said.

According to Shaun Donovan, the Secretary of the Department of Housing and Urban Development, there’s no way to accurately forecast how many service members would be eligible for relief under this part of the settlement. However, he said a similar agreement with just one of the servicers, Bank of America (BAC, Fortune 500), yielded 157 cases in which compensation was paid out.

“I’m anticipating that there could be thousands of potential victims,” he said

Service members who were denied the opportunity to refinance at the 6% interest rate required under the Relief Act will also be refunded anything they were charged over the 6% rate, plus interest.

In addition, military members who bought their homes between July 1, 2006 and December 31, 2008 and were forced to sell them at a loss due to a permanent change in station may be compensated for the loss in their home’s value.

Service members who believe their rights were violated by Bank of America, J.P. Morgan Chase (JPM, Fortune 500), Ally Financial (the old GMAC), Citibank (C, Fortune 500), or Wells Fargo (WFC, Fortune 500) can contact the Justice Department directly at 1-800-896-7743. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/mUezg643L5w/index.htm

NEW YORK (CNNMoney) — Borrowers with some federally insured mortgages will be able to refinance into lower interest rate loans more easily and cheaply under a plan being unveiled Tuesday by the Obama administration.

At a news conference scheduled later in the day, President Obama was set to announce that the Federal Housing Administration will cut upfront fees for refinancing loans it already insures.

The new fees are for borrowers whose FHA loans were issued before June 1, 2009. An estimated 2 to 3 million borrowers could take advantage of the savings, which could reduce mortgage payments for the typical FHA borrower by about a thousand dollars a year, according to the administration.

Borrowers who refinance their existing FHA loans will pay an upfront insurance premium equal to 0.1% of the mortgage amount — $100 for a $100,000 loan — plus an annual fee of 0.55%.

The fees being announced for refinancing contrast sharply with the cost of obtaining a new FHA loan, according to Jaret Seiberg, an analyst with the Washington Research Group. A borrower making a 3.5% down payment on a home purchase as of April 1 will pay a 1.75% upfront fee and a 1.25% annual fee. Those purchase fees were raised barely a week ago to improve the FHA’s capital reserve.

Has Obama’s housing policy failed?

Still, lowering refinancing fees “should be broadly positive for housing and the economy by reducing foreclosures and freeing up income for consumers to spend on other goods and services,” Seiberg said.

The new policy will also make it easier for the banks to refinance loans because it directs the FHA to not count these refinanced loans toward the lender’s “compare ratio.” That calculates the performances of loans issued by the lenders and compares it to other lenders’s performances.

Some lenders have not wanted to refinance FHA loans because they tended to have been made during years of high default rates, according to Seiberg. The administration proposal eliminates the downside to banks making these refinance loans.

This FHA refinance fee reduction is the latest in a long line of administration initiatives intended to jump start the housing market and, by extension, the economy.

It can be thought of as an addition to the Home Affordable Refinance Program (HARP). The program enables borrowers with mortgages backed by Fannie Mae (FNMA, Fortune 500) or Freddie Mac (FRE) to refinance even when they are deep underwater on their loans, owing far more than their homes are worth.

By reducing mortgage payments, both HARP and the new FHA fees free up money that could now be spent on other things like consumer goods.

Also being provided with potential relief are servicemen wrongfully foreclosed on. Lenders and servicers will be required to review the cases of every service member foreclosed upon since 2006.

Under the plan, any service member wrongly foreclosed upon will receive compensation. There will also be a refund of any overcharges for those who were denied the opportunity to refinance, and relief for those who had to sell their homes at a loss because of a change in station. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/mUezg643L5w/index.htm

NBA star Michael Jordan put his Highland Park home up for sale on Wednesday. The listing price: $29 million.

The 56,000 square-foot contemporary home, which is located in a suburb of Chicago, has three levels, including 9 bedrooms and 5 fireplaces on more than 7 acres of property.

NEXT: Pool pavilion

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/oFNwx1q4uqU/index.html

NEW YORK (CNNMoney) — National home prices fell 4% in the fourth quarter of 2011, putting them back at levels last seen in mid-2002.

That’s the fifth consecutive annual loss and the biggest decline since 2008, when markets were in free fall and prices plummeted more than 18%.

Prices have been falling since they topped out in 2006, and are down 33.8% from their peak, according to the SP/Case-Shiller national home price index.

“The housing market ended 2011 on a very disappointing note,” said David Blitzer, spokesman for SP. “While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended.”

After prices fell sharply in 2007 and 2008, declines over the past three years have been more modest. Many analysts thought markets were bottoming out and would soon stabilize, and even pick up. The last quarter of 2011, when national index prices fell a steep 3.8% from the third quarter, may have dashed those hopes.

“While we thought we saw some signs of stabilization in the middle of 2011, it appears that neither the economy nor consumer confidence was strong enough to move the market in a positive direction as the year ended,” said Blitzer.

Robert Shiller, the Yale economist and co-creator of the Case-Shiller indexes, is more optimistic. Last year, he thought home prices were in danger of falling by up to another 25% before they bottomed out.

On Tuesday, he cited several economic reports as signs that housing could start stabilizing. He also focused on surveys that indicated that Americans are very confident of the long-term prospects for housing as an investment.

During the boom, about 90% of the people he surveyed thought it was a good time to buy. Recently, 92% of people agreed with that statement. Still, Shiller is far from bullish on the housing market.

“We may be on the verge of recovery but we may not,” he said.

The SP/Case-Shiller 20- and 10-city indexes recorded similar sharp declines during the quarter. Among individual cities, Atlanta recorded a 12.8% year-over-year fall, the worst of any city.

Other big losers were Las Vegas, down 8.8%, Chicago which fell 6.5% and Seattle, which declined 5.6%. Detroit, where prices crept up 0.5% for the year, was the only city in the 20-city index to register a gain.

Multi-million dollar foreclosures

In the past five months prices have declined at an annualized rate of more than 6%, according to Dean Baker, director with the Center for Economic and Policy Research, a trend he said is especially troubling. He cites some reasons for hope, however.

“Case-Shiller is a lagging indicator and most of the contracts reflected in this report were signed in August and September,” he said. “The latest economic data shows a much brighter picture.”

Industrial production has been up and unemployment has dropped.

“The economy is stronger now than in the first half of 2011 and that will filter down to home prices,” said Baker.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/VWoAKh9XWnY/index.htm

HUD Secretary Shaun Donovan says the $26 billion mortgage settlement deal will be filed in court this week.

WASHINGTON (CNNMoney) — Final details are due out this week in the $26 billion settlement to help struggling homeowners and settle charges of abusive and negligent foreclosure practices, according to President Obama’s housing chief.

The Obama administration made a big announcement nearly three weeks ago, touting that 49 states had agreed on a deal with the five largest banks providing relief to homeowners who were victims of improper foreclosures. The relief would come in the form of principal reductions, mortgage refinancings and small payouts.

But so far, the only details made public have been what officials have said, as well as a few short summaries and fact sheets.

Department of Housing and Urban Development Secretary Shaun Donovan said in a Senate Banking hearing Tuesday that the deal will be filed in court later this week, making all the details public.

Donovan said that the earlier announcement revealed the “significant aspects of the agreement.” He suggested that officials have been in minor negotiations with some states about, for example, how they planned to use their piece of the settlement.

He also said that federal officials had been in talks with other banks considering signing on to the deal.

“I would put it more in the dotting I’s and crossing T’s, rather than in the significant terms of the settlement that are being finalized,” Donovan said of the lag between the announcement and release of the actual legal agreements.

The deal between the nation’s five largest bank servicers, federal officials and 49 states would settle charges of improper foreclosure practices dating back to 2008. The banks committed $26 billion to help underwater homeowners and compensate those who lost their homes. The banks also agreed to change the way they handle and approve foreclosures.

The deal had been in the works for 16 months. Up to 1 million homeowners could see their principal reduced by up to $20,000, while another 750,000 could be able to refinance loans. Payments up to $2,000 will be made to those who lost their homes to foreclosure over the past three years.

Donovan did clarify a few details at the hearing, which had been omitted during the original announcement. For example, he revealed that banks won a concession concerning second mortgages, which would be written down equally with first mortgages under the settlement.

Banks’ reticence to write down second liens played a role in stumping progress of Obama administration housing relief efforts. Usually in a foreclosure, second mortgages or second liens are losses borne entirely by the banks. Banks tend to own second liens, which accompany about half of all mortgages at risk for foreclosure, according to a 2010 Treasury report.

Critics, including author of the Naked Capitalism blog Yves Smith, have said the equal treatment of the liens will benefit banks over investors who tend to own first mortgages.

What the foreclosure settlement means for you

Bank lobbying groups said they were reluctant to comment on Donovan’s comments until the final details are made public.

Donovan said during the hearing that a big benefit of the settlement deal will be its impact spurring banks to reduce the mortgage principal for underwater homeowners who are not part of the settlement.

“We think that the settlement could have a catalytic effect in really demonstrating that principal reduction is positive not just for homeowners and communities, but it is also positive for investors when it’s done … in a way that increases returns to investors,” Donovan said. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/w-60-UVqzsA/index.htm

NEW YORK (CNNMoney) — In an effort to bolster its capital reserves, the Federal Housing Administration is planning to hike the insurance premiums it charges borrowers.

Beginning April 1, the agency, which is the largest insurer of low-down payment mortgages, will raise the up-front insurance premium it charges borrowers by 75 basis points to 1.75% of the base loan amount.

In addition, annual insurance premiums will go up 0.1 percentage point for loans under $625,500 and 0.35 points for loans that exceed that amount.

The agency said the hikes are necessary to replenish the agency’s declining capital reserves, which fell below the level mandated by Congress back in 2009. Further red flags were raised in November when the agency’s annual report warned that if home prices continued to drop in the coming year, the agency’s losses could exceed its reserves.

“After careful analysis of the market and the health of the [Mutual Mortgage Insurance] fund, we have determined that it is appropriate to increase mortgage insurance premiums in order to help protect our capital reserves and to continue encouraging the return of private capital to the housing market,” said acting FHA commissioner Carol Galante.

Why the Fed can’t fix housing

Borrowers will be able to roll the higher up-front fees into their mortgage balance, which should help borrowers better afford the cost. Combined, the higher up-front fees and the 0.1 point premium increase are expected to add about $5 to the average monthly mortgage payment for FHA loans, according to the agency.

Even though those payouts may seem nominal, it’s bad news for the housing market, said Jaret Seiberg, an analyst with the Washington Research Group. He said the hikes will discourage sales to first time homebuyers by making it more expensive to borrow thereby depriving sellers of potential buyers. Builders will also suffer as FHA-insured loans remain an important source of financing for their buyers, he added.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/Vli5joaX_4k/index.htm

Connected home technology, similar to The Jetsons, is finally ready.

BARCELONA, Spain (CNNMoney) — In the classic 1960s animated sitcom The Jetsons, everything in the space-age family’s home could be controlled by the press of a button on a remote control.

Fifty years later, that futuristic vision is finally becoming reality.

At Mobile World Congress this week, the wireless industry’s largest annual convention, companies like ATT (T, Fortune 500), Qualcomm (QCOM, Fortune 500), Intel (INTC, Fortune 500), and Sony (SNE) are showing off how everything in your home — from your door locks to your thermostat to your TV — can be controlled by a smartphone or tablet.

That kind of technology has been demonstrated and discussed for years, but it never graduated past a niche product for the uber rich and extremely geeky. Today, however, the hardware, software, and cloud-based infrastructure necessary to make it a reality is finally inexpensive enough for companies to bring full-home connectivity to the mainstream market.

But hold off on the excitement for a moment — there’s a sticking point. Connected-home technology won’t become widespread until there’s a uniform vision for how it will all work together.

There isn’t one. Not yet.

ATT on Monday unveiled its new home security platform, which allows security companies to sell automated home protection services. Using ATT’s network and software, a home security customer could control their heat, locks, lights, oven and security cameras using an iPad.

Intel featured a similar home-control technology, except instead of connecting devices through a wireless network, its system lets all the gadgets in the house talk to one another using what’s known as machine-to-machine connections. Your window shades, dishwasher, refrigerator and other appliances would all link with a central router running the Linux operating system, which is connected to and controlled over the Internet.

Chipmaker Qualcomm showed off its new “Hy-Fi” platform, which lets consumers easily play media from any device on any other device in the home. Want to watch a movie on your TV that’s stored on your iPad? A Hy-Fi router and receiver wired to your TV will take care of that. It also lets you listen to a song on your stereo that’s stored on your hard drive.

Sony showed how you can dock a Sony smartphone, connect it to a Sony TV, and navigate your phone’s media using your TV’s remote. Or you can play a game on your PlayStation, and pick up where you left off on your portable PS Vita.

Each system has its own unique platform that is incompatible with everyone else’s.

Without one clear standard for all in-home devices to talk to one another, consumers’ choices are limited. You can either buy everything from the same brand (Sony’s model), everything running the same platform (Intel and ATT’s models), or invest in additional hardware to connect all your existing stuff together (Qualcomm’s model).

There are also other competing platforms that weren’t at this year’s Mobile World Congress.

Apple (AAPL, Fortune 500) has a home connectivity platform of its own, which allows Apple TV, Mac, iPhone and iPad users to stream and play content from any Apple device on the same network. Google (GOOG, Fortune 500) is in the process of unveiling its own standard called Android@Home, which would allow connected devices in your home to be powered by an Android smartphone or tablet.

There are advantages and disadvantages to each model.

Google and Intel have an open standard that any device maker can adopt for free. ATT makes companies license its platform for a fee, but with that comes a representative that customers can yell at when things don’t work. And Sony and Apple users don’t have to purchase any extra technology — just so long as they don’t mind buying only Sony or Apple products.

Until one standard becomes universally accepted, The Jetsons vision will remain a fantasy. But with every major gadget maker pursuing it, it’s now finally a fantasy backed up by impressive real-world demos.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/Sn3HlwBzDrk/index.htm

NEW YORK (CNNMoney) — Housing is still one of the biggest drags on U.S. economic growth, but don’t look to the Federal Reserve for help. The central bank may have few tools left to fix it.

That’s the basic hypothesis of a paper top economists presented to a room full of monetary policy elites in Manhattan Friday.

The US. Monetary Policy Forum is a one-day meeting presented by the University of Chicago Booth School of Business. In attendance are Federal Reserve officials, members of foreign central banks and economists from some of the world’s largest banks and top universities.

At Friday’s meeting, these top thinkers focused heavily on weaknesses in the housing market, and the mood was not exactly upbeat.

Traditionally, the Fed could aid the housing market during tough times, by lowering its key interest rate and thereby lowering mortgage rates. But the Fed’s interest rate is already near zero and mortgage rates are already at record lows — and yet the housing market remains in a slump.

Could the Fed be out of bullets when it comes to this key part of the American economy?

Has Obama’s housing policy failed?

Economists at Friday’s meeting argued the Federal Reserve can still bring interest rates lower with unconventional moves like asset purchases — called quantitative easing — but such policies are now unlikely to have a meaningful impact on housing.

That’s because homeowners who might qualify for refinancing at lower interest rates have likely already done so.

The overhang in the housing market “may not be easily addressed by monetary policy,” said Michael Feroli, chief U.S. economist at JPMorgan Chase.

St. Louis Fed President James Bullard agreed that the housing market is largely out of the Fed’s hands now.

“To the extent that you would have policies that are going to help the housing market, they’re not going to come from monetary policy makers,” Bullard said.

Million-dollar foreclosures

But San Francisco Fed President John Williams pointed out that by buying assets that target housing specifically — like mortgage-backed securities — he thinks the Fed’s policies have already lowered rates and could still push mortgage rates down further.

Another Fed president, Charles Plosser of Philadelphia, said later that he is critical of such a policy. The Fed already overstepped its bounds in 2008, when it started buying mortgage-backed securities, Plosser said.

He believes those actions blur the lines between fiscal and monetary policy — a growing problem in the wake of the financial crisis that he calls “dangerous.”

“The boundaries were established for good reasons and we ignore them at our own peril,” he said.

A few members of Congress agree, and have been highly critical of what they see as the Fed’s efforts to interfere in the housing market.

Fed officials have recently become more outspoken about problems facing the housing market, and have seemed eager to shift the ball into fiscal policy’s court — the purview of Congress and the president.

In January, Fed Chairman Ben Bernanke ruffled feathers of some Republican lawmakers when he issued a white paper analyzing housing policies proposed by the Obama administration, including ideas to transition foreclosed properties into rentals and programs that would facilitate refinancing for underwater mortgages.

Feroli, along with Ethan Harris, co-head of economic research at Bank of America Merrill Lynch and others, endorsed those policies in their paper Friday. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/hRzZ_7HZJ94/index.htm

New home sales showed improvement in the latest government report.

NEW YORK (CNNMoney) — New home sales exceeded forecasts in the latest government readings Friday, another sign of a long-awaited recovery in the battered housing market.

The Census Bureau reported that the pace of new home sales hit a seasonally-adjusted annual rate of 321,000 in January, up from the previous reading for December and better than economists’ forecasts. Census also revised the December figure higher to a rate of 324,000, meaning that the pace of sales was about 6% stronger that month than the original estimate.

The supply of new homes for sale once again fell, the 11th straight month the inventory of new homes on the market has been at a record low level. The continued decline in supply comes even as other government readings have shown an increase in housing starts by home builders in recent months.

The tight supply, which was at 151,000 new homes in January, helped to lift prices, as the median price of a new home sold in the month rose slightly to $217,100, up $600 from December.

There are other signs that the long-suffering housing market is finally improving. The pace of sales of existing homes in January was at the highest point since the end of an $8,000 home buyers’ tax credit in 2010. Mortgage rates have been at record lows until a slight increase this week.

Those low financing costs, coupled with years of price declines and some improvement in the job market have made home ownership more affordable than it has been in decades.

But home prices are still depressed, hurt by the large inventory of foreclosed homes still on the market. The price of existing homes sold in January fell to a 10-year low.. And even with the slight increase in new home prices in January, prices are still lower than the annual average for 2010 or 2011. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/uD-Fb1S0sxE/index.htm

NEW YORK (CNNMoney) — Housing is still one of the biggest drags on U.S. economic growth, but don’t look to the Federal Reserve for help. The central bank may have few tools left to fix it.

That’s the basic hypothesis of a paper top economists presented to a room full of monetary policy elites in Manhattan Friday.

The US. Monetary Policy Forum is a one-day meeting presented by the University of Chicago Booth School of Business. In attendance are Federal Reserve officials, members of foreign central banks and economists from some of the world’s largest banks and top universities.

At Friday’s meeting, these top thinkers focused heavily on weaknesses in the housing market, and the mood was not exactly upbeat.

Traditionally, the Fed could aid the housing market during tough times, by lowering its key interest rate and thereby lowering mortgage rates. But the Fed’s interest rate is already near zero and mortgage rates are already at record lows — and yet the housing market remains in a slump.

Could the Fed be out of bullets when it comes to this key part of the American economy?

Has Obama’s housing policy failed?

Economists at Friday’s meeting argued the Federal Reserve can still bring interest rates lower with unconventional moves like asset purchases — called quantitative easing — but such policies are now unlikely to have a meaningful impact on housing.

That’s because homeowners who might qualify for refinancing at lower interest rates have likely already done so.

The overhang in the housing market “may not be easily addressed by monetary policy,” said Michael Feroli, chief U.S. economist at JPMorgan Chase.

St. Louis Fed President James Bullard agreed that the housing market is largely out of the Fed’s hands now.

“To the extent that you would have policies that are going to help the housing market, they’re not going to come from monetary policy makers,” Bullard said.

Million-dollar foreclosures

But San Francisco Fed President John Williams pointed out that by buying assets that target housing specifically — like mortgage-backed securities — he thinks the Fed’s policies have already lowered rates and could still push mortgage rates down further.

Fed officials have recently become more outspoken about problems facing the housing market, and have seemed eager to shift the ball into fiscal policy’s court — the purview of Congress and the president.

In January, Fed Chairman Ben Bernanke ruffled feathers of some Republican lawmakers when he issued a white paper analyzing housing policies proposed by the Obama administration, including ideas to transition foreclosed properties into rentals and programs that would facilitate refinancing for underwater mortgages.

Feroli, along with Ethan Harris, co-head of economic research at Bank of America Merrill Lynch and others, endorsed those policies in their paper Friday. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/hRzZ_7HZJ94/index.htm

Shaun Donovan is the Secretary of the U.S. Department of Housing and Urban Development.

(CNNMoney) — Earlier this month, I was proud to join Attorney General Eric Holder, colleagues from across the federal government, and 49 state attorneys general to announce a historic mortgage servicing settlement on behalf of American homeowners — one that addresses foreclosure processing violations by the nation’s five largest mortgage servicers.

The $25 billion settlement provides important relief for one million homeowners. It forces the banks to reduce principal balances, refinance loans for “underwater” borrowers, and pay billions of dollars to states and consumers to provide other forms of relief.

Another component of the settlement that has received a lot of attention is the payments of about $2,000 it provides for an additional 750,000 homeowners.

Some have questioned whether $2,000 is enough redress for families who lost their homes improperly. The answer is obviously no.

But that isn’t what these payments are about. Rather, they are about holding lenders and servicers accountable for how they treated a much larger group of homeowners — their customers — poorly.

There’s understandably been a lot of focus on robo-signing and what happened to people who lost their homes improperly.

But when HUD initiated a large-scale review of the Federal Housing Administration’s largest servicers in the summer of 2010, we found much more than bank employees signing thousands of foreclosure documents that they never verified or even bothered to read.

What the foreclosure settlement means for you

We also found that early on in the process, homeowners — some of whom were only 30 days behind on their mortgage — never even got a call from their lender to provide options that may have been available to them.

In other cases, we found that lenders did nothing when borrowers ran into trouble because they lost their job or had a medical crisis.

Over and over, what we saw was that folks who should not have gotten into trouble and who should have been able to get some help early on — that was both good for them and good for the lender — didn’t get that help, help that in many cases, banks were legally obligated to provide.

These $2,000 payments will be made to families who suffered from these kinds of errors — where borrowers were charged fees that they shouldn’t have been or had dropped calls or lost paperwork when they sought help with their mortgages.

For families who suffered much deeper harm — who may have been improperly foreclosed on and lost their homes and could therefore be owed hundreds of thousands of dollars in damages — the settlement preserves their ability to get justice in two key ways.

First, it recognizes that the federal banking regulators have established a process through which these families can receive help by requesting a review of their file. If a borrower can document that they were improperly foreclosed on, they can receive every cent of the compensation they are entitled to through that process.

The other foreclosure settlement: Millions eligible

Second, the agreement preserves the right of homeowners to take their servicer to court. Indeed, if banks or other financial institutions broke the law or treated the families they served unfairly, they should pay the price — and with this settlement they will.

Obviously, the pain of this crisis cannot be undone by writing a check and this settlement is just one of many important steps we in the Obama Administration have taken and will take to right the wrongs this housing crisis has inflicted on Americans. But by providing families with immediate relief and by preserving their rights under the law to hold their servicer accountable, this settlement represents an important step toward turning the page on an era of recklessness — and ensuring that American families never have to face this kind of crisis again. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/8tUIf3RbsS8/index.htm

NEW YORK (CNNMoney) — Home prices fell to their lowest point in more than a decade in January, which helped to lift the pace of home sales, according to a report from an industry trade group.

The National Association of Realtors reported that the median home price in January fell 2% from December to $154,700. That’s the lowest price reading since November 2001, before the run-up in home prices that became known as the housing bubble.

The median price is the point at which half of homes are sold for a higher price, and half are sold at a lower price. (Multi-million dollar foreclosures)

Serving as a drag on existing home prices is a large inventory of homes in foreclosure. Distressed home sales, which includes homes in foreclosure and so-called short sales in which the home is sold for less than what is owed on the mortgage, made up 35% of sales in January.

“Prices will continue to fall through the first half of 2012 due to the high share of distressed sales,” said Stuart Hoffman, chief economist with PNC Financial. “The recent agreement between the big mortgage servicers, state attorneys general and the Obama administration will also result in more homes going to foreclosure over the next few months, adding to downward pressure on prices.”

But the pace of sales rose to the highest level since May of 2010, helped by the low prices and rock-bottom mortgage rates. The seasonally-adjusted annual sales pace of 4.57 million homes was up slightly from the revised 4.38 million in December. The last time homes sold at that pace, buyers were rushing to qualify for an $8,000 homebuyer’s tax credit that was about to expire. The latest reading was roughly in line with the expectations of economists surveyed by Briefing.com.

“The uptrend in home sales is in line with all of the underlying fundamentals — pent-up household formation, record-low mortgage interest rates, bargain home prices, sustained job creation and rising rents,” said Lawrence Yun, chief economist for the Realtors.

The housing market has been showing signs of recovery in recent months. The combination of low mortgage rates and a decline in home prices means homes are more affordable than they’ve been in decades. PNC’s Hoffman agreed that the report is a further sign of recovery in the market, although he cautioned “it will remain a long process.”

New home starts by builders have been rising, along with their confidence and customer traffic, according to an industry survey.

The supply of existing homes on the market tightened slightly in the Realtors’ latest report, slipping 0.4% to 2.3 million homes, roughly a 6 month supply. That is down 20% from the supply of homes a year ago. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/95wZWdUBSSo/index.htm

Click image to see inside 8 multi-million dollar foreclosures.

NEW YORK (CNNMoney) — Five years after the housing bubble burst, America’s wealthiest families are now losing their homes to foreclosure at a faster rate than the rest of the country — and many of them are doing so voluntarily.

Over 36,000 homes valued at $1 million or more were foreclosed on — or at least served with a notice of default – in 2011, according to data compiled by RealtyTrac, which tracks foreclosures. While that’s less than 2% of all foreclosures nationwide, it represents a much bigger share of foreclosure activity than in previous years.

“These properties are accounting for a bigger piece of the foreclosure pie,” said Daren Blomquist, vice president of RealtyTrac.

Out of all foreclosure activity, the share of foreclosures on properties valued at $1 million or more has risen by 115% since 2007 while the share of multi-million dollar foreclosures — or homes valued at more than $2 million — jumped by 273%. Meanwhile, the share of foreclosures on mid-range properties valued between $500,000 and $1 million fell by 21%.

Until recently, many homeowners at the high end of the housing market were able to postpone the foreclosure process, Blomquist explained. With other assets and alternatives, “they had more financial means to hold out against default.”

In addition, lenders are typically more amenable to working with homeowners that have other resources, said Ron Shuffield, president of Esslinger-Wooten-Maxwell, a real-estate firm in Miami where homes priced over $1 million represented 9% of all foreclosures last year.

See inside 8 multi-million dollar foreclosures

But with a recovery in the housing market still years away, foreclosure has turned out to be a worthwhile option after all. Saddled with bloated mortgages after a long run up in property values, many high-end homeowners have chosen to pursue a “strategic default.” Even though they can afford the monthly mortgage payments, they still decide to walk away from their home because they owe more on the property than it is worth.

“In the lower-priced houses you’ll see more people defaulting because they can’t afford the payments and it’s a choice between feeding their family and paying the mortgage on a home that’s under water,” said Stuart Vener, a national real estate and mortgage expert with the Florida-based Wilshire Holding Group.

“In million-dollar homes, you’re looking at people who can afford it, but they have to make a business decision: Does it make sense to make payments on a mortgage when the home is worth less than they owe?” he said. In many cases, it often makes more financial sense to walk away.

At least they can take their time packing up all of their belongings. On average, it takes about 348 days for a foreclosure to be completed, Blomquist said. “They may get almost a year of free housing out of the deal.”

But don’t expect a few depressed mansions to bring down the neighborhood. A single foreclosure in an otherwise wealthy area is unlikely to impact surrounding values, Blomquist said.

“You’re not going to see the weeds growing,” Vener added. But there will be an opportunity for buyers to snatch up these impressive houses at bargain basement prices, he said, which could provide a much-needed boost to sales overall. “In a good way, this is going to drive turnover,” he said.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/1hSdEV1viRs/index.htm

New home construction got off to a strong start for the year, with housing starts and building permits rising in January on a monthly and annual basis.

NEW YORK (CNNMoney) — New home construction got off to a strong start for the year, with housing starts and building permits rising in January on a monthly and annual basis — another sign that the U.S. housing market and broader economy are headed in the right direction.

The Census Bureau reported that housing starts rose to an annual rate of 699,000, up 1.5% from December. Compared to a year ago, housing starts were almost 10% higher.

Building permits, which are less affected by weather than starts, came in at a 676,000 annual rate in January, up 0.7% from the prior month and 19% from a year earlier.

Results were also better than industry expectations. A consensus of industry experts from Briefing.com had forecast starts of 671,000 and permits of 675,000.

Housing completions fell to an annual rate of 530,000 in January, however, a drop of 12% compared to December, but up more than 4% from a year earlier.

“Along with the overall positive tides seen recently in the economy, it looks as if residential building is starting to follow suit,” said Mike Lubansky, senior financial analyst at Sageworks. “Although residential building still has a steep hill to climb in order to achieve a full recovery to pre-2007 levels, it does look to be on the right trajectory.”

For a full-blown recovery, experts say good news needs to continue out of the job market. So far, the unemployment rate has dropped for five straight months, and now stands at 8.3%, the lowest since February 2009.

Initial claims for unemployment benefits have also been falling. On Thursday, a government report showed that the number of Americans filing for jobless claims plunged to the lowest level in nearly four years.

“Today’s data are further proof that the recovery solidified in late 2011, and that momentum has carried forward into 2012,” said Gus Faucher, senior economist at PNC Financial Services Group. “More importantly, the likelihood of an even stronger recovery is growing.”

He added that a continued pick-up in job growth this year could support faster consumer spending growth and a stronger rebound in housing. But, he added, the financial crisis in Europe remains the largest downside risk.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/mN49AIN9GW8/index.htm

NEW YORK (CNNMoney) — The mortgage meltdown that began five years ago appears to be reversing course as the percentage of loans that fell into delinquency slowly returned to normal rates and fewer loans fell into foreclosure.

On a seasonally adjusted basis, 7.58% of mortgage borrowers were late on their loan payments during the last three months of 2011, according to the Mortgage Bankers Association. That was down 0.67 percentage points from 12 months earlier and 2.5 percentage points from the peak set in the first quarter of 2010.

“That’s a pretty substantial decline,” said Mike Fratantoni, the MBA’s Vice President for Single-Family Research and Policy. “We’re about halfway back from the peak.”

The improved mortgage performance reflected continued improvements on the jobs front and in the broader economy, according to Jay Brinkmann, chief economist at the MBA.

Home buying: Most affordable in decades

He also said the the 0.28 percentage-point decline in loans on which foreclosure actions were started during the fourth quarter is a good predictor of fewer future bank repossessions. During the quarter, foreclosure starts dropped to below 1%, a healthy decline from the 1.4% peak logged in the third quarter of 2009 and significantly closer to the long-term average of slightly under 0.5%, he said.

The delinquency numbers could have been even better except for forces that kept mortgages in the default process longer. As a result of the robo-signing scandal, banks taken greater pains to make sure their paperwork is in order. That has meant that many loans have gotten stuck in the foreclosure pipeline longer, boosting delinquency rates.

The delays have been especially long in states, like Florida and New York, where the courts are involved in the foreclosure process.

In such judicial foreclosure states, the percentage of loans stuck in foreclosure inventory is at 6.8% and growing. Meanwhile, in non-judicial states, only 2.8% of loans are stuck in the pipeline and that percentage is shrinking.

What the $26B foreclosure settlement means for you

The $26 billion foreclosure settlement between major mortgage lenders and the U.S. Department of Housing and Urban Development and attorneys general from 49 states and the District of Columbia should bring greater clarity and speed to the foreclosure process.

That could reduce delinquency rates substantially, according to Fratantoni, and bring them even closer to long-term, historical rates.

One category that failed to show improvement during the quarter were delinquencies on mortgages insured by the Federal Housing Administration. The percentage of FHA loans that were past due rose to 12.36% from 12.09% a quarter earlier and from 12.27% 12 months earlier. Seriously delinquent FHA loans increased to 9.02% from 8.39% and 8.46%.

Brinkmann attributed the increase to the fact that a much larger percentage of the FHA’s loan portfolio has been issued during the past few years and those loans are now entering into the dangerous years for mortgages, the three or four years after issue when delinquency rates start to peak.

Just two years, 2008 and 2009, account for 53% of the seriously delinquent loans in the FHA’s portfolio. Brinkmann expects delinquency rates for loans issued during those years to continue to rise.

“The key question, though, is: What did the FHA plan for? and our understanding is that the delinquency rate is below what the FHA was expecting,” he said. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/UC6mUQ23c9k/index.htm

Citi has participated in the FHA’s Direct Endorsement Lender program since 1981.

NEW YORK (CNNMoney) — Citigroup will pay $158 million to settle charges that its mortgage unit defrauded the Federal Housing Administration by inaccurately claiming that certain mortgages were eligible for government insurance, government officials announced Wednesday.

Under the FHA’s Direct Endorsement Lender program, lenders like Citi’s CitiMortgage division can submit certain loans for government insurance in case a borrower defaults. Lenders are required to maintain their own quality-control programs to ensure that loans submitted for such insurance have been prepared properly and without any evidence of fraud.

Citi, however, repeatedly obscured or downplayed problems with loans submitted for insurance over the past decade, the Manhattan U.S. Attorney’s Office said Wednesday. The firm ignored roughly 1,000 cases of potential fraud and failed to verify information on borrowers’ ability to make payments, according to the complaint in the case.

Of the 30,000 mortgages Citi (C, Fortune 500) has endorsed for FHA insurance since 2004, more than 30% have defaulted, including 47% of those originated in 2006 and 2007. The government has already paid out nearly $200 million in claims on these loans, a “substantial percentage” of which should never have been eligible for insurance, the complaint says.

Federal officials brought similar cases in relation to the FHA insurance program last year against Deutsche Bank (DB) and Allied Home Mortgage Corporation.

“This settlement demonstrates that lenders are held accountable to strict underwriting standards,” David Montoya, inspector general for the Department of Housing and Urban Development, said in a statement.

“We are committed to aggressively pursuing those whose misconduct contributed to the housing crisis and those who flagrantly continue to do so.”

The case is distinct from the nationwide settlement announced last week in which Citi and four other large lenders committed $26 billion to help underwater homeowners and compensate those who lost their homes due to improper foreclosure practices. Also involved in that settlement were Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Wells Fargo (WFC, Fortune 500) and Ally Financial.

“We are pleased to resolve this matter in conjunction with the National Mortgage Settlement reached last week,” Citi spokesman Mark Rodgers said in an email. “We take our quality assurance processes seriously and have pro-actively undertaken process improvements to ensure that they are as robust as possible.”

Citi admitted responsibility for failing to comply with the insurance program as part of the settlement, which was approved by U.S. District Judge Victor Marrero on Wednesday. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/xKlGPf0Js2w/index.htm

The bank offered Angelique Pierce $25,000 to short sell her home. The listing price: $95,000.

NEW YORK (CNNMoney) — In an effort to cut their losses, banks are paying some struggling homeowners as much as $35,000 to sell their homes before they end up in foreclosure.

The deals are aimed at incentivizing homeowners who owe more on their home than it is worth and who are seriously delinquent on their payments to sell their homes in a short sale.

In short sales, homes are sold for less than what is owed and the bank forgives the excess debt. Banks have been reluctant to approve such deals in the past — since they take a loss on the home — but in certain cases, it’s become a much better proposition than letting the homeowner fall into foreclosure.

This new approach by the banks has startled plenty of homeowners, according to Elizabeth Weintraub, a Sacramento-area real estate agent who specializes in short sales.

“Initially, the homeowners are skeptical,” she said. “The bank may have already turned down their request for a modification. Then, one day, they call and say, ‘Let us give you some cash.’”

When Chase Mortgage (JPM, Fortune 500) told Angelique Pierce, that she would receive a check for $25,000 if she sold her house, she couldn’t believe it.

“I got the offer in the mail,” said the Rancho Cordova, Calif. resident. “I called my bank to ask if it was real.”

After Pierce became disabled a few years ago and had to stop working work, she fell behind on payments on both her first and second mortgages, valued at $250,000 and $50,000, respectively.

Now, she’s trying to sell her three-bedroom ranch for just $95,000 — almost half of the $179,000 she paid for the place in late 2002.

Foreclosure free ride: 3 years, no payments

From the bank’s point of view, the offers make sense, according to Tom Kelly, a spokesman for Chase Mortgage, who would not comment on Pierce or other individual cases. “The first choice is a modification but if that’s impossible than a short sale is a faster, more efficient solution,” he said.

For the banks, foreclosure has become an increasingly difficult and expensive option. Homeowners have learned to fight the banks tooth and nail, dragging out cases for years.

And as the cases drag, expenses grow. Homeowners not only stop paying their mortgages but they stop paying property taxes and conducting normal maintenance as well. Roofs, siding, plumbing and other parts of the home deteriorate and the property loses value. By the time banks take possession, they’re out tens of thousands of dollars.

Foreclosures: America’s hardest hit neighborhoods

“I’ve seen a lot of foreclosures for sale where it would cost a lot more than $20,000 to get them into condition to sell again,” said John Hayton, a short sale specialist in Orlando, Fla, who has had a number of clients receive offers from the banks.

Short sales also command higher prices than foreclosed homes. In December, foreclosed properties sold for an average of 22% less than conventional sales, while the discount for short sales was only 14%, according to the National Association of Realtors.

All that has been true for years, but it is only lately that these outsized incentives, which Bloomberg recently reported on, have surfaced.

Sellers are more cooperative when they’re going to receive a five-figure check for their troubles.

Nick Chaconas, an agent with discount broker Redfin, wondered why one seller was so anxious to sell their home. “Since I represent the buyer, I didn’t even know about the incentive until the closing,” he said.

It turned out that the seller’s bank was writing her a check for $30,000.

Whether sellers can expect incentives from their banks depends on multiple factors, including where they live.

