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Sales of Preowned Houses Drop, Prices Go Up Due to Lack of Inventory

Lack of Housing Inventory

Sales of previously owned homes dropped in December from November, but the national median home prices rose to it’s highest best price in seven years.

With all that said, 4.65 million homes were sold for all of 2012, up from 9.2% in 2011, the most in five years and a sign that the housing market is slowly taking steps toward recovery.

“This isn’t worrisome at all,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh, who projected a drop to a 4.95 million annual rate. “For the first time in a while, it looks like it’s a sellers’ market as much as it’s a buyers’ market. I suspect prices and sales will go up again in 2013.”

“We remain convinced that the housing recovery is well under way and should continue through 2013,” said Dan Greenhaus, chief global strategist at BTIG, an institutional brokerage.

Meanwhile, only 1.82 million homes were listed for sale in December, according to the National Association of Realtors. That is a 22 percent drop from a year ago and the lowest supply since May of 2005.

“The greatest concern in the market is the inventory situation,” said Lawrence Yun, chief economist for the NAR. “Even if we see an increase in the Spring and Summer, if home sales hold at the current level or even a 5 to 6-month supply, price increases are guaranteed. We don’t want to see rapid appreciation in prices faster than income.”

First-time home buyers, who are the crucial to the housing recovery, made up only 30 percent of sales in December. Banks have started to make tighter credit standards and also requiring larger down payments since the housing bust, six years ago. That means the buyers that are “would-be buyers” aren’t able to qualify for even the lowest mortgage rates.

The rate on the 30-year fixed mortgage averaged 3.66 percent in 2012, the lowest annual average in 65 years, according to Freddie Mac.

“Record low mortgage interest rates clearly are helping many home buyers, but tight inventory and restrictive mortgage underwriting standards are limiting sales,” the Realtors group’s chief economist, Lawrence Yun, said in a news release.

Sales for expensive houses priced at $1 million or more rose 62 percent in 2012. While the sales of homes below $100,000 fell 17 percent.

The median price of an existing home rose to $180,800 in December 2012, up 11.5 percent from $162,200 in December 2011. It was the biggest year-over-year gain since November 2005.

“The only concern going into 2013 is the inventory situation,” Lawrence Yun, NAR chief economist, said in a news conference as the figures were released. “Price increases are almost guaranteed going into 2013,” Yun said, adding that the group’s projection of a 4 percent to 5 percent increase this year may be exceeded.

How to play the 2013 housing market

2013 could bring on more home price appreciation and changes in the popular mortgage interest tax deduction.

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Death Spiral Map

Death Spiral States: Forbes Says 11 States are in a Downward Spiral with More Takers than Makers

Eleven states made it on the list of Forbes Death Spiral. What is does death spiral mean? It means that the state can look forward to a rising tax burden, deteriorating state finances and an exodus of employers.

Those eleven death spiral states are California, New York, Illinois, Ohio, Kentucky, South Carolina, Alabama, Mississippi, New Mexico, Maine and Hawaii.

What’s driving the Death Spiral in 11 states?

“There are a lot of economic factors that are built into the death spiral,” says William Baldwin of Forbes. “The essential one, is whether the state has more takers than makers. A taker is someone who draws money from the government, as an employee, pensioner or welfare recipient. A maker is someone gainfully employed in the private sector. Let us give those takers the benefit of our sympathy and assume that every single one of them is a deserving soul. This person is either genuinely needy or a dedicated public servant or the recipient of a well-earned pension.”

The states and their taker/maker ratio, with the worst of the “death spiral” states was New Mexico, with 1.53 takers for every 1 maker.

Mississippi 1.49, California 1.39, Alabama 1.10, Maine 1.07, New York 1.07, South Carolina 1.06, Kentucky 1.05, Illinois 1.03, Hawaii 1.02, and Ohio 1.00.

If you live in one of these death spiral states, Forbes says to rent instead of buy a house because property taxes will inevitably rise. William Baldwin of Forbes also says to sell municipal bonds you have in those states because they’re more likely to default and restructure those bonds so that they pay back less.

The second factor that goes into whether or not a state is in a death spiral is a “scorecard of state credit-worthiness done by Conning & Co., a money manager known for its measures of risk in insurance company portfolios,” says Baldwin. “Conning’s analysis focuses more on dollars than body counts. Its formula downgrades states for large debts, an uncompetitive business climate, weak home prices and bad trends in employment.”

Speaker of the South Carolina House Bobby Harrell, R-Charleston, says the article from Forbes is wrong, especially in calling members of the military, public employees and retirees “takers”.

“We have military installations all over South Carolina. Those folks are government employees, but they are certainly the kind of government employees that we want, because we care passionately about the military in South Carolina,” Harrell says. “We have retirees moving here from all over the country, so many that we’ve had to add a seventh Congressional district. We have, according to a tax group who studied this in Washington not too long ago, we have the lowest taxes in the country.”