Wells Fargo (WFC, Fortune 500) limits its offers to certain states, such as Florida, where the foreclosure process can be lengthy, according to spokeswoman Veronica Clemons. The bank has paid $10,000 to $20,000 to borrowers who short sell or transfer their title to Wells via a deed-in-lieu.

What the foreclosure settlement means for you

Bank of America (BAC, Fortune 500) had a pilot program in Florida that paid incentives of $5,000 to $20,000 for sales that were initiated between Sept. 26, 2011 and Nov. 30, 2011 and close by the end of this August. The amount of the incentive is based on 5% of the unpaid balance, with a $5,000 minimum and $20,000 maximum.

Jumana Bauwens, Bank of America’s spokeswoman, called it a “test-and-run program” that may be expanded to other states.

The offers are not always a panacea for homeowners struggling to pay the bills, however.

Pierce, for example, has not been able to make hers pay off. She had a buyer but her second mortgage holder refused to go along with the deal unless it got a share of the $25,000 she was being offered by the bank. She said that the bank balked at the deal and the sale was cancelled.

She’s looking for another buyer, but it’s up in the air if Chase will honor its original offer if the second mortgage holder won’t cooperate. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/7mqBANw8OHg/index.htm

Experts say many foreclosures that were on hold during the deal negotiations will now proceed.

NEW YORK (CNNMoney) — Even as the $26 billion mortgage settlement helps hundreds of thousands of troubled homeowners, it will bring a wave of new foreclosures.

Many lenders held off on reposessing homes during the complex negotiations between 49 state attorneys general, and federal officials.

That’s left a backlog of troubled loans, many of which won’t be helped by measures in the deal that will let homeowners refinance or reduce the amount of their mortgage.

“The bottom line is that 2012 will see a lot of foreclosures that should have taken place in 2011 and didn’t,” said Rick Sharga, executive vice president for Carrington Holdings, a real estate finance firm.

Daren Blomquist, vice president of RealtyTrac, online marketer of foreclosed properties, agrees that much of last year’s 34% drop in foreclosure filings was likely due to the uncertainty involved in the negotiations. He estimates that new filings will climb from 1.9 million in 2011 to between 2.2 million and 2.5 million this year.

“We think what we saw in 2011 was artificially low foreclosure numbers,” he said. He added that banks took longer to file foreclosure notices last year, and longer to finish the foreclosure process.

Banks pay homeowners to sell

HUD press secretary Derrick Plummer said Thursday’s mortgage settlement is designed to make foreclosure the last resort for banks negotiating with homeowners who are seriously delinquent on loans.

Sharga and Blomquist agree said that the mortgage deal will help many homeowners stay in their homes who would have otherwise been forced out. Up to one million mortgage holders could see the amount of money they owe reduced.

But the solutions offered by the settlement can only work for homeowners who can afford to make new, lower mortgage payments. Banks will have little choice to foreclose on those who have stopped paying due to prolonged unemployment or other severe economic distress.

“The settlement really wasn’t designed to prevent foreclosure on loans that aren’t salvageable,” said Sharga.

Banks have been letting delinquent loans sit in limbo, but now that a settlement has been reached, banks will likely start contacting delinquent homeowners to see which loans can be salvaged. Sharga says that the banks will likely turn up a raft of new foreclosures.

The five lenders who are parties to the deal — Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Wells Fargo (WFC, Fortune 500) and Ally Financial — together account for about 60% of the mortgage market, Sharga said. And there are many other lenders who were also taking a wait-and-see approach while the big banks held talks, who might soon join the settlement as well.

Sharga and Blomquist said that while the increase in foreclosures will cause plenty of pain in the short term, it’s an important part of the recovery process for the housing market, especially the hardest-hit markets.

“The uncertainty has been very bad for the market over the last year,” said Blomquist.

There are currently more than 3 million homeowners either seriously delinquent on mortgages or in foreclosure, and that looming inventory has been one of the biggest drags on home sales prices.

“The market needs to clear out a lot of the distressed inventory before prices start to come back,” Sharga said. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/9Zt-uGAP_sw/index.htm

The bank offered Angelique Pierce $25,000 to short sell her home. The listing price: $95,000.

NEW YORK (CNNMoney) — In an effort to cut their losses, banks are paying some struggling homeowners as much as $35,000 to sell their homes before they end up in foreclosure.

The deals are aimed at incentivizing homeowners who owe more on their home than it is worth and who are seriously delinquent on their payments to sell their homes in a short sale.

In short sales, homes are sold for less than what is owed and the bank forgives the excess debt. Banks have been reluctant to approve such deals in the past — since they take a loss on the home — but in certain cases, it’s become a much better proposition than letting the homeowner fall into foreclosure.

This new approach by the banks has startled plenty of homeowners, according to Elizabeth Weintraub, a Sacramento-area real estate agent who specializes in short sales.

“Initially, the homeowners are skeptical,” she said. “The bank may have already turned down their request for a modification. Then, one day, they call and say, ‘Let us give you some cash.’”

When Chase Mortgage (JPM, Fortune 500) told Angelique Pierce, that she would receive a check for $25,000 if she sold her house, she couldn’t believe it.

“I got the offer in the mail,” said the Rancho Cordova, Calif. resident. “I called my bank to ask if it was real.”

After Pierce became disabled a few years ago and had to stop working work, she fell behind on payments on both her first and second mortgages, valued at $250,000 and $50,000, respectively.

Now, she’s trying to sell her three-bedroom ranch for just $95,000 — almost half of the $179,000 she paid for the place in late 2002.

Foreclosure free ride: 3 years, no payments

From the bank’s point of view, the offers make sense, according to Tom Kelly, a spokesman for Chase Mortgage, who would not comment on Pierce or other individual cases. “The first choice is a modification but if that’s impossible than a short sale is a faster, more efficient solution,” he said.

For the banks, foreclosure has become an increasingly difficult and expensive option. Homeowners have learned to fight the banks tooth and nail, dragging out cases for years.

And as the cases drag, expenses grow. Homeowners not only stop paying their mortgages but they stop paying property taxes and conducting normal maintenance as well. Roofs, siding, plumbing and other parts of the home deteriorate and the property loses value. By the time banks take possession, they’re out tens of thousands of dollars.

Foreclosures: America’s hardest hit neighborhoods

“I’ve seen a lot of foreclosures for sale where it would cost a lot more than $20,000 to get them into condition to sell again,” said John Hayton, a short sale specialist in Orlando, Fla, who has had a number of clients receive offers from the banks.

Short sales also command higher prices than foreclosed homes. In December, foreclosed properties sold for an average of 22% less than conventional sales, while the discount for short sales was only 14%, according to the National Association of Realtors.

All that has been true for years, but it is only lately that these outsized incentives, which Bloomberg recently reported on, have surfaced.

Sellers are more cooperative when they’re going to receive a five-figure check for their troubles.

Nick Chaconas, an agent with discount broker Redfin, wondered why one seller was so anxious to sell their home. “Since I represent the buyer, I didn’t even know about the incentive until the closing,” he said.

It turned out that the seller’s bank was writing her a check for $30,000.

Whether sellers can expect incentives from their banks depends on multiple factors, including where they live.

Wells Fargo (WFC, Fortune 500) limits its offers to certain states, such as Florida, where the foreclosure process can be lengthy, according to spokeswoman Veronica Clemons. The bank has paid $10,000 to $20,000 to borrowers who short sell or transfer their title to Wells via a deed-in-lieu.

What the foreclosure settlement means for you

Bank of America (BAC, Fortune 500) had a pilot program in Florida that paid incentives of $5,000 to $20,000 for sales that were initiated between Sept. 26, 2011 and Nov. 30, 2011 and close by the end of this August. The amount of the incentive is based on 5% of the unpaid balance, with a $5,000 minimum and $20,000 maximum.

Jumana Bauwens, Bank of America’s spokeswoman, called it a “test-and-run program” that may be expanded to other states.

The offers are not always a panacea for homeowners struggling to pay the bills, however.

Pierce, for example, has not been able to make hers pay off. She had a buyer but her second mortgage holder refused to go along with the deal unless it got a share of the $25,000 she was being offered by the bank. She said that the bank balked at the deal and the sale was cancelled.

She’s looking for another buyer, but it’s up in the air if Chase will honor its original offer if the second mortgage holder won’t cooperate. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/7mqBANw8OHg/index.htm

NEW YORK (CNNMoney) — Rates on 30-year fixed mortgages remained at an all-time record low for the second week in a row.

The 30-year fixed rate held steady at an average of 3.87% for the week ending February 9, the lowest rate ever recorded in the 40-year history of the Freddie Mac Primary Mortgage Market Survey. That compares with the 5.05% rate recorded at the same time a year ago.

Meanwhile the 15-year fixed rate inched slightly higher to an average of 3.16%, up from the record 3.14% it set in the previous week. The 5-year Treasury-indexed adjustable rate mortgage and the 1-year Treasury-indexed adjustable rate mortgage also saw modest gains.

Frank Nothaft, vice president and chief economist at Freddie Mac, attributed the increases to last Friday’s much better-than-expected jobs report. The report showed that the economy gained 243,000 jobs last month and the unemployment rate eased to 8.3% — the lowest rate since February 2009.

“A strong January employment report added upward pressure to most mortgage rates this week,” said Nothaft.

Nevertheless, the historically-low rates are great news for homeowners looking to refinance their mortgages — a move many homeowners may soon be hoping to make. The same day Freddie’s mortgage rate survey was released, federal and state officials announced a $26 billion foreclosure settlement with five of the nation’s largest home lenders over charges of foreclosure made without proper paperwork and protocols, known as “robo-signing”.

Foreclosure settlement: What it means for you

At least $17 billion of the settlement will go toward reducing the principal of mortgages held by homeowners who owe more on their home than it is worth and are behind on payments.

Another $3 billion will go toward refinancing mortgages for borrowers who are current on their payments — offering them a chance to realize substantial savings on monthly payments.

Last week, the rate hit an all-time low after the fourth quarter gross domestic product report showed that the economy was growing at a rate that fell short of expectations.

Top 10 turnaround towns

Those new record rates were fortuitously timed for the Obama administration to announce its latest refinancing proposal, which aims to help millions of homeowners refinance. The plan, which requires approval by Congress, would allow borrowers who are current on their mortgage to save an average of $3,000 a year by refinancing into loans backed by the Federal Housing Administration.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/e8nKg6y6zTQ/index.htm

WASHINGTON (CNNMoney) — In the largest deal to date aimed at addressing the housing meltdown, federal and state officials on Thursday announced a $26 billion foreclosure settlement with five of the largest home lenders.

The deal settles potential state charges about allegations of improper foreclosures based on robo-signing, seizures made without proper paperwork.

The settlement includes the Justice Department and the U.S. Department of Housing and Urban Development, as well as 49 state attorneys general — all but Oklahoma.

“We are using this opportunity to fix a broken system,” said U.S. Attorney General Eric Holder at the news conference announcing the settlement.

Most of the relief will go to those who owe far more than their homes are worth, known as being underwater on the loans. That relief will come over the course of the next three years, with the banks having incentives to provide most of the relief in the next 12 months.

“This settlement is about homeowners, homeowners in distress,” said Iowa Attorney General Tom Miller.

What the settlement means to you

Principal reduction: At least $17 billion will go to reducing the principal owed by homeowners who are both underwater and behind on their mortgages.

Depending on which loans have principal cut, the total amount of relief could reach as much as $34 billion.

Federal officials say that portion of the settlement will provide relief for up to 1 million of the most beleaguered homeowners. But if that many homeowners get the amount they owe pared, it would only be an average reduction of $17,000 in their principal.

Given the fact that many homeowners are far more underwater and will need steeper reductions in order to be able to afford their payments, the number of homeowners who receive help under this part of the program will likely fall far short of the 1 million mark.

Refinancing: Officials say up to 750,000 other underwater homeowners who are current on their mortgages will be able to refinance their current loans at lower rates. They will not receive a reduction in principal, but with mortgage rates now near record lows, they could receive substantial savings on their monthly payments.

The settlement sets aside $3 billion to account for the reduced interest payments the banks will receive after the refinancing.

Robo-signing payments: About $1.5 billion of the settlement will go to homeowners who had their homes foreclosed upon between Jan. 1, 2008 and Dec. 31, 2011, and who meet other criteria. They will receive up to $2,000 each.

Participating banks: The five mortgage servicers that are parties to the settlement — Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500), Wells Fargo (WFC, Fortune 500) and Ally Financial — will pay a total of $5 billion to the states. Some of that money will go to foreclosed homeowners and the rest to the states.

Federal officials say negotiations are underway to expand the settlement to nine other major servicers, which would raise the overall value of the settlement to $30 billion.

Top 10 turnaround towns

The deal is the second biggest settlement involving the states ever reached, trailing only the $206 billion settlement in 1998 between state attorneys general and the tobacco industry.

And it dwarfs any settlements that major Wall Street firms have reached to settle other allegations of misdeeds related to the financial markets meltdown and the Great Recession.

Still it only will help a faction of those homeowners who are struggling with mortgages.

There are 1.5 million homeowners who are 90 days or more delinquent on their mortgages but not yet in foreclosure, according to the most recent estimate from the Mortgage Bankers Association. And CoreLogic estimates that 11 million homeowners are underwater on their mortgages.

Obama proposes new home refinancing plan

The settlement does not preclude criminal prosecutions from being pursued. It also doesn’t stop investigations into other allegations of misdoings, such as the process of bundling loans into mortgage-backed securities and selling them to investors.

The deal is supposed to protect consumers when it comes to robosigning, and ensure that mortgage servicers agree to communicate better, avoid delays and give homeowners who are late on mortgage payments a fairer shake.

New York’s participation had been shaky this week, because some of the banks involved in the multi-state deal had also been sued by Attorney General Eric Schneiderman last week. Those banks — Bank of America, Wells Fargo and JPMorgan Chase — had also asked for a legal pass from Schneiderman’s lawsuit, which accuses them of deceptive foreclosure practices for relying on the Mortgage Electronic Registration System.

On Tuesday, Schneiderman’s office organized a media briefing to talk about the deal and then canceled it minutes before it was supposed to begin.

The big question throughout the negotiations was how much money would be available to help homeowners, which depended on how many states agreed to the deal. California’s participation raises the total settlement value by several billion dollars.

At least one consumer advocacy group, the Center for Responsible Lending, has said the deal — while “no silver bullet” — leaves room to hold banks accountable in other mortgage probes, said Kathleen Day, a spokeswoman for the nonprofit.

But other left-leaning groups, including Move On and the New Bottom Line, are continuing to urge states to hold out for a big criminal investigation and a $300 billion settlement award.

–CNN’s Jessica Yellin contributed to this story. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/1142qdPWxOA/index.htm

NEW YORK (CNNMoney) — The nation’s five largest banks have finally struck a deal with 49 states to settle charges of abusive and negligent foreclosure practices dating back to 2008.

Under a deal announced Thursday, the banks will commit $26 billion to help underwater homeowners and compensate those who lost their homes due to improper foreclosure practices.

The banks also agreed to change the way they handle and approve foreclosures.

A group of state attorneys general claimed that banks lost important paperwork, cut corners and enlisted robo-signers to attest to facts they had no knowledge of on hundreds of documents a day.

The settlement has been in the works for more than a year.

What did the mortgage lenders and loan servicers agree to do? The banks and servicers have committed at least $17 billion to reduce principal for borrowers who 1) owe far more than their homes are worth 2) are behind on payments.

The amount of principal reduction will average about $20,000 per borrower.

Another $3 billion will go toward refinancing mortgages for borrowers who are current on their payments. This will enable them to take advantage of the historic low interest rates currently available.

The banks will pay $5 billion directly to the states, the only hard money involved in the deal. Out of that fund will come payments of $1,500 to $2,000 to homeowners who lost their homes to foreclosure. Other funds will be paid to legal aid and homeowner advocacy organizations to help individuals facing foreclosure or experiencing servicer abuses.

Another $1 billion will be paid directly to the Federal Housing Administration.

In addition, the banks agreed to eliminate robo-signing altogether and to use proper and legal procedures when putting homeowners through the foreclosure process. They also agreed to end servicer abuses, like harassing delinquent borrowers for payments, and to include principal reductions more often in their mortgage modifications programs. (Mortgage deal could bring billions in relief)

Is my mortgage lender taking part in this settlement? Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM)
are taking part in the settlement.

In addition, nine other unnamed loan servicers may join the settlement later, and that would bring its value to $30 billion.

Loans owned or backed by Fannie Mae and Freddie Mac, however, are not part of the deal. (Obama proposes new home loan refinancing program)

The Federal Housing Finance Agency, which oversees the two government-sponsored mortgage giants, will not allow any balance reductions for loans insured by the companies under the settlement.

I lost my home to foreclosure; how do I know if I qualify for payment? If you were foreclosed on in the calendar years 2008 through 2011, you may be be eligible for a payment of up to $2,000. People who think they may qualify should notify their bank.

The exact amount of the payments will depend on how many people participate in this part of the settlement. They will share equally in a pool of $1.5 billion. The U.S. Department of Housing and Urban Development expects about 750,000 former homeowners to take part.

What should I do if I think I may qualify for a principal reduction or refinanced mortgage? Contact your lender/servicer and ask them to review your case.

If I take the money, what rights do I give up? Individual borrowers do not give up any right to sue.

As part of this deal, state attorneys general gave up the right to sue the mortgage servicers for foreclosure abuses arising out of the robo-signing scandal. However, they reserve the right to sue if they uncover improper acts when the loans were originated or when they were securitized.

When will the new rules and bank policies be put into place? Most of them have already become part of bank policies.

When will homeowners get paid? HUD said the settlement will be put before a court for approval within two weeks. It is unknown how long it will then take for a court to rule.

The relief for homeowners has to be completed within three years, but the state attorneys general and HUD want it to be front-loaded and completed within 12 months.

Would I have to pay taxes on the principal reductions or the pay-outs? If the principal is reduced in 2012, it will not be subject to income tax.

That’s because the Mortgage Debt Relief Act of 2007 allows taxpayers to exclude income from the discharge of debt on their principal residence. The act is scheduled to expire at the end of this year, however.

So if the act is not extended and the principal reduction occurs in 2013, borrowers may be on the hook to pay taxes on the settlement amount.

It’s not clear whether you would have to pay taxes on the $1,500 to $2,000 payout. The IRS declined to comment on the question.

Will the settlement make it harder to get a mortgage? The new rules and regulations the banks have agreed to under the settlement should have little impact on future mortgage borrowing since most of practices are already in place, said Keith Gumbinger of HSH Associates, a mortgage information provider.

The actual cost to the banks of the settlement should not discourage lending either. (Housing: The one bailout America really needs)

Only $5 billion of the $26 billion settlement will be a direct cost to the banks. The remainder will be the cost of modifying mortgages. Many of those modifications may be in the best interests of the banks to make, however, since the alternative may be foreclosure, which can cost banks more than modifications.

Were you foreclosed on? Do you think the banks owe you money? Send your story and contact information to RealStories@turner.com and you could be featured in an upcoming article on CNNMoney. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/a9I13YfViQE/index.htm

Housing Secretary Shaun Donovan is one of the participants in the foreclosure settlement talks that are expected to produce a mortgage settlement soon.

WASHINGTON (CNNMoney) — New York and California will join just about all the other states in a settlement with the nation’s largest banks aimed at helping homeowners struggling with loans bigger than the value of their homes, according to a person familiar with the talks.

A few other states were still on the fence as of late Wednesday, the person said.

With those two big states, the deal could be worth as much as $25 billion when it is announced, either Thursday or Friday, another person familiar with the talks said.

Requests for comment to the New York Attorney General’s Office were not returned. A spokesman from the California Attorney General’s Office said the state was still in negotiations.

For more than a year, state attorneys general, regulators, federal officials and big banks have been in talks about a settlement of allegations of improper foreclosures based on “robosigning,” seizures made without proper paperwork.

As of Wednesday night, at least 42 had signed on, which would yield as much as $25 billion available for qualified homeowners. The deal marks the largest housing relief available “underwater” homeowners whose principal exceeds their home’s value, as well as those who have been foreclosed on, since the financial crisis began.

Obama proposes new home refinancing plan

Under an earlier draft of the deal, some 1 million U.S. homeowners who are underwater on their mortgages could be eligible for as much as $20,000 in relief of principal owed, according to Secretary of Housing and Urban Development Shaun Donovan.

But the relief would only be available to those homeowners whose mortgages haven’t been sold to the government-sponsored mortgage guarantors Fannie Mae and Freddie Mac.

In return, mortgage servicers in states that agree to the deal would get immunity from future state servicing and originating claims — although homeowners could pursue claims against banks and states could still pursue criminal investigations.

New York’s participation had been shaky this week, because some of the banks involved in the multi-state deal had also been sued by Attorney General Eric Schneiderman last week. Those banks — Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) — had also asked for a legal pass from Schneiderman’s lawsuit, which accuses them of deceptive foreclosure practices for relying on the Mortgage Electronic Registration System.

On Tuesday, Schneiderman’s office organized a media briefing to talk about the deal and then canceled it minutes before it was supposed to begin.

The deal is supposed to protect consumers when it comes to robosigning, and ensure that mortgage servicers agree to communicate better, avoid delays and give homeowners who are late on mortgage payments a fairer shake.

The big question throughout the negotiations was how much money would be available to help homeowners, which depended on how many states agreed to the deal. If all 50 states sign on, the mortgage servicing settlement has the potential to offer as much as $25 billion. California’s participation raises the total settlement value by several billion dollars.

Generally, the attorneys general have been concerned that if they signed on to a deal, it would cripple their own investigations into mortgage cases.

At least one consumer advocacy group, the Center for Responsible Lending, has said the deal — while “no silver bullet” — leaves room to hold banks accountable in other mortgage probes, said Kathleen Day, a spokeswoman for the nonprofit.

The negotiations are between federal agencies, including the U.S. Department of Justice and the U.S. Department of Housing and Urban Development, as well as the state attorneys general and the five largest mortgage servicers:Bank of America, Wells Fargo, JPMorgan Chase, Citigroup (C, Fortune 500) and Ally Financial. A few other regional banks that service mortgages are reportedly considering signing on as well.

And left-leaning groups, including Move On and the New Bottom Line, are continuing to urge states to hold out for a big criminal investigation and a $300 billion settlement award.

–CNN’s Jessica Yellin contributed to this story. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/BBHm4c3ngWs/index.htm

NEW YORK (CNNMoney) — Slowly, but surely, the foreclosure crisis seems to be abating.

The number of homes in foreclosure shrunk by 130,000, or 8.4%, in 2011, according to a report from CoreLogic, an economic research firm.

These are homes owned by borrowers who had slipped far behind on payments, forcing lenders to put them into the foreclosure process. The homes remain foreclosure inventory until they’re sold — either at auction or in a short sale, which is when a home is sold for less than the mortgage value — or until homeowners are current again on payments.

There are dual reasons for the inventory drop, according to Mark Fleming, chief economist with CoreLogic.

Foreclosure deal has 40 states but others balk

“The pace at which properties are entering foreclosure is slowing,” he said. “And servicers nationwide stepped up the rate at which they were able to process distressed assets.”

In recent years, homes have entered foreclosure more slowly because lenders are carefully scrutinizing applicants; only very low-risk borrowers get loans. That, plus a gradual improvement in the economy, means fewer borrowers are getting into trouble.

Even borrowers in default are not going into the foreclosure process as quickly as they used to. They’re being held up by a variety of judicial and regulatory constraints, according to Fleming.

For one thing, the robo-signing issue, in which banks filed sloppy and sometimes improper paperwork, made lenders more cautious about getting their paperwork in order before beginning to process foreclosures.

Once the banks do put homes into foreclosure, they’re trying to speed them through it faster. One way they’ve done that is by encouraging short sales.

Another is that they’ve stepped up their foreclosure prevention efforts — often with the aid of numerous government programs such as Home Affordable Modification Program, which the government claims has helped a million Americans keep their homes.

After foreclosures are completed and the homes are back in the hands of their lenders, the homes are being sold very quickly.

“This is the first time in a year that REO sales [those of bank-owned properties] have outpaced completed foreclosures,” said Fleming.

In December 2011, there were 103 sales of bank-owned homes for every 100 homes in foreclosure inventory. That was up considerably from November 2010, when there were only 94 REO sales for every 100 in the foreclosure process.

Florida has the dubious distinction of recording the highest foreclosure inventory in the nation in December, with more than 17% of homeowners seriously delinquent and nearly 12% of homes with mortgages in foreclosure inventory

The inventory in Florida is bloated because, as in more than half of all the states, most foreclosures have to go through the courts.

Foreclosure free ride: Three years and no payments

Courts have taken a much closer look at the cases coming before them, no longer taking the bank’s word for everything.. Consequently, it takes a longer time to schedule an auction, which keeps many homes trapped in the foreclosure pipeline.

A hard-hit state such as Nevada, which has had the highest incidence of delinquency in the nation but where most foreclosures do not go through he courts, posted a foreclosure inventory rate of less than half that of Florida. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/AG_jO21rIIM/index.htm

Housing Secretary Shaun Donovan is one of the participants in the foreclosure settlement talks that are expected to produce a mortgage settlement soon.

WASHINGTON (CNNMoney.com) — More than 40 states have signed on to a draft deal settling claims of improper mortgage servicing that’s aimed at relieving homeowners struggling with loans bigger than their home’s value.

But several key states — including California, New York, Nevada, Florida and Delaware — remain undecided, sources familiar with the negotiatons tell CNN.

“The sign-on deadline for the proposed joing state-federal mortgage servcinsettlement passed Monday with more than 40 states,” said Iowa Attorney General Thomas J. Miller, who has been leading the negotiations that have spanned nearly a year. “This enables us to move forward into the very final stages of remaining work.”

Attorneys general from California, New York and Delaware, who have all been cold to the deal in past weeks, are still talking with negotiators and may yet signal their participation, according to sources familiar with the talks.

Attorneys general from Florida and Nevada also have issues, but are still at the negotiating table.

“My office is continuing to review the intricate draft settlement terms and advocating for improvements to address Nevada’s needs,” said Nevada’s Attorney General Catherine Cortez Masto.

Federal officials and state attorneys general could announce — perhaps as early as this week — the deal with some of the nation’s largest banks that could yield up to $25 billion for qualified homeowners. That would be more than any housing relief program has produced since the financial crisis began.

Obama proposes new home refinancing plan

Under the latest draft, about 1 million U.S. homeowners who are “underwater” on their mortgages — with principal exceeding the home’s value — could be eligible for as much as $20,000 in relief of principal owed, according to U.S. Housing and Urban Development Secretary Shaun Donovan.

In return, mortgage servicers in states that agree to the deal would get immunity from future state servicing and originating claims — although homeowners could pursue claims against banks and states could still pursue criminal investigations, according to reports.

Driving the deal originally were allegations that mortgage servicers cut corners and enlisted robo-signers that improperly foreclosed on homeowners. However, the deal under negotiation now wouldn’t be able to return houses to those who have already been foreclosed on, according to reports.

What the deal would do is ensure that mortgage servicers agree to communicate better, avoid delays and give homeowners who are late on mortgage payments a fairer shake.

The big question is how much money would be available to help homeowners, but that depends on how many states agree to the deal. If all 50 states sign on, the mortgage servicing settlement has the potential to offer as much as $25 billion. But without California, the nation’s largest state, the pot would be several billion dollars smaller.

Last week, California’s Harris and Attorney General Beau Biden of Delaware said the deal, as drafted, wasn’t good enough for their states.

New York’s Schneiderman was tight-lipped about his participation when asked. Calls to his office on Monday weren’t returned.

Generally, the attorneys general have said they’re worried they if they agree to the deal it would cripple their own investigations into mortgage cases.

But California’s Harris is more comfortable that the deal will leave her room to pursue her own investigations and lawsuits, a source close to the talks told CNN. However, she had not signed on as of Monday night.

At least one consumer advocacy group, the Center for Responsible Lending, has said the deal — while “no silver bullet” — leaves room to hold banks accountable in other mortgage probes, said Kathleen Day, a spokeswoman for the nonprofit.

The negotiations are between federal agencies, including the U.S. Department of Justice and the U.S. Department of Housing and Urban Development, as well as the state attorneys general and the five largest mortgage servicers:Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM). A few other regional banks that service mortgages are reportedly considering signing on as well.

The big banks aren’t as keen to sign off on a multi-state deal that doesn’t include immunity from mortgage servicing claims from California’s and New York’s attorneys general, said a source familiar with the deals.

And left-leaning groups, including Move On and the New Bottom Line, are continuing to urge states to hold out for a big criminal investigation and a $300 billion settlement award.

– CNN’s Jessica Yellin and Lesa Jansen, and CNNMoney’s Erica Fink contributed to this report. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/fffyS9ox1fQ/index.htm

NEW YORK (CNNMoney) — The Obama administration on Wednesday detailed its latest plan to help millions of homeowners refinance their mortgages to today’s historically-low rates.

The plan, which requires approval by Congress, would allow borrowers who are current on their mortgage to save an average of $3,000 a year by refinancing into loans backed by the Federal Housing Administration, according to the U.S. Department of Housing and Urban Development.

The plan is estimated to cost between $5 billion and $10 billion. To pay for it, President Obama said he does not plan to add to the deficit. Instead, he wants to impose a fee on large banks — a move that may have a hard time making it past members of Congress, who have rejected the notion of taxing the banks in the past.

The refinancing plan is the latest in a string of programs designed to help solve the nation’s housing market crisis. Three years ago, Obama unveiled the Home Affordable Modification Program (HAMP) foreclosure prevention effort and soon followed up with the Home Affordable Refinance Program (HARP), which helps homeowners who owe more on their homes than they are worth refinance their loans. But the programs, which sought to help 8 to 9 million homeowners who hold loans from government-supported Freddie Mac (FRE) and Fannie Mae (FNMA, Fortune 500), have helped only some 2 million to date.

What’s different about this latest proposal is that it would help borrowers with private, non-government bank loans who could not obtain new refinanced loans in the past because they owed more on their mortgages than their homes were worth.

“If you’re underwater through no fault of your own and can’t refinance, this plan changes that,” Obama said in a speech in Falls Church, Va. On Wednesday.

Has Obama’s housing policy failed?

To be eligible for the new refinancing program, borrowers must not have missed a mortgage payment for at least six months and have no more than one late payment in the six months prior to that. They also must have a credit score of 580 or better, a threshold that the administration says 9 out of 10 borrowers meet.

The borrower’s mortgage balance also cannot exceed the loan limits for FHA-insured loans in their communities, which range from $271,050 in low housing cost areas to $729,250 in high-cost ones. They also must own and occupy the home covered by the loan.

The administration wants the program to include a provision requiring lenders to take a “haircut” by writing down mortgage balances of deeply underwater loans — those whose borrowers owe more than 140% of their current home values. By doing so, it would greatly reduce the risk that the borrower will default, the administration said.

By refinancing into lower interest rate loans, mortgage borrowers could substantially reduce their monthly payments. Many would go from paying 6% or more to about 4.25%. On a $200,000 balance, that would save about $216 a month on a 30-year mortgage.

The program will also offer an option to allow borrowers to refinance into 20-year loans. These will not necessarily reduce monthly payments but will enable borrowers to build home equity more quickly and enable them to finish paying off the loans sooner.

Foreclosures: America’s hardest hit neighborhoods

The administration wants homeowners to take that option and is proposing that the FHA pay closing costs to encourage them, which would result in an additional average savings of about $3,000.

This latest initiative first emerged in last week’s State of the Union address, when the president said he would launch a program that could save borrowers thousands of dollars a year by allowing them to refinance into loans at current low interest rates.

The president said the plan is an effort to help bolster the housing market, and subsequently the economy. The 3.5 million homeowners the program targets are not in default, the administration said, and the cash freed up could result in more consumer spending. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/sBTaat11HoA/index.htm

NEW YORK (CNNMoney) — Home prices posted a steep, month-over-month drop in November, falling 1.3%, according to the latest SP/Case-Shiller 20-city report. Prices fell in 19 of the 20 cities the index covers.

Prices are down 3.7% from a year ago, and off 32.8% since they peaked in the summer of 2006. The index is currently only 0.6% above its March, 2011 low.

“Despite continued low interest rates and better real GDP growth in the fourth quarter, home prices continue to fall,” said David Blitzer, spokesman for SP.

Phoenix, one of the hardest hit metro areas in the country, was the only place to record a gain in November. Prices there rose 0.6% month-over-month but are down 3.6% from a year ago.

Home prices in Chicago posted the steepest decline of any city on the index, falling 3.4% month-over-month. Atlanta prices were down 2.5% and Detroit prices fell 2.4%.

Has Obama’s housing policy failed?

The drop in home prices was more than housing bear Peter Morici, professor at the University of Maryland Smith School of Business, anticipated. He had forecast a 0.8% drop.

“We’ve had more robust sales activity in the housing market lately,” he said.

Morici thinks recent home price weakness stems at least partially from the fact that more sellers have accepted the weak market conditions and are putting their homes up for sale. Retirees and other home owners had postponed sales, trying to wait out the decline.

“Sooner or later, you have to get rid of that house,” he said.

Steal this house: 7 great foreclosure deals

Pat Newport, a housing market analyst for IHS Global Insight, agrees that’s part of the story.

“People are a lot more flexible on price than they were three years ago,” he said. “They’re willing to lower their asking prices to move their houses.”

He thinks a bigger contributor to the market malaise is sales of properties in foreclosure. Many homes sold these days are either short sales or homes that were repossessed from mortgage borrowers who could not pay their loans.

Foreclosures: America’s hardest hit neighborhoods

“That probably explains the steep declines in Atlanta,” said Newport. “That city has a large number of foreclosed properties.”

Atlanta continues to be a standout for price drops. Its 2.5% November fall followed a 5% drop in October, a 5.9% plunge in September and a 2.4% slide in August. It also posted the weakest annual return, down 11.8%.

Other poor performers over the 12 months ended in November were Las Vegas, where prices were hard hit by foreclosure sales and fell 9.1%, and Seattle, which recorded a 6.3% decline. Detroit, up 3.8% and Washington, with a gain of 0.5%, were the only cities in positive territory for the past 12 months.
 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/lSobtB0larc/index.htm

U.S. Attorney General Eric Holder and Housing and Urban Development Secretary Shaun Donovan explain a new mortgage meltdown working group to target wrong doing in the securities markets.

WASHINGTON (CNNMoney.com) — President Obama’s latest probe into the mortgage meltdown will have more power than past efforts, and federal officials say it won’t derail a possible $20 billion settlement for underwater and foreclosed homeowners.

U.S. Attorney General Eric Holder and Department of Housing and Urban Development Secretary Shaun Donovan took great pains Friday to explain how their working group into the mortgage meltdown will be better than past joint-agency federal probes.

However, one former watchdog says he thinks the new working group is “window dressing.”

“This certainly looks like political rebranding of the existing efforts,” said Neil Barofsky, a former special inspector general of the federal bailout of big banks.

The new working group is a coalition of many of the same agencies and even the same state attorneys general that have been working together since the Obama administration announced the creation of its first mortgage fraud task force in 2009.

Holder said this new watchdog group will have more than 50 investigators and attorneys assigned to it. And he announced that subpoenas are being sent to 11 financial firms for records related to the buying and selling of mortgages.

By sharing documents and jurisdictions with New York State Attorney General Eric Schneiderman, officials can take advantage of New York state laws that are tougher on Wall Street financial fraud than the federal government’s laws, Holder said.

“This working group can set a template for not just accountability but for real relief for homeowners,” Holder said.

However, Barofsky said that if the Justice Department is really serious about going after securities fraud, it should tap the U.S. Attorney for the Southern District of New York, an office with the most experience on security fraud cases. Barofsky notes the New York office was not mentioned in the list of officials leading the working group.

“You’re putting someone in charge of it who doesn’t have experience with securities fraud,” said Barofsky, a critic of Obama administration programs aimed at helping underwater homeowners. “Why don’t you have your most skilled A-team contributing to this?”

No hot tempers at consumer chief’s House hearing

Holder and Donovan also said that their so-called “Residential Mortgage-Backed Securities Working Group” will focus on the creation of mortgages to homeowners who couldn’t afford them, as well as the buying and selling of those mortgages to spread the risk.

They added that this working group will steer clear of mortgage-servicing problems — the focus of ongoing negotiations between the biggest banks, regulators and states attorneys general.

“If you think about the actions that really led to the devastating effects on homeowners, it really was the origination and the securitization of these products,” Donovan said.

Iowa Attorney General Tom Miller, who has been leading the settlement talks over mortgage servicing, agrees the two efforts can co-exist. The mortgage meltdown contains “many pieces of a puzzle,” and the new joint working group will allow officials to “address those other pieces,” said Geoff Greenwood, spokesman for the Iowa attorney general.

However, one big bank chief said he’s worried the new probe and the settlement will collide. Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM) have been in talks with the state attorneys general, the Justice Department, and the Department of Housing and Urban Development for nearly a year

JP Morgan Chase CEO Jamie Dimon, in an interview with CNBC on Thursday, was the first to say he thinks the new working group could threaten a settlement.

But Citigroup CEO Vikram Pandit told CNNMoney’s Poppy Harlow that the federal government has the right to create such a working group to pursue wrong-doing in the mortgage market.

“If people have done something wrong, they ought to be held accountable for it, there’s no question about that,” Pandit said. “That’s how the business world should work.”

The settlement could be significant if it makes good on promises to deliver between $20 and $25 billion, which could help ease an average of $20,000 in principal owed on mortgages for some underwater homeowners — if states agree to give immunity to the big banks from new mortgage servicing legal claims.

However, three sources familiar with the talks say the latest proposed deal is in trouble, in part because California State Attorney General Kamala Harris said this week she isn’t interested in the latest deal being discussed. Harris says it’s not good enough for California, according Shrum Preston, spokesman for the California Justice Department.

New York’s Schneiderman is also reportedly cold to the latest deal, two sources familiar with the talks have said. At the Friday press conference, Schneiderman would not say whether his work with the new task force would guarantee that New York will participate in the settlement.

The big banks aren’t as keen to sign off on a multi-state deal that doesn’t include immunity from mortgage servicing lawsuits from California and New York, said a source familiar with the deals.