Do You Live In A Death Spiral State?

Death Spiral States

New Mexico is at the bottom of yet another list, and this one has a grim-sounding name. Forbes Magazine calls us a “death spiral” state.
Forbes lists our state as one of eleven states whose economies are at high risk of going into a tailspin – a death spiral.

Forbes Releases List Of 11 “Death Spiral” States

A writer at Forbes Magazine has identified a phenomenon called the “death spiral states.” The category includes 11 states where private sector workers are outnumbered by people who are dependent on the government. That number would include state workers, and people who are receiving welfare or pension.

What’s Driving “Death Spiral” in 11 States?

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New Home Start Four Year High

New Home Starts Reach Four Year High in October

New Home Start Four Year High

New construction in housing hit the strongest for two months starting in October since four years ago. The Commerce Department said on Tuesday housing starts increased 3.6 percent to a seasonally adjusted annual rate of 894,000 units, the highest it’s been since July 2008.

The biggest increase was from multi-family construction, which was up 11.9 percent. Single-family construction went down only 0.2 percent compared to September but was back up 35.3 percent from October 2011. Despite Hurricane Sandy hitting the east coast during this survey period, outcome was still good and the drive for the housing market is starting to boom.

“Single-family housing starts and permits were above expectations for October, suggesting more residential investment in the fourth quarter,” Macroeconomic Advisers analysts wrote in a research note.

The rise in starts was mostly apartment buildings, which were up by 10 per cent, while new houses held steady. Foreclosures may have pushed many people into renting rather than owning a home. This is leading to a surge in apartment rental. Higher rents are making it especially profitable to build new apartments.

David Crowe, National Association of Home Builders chief economist, said in a statement, “Today’s report bears out similar changes in other economic indicators that housing continues to recover at a slow but steady place, and is right in line with our expectations of modest month-to-month growth. However, we still have a long way to go to get back to normal production as inaccurate appraisals, tight lending conditions for home buyers and policy uncertainties continue to impede the recovery.”

“The foundations for housing are getting better. Prices have stabilized, and people are feeling a bit more confident,” said Kevin Cummins, an economist at UBS Securities LLC in Stamford, Connecticut.

With all the reports of recovery numbers, this could mean the the US and world economy could start to build in 2013. From the report, it showed confidence among builders that has reached its highest level since the last days of the housing boom in 2006.

Eric Green, chief economist at TD Securities in New York said, “The broad improvement in home prices, home equity, starts, and inventory clearing are key developments that position the economy for stronger growth next year, and beyond.”

Housing Starts Highest in Four Years

New economic data today as October housing starts hit their highest rate in more than four years. This is very good news for the housing market, a segment of the economy that has continued to struggle since the recession. Reports indicate that for the first time since 2005, homebuilding is expected to add to gross domestic product.

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Housing Market Recovering Slowly

Housing Market Recovering Slowly

The housing market may be on a rebound, at last. New data is showing that price declines entering big cities, sales of new homes improving nationally and foreclosures in California dropping to levels that haven’t been seen since before the start of the credit crunch almost five years ago.

Eric S. Belsky, managing director of Harvard’s Joint Center for Housing Studies said in a news release, “With new home inventories at record lows, unless the broader economy goes into a tailspin, stronger sales should further stabilize prices and pave the way for a pickup in single-family housing construction over the course of 2012.”

Dan McCue, research manager for the Joint Center added, “We did want to highlight the differences we saw between this year and last year, and signs that seem to indicate that a recovery is beginning. In addition to the fact that it might be a long haul to get out of the deep hole we’re in. I do think that every time we talk about the return [of the housing market] we need to talk about how far the housing markets have gone. Never before has a downturn been so strong and a recovery so weak.”

The economy overall is starting to improve, but the housing market was the last one to stabilize. Good news, notices of default fell to 56,258 statewide in the first three months of the year, a 17.6% drop from the same period last year, DataQuick of San Diego reported. That was the fewest number of default notices filed since the second quarter of 2007.

Many homebuyers are young adults who have been sitting on the sidelines waiting for the job market to improve before jumping into a house loan. Finally, they feel comfortable to buy. “As markets tighten, these young adults may begin to take advantage of today’s lower home prices and unusually low mortgage rates. With rents up, home prices sharply down and mortgage interest rates at record lows, monthly mortgage costs relative to monthly rents haven’t been this favorable since the early 1970s,” Belsky said in the release.

The Standard & Poor’s/Case-Shiller index of 20 U.S. cities is the most watched measure for home values and it showed price declines in January to February.  With pricing falling 0.8% from January to February, and were down 3.5% from February 2011.  Economists are trying to take this data with a grain of salt because the sales of homes are typically slow during those months.  The index’s year-over-year decline in home values has also been steadily shrinking in recent months.