–CNNMoney’s Poppy Harlow and CNN’s Terry Frieden contributed to this story. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/xr6-BydUz3A/index.htm

NEW YORK (CNNMoney) — Just 302,000 new homes were sold in 2011, 6.2% below 2010 and the lowest number of annual sales since the government started tracking home sales in 1963.

In December, sales of single-family homes fell 2.2% month-over-month to an annual rate of 307,000, according to estimates released by the Census Bureau and the Department of Housing and Urban Development.

A consensus of experts from Briefing.com had forecast an annual rate of sales of 321,000 for December. The actual result was a 6.9% decline from 12 months earlier, when homes sold at a 329,000 annual rate.

The dismal report was a reversal of other recent housing market trends. Last week, the National Association of Realtors reported that existing-home sales rose for the third straight month in December and the Census Bureau said that construction of new homes had been gaining ground.

Pat Newport, an industry analyst with IHS Global Insight, did not put much stock in the December new-home sales report, however. “They’re not statistically significant,” he said. “I think the other recent numbers, like on housing starts and permits, give a more accurate picture of the current trends in the market.”

Construction gains late in the year indicate that the new home market is picking up, he said.

Still, he added, these are the lowest new home sales numbers for the nation as a whole and for three of the four regions ever recorded. Only the Midwest escaped notching a new a record low.

Steal this house! 7 foreclosure deals

The median home price for homes sold during December was $210,300 and there was a 6.1-month supply of homes at the current rate of sales.

Getting new home construction healthy again would help revitalize the economy. For every 100 homes built, 300 jobs are created, said David Crowe, chief economist for the National Association of Home Builders. “Half of those are on construction sites and the other half are people building appliances, cabinets, carpets and other goods for the home,” he said.

He’s forecasting an 18% rise in new homes sales this year. Newport, of IHS Global, is predicting a slightly lower gain of about 15%. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/KVnRZS2LjEE/index.htm

NEW YORK (CNNMoney) — Just 302,000 new homes were sold in 2011, 6.2% below 2010 and the lowest number of annual sales since the government started tracking home sales in 1963.

In December, sales of single-family homes fell 2.2% month-over-month to an annual rate of 307,000, according to estimates released by the Census Bureau and the Department of Housing and Urban Development.

A consensus of experts from Briefing.com had forecast an annual rate of sales of 321,000 for December. The actual result was a 6.9% decline from 12 months earlier, when homes sold at a 329,000 annual rate.

The dismal report was a reversal of other recent housing market trends. Last week, the National Association of Realtors reported that existing-home sales rose for the third straight month in December and the Census Bureau said that construction of new homes had been gaining ground.

Pat Newport, an industry analyst with IHS Global Insight, did not put much stock in the December new-home sales report, however. “They’re not statistically significant,” he said. “I think the other recent numbers, like on housing starts and permits, give a more accurate picture of the current trends in the market.”

Construction gains late in the year indicate that the new home market is picking up, he said.

Still, he added, these are the lowest new home sales numbers for the nation as a whole and for three of the four regions ever recorded. Only the Midwest escaped notching a new a record low.

Steal this house! 7 foreclosure deals

The median home price for homes sold during December was $210,300 and there was a 6.1-month supply of homes at the current rate of sales.

Getting new home construction healthy again would help revitalize the economy. For every 100 homes built, 300 jobs are created, said David Crowe, chief economist for the National Association of Home Builders. “Half of those are on construction sites and the other half are people building appliances, cabinets, carpets and other goods for the home,” he said.

He’s forecasting an 18% rise in new homes sales this year. Newport, of IHS Global, is predicting a slightly lower gain of about 15%. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/KVnRZS2LjEE/index.htm

President Obama announces Justice Department task force to go after mortgage crimes that victimized homeowners.

WASHINGTON (CNNMoney) — A new special task force to investigate and prosecute those responsible for bad mortgages during the housing boom will be part of President Obama’s 2012 agenda.

Obama announced Tuesday that he’s asked the Justice Department to create a special unit of prosecutors and state attorneys general to investigateg abusive lending and packaging of risky mortgages that led to the housing crisis. And he’s tapped an avowed Wall Street enemy, New York Attorney General Eric Schneiderman, to help run the crime unit, according to a White House official.

“This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans,” Obama said in his State of the Union speech.

The new unit’s goal will be to investigate banks, financial firms and mortgage originators that broke the law, and to compensate victims and provide relief for homeowners, the White House official said.

Although the housing bust is more than four years old, this is the first time the Obama administration has indicated it will go after mortgage originators and Wall Street banks that got homeowners into loans they couldn’t afford — actions seen as a key culprit of the financial crisis.

Foreclosures: Hardest hit zip codes

The mortgage industry has often been blamed for its role helping homeowners get lines or credit and bigger mortgages during the housing boom. The industry saw little downside, unloading the risk that the loans would go bad on to the financial markets.

With Schneiderman, who has been working on his own investigations into big banks, Obama is signaling he’s ready to go after financial crimes. And left-leaning progressive groups cheered the news.

“Schneiderman has shown himself to be a courageous hero in his defense of the struggling underwater homeowners in his state and across the country,” according to a statement released by a coalition of left-leaning advocates such as MoveOn and New Bottom Line.

The news came as a surprise to the financial industry, which had been predicting Obama would tout a proposed settlement under discussion among federal regulators, state attorneys general and the largest bank mortgage servicers under investigation for improperly foreclosing on homeowners.

“We believe the industry is worried that this new task force will go after the banks for the origination of many of the mortgages that have defaulted or are now underwater,” said Jaret Seiberg, a senior policy analyst for the Washington Research Group.

The state attorneys general, the Justice Department and the Department of Housing and Urban Development have been in talks for nearly a year with big bank servicers that stand accused of using robo-signers to service home loans. The five largest mortgage servicers involved in the talks are:Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM).

According to people familiar with the talks, a draft settlement would result in those banks paying $20 billion to $25 billion toward housing relief. About 1 million underwater homeowners would be eligible for an average $20,000 off the principal owed.

In return, state attorneys general would not be able to file future lawsuits against the bank mortgage servicers that agree to the deal. The amount of relief available for homeowners depends on how many state attorneys general agree to the deal.

Obama didn’t mention the talks in his State of the Union speech. A White House official said Wednesday that the new task force would not prevent progress that has been made on that deal.

– CNNMoney’s Les Christie and CNN’s Terry Frieden contributed to this report. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/xl3yAZEn7Co/index.htm

The numbers are grim: China’s property bubble is heading for a spectacular burst, and its effect on the country’s economy will be widespread.

FORTUNE – The Chinese government’s announcement last week that growth for 2011 slowed only slightly to a still impressive 9.2% was greeted enthusiastically by the world’s stock markets. Investors also remain buoyant on China’s future. They appear to be buying the official line that the gigantic property price bubble is gradually and smoothly deflating, posing little risk to an engine that’s so crucial to the future of global trade.

But the math tells a different story. The housing frenzy has driven prices so high, so fast, that a crash on the scale of the real estate collapse in Japan in the 1990s is a virtual certainty. And China’s already exaggerated official growth rate could take a pounding, all the way to the zone of the unthinkable, into the low single-digits.

For this analysis, I’ll borrow heavily from my former professor and mentor at the University of Chicago’s Booth School of Business, Robert Aliber. Affectionately known to his students by his initials “RZA,” Aliber is now retired to New Hampshire, but he writes a superb newsletter for his friends and clients. He spotted the reckless credit expansion, huge trade deficits and asset bubbles that now haunt both the U.S. and European economies long before most experts.

As Aliber puts it, “In China, the housing boom is a far bigger source of growth than is widely recognized, and it’s totally unsustainable.”

China can’t grow its way out of a European recession

Aliber got his first clue that the craze spelled disaster from a former student living in Beijing. The young Chicago alumnus told Aliber that he’d just moved into an apartment building with several hundred units, and was the only one living there. Investors had bought all the other apartments that hadn’t sold.

Later that year, Aliber visited the office of an upscale developer in Beijing, who was getting $600,000 for 1100 square foot units with bare walls. The folks doing the purchasing were earning between $20,000 and $30,000. Given those modest incomes, it was obvious that the buyers weren’t purchasing an affordable new residence, but speculating in real estate, either to live there for awhile then flip the unit, or simply leave it vacant while seeking a buyer willing to hand them quick windfall.

Rent vs. price

What amazed Aliber was the chasm between the prices of the apartments and the rents they fetched. A typical $600,000 unit brought a landlord less than $1000 a month in rent after expenses (assuming no mortgage). It wasn’t the rental yields that attracted investors, it was the huge price appreciation, averaging from 20% to 30% from 2008 until last year.

Rents — the cost of living in the unit — exercise a sort of gravitational pull on prices. That’s because people won’t pay far more to own a home than to rent a similar one, unless they think prices will keep soaring — a view that’s a sure sign of casino mentality, and never lasts. In China, prices in the frothiest markets are fifty or sixty time rents. That’s the case with the example we discussed above, where the price is $600,000, and the rent is $12000, a ratio of 50-to-1. The 50 to 60 multiple is far above the level in most U.S. markets at the height of the bubble in 2006; in those heady days, a multiple of 40 was considered giant.

So how far do China’s prices need to fall so that the cost of owning is reasonably close to the level of rents? Aliber reckons that the rental yield on apartments will eventually go from less than 2% to 5%, or even a bit higher.

The rental yield is simply the annual rent divided by the market price, just as the yield on a bond is the fixed interest payment divided by the price of the bond that day. In the U.S., the rental yield averages around 6%, meaning the multiple of prices to rents is around 17. The adjustment to a 5% rental yield in China would push prices down by 60%.

15 business people who’ve changed China

Aliber is by no means the sole China expert to predict that a steep drop is coming. “I estimate that a decline of 60% or even more is the upper end of the range, but is indeed possible,” says Derek Scissors, an economist at the Heritage Foundation.

The adjustment has already begun. While the government’s official figures show modest declines starting late last year, those numbers are famously unreliable. A better view comes from owners trying to sell their units. Losses of 30% aren’t uncommon. In fact, many owners who paid, say, $600,000 in 2010 are furious that their landlords are now offering unsold units in the same building for $450,000.

What’s the probable hit to China’s vaunted growth rate? It’s important to recap the forces that caused the frenzy. China imposes tight restrictions on returns on bank accounts, government bond yields and other domestic investments. Inflation for 2011 exceeded 5%, but 10-year bond yields are just 3.5%. It’s extremely difficult to find investments that yield more than inflation. When the easy money policies took charge after the worldwide crash of 2008, the excess cash flowed into the only place with big returns — real estate.

For around four years, China has been building around 1 billion square meters of housing a year, ten times the figure in the U.S. The amount needed to accommodate real owners — people moving from farms to the cities, for example — is 700 million square meters.

So let’s assume that demand goes back to that level. China is also swamped with seven to eight million vacant units. If around two million of those are sold a year, China will need to build just 500 million square meters annually — half of the total over the past several years. That decline will pound not just expenditures on apartments, but production of steel, copper and appliances.

By Aliber’s reckoning, the sharp decline in housing production could lower China’s growth rate by a full five points. In his view, around three points of its 9.2% growth rate in 2011 came from the bubble. Shave two more points for the empty apartments that need to be sold, and future growth looks far less robust than the official projections.

Unlike the post-crash U.S., China will keep growing after the bubble bursts, though at a far slower rate. What bears watching is the effect of another gigantic stimulus program to compensate for the decline in housing. If renewed inflation follows, so will a slowdown needed to bring tame it.

Or as Aliber observes, “China’s spurt of a 10% growth rate is likely to be history.”

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/yIMjDVDEaCY/

Sales of existing homes continued to improve in December, lifting full-year sales volume modestly higher.

NEW YORK (CNNMoney) — Home sales ended a difficult year on a high note, resulting in a gain in full-year sales volume.

The National Association of Realtors reported that the annual sales pace in December reached 4.6 million homes, up 5% from November’s pace and 3.6% from a year ago.

It was the third straight month of improvement in the pace of sales. The fourth-quarter sales volume lifted full-year sales to 4.26 million homes, up 1.7% from 2010 levels.

“The pattern of home sales in recent months demonstrates a market in recovery,” said Lawrence Yun, the group’s chief economist. “Record low mortgage interest rates, job growth and bargain home prices are giving more consumers the confidence they need to enter the market.”

Home prices, however, remained depressed, largely because distressed sales continue to make up a significant part of the market.

The median price was $164,500 in December, down 2.5% from a year ago. For the full year, the median price of $166,100 was off 3.9% from 2010 levels.

Realtors said foreclosed homes sold for an average discount of 22% below market value in December, compared to a 20% discount a year ago. Meanwhile, short sales, which are homes sold for less than the amount owed on a mortgage, sold for a 13% discount, compared to a 16% discount in December 2010.

Foreclosures made up 21% of all sales, while short sales were 12%. Both figures were comparable to 2010.

But even with the distressed properties on the market, the inventory of homes for sale has gotten tight.

Realtors calculate that at the current sales pace, there is only a 6.2 month supply of homes available for sale, the smallest since March 2005, before the housing bubble burst.

That was down from a 7.2-month supply in November and more than an 8-month supply a year ago, which is a “a notable decline,” according to Troy Davig, an economist with Barclays Capital.

“The housing market appears to be making progress in terms of working through its excess inventory,” said Davig in a note Friday.

Joseph LaVorgna, chief U.S. economist for Deutsche Bank, said the current conditions should lead to improved prices and sales in the near term.

Other encouraging signs include a survey of home builders that showed the most bullish view of current sales conditions and customer traffic in nearly five years. The government’s report on home building is also showing improvement.

“Coming on the back of a dramatic improvement in homebuilders’ sentiment, the latest existing-home sales report corroborates our thesis that a housing recovery has finally begun,” LaVorgna wrote in a note.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/abGK1b7CvXw/index.htm

NEW YORK (CNNMoney) — New home construction slowed slightly in December after a strong November showing, but was still much more active than a year earlier.

The Census Bureau reported that housing starts fell to 657,000 on an annual basis, down just 4.1% compared with a strong November. Building permits, which are less affected by weather than starts, came in at a 679,000 annual rate, about the same as a month earlier.

The results lagged industry expectations. A consensus of industry experts from Briefing.com had forecast starts of 673,000 and permits of 680,000.

But the results were considerably better than a year earlier, with permits up 7.8% and starts spiking 24.9%.

“I think it’s a decent report,” said David Crowe, chief economist for the National Association of Home Builders. “Single family starts were up 4.4% and permits were up 1.8% [compared with a month earlier]. Multi-family, [which fell] adjusted from an unusually high November.”

The strong finish to 2011 enabled the industry to surpass 2010 totals in both starts and permits. Builders started 606,900 housing units in 2011, 3.4% more than in 2010. Housing permits came in at 611,900, 1.2% higher than a year earlier.

Only 583,900 homes were actually completed during the year, however, a drop of more than 10% compared with the 651,700 units completed in 2010.

Development might be stronger except for difficulties from tight lending, according to Crowe. “Builders are unable to get financing to acquire properties and develop housing,” he said.

There is, however, another limiting factor that will dampen home building for many more months, according to Mike Larson, a housing industry analyst for Weiss Research.

“Builders know they’re competing with foreclosures, which are being parceled out to the housing market very slowly by the lenders,” he said. “That’s why we won’t see a robust recovery anytime soon.”

The trend is in the right direction though, with economic indicators such as initial jobless claims, which are at a four-year low, and consumer confidence, which jumped in both November and December, pointing in the right direction.

“We expect a better 2012, based on an economy that will continue to improve,” Crowe said. 

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NEW YORK (CNNMoney) — Mortgage loan applications surged 23% last week, according to the Mortgage Bankers Association, as record-low interest rates convinced many homeowners it was time to refinance into lower-cost loans.

Refinancing activity climbed 26.4% during the week ending January 13, to its highest level since early August, the MBA reported. Meanwhile applications for new mortgages climbed 10.3% week-over-week.

The heightened activity comes as mortgage rates test new bottoms. Last week, rates on both the 30-year and 15-year fixed loans fell to new records, at 3.89% and 3.16%, respectively, according to Freddie Mac.

The vast majority of the applications — 82.2% — were to refinance existing loans rather than purchase new ones, the MBA said.

The fact that purchase applications significantly lagged those for refinancings underscored a truism about low mortgage rates, said Doug Duncan, chief economist for Fannie Mae (FNMA, Fortune 500). “[Home] sales are a lot less interest-rate sensitive than people think,” he said.

Home sales during boom worse than thought

Even with ultra-low rates, existing homes sales languished in November at an annualized rate of 4.4 million, according to the National Association of Realtors. That’s well below the “normal” rate of between 5 million and 6 million.

Duncan pointed out that low and declining interest rates may cause homebuyers to hesitate: They may expect them to fall even further.

On the other hand, rising rates, which often accompany an improving economy, can give potential homebuyers a reason to act — before rates and prices become less affordable.

Low rates have had a positive impact on the housing market in at least two important ways, said Keith Gumbinger of HSH Associates. First, there are those borrowers who were able to avoid foreclosure by refinancing and lowering their monthly payments.

Then there are the tens of thousands of homeowners with risky adjustable-rate mortgages who have avoided potential disaster. These borrowers could have been hit hard had rates been higher when their loans reset. But instead, they are saving money, he said.

Adjustable-rate mortgages reset under a formula that involves a margin, specified in the contract, and an index, usually the one-year London Inter-Bank Offerer Rate (LIBOR). Margins on option ARMs range between 1.625% and 2.5%, and the current LIBOR rate is around 1.1%. That combines for a very affordable rate of 2.7% to 3.6%.

“For anyone with the guts to hang on, ARM borrowing has been very favorable,” said Gumbinger. “If you took the risk, you could be enjoying the results right now.”

However, the days of record low rates may be ending — thanks to a recent action by Congress.

To pay for the extension of payroll tax cuts, Congress mandated an increase in fees for Fannie Mae and Freddie Mac loans. That could mean an increase in upfront costs for borrowers of about half a point, starting April 1.

The average fee borrowers pay now is about 0.7% of the mortgage balance for a 30-year and 0.8% for a 15-year, according to Freddie, or about $700 or $800 for every $100,000 borrowed. The new fee would add $500 for every $100,000 in principal.

Instead of paying upfront, borrowers could pay the fee as a higher interest rate. Gumbinger said it would mean an additional one-eighth of a point to their rate.

That may not sound like much, but adding an eighth of a point to interest rates comes to an extra $225 a year or so on a $250,000 mortgage, according to Scott Sheldon, a loan officer with W.J. Bradley Mortgage in California.

“I’m telling all my clients that they need to get a lock immediately,” he said.  

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There’s not much President Obama could have done to fix the housing market, experts say.

NEW YORK (CNNMoney) — The president’s efforts to revive the housing market have largely failed. But is that entirely Obama’s fault?

“I don’t think anyone could have done anything to stabilize the housing market,” said Ed Jacob, executive director of NHS Chicago, which provides homeownership and foreclosure prevention services. “This housing market was in far worse shape than anyone knew.”

Obama took office in 2009, promising swift action to address the mortgage crisis. He quickly unveiled his signature foreclosure prevention program, known as HAMP, and his refinance program, known as HARP.

But the HAMP program, which was designed to lower troubled borrowers’ mortgage rates to no more than 31% of their monthly income, ran into problems almost immediately. Many lenders lost documents, and many borrowers didn’t qualify. Three years later, it has helped a scant 910,000 homeowners — a far cry from the promised 4 million.

HARP, which was intended to reach 5 million borrowers, has yielded about the same results. Through October, when it was revamped and expanded, the program had assisted 962,000.

Meanwhile, more than 3.5 million people remain behind in their mortgage payments and more than 1.9 million homes are in foreclosure. And home prices have fallen for six months straight.

GOP cribs: Where the candidates live

One of the main problems with Obama’s foreclosure prevention program was that the housing crisis had already spiraled beyond unaffordable mortgage rates. Homeowners were defaulting because they didn’t have jobs — and the administration’s effort did little to help them.

In response, Obama rolled out a multitude of initiatives designed to help the underwater and the unemployed. But few of them have had much impact.

“He focused his gun in the wrong place,” said Anthony Sanders, a real estate finance professor at George Mason University. “The administration’s approach is to kick the can down the road. That doesn’t lead to a recovery and just strings the problem along.”

But the president deserves points for having the Federal Housing Administration step in to provide mortgages for homeowners and for spurring homebuying with a tax credit, said John Burns, head of John Burns Real Estate Consulting. They staunched the bleeding in home sales and values. The Federal Reserve has also tried to help by keeping mortgage rates at record lows.

At the same time, though, the economy has remained weak. Unemployment is still high, consumer confidence is still low and banks are still hesitant to lend.

And Congress and the president remain at odds over how to spur job creation, which many say is the key to stabilizing the housing market.

“Obama was in many ways hemmed in as to how to effectively and positively affect the housing crisis,” said Gabriel Stuart, director of UCLA’s Ziman Center for Real Estate. “The economy was moving under their feet.”

One thing some experts say Obama could have done is required servicers, as well as Fannie Mae and Freddie Mac, to write down the principal balance on loans. This, however, has been a very controversial step because it would have forced large losses on banks and the government-controlled mortgage finance companies.

But at least the administration could have come down harder on the mortgage servicers, forcing them to expand and improve their foreclosure prevention processing procedures more quickly, experts said.

In Phoenix, Obama’s foreclosure programs are helping some people, but many more could take advantage of them if the administration had taken a harder line with servicers, said Patricia Garcia Duarte, chief executive of NHS-Phoenix, which counseled 1,800 delinquent homeowners last year.

“The missing ingredient was that it was a voluntary program,” she said. “If it hadn’t been, we would have had much better results.”

Were you falling out of the middle class even before the Great Recession hit? Do you have a job but still feel you aren’t upwardly mobile? Are you better or worse off than your parents? Email realstories@cnnmoney.com with your name and phone number, and you could be featured in an upcoming story on CNNMoney. 

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The Pyrons went through a foreclosure nightmare, when they discovered that they didn’t “officially” own their home because of a paperwork snafu.

NEW YORK (CNNMoney) — With more than 200,000 households receiving foreclosure notices each month, there are bound to be a few mistakes. But for some unlucky homeowners, these blunders carry some serious consequences.

Maria and Joseph Perez were threatened with foreclosure and abandoned their home after a routine refinancing of their mortgage turned into a four-year (and counting) battle.

The couple had initially purchased their Seguin, Texas home in 2007 with a mortgage that was backed by Bank of America and serviced by a firm called Taylor, Bean Whitaker. In August 2009, the couple refinanced the loan through Quicken in order to get a better rate.

So Jose was puzzled when, a month after refinancing, he received a notice from Bank of America that said he was behind on his payments on the old loan.

It turned out that Taylor, Bean Whitaker, the mortgage servicer, had ceased operations the same month they had refinanced. And Bank of America hadn’t received the funds from the new loan to pay off the old one, said attorney Barry Brown, who is representing the couple.

Since there is pending litigation, Bank of America wouldn’t comment on this specific case. But company spokesman Richard Simon said that when Taylor, Bean Whitaker went bankrupt, the state government froze its deposits, including monthly payments that customers had made to the servicer and recently processed payoffs on refinanced loans.

Foreclosure free ride: 3 years, no payments

Adding an even odder twist was that Quicken had sold the servicing rights to the new loan to Bank of America. So while the couple was sending Bank of America payments on the new loan each month, Bank of America was sending them notices demanding payments for the old loan.

After several weeks of talks with the Perezes in late 2009, Bank of America finally acknowledged that they had refinanced their loan and stopped sending the payment notices, said Brown. The couple thought the situation had been cleared up.

But about a year later, the bank started asking for payments again. Somehow, the Perez’s loan was again flagged as past due even though the frozen payments on the old loan from Taylor, Bean Whitaker had been released to Bank of America.

“The Perezes began to get collection calls and threats,” said Brown. “They barraged them with foreclosure notices, 16 in one month.”

The couple, who have two young children, said they were being driven crazy. Their credit scores suffered. To cope, Jose, who is an electrical technician with Tyson Foods, asked the company to transfer him. They sold the house a year ago and moved to Kansas, far from family and friends.

The move ended the foreclosure fight, but the Perez’s are suing Bank of America for unspecified damages for pain and suffering. They’re charging violations of Real Estate Settlement Provisions Act (RESPA) law, which specifies how lenders should offer mortgages and under what terms, and debt collection abuse laws.

“They feel like they’re in exile,” said Brown.

Brian and Khanklink Pyron lived happily in their Houston-area home for two years before they realized that they weren’t technically the rightful owners — and the bank that was wanted its property back.

Right after the couple bought their home in 2008, the title company, Esquire, went bankrupt. The problem was that Esquire never transferred the money the Pyrons paid for the home to the seller’s mortgage holder, Wells Fargo Bank (WFC, Fortune 500), nor did it transfer the title of the home.

The money that was supposed to go to Wells Fargo instead wound up with the state of Texas guarantor, which was handling all of Esquire’s accounts. Meanwhile, Wells Fargo, which hadn’t received a dime from the sale yet, put a lien on the home.

“The title company meant to transfer the funds and the title but it went defunct, so we had no recourse in terms of recouping the loan,” said Vickee Adams, a Wells Fargo spokeswoman.

10 cheap foreclosed homes for sale by Uncle Sam

The Pyrons found out that the title transfer never took place after they mailed their property tax check and got a letter back from the county clerk’s office telling them that the taxes had already been paid by Wells Fargo. When they called the bank to find out why they had paid the taxes, they found out that the bank still owned the home.

“We’re going crazy,” said Brian Pyron. “We had no idea this was happening. We were never late with payments.”

The other shoe dropped when Wells Fargo filed a foreclosure notice. After some wrangling, the bank told the Pyrons they would resell the house to them. But there was a catch: The bank, which had approved the original deal as a short sale for $130,000, now wanted $172,000, said Pyron.

The couple hired a lawyer but couldn’t afford the fees so they let him go. Their credit scores plunged and they lived in constant fear of losing their home.

Then, last Friday, came a fortunate turn in the case. Wells Fargo met with the Pyrons and told them they would release the lien on the home. The bank didn’t ask for any concessions or extra cash.

Now the Pyrons, who have been making their mortgage payments throughout this whole ordeal, are just waiting for the paperwork. “This is a huge relief for us,” said Brian.

“I’m glad to know that [we] were able resolve the matter,” said Wells Fargo’s Adams. “These actions reflect the consistent effort we pursue to help our customers retain home ownership.”

Sharon Bullington, 70, and her husband James, a 78-year-old retired General Motors employee, would never have guessed that paying their mortgage bill too early would cause them to almost lose their home.

Initially, medical bills pushed them to default on their mortgage. At the time, the couple owed nearly $180,000 on their New Port Richey, Fla. home, and their monthly mortgage payments were more than they could afford.

What about us? Responsible homeowners left out in the cold

But the couple qualified for a trial modification of their mortgage through the government’s Home Affordable Modification Program, which offered them a loan with much more manageable monthly payments.

Yet, just a couple months later, Sharon found out that they had been booted from the HAMP program.

A letter from her lender, Bank of America, stated that the Bullington’s were no longer eligible for the HAMP program because they were not able to “to make each payment in the month in which it is due.”

Sharon had made the “mistake” of sending the payment for January in December. The couple was being kicked out of the program for paying too early. And since the trial modification fell through, the couple was yet again facing foreclosure.

After making many calls and enlisting a lawyer, the couple got a break. The case, which began with the January, 2011 early payment, was finally resolved in August with the bank admitting its error and refinancing the mortgage for the couple, said Shawn Yesner, the Bullington’s attorney. 

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NEW YORK (CNNMoney) — Foreclosure filings and repossessions fell to their lowest level since 2007 last year.

Total filings of default notices, scheduled auctions and bank repossessions were down 33% for the year to 2.7 million, according to RealtyTrac, the online marketer of foreclosed properties.

One in every 69 homes had at least one foreclosure filing during the year, while 804,000 homes were repossessed. That’s a significant improvement from the peaks reached in 2010 — when one in every 45 households received a foreclosure filing and 1.05 million homes were repossessed — and the lowest levels seen since 2007, the report said.

While the declines seem like good news for the housing market, where a flood of foreclosed homes has depressed home prices, much of it is due to processing delays caused by fall-out from the “robo-signing” scandal that broke in late 2010.

During the year, banks spent more time making sure paperwork was legal and proper, creating a backlog in the foreclosure pipeline. As a result, the average time it took to process a foreclosure climbed to 348 days during the fourth quarter, up from 305 days a year earlier.

“Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year,” said Brandon Moore, chief executive officer of RealtyTrac.

However, Moore said there were “strong signs” during the second half of the year that lenders are working through foreclosure backlogs in certain markets. He expects foreclosure activity to rise above 2011′s level but remain below the peak hit in 2010.

Low rates offer some help for homeowners

Early in 2011, many forecasters were predicting a wave of foreclosures due to resetting adjustable-rate mortgages but low mortgage rates helped many borrowers refinance into more affordable loans and keep their homes, said Moore.

Refinancings accounted for 71% of all mortgage lending in 2011, according to the Mortgage Bankers Association.

The government helped as well, through efforts like the Home Affordable Refinance Program (HARP), which made refinancing easier for borrowers who owe more on their mortgage than their homes are worth.

Turning foreclosures into rentals

Government foreclosure prevention programs, including HARP and the Home Affordable Modification Program (HAMP), have started about 5.5 million mortgage modifications since April 2009, according to the U.S. Department of Housing and Urban Development.

“Programs like HAMP and HARP have definitely made a dent in the foreclosure problem,” said Moore “However, they are certainly not living up to their billing of preventing several million foreclosures. In addition, many [HAMP] homeowners fall back into foreclosure later on.”

Of course, there were still plenty of factors working against homeowners in 2011, including the continued erosion in home prices. The SP/Case-Shiller 20-city home price index fell 3.4% over the 12 months ended October 31. Falling prices rob homeowners of home equity, which they can tap if they need emergency cash.

Foreclosure hot spots

Hot spots for foreclosures remain mostly in “bubble states,” where speculative investors helped drive up home prices beyond their fundamental values during the mid-2000s housing boom.

Nevada, where one out of every 16 households received some kind of default notice during the year, was the worst hit of all, a distinction it has held for the fifth consecutive year.

Foreclosure free ride: 3 years, no payments

Arizona had the second highest foreclosure rate and California came in third. Florida, which had been running neck-and-neck with the other “Sand States” in past years, fell to seventh, behind Georgia, Utah and Michigan.

Among metro areas, Las Vegas suffered from the highest foreclosure rate in 2011. California put seven cities in the top 10, led by Stockton in the second slot. Other cities in the top 10 included Phoenix, which finished sixth, and Reno, Nev. was eighth. 

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Fannie Mae CEO Michael Williams.

NEW YORK (CNNMoney) — Fannie Mae CEO Michael Williams plans to resign, the government-controlled mortgage giant said Tuesday.

Williams, who took over as president and CEO of the troubled company in 2009, will continue as CEO until Fannie Mae’s board names a successor.

The firm did not provide a specific reason for Williams’ departure; in a statement, Williams said only that he had decided that “the time is right to turn over the reins to a new leader.”

Williams will leave behind a firm still struggling to get its finances in order.

In November, Fannie Mae (FNMA, Fortune 500) reported a net third-quarter loss of $5.1 billion. The loss forced the firm to ask for another $7.8 billion in funding from the Treasury Department, a request that took its bailout total to $112.6 billion.

Federal regulators put Fannie Mae and fellow government-sponsored enterprise Freddie Mac (FMCC, Fortune 500) into conservatorship during the financial meltdown in September 2008. The sister companies now depend on government help to cover losses on the mortgages they own or guarantee.

In October, Freddie Mac CEO Ed Haldeman also announced plans to step down at some point this year.

Williams and Haldeman have faced scrutiny in recent months for their hefty paychecks, granted even as their firms rely on taxpayer support. The targets for their 2011 pay, which will include deferred compensation, are set at about $6 million a piece.

In December, the Securities and Exchange Commission charged six former executives of Fannie Mae and Freddie Mac, including former Fannie CEO Daniel Mudd and former Freddie chief Richard Syron with securities fraud. The SEC alleges that the executives misrepresented the firms’ holdings of high-risk mortgage loans ahead of the financial crisis. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/KHSuwNWQ8DE/index.htm

The government wants to turn foreclosures into rentals.

NEW YORK (CNNMoney) — Federal officials hope to launch a pilot program in early 2012 to convert government-owned foreclosures into rental properties.

The program, which was cited by Federal Reserve Chairman Ben Bernanke last week as one way to address the housing crisis, would sell foreclosed homes now owned by Fannie Mae (FNMA, Fortune 500) and Freddie Mac (FMCC, Fortune 500) to investors in bulk. The properties would then be converted into rentals.

The initiative began back in August, when the Federal Housing Finance Agency, the Treasury Department and the U.S. Department of Housing and Urban Development announced they were seeking suggestions on ways to dispose of repossessed homes now owned by Fannie Mae, Freddie Mac and the Federal Housing Administration.

In addition to getting the properties off the government’s books, officials are hoping putting the homes back into productive use will stabilize neighborhoods and housing values. Also, it is looking to expand the supply of rentals, which are increasingly in demand.

The agency is not releasing details on how the rental program would work, instead saying it is “proceeding prudently but with a sense of urgency to lay the groundwork for the development of good initial transactions in early 2012.”

Administration officials said they are continuing to work with the agency to develop the program.

Housing, stocks, gold and oil: Hot or not in 2012?

Until now, most foreclosed homes have been sold individually because investors have demanded bigger discounts to buy large numbers of properties.

But federal officials are warily eyeing the expected surge in foreclosures as banks ramp up their action against delinquent homeowners. The process had been stalled since late 2010 when banks’ shoddy paperwork practices came to light.

There are close to 2 million homes in the late stages of delinquency, according to Lender Processing Services. Since foreclosed properties often sell below market value, they can wreak havoc on home prices.

Converting these homes to rentals can both help the neighborhood and minimize losses to Fannie, Freddie and the FHA, which hold about 250,000 properties, Bernanke told lawmakers last week.

He urged lawmakers to ramp up their efforts to fix the housing market, placing particular emphasis on the problem of vacant homes on the market.

“Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery,” he said. 

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NEW YORK (CNNMoney) — Concerns are growing that the Federal Housing Administration will need to be bailed out by taxpayers.

The agency’s latest monthly outlook report revealed a spike in serious delinquencies for FHA-insured loans, posing a further threat to the agency’s already depleted cash reserves.

According to the report, the percentage of loans in the FHA’s portfolio with three missed payments or more rose to 9.3% in November, up from 8.4% in August.

“It’s highly likely that the FHA will need a taxpayer bailout over the next three to five years,” said Joseph Gyourko, a real estate professor at the University of Pennsylvania’s Wharton School and author of a report entitled “Is FHA the Next Big Housing Bailout?.”

In November, an independent audit of the FHA’s finances found that losses from mortgage defaults had depleted the agency’s reserve fund to 0.24%, or $2.6 billion, during fiscal 2011 — well below the Congressionally-mandated 2% level. (The ratio measures the net worth of the reserve fund compared with the value of the loans FHA has insured.) In 2006, the reserve fund stood at 7%.

At the time, the agency’s auditor warned that if home prices continued to drop, FHA could run through the remainder of its reserves, forcing it to either seek a bailout from the Treasury Department or further increase the premiums it charges borrowers. The FHA doesn’t issue mortgages, but instead insures lenders against defaults.

Such a bailout could cost billions: Guyourko argues that the FHA is so undercapitalized that it would need at least $50 billion, even if the housing markets don’t deteriorate further. But even by more conservative measures, the agency would need at least $20 billion to meet the capital requirements mandated by Congress.

In early December, the House Financial Services Committee grilled Shaun Donovan, the Secretary of the U.S. Department of Housing Urban Development, over the possibility of a bailout. Donovan blamed FHA’s financial woes on loans made before 2009 and said that loans issued in recent years were experiencing a “dramatic decline in the rate of early payment default.” As a result of these healthier loans, he said the reserve fund would be able to return to the required 2% level in 2014.

Yet, Wharton’s Gyourko argues that the FHA has underestimated the risk of these more recent loans. Many of the new serious delinquencies were from loans issued in 2009 and 2010 and he projects there will be many more defaults to come.

Foreclosure free ride: 3 years, no payments

One reason is that many of the borrowers who took out FHA-backed mortgages during this time relied on the First-Time Homebuyer Tax Credit for down payments. A large percentage of these borrowers didn’t have enough cash for the small 3.5% down payment that FHA requires, let alone the money to make their ongoing mortgage payments, he said.

The FHA said that the vast majority of home buyers who claimed the tax credit used their own cash for down payments or borrowed from relatives and are therefore low risk.

Home prices will also play a key role in whether taxpayers will have to rescue the FHA, said Guy Cecala, publisher of Inside Mortgage Finance, a trade publication.

“Given that most FHA loans are made with a 3.5% down payment, most are underwater within a year after price declines,” he said.

Many FHA borrowers are teetering on the edge of foreclosure and further housing price declines will push many of those over, exposing the agency to more losses. “I think there will have to be a bailout over the next couple of years,” said Cecala.

The FHA claims its total liquid assets are $400 million higher than a year ago and home prices would have to fall 4% to 5% before the agency would need a bailout. It said it has also recognized expected losses and planned for them by raising upfront insurance premiums to bolster its assets.

Still, that might be cutting it close. Home prices are projected to fall another 3% to 4% in 2012 before stabilizing, according to forecasting firm Fiserv.

For all the FHA’s problems, however, it has filled a great need over the past few years, said Cecala. Low-income and first-time home buyers have relied on FHA loans to finance their purchases. Without the backing of the FHA, fewer homes would have been sold and prices would be even lower.

“The housing market would be in far worse shape than it is,” he said. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/DZtVvS8UEu8/index.htm

NEW YORK (CNNMoney) — Flippers, the real estate investors who buy homes on the cheap and quickly resell them at a profit, just got a reprieve from the Federal Housing Administration.

In an effort to help stabilize housing prices and unload some of the foreclosures that are flooding low-income communities, the mortgage insurer extended a waiver of its anti-flipping regulations through 2012.

The waiver, which was initially issued in 2010 and set to expire this month, suspends regulations that prohibit the agency from insuring mortgages used to purchase homes that are bought and resold in less than 90 days.

“This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight,” said Acting Federal Housing Administration Commissioner Carol Galante.

Low-income neighborhoods are particularly plagued by foreclosed homes that lower property values and act as magnets for crime and other social ills. Real estate flippers often rehab these damaged homes before reselling them, improving conditions for neighborhoods.

The FHA, which does not issue mortgages but insures them, is a primary player when it comes to mortgage lending in low-income communities. Many loans in these communities could not be issued without FHA backing.

The ban against flipping was initially put in place to prevent predatory flipping, in which homes are quickly resold at inflated prices to unsuspecting borrowers.

In order to qualify for the waiver, certain conditions must be met. The transaction must be “arms length” with no other relationship between seller and buyer.

Home price forecasts: Your local market tracked

In addition, if the new sale price is 20% or more above the previous selling price, the lender has to document and justify the increase and meet other conditions, such as making sure the home has been inspected.

Since the waiver went into effect in February of 2010, the FHA has insured more than 42,000 loans to purchase homes that were being resold within 90 days. These totaled more than $7 billion in mortgage principal. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/z6dPZJAy-JA/index.htm

Mitchell Barton’s parents, Curtis and Bridget, helped guide him through the minefield of first-time homebuying with good advice on how to shop for a house and by connecting him with a family friend who was an agent for Better Homes Gardens Real Estate.

“Most important, we provided the bulk of his down payment as a gift,” said Curtis, who works as a water quality inspector. “Because of our help, he qualified for the best interest rate, and his principal was substantially lower, both of which in turn made his monthly payments affordable.”

Mitch has a good job for a 27-year-old; he’s an engineer at FLIR Systems, a maker of night vision and infrared equipment. Still, he simply hasn’t had enough time to build up his savings. Without the $25,000 his parents came up with, he probably couldn’t have afforded the modest three-bedroom house he bought in suburban Portland.

His parents — who had gotten help from their parents 30 years ago to purchase their first home — were glad to help. “I don’t see this as anything unusual,” said Bridget. “It’s something that families should do if they can.”

Mitch said that he has always been close to his parents but, “this is a milestone in our relationship.” He added that he feels a firmer sense of responsibility and maturity and his parents are very confident that he will handle himself well.

“We know our son will continue to work and pay his bills on time, so it made sense to help him get started on building equity and building his life,” said Curtis.

NEXT: Remodeling help

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/npWsH_Ztp9U/index.html

NEW YORK (CNNMoney) — Housing markets, which had been slowly gathering strength, fell for the sixth straight month in October, down 1.2% compared with September and 3.4% a year ago.

The home price decline recorded by the SP/Case-Shiller 20-city index was disappointing in light of several other recent reports that painted a more positive housing market picture.

New home sales, existing home sales and home building have all recorded increases lately and mortgage interest rates are at record lows, giving homebuying an added boost.

The 20-city index has dropped every month since April and is off 1.9% over that period. Since the housing bust began in mid-2006, homes have lost nearly 33% of their value.

Peter Morici, a professor of economics at the University of Maryland, said home prices remain weak because demand for existing homes is soft. Many potential buyers are migrating to rental markets or buying new homes that had sat unsold for months.

According to Morici, the current home price levels represent a correction from inflated prices reached during the bubble.

“Prices are where they belong and that’s where they’ll stay,” he said.

Nineteen of the 20 cities posted declines in October, with Phoenix the only exception. Prices went up there 0.3% compared with September.

Midwest markets and the Atlanta metro area fared badly, with Atlanta prices down 5% in October following a 5.9% plunge in September.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/5ncuAy5-GDQ/index.htm

Richard M. Kovacevich is the retired Chairman CEO of Wells Fargo. William M. Isaac is Global Head of Financial Institutions at FTI Consulting and former Chairman of the FDIC. The views expressed are their own.

The recession of 2008, precipitated by the collapse of the subprime mortgage bubble, may be officially over, but economic growth remains anemic and is producing virtually no job growth. We must stimulate the moribund housing markets. Yet in the past three years, there has been no progress on the housing front, and Washington policymakers seem bereft of ideas for turning things around.

Congress’ latest idea is raising mortgage fees charged by Fannie Mae (FNMA, Fortune 500) and Freddie Mac (FMCC, Fortune 500) to pay for the payroll tax extension.

They argue this will eventually lead to getting the government out of the mortgage business.

It’s not clear how increasing fees charged by Fannie and Freddie will encourage the government to wind down these agencies. Moreover, raising mortgage fees in the midst of the worst housing slump since the Great Depression will not stimulate housing or job creation. We need a clear path for eliminating Fannie and Freddie over time.

Subprime mortgages have existed for decades. But they were a small percentage of the mortgage market (well under 10%), until Fannie and Freddie reduced credit standards to increase market share and meet low-income and minority home ownership targets mandated by Congress. By 2007, nearly 50% of all mortgages that originated in the U.S. were subprime, with Fannie, Freddie and other agencies guaranteeing about 70%.

Without these government guarantees, the subprime bubble and the resulting financial crisis would never have happened. Bank regulators and industry experts warned Congress for decades about Fannie and Freddie and their increasingly large and risky portfolios.

Because Congress failed to act, nearly the entire developed world is suffering from the mortgage-induced recession. Taxpayers are on the hook for hundreds of billions of dollars of losses at Fannie and Freddie — dwarfing the losses from banks, Wall Street, auto companies, insurance companies and all other bailouts combined.

Steps to Mortgage Reform

We don’t understand why reform of Freddie and Fannie is taking so long and what all the angst is about. The solution is straightforward: The public/private hybrid of Fannie and Freddie should be abolished, their existing business sold or liquidated, and the mortgage market privatized.

This can be done in an orderly way in a few easy steps.

Fannie’s and Freddie’s existing portfolio of mortgages should be sold at a rate of about $75 billion a year until it reaches zero.

The current $625,000 size limit on new mortgages guaranteed by Fannie and Freddie should be reduced by $100,000 per year, so that Fannie and Freddie would be out of the guarantee business within six years.

The liability for any outstanding guarantees would be managed by the current government conservatorship of Fannie and Freddie until they run off or are sold.

If the government still wants to be in the mortgage business for low-income families or minorities, it should be on budget and transparent. There already exists a government organization to do this — the Federal Housing Authority.

Some say this would put at risk the American dream of home ownership. We disagree. The United States is the only major country in the world where the government is heavily involved in the mortgage market. Yet, home ownership percentage in the United States is only slightly higher (a percent or two) than most other developed countries, while countries like Canada have higher percentages than the U.S.

Some speculate that without Fannie and Freddie, mortgage rates would skyrocket and the 30-year, fixed-rate mortgage would be a thing of the past. We disagree. Non-conventional or “jumbo” 30-year mortgages not guaranteed by Fannie and Freddie have existed for decades.

In the decade preceding the financial crisis, the interest rate on these jumbo non-conventional mortgages averaged just .25% higher than similar guaranteed mortgages, a difference of a little over $40 a month on a $200,000 mortgage. Shouldn’t Americans, like homeowners throughout the world, pay a tax-deductible $40 or so extra per month so taxpayers aren’t on the hook for hundreds of billions to bail out Fannie and Freddie?

It’s clear that we need to abolish the public/private mortgage model as represented by Fannie and Freddie. The U.S. mortgage market should be privatized, as it is in other developed countries.

It’s time for Congress to do what it should have done decades ago. Get the government out of the mortgage business so taxpayers are never again at risk. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/aV6ILd9TT1o/index.htm

Home building rose to its strongest level since spring of 2010 in November.

NEW YORK (CNNMoney) — Home building spiked up in November to the strongest level in almost two years, as record-low mortgage rates and a surge in apartment and condo construction lifted activity.

Housing starts shot up to an annual rate of 685,000 in the month, up 9.3% from October and 24.3% higher than a year earlier. Building activity easily topped predictions of 627,000 starts economists surveyed by Briefing.com were expecting.

Building permits, a closely-watched reading that is less affected by weather than actual starts, also shot up, rising 5.7% from October and 20.7% from the year before to 681,000 homes annually.

“By historical standards, homebuilding activity is still very depressed, but at least it appears to be on an established upward trend,” said Paul Diggle, property economist at Capital Economics.

More real estate news

Helping to lift building was the fact that the average rate for 30-year and 15-year fixed rate mortgages hit record lows last week, according to Freddie Mac. And the latest National Association of Home Builders’ survey released Monday also showed a pick-up in activity, with the best level of customer traffic since early 2008.

Both permits and starts were the strongest readings since the spring of 2010, the original deadline for a homebuyer tax credit that sparked a temporary rebound in building and home sales.

Joseph LaVorgna, chief U.S. economist for Deutsche Bank, said it’s important not to get too excited about a single month of strong building, particularly so far ahead of the spring selling season — a key period for the market. But he said the latest readings are encouraging.

“There has been a noticeable uptrend in several key housing metrics in the back half of this year, so even though we are downplaying the November data to some degree, it does appear that residential construction is finally beginning to rise from its post-recession lows,” he said in a note to clients Tuesday.

The gains in single-family home starts and permits were more modest than those for multi-family homes.

Starts of buildings with five or more housing units nearly tripled from a year ago, to an annual level of 230,000.

It was the greatest number of starts of units of that size since September 2008, the month the Lehman Brothers bankruptcy sparked a meltdown in financial markets. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/Hs1I8hrP9jw/index.htm

NEW YORK (CNNMoney) — The Securities and Exchange Commission charged six former executives of Fannie Mae and Freddie Mac with securities fraud on Friday for misrepresenting their holdings of high-risk mortgage loans.

The SEC is targeting three former executives of Freddie Mac, including chief executive officer Daniel Mudd, chief risk officer Enrico Dallavecchia and executive vice president of single-family mortgage business Thomas Lund.

The agency is also going after three former executives of Fannie Mae: CEO Richard Syron, executive vice president and chief business officer Patricia Cook and executive vice president for the single family guarantee business Donald Bisenius.

The SEC is seeking financial penalties against them, but did not specify an amount.

Mortgage finance giants Freddie Mac and Fannie Mae, which play a central role in the U.S. housing market by keeping the cost of mortgages lower, received the biggest federal bailout of the financial crisis.

In addition, top executives have drawn some $100 million in pay. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/RTieQfQN4BU/index.htm

NEW YORK (CNNMoney) — If you thought the U.S. housing market couldn’t get much worse, think again.

Far fewer homes have been sold over the past five years than previously estimated, the National Association of Realtors said Tuesday.

NAR said it plans to downwardly revise sales of previously-owned homes going back to 2007 during the release of its next existing home sales report on Dec. 21.

NAR’s existing home sales numbers, released monthly, are a closely followed gauge of the health of the housing market.

While NAR hasn’t revealed exactly how big the revision to home sales will be, the agency’s chief economist Lawrence Yun said the decrease will be “meaningful.”

“For the real estate business, this means the housing market’s downturn was deeper than what was initially thought,” Yun said.

Yun said the database NAR uses to track existing home sales, the Multiple Listing Service (MLS), has led the real estate agency to over-count existing home sales for several reasons.

The MLS database only includes home sales listed by realtors, and excludes homes listed by owners, providing a very narrow view of the market. And because more people are using realtors to list their homes instead of selling them independently, realtor-listed sales numbers have become artificially inflated, said Yun.

In addition, some of the assumptions NAR used in calculating its data have become outdated, since they were based on 2000 Census data.

First-time homebuyers guide

The MLS has also been expanding its geographic coverage, so it may have appeared that there were more home sales simply because data from new areas were starting to show up. Also because of this geographic expansion, the system has been double-counting sales of some homes that can be considered part of multiple regions.

“Colorado Springs has their own database, but because the Denver market is nearby they may also list that home in the Denver database, so when the home gets sold, both Denver and Colorado Springs will say sales rose — so that’s genuine double-counting,” said Yun.

Yun said NAR realized this upward “shift” in data during its most recent re-benchmarking process this year. With the help of the government, economists and other real estate groups, NAR has now taken these factors into account and will issue revised numbers on Dec. 21 at 10 a.m.

“There are multifaceted reasons why things were drifting upward in our database,” said Yun. “We have tried to adjust for all these factors so that we have a better understanding of total home sales in America.”

Yun emphasized that the revisions will have no impact on consumers because median home price data will not be revised. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/nLad2g3gNgE/index.htm

EagleView founder Chris Pershing changed how the roofing industry operates with a software breakthrough.

NEW YORK (CNNMoney) — Sometimes one bright idea — and a whole lot of work to implement it — can reshape an entire industry.

In 2006, roofing salesman David Carlson vented to his brother-in-law about his frustrations from climbing onto rooftops and manually measuring to give estimates on repair work. Measuring by hand is a tedious process. Plus, people fall off roofs.

Carlson’s brother-in-law, Chris Pershing, happened to be a software engineer. He did more than listen: Pershing set out to build a software program that would literally change the way the $30 billion roofing industry views America’s rooftops.

Today Pershing’s company, EagleView, uses aerial photography and 3-D modeling to produce on-demand reports for accurate measurements of almost every roof in the country. No ladder, no tape measurers and no perilous, time-consuming estimates.

“Having an Eagle View report has become an industry accepted standard,” says Kirk Belz, a partner at Mid-America Adjusting Services, an Ozark, Mo., company that investigates claims for national insurers.

EagleView’s reports, priced at $20 to $80 each, are now used by around 50,000 roofers and almost every single large insurance company. Sales are on track to hit $40 million this year, up from $1.4 million three years ago, and the 175-person company plans to hire another 40 to 50 sales and software people in the coming year.

Back in 2006, when Pershing first considered the idea of automating rooftop measurements, he was sure someone had already invented it. He hunted the Internet for software that used photographs to generate estimates but found nothing.

So he began experimenting with sites like Microsoft’s (MSFT, Fortune 500) Bing and Google (GOOG, Fortune 500) Earth, searching for satellite images. What he discovered surprised him: aerial photography, rather than satellite imagery, could provide better pictures and more accurate measurements.

“I thought there was certainly a huge opportunity out there,” says Pershing, 39.

Pershing studied one of his wife’s birdhouses, staring at the roof from different angles. He took snapshots in his head of those angles and then sketched various viewpoints of the roof. Over the next few months, he holed up at his computer on nights and weekends, developing software that would use algorithms to infer the size, shape, pitch and area of the roof.

He practiced his algorithms on a few addresses, including his own and his neighbors’. He even pulled up imagery of pyramids in Egypt, estimating the height of the pyramid to within a couple of bricks. He got the slope of his neighbor’s homes almost exactly.

By the end of 2007, Pershing quit his job making software for ultrasound machines and started EagleView in a small rented office outside Seattle. He convinced family and friends to invest $200,000 into his new venture and set out to buy rights to aerial photographs normally used by states, counties and the U.S. Geological Survey.

When Pershing began telling contractors and insurance claims adjustors about his technology, they were skeptical. The industry had for decades measured by hand.

“I thought, ‘There is no way,’” says Belz, the Missouri claims adjustor. But once a few big insurers embraced the technology, Belz and others began to follow.

Pershing hired tech veteran Chris Barrow to be CEO in 2008 and changed roles to become chief technology officer. Barrow then raised $6 million from investors.

“One of the smartest things Chris did was step away,” says Roger McOmber, an angel investor in Dallas. “It’s hard to do, but it’s that team mentality.”

Today, EagleView customers can order reports online or through a smartphone app and can get a PDF report delivered in an hour. A dozen competitors, including sites like GeoEstimator.com and Roofwalk.com, offer similar services. Despite the competition and the recession, EagleView’s sales grew at a 200% clip last year.

Belz, the claims adjustor, says he can process 25% more claims each day without ever sending an adjustor onto a roof — saving at least 45 minutes per job. “It really speeds the day up for adjustors,” he says. “And going onto the roof is one of the most dangerous parts of the job.”

The software also produces more precise estimates than workers with tape measurers, says James (Arry) Housch, who owns Arry’s Roofing Services Inc. in Tarpon Springs, Fla. Instead of handing a customer a piece of scratch paper with some numbers and a business card, Arry’s Roofing salesmen give potential customers a professional PDF report.

“It sets us apart from the competition,” Housch says. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/dLm0HunIH5U/index.htm

Robert Shiller, the man who spotted the two biggest bubbles of this century warns not to get swayed by celebrity.

FORTUNE — “My father, Benjamin Shiller, told me not to believe in authorities or celebrities — that society tends to imagine them as superhuman. It’s good advice. People are snowed by celebrities all the time. In academia people have this idea of achieving stardom — publishing in the best journals, being at the best university, writing on the hot topic everyone else is writing about. But that’s what my father told me not to do. He taught me that you have to pursue things that sound right to you.

“In 2004, when I wrote the second edition of my book Irrational Exuberance, I said in the preface I was worried that the boom in home prices might collapse, bring on bankruptcy in both households and businesses, and lead to a world recession. I remember thinking that this sounds kind of flaky — nobody else is saying this, I can’t prove it, this could be embarrassing. But I had learned from my father not to care what other people think. This was my book, and I believed this, so I just said it.”

Robert Shiller

Age: 65

Job experience: Yale University economist; author; co-creator of SP/Case-Shiller home price indices; co-founder and former chief economist of financial tech firm MacroMarkets; co-founder of Case-Shiller Weiss (now Fiserv Case-Shiller)

Claim to fame: Author of bestseller Irrational Exuberance; spotted both the Internet and housing bubbles early on.

This article is from the December 12, 2011 issue of Fortune. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/d97iTDrnIco/index.htm

JPMorgan Chase is among the firms targeted in the suit.

NEW YORK (CNNMoney) — The Massachusetts attorney general sued some of the nation’s biggest banks on Thursday, accusing them of “unlawful and deceptive conduct in the foreclosure process.”

Attorney General Martha Coakley said in a statement that Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citi (C, Fortune 500) and GMAC Mortgage are targeted in the suit, as is Mortgage Electronic Registration System Inc. (MERS) and its parent company.

The statement described the state court lawsuit as “the nation’s first comprehensive lawsuit against the five major national banks regarding the foreclosure crisis.”

“The AG’s lawsuit seeks accountability for the banks’ unlawful and deceptive conduct in the foreclosure process, including unlawful foreclosures, false documentation and robo-signing … and deceptive practices related to loan modifications,” the statement said.

MERS runs a database created in the 1990s to digitize and centralize the paperwork surrounding the bundling and selling of the loans.

The Massachusetts suit alleges that the database was used by the big banks to transfer ownership of mortgage debt without paying government registration fees and properly recording the transactions. The system also concealed the identities of the holders of mortgage debt from borrowers, the suit claims.

MERSCORP, parent company for Mortgage Electronic Registration System Inc., said the Massachusetts complaint “hangs on ambiguous language” and “has no applicability to MERS’ business model.”

Fannie Mae, banks halt foreclosures for the holidays

The banks, meanwhile, say negotiations they are conducting with a group of state attorneys general toward a settlement over their handling of foreclosures are a more promising means of resolving the issue than lawsuits.

Bank of America spokesman Lawrence Grayson said the firm believes “that collaborative resolution rather than continued litigation will most quickly heal the housing market and help drive economic recovery.”

Chase echoed those comments, saying it was “disappointed” with the suit, as did GMAC Mortgage, which said it would “vigorously defend” its actions in court.

Citi said in a statement that it had not yet reviewed the lawsuit, but that the bank believes “we have operated appropriately in compliance with existing laws.” Wells Fargo also denied the allegations, adding that the suit “will do little to help Massachusetts homeowners or the recovery of the housing economy” in the state.

Settlement talks fraying: Coakley told reporters Thursday that the suit had come about in part because settlement talks with the banks, which have dragged on for more than a year, appear unlikely to yield a fair result.

“It is over a year later, and I believe that the banks have failed to offer meaningful and enforceable relief to homeowners,” she said. “They’ve had more than a year to show they’ve understood their role and the need to show accountability for this economic mess, and they’ve failed to do so.”

Attorneys general from California, New York, Delaware and Nevada have also distanced themselves from the settlement talks and are pursuing their own investigations.

Will FHA be the next big government bailout?

The talks are stalled at present, but have focused on a settlement in the range of $20-25 billion in total from the firms involved in exchange for release from liability for all conduct related to foreclosures, according to sources familiar with the matter. Of this total, roughly $10-15 billion would come in the form of credit for loan modifications.

Iowa Attorney General Thomas Miller, who is coordinating talks on behalf of the states, said in a statement Thursday that Coakley had pledged to “evaluate the joint state-federal settlement we’re negotiating, which we hope to reach soon.”

“We’re optimistic that we’ll settle on terms that will be in the interests of Massachusetts,” he added. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/P2wxliCb2Ng/index.htm

JPMorgan Chase is among the firms targeted in the suit.

NEW YORK (CNNMoney) — The Massachusetts attorney general on Thursday sued some of the nation’s biggest banks, accusing them of “unlawful and deceptive conduct in the foreclosure process.”

Attorney General Martha Coakley said in a statement that Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citi (C, Fortune 500), and GMAC Mortgage are targeted in the suit, as is Mortgage Electronic Registration System Inc. and its parent company.

The statement described the state court lawsuit as “the nation’s first comprehensive lawsuit against the five major national banks regarding the foreclosure crisis.”

“The AG’s lawsuit seeks accountability for the banks’ unlawful and deceptive conduct in the foreclosure process, including unlawful foreclosures, false documentation and robo-signing, MERS, and deceptive practices related to loan modifications,” the statement said.

Citi said in a statement that it had not yet reviewed the lawsuit, but that the bank believes “we have operated appropriately in compliance with existing laws.”

Representatives of the other firms in the lawsuit did not immediately return requests for comment. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/P2wxliCb2Ng/index.htm

Bill McLaughlinn is fighting cancer and has lost his eligibility for a government program to help defray energy costs.

NEW YORK (CNNMoney) — Bill McLaughlin is bracing himself for a tough winter. He and his wife, Cindy, live in Brewer, Maine and neither of them are working. Bill, who’s 59, is disabled and Cindy lost her job more than a year ago. And now the cold is setting in.

During any winter in Maine, paying for the oil that heats their home is a big expense. But this winter, it will be especially taxing.

The price of heating the average home with oil is expected to jump 10% this year to an average of $2,535 over the winter heating season (October 1 through March 31), according to the U.S. Energy Information Administration (EIA). That’s 45% higher than just two years ago, when the average bill was just $1,752.

Even while keeping the thermostat low, the McLaughlins burn about 750 gallons of oil a year. At about $3.50 a gallon, that’s more than $2,600.

“We’re in a real bind; There’s no safety net,” said Bill. “We’ve run through all our savings and if we pay for heat, we have less money for food and medicine. We don’t even have our car out on the road. My wife depends on friends when she has to go someplace.”

The McLaughlins can partly blame their soaring heating bills on political unrest in Libya, where the oil supply has been greatly reduced, causing oil prices across the globe to soar, explained Neil Gamson, an economist and forecaster for the EIA.

The couple also lives in one of the few regions in the country that is still highly dependent on oil as a home heating fuel. While only about 8.2 million homes still use heating oil, according to Census Bureau data, a vast majority of those homes are in the Northeast, where long, cold winters require greater fuel consumption.

In this region, more than one in every four homes relies on heating oil, the EIA reports, and many don’t have the option to switch to cheaper fuels, such as natural gas.

“In some places, the natural gas infrastructure is just not there,” said Gamson. “There are no gas lines in some older Northeastern cities.”

Subsidy cuts: For many cash-strapped Americans, the increase in fuel costs is coming at the same time when funding for the government’s Low Income Home Energy Assistance Program, or LIHEAP, which subsidized energy bills for 9 million households last year, may get slashed almost in half.

In mid-November, President Obama signed a budget bill authorizing a 47% cut in LIHEAP’s funding to $2.5 billion, according to a spokeswoman for the Administration for Children Families of the U.S. Department of Health and Human Services (HHS), which administers the program.

More than 1 in 5 Americans are economically insecure

The final funding levels for LIHEAP will likely be taken up later this year or in early 2012, said Ed Gilman, a spokesman for Maine Congressman, Mike Michaud. But the cuts have already begun.

The McLaughlins have lost their LIHEAP funding. “We were told that we were ‘over income’” said Cindy. “Our income did not change from last year and last year we qualified. We were informed that they lowered the guidelines.”

That’s despite the fact that Bill hasn’t worked in six years, since a series of ailments forced him to stop working at his job in concert lighting and sound. A year ago, he was diagnosed with small cell cancer. Chemotherapy has weakened his immune system and his wife is afraid he could catch pneumonia in the cold house this winter.

Congressman Michaud, has posted many other stories of the hardships faced by Maine residents who have lost LIHEAP funding on his Facebook page.

The new faces of poverty

One woman wrote that her 85-year-old mom and 86-year-old dad, a World War II Marine veteran, were told they would not be getting any assistance this year even though they desperately need it.

Another, a hospice social worker, said she was appalled as a patient shivered through the last few days of her life because LIHEAP could only cover a small portion of her heating expenses.

Less reliance on oil: One bright spot in all of this is that the rising price of oil affects far fewer households than it did in the past.

Most homeowners have already transitioned to natural gas, with less than 10% of all households still burning oil. That percentage is expected to drop even further as the cheaper fuel option becomes available in more towns, said Gamson.

For those who heat their homes with gas, prices are projected to be stable over the next few years. There’s a glut of natural gas available and more is coming on line as new sources, like the Marcellus Shale in Pennsylvania and New York, open up for development.

The EIA projected gas prices will be just 2.2% higher during this winter season and nearly 18% lower than two years ago. The average homeowner will pay only about $732 to heat their home with gas this season.

I’m home! Adult children move back in

Electricity rates are also expected to stay flat. Heating homes with electricity will cost an average of $954 this winter, down $8 from last year.

But those kinds of energy bills are a pipedream for people like the Bill McLaughlin. “I don’t want anything extra,” he said. “I just want to be able to go to bed at night with the temperature set at 60 degrees.”

For information on how to apply for LIHEAP, go to the HHS pages at http://www.acf.hhs.gov/programs/ocs/liheap/brochure/brochure.html. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/gFWBrucUUHY/index.htm

The Empire State Building looms over the Manhattan skyline in September.

NEW YORK (CNNMoney) — The thousands of tourists who flock to the Empire State Building every year may soon be able to buy a chunk of it for themselves.

The iconic New York skyscraper, along with the One Grand Central Place building on East 42nd Street and another Manhattan property on West 57th Street, may soon become part of a public company, according to documents filed with the Securities and Exchange Commission on Tuesday by Malkin Holdings LLC, which controls the properties.

The news was first reported by the New York Times.

The filings said Malkin Holdings “has embarked on a course of action that could result in” the properties becoming part of a real estate investment trust, which would be open to public investment following an IPO. The filings offered no further information, but said more details would be forthcoming when additional documents are filed with the SEC in about three months.

A spokeswoman for Malkin Holdings said the firm had no further comment.

The Empire State Building, completed in 1931, stretches 102 stories high and has 70 elevators. It has undergone significant renovations in recent years, its lobby restored to its original Art Deco style in 2009 and its 6,514 windows retrofitted last year to improve energy efficiency. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/08vY7TkBaJU/index.htm

NEW YORK (CNNMoney) — National home prices declined on an annual basis in the third quarter, to levels last seen eight years ago — but the rate of decline slowed from the prior three months, according to a report issued Tuesday.

Home prices dropped 3.9% year-over-year during the three months ended Sept. 30, according to the SP/Case-Shiller national home price index. That was an improvement in the annual rate of change; during the second quarter of the year, prices were down 5.8%.

Prices were nearly flat over the summer, gaining just 0.1% compared with three months earlier.

A separate SP/Case-Shiller index covering 20 major cities fell 3.6% year-over-year. The U.S. average home is selling for about the same price it fetched back in 2003.

“Over the last year, home prices in most cities drifted lower,” said David Blitzer, a spokesman for SP. “Any chance for a sustained recovery will probably need a stronger economy.”

The report was a disappointment. The year-over-year drop of 3.6% in the 20-city index was steeper than a consensus of experts from Briefing.com was projecting. They has estimated a 3% decline.

Other housing market metrics had improved lately. New-home sales edged up in October as did existing home sales. Building permits have risen as well.

But, after many months of decline, foreclosures have been on the rise. If they start to flood the market again, they will drive home prices down.

Several cities have struggled mightily over the past 12 months, with prices down 9.8% in Metropolitan Atlanta over that period. Minneapolis prices were down 7.4% and Las Vegas prices dropped 7.3%. Only Detroit, up 3.7%, and Washington, 1% higher, gained over the past 12 months. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/OV96-xfXucY/index.htm

NEW YORK (CNNMoney) — New-home sales edged slightly higher last month, as more Americans hunted for bargains in the struggling housing market.

The Census Bureau reported an annual sales rate of 307,000 new homes last month, up 1.3% from a downwardly revised rate of 303,000 homes in September. Compared to new home sales a year ago, October sales were up 8.9%.

The 307,000 rate fell just short of expectations. Economists had forecast a sales rate of 312,000 new homes, according to consensus estimates from Briefing.com.

While the higher rate in October indicated that consumers are chipping away at the huge inventory of homes on the market, there’s still a long way to go.

There were about 162,000 new homes on the market by the end of October. That represented a 6.3-month supply at the current rate of sale. The median sale price was $212,300.

Housing in 2012: Things are looking up

Last week, a separate report showed that more house-hunters are also eyeing previously owned homes. Sales of existing homes rose 1.4% in October, slightly more than economists had expected, according to the report.

At the same time, an increasing number of homebuilders are making plans to build houses and breaking ground on new construction, with building permits and housing starts climbing in October, according to a report released earlier this month.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/J_KbEpBiz-s/index.htm

NEW YORK (CNNMoney) — Homebuyers scooped up more previously owned homes in October, slowly putting a dent in the huge inventory on the market, an industry report showed Monday.

Sales of existing homes rose 1.4% last month to an annual rate of 4.97 million homes, up from a downwardly revised 4.90 million homes in September, the National Association of Realtors reported Monday.

That was higher than expected. Economists polled by Briefing.com had expected an annual rate of 4.85 million homes in October.

Compared to a year ago, the rate of existing home sales has jumped 13.5%, from 4.38 million units.

Continued gains in home sales have lightened up the inventory of homes on the market, the report showed. Total housing inventory at the end of October slipped 2.2% to 3.33 million existing homes for sale, representing an 8-month supply at the current sales pace. That’s down from an 8.3-month supply in September, and continues an ongoing downward trend since hitting a record high of 4.58 million in July 2008.

Housing in 2012: Things are looking up

Foreclosures and short sales dropped to 28% of sales in October, down from 30% in September.

Even as the stockpile of homes on the market eases, housing prices are continuing to dip. The median price for an existing home was $162,500 in October, 4.7% lower than a year ago.

That means it’s still a great buying opportunity for house hunters. But one of the problems preventing the housing market from making a full recovery is that many of the homebuyers attempting to buy houses are seeing their mortgage applications rejected, said NAR chief economist Lawrence Yun.

Contract failures, which include declined mortgage applications or failures in loan underwriting because of problems including appraised values coming in below the negotiated price, jumped to 33% in October, up from 18% in September.

“Home sales have been stuck in a narrow range despite several improving factors that generally lead to higher home sales, such as job creation, rising rents and high affordability conditions,” said Yun.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/KgV5Qxg0vkw/index.htm

Steady decline in foreclosure filings comes to end with jump in third quarter, according to the Mortgage Bankers Association. But that’s despite a drop in delinquencies.

NEW YORK (CNNMoney) — Home foreclosure filings rose in the third quarter, as recent declines in the rate of new foreclosures came to an end, according to an industry trade group.

The Mortgage Bankers Association reported that foreclosures started for 1.08% of outstanding home loans, up from 0.96% in the second quarter.

The jump in foreclosures came even as the rate of homeowners who are delinquent on their mortgages fell. Those only 30 days late making payments improved to 3.19%, the lowest level since the second quarter of 2007. And those 60 and 90 days or more late in making payments also declined, bringing the percentage of delinquent loans not in foreclosure to under 8%.

But the MBA said increased foreclosure filings by several big lenders led to the upturn in homes in foreclosure.

“While the delinquency picture changed for the better in the third quarter, the foreclosure data indicated that we are not out of the woods yet,” said Michael Fratantoni, MBA’s vice president of research and economics.

Fratantoni said he couldn’t speculate on what caused the turn by those major servicers. But other experts said some of the increase could be due to lenders working through problems with their loan documentation that had put a brake on some foreclosures.

The recent foreclosure increases are a sign that filings are “coming out of the rain delay we’ve been in for the past year as lenders corrected foreclosure paperwork and processing problems,” said James Saccacio, CEO of RealtyTrac, a private service that also tracks foreclosure activity.

A year ago, several major banks and mortgage servicers — including Ally, Bank of America (BAC, Fortune 500), and JPMorgan Chase (JPM, Fortune 500) — acknowledged problems with paperwork they were using to file foreclosure actions against delinquent homeowners. They announced various changes in practices and temporary moratoriums in new filings while they worked through the problems.

But Fratantoni said the moratoriums tended to slow foreclosure sales being completed more than it slowed new filings.

It’s also possible that some lenders are seeing some improvement in the housing market, ironically giving them greater incentive to start the foreclosure process.

For example, some experts say there have been new signs of life recently in the Las Vegas real estate market. Nevada had the highest rate of foreclosure filings in the quarter, and one of the biggest increases, as new filings hit nearly 2.5% of loans there. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/bIk9jhI2ZfY/index.htm

NEW YORK (CNNMoney) — Permits for housing construction climbed in October, signaling an uptick in optimism among homebuilders.

The number of permits for future housing construction jumped to a seasonally adjusted annual rate of 653,000 last month, up 10.9% from the revised rate of 589,000 in September, the Commerce Department said.

That was much higher than expected, with economists surveyed by Briefing.com looking for a 603,000 permit rate.

But until builders actually start building, this big increase in permits may indicate that builders are hedging their bets and may not translate into an actual increase in construction, said Doug Roberts, chief investment strategist for Channel Capital Research.

“Getting a permit and actually beginning to build a house is the difference between getting engaged and getting married,” said Roberts. “What you have is builders thinking the market might be coming back, so they’re getting permits to make sure they are ready to build if it does.”

Housing in 2012: Things are looking up

In fact, the physical construction of new homes ticked slightly lower during the month, the government report showed.

Housing starts, the number of new homes being built, edged down 0.3% to an annual rate of 628,000 units in October, the Commerce Department said. That’s down from a revised 630,000 in September.

“Builders thought they were going to be able to get out there and get some houses done, but then they found that they didn’t necessarily want to make the stone cold commitment and want to put anything in the ground,” Roberts said. “The demand wasn’t there, so they weren’t willing to bet a serious amount of money.”

But economists had expected a much lower annual rate of 604,000 units, according to consensus estimates from Briefing.com.

If the glut of foreclosures starts thinning and demand picks up, the jump in permits could translate into a rise in new construction in coming months.

“But that’s a big ‘if’,” Roberts said.

Still, permits and construction have both increased significantly from a year ago. Housing starts are up 16.5% from the same month a year ago, and building permits are up 17.7%. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/Dnew7mjbKC4/index.htm

(MONEY Magazine) — Last year the economic forecasting firm Fiserv predicted that home values would sink around 5% in 2011, and that prices in three-quarters of the nation’s major metro areas would fall. The bad news is, the firm wasn’t that far off the mark. The good news: In the coming year, Fiserv thinks 95% of the 384 metro areas it tracks will see prices rise.

Don’t expect the market to move much beyond first gear, though. The median expectation among more than 100 economists and real estate pros surveyed by MacroMarkets is that home values will inch ahead by a mere 0.25%, compared to their 2011 median forecast decline of 2.8%. They also foresee annualized gains through 2015 of just 1.1%, as the real estate market slowly works its way through a mountain of foreclosures.

Those foreclosures will continue to weigh on the market. According to Core- Logic, there are 5.4 million homes that are for sale or part of the market’s “shadow inventory” — which includes bank-owned properties, homes in the foreclosure pipeline that haven’t hit the market yet, or properties where owners are seriously behind on payments.

To put that in perspective, Freddie Mac forecasts that only 4.8 million homes will be purchased in all of 2012. A market with six months of inventory is considered healthy. That there’s more than a year’s worth of housing stock now tells you what a tough slog this will still be. “It’s analogous to a flood,” says Mark Fleming, CoreLogic’s chief economist. “The water is very deep in the living room, but it’s no longer getting deeper and is starting to recede.

Helping that process along will be low-interest-rate mortgages that are expected to remain cheap. Jay Brinkmann, chief economist at the Mortgage Bankers Association, says the 4.2% rate on a 30-year fixed rate in late October might not last long. Still, he expects the 30-year fixed mortgage rate to stay below 5% throughout 2012.

The action plan: It will pay to think small — as in reduce your mortgage bills and focus on modest homes.

Buyers: Downsize the dream. For those gearing up to make a purchase, 2012 could be a great opportunity, what with cheap prices, low borrowing rates, and little competition among prospective bidders.

Before you take the plunge, remember that the price you pay matters, as does your ability to easily resell that home down the road.

Make Money in 2012: Jobs

This means it’s best to focus on smaller properties in your area near restaurants and retail. McMansions of at least 2,600 square feet, which were the ideal in the boom years, are coveted by a mere 18% of households today, according to a recent survey by Trulia. And that figure could fall even more.

A separate survey by the National Association of Home Builders found that home-construction firms expect U.S. houses to average 2,152 square feet in 2015 — down 10% from last year.

Some of this is attributable to the lingering effects of the past recession, which has eaten into housing budgets. But there’s also a permanent change at play. “Baby boomers are trading down. They don’t need the McMansion, and they don’t want to drive as much,” says Trulia chief economist Jed Kolko.

Sellers: Price it right. The longer you can wait for prices to stabilize in your area and for demand to pick up, the less likely you’ll need to entertain low-ball offers. If you have to make a move in 2012, though, the trick will be to price your home correctly out of the gate.

According to a recent national survey of real estate agents, 75% of homeowners believe their house is worth more than what agents put the fair market value at, and nearly one in two homeowners still overestimate their home’s value by more than 10%.

Meanwhile, Trulia reports that about one in four homes in its database has gone through at least one price reduction, and the average price cut for those homes is 8%.

Joe Magdziarz, president of the Appraisal Institute, says you and your agent should stick with comparable sales data just within the past 90 days, as that’s what lenders expect appraisers to use.

What to do when mom and dad move in

If you don’t trust your agent’s recommendation, shell out $300 to $400 for an outside appraisal. That will be money well spent if it pushes you to list your home in sync with current market valuations and you sell faster.

Owners: Shorten your loan. Refinancing your old mortgage to a new fixed-rate loan could have you smiling for years to come. If there’s any chance you can refinance into a 15-year loan, go for it; the 3.45% rate in late October was near an all-time low. On a $250,000 mortgage, going from a 30-year mortgage at 4.2% to a 15-year loan charging 3.45% would save you $120,000 in interest over the life of the loan.

What if the added $560 monthly payment is too steep to handle? Shop for a 20-year loan. The rate is likely to be only slightly less than on a 30-year loan, but the faster payback will save you in the long run.

Can’t refinance because you don’t have the 20% equity lenders typically demand these days? As long as you plan on being in your home for at least five years, look into a cash-in refinancing, where you bring some money to the closing table to push up your equity.

“If you can use cash that doesn’t eat into your emergency savings, this makes a lot of sense,” notes Michigan financial planner Gary Gilgen. “I’d rather have that money get my mortgage lower than have it sitting in the bank earning less than 1%.” 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/RQBhmwrxc7E/index.htm

Historic increases in farmland prices seen in parts of the Midwest.

NEW YORK (CNNMoney) — Agricultural land value is soaring in the Midwest, with parts of the region surging 25% from last year, according to two recent Federal Reserve surveys. The jump is the highest increase in three decades.

Record farmland prices are also being reported in the northern Plains.

Surveys released by the Kansas City and Chicago Federal Reserves Tuesday find that despite a struggling U.S. housing market, agricultural land in their districts is booming. And the run-up in prices may have yet to peak, they said.

“District farmland values surged to a record high in the third quarter,” the Kansas City survey said. “Cropland values rose more than 25 percent over the past year, and ranchland values increased 14 percent.”

In particular, Nebraska experienced exceptionally strong gains in the Kansas City District due to bumper crops — especially productive seasons for certain crops — reporting a roughly 40% rise in farmland prices from one year ago.

More real estate news

The surveys indicate that good credit conditions, successful harvests, and elevated levels of farming income helped to contribute to this large surge in an already strong agricultural property market.

According to the Chicago Fed, farmland values in its district had their largest increase since 1977, jumping 7% from the previous quarter.

Iowa farmland prices led the Chicago Fed’s district, jumping 31% from last year’s 3rd quarter.

However, not every state in the region had such historic success.

The southern Plains, Oklahoma in particular, saw more modest increases — mainly due to devastating droughts, affecting yields from crops and livestock.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/0Sougb6CVfU/index.htm

NEW YORK (CNNMoney) — Continued trouble in the housing market has further eroded the Federal Housing Administration’s reserves, leaving it with a very thin cushion to protect it against future financial losses.

And should housing values continue to plummet, the agency may have to turn to taxpayers for a bailout, according to its annual report, which was released Tuesday.

The agency’s reserves fell to 0.24% in fiscal 2011, down from 0.5% the year earlier, according to independent estimates in the report. This ratio measures the net worth of the reserve fund compared with the value of the loans FHA has insured.

If home prices continue to drop in the coming year, the agency’s losses could exceed its reserves, forcing it to either seek a bailout from the Treasury Department or once again increase the premiums it charges borrowers.

Agency officials, however, downplayed the risk of it needing a government bailout. They pointed to forecasts from Moody’s Analytics, which call for home prices to rise 1.2% in fiscal 2012 under its baseline scenario.

“It would take a very significant decline in home prices for the portfolio to require any additional support,” said Carol Galante, FHA’s acting commissioner.

The report also said that while there is a close to 50% chance that the losses on the agency’s current portfolio could exceed its current cushion, it said the reserve fund will be bolstered by the new loans FHA insures in the coming year.

In fact, reserves are expected to return to 2% under the actuaries’ baseline scenario, which calls for home prices to rise over the next three years. That would put it within the threshold mandated by Congress.

Outside experts, however, say they continue to worry about the agency’s fiscal soundness, especially since it has insured hundreds of billions of new loans in the past three years. Most of these carried very small down payments.

“To most observers in the mortgage industry that means a considerable amount of risk, particularly if housing prices continue to fall,” said Guy Cecala, publisher of Inside Mortgage Finance, an industry publication.

The agency may also be underestimating how far underwater many of its borrowers are, as well as other risks, said Joseph Gyourko, a real estate professor at the University of Pennsylvania’s Wharton School. He estimates the agency could face losses of between $50 and $100 billion in coming years and will require funding from the federal government.

The FHA had skyrocketed in popularity during the housing meltdown since it backstops banks if borrowers stop paying and requires buyers to put down only 3.5% — although they also pay higher insurance premiums.

Real estate moguls in the making

But FHA also saw its delinquencies balloon, forcing it to raise its premiums and increase its average credit score, which topped 700 for the first time in fiscal 2011. Most of the agency’s problems stem from the loans it insured prior to the middle of 2009. These independent experts expect losses from these older loans to eventually total more than $26 billion.

The agency’s annual report comes as Congress debates whether to once again increase the limit on loans FHA insures. That level fell to $625,000 after being hiked to as much as $729,500 during the housing crisis.

At the same time, fewer buyers are turning to FHA-insured loans, the report found.

The agency insured 15% of home purchases in fiscal 2011, down from 19% in fiscal 2010 and 2009, according to the agency’s annual report to Congress, released Tuesday. The cause for the drop-off was twofold: fewer people were buying homes and the agency raised its insurance premiums, making it a less attractive option.

The FHA doesn’t mind that it is becoming less popular since it signals the revival of the private mortgage market, Galante said.

“We hope to see it continue,” she said. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/_x1Dm9UJ-do/index.htm

You may be sleeping in a cliff-top yurt under the stars, but it’s a far cry from camping. The tent-like rooms all have wood floors, plush queen-sized beds and French doors that open to decks overlooking the ocean. Plus the hotel offers a heated pool, outdoor sushi bar and morning yoga sessions free of charge.

NEXT: Harlingen Harbour Crane

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/7gmYOHuZ64U/index.html

NEW YORK (CNNMoney) — Losses widened at mortgage giant Fannie Mae in the third quarter, forcing the government-controlled firm to request another $7.8 billion from the Treasury Department.

The company reported Tuesday a net loss of $5.1 billion, compared to a net loss of $2.9 billion in the second quarter. A year ago, Fannie Mae reported a net loss of $1.3 billion.

The current quarter’s loss was driven mainly by continued delinquency issues in mortgages it had purchased or guaranteed before 2009. Additionally, Fannie Mae suffered from an increase in expenses related to foreclosed properties. Declining interest rates also contributed to the company’s losses.

Fannie Mae’s (FNMA, Fortune 500) latest request for Treasury funding brings its total bailout to $112.6 billion. This will require an annualized dividend payment to the government of $11.3 billion, more than the company has ever earned in annual net income.

Millions of homeowners eligible for foreclosure review

Last week, Fannie Mae’s twin, Freddie Mac, asked the government for an additional $6 billion, after reporting a $4.4 billion quarterly loss. It has now received $72.2 billion from the Treasury Department.

Federal regulators put Fannie Mae and Freddie Mac (FMCC, Fortune 500) into conservatorship during the financial meltdown in September 2008. The two companies now depend on government help to cover losses on the mortgages they own or guarantee.

But they remain a vital source of liquidity to the American housing market. It’s estimated that the two firms, along with the smaller Ginnie Mae, have collectively guaranteed more than 80% of the single-family mortgages originated since the start of 2009.

On Monday, the Federal Housing Finance Agency, which regulates the firms, said it estimates that the net cost of the bailouts through 2014 will be about $124 billion, down about 19% from its estimate a year ago.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/Tsn4Tyz0blQ/index.htm

NEW YORK (CNNMoney) — Sales of new homes, a benchmark indicator both for the housing market and the overall economy, rose slightly but remained slow in September.

Sales reached a 313,000 annual rate in September, 5.7% more sales than the revised estimate for August, according to a monthly report from the Census Bureau released Wednesday. But sales were off 0.9% compared with 12 months earlier.

New-home sales have been hovering around the 300,000 mark for many months, a shadow of the activity of the boom years, when monthly sales peaked at an annual rate of 1.4 million units.

There were about 163,000 new homes on the market by the end of September. That represented a 6.2 month supply at the current rate of sale. The median sale price was $204,400. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/KEYabiDg_Uk/index.htm

NEW YORK (CNNMoney) — Sales of new homes, a benchmark indicator both for the housing market and the overall economy, rose slightly but remained slow in September.

Sales reached a 313,000 annual rate in September, 5.7% more sales than the revised estimate for August, according to a monthly report from the Census Bureau released Wednesday. But sales were off 0.9% compared with 12 months earlier.

New-home sales have been hovering around the 300,000 mark for many months, a shadow of the activity of the boom years, when monthly sales peaked at an annual rate of 1.4 million units.

There were about 163,000 new homes on the market by the end of September. That represented a 6.2 month supply at the current rate of sale. The median sale price was $204,400. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/KEYabiDg_Uk/index.htm

NEW YORK (CNNMoney) — Home prices continued a winning streak in August, the fifth straight month of price gains, but remain lower on a year-over-year basis.

A gauge of home prices featuring 20 major cities, the SP/Case Shiller index, reported Tuesday that prices rose 0.2% in August but were still down 3.8% year over year.

“Even though the 2012 rates are improving, national home prices are still below where they were a year ago,” said David Blitzer, a spokesman for SP.

Overall, the market is treading water and there doesn’t seem to be any reason to suspect that’s going to change soon.

“As long as the economy remains weak, foreclosures are still a problem and lending standards stay stringent, we’re not going to see much movement in home prices,” said Mike Larson, a real estate analyst for Weiss Research.

“You just haven’t gotten yet the rocket fuel needed to send housing soaring again,” he said.

Among individual metro areas, Washington saw the biggest gain — 1.6% in August. Detroit and Chicago were close behind at 1.4%. In the past 12 months, Washington prices have gone up 0.3%. In Detroit prices were up 2.4% since August 2010, more than any other area.

The Atlanta metro area recorded the steepest decline, down 2.4% for the month. Year-over-year prices were off 6.3%. Minneapolis home prices recorded the worst 12-month drop of 8.5%.

The home price report comes on the heels of changes in the Home Affordable Refinance Program (HARP) announced Monday by the Obama administration. The changes will enable many homeowners to refinance high-interest mortgages more easily, making their monthly payments more affordable. The plan should enable some to avoid default.

Ed Mermelstein, a New York-based real estate attorney, broker and developer, doubts that the HARP changes will have much impact on home prices or sales.

“The economy and jobs have to come back. That’s what’s going to help the housing market,” he said.

Larson pointed out that even if they work as planned, HARP’s main focus is helping existing homeowners stay in their homes; it won’t spur new sales.

Newport said he thinks that housing market weakness will continue improving.

How to rescue the housing market: foreclosures

“The key reason is that more distressed homes are coming onto the market and will be selling,” he said. “That tends to drag home prices down.”

Fiserv, which provides real estate financial analytics to industry, is projecting a further home price decline of 3.6% through the end of June 2012.

If that forecast comes true, it would mean home prices will plumb a new, post-bubble bottom over the next nine months, down 34% from the mid-2006 peak. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/8oAAPWkFbjA/index.htm

President Obama is expanding his refinancing program, but it won’t do much for the housing market.

NEW YORK (CNNMoney) — It might get easier for some homeowners to refinance their mortgages, but that won’t do much to help the broader housing market.

The Obama administration Monday announced changes to its refinancing program to allow more homeowners who are current on their loans to take advantage of today’s super-low mortgage rates.

The program is being touted as a way to help stabilize the housing market and stimulate the economy. But without addressing distressed homeowners and helping to clear the foreclosure glut, the effects will likely be limited, experts said.

“I would call it much to do about nothing,” said John Burns, head of John Burns Real Estate Consulting. “It will help in such a small way, it’s almost meaningless.”

Designed to allow those who are current with their payments but have little or no equity in their home to secure lower mortgage rates, the president’s Home Affordable Refinance Program has helped only 894,000 borrowers since the spring of 2009. The administration had originally hoped that up to 5 million homeowners would benefit.

To spur take up, the administration is now allowing more people to participate, as opposed to limiting it to borrowers whose loans are no more than 25% larger than their homes’ value. It is also eliminating various fees and appraisal requirements, as well as extending the program for another 18 months.

And perhaps, most significantly, it will ease banks’ liability to repurchase the loans if the borrower defaults. This should increase competition among banks to refinance more homeowners in good standing, administration officials said.

Up to another one million homeowners may now qualify, according to the administration. The number could be as high as 1.6 million, according to Moody’s Analytics.

Responsible homeowners left out in the cold

The announcement is the first of a series of measures President Obama plans to implement to spur the economy without Congressional approval. With his American Jobs Act bogged down in politics and not likely to pass, the president is looking for alternate ways to stabilize the nation’s financial house.

But the administration acknowledges that increasing refinancing is not a silver bullet to aid the ailing housing market.

“This is only one piece of a broader strategy to help the housing market,” said Housing Secretary Shaun Donovan, citing federal efforts to assist those who are delinquent or unemployed.

The move could help some homeowners who are struggling to stay current with their payments by reducing their monthly obligation by a few hundred dollars. The administration expects borrowers to save about $2,500 a year, on average.

However, it fails to get at the root cause of the housing market’s problems, which is the 3.5 million homeowners who are either in foreclosure or at least four months behind, said Celia Chen, senior director with Moody’s. Preventing “a few households” from falling behind will be of marginal help.

The effort really is an economic stimulus program, experts said. By reducing homeowners’ monthly payments, it will allow them to spend money on other things and spur demand.

“Hopefully, they’ll be going out shopping instead, which the economy does need now,” Chen said. “Any boost will have a positive impact.”

Not everyone, however, will benefit from the program. Mortgage investors will see the value of securities comprised of higher-rate loans reduced once they are refinanced. These investors, in turn, will have less money to spend.

“The benefit to the economy may be outweighed by losses to investors,” said Mahesh Swaminathan, mortgage strategist with Credit Suisse. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/h_RZTUyU4Zg/index.htm

NEW YORK (CNNMoney) — President Obama will announce changes in the government’s Home Affordable Refinance Program (HARP) on Monday, aimed at making it easier for homeowners to capitalize on current low-interest rates by refinancing their old, high-interest mortgages.

More than 890,000 Americans with underwater mortgages have already utilized the HARP program to reduce monthly mortgage payments but millions more have not. One reason: The current rules do not permit severely underwater borrowers to participate.

The new rules will allow homeowners who owe more than 125% of the market value of their homes — $125,000 in mortgage balance on a home worth less than $100,000, for example — to get new loans.

The program will also streamline the refinancing process for those who have been current on their mortgage payments and it will reduce or remove fees that had hindered homeowners from refinancing in the past.

“We know there are many homeowners who are eligible to refinance under HARP and those are the borrowers we want to reach,” said Edward DeMarco, acting director for the Federal Housing Finance Agency (FHFA), which oversees Fannie Mae and Freddie Mac..

Jaret Seiberg, an analyst for MF Global Inc.’s Washington Research Group, which analyzes public policy for institutional investors, said lifting the loan-to-value restriction will help only a limited number of borrowers.

“This change is unlikely significantly to expand the universe of eligible HARP borrowers as the borrowers must still be current and qualify for a new loan,” he said in a research report.

However, Seiberg believes, the changes should allow banks to refinance loans without fear that Fannie Mae (FMNA) and Freddie Mac (FMCC, Fortune 500) will force them to repurchase those loans if the borrower defaults.

Fannie and Freddie will also reduce the fees they have charged in the past in order to enable borrowers to better afford the new loans. Among the fees that will be reduced or eliminated are those for appraisals, title insurance and closing costs.

Fees will also be waived for some underwater borrowers who refinance into 20-year or other, shorter-term loans. By doing so, it could help homeowners get above water faster.

A homeowner who has a $200,000 balance on their 30-year mortgage with a 6.5% rate and a home value of $160,000, for example, currently makes payments of $1,264 a month.

If they refinance into a 20-year fixed-rate loan at 4.25%, it will reduce their monthly payments to $1,238 and slash their loan balance to $160,000 in just five-and-a-half years. If they refinance to a 30-year loan at 4.5%, their monthly payments will be quite a lot lower, $1,013, but it will take 10 years to reach $160,000.

“It’s an opportunity for borrowers to improve their household balance sheets by repaying their mortgages much quicker,” said DeMarco.

HARP is only open to borrowers who are current on their payments for the past six months with no more than one missed payment in the past 12 months. The loans must have been originally issued before May 31, 2009 and purchased by Fannie Mae or Freddie Mac.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/uGI-GDFEb-8/index.htm

Libyan mansion is home to Libya’s U.N. ambasador and long a sore spot for Englewood, N.J.

WASHINGTON (CNNMoney) — When Libya first bought a 25-room, 1906 mansion in suburban New Jersey, the community was in an uproar.

Now, for the first time in nearly 30 years, the mansion known as Thunder Rock may get a little more love — if it’s used to help usher in a new era of what many hope to be peaceful relations between the United States and Libya.

Valued at $5.6 million by the county tax assessor’s office, the mansion was not among assets frozen by the U.S. Treasury Department earlier this year. The mansion has been granted embassy-like status, serving as a New York-area home to the Libyan ambassador to the United Nations.

But the statuesque house, which could pass for a stone castle or a manor, has long been a sore spot in Englewood, N.J. — especially after the bombing of Pan American flight 103 over Lockerbie, Scotland, in 1988.

“I was afraid Gadhafi was going to motorcade up Palisade Avenue and we were going to have armed conflict in Englewood, with the blood of Americans being on his hands,” said Rep. Steve Rothman, a New Jersey Democrat who was mayor when Libya bought the 4.7 acre property in 1982.

At several points during the last 30 years, Rothman has worked on deals with the Reagan and Obama administrations, and with the United Nations to prevent Gadhafi from stepping foot in Englewood.

The most recent deal may have prevented Gadhafi from sleeping in a Bedouin tent on the mansion’s lawn during his 2009 visit to address the United Nations. Gadhafi ended up in a Manhattan U.N. apartment.

The mansion is currently serving as a second, quasi-summer home to Abdurrahman Mohamed Shalgham, Libya’s ambassador to the United Nations. Shalgham was Gadhafi’s U.N. ambassador and was among the first to defect to the opposition movement, publicly denouncing the “brutality” of Gadhafi back in February.

United Nations ambassadors are allowed to have homes within 25 miles of New York City, which is why the mansion has been given embassy-like status.

But that didn’t stop the city of Englewood from going to court to try to force the Libyan government to pay property taxes, a battle it won in the lower courts but lost in federal appeals court in 1985.

When Treasury announced sanctions and freezing assets, Englewood Mayor Frank Huttle told the Bergen Record he wanted to look into pursuing legal action against the Libyans again.

“I continue to explore all options on the property tax status. I look forward to working with a new Libyan government,” Huttle said.

But now, with the Transitional National Council taking over Libya, anything could happen. The mansion could get more use. Or the new Libyan government could decide to sell it.

Rothman said he expects it will continue as a residence and he welcomes the change for the Libyan people.

“Our 28-year-old agreement between the U.S. and Libya that kept Gadhafi out of the Englewood mansion for all that time was quite effective,” Rothman said. “I expect that unless the Libyans change their minds and wish to relocate, the ambassador will continue to occupy that home.” 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/mnW8nUGyrWI/index.htm

NEW YORK (CNNMoney) — Mortgage rates have never been cheaper, with the 30-year rate falling below 4% for the first time in history.

The interest rate on a 30-year fixed-rate loan fell to 3.94% this week, the lowest rate since mortgage giant Freddie Mac (FMCC, Fortune 500) began tracking it. Meanwhile, the average for a 15-year fixed-rate mortgage also hit a record, falling to 3.26%.

“Average 30-year conventional fixed mortgage rates fell below 4% for the first time in history this week following a sharp drop in 10-year Treasuries early in the week as concerns over a global recession grew,” said Freddie’s chief economist, Frank Nothaft.

Yields on the benchmark 10-year U.S. Treasury bond, which mortgage rates closely track, have been under 2% this week, closing as low as 1.78%.

The dirt-cheap mortgage rates can result in considerable savings for homeowners. Compared with just three months ago, when the 30-year was at 4.60%, borrowers today can save about $40 a month per $100,000 borrowed. That comes to a savings of nearly $14,000 for every $100,000 borrowed over the life of the 30-year loan.

The low rates have done little to boost home buying, however, according to the Mortgage Bankers Association. Their weekly survey of mortgage applications reported a drop in all loans of more than 4%. Purchase loan applications were almost flat and refinance applications fell more than 5%.

Big mortgages: Harder to get and more expensive

“Potential borrowers largely remained on the sidelines, seemingly unimpressed by the lowest (by any measure) mortgage rates since the 1940s,” said Mike Fratantoni, MBA’s Vice President of Research and Economics.

Some industry insiders remain unimpressed by the relentlessly falling cost of mortgage borrowing.

“Record low rates, blah, blah, blah: We’ve already heard this,” said Keith Gumbinger of HSH Associates, a mortgage information provider. “Other than the price of money, nothing else has happened.”

Given the nation’s faltering recovery, the turmoil in Europe and the struggling housing market, the downward trend in mortgage rates is natural, according to Gumbinger.

“The lowest mortgage rates come at the bleakest periods,” he said.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/R7EA4s0oczo/index.htm

NEW YORK (CNNMoney) — Fannie Mae (FNMA, Fortune 500), the government-controlled mortgage giant, ignored indications that attorneys it hired to handle defaults were abusing the foreclosure process, according to a report from the inspector general for the Federal Housing Finance Agency (FHFA), the agency that oversees Fannie.

The inspector general concluded that as early as 2003, legal firms retained by Fannie engaged in misdeeds. These included filing false documents and “robo-signing,” in which law firm employees signed filings and affidavits attesting to knowledge that they did not possess.

Even after mortgage borrower complaints were raised in the press, the inspector general said FHFA and the agency it replaced, the Office of Federal Housing Enterprise Oversight, failed to take adequate corrective action and Fannie continued to use the law firms blamed for the problems.

“If a law firm self-reported no issues as it processed cases,” the inspector general said, “then Fannie Mae presumed the firm was doing a good job.”

In a letter to FHFA, Elijah Cummings, ranking member of the House Committee on Oversight and Government Reform who requested the report, called the failures “an abuse of the public trust and an assault on the integrity of our justice system.”

Foreclosures rise in August

The abuses likely affected many borrowers, given Fannie’s huge footprint in the mortgage market. By 2008, when it entered conservatorship after suffering large losses in the mortgage meltdown, the value of loans it backed exceeded $3 trillion — 26% of the total mortgage market.

As the foreclosure crisis deepened, many of those loans defaulted. In 2010, Fannie foreclosed on more than 260,000 borrowers.

“It appears that an untold number of borrowers with loans owned or guaranteed by Fannie Mae may have suffered abuses that violated their legal rights,” said Cummings.

Fannie should have known the problem existed. A Fannie shareholder alerted the company back in December 2003 that its attorneys may have engaged in abusive practices in Florida, and the agency hired an outside firm to investigate.

In 2006, an internal report from that probe concluded that “[F]oreclosure attorneys … are routinely filing false pleadings and affidavits.”

A Fannie Mae spokeswoman declined to comment on the full report, but confirmed that the 2006 investigation identified a specific issue with the practice of filing lost note affidavits, which she said was immediately addressed.

Mortgage help for unemployed disappears

But a June 2010 field visit to Florida by Fannie staff found that its attorney network there was so overwhelmed by foreclosure volume — and the flat fees paid to them by Fannie were so inadequate — that the firms could not devote the time needed to process the documents properly and often took shortcuts.

The problem was not confined to Florida. In 2006, a New Jersey judge found that attorneys acting for Fannie filed 250 motions for permission to seize homes that were signed by an employee who had not worked for the firm for more than a year.

FHFA itself, which took over the supervision of Fannie in July 2008, also failed to make sure that Fannie was properly supervising its attorney network, according to the new inspector general’s report.

In 2010, FHFA recommended several steps that Fannie could take to curb abuses. These included introducing foreclosure checklists for its attorneys to follow; revising the compensation it paid attorneys to give them incentives to improve speed and effectiveness and to penalize poor performances; and engaging with lawyers and mortgage servicers to reduce lost paperwork and other problems.

The inspector general found little evidence that most of the directives were acted upon.

Even after foreclosure processing abuses started to draw heavier media attention last August and FHFA began its own review of the effectiveness of Fannie’s oversight of its attorney network, not much improvement was made.

FHFA’s internal review was finished in January 2011, and FHFA briefed Fannie on its findings that the enterprise did not meet safety and soundness standards in its dealings with its attorneys. Yet the report has not been formally released to Fannie or published.

The inspector general’s report concluded that Fannie had to be much more proactive in overseeing its attorney network and that FHFA had to be more alert in policing Fannie.

It recommended that FHFA develop and implement new guidelines, procedures and plans covering default-related services. FHFA expressed willingness to do this.

Said an FHFA spokeswoman: “We are concluding our supervisory work in this area and we will direct the Enterprises to take whatever action is warranted once we are done.” 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/BI2sZg_nTvs/index.htm

There’s no way the U.S. can get back on track without a cure for what’s killing real estate.

By John Cassidy, contributor

FORTUNE — Is this a great country or what? At the start of last year, a friend of mine, the proprietor of a small business that has suffered badly in the recession, entered a trial mortgage-modification program. A few months later the bank told him that his application for a government-assisted refinancing rate had been turned down — his house was too far underwater. He had bought it during the boom for $220,000, putting down $30,000, and then spent another $45,000 doing it up. Now it’s worth about $100,000. Once his monthly payments were set to go back up (his mortgage rate is 6.5%), my friend stopped paying them and waited for the foreclosure and eviction notices to arrive. A year and a half later he is still inhabiting his own home and watching the mail.

Whenever I hear somebody saying that growth is about to pick up, I think about my friend and the roughly 11 million homeowners whose mortgages are worth more than their homes. Some of them are still making their monthly payments. Some, like my pal, are living for nothing. The drip-drip foreclosure crisis shows how, six years after the bursting of the real estate bubble, the U.S. residential real estate market is still a mess. And without a genuine revival in housing, it is hard to think we will ever get a self- sustaining recovery.

Sure, the news that President Obama and the Republicans are talking about enlarging this year’s payroll tax cut and extending unemployment benefits through 2012 is good news. The last thing the economy needs is a $250 billion hit to spending, which is what doing nothing would amount to. But where are the serious proposals to revive the housing market? It’s as if both parties have agreed to drop the issue.

Housing isn’t just another industry: It’s a driving force for the entire economy. Residential investment accounts for up to a quarter of overall capital investment. House prices have a big influence on consumer spending — for every $1,000 the value of his house falls, a homeowner tends to cut his outlays by about $50 or $60. And falling property tax revenues are decimating many towns and cities. How bad is it out there? New-home construction is running at less than a third of its pre-recession level; in August it fell again. Existing-home sales picked up a bit, but that was largely because of bottom-fishing investors who are betting prices can’t go any lower. Let’s hope they are right. Nationwide, according to the SP/Case-Shiller index, prices are down 6% over the past year and down 32% since the first quarter of 2006.

I’m not saying that fixing the housing market is easy. If it were, somebody would have done it. But to begin with, we could make the much-maligned Home Affordable Refinancing Program (HAMP) work better. Generally, anybody who is current on payments and whose home is worth at least 80% of the outstanding loan is eligible to participate. But many homeowners have been put off by the red tape and by additional charges that Fannie Mae and Freddie Mac, which ultimately own or insure many of the mortgages, have imposed on applicants.

Then there are folks whose mortgages are way underwater. One option: Force the banks to foreclose on them and get the whole nightmare over with. But that would dump yet more properties on the market. A better solution, which has never seriously been tried, would be to expand the mortgage-modification program, offering interest rate reductions and principal write-offs in return for options on the upside value of the property. For example, the government and the bank could reduce my friend’s mortgage to $150,000 — 150% of the property’s current value — but demand half of any profit he makes when he eventually sells the property.

The details would need working on — there’s a tradeoff between maximizing uptake and minimizing rewards to irresponsible borrowers — but surely it is worth trying. Three years of fiddling with the housing problem haven’t gotten us very far.

–John Cassidy is a Fortune contributor and a New Yorker staff writer.

This article is from the October 17, 2011 issue of Fortune.

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/A2lRv70iHtk/

NEW YORK (CNNMoney) — Home prices in July climbed for the fourth month in a row, but are still down from a year ago.

According to the latest SP/Case-Shiller home price index of 120 major cities, prices rose 0.9% in July compared with June, but they’re still 4.1% lower than 12 months ago.

“We are far from a sustained recovery” said SP spokesman David Blitzer. “Continued increases in home prices through the end of the year . . . must materialize before we can confirm a housing market recovery,”

Adjusted for seasonal differences, the 20-city index was flat month-over-month.

But a handful of cities have shown surprising strength recently. In Detroit for example, prices jumped 3.8% month-over-month, after spiking 5.8% in June. Minneapolis prices increased 2.6% and Washington recorded a 2.4% rise.

Weakness continued in Las Vegas, which was down 0.2% month-over-month and in Phoenix, which edged 0.1% lower.

Blitzer cited some positive signs for the struggling housing market. Existing home sales were up 20% in August compared with 12 months earlier. Foreclosures have dropped most of the year.

On the negative side, however, housing starts are near historic lows and consumer confidence remains depressed.

“These combined statistics indicate the market is still bottoming and has not turned around,” he said.

Stan Humphries, chief economist for the real estate website Zillow, is not optimistic about the outlook for housing.

“I still believe that the continued fears about a Greek default, weak employment growth and low consumer confidence will ultimately translate into weaker housing performance in the back half of this year,” he said. “Looking ahead, expect fading monthly momentum in Case-Shiller.”

Complicating things is that a quarter of homeowners are underwater on their mortgages, owing more than their homes are worth, making it difficult to refinance into low interest mortgages.

Underwater borrowers are also more likely to go into foreclosure since there’s no home equity to tap should they run into a rough financial patch.

Even though most analysts can’t work up much enthusiasm for the upward price trend, it’s still welcome news, according to Anthony Sanders, a professor of real estate at George Mason University.

“Four months of price increases is a pretty good sign that the market has stabilized,” he said.

A more stable market could mean that lenders will loosen up purse strings a bit, making it easier for potential homebuyers to get mortgages, which could pump up demand for homes.

That could happen, according to Sanders, but he expects some bad price trend news this fall as a weaker selling season begins.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/-0H5f86DoU8/index.htm

Despite rock-bottom low interest rates and soft home prices, buyers are staying at bay: new home sales fall for the fourth straight month in August.

NEW YORK (CNNMoney) — New-home sales fell once again in August, the fourth straight month of declining sales for the beleaguered home building market.

New homes sold at a seasonally adjusted annualized rate of 295,000 last month, a 2.3% drop from a revised rate of 302,000 homes sold in July, the Census Bureau said Monday.

That was better than the rate of 293,000 that economists were expecting, according to a consensus estimate from Briefing.com.

Even as sales were weak in August, they were still 6.1% above the same time last year, when new-home sales were at an annual rate of 278,000.

“The trend in recent months has been dead flat, with sales hovering around the 300,000 mark, down more than 80% from the boom-time peak,” said Ian Shepherdson, chief economist at High Frequency Economics, in a research note.

Obama’s housing scorecard

Shepherdson was actually “moderately relieved at this number,” given that Hurricane Irene hit during the month, and consumers watched rating agency Standard Poor’s downgrade the credit rating of the United States following a Congressional stalemate over the debt ceiling.

“Still, the market is dead, and even record low mortgage rates are not doing anything to help,” said Shepherdson.

Interest rates are at rock-bottom lows. Mortgage rates are tied to the yields of Treasury notes, and investors anxious about the European debt crisis have been pouring into the safe haven of government debt.

Also, in the wake of the housing bust, home prices continue to remain soft.

The median sale price of new homes sold last month was $209,100, down 8.7% from the previous month when the median price was $228,900. And the average sale price was $246,000, down 8.7% from July’s average of $269,500.

For prospective buyers, there were 162,000 homes available at the end of August, the government reported. At current sluggish sales rates, that represented a 6.6 month supply.

I bought my dream retirement home — cheap!

Builders are building fewer homes these days in the face of tepid sales. “Builders have responded by cutting new construction to a record low, so the months’ supply number is a healthy-looking 6.6,” said Shepherdson. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/dmqn_aQOap4/index.htm

Sales of existing homes jumped 7.7% in August and were up 18.6% compared to the same time a year ago, a report said.

NEW YORK (CNNMoney) — Home buyers are starting to creep back into the housing market, lured by rock-bottom prices.

Sales of existing homes rose 7.7% last month to an annual rate of 5.03 million homes, from 4.67 million homes in July, according to the National Association of Realtors.

Economists had expected August sales to come in at a rate of 4.7 million homes, according to consensus estimates from Briefing.com.

Home prices have cratered since the start of the recession, and mortgage rates have also been very low. Last week, 30-year mortgages hit a record low.

“All year, the relationship between home prices, mortgage interest rates and family income has been hovering at historic highs, meaning the best housing affordability conditions in a generation,” said Ron Phipps, president of NAR, in a written statement.

Compared to a year ago, the rate of home sales has surged
18.6% from a lethargic 4.24 million homes. Sales have picked up as home prices have fallen. The median price for an existing home was $168,300 in August, down 5.1% from a year ago.

But home buyers are still struggling against a very tight credit market, as banks have pulled back on lending.

“The biggest factors keeping home sales from a healthy recovery are mortgages being denied to creditworthy buyers, and appraised valuations below the negotiated price,” said Phipps. He recommended that community banks and small regional banks might be the best option for a prospective home owners.

Rising costs of renting are also drawing Americans into the home buying market, said Lawrence Yun, NAR chief economist, in a written statement.

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And still other buyers walked back into the housing market in August to protect their assets from market volatility. “Investors were more active in absorbing foreclosed properties,” said Yun. “In addition to bargain hunting, some investors are in the market to hedge against higher inflation.”

Ian Shepherdson, Chief U.S. Economist at High Frequency Economics said in a research note that the rise in home sales in August is attributed to pent-up demand and says it’s nothing to be celebrated.

“This is all welcome, but it should not be mistaken for evidence that a real recovery is beginning,” he said. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/3JV_99UqIqs/index.htm

NEW YORK (CNNMoney) — The tornado season of 2011 will go down as one of the most destructive and dangerous in U.S. history.

More than 1,500 tornadoes were reported this year, exceeding the 10 year average of 1,300, according to the National Weather Service.

Even worse: An estimated 550 people have been killed by tornadoes, roughly 10 times the average annual rate, according to Greg Carbin, a meteorologist for the National Weather Service’s Storm Prediction Center. And we haven’t even entered the storm-heavy months of October and November yet.

For Joe Zinser, the owner of Tornado and Storm Shelters.com in Flower Mound, Texas, this year’s storm season has been bittersweet. He has sold more than 600 storm shelters — twice what he typically sells in a year.

Fight your insurer’s claim denial

“We can’t build fast enough to satisfy the demand,” he said. “If you order now, it will be January before you even get it in.”

An average basic shelter that seats eight people from his company costs about $5,000.

Other storm shelter companies are also logging record sales. Robert Toll, co-owner of Arkansas Storm Shelters said he’s had more inquires for his shelters in 2011 than in the previous seven years combined.

Few homes in Joplin, Mo., were equipped with storm shelters when a devastating tornado hit the area in May. Last week, the city confirmed that two more people had died from injuries sustained from the storm, bringing the death toll to 162.

“There was a laissez-faire attitude,” said Keith Stammer, the city’s director of emergency management. “The [previous] storms were never this deadly.”

Stammer applied to the Federal Emergency Management Agency (FEMA) for assistance in purchasing 3,000 new storm shelters.

Some residents are not waiting for federal aid, however. The reasons they had for not buying a storm shelter in the past, like the expense — shelters there can run as much as $10,000 once the cost of excavating the stony ground to install one is factored in — now seem like less of an issue.

Tornadoes hit so haphazardly that it can be easy to dismiss their threat. When Steve Toth, a retired police lieutenant moved to Billings, Mont., from Anaheim, Calif., his homebuilder told him he didn’t need a shelter.

“The builder said he had never seen a tornado there before 2003,” said Toth. “He said, ‘What are the odds of another one hitting?’”

Toth’s wife, however, insisted on a shelter. Less than 10 months later, a tornado destroyed most of their house but he, his wife and his daughter’s family were all safe.

When his builder rebuilt eight homes in the area, he installed a storm shelter in each.

Homeowners most in need of storm shelters live in the Midwest and South, especially in and around Oklahoma, where cold air systems coming off the Rockies hit warm, moist air from The Gulf of Mexico. Those ingredients, plus wind shears, produce more tornadoes than anywhere else on Earth, said Carbin.

The most important thing to look for when buying a shelter is sturdiness. Not only must it be able to resist wind, but it also has to hold up to ground water and be able to resist corrosion.

Look for shelters that carry a seal from organizations like the National Storm Shelter Association (NSSA), which test and certify shelters, according to Ernst Kiesling, a professor of civil engineering at Texas Tech University who runs the storm shelter research arm of the University’s Wind Science and Research Center.

There are two basic types of shelters, above- and below-ground. Above-grounds are usually made of steel and bolted to the concrete floor of a garage or basement. In-ground shelters are usually put in a trench.

Whichever type you purchase, it’s vital that the doors can be opened from the outside so rescuers can get in, and that air vents are positioned so that they won’t get clogged with debris.

Tips for choosing a below-ground shelter:

• Below-ground shelters should be positioned with an eye toward the normal direction storms blow in, said Toll. In most of Tornado Alley, storms come from the southwest. “The doors should open in that direction,” he said. “That way, you don’t have to pull against the wind to close them.”
• Make sure the shelter is adequately weighted so it won’t float up if the ground gets saturated with water.
• Locate the shelter in a place where it will have minimal outdoor exposure. You don’t want to be running a long way through the storm to get to safety.
• Keep it away from flood zones. Tornadoes often accompany hurricanes or heavy thunderstorms and shelters are useless if they fill with water.
• Locate the shelter away from potential large falling objects. If a masonry wall falls over the entry, it can trap people inside.

Tips for choosing an above-ground shelters:

• Make sure the shelter has been correctly bolted to a steel-reinforced concrete floor and that floor is in good condition.
• Keep the shelter separate from load-bearing walls.
• The doors should have three latching mechanisms for strength and those latches should engage easily so it’s easy to get in and out.

 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/1uymsCSIJCs/index.htm

NEW YORK (CNNMoney) — Mortgage rates hit yet another record low this week amid ongoing economic concerns both at home and in Europe.

The average rate for a 30-year, fixed-rate loan fell to 4.09% this week, its lowest level in 60 years, according to mortgage giant Freddie Mac. Last week, the 30-year fixed averaged 4.12%. The average rate for a 15-year fixed mortgage — a popular option among those who wish to refinance — sunk to 3.30%, down from 3.33% last week, Freddie reported.

“Continued investor concerns over the state of the European debt markets kept U.S. Treasury bond yields low and allowed mortgage rates to ease once more this week,” said Frank Nothaft, vice president and chief economist, Freddie Mac in a statement.

The low rates have done little to boost the beleaguered housing market, however. While mortgage applications increased 6.3% last week, only 23% of applicants intended to use the loan to buy a home, according to a weekly mortgage survey from the Mortgage Bankers Association. The remainder of applicants were homeowners seeking to refinance existing, higher-rate mortgages.

There are more than 8 million homeowners with mortgage issued through Fannie Mae and Freddie Mac who have loans carrying interest rates of 6% or more, according to the Federal Housing Finance Agency.

The average interest rate of mortgages outstanding in the second quarter was 5.28 percent, according to Freddie Mac’s Nothaft. By refinancing into today’s 30-year fixed mortgage, homeowners with a $200,000 loan could shave almost $1,715 a year in interest payments.

However, not every homeowner or buyer would qualify. Many lenders require borrowers to have stellar credit and large down payments before they will give them mortgages with favorable rates.

Will rates continue to drop?

The latest decline in mortgage rates marks the second week in a row that mortgage rates have fallen, according to Freddie.

“It would be hard to continue to forecast record lows week after week,” said Keith Gumbinger of HSH Associates, a publisher of mortgage information. “But there is some expectation that the Federal Reserve will pull something out of its hat next week to make interest rates go down.”

Foreclosures rise in August

In August, the Fed promised to keep interest rates low through at least mid-2013.

Treasury yields, however, rose this week from near 1.9% on Monday for a 30-year to 2.09% Thursday.

According to Greg McBride, senior financial analyst for Bankrate.com, 30-year fixed-rate loans and 10-year Treasury yields usually rise and fall in tandem, with mortgage rates normally about 1.6 percentage points to 1.8 percentage points typically higher than yields. That difference represents the premium investors demand as compensation for taking on the extra risk of mortgage-backed securities, he explained.

Obama’s housing scorecard

These days, however, the spread is closer to 2 percentage points. So if that decreases to normal levels, interest rates would fall further.

McBride, however, does not see the spread shrinking for the time being. Economic conditions are in such turmoil that investors are putting a higher value on the risk premium, which means mortgage-backed securities must offer higher returns than during more stable eras. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/ArQ2GhR3A6M/index.htm

(MONEY Magazine) — Most of the news lately about real estate has been dismal: Home prices are swooning, foreclosures ballooning.

There is, however, one bright spot: the rental market, where demand is up and rents are rising. That’s partly because those foreclosures have turned more than 4 million former homeowners into renters, but also because many other prospective homeowners, worried about losing their jobs or housing prices falling a lot further still, are reluctant to buy now.

As with many investments, the best time to get in is when most others are sitting on the sidelines. To figure out whether you can benefit by investing in rental property, here’s what you need to know.

THE CASE FOR BUYING NOW

Many factors make this a great time to invest. Mortgage rates are at a 40-year low, and homes in many areas are ultra-cheap. Meanwhile, demand for rentals has risen in more than 500 cities, according to recent Census data. That, in turn, has enabled landlords to charge more. Hotpads.com, a real estate research firm, reports that rents nationwide jumped 11.6% in 2010, to $1,320 a month.

You’ll need that rental income to tide you over until home prices bounce back; in fact, the typical investor today plans to hold for 10 years, according to a survey by the National Association of Realtors.

Send The Help Desk your real estate questions.

If you can hang on that long, you’ve got a good shot at solid gains, especially if you’re financing the home purchase. “Whereas leverage is dangerous when buying stocks, it can be a good long-term strategy with real estate,” notes real estate investor and Columbia University adjunct finance professor Marshall Sonenshine.

The big catch: “Can you afford to hold the property that long and not need the equity for your kid’s college fund?” says Sonenshine. Or whatever other pressing need might crop up.

You’ll also face some tough financing rules. Most banks now require a down payment of at least 20% to 25% and evidence you have enough cash to cover six months’ worth of mortgage, tax, and insurance payments.

HOW TO FIND A GOOD DEAL

Investment real estate is like produce: It’s best bought locally. “Buy something you can get to in 10 minutes,” says Seattle real estate investor Bill Snyder.

Familiarity with the neighborhood also limits nasty surprises like a noisy bar or a nearby development competing for renters.

Work with a local realtor who has experience with rentals and can help you assess how attractive a given home will be to tenants.

10 Best cities to buy a rental property

And while prices on multifamily dwellings haven’t dropped as much as they have on single-family homes, don’t ignore plexes: Intake from a few rents instead of just one will boost your cash flow; a single vacancy won’t hurt as much; and you could benefit from economies of scale for things like appliances and painting. But stick to buildings with four units or fewer to avoid stricter financing requirements, such as a bigger down payment and higher mortgage rates.

Once you’ve identified candidates, crunch the numbers. The goal: to make sure your rental income will at least cover your loan payments, plus a 20% cushion to handle repairs, vacancies, and property management.

To figure out what you’ll garner in rent, ask sellers for recent leases, says Snyder, and double-check their numbers by perusing sites like Rentometer and Craigslist for similar rentals in the neighborhood.

Assume your mortgage rate will be at least a half-point higher than rates on owner-occupied properties. Factor in insurance and property taxes, and bank on a 5% vacancy rate. Otherwise, “one empty month can kill you,” says Ellie Berlin, a broker with Houlihan Lawrence in Larchmont, N.Y.

KNOW WHAT YOU’RE IN FOR

Brush up on your people skills: Owning rentals also means responding to tenant complaints, like the 2 a.m. phone call about a broken toilet. Want to palm off the grunt work? You can hire a handyman (around $45 an hour) or a management company (8% to 10% of monthly income plus a half-month’s rent for filling vacancies), but the luxury will eat into cash flow.

To find your own tenants, creative ads on Craigslist are your best bet. Run credit and reference checks (National Tenant Network, at ntnonline.com, can help). And invest in small touches to make your place stand out, such as cool lighting fixtures or antique door hardware. Those will pay off when it’s time to sell too.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/EpiWYFQRLOI/index.htm

Using statistics from data services company Onboard Informatics, we crunched the numbers in order to zero in on America’s best small towns for families. (Last year, we looked at small cities, with populations between 50,000 and 300,000.)
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A mortgage foreclosure settlement is being held up by a dispute among the states.

WASHINGTON (CNNMoney) — A deal to help victims of improper foreclosures has been slow going, in large part because of infighting among state attorneys general over giving banks a free pass from future lawsuits.

The talks are between the attorneys general and federal agencies on one side, and the five largest mortgage servicers, which comprise nearly 60% of the market: Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM).

Attorneys general in states with stronger fraud enforcement laws, such as New York, Delaware and Massachusetts, don’t want to give up the right to go after banks in future fraud lawsuits. And a few other state attorneys general have balked at the draft versions they consider too tough on the banks, according to sources familiar with the talks.

The infighting came to a head Tuesday, when Iowa Attorney General Tom Miller — who had been leading the talks on behalf of the states — booted New York Attorney General Eric Schneiderman from an executive team, accusing Schneiderman of “working to actively undermine” a deal with the states.

A call to the New York Attorney General’s office was not immediately returned.

At the heart of the talks are wholesale changes in the policies and practices of mortgage servicing that could help consumers, especially those behind on payments. But the banks, while willing to commit to some massive changes, are pushing for immunity from future lawsuits.

Also at stake is a reported $20 billion pot of money, to be collected from the banks, that states could use to modify mortgages and counsel underwater homeowners, according to sources familiar with the talks.

Schneiderman has been tough on the banks. Earlier this month, his office filed a motion to oppose a proposed $8.5 billion settlement between investors and Bank of America and the Bank of New York over bad mortgage-backed securities. Schneiderman called that deal “unfair and inadequate” in court records.

Number of troubled mortgages on the rise again

He has his own broad investigation into banks that sold mortgages to investors, zeroing in on some of the same banks involved in the settlement talks. Schneiderman’s probe targets the practice of assigning and bundling mortgages into securities, sources familiar with that investigation have said.

And he has said over the past several months that any deal with banks on foreclosure practices shouldn’t prevent individual states from their own investigations into the mortgage-servicing industry.

If New York pulls out entirely, it could dampen down any final settlement award. But New York could still back the deal.

The government probe of mortgage servicers followed reports that the institutions were using shoddy documentation to improperly foreclose on homeowners. That news prompted several servicers to halt foreclosures for a short period of time.

The attorneys general launched the probe in October to review improper documentation and mortgage modifications.

Federal government agencies involved include the Department of Justice, the Department of Housing and Urban Development, the Department of Treasury, the Federal Trade Commission as well as the new Consumer Financial Protection Bureau. 

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NEW YORK (CNNMoney) — New-home sales fell once again in July, the third straight month of declining sales for hard-pressed home builders.

New homes sold at a seasonally adjusted annualized rate of 298,000, a modest 0.7% drop from a downwardly-revised rate of 300,000 homes sold in June, the Census Bureau said Tuesday. It was also below the rate of 310,000 that a panel of housing market analysts at Briefing.com had forecast.

Sales rose 6.8% year-over-year from 279,000 in July 2010.

“We’ve been bouncing around the 300,000 level for months, for years, really,” said David Crowe, the chief economist for the National Association of Home Builders. “It reflects continued buyer concern with the weak economy.”

The median price for a new home sold in July was $222,000, down about 5.5% from June but up 8.8% from 12 months earlier.

The inventory of new homes for sale stood at 165,000 during the month. It would take 6.6 months to sell off those homes at the current sales rate.

With sales so slow, new-home construction is also slumping. The home building industry is normally a major contributor to the economy, but it is so depressed right now that it’s it a drag on the economic recovery.

Crowe said home sales might weaken even more in the aftermath of the debt-ceiling debate, the downgrading of U.S. debt and the subsequent volatility in the financial markets.

“We might see August figures drop because of the market turmoil and the uncertainly it creates in consumers,” he said.

Historically low interest rates do not seem to be helping. Applications for mortgages have spiked, but most of the increase is for refinancing old mortgages rather than for purchasing new homes, according to Crowe. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/lttWeE_Na8I/index.htm

Brad Pitt listed his Malibu bachelor pad for $13.75 million.

NEW YORK (CNNMoney) — The star of “Seven” and “Ocean’s Eleven” recently listed his four-bedroom Malibu Beach bungalow for $13.75 million.

Brad Pitt reportedly purchased the oceanfront home for about $8 million in 2005, after splitting from ex-wife Jennifer Aniston. He did several extensive renovations on the property, including adding a heated lap pool and tennis court.
He also obtained planning and coastal approval for a proposed second story designed by Chris Sorensen, an architect who specializes in environmentally friendly design.

The bluff-top home was briefly offered in 2009 for $18 million, but the price was lowered significantly before it hit the market again this year.

Behind private gates, Pitt’s 4,088 square-foot bachelor pad sits on 1.26 acres in the highly desirable Encinal Bluffs area of Malibu, Calif. with stairs and path access to a sandy beach cove. In addition to the pool and tennis court outside, a covered porch and open patio look out on to the coast line, according to the listing.

See inside celebrity homes

Inside the home, originally built in 1962, walls of glass open to sweeping ocean views. The mid-century home also features radiant heat, three fireplaces, dark bamboo floors, a modern stainless kitchen with walk-in refrigerator and freezer, and, naturally, a state-of-the-art security system.

Although the Oscar nominee and his long-time partner, Angelina Jolie, have six children together, this estate has only three bedrooms, two of which are currently set up as offices, in addition to the master suite.

The globe-trotting couple are known to split their time among a number of other properties, including their homes in New Orleans, Cambodia and France. Pitt is currently in Glasgow filming “World War Z.” 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/k8QnsCUROVM/index.htm

NEW YORK (CNNMoney) — An ominous cloud is hanging over the housing market: Millions of distressed properties could be put up for sale at any moment, potentially adding to the glut of unsold homes that are already on the market and depressing home prices even further.

But there is one glimmer of hope in this otherwise ominous scenario. A recent report from Standard Poor’s found that the time it would take for banks to purge all of this so-called “shadow inventory” from the market (through foreclosure sales, mortgage modifications and other measures) shrunk to 47 months during the second quarter, a significant drop from the 52 months it estimated for the first quarter of this year.

The report also found that the total dollar value of the loans on these properties – known as non-agency loans because they are not backed by Fannie Mae, Freddie Mac or the Federal Housing Administration — also fell to $405 billion at the end of June from $433 billion three months earlier.

“It’s good news that things are starting to slow down and we’re getting closer to the end of the problem,” said Diane Westerback, Managing Director of Global Surveillance Analytics for SP. “It could mean a gradual recovery for the market.”

SP said the decline was helped by stabilizing liquidation rates and by fewer borrowers falling behind on their mortgage payments as the economy slowly recovered during the quarter. The firm also said tightened lending standards over the past several years has helped reduce the likeliehood of defaults among recent homebuyers.

Yet, the housing market still has a long way to go. SP estimates that there are still a total of between 4 million and 5 million homes, including those with agency-backed loans, in shadow inventory, an amount that continues to jeopardize the housing market’s recovery, according to Westerback.

Best home deals in MONEY’s Best Places to Live

When all of the shadow inventory finally makes it to market, it will likely do so at a deep discount, weighing on overall home prices and depressing values further, said Westerback.

As many recent foreclosure reports have warned, many homes that should currently be going through foreclosure aren’t doing so because banks have been slow to process the paperwork or initiate the proceedings following the robo-signing scandal. As a result, many homeowners who are delinquent on their mortgage payments have been able to stay in their homes.

“There’s a big asterisk on shadow inventory numbers,” said Anthony Sanders, director of real estate entrepreneurship at George Mason University. “In many states, the banks have slowed foreclosure filings to a crawl.”

The first filings issued to delinquent borrowers may come many months after they stop making their regular mortgage payments. RealtyTrac, a marketer of foreclosed homes, analyzed all the initial notices of default filed in California this year and compared them with filings from 2007.

The total of missed payments for the recent filings came to an average of $78,000 per borrower, up from $17,000 four years earlier. To RealtyTrac spokesman, Rick Sharga, that indicated that banks were postponing the notices for many more months than they used to.

Homes fall out of shadow inventory when banks repossess and resell the homes, when their owners sell them, or when they’re cured, that is, when borrowers catch up on their mortgage payments and remain up-to-date.

Since borrowers with cured loans often redefault, SP counts 70% of all cured loans as part of the shadow inventory.

Buying is cheaper than renting in most U.S. cities

Although the SP data only covers non-agency loans, the authors said similar dynamics apply to loans held by the government-sponsored mortgage giants, Fannie Mae and Freddie Mac.

The difference is that, since Fannie and Freddie absolutely dominate the mortgage lending market today, and have done so since the bust, much of their portfolios are in recently-issued loans, which were very strictly underwritten. As to be expected when the banks are being far more careful in who they lend to, the default rates for recent loans is much lower and so the government agencies have a lower percentage of their loans in shadow inventory than do the banks.

Nevertheless, Fannie and Freddie are looking to rid themselves of a large percentage the shadow inventory they do have — and quickly. Earlier this month, the Federal Housing Finance Agency (FHFA), the Treasury Department and the U.S. Department of Housing and Urban Development were seeking suggestions on how to dispose of the 92,000 repossessed homes now owned by Fannie Mae, Freddie Mac and the Federal Housing Administration in a way that would benefit local communities.

Home ownership hits lowest level since 1965

Getting rid of the government’s shadow inventory in a way that won’t further depress home prices will be tricky, however. And the government’s homes are only a fraction of the shadow inventory out there.

As long as homes remain in the shadows, the housing market will have a hard time recovering.

“The big issue is that homebuyers understand that there’s a backlog of houses that could flood the market at any time,” he said. “I could buy a home in Las Vegas and the banks could release a lot of repossessed homes back on the market and drive down prices 10%.”

That lowers confidence for many potential homebuyers to the point where they are hesitant to pull the trigger on home purchases.

“Homebuying is scary enough already these days,” said Sanders. “Throw in the shadow inventory and it’s pretty darn grim.” 

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NEW YORK (CNNMoney) — In another hit to the beleaguered housing market, a report out Monday found that the number of delinquent mortgage borrowers — those who have missed at least one payment — rose during the second quarter.

The delinquency rate grew only slightly, up 0.12 percentage points to 8.44%, but that reverses the steady improvement of the past two years.

The increase, as reported by the Mortgage Bankers Association (MBA), may not sound like much, but it could mean that the recovery in the housing market will take even longer than thought.

The MBA breaks down delinquencies by degree of severity, ranging from one payment past due to 60 days late, 90 days late and loans that are in the process of foreclosure proceedings, the final step before bank repossession.

One bright spot: The number of loans more than 90 days late declined. Those are the mortgages that are most likely to proceed all the way to repossession.

Still, the number of initial filings ticked higher.

Borrowers earlier in default are more likely to begin repayment again. Often the problems besetting them were temporary, such as an unexpected medical bill or a brief layoff from work.

“Delinquencies are mirroring what’s taking place in the employment market,” said Jay Brinkmann, the MBA’s chief economist.

How can Obama solve long-term unemployment

There were other reasons for hope. There was a drop in the number of new foreclosures initiated, which means fewer borrowers are actually losing homes to bank repossessions. The nation is back to 2007 levels in that delinquency category.

Another is that the newest loans, those issued after 2007, are performing much better than earlier issues. Mortgages originated from 2005 through 2007 represent 30% of all mortgages, but account for 65% of defaults.

Once the problems with those mortgages work through, delinquency rates should start to drop off more significantly, as long as the economy starts to pick up and hiring gains strength. 

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NEW YORK (CNNMoney) — Mortgage rates have hit a record low, making homes even more affordable for prospective buyers.

According to mortgage backer Freddie Mac’s Primary Mortgage Market Survey, the average 30-year fixed rate loan fell to 4.15% this week – its lowest level in more than 50 years. Previously, the record low was 4.17%, which was set the week of Nov. 11, 2010. Last week, the 30-year rate was 4.32%.

The average for the 15-year fixed-rate mortgage was 3.36% this week, down from 3.5% last week.

“The Federal Reserve’s policy statement last week and ongoing market concerns over the European debt market carried momentum into this week allowing all mortgage products in our survey to reach all-time record lows,” said Frank Nothaft, vice president and chief economist at Freddie Mac.

The rock-bottom rates have made it even more enticing for those who are looking to buy a home to act now.

Housing affordability – the percentage of homes sold during a quarter that are within the reach of people earning the median family income – had already been trending near record levels before mortgage rates started to plunge, according to a report from the National Association of Home Builders (NAHB) and Wells Fargo released Thursday. The organization said that when a family spends 28% or less of its gross income on housing expenses it qualifies as affordable.

Yet, despite the extremely favorable conditions, most housing markets remain depressed.

“At a time when homeownership is within reach of more households than it has been for more than two decades and interest rates are at historically low levels, the sluggish economy and the extremely tight credit conditions confronting home buyers and builders remain significant obstacles to many potential home sales,” said Bob Nielsen, NAHB’s chairman and a home builder from Reno, Nev.

Sales of existing homes fell month-over-month in July, according to the National Association of Realtors (NAR), although they’re up from 12 months earlier. Meanwhile, new home sales have been crawling along at about a quarter of what they were during the housing boom

While mortgage rates will probably head lower, any further rate declines would probably be small, according to Ken Johnson, a professor of real estate at Florida International University.

Rates closely track yields on U.S. Treasury bonds, which have also plummeted this week. The 10-year note hit a record low on Thursday, falling below 2% to 1.99%.

“The banks would fall into a liquidity trap [if rates go much lower],” he said. “If they can’t make money lending, they’ll stop.”

25 Best Places for Affordable Homes

For now though, each tenth of a percentage point that a mortgage rate drops results in a savings of about $6 a month for every $100,000 borrowed. The monthly bill for homeowners getting $200,000 mortgages this week would be about $20 less than if their mortgages were issued last week. Over the course of a 15- or 30-year mortgage, that can result in considerable amount of savings.

According to NAHB, even before interest rates started diving, about 72.6% of all homes that were purchased during the three months ended June 30 were affordable to an American family earning the median income of $64,200.

Best Places: Best home deals in top 10 place

In some markets, such as Youngstown, Ohio, the most affordable major market in the nation, nearly 94% of all homes sold last quarter could be bought by families earning the area median income of about $55,000.

Syracuse, NY, at an index of 92.6%. Indianapolis at 91.6% and Dayton, Ohio at 90.7% were also very favorable markets for home buyers.

The least affordable market was New York City, where the median price of homes sold during the quarter was $424,000 and where only a quarter of homes sold during the quarter were affordable to those earning the median area income of $67,400.

Three other least-affordable markets were all in California: San Francisco at 27.5%, Santa Ana at 40.5% and Los Angeles at 41.6%.

NAHB and Wells Fargo’s data underlines the stark contrast between expensive coastal markets, where most of the least affordable markets lie, and the heartland, where the most affordable cities are.

“I think prices are turning around,” he said, “especially in middle America, but the turnaround will be very slow. ”

The record-low mortgage rates, combined with increasing affordability in some markets, could be the catalyst needed for some home buyers who were sitting on the fence to stop renting and put some money on the table.

“It’s silly not to buy right now — if you can,” said Johnson.  

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A vacant lot is offered for sale in a single-family housing development. Building permits, a leading indicator for the strength of the housing industry, fell 3.2% in July.

NEW YORK (CNNMoney) — After showing some strength just a month before, new home construction slumped in July, according to two key measures released by the government Tuesday.

Housing starts, the number of new homes being built, fell 1.5% to an annual rate of 604,000 units during the month, the Commerce Department said.

The government report also showed permits to build new homes, a proxy of future construction activity, fell 3.2% during the month to an annual rate of 597,000 units.

The declines come after both housing measures ticked up more than expected in June.

A large stock of cheap foreclosed homes continues to lessen demand for new construction and depress home prices.

“Foreclosures are competing not only with the builder, but against the potential new homebuyer who can’t sell their home either,” said David Crowe, chief economist for the National Association of Home Builders.

Best home deals in the Best Places

In this environment, rents are rising and home builders are seeing more opportunity to construct multi-family homes and apartment buildings.

Construction of buildings with five units or more rose 6.3% in July, while construction of single-family homes plunged 4.9% from month-to-month.

“We have an increase in renters, and they’re not stymied by credit issues, so we need to add rental units to answer that demand,” Crowe said.

Demand for mortgages has been weak recently, and at the same time tight credit standards have also been restricting potential homebuyers from successfully taking out mortgages.

According to a separate report issued Monday by the Federal Reserve, banks have kept those standards largely unchanged for at least three straight quarters, after tightening them in the recession.

Not surprisingly, a recent industry reading on homebuilder confidence remained at 15 in August, indicating builders view their current business conditions as very poor.

Meanwhile, other Fed data show consumers have been cutting back on mortgage debt for nine of the last 10 quarters.

Over the last year, housing starts are still up 9.8% and building permits are up 3.8%. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/GI-SU4tvd8o/index.htm

A vacant lot is offered for sale in a single-family housing development. Building permits, a leading indicator for the strength of the housing industry, fell 3.2% in July.

NEW YORK (CNNMoney) — After showing some strength just a month before, new home construction slumped in July, according to two key measures released by the government Tuesday.

Housing starts, the number of new homes being built, fell 1.5% to an annual rate of 604,000 units during the month, the Commerce Department said.

The government report also showed permits to build new homes, a proxy of future construction activity, fell 3.2% during the month to an annual rate of 597,000 units.

The declines come after both housing measures ticked up more than expected in June.

A large stock of cheap foreclosed homes continues to lessen demand for new construction and depress home prices.

“Foreclosures are competing not only with the builder, but against the potential new homebuyer who can’t sell their home either,” said David Crowe, chief economist for the National Association of Home Builders.

Best home deals in the Best Places

In this environment, rents are rising and home builders are seeing more opportunity to construct multi-family homes and apartment buildings.

Construction of buildings with five units or more rose 6.3% in July, while construction of single-family homes plunged 4.9% from month-to-month.

“We have an increase in renters, and they’re not stymied by credit issues, so we need to add rental units to answer that demand,” Crowe said.

Demand for mortgages has been weak recently, and at the same time tight credit standards have also been restricting potential homebuyers from successfully taking out mortgages.

According to a separate report issued Monday by the Federal Reserve, banks have kept those standards largely unchanged for at least three straight quarters, after tightening them in the recession.

Not surprisingly, a recent industry reading on homebuilder confidence remained at 15 in August, indicating builders view their current business conditions as very poor.

Meanwhile, other Fed data show consumers have been cutting back on mortgage debt for nine of the last 10 quarters.

Over the last year, housing starts are still up 9.8% and building permits are up 3.8%. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/GI-SU4tvd8o/index.htm

NEW YORK (CNNMoney) — Home prices have taken such a beating and demand for rental units has increased so much that it’s now cheaper to buy a two-bedroom home than to rent one in most major U.S. cities.

According to real estate web site Trulia, buying was cheaper than renting in 74% of the country’s 50 largest cities in July. In just 12% of the cities, including New York, Seattle and San Francisco, renting was cheaper. In the remaining 14% of cities, renting was less expensive but close to the cost of buying.

In addition to a continuing decline in home prices, rock-bottom interest rates have added a lot of weight to the buy side of the scale. The overnight average rate for a 30-year fixed was just 4.19% on Monday, according to Bankrate.com. A 15-year fixed averaged just 3.43%.

Add in the tax perks of home ownership and for those who can afford it (and who can actually qualify for a loan), it certainly is a buyer’s market.

“It’s a personal decision, of course. But if you have a steady job and you are planning to stay for seven years or more and have enough cash to put 20% down and enough left over for seven or eight months of expenses, you’re better off buying in most places,” said Daisy Kong, a spokeswoman for Trulia.

Las Vegas offered the most compelling buy-side math, Trulia’s survey found.

Prices there have plunged more than 59% from their August 2006 peak, according to the SP/Case-Shiller home price index.

The median price of a two-bedroom, two-bath condo or townhouse is about $60,000, according to Trulia, a ratio of only six times the median annual rent of a similar rental apartment, which is $9,700.

Monthly mortgage payments on a median-priced Vegas condo would come to only $256 on a 30-year, 5% interest loan. Even factoring in property taxes and common charges of roughly $300 a month, the monthly amount is still much lower than the $810 in monthly rent they would pay on a similar place.

Detroit, according to Trulia, is another metro area where buying is better. The median price for a condo or townhouse is about seven times annual rent. Home prices in Mesa, Ariz. and Fresno, Calif. also clock in at seven times rent.

Arlington, Texas, Sacramento, Calif., Phoenix and Jacksonville, Fla. all had buy-rent ratios of eight, Trulia said.

Even though rents average $2,980 a month in New York (the highest of any of the 50 markets), it’s still the best city for renters, according to Trulia’s survey.

Paying for the same kind of two-bedroom Manhattan apartment would cost 36 times as much, nearly $1.3 million.

Big money towns

One surprising place where renting is cheaper is Ft. Worth, Texas; buying exceeds renting costs by 32 times. Part of the reason is there are relatively few condos in the city and they tend to be upscale and costly. That, combined with low rents of about $9,500 a year, make renting cheaper.

Omaha, Neb., where buying is 27 times annual rents, Seattle and San Francisco, which both clock in with purchase prices that are 24 times rents, and Kansas City, at 22 times rents, are other places where renting makes financial sense.

The buy-rent calculation is just one part of the decision-making process. Other factors include:

• How long you plan to stay. If you’re not keeping the home for several years, transactional costs of buying and selling (e.g; commissions, closing costs) can wipe out any buying edge.
• Whether you have cash for closing. It’s not easy to find banks willing to lend more than 80% of the cost of a home. That means buyers have to come up with 20% down, plus closing costs. On a $200,000 home, that’s $40,000.
• Whether you can cover all the homeownership costs. It’s not just the mortgage: There are property taxes, insurance, heat, utilities and regular maintenance.
• Whether you can claim the tax advantages of homeownership. Mortgage interest is deductible and can shave a lot off tax bills but this benefit accrues mostly to high income earners with substantial mortgage payments. Many borrowers claim the standard deduction on their taxes and so derive no savings from the deduction.

Even where it’s cheaper to rent, it doesn’t necessarily mean renters will come out ahead, according to Ken Johnson, a real estate professor at Florida International University and co-author of a new study on whether it’s better to buy or rent.

“Paying off a mortgage is a kind of forced savings,” he said. Each check homeowners write lowers the balance they owe and increases the value of their property holdings. That, unlike cash in a bank account, is not easy to tap.

Where the jobs are

Homeowners have to go through a lengthy and costly process to access it by taking out a home equity loan or a cash-out refinance — actions they tend not to take unless there’s a specific need.

Depending on where they live, renters may save on monthly expenses but, unlike the forced savings of mortgage payments, they won’t have anything to show for their monthly payments in the way of savings.

Ultimately, however, the decision whether to buy or rent depends on each person’s situation and their plans for the future.

While buying a home may be an attractively cheap option these days, many mortgage holders have found out the hard way that the joys of homeownership can turn sour should the unexpected strike. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/HaUyuu9GMqo/index.htm

NEW YORK (CNNMoney) — Home prices have taken such a beating and demand for rental units has increased so much that it’s now cheaper to buy a two-bedroom home than to rent one in most major U.S. cities.

According to real estate web site Trulia, buying was cheaper than renting in 74% of the country’s 50 largest cities in July. In just 12% of the cities, including New York, Seattle and San Francisco, renting was cheaper. In the remaining 14% of cities, renting was less expensive but close to the cost of buying.

In addition to a continuing decline in home prices, rock-bottom interest rates have added a lot of weight to the buy side of the scale. The overnight average rate for a 30-year fixed was just 4.19% on Monday, according to Bankrate.com. A 15-year fixed averaged just 3.43%.

Add in the tax perks of home ownership and for those who can afford it (and who can actually qualify for a loan), it certainly is a buyer’s market.

“It’s a personal decision, of course. But if you have a steady job and you are planning to stay for seven years or more and have enough cash to put 20% down and enough left over for seven or eight months of expenses, you’re better off buying in most places,” said Daisy Kong, a spokeswoman for Trulia.

Las Vegas offered the most compelling buy-side math, Trulia’s survey found.

Prices there have plunged more than 59% from their August 2006 peak, according to the SP/Case-Shiller home price index.

The median price of a two-bedroom, two-bath condo or townhouse is about $60,000, according to Trulia, a ratio of only six times the median annual rent of a similar rental apartment, which is $9,700.

Monthly mortgage payments on a median-priced Vegas condo would come to only $256 on a 30-year, 5% interest loan. Even factoring in property taxes and common charges of roughly $300 a month, the monthly amount is still much lower than the $810 in monthly rent they would pay on a similar place.

Detroit, according to Trulia, is another metro area where buying is better. The median price for a condo or townhouse is about seven times annual rent. Home prices in Mesa, Ariz. and Fresno, Calif. also clock in at seven times rent.

Arlington, Texas, Sacramento, Calif., Phoenix and Jacksonville, Fla. all had buy-rent ratios of eight, Trulia said.

Even though rents average $2,980 a month in New York (the highest of any of the 50 markets), it’s still the best city for renters, according to Trulia’s survey.

Paying for the same kind of two-bedroom Manhattan apartment would cost 36 times as much, nearly $1.3 million.

Big money towns

One surprising place where renting is cheaper is Ft. Worth, Texas; buying exceeds renting costs by 32 times. Part of the reason is there are relatively few condos in the city and they tend to be upscale and costly. That, combined with low rents of about $9,500 a year, make renting cheaper.

Omaha, Neb., where buying is 27 times annual rents, Seattle and San Francisco, which both clock in with purchase prices that are 24 times rents, and Kansas City, at 22 times rents, are other places where renting makes financial sense.

The buy-rent calculation is just one part of the decision-making process. Other factors include:

• How long you plan to stay. If you’re not keeping the home for several years, transactional costs of buying and selling (e.g; commissions, closing costs) can wipe out any buying edge.
• Whether you have cash for closing. It’s not easy to find banks willing to lend more than 80% of the cost of a home. That means buyers have to come up with 20% down, plus closing costs. On a $200,000 home, that’s $40,000.
• Whether you can cover all the homeownership costs. It’s not just the mortgage: There are property taxes, insurance, heat, utilities and regular maintenance.
• Whether you can claim the tax advantages of homeownership. Mortgage interest is deductible and can shave a lot off tax bills but this benefit accrues mostly to high income earners with substantial mortgage payments. Many borrowers claim the standard deduction on their taxes and so derive no savings from the deduction.

Even where it’s cheaper to rent, it doesn’t necessarily mean renters will come out ahead, according to Ken Johnson, a real estate professor at Florida International University and co-author of a new study on whether it’s better to buy or rent.

“Paying off a mortgage is a kind of forced savings,” he said. Each check homeowners write lowers the balance they owe and increases the value of their property holdings. That, unlike cash in a bank account, is not easy to tap.

Where the jobs are

Homeowners have to go through a lengthy and costly process to access it by taking out a home equity loan or a cash-out refinance — actions they tend not to take unless there’s a specific need.

Depending on where they live, renters may save on monthly expenses but, unlike the forced savings of mortgage payments, they won’t have anything to show for their monthly payments in the way of savings.

Ultimately, however, the decision whether to buy or rent depends on each person’s situation and their plans for the future.

While buying a home may be an attractively cheap option these days, many mortgage holders have found out the hard way that the joys of homeownership can turn sour should the unexpected strike. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/HaUyuu9GMqo/index.htm

hire a professional painter

(MONEY Magazine) — Done right, an exterior paint job is a smart investment: It will protect your home from the elements, help defer costly repair work, preserve your property value, and add curb appeal. Plus, if your existing paint is peeling, cracking, or bubbling, delaying the job will only cost you more.

Make the results last as long as possible — and maximize the number of years before you open your wallet again — by basing your hire on five key factors.

Get referrals from friends and tradesmen and check reviews on angieslist.com. Then ask three painters for written bids. Focus on details other than price, which may range from $4,000 to $10,000.

The job will only be as good as the surface prep, says Debbie Zimmer of the Paint Quality Institute, so compare how each painter promises to wash, scrape, and sand.

Before you choose, check out the exteriors of former customers’ homes; it’s worth hiring a pricier pro for a good result. And ask to see the painter’s liability and workers’ comp insurance (plus EPA lead-safe certification if your house is pre-1978).

The bid should include a coat of primer on any exposed wood and two coats of finish paint on everything.

“Eighty percent of your cost is labor, so maximize that investment with the longest-lasting paint you can get,” says V.C. “Bud” Jenkins, professor of paint chemistry at Cal Poly Pomona.

Any brand of paint will do as long as it’s the company’s premium line, says Jenkins; that ensures that it’s 100% acrylic (cheaper ingredients don’t wear as well) and contains mildew-cides and other additives.

A spray gun is quick, but it doesn’t press paint onto the surface. That hinders adhesion on wood siding, shortening the life of the paint job, says Bob Cusumano of the Painting and Decorating Contractors of America.

For wood siding, make sure the painter will use brushes or rollers — or at least will brush or roll after the sprayer.

It’s not the length of coverage that matters most. “If there’s a flaw, it’s going to show up within a cycle of the seasons,” Cusumano says. So a one-year warranty is fine, as long as it states that the painter will fix any issues (such as bubbling or peeling) without exclusions.

For added safety, Cusumano recommends writing in “Contractor is responsible for adhesion of previously applied coatings” to clarify that underlying problems are his responsibility to fix.

Though most paint jobs last five to seven years (depending on your climate and the age of your house, among other factors), regular maintenance might extend that to 10.

So choose a painter who is willing to come back yearly to touch up worn or peeling areas. That will cost a few hundred bucks per visit but save a bundle in the long run.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/iesaLfMJA9g/index.htm

NEW YORK (CNNMoney) — As Congress and President Obama hammered out a debt deal over the past week, mortgage rates plunged — hitting new lows in some instances.

The 30-year fixed rate, usually the most popular choice for homebuyers, fell to 4.45% from 4.57% last week — its lowest point since last November, according to the Mortgage Bankers Association.

Meanwhile, the rate on the less popular 15-year fixed plunged to a new record low of 3.52%, down from 3.67% a week earlier.

The up-front points lenders charged dropped as well, to 0.78 from 1.14 for 20%-down loans, according to the industry group. A homebuyer financing a $200,000 mortgage could save $14 a month and pay $720 less at closing based on the current points.

The rock-bottom interest rates drove up total mortgage applications — both for purchases and refinancings — by about 7%, compared with a week earlier, said Michael Fratantoni, the Mortgage Bankers Association’s vice president of research and economics. While the increase may seem substantial, he noted that applications are still well below last year’s level.

“Refinance application volume increased, but even though 30-year mortgage rates are back below 4.5 percent, the refinance index is still almost 30 percent below last year’s level. Factors such as negative equity and a weak job market continue to constrain borrowers,” he said.

Responsible homeowners left out in the cold

On Bankrate.com Wednesday, a 30-year fixed was available that carried an annual percentage rate of just 4.03%. The overnight average was 4.37%, the site reported.

Mortgage rates are following bond yields lower, explained Greg McBride, Bankrate’s chief economist. The yield on 10-year Treasury notes hit 2.6% on Wednesday down from 3.03% the last week of July.

“The plunge in Treasury yields is because we’ve been hit with a string of poor economic readings,” said McBride.

Those include a weak GDP report and slowdowns in manufacturing, consumer spending and hiring.

Job killing companies

With rates so low and home prices down more than 30% from peak, there has probably never been a more affordable time to buy a home.

For some buyers though, “Time is of the essence.,” said McBride. “The loan limits (for Fannie/Freddie mortgages) drop on October 1 so acting now for closing by Sept. 30 is important for buyers in the upper price levels.” 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/Z-nWniK95Tg/index.htm

Click the chart for more on Zillow.

NEW YORK (CNNMoney) — Shares of real estate site Zillow shot up 120% early in its public debut Wednesday, though they cooled a bit as the day continued.

Zillow (Z) priced its IPO late Tuesday at $20 per share. The stock quickly rose to $44 a share Wednesday, where it traded for most of the morning, before drifting as low as $32.50. The stock ended at $35.77, or 79% higher.

The company sold 3.46 million shares in the IPO, and the stock is trading on the Nasdaq under the ticker symbol “Z.”

Zillow provides information about homes, real estate listings and mortgages through its website and mobile app. The company, which is based in Seattle, operates Zillow.com, Zillow Mortgage Marketplace and Zillow Mobile.

Unprofitable: Zillow has not yet turned a profit, just like many other Internet companies to make IPO filings this year, including Pandora (P) and Groupon.

Zillow revealed in its S-1 filing to the SEC that losses narrowed to $6.8 million in 2010 from a $12.9 million loss in 2009.

In the first quarter of 2011, Zillow lost $865,000. In the same quarter last year, the company lost $2.8 million.

On a revenue basis, Zillow took in $30.5 million in 2010 versus $17.5 million in 2009.

Zillow’s IPO comes at a rocky period for the housing sector, which has yet to stage a sustained recovery. Earlier Wednesday, a real estate group’s report showed sales of existing homes dipped in June as buyers unexpectedly backed out of contracts.

The underwriters of the Zillow IPO — Citigroup, Allen Co., Pacific Crest Securities, ThinkEquity and First Washington Corp. — have a 30-day option to purchase up to an additional 519,300 shares.

After the IPO is complete, Zillow said it will sell 274,999 shares at $20 each to certain existing investors in the company.

In other IPO news Wednesday, headphone maker Skullcandy also made its public debut. But Skullcandy (SKUL) shares didn’t get a Zillow-like pop. The stock was up 8% in early trading but ended completely flat, exactly at the initial price of $20. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/KHAFrcCfUG8/index.htm

Home buyers unexpectedly pulled out of contracts last month, driving down home sales by 0.8%.

NEW YORK (CNNMoney) — Sales of existing homes dipped in June as buyers unexpectedly backed out of contracts, according to an industry group.

Home sales fell 0.8% to a seasonally adjusted annual rate of 4.77 million, down from 4.81 million in May, the National Association of Realtors said Wednesday.

Economists had expected a June sales rate of 4.93 million homes, according to consensus estimates from Briefing.com.

“A variety of issues are weighing on the market including an unusual spike in contract cancellations in the past month,” said Lawrence Yun, the chief economist at NAR.

Yun said the reason behind the spike was unclear, but he pointed to tight credit and low appraisal prices as possible culprits.

In addition, he said the weak economy and concerns over the federal budget deficit “may be causing hesitation among some consumers or lenders.”

Meanwhile, the national median home price in June was $184,300. That’s up from $169,300 in May and $182,900 a year ago.

America’s ugliest homes

The modest rebound comes after a prolonged drop in prices, which had been driven lower by a glut of foreclosed homes in the wake of the housing crisis. In June, distressed properties made up 30% of total sales.

There were 3.77 million existing homes on the market at the end of June, according to the report. At the current sales rate, it would take over 9 months to sell through that inventory.

Despite the drop in prices over the last few years and historically low mortgage rates, the realtors said high lending standards have kept many potential buyers at bay.

“With record high housing affordability conditions thus far in 2011, we’d normally expect to see stronger home sales,” said Ron Phipps, the president of NAR.

The report was “a bit disappointing,” said Ian Shepherdson of High Frequency Economics. “But [it] does not imply any further softening in the underlying trend in sales.”

After falling to an all-time low in February, home sales had shown some signs of improvement in March and April.

Sales fell in May due to a combination of severe weather and high gas prices.

In June, sales of single-family homes held steady, while condo sales fell.

Home sales rose in the Midwest and South, but the gains were offset by declines in the Northeast and West. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/HIYNWhx87GE/index.htm

Zillow, the home price website, is one of several tech IPOs making a big splash in recent months.

NEW YORK (CNNMoney) — Shares of real estate site Zillow more than doubled in its public debut Wednesday, though they cooled a bit as the day continued.

Zillow (Z) priced its IPO late Tuesday at $20 per share. The stock quickly rose to $44 a share Wednesday, where it traded for most of the morning, before drifting down to $34.40 in midday trading. Still, that’s a 72% increase from the initial price.

The company sold 3.46 million shares in the IPO, and the stock is trading on the Nasdaq under the ticker symbol “Z.”

Zillow provides information about homes, real estate listings and mortgages through its website and mobile app. The company, which is based in Seattle, operates Zillow.com, Zillow Mortgage Marketplace and Zillow Mobile.

Unprofitable: Zillow has not yet turned a profit, just like many other Internet companies to make IPO filings this year, including Pandora (P) and Groupon.

Zillow revealed in its S-1 filing to the SEC that losses narrowed to $6.8 million in 2010 from a $12.9 million loss in 2009.

In the first quarter of 2011, Zillow lost $865,000. In the same quarter last year, the company lost $2.8 million.

On a revenue basis, Zillow took in $30.5 million in 2010 versus $17.5 million in 2009.

Zillow’s IPO comes at a rocky period for the housing sector, which has yet to stage a sustained recovery. Earlier Wednesday, a real estate group’s report showed sales of existing homes dipped in June as buyers unexpectedly backed out of contracts.

The underwriters of the Zillow IPO — Citigroup (C, Fortune 500), Allen Co., Pacific Crest Securities, ThinkEquity and First Washington Corp. — have a 30-day option to purchase up to an additional 519,300 shares.

After the IPO is complete, Zillow said it will sell 274,999 shares at $20 each to certain existing investors in the company.

In other IPO news Wednesday, headphone maker Skullcandy also made its public debut. But Skullcandy (SKUL) shares didn’t get a Zillow-like pop. The stock was up 8% in early trading but was close to flat by midday. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/KHAFrcCfUG8/index.htm

Take a look inside the Spelling mansion, which includes 14 bedrooms, 27 bathrooms, a bowling alley, a gift-wrapping room and a rooftop garden.

NEW YORK (CNNMoney) — One of the most expensive homes of all time, the 56,500-square foot Spelling Manor, sold for a very steep discount Thursday — $85 million — or 43% off the original asking price.

The French Chateau-style home was originally listed for a record $150 million by Candy Spelling, wife of the late Aaron Spelling, who was the producer of such hit shows as “Charlie’s Angels,” “Dynasty,” “The Love Boat” and “Fantasy Island.”

The buyer was 22-year old Petra Ecclestone, heir to the Formula 1 auto racing fortune. Ecclestone will be moving into the mansion with her fiance, businessman James Stunt, and the couple’s dogs. Rick Hilton and David Kramer of Hilton Hyland Real Estate represented Ecclestone in the transaction

Even at $65 million below the asking price, the deal is one of the highest ever for a single-family home in the U.S. Holding the record is venture capitalist Yuri Milner’s $100 million purchase of a Los Altos Hills, Calif. home earlier this year, according to Candice Cerro, spokeswoman for Realtor.com.

Seinfeld selling Colo. home for $18 million

Kramer said the listing had been considerably active while on the market, mostly due to an influx of international buyers hoping to take advantage of depressed prices in the U.S. housing market and a weak dollar.

To pre-qualify buyers, Kramer said he just looked them up online. “If I find them on the ‘Forbes’ list, often times that will do it,” he said.

More famous homes

The Spellings purchased the property from entertainer Bing Crosby in 1991 and later demolished it to build the manor.

Although the home is very large, Kramer said it is also very livable. “There are a lot of rooms you could sit in and really enjoy yourself,” he said. “The dining room is stunning, opening to the yard, facing a lily pond. There are all these little vignettes where you just want to be.”

The home’s other notable features include 14 bedrooms, 27 bathrooms, a projection room, bar, oak-paneled library, office, billiards room, game room, two-lane bowling alley, wine cellar, tasting room, china room, gift-wrapping room, gym, barbershop, beauty salon and rooftop garden.

But Ecclestone was particularly attracted to the grounds, Kramer said. “She and James kept saying ‘our dogs will love this.’” 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/vd5rQPUaets/index.htm

Comedian Jerry Seinfeld put his 14,200-square foot, Telluride, Colo. vacation home on the market for $18.25 million.

While the comedian lives full-time with his wife and three children in New York City, he owns several vacation properties, including this one, which features 11 bedrooms, a spa and full gym.

Photos courtesy of Sotheby’s International Realty.

NEXT: The den

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/VdFM-48qKa8/index.html

Las Vegas has long been a Mecca for gamblers, but now it’s the go-to place for real estate investors who want to clean up on rental properties.

Nationwide, the opportunities for this kind of investing haven’t been this good in years. Not only are home prices way down but interest rates are near all-time lows and rents are climbing.

In May, according to the National Association of Realtors, 19% of home purchases were for investment, up from 17% in 2010.

Nowhere are potential profits better than in Las Vegas, according to a new survey by Local Market Monitor, a North Carolina-based firm that specializes in forecasting real estate prices. Local Market Monitor put together the survey for HomeVestors, a franchise real estate investing company. The survey ranked 316 markets by estimated returns on investment in single-family home rental properties.

“Overall, the highest ratings are in markets where home prices have fallen substantially,” said Ingo Winzer, founder of Local Market Monitor. “Home prices in these markets are also below average, so empty homes are easily turned into competitive rental properties.”

The cities were ranked by estimated future returns compared with the projected national average return. According to Local Market Monitor’s data, for example, investors in Las Vegas who rent out the properties they buy now will have a 4.7% higher return than the 5.3% national average.

The potential for profits has to be high for investors to enter into this risky market: Winzer expects home values to fall another 7% over the next three years.

Here are the top 10 markets ranked highest in investment return.

NEXT: Las Vegas

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/MXxkNpUzYeo/index.html

NEW YORK (CNNMoney) — Getting a mortgage can be tough these days — even people with near-perfect credit have been rejected for loans. But for some lucky borrowers, things aren’t as bad as the doom-and-gloom crowd says.

At a recent press conference, Federal Reserve Chairman Ben Bernanke said lending standards for mortgages have tightened so considerably that “the bottom third of people who might have qualified for a prime mortgage in terms of, say, FICO scores a few years ago — cannot qualify today.”

Indeed, roughly one-in-four mortgage applicants was denied in 2010, up from about 18% in 2003, according to data from the Federal Financial Institutions Examination Council. And those are just the ones that apply — many discouraged potential borrowers don’t even bother to apply anymore.

Yet, there is money to lend. Bob Ryan, the acting commissioner for the U.S. Department of Housing and Urban Development, or HUD, recently said that mortgage money “is flowing, it’s stable, it’s tightened from the boom years, but it’s there.”

And many of those potential home buyers sitting on the sidelines may just have a shot at it — as long as they take a few crucial steps.

“The belief is that you can’t get a mortgage at all — but you can,” Keith Gumbinger, of the mortgage information provider HSH Associates.

Most of the major mortgage underwriters have only returned to the more prudent standards of the days before the housing bubble. Now, according to Tuck Bradford, a branch manager with lender Mortgage Master, borrowers usually must meet four criteria in order to get a mortgage backed by Fannie Mae (FNMA, Fortune 500) or Freddie Mac (FMCC, Fortune 500), the two government-run mortgage giants:

• The ability to make a 20% down payment, plus closing costs.
• A good credit score. Borrowers usually need a minimum credit score of 620.
• Enough income to afford payments. The general rule of thumb: no more than 28% of your gross income should go toward housing costs.
• A loan-to-value ratio of 80%. Lenders want the home value to far exceed the mortgage balance because if a borrower defaults, the bank sells the home to recoup the loss.

In today’s market, however, even having all four of these factors in place doesn’t always guarantee that you will get a loan.

Steve Habetz, a loan officer in Westport, Conn. had a client who was seeking to refinance but he had a single blemish scarring an otherwise spotless credit report. The client had a couple million dollars in assets, high income, ample home equity — and a strong credit score of 700.

“This guy was a Boy Scout when it came to paying debts,” said Habetz. “He had never been late.”

Yet, Habetz couldn’t get him a mortgage. The problem: an investment property the client had owned and tried to unload but couldn’t (thanks to the housing bust). He eventually resorted to a short sale — a deal in which the proceeds of the sale are insufficient to pay the amount owed on the mortgage and the bank agrees to forgive the losses.

Not only did the short sale lop 100 points or so off his credit score, but it also resulted in an automatic rejection of his refinance application.

“It’s maddening,” said Habetz. “Other than that one detail, he’s very low risk. Because he had the short sale, he’s out of the box for two years.”

But, for every client like Habertz’s who gets rejected, there are those who have been much luckier at landing mortgage loans. And typically, they have turned to the Federal Housing Administration for help.

“The FHA is just about as free and easy as it was in the go-go days,” said Gumbinger.

Squatter Nation: 5 years without a mortgage payment

Standards for these loans, insured by the FHA and issued by regular mortgage lenders, are flexible and aimed at making mortgage borrowing easier, especially for working-class Americans.

For years, the FHA had no minimum credit score requirement at all. Now though, it requires a minimum of 580 to qualify for a 3.5%-down loan and 500 for a 10%-down mortgage.

In practice, however, some banks will impose higher standards, according to Scott Sheldon, a loan officer with First California Mortgage in Sonoma County, Calif.

“We FHA lenders have to protect ourselves and we’ve been going with a 640 minimum for a 3.5% mortgage,” he said.

Sheldon had one client who seemed like an impossible case. The client was buying a home in Healdsburg, California, the heart of Sonoma’s wine country. His credit score was just over 600, he was paying alimony and child support and he only had enough money for a small down payment. And there was one additional tiny problem: He had just emerged from bankruptcy in April 2009.

In other ways, he was low-risk borrower. He grossed $10,000 a month, ample enough to satisfy debt-to-income guidelines on the $315,000 home he was buying, and he was able to document a stable work history.

The client knew he had to raise his credit score above the 600 level in order to improve his chances. So he paid a credit repair service, Lexington Law, about $500 to find and correct errors in his records. That helped boost his score above 640.

How foreclosure impacts your credit score

The client got the loan and closed on a home a couple weeks ago. The bankruptcy made it tough — but not impossible.

As Melanie Roussell, a spokeswoman for the FHA explained, the agency is willing to overlook a blemish on a credit report — even a big one — if other factors are favorable.

In today’s unforgiving housing market, that’s music to a borrower’s ears.

Do you have a job that people would be surprised to learn pays a salary of $100,000 or more? If so, email blake.ellis@turner.com for the chance to be included in an upcoming story on CNNMoney.com. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/aw-0htpP-UI/index.htm

NEW YORK (CNNMoney) — The downward cycle in home prices broke in April after eight consecutive months of decline, according to a survey released Tuesday.

According to the SP/Case Shiller 20-city index, prices rose 0.7% compared with March, although they fell 0.1% when adjusted for the strong spring selling season. Prices were down 4% year-over-year.

“In a welcome shift from recent months, this month is better than last — April’s numbers beat March,” said David Blitzer, SP’s spokesman, in a statement. “However, the seasonally adjusted numbers show that much of the improvement reflects the beginning of the spring-summer home buying season.”

“It is much too early to tell if this is a turning point or simply due to some warmer weather,” Blitzer added.

Any hint of good news in the troubled housing market will likely bring cheer to the industry, and there are some signs that market conditions are not quite as dire as some of the other statistics may indicate. Foreclosures, for example have been falling.

That has translated in a decline of 16% in the sales volume of distressed properties this year, while volume of non-distressed sales rose 11%, according to Joseph LaVorgna, chief economist for Deutsche Bank.

That’s good news because much of the price drop over the past year can be blamed on severe price slashing for homes in foreclosure, as Federal Reserve chairman Ben Bernanke pointed out in a press conference last Wednesday. Prices for homes sold by regular sellers have held up much better.

Foreclosures down for seventh straight month

“That suggests,” said Bernanke, “if we can reduce the current number . . . maybe 40% of home sales, which are on a distressed basis, that would do a lot for stabilizing the market and helping give people confidence that they can buy and not be buying into a falling market.”

Still, the fact that prices perked up in April is not necessarily something to write home about, said Mike Larson, a housing market analyst for Weiss Research.

“It happens every spring,” he said “It’s very clear there’s a seasonal component. Even non-statisticians can see that. The report was, however, better news than what people were expecting.”

Metropolitan Washington continued to be the strongest of the 20 cities covered by the report. Prices rose 3% in April there and have been on the plus side year-over-year, up 4%.

Foreclosures for sale: Big supply, low prices

The worst performing market for the month was Detroit, where prices fell 2.9%. The biggest year-over-year drop was recorded by Minneapolis, where prices have plunged 11.1% since last April.

The big picture is that a housing market recovery has yet to gain any steam, according to Larson.

“We’re not falling off a cliff anymore, but we’re only going sideways,” he said.

The year-over-year price comparisons could start to become more favorable, according to LaVorgna. For many months, price changes have looked worse than they might actually have been because they were being compared to months when the home buyer tax credit was in effect, which boosted prices.

“[W]ith the homebuyer tax credit having expired in June 2010, we will soon be getting “clean” housing data unencumbered by artificial distortion,” he said.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/GNrDrLoaz7U/index.htm

Prices are zooming in the Bay Area as startups hire and new techies flock to town.

FORTUNE  – Whether we’re living through another tech bubble remains hotly contested, but there’s no denying its impact on one market: rental apartments in San Francisco. With Twitter, Zynga, and numerous other local startups hiring in droves, all those newbies need somewhere to live.

In the trendy SoMa and South Beach neighborhoods, says Paul Hwang of Skybox Realty, there may be up to five applications for every apartment listing. Most places are renting at an average of 10% to 20% higher than just six months ago; a $2,400-a-month one-bedroom can now top $2,700.

“The last couple of years, people were happy to have a job,” says Hwang. “Now all I hear is, ‘I’m going to start my own thing.’ All that can be reflected in rent.”

As a result, the apartment hunt can be even more grueling for prospective residents.

Source: Relocation breakthroughs

Naseem Zojwalla, a New York transplant and senior medical director at Onyx Pharmaceuticals, had four days to find an apartment in SoMa, her neighborhood of choice. She saw 10 apartments — where as many as 10 people showed up for tours — but it wasn’t until someone terminated their lease at The Paramount, a luxury rental apartment building, that Zojwalla landed a 800-square-foot one-bedroom unit for $3,000.

“It was definitely more expensive than I expected,” she recalls.

Don’t expect the situation to change any time soon. In fact, brokers expect tech hiring to further intensify this fall and next spring as companies further ramp up hiring. Maybe the solution is to make sure that every new workspace comes with a very comfy couch.

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/jqiWPUNEnmE/

NEW YORK (CNNMoney) — Sales of new homes fell 2.1% in May, after rising for two months in a row, as the housing market continues to struggle.

The Census Bureau reported an annual sales rate of 319,000 new homes last month. That was down from a revised rate of 326,000 in April. But compared to a year ago, sales are up 13.5%.

And the rate in May was better than expected. Economists had forecast a sales rate of 305,000 in May, according to consensus estimates from Briefing.com.

After falling to an all-time low of 278,000 in February, new home sales have been one of the weakest sectors of the economy.

Desperate for a housing rebound

Sales peaked in July 2005. But ever since the recession took hold in 2008, home builders have remained reluctant to boost production — especially with unemploymentstill painfully high.

The glut of foreclosures on the market has also sliced demand for new homes, as financially strapped consumers look for better bargains.

A separate report from the National Association of Realtors on Tuesday showed that sales of existing homes dropped 3.8% in April, slightly more than expected.

The average price of new homes sold in May was $266,400, according to the report. That was up from $265,000 in April.

There were an estimated 166,000 new homes for sale. At the current sales rate, it would take 6.2 months to sell through that inventory, the report said.

New home sales in the Northeast declined the most last month, dropping 27%. The only region to see sales rise was the South, which reported a 2.4% increase.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/1rcPZRpdOZQ/index.htm

• Where is America’s cheapest real estate?

If you’re hunting for a real estate bargain, look no further: Here are 10 cities where the typical home costs less than $82,000.

The nation’s cheapest major housing market is the area in and around Youngstown, Ohio. There, the median home price barely breaks $55,000, according to the National Association of Realtors. We’re not talking about hovels in slums; these are well-kept homes in nice suburban or city settings priced at levels to make consumers in pricey coastal markets ache with envy.

Want something even nicer. There is a seven bedroom, 4,800 square foot home — 19 rooms total — well kept and in the historic district on the market for $150,000. That’s not a misprint.

Take your time house hunting: That could save you some dough. Fiserv, the provider of real estate information and analysis, is forecasting a further home price decline in 2011 totaling nearly 12% for the year.

NEXT: Lansing, Mich. Median price: $64,400

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/edykWyEGilc/index.html

NEW YORK (CNNMoney) — Sales of existing homes fell in May, as severe weather and high gas prices weighed on the shaky housing market.

Home sales fell 3.8% to a seasonally adjusted annual rate of 4.81 million, down from a revised rate of 5 million in April, the National Association of Realtors said Tuesday.

Sales were more than 15% lower than in May 2010.

Economists had expected a May sales rate of 4.79 million existing homes, according to consensus estimates from Briefing.com. (Read: Five years, no mortgage payment)

“Spiking gasoline prices along with widespread severe weather hurt house shopping in April, leading to soft figures for actual closings in May,” said NAR chief economist Lawrence Yun.

Gas prices surged earlier this year, pinching household budgets and putting a damper on consumer spending. In addition, sales were hurt by tornados and flooding in May that devastated parts of the South and Midwest.

10 dirt-cheap housing markets

Sales fell more than 6% in the South and were down over 5% in the Midwest. By contrast, sales fell 2.5% in the Northeast and were flat in the West.

Yun called the drop in May sales “disappointing,” but he expects the market to pick up in the second half of the year, given the recent decline in gas prices.

NAR also said that the national median price for existing homes of all types fell 4.6% in May to $166,500.

While sales had stabilized somewhat earlier this year, the market for existing homes has been working through aglut of foreclosed properties for years — a trend that has weighed on prices.

In May, distressed homes accounted for 31% of all sales, which typically sell for about 20% less than homes that aren’t in foreclosure, according to NAR.

Yun said the long and painful drop in home prices “could be diminishing” as some buyers look to take advantage of what he called the highest affordability conditions in 40 years.

House hunting: Is this the best time to buy?

He warned, however, that existing home sales are being held back by “restrictive loan underwriting standards.”

“There’s been a pendulum swing from very loose standards which led to the housing boom to unnecessarily restrictive practices as an overreaction to the housing correction — this overreaction is clearly holding back the recovery,” said Yun.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/O4bXtEGXKFM/index.htm

Members of the Rent is Too Damn High Party beware! Residential rental prices are on the rise. Here’s who wins in the new non-ownership society.

FORTUNE — There are still many factors discouraging even the most savvy homebuyers from purchasing a home, but a new class of renters is expected to bring a bright spot to the troubled U.S. real estate market. Prices for rental apartments are expected to rise nationally – by approximately 4.5% in 2011 and up to another 3% in 2012, according to Rent.com.

Why buy when you can rent?

During the housing boom between 2001 and 2005, prices for rentals fell by nearly 10% as easy credit offered by banks lured many newcomers to homeownership. Since the bust of the housing market, rents have more than made up those declines as more people now question the financial merits of homeownership or simply can’t get approved for a mortgage. From 2006 to 2009, rental prices on average increased by more than 15%, according to Moody’s Analytics economist Andreas Carbacho-Burgos. Nationwide, the average rent today is $1,360 a month.

Experts predict rents will continue rising.

Christina Aragon, director of strategy and consumer insight of Rent.com, says this is being driven by demographic changes coupled with an improving economy and ongoing foreclosure problems hampering the market for single-family homes. Much of the demand for rentals will likely come from younger people who tend to rent rather than buy. The economic recession pushed many jobless twenty- and early thirty-somethings to crash with friends and parents, but Aragon expects that the improving job market will get them to find their own place. What’s more, the number of people aged 25 to 34 is forecast to grow 1.4% per year through 2013, helping drive demand further.

Paying more to the landlord might be bad news for renters, but it could signal that better days are ahead for the overall housing market. Here are a few winners of our burgeoning rental economy.

Builders and developers

Since the bust of the housing market, residential construction has dropped to record lows. But that is poised to change as builders and developers have already begun trying to cash in on higher demand for rental apartments.

Charles Brindell, chairman of the National Association of Home Builders’ Multifamily Leadership Board, says he expects apartment construction to pick up to at least 160,000 units this year, mostly in urban areas along the East Coast. This would be significantly higher, given that construction since 2009 has totaled less than 90,000 a year – the lowest in 50 years.

Brindell, also CEO of a Texas-based firm that invests and develops apartment communities, says he’s bullish because of the improving job prospects for younger workers. Brindell’s Mill Creek Residential Trust is planning to build 3,000 apartment units this year, mostly in the Northeast including the Boston area, Long Island, New York, and Virginia.

However, while a burst of activity in multi-family homes is certainly good news for the construction sector, it is by no means enough to return the homebuilders to their previous level of activity. The NAHB index that tracks builder confidence remains low at 16 — it was as high as 72 in 2005.

Real estate investment trusts (REITs)

It’s not that homeownership is dead, but people are certainly renting more and investors have picked up on the higher demand.

REITs, which invest in commercial properties from office buildings to rental apartments – have outperformed the SP500 since the financial crisis. In 2010, investments in apartment complexes led gains in the overall REITs market with total returns at 47%. Returns for the overall REITs market was 28%, markedly higher than the SP500 that saw returns of 15%.

Last month, real estate investment trusts Equity Residential (EQR), headed by real estate mogul Sam Zell, and AvalonBay Communities (AVB) – both among the nation’s biggest apartment owners — posted higher year-over-year revenue as the companies raised rents.

For Equity Residential, average rent rose 3.6% to $1,400 and occupancy rose to 95% from 94.6% the previous year on properties the company operated for a year or more. Revenue rose by 4%. And AvalonBay reported that revenues jumped 3.7% and average monthly rental rates ticked up slightly quarter over quarter from $1,873 to $1,879.

As of Monday, total returns for REITs were 8.73% (with about seven months to go), outperforming the Russell 2000, NASDAQ and SP 500. Investments in apartment complexes continued contributing much of the gains.

Overall U.S. housing market

Given that many homeowners are still trying to clean up their messy finances, it might be hard to see how higher rents could benefit the overall U.S. housing market. In theory, at least, renting could become so expensive that it costs less to buy a house and make monthly mortgage payments.

In fact, that’s happening already, even if it hasn’t yet translated to a return to homeownership. In Moody Analytics’ latest list of rent ratios for 54 U.S. metropolitan areas, 29 cities fell into the  “better to buy” category. With many experts predicting that home prices have further to fall this year and with higher expectations for rentals, more cities could end up on the buy side of the buy-versus-rent calculator.

But much of that will likely depend on huge hurdles weighing on the housing market – namely, record foreclosure rates, high unemployment and tighter lending standards for new mortgages. Areas that continue to experience high foreclosure rates and widespread unemployment, such as Florida and Arizona, might find it more affordable to buy than rent. Yet renting will likely be king in more urban areas with more employment opportunities, such as New York and Seattle.

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/f99flFsdZsA/

WASHINGTON (CNNMoney) — The California and Illinois attorneys general have issued subpoenas to big mortgage servicing firms accused of rubber-stamping foreclosure documents, expanding their investigations into the firms.

Illinois Attorney General Lisa Madigan sent subpoenas to two Florida servicers — Lender Processing Services Inc. and Nationwide Title Clearing Inc. — as part of her probe into so-called robosigning practices, according to Madigan’s office.

California Attorney General Kamala Harris issued subpoenas to Lender Processing Services on Wednesday, her office said.

Harris is creating a new “mortgage fraud strike force,” a state panel staffed with attorneys and investigators who will dig into “every step of the mortgage process,” from origination to the sale of mortgage-backed securities, her office said.

“California homeowners have been exposed to fraud and crime at every step of the mortgage process,” Harris said in a statement. “Justice demands we come to their aid, and a key step in that is to investigate robosigning and the potential for inaccurate or unjust foreclosures.”

Wall Street banks face New York mortgage probe

The two mortgage servicing companies under investigation are not among those in top-secret talks with federal agencies and state attorneys general over a proposed settlement of allegations that thousands of homeowners wrongly faced foreclosure.

However, Lender Processing Services and Nationwide Title Clearing work for the banks in talks with the attorneys general, including Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500) and Ally Financial (GJM).

Those big banks are in talks with regulators that could result in a multi-billion-dollar pool of money that could be used to help struggling homeowners.

Lender Processing Services processes loans for more than 50% of all U.S. mortgages, according to the Illinois attorney general’s office. Nationwide Title Clearing is smaller but works for eight of the top 10 lenders, Madigan’s office said.

Calls to Lender were not immediately returned.

A Nationwide spokeswoman said the company had not received the subpoena and could not comment on the specifics.

“Nationwide Title Clearing welcomes the opportunity to help clear up common misconceptions surrounding the issue and wishes to help the public gain a deeper understanding of normal mortgage industry documents and processes,” said Cassandra McSparin. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/1GawWCYzWpE/index.htm

NEW YORK (CNNMoney) — There’s a three-year inventory of homes in foreclosure for sale, and that’s devastating home prices.

Las Vegas has so many foreclosures that 53% of all the homes sold in Nevada are in some stage of foreclosure, according to a report from RealtyTrac, the online marketer of foreclosed properties.

Foreclosures represent 45% of sales in California and Arizona, and 28% of all existing home sales during the first three months of 2011.

“This is very bad for the economy,” said Rick Sharga, a spokesman for RealtyTrac.

What’s more, the homes are selling at steep discounts, especially so-called REOs, bank-owned homes that have been taken in foreclosure procedures.

The average REO cost on average about 35% less than comparable properties, according to RealtyTrac.

But in some areas, the discounts were ever greater: In New York State, the discount for REOs was 53% during the first quarter. And it was nearly 50% in Illinois, Ohio, and Wisconsin.

10 dirt cheap housingmarkets

Also weighing on market prices are “short sales,” homes where the selling price is less than what is owed by the borrowers. These sales sold at an average 9% discount.

Including both REOs and short sales, Ohio had the biggest discount of any state, at 41%.

There were 158,000 deals involving distressed properties nationwide during the first quarter, less than half the nearly 350,000 during the same period two years earlier.

With the slowed sales pace, it will take three years to burn through the inventory of 1.9 million distressed properties, according to Sharga.

“Even if you look at REOs alone, it will take 24 months to clear them and that’s without any new foreclosures at all coming into the system,” said Sharga.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/H2gSOf0Q6hI/index.htm

America’s age is showing

NEW YORK (CNNMoney) — Florida may have the reputation as a big draw for retirees, but it’s actually the northern end of the Eastern Seaboard that has the most aged population in America.

Maine’s median age in 2010 was 42.7, the Census reported Thursday. That’s two years older than the median in Florida, and more than five years above the national median age of 37.2.

“This has been going on for years,” said Jim Breece, an economist at the University of Maine. “The biggest factors are the low birth rate here and the out-migration of young families looking for opportunities.”

Breece added that the state tends to retain its older residents and has attracted quite a few new retirees from out of state. Some towns are catering to this demographic, building new retirement communities and offering events like concerts and lectures to enrich retirements. (’25 best places to retire’)

The nation as a whole grew nearly two years older since the last Census count in 2000, when the median age was 35.3. In 1990, it was just 32.7.

The second oldest state is Vermont, with a median age of 41.5. West Virginia’s median is 41.3 and New Hampshire’s is 41.1. Seven states have a median age of more than 40 years.

Florida did have the highest percentage of senior citizens — residents aged 65 or older — at 17.3%. That was well above the national median of 13%. At 16%, West Virginia has the second highest percentage of senior citizens.

Utah is the nation’s youngest state with a median of 29.2, followed by Texas (33.6), Alaska and the District of Columbia (33.8) and Idaho (34.6).

Utah is so much younger than anywhere else because of the large families there: That was reflected in the state’s percentage of residents under 18 years old (31.5%), the nation’s highest. Second was Idaho at 27.4%.

Best shrinking places to live

The nation is aging rapidly. The 45- to 64-year-old age cohort, representing the baby-boom generation, grew more than 31% since 2000. The 65-and-over population grew more than 15%, the second fastest growing age group.

In contrast, the number of Americans aged 25 to 44 counted in the 2010 census shrank 3.4%. This could be demographic nightmare for Social Security and Medicare budgeters.

Cities with over 100,000 residents and the oldest populations include Scottsdale, Ariz. (median age of 45.4), Clearwater (43.8), Cape Coral (42.4), Fort Lauderdale (42.2) and Hialeah (42.2), all in Florida.

The youngest cities were Provo, Utah (23.3), Gainesville, Fla. (24.9), Athens, Ga. (25.9), Tallahassee, Fla. (26.1) and Columbia, Mo. (26.8). 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/PyBnqeIsSfk/index.htm

The former first family of Alaska recently bought a home in Scottsdale, Ariz. for $1.695 million, according to reports. The gated home was previously sold one year ago for $803,650, according to public records.

Photos courtesy of Trulia.

NEXT: The kitchen

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/yPcbbvYvakU/index.html

Ready to be Depressed?

House prices have fallen further in the past five years than they did in the Great Depression – and there’s no sign the free fall is about to stop.

Downtrend resumes

The Case-Shiller index of U.S. national house prices fell again in the first quarter, SP reported Tuesday.

The index is off 33% since it peaked in 2006. The peak-to-trough decline during the Great Depression, by contrast, was 31%, says Paul Dales of Capital Economics in Toronto.

That’s not the only eye-opener out of Tuesday’s Case-Shiller report. Real house prices, adjusted for inflation, are back at levels last seen in 1999, says Patrick Newport of IHS Global Insight.

Going by per capita income and disposable income per employee, housing is now 24% cheaper than usual, says Dales – making houses as big a bargain as they have been since Gerald Ford was stepping in White House garbage cans.

But don’t mistake those statistics for an argument that prices are likely to rise any time soon. While house prices are now on par with levels seen a decade ago, the economic outlook for the United States and most of its citizens looks a lot less optimistic now than it did in 1999.

Incomes have been falling as more workers are forced to compete with cheaper overseas labor, and the leverage that Americans used for years to fill a growing wage gap now looks like a decidedly mixed blessing. Massive debt and government belt tightening are likely to keep a lid on the economy for years, further limiting household gains.

And maybe the biggest shift is people’s view toward housing. After the stock bust of 2000-2001 many Americans noticed their houses kept appreciating and started viewing real estate as a winning asset class. But the collapse of the housing bubble means that thought is mostly history, which will limit the pool of willing buyers even with prices at striking low levels.

So how long till you get your head back above water on a house bought at the top of the market? Try 2025. In after the Depression-era housing bust, Dales writes, prices took 19 years to reclaim their previous peak. If you’re in the market for a greatly depressing thought, it’s a good one.

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/qIcCxjZXzZI/

In Detroit, foreclosed and abandoned houses often abut family homes.

NEW YORK (CNNMoney) — A group of religious leaders from Detroit is blaming JPMorgan Chase and Bank of America for contributing to blight in the city.

Rev. Charles Williams II of Historic King Solomon Baptist Church says the banks contribute to the decline of neighborhoods by neglecting houses after they foreclose on them, allowing the structures to fall into ruin.

“They kick people out of these properties and now they’re abandoned, windows kicked out, pipes stolen,” said Williams. “This is a city-wide epidemic. We want to call Chase into action to put money back into these houses and put people back into these houses.”

Urban and suburban blight is a familiar sight in the Motor City. Block after residential block in what were once considered middle-class neighborhoods are now pockmarked with abandoned houses, often stuffed with garbage or gutted by fire.

These ruined houses often abut homes that are still inhabited by working families.

“Blight breeds blight breeds blight,” said Williams. “I don’t know if you have had the urban experience of sending your kid to school and they have to walk down a block of abandoned houses, but that’s not safe.”

JPMorgan Chase (JPM, Fortune 500) spokeswoman Nancy Norris denied the minister’s allegations. “We have a disciplined program to check on and maintain properties after foreclosure,” she said.

Bank of America (BAC, Fortune 500) spokesman Rick Simon said his bank considered foreclosure a “last resort” and was preparing to open three customer assistance centers in the Detroit area “to serve mortgage and other credit customers who are facing financial difficulty.”

Simon also said Bank of America plans to work with the city “to identify up to 100 low-value and vacant properties for demolition” and donate the land to the city “for green space, urban farming or redevelopment.”

Home price ‘double dip’ confirmed

In the metropolitan area of Detroit, Warren and Livonia, 21,192 homes were involved in some form of foreclosure filing in the first quarter of 2011, equal to more than 1.1% of the total homes in that area, according to RealtyTrac.

Williams said that he and 10 other ministers held a news conference Wednesday in front of a foreclosed property owned by Chase.

But Chase spokeswoman Norris said that the bank does not, in fact, own the home that was the setting for the briefing.

“We found it kind of odd that they went to a house that’s not owned by us, to criticize us,” she said.

Williams, however, insisted that the house on Biltmore Street on the west side of Detroit “is, in fact, foreclosed property by Chase Bank.”

Chase spokesman Tom Kelly confirmed that his bank did service the mortgage on the home and did foreclose on the home, but did not own it at anytime.

– Staff writer Les Christie contributed to this story. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/6BAxokXHcv4/index.htm

NEW YORK (CNNMoney) — Home prices hit another new low in the first quarter, down 5.1% from a year ago to levels not reached since 2002.

It was the third straight quarterly drop for the SP/Case-Shiller national home price index, which was released Tuesday.

Prices are now down 32.7% from their peak set five years ago.

“Home prices continue on their downward spiral with no relief in sight,” said David Blitzer, spokesman for Standard and Poor’s.

The index covers 80% of the housing market, and this month’s report confirmed “a double-dip in home prices across much of the nation,” said Blitzer.

The housing market went through a brief recovery period starting in mid-2009, recovering nearly 5% of earlier losses. After homebuyer tax credits expired last April, the slump resumed.

A separate SP/Case-Shiller index covering 20 major cities also dropped during March, the index’s eighth straight monthly decline. 10 dirt-cheap housing markets

Of the 20 cities, only Washington has posted a home-price gain: 4.3% over the past 12 months.

Minneapolis homes lost the most value over that period, with prices falling 10%.

Other big losers include Phoenix (- 8.4%), Chicago (- 7.6%) and Portland, Ore. (- 7.6%)

Prices continue to be hammered by foreclosures with high numbers of repossessed homes flooding the market.

Many repossessed properties are in poor condition and sell at a big discount to conventionally sold homes, driving down overall values.

Falling home prices have a devastating impact on new home construction, according to Pat Newport, a housing market analyst for IHS Global Insight.

“They are a key reason why builders aren’t building new homes, even in the fastest growing states, like Texas,” he said. “Existing homes are selling for so much less, the builders can’t compete.”

Normally, new-home construction is an important contributor to the economic recovery. Not so this time, according to Mike Larson, an analyst with Weiss Research.

“Housing has been an albatross for the economy as opposed to an engine powering it,” he said.

If residential development had come back as it has in the past, the current recovery would be much stronger. There’s be much more robust hiring of construction workers, building materials manufacturers and drivers and deliverymen to bring the products to site.

Newport pointed out that when developers build a new home for $300,000 it adds $300,000 to the economy, as measured by GDP. An existing-home sale just adds 5% or 6% in broker’s commission.

“As a component of the GDP,” said Larson, “housing has been out to lunch.” 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/yd8RXwbf1rc/index.htm

(Money magazine) — They all but disappeared after the housing bust as homeowners grew fearful of future interest-rate hikes and rates for fixed loans fell to historic lows. But “the fear of the adjustable-rate mortgage has started to settle down,” says Steve Habetz, a loan officer in Westport, Conn.

And how. With 30-year fixed-rate loans now inching toward 5%, the number of borrowers taking adjustable-rate mortgages, which typically carry a low fixed rate for one to 10 years and then adjust annually based on current rates, has jumped 75% since last year.

No wonder: Rates for ARMs that reset after five years, the most common variety, were recently a mere 3.69%, vs. 4.99% for a 30-year fixed loan. That’s the widest gap since 2003, according to HSH Associates.

Grabbing that ARM could save you $230 on monthly mortgage payments and more than $19,000 in interest during the first five years on a $300,000 loan.

If you’re buying or refinancing, it’s tempting to save the dough. But you could also get stuck with a payment you can’t afford after the rate adjusts. Think it won’t happen? Chances are you’re basing that assumption on when you think you’ll sell and what your salary might look like someday.

Read on to figure out if an ARM is really right for you.

The assumption: I’ll move before the fixed term ends.

The pitfall

“People stay in their homes longer than they think,” says Doylestown, Pa., financial planner Paula Nangle.

According to the National Association of Realtors, the typical home seller has been in his house for eight years. That’s partly because it can take a while to sell.

Anyone a few years from retirement should be especially wary: You could wind up with a payment spike just as you begin living on a fixed income.

The strategy

A three- or five-year ARM makes sense only if you’re absolutely certain you’re not going to stay — say, because you’ve been temporarily relocated by your employer.

When you’ve got good reason to think you’re going to move but aren’t sure of the timing — maybe you’re in a starter home but plan to have a large family — go with a seven-year ARM.

Home clearance sale coming from ‘desperate’ sellers

Recently 7/1 loans cost just a third of a percentage point more than 5/1s, which is worth it for the extra security, says Nangle.

The assumption: I’ll refinance in a few years.

The pitfall

Rates are going in one direction: up.

The Mortgage Bankers Association predicts that 30-year fixed rates will hit 6% by the fourth quarter of 2012 and climb higher the year after.

Say you took a 5/1 ARM at 3.69% on a $300,000 loan and refinanced to a 6% fixed loan in five years.

You’d pay $86,300 more in interest over the full term of the loan than if you took the 4.99% 30-year fixed loan today.

The strategy

Get a 30-year fixed. True, you’ve been hearing false warnings about rate hikes for years. But at this point “rates would drop only if economic growth stalled,” says Michael Fratantoni, vice president of research and economics for the Mortgage Bankers Association.

Moreover, you might find it hard to refinance if you lost your job, your home value declined, or your lender raised the bar on equity requirements.

The assumption: I’ll be earning more money soon.

The pitfall

Your salary may not rise as fast as your loan payment.

The average mid-career professional got a 2.5% raise last year, according to Worldatwork.org. Meanwhile, the rate on most five- and seven-year ARMs can jump five percentage points the first year the payment adjusts.

The strategy

Someone who can be fairly certain of a higher income down the road — say, a medical resident — can take the ARM.

Otherwise, buy only a home that you can comfortably afford with a 30-year fixed loan (See the “How much house can I afford” calculator).

“If you need an ARM to manage the loan payments, then buy a smaller home,” says Chad Smith, senior vice president of mortgage services at LendingTree.com.

Should you be so lucky as to see a big spike in your income, you can always save the extra dough — and buy a bigger house later.  

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/o5xiOfSPPLs/index.htm

NEW YORK (CNNMoney) — Home prices are already a third off their highs, but this summer could bring the real discounts.

Buyers are still cautious, and anxious sellers will have to price aggressively to get them off the fence.

That could result in a “summer clearance sale,” predicts Pete Flint, CEO of Trulia, the real estate web site.

“We don’t imagine a stampede of buyers, like outside of Macy’s on Black Friday,” he said. “We see this more akin to January sales where retailers are trying to get rid of stock before it gets stale.”

Several factors, he said, will lead to blow-out prices:

Accelerating price drops: Home prices have already reached their lowest level since the housing bubble burst, and are now at 2002 levels. Sellers will feel the pressure to make deals before their homes lose even more value.

Bloated inventory: There are boatloads of homes on the market, more than eight months worth at the current rate of sales. Many are distressed properties — short sales and bank repossessions. Such homes are selling at discounts up to 50%.

Tight credit: Some homebuyers still can’t obtain mortgages, limiting demand.

Unemployment: While the job picture has brightened, unemployment is still around 9%. People without jobs don’t buy homes, obviously, but high unemployment also rattles working people. Lacking the confidence that their jobs are secure, they may not look to buy.

These forces could all come to a head this summer, according to Flint, because of the cyclical nature of homebuying. Buying takes off in spring as many young families hope to make their moves before the new school year.

“By the end of the homebuying season, sellers will become increasingly desperate,” said Flint.

10 Cities where houses are already dirt cheap

Adding to already swollen inventories will be a flood of new distressed properties poised to hit the market.

“By the summer, most of the ‘robo-signing’ delays will be over and more distressed properties will be on the market,” said Celia Chen of Moody’s analytics.

Many banks had slowed foreclosure proceedings until they made sure that paperwork was in order. That put hundreds of thousands of homes into foreclosure limbo: Borrowers were no longer making payments in many cases, but were allowed to remain living in the homes.

There’s little urgency for buyers to act in this stagnant market because no one expects prices to turnaround, according to Ken Johnson, a real estate professor at Florida International University and co-author of a new study on whether it’s better to buy or rent. Realizing that home prices will likely get even better, buyers can wait for even better deals.

“If people think we’re at the bottom of the market, they’ll act,” he said.

Housing markets: best recovery bets

All the experts, however, are telling buyers that prices will continue to erode all through 2011. Even after that, no one is predicting outsized price gains.

“There will be a lousy housing market for another year or two,” said Michael Larson, a housing analyst for Weiss Research.

Even if we’re at or near the bottom, buyers are unlikely to see prices rise much if they wait.

“I myself continue to rent,” said Johnson. “I know that even if I don’t buy for a year, it’s no big deal. Who cares if I miss the bottom if prices only go up a couple of points or so?” 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/M63BuARrlb0/index.htm

NEW YORK (CNNMoney) — Home prices won’t rebound until jobs come back. But jobs won’t come back until the housing mess gets fixed.

That’s a problem because both the housing market and the broader economy are having trouble getting back in gear. Hiring is losing steam, and after home values hit a post-boom low, many are projecting further price declines.

“The economy can move forward without housing,” said Mark Zandi, chief economist with Moody’s Analytics. “But I don’t think it can flourish and create enough jobs to bring down unemployment in a significant way without a revival of the housing market.”

Both Moody’s Analytics and mortgage finance giant Fannie Mae (FNMA, Fortune 500) are projecting an additional 5% home price decline through the end of this year. But some economists think the turnaround could be even further away. Barry Ritholtz of Fusion IQ and Dean Baker of the Center for Economic and Policy Research both think prices are overvalued by as much as 12%.

“Right now home prices are a falling asset class and have been for five years,” said Ritholtz. “That almost becomes a self-fulfilling prophecy.”

Housing typically helps lead the way in an economic recovery not only through a surge of construction and the hiring that goes with it, but though demand for goods and services that go into forming a new household.

“The worst thing about a damaged housing market is it freezes all types of economic activity,” said Ritholtz.

Economic malaise takes root

Baker worries about what kind of overall growth can be achieved if housing continues to suffer.

“Housing has been very important in other recoveries. That’s not the story today. It’s tough to see what else could take the place,” said Baker.

Doug Duncan, chief economist of mortgage finance giant Fannie Mae, is focused on the impact of jobs on housing — and vice versa.

“Our mantra all along has been employment, employment, employment,” Duncan said. “Until you see employment growth and then income growth and then household formation, you don’t get to the bottom of this.”

Duncan is anxiously awaiting the government’s monthly unemployment report on Friday. He said a further slowing in the economy could push back his forecast for when a housing recovery will begin.

On Wednesday, payroll processor ADP showed reported that hiring by businesses ground to a halt in May, raising concerns about the recovery in employment. Economists surveyed by CNNMoney are now forecasting 170,000 jobs were added in May, barely enough to keep up with population growth. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/43HnA5Yv34E/index.htm

NEW YORK (Money) — My fiancé and I are saving up to buy a house in the not-too-distant future. We want to take advantage of the housing market, but he’s skeptical about whether this is the best time to buy. When do you think prices will go up? — S.R., Los Angeles

I can understand your fiancé’s reluctance given that house prices continue to weaken. The SP/Case-Shiller Home Price Index released last week showed that prices fell nationally in the first quarter of this year.

That’s the third quarter in a row prices have dropped, taking them back to mid-2002 levels. Meanwhile, at the end of March the monthly index that tracks 20 large metro areas dipped below its previous low of April 2009, essentially confirming a double-dip in home prices for much of the country.

As for your city, Los Angeles, the stats weren’t quite as bad as those of the 20-metro area index of which it’s a part. Prices in L.A. still remain about 5% above their trough of May 2009, although they fell again in March, the eighth month in a row.

On a decidedly more positive note, though, your hometown did make our list of the Top 10 Turnaround Towns. Whether that turnaround will be in progress by the time you’re ready to buy is anyone’s guess.

But given the recent lackluster jobs report and the million-plus homes in foreclosure, I don’t think anyone is expecting a robust about-face anytime soon. But that doesn’t mean you and your hubby-to-be shouldn’t be out scouting the market for a house to buy.

Desperate for a housing rebound

Just as people learned who bought a house at or near the peak of the housing market back in 2006, what really matters isn’t what house prices have done in the recent past, but what they’ll do in the future.

And despite all the gloom and doom, I think it’s reasonable to expect that prices will eventually stabilize and begin climbing again.

Why? For one thing, even though this housing bust has made many people rethink the once widely (and erroneously) held notion that house prices are immune to major setbacks, it’s not as if consumers no longer aspire to own a home or view one as a good investment.

In fact, a recent Pew Research Center report found that the overwhelming majority of people still consider a house the best long-term investment one can make. They just don’t believe it quite as fervently as they did a decade ago.

And when current renters were asked whether they would prefer to rent or buy in the future, 81% said they would like to buy a house at some point. This tells me that the fundamental demand for housing is still solid.

Granted, it may take a while for this underlying demand to nudge prices upward, considering the weak jobs climate, the overhang of housing inventory and the fear that your husband and others have that someone who buys now could see prices go even lower.

But eventually house prices should become attractive enough to lure enough buyers to raise prices. That’s the way markets work. If you’d like an example of how that dynamic has operated in the past, you need look no farther than your own city.

Winners of the rental economy

After a big run-up in the 1980s, house prices in Los Angeles peaked in early 1990 — and then dropped 27% over the next six years. But after hitting a trough in 1996, prices began to climb, and by the beginning of 2000 had risen 37% and regained their former peak.

We all know what happened next. Prices more than doubled over the following six years as Americans (abetted by all-too-eager lenders) went on a housing feeding frenzy that culminated in a bust.

But the point is that even after sharp declines, housing markets can recover (assuming an area’s underlying economy is sound), and prices do resume their upward trend. So getting back to you and your finance, it seems to me that this is a pretty good time to be in the market for a house.

Is it possible that prices might go lower still from here? Sure. But it’s unrealistic to expect to call the bottom of the market and time your purchase just right.

What you can do, though, is take advantage of the depressed market to do an extensive search for a house you like — and then use the leverage of a weak market to negotiate hard on price.

As a buyer, you’re in the advantageous position of having time and market conditions on your side. Before you do anything, though, you need to make sure you’ve got realistic expectations.

Prices in Los Angeles really popped after the market recovered from the 1990 crash. But with the experience of this unprecedented housing debacle seared into the minds of buyers and lenders, I expect we’ll see much more muted appreciation potential in the future.

I think there’s an increasing sense that a house is first a place to live and then an investment, not the other way around. After a period where people became serial house flippers, there’s also a growing awareness that owning a house is a long-term commitment.

In years past, the rule of thumb was that you should consider buying only if you planned on living in an area at least five years. Today, I’d say you probably shouldn’t even think of buying a house unless you plan to stay in it more like seven to 10 years.

That’s not to say you might not come out ahead for shorter periods, especially if you don’t buy at the height of a bubble. But given the large transaction costs of buying and selling and a more subdued appreciation outlook, I’d err on the side of planning for a longer stay than a shorter one.

For more info on how to navigate today’s tricky housing market, you can go to our Real Estate section. And if you’re not totally wedded to the City of Angels, you may also want to check out our recent story on the least expensive housing markets.

The bottom line, though, is you and your betrothed should be approaching the prospect of becoming homeowners much the same way that, ideally, one enters into a marriage. You take your time, give it the serious thought it deserves — and then move forward only if you plan to be in it for the long haul. (send Walter Updegrave a question) 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/N2FIFAC0VPE/index.htm

NEW YORK (CNNMoney) — Should you keep paying your mortgage on a home that’s dwindling in value?

No way, say an increasing number of underwater homeowners who are voluntarily choosing to “walk away” from their home loans, a practice known as “strategic default.”

Jon Maddux, CEO of YouWalkAway.com, reports 10% more clients this year to his company, which advises people how best to handle the walk away process.

Charles Gallagher, a real estate attorney in St. Petersburg, Fla., has also seen an uptick.

And a recent survey by home finance company Fannie Mae found that while only about 27% of homeowners would even consider walking away, that’s up from 15% last year.

In an early 2010 report, Morgan Stanley (MS, Fortune 500) researchers said nearly 200,000 defaults in the prior year were voluntary, or roughly 12% of the total. The bank expects to issue updated estimates in coming weeks.

10 dirt cheap housing markets

The profile of a typical strategic defaulter is not what you’d expect, said Peter Ticktin, a Florida-based attorney, whose firm is handling 3,000 foreclosure cases.

“Because they borrowed money and stopped paying their loans, you would think they’re deadbeats — but it’s not like that,” Ticktin said.

In fact, most are good credit risks with high FICO scores, according to Andrew Jennings, chief analytics officer at Fair Isaac (FICO), the company behind FICO.

Take Jeff Horton, an IT manager in Orlando, Fla.

He stopped making mortgage payments on two homes in October 2009, a condo purchased for $140,000 in 2005, and a house he bought two years later for $265,000. He had occupied the condo until he bought the house, and then rented it out.

“I would have kept up the payments, but the condo was appraised for $54,000 and the house, $135,000,” said Horton.

To keep paying off the homes didn’t add up. He could rent a nice three-bedroom home in town for about $1,000 a month, less than half what he was paying for his mortgages, even after rental income.

For him and other homeowners, that makes up for the credit-score hit and the fact that you won’t be able to get a mortgage for several years.

Before he stopped paying, his credit score was an excellent 750. It dipped as low as 520, but is up to 600 again.

“Strategic default can be a financially sophisticated thing to do,” said Mark Fleming, chief economist for CoreLogic, the financial analytics company. “And it makes sense that more financially savvy people do it. They may treat their mortgages like they would their investment portfolios — in a financially ruthless manner.”

Home price ‘double-dip’

Sometimes, borrowers have to acquire that ruthlessness.

Helen Sheridan purchased a townhouse condo in 2006 at the height of the boom in San Diego. She paid $630,000 for a place worth $450,000 today.

When the economy tanked, she lost about 30% of her income as a certified public accountant and her mortgage payments, while still doable, became burdensome. With a teenage daughter and son, she was facing college costs.

She had to overcome some conventional thinking about the sanctity of debt repayment to make what she realizes is the correct financial choice.

“I still feel guilty,” Sheridan said. “I break out in tears, but I have a family to support.”

One factor that pushed her over the edge was that the house needs maintenance and repair.

“People are more educated about the process,” said Maddux of YouWalkAway. “They’re making more calculated, less emotional, decisions and are less fearful and less concerned about the stigma.”

Sheridan is getting help from YouWalkAway and her house will be auctioned off on June 13.

University of Arizona law professor Brent White thinks the past few years of banking scandals have reinforced the view that it’s not unethical to walk away.

“There’s a sense that the banks don’t follow the ‘rules,’ but somehow the little guy is supposed to — more and more people are saying ‘enough is enough’ and walking away,” said White, who is also the author of “Underwater Home: What Should You Do If You Owe More on Your Home than It’s Worth?”

Some homeowners, however, can’t get past the stigma.

Gallagher represents a Florida couple, a dentist and a financial consultant who is well known in the area. They bought a house for $1.4 million during the boom, and considered walking away when it was appraised recently at close to $400,000.

“Ultimately, the couple did not default,” said Gallagher. “Given her public profile, she was worried about the backlash. She remains making payments on a deeply underwater mortgage.” 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/9zXWtsztpqw/index.htm

Housing guru Robert Shiller sees more pain ahead.

NEW YORK (CNNMoney) — In an off-hand remark before cameras and microphones, economist and housing market guru Robert Shiller opined earlier this year that he would not be shocked if there was another 10% to 25% in the nation’s home price plunge — and he’s not backing down from that statement.

At a SP Housing Summit in New York, Shiller on Thursday reiterated his fears of falling home prices. It’s not a forecast, he said, just a comment on his understanding of housing market trends.

He explained that speculative markets, like stocks or commodities, act like random walks. They go up and down all the time. Housing market direction tends to be more consistent.

“I worry that this is a real and continuing downturn, like in Japan,” Shiller said. “It had a boom in the 1980s that peaked in 1991. Prices declined in the major cities for 15 straight years after that.”

The U.S. housing market is hard to predict because the boom and bust it went through was unique. Shiller has studied historical price data back to the 1890s and found nothing like it.

Squatter Nation: 5 years with no mortgage payment

“This is the biggest housing boom and bust in U.S. history,” he said. “The bubble was unique. “That makes it impossible for statisticians to forecast because they deal with things that repeat themselves. You see a pattern and expect it to repeat.”

It’s even different from the Great Depression, when the home price plunge was at about the same rate. The big difference, however, was that prices of nearly everything else cratered in the 1930s as well — which has not been true during the housing bust. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/CzaKUy6wKcg/index.htm

NEW YORK (CNNMoney) — Three top mortgage servicers are finally being taken to the woodshed by the Obama administration.

Federal officials say these banks are doing such a bad job at foreclosure prevention that the government will stop paying them for modifying delinquent loans.

The Treasury Department announced on Thursday that it will withhold incentive payments to Bank of America (BAC, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500) until they substantially improve their performance in the federal Home Affordable Modification Program, known as HAMP.

Ocwen Loan Servicing (OCN) was also cited but will continue receiving payments. Its results were affected because it started servicing a large pool of mortgages while under review.

The banks needed to boost their performance in several areas, including correctly evaluating whether a homeowner meets the HAMP income requirements.

Though the administration has talked tough in the past, this is the first time it is wielding the most powerful weapon in its HAMP arsenal — the withholding of payments. Servicers are eligible for up to $4,500 over three years if they put borrowers into sustainable modified mortgages.

Until now, officials had hoped that compliance reviews and publication of each servicer’s performance would be enough to get the banks to improve their handling of troubled borrowers. They stressed the withholding of payments is the “next step” in the process.

“While we continue to get tens of thousands of new homeowners into mortgage modifications each month, we need servicers to step up their performance to meet the needs of those still struggling,” said Tim Massad, a Treasury official.

So far, the administration has paid $1.3 billion in incentive payments — paid for with funds from the 2008 TARP law — to 84 servicers. It has used about $2 billion of the $46 billion in TARP funds dedicated to homeowner help.

Banks react: The cited banks had varying responses to the Treasury’s action, with Wells Fargo saying it would formally dispute the findings.

The San Francisco-based bank said Treasury is using data from last year and that it has cut its error rate to 4.5%, down from the 27% cited in the report.

“We realize that continued improvements are needed, but this report does not fairly reflect our leading role in making loan modifications,” the bank said in a statement. “It paints an unfairly negative picture of our modification efforts and contradicts previous written assessments shared with us by the Treasury.”

Chase said it “respectfully disagrees” with the assessment, while Ocwen said it was surprised that it was dinged for problems with the modifications made by servicers whose portfolios it took over.

Bank of America said it acknowledges it must make improvements, particularly in areas affecting homeowners.

“We have made great progress in several key performance areas and, in the first quarter, Bank of America was responsible for one of every four modifications completed under HAMP,” said Dan Frahm, a senior vice president at the nation’s largest servicer.

Squatter Nation

Pressure building: The Obama administration has been under fire for not getting the banks to do more to help homeowners practically since the HAMP program began in the spring of 2009. Officials have been repeatedly pressed to hold the banks accountable for their poor results in the administration’s signature foreclosure prevention program, which has performed far below expectations.

Through April, nearly 700,000 homeowners have received permanent modifications through the HAMP program, which the administration said would help up to 4 million people.

Servicers have also started 25,500 second lien modifications through a separate Obama administration program and have helped nearly 15,000 people get out of their homes through short sales or other foreclosure alternatives.

Also, nearly 4,300 people with Federal Housing Administration mortgages have received modified loans through another foreclosure prevention initiative. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/EmayYXFpfV8/index.htm

Millions are staying in their homes without paying their mortgages.

NEW YORK (CNNMoney) — Charles and Jill Segal have not made a mortgage payment in nearly five years — but they continue to live in their five-bedroom West Palm Beach, Fla. home.

Lynn, from St. Petersburg, Fla., has been living without paying for three years.

In Thousand Oaks, Calif., an actor has missed 30 payments, and still, he has not lost his home.

They’re not alone.

Some 4.2 million mortgage borrowers are either seriously delinquent or have had their cases referred to lawyers to pursue foreclosure auctions, according to LPS Applied Analytics. Of those, two-thirds have made no payments at all for at least a year, and nearly one-third have gone more than two years.

These cases can go on and on. Nationwide, it takes an average of 565 days to foreclose on borrowers in default from their first missed payments to the final auction. In New York, the average is 800 days and in Florida, where the “robo-signing” issue is particularly combative, it’s 807.

If they want to fight evictions hard, borrowers can remain in their homes even longer while their cases are being worked through.

The Segals have been doing that — in court. They bought their home in 2003 with an adjustable rate mortgage. After a few years, their monthly payments tripled to $3,000, just as their home-inspection business was cratering.

The Segals want the bank to modify the mortgage so payments are affordable, and they think the court will agree that their lender put them into a toxic loan.

“The evidence will show that we were defrauded,” said Jill Segal.

Walk away from your mortgage? Time to get ruthless

If they lose, of course, they’ll finally have to leave. And, unfortunately, more than 50 months of missed mortgage payments hasn’t translated into big savings.

“It’s very hard to save,” said Jill Segal. “Our company’s billing is 90% off and my husband is only working about four days a week.”

Lynn, who didn’t want her last name used, purchased a two-bedroom on Tampa Bay in 1998 for $135,000.

As the waterfront property’s value skyrocketed, eventually reaching $750,000, she refinanced twice (once to expand a business), and took out a second mortgage. She now owes more than $600,000 on the home, which is worth only $235,000.

Living in this foreclosure limbo is “Hell,” Lynn said. “I feel like I’m locked in a box. I work for a financial organization and if this came out, it could cost me my job.”

She’s still hoping to negotiate the loan. In the meantime, small things bother her. “A couple years ago, I lost my dog and I can’t decide on getting a new one,” she said. If she has to move, she can’t be sure she’ll go somewhere that allows pets.

The actor from Thousand Oaks, Calif. began having problems during the screenwriters’ strike in late 2007, followed by a threat of a strike by the Screen Actors Guild.

He’s working with his lender toward a mortgage modification, submitting page after page of documents, which the bank has often misplaced or waited so long to examine them that they had grown too old to use.

His ideal outcome is get the loan modified and get all his late fees waived. He feels entitled to that because the bank advised him to stopped paying in the first place to qualify for one of the government’s foreclosure programs. Before that, he had missed only one payment.

Meanwhile, he has cobbled together some income streams — small acting parts, teaching acting classes and even handyman work.

“In a way, I feel like I’m lucky because I haven’t had to pay any ‘rent’ for 30 months,” he said.

But he feels like he’s always under a cloud. “I haven’t slept in three years,” he said. “It’s terrifying. I have to have the ultimate poker face in front of my kids.”

10 dirt cheap housing markets

Ruben Martinez, a Staten Island, N.Y., man trapped in a particularly bad adjustable rate mortgage, stopped paying more than three years ago. His attorney, Robert Brown, has managed to stave off one foreclosure.

Martinez, still struggling to find work, has little in savings despite the missed payments. He’s earning some income as a pastor and consulting for a non-profit family counseling organization.

“There’s pressure on me every day,” he said. “I have a wife, three daughters and two grandchildren. Where are we going to live?” 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/ghLpcW2t--M/index.htm

Vacancy rates at U.S. malls are at their highest level in years. So why are investors pouring money into them?

FORTUNE — For many suburbanites across America, the local mall has been popularly viewed as a landmark of sorts, if not the ultimate teenage hangout. In a way, that reputation – more as a place to meet up than a place to shop – has been part of their demise in recent years, as anchor stores struggle to compete with the rise of standalone big-box retail chains.

The latest economic recession only made things worse. Gravely weak retail sales hit mall anchors, such as Sears (SHLD) and Mervyn’s, particularly hard – helping drive up mall vacancies, while sending rents paid by tenants spiraling down. Even though retail sales have improved for the past several months as the U.S. economic recovery slowly carries on, it hasn’t exactly spurred more mall occupancies. During the first three months this year, vacancies nationwide struck the highest level in at least 11 years, according to real-estate research firm Reis Inc., which showed the average vacancy rate at 9.1%, up from 8.7% the previous quarter.

But then, not all malls are created equal, say some industry analysts who think a mall comeback is under way.

To be sure, the positive outlook doesn’t apply to all properties but rather top-tier locations often owned by big, publicly traded mall owners like Simon Property Group (SPG) and Taubman Centers (TCO). They’ve seen vacancy rates fall to 7% or lower and better sales have translated to higher rents, a reversal from two years ago when retailers insisted on concessions as they struggled with the recession. What’s more, shares of both companies have surged in the past year, and investors are betting business will improve further.

In 2010, investments in regional malls were among sectors that led the overall real estate investment trusts market, which saw total returns at about 28% — far outperforming the SP500′s returns of about 15%. Total returns for mall REITs were about 35%, besting the overall REITs market, according to the National Association of Real Estate Investment Trusts.

And so far this year, mall REITs have continued to outperform the REITs index.

There has been very little new mall construction since 2006, due to a combination of over-building and changing consumer habits as many turn to online shopping. However, industry analysts say some regional malls still hold promise as big mall operators redevelop existing locations to draw fickle consumers.

Remaking the mall

Retail property giant Macerich (MAC) reopened Santa Monica Place in California, rebuilding it as a three-story outdoor shopping venue with anchored by Nordstrom (JWN), Bloomingdale’s (M), high-end restaurants and a food market. Simon, which operates 336 malls across the U.S., expanded Austin’s Domain mall in 2010, adding various stores including Target (TGT), which traditionally wouldn’t be found at most regional malls but still draws a steady stream of customers.

“The long-term earnings estimate picture for Simon Property is optimistic,” according to a May research note by Zacks Equity Research, which maintained its neutral rating of the company. Zacks, however, warned a few factors could dampen demand, including excess retail space in a number of markets and ongoing growth of catalog and online shopping.

Retail consulting and research firm Customer Growth Partners maintains a bullish outlook on large public mall operators, despite the possible headwinds. Efforts to redevelop existing malls helped increase mall productivity for the first time since 2007 to $469 per square foot, an 8% increase over 2009. And even though retail sales since March have slowed, the firm believes companies like Simon and Taubman will continue to do well as reinvestment continue.

Besides, Customer Growth Partners adds, mall anchor stores from Macy’s to Nordstrom have seen markedly better earnings following huge cuts amid the latest economic recession. While middle to lower income shoppers remain cautious on spending, Macy’s benefits from a higher-end consumer. During the first quarter, it reported net income of $131 million, or 30 cents per share – much higher than the $23 million, or 5 cents per share, during the same period last year.

“Malls have proven to be very good areas for investors to be exposed to,” says David Harris, REIT sector equity research analyst with Gleacher Company. “They have managed to do very well despite the growth in Internet sales that some thought would destroy them.”

But regional malls aren’t exactly in the clear. Online retailing is growing increasingly mainstream, potentially making retailers wonder why they would ever need to lease big boxes when customers can order whatever they want on their smartphones. But perhaps the more immediate worry is the continually worn-out consumer, who faces a relentlessly difficult job market and rising fuel and food costs.

Nevertheless, those bullish on regional malls would point to a 1998 Time Magazine cover story titled, “Kiss your Mall Goodbye: Online shopping is faster, cheaper and better.” The point is malls have seen large headwinds before. And however much they’ve struggled to reinvent themselves through recessions and the growth of online shopping, they are still very much a part of a slice of suburban America. Now it remains to be seen if they’ll be more than just popular hangouts.

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/RqBwMniVTMw/

Home buyers pay a premium to buy a slice of paradise.

During the first three months of 2011 the median price of a home sold in Honolulu was nearly $580,000, according to the latest data from the National Association of Realtors. That gives Honolulu the distinct honor of being the most expensive housing market in the nation.

“Oahu is beautiful and it has the best weather in the world,” says Honolulu-based real estate agent Bryan Hino. That has attracted many well-heeled foreign buyers, which has helped keep prices high.

It’s not just the lure of balmy weather and palm trees that keeps homes pricey. Hawaii is one of the most remote places on earth and many building materials have to be shipped long distances to get there.

Land is also limited and the terrain difficult to navigate, which helps to inflate property values and construction costs. Honolulu is hemmed between ocean and mountains, leaving little land left that is easy to develop. Much of the land that remains on Honolulu’s home island of Oahu has been set aside for preservation, military or agricultural purposes, leaving a small fraction for home building.

Luckily, many Hawaiians are better prepared to afford the sky-high prices: Residents’ median household income is $81,000, about 25% higher than the national median, according to Wells Fargo Bank.

NEXT: San Jose, Calif.

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/5ugc07vimUU/index.html

NEW YORK (CNNMoney) — Permits for housing construction climbed in May, signaling a glimmer of optimism among homebuilders about the future of the housing market.

The number of permits for future housing construction jumped to a seasonally adjusted annual rate of 612,000 last month, up 8.7% from the revised rate of 563,000 in April, the Commerce Department said.

It was the highest monthly rate since December and was much higher than expected, with economists surveyed by Briefing.com looking for a 548,000 permit rate.

Permits for single-family homes, viewed as a more stable indicator of new homebuilding activity than permits for multi-family home construction, ticked up 2.5% from April to a rate of 405,000.

10 most expensive housing markets

While permits are typically viewed as an indication of builders’ confidence in the housing market, the big jump in permits could have had a lot to do with seasonality, even allowing for the government’s adjustment, said Doug Roberts, chief investment strategist for Channel Capital Research.

Roberts said that this is the prime time of year to begin construction, given the better weather. And given the flooding and bad weather in April, many builders may have gotten off to a late start — leading to a jump in permits and housing starts last month.

“These are the months where the most construction occurs, so this increase could be more of a seasonal blip,” he said. “We’ll have to see if we gain some traction after the next few months — but for now, it’s not like we’re at the beginning of a new housing boom.”

But an increase in cofidence also likely played a part in the positive report, said Roberts.

Though the housing market remains weak, it began stabilizing when the Federal Reserve introduced quantitative easing measures, aimed to help stimulate the economy. But Roberts said the combination of the Federal Reserve’s stimulus program ending this month and the glut of homes still on the market may make it a rough second half of the year for homebuilders.

“The market is stabilizing,” he said. “But it’s like when you stabilize a patient after an auto accident — it doesn’t look like he’s going to die, but in terms of doing marathons, he’s got a long way to go.”

Housing starts, the number of new homes being built, rose 3.5% in May to an annual rate of 560,000 units from a revised 541,000 in April, the Commerce Department said.

Economists had expected an annual rate of 540,000 units, according to consensus estimates from Briefing.com.

Construction of single-family homes rose 3.7% to a rate of 419,000. 

Article source: http://rss.cnn.com/~r/rss/money_realestate/~3/-2oGXCXjYu4/index.htm

NEW YORK (CNNMoney) — Foreclosure filings experienced their eighth straight month of declines, according to RealtyTrac.

In May, filings fell 33% from a year earlier and 2% month-over-month, according to the online marketplace of foreclosed properties. The number of homes that were repossessed (referred to as REOs or real estate-owned properties) in May also declined to 66,879, down 3.8% from April and 29% year-over-year, the firm said.

The huge year-over-year drop in foreclosures doesn’t necessarily mean the housing market is staging a recovery, however.

James Saccacio, the CEO of RealtyTrac, says the declines are likely due to lingering effects of the “robo-signing” scandal, which broke last September, when it was discovered that banks were playing fast and loose with foreclosure documents.

In some cases, it was found that banks brought foreclosure proceedings upon homeowners when they had no standing to do so. Sloppy paperwork sometimes made it impossible to tell which entity was the rightful owner of the mortgage notes.

To help fix the mess, foreclosure proceedings were temporarily suspended. Even though the suspension has since been lifted, the pace of foreclosures remains significantly slower as banks more thoroughly review each case to ensure they are being handled legally and properly.

Walk away from your mortgage? Get ‘ruthless’

“Foreclosure processing delays continue to mask the true face of the foreclosure situation,” said Saccacio. “Lenders are somewhat unevenly pushing batches of bad loans through foreclosure as they overhaul their paperwork and documentation procedures.”

There’s another factor at play, as well. The banks can’t sell the homes they’ve already seized so they aren’t as incentivized to repossess more homes.

“[There's] weak demand from buyers, making it tough for lenders to unload their REO inventory,” said Saccacio. “Even at a significantly lower level than a year ago, the new supply of REOs exceeds the amount being sold each month.”

The banks don’t want to take on the expense of maintaining the homes — property taxes, heating costs, repairs and insurance — if they can’t sell them quickly.

Selling off the inventory of repossessed homes is crucial to the housing market, said Jim Gillespie, CEO of Coldwell Banker. Sold at steep discounts, REOs compete with new homes for buyers and have severely depressed new home sales.

“That’s a critical element for the economic recovery,” said Gillespie. “If new homes were selling anywhere close to their levels of five years ago, it would add a full point to the GDP.”

The steepest drops in filings have come from judicial states, ones in which the courts are involved in repossessions. In these states, where foreclosure proceedings are subject to the scrutiny of the courts, it appears banks are taking special care to make sure they’ve stamped out the last vestiges of the robo-signing issues.

Nevada, where most cases are handled outside of court, continued to be foreclosure central. One of every 103 households received a notice of some kind in May. However, that was an improvement of 23% compared with May 2010. Arizona, with one filing for every 210 households, and California, one for every 259, were second and third.

The judicial state of Florida, where the housing market is no better, has seen a much greater drop-off in filings over the past year, down 62%. It now has the eighth highest foreclosure rate, of one filing for every 461 households. A year ago, it was in the top four, along with the other “Sand States.” 

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