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Short Sale Tax Relief Set to Expire

Short Sale Tax Relief Set to Expire

If you are a person that wants to get in on the short sale tax relief, now is the time. Short sales will start to become even more popular by the end of 2012 because the tax relief law will be set to expire.

Homeowners who sold their home in a short sale or have had some other sort of mortgage debt forgiven or canceled, can take advantage of this short sale tax relief.  The completions of short sales in order to qualify for the tax relief act is set for the deadline of Jan. 31, 2013. Since short sales can take an average of four to eight months to complete, homeowners are running out of time to take advantage of this offer.

Marge Peck, associate broker and co-owner of Discover Arizona Real Estate, a company that specializes in short sales in Mesa, Arizona says, “Everybody that is considering a short sale needs to talk to a CPA and see if now is the time for them to get off the Titanic and in a lifeboat before this law expires. I’ve just hired more staff. We’re prepared for the tsunami of people saying ‘I’ve waited long enough, nothing’s going to change.’”

Short sales are transactions where the borrower owes more than the home is currently worth, so the lender agrees to accept less than the full mortgage payoff at closing time.

If a bank forgives the amount the borrower is upside down with, such as a short sale, they would still have to pay taxes on that forgiven amount, since the Internal Revenue Service sees it as income.

Penny McLaughlin, owner of Penny’s Team based in Poulsbo and a certified distressed property expert (CDPE) says, “People who are underwater with their mortgage need to figure out if they’ll go into a short sale or let it foreclose.  It used to be ‘horrible’ to do a short sale … but it’s better on their credit. I’ve had people who’ve done a short sale and are now being able to buy, 18 to 20 months later.”

According to CoreLogic, a provider of consumer, financial and property information short sales made up 9.1% of home sales in March, that’s up from 7.39% in March 2011, 6.67% in March 2010 and 4.79% in March 2009.

Daren Blomquist, vice president of RealtyTrac estimates this pattern will continue. “I think we will continue to see them go up. It’s like the pattern you saw with the home buyer tax credit—the biggest spike is at the end of the deadline. I would expect to see a similar pattern with the pre-foreclosure sales.”

Short Sale Tax Implications

Short Sale Tax Implications expires in 2012. If you are looking to do a Short Sale you have less than 6 months left. 2012 is the last year so don’t take any chances.

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Marion Sandler Dies at 81-years Old

Marion Sandler Dies at 81-years Old

Marion Sandler died at age 81 in her San Francisco home on June 1, 2012.

Marion Sandler was a business executive who ran Golden West Financial Corp. with her husband for 43 years before they sold the mortgage lender in 2006 to Wachovia Corp. for $24 billion.

Sandler and her husband, Herb bought Golden West in 1963 and helped it grow from a two-branch savings-and-loan business with only 26 employees to a publicly-traded company with 11,000 employees and 285 branches.

Marion Sandler told The Chronicle in 2006 about her husband-and-wife CEO team, “We’ve almost never not worked together. We are extraordinarily compatible. I just can’t describe it.”

The sale of Golden West gave both Sandlers more time on their passion of philanthropy. They were committed to giving their wealth to philanthropically and contributed more than $1.3 billion to the Sandler Foundation. That included founding the first online news source called, ProPublica. ProPublica is a nonprofit that specializes in investigative reporting, which went on to win a Pulitzer Prize.

The editors of ProPublica said on the website that Marion Sandler played key roles from interviewing staffers to selecting its name and logo. “She participated in every ProPublica Board meeting until the most recent one; only her last illness could keep her away. Usually in such sessions, she was knitting except when speaking; always, she was listening carefully, and her points were as tightly focused as her stitches, wrote. “It is our great good fortune — and yours as readers, we think — that she cared about this one. We mourn her loss.”

The American Civil Liberties Union put out a statement saying the Board of Directors and staff at ACLU are deeply saddened by the death of Marion Sandler. ACLU Executive Director Anthony D. Romero said in the statement, “Marion understood the struggle for justice from firsthand experience. She blasted through every gender barrier in the investment and banking world at a time when women were still being asked to fetch their male co-workers their morning coffee. Along with her devoted husband, Herb, she reached the pinnacle of the banking industry. But she never lost her sense of humanity, justice and fairness that infused her business and philanthropy. Her acumen, commitment and friendship meant an enormous amount to me personally. America lost a great woman, leader, humanist and philanthropist. But America is a more perfect union because Marion Osher Sandler graced our earth with her presence, power and love for improving the human condition.”

Marion Sandler is survived by her husband, daughter Susan Sandler, son James Sandler, brothers Bernard and Harold Osher, and two grandchildren.

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Mortgage Rates Fall To New Lows In US

The housing market continues to grow more affordable in the United States for those that are able to secure a mortgage loan. Rates for 15-year and 30-year fixed loans fell to all-time record lows once again in the last week. It was the fifth week in a row that the 30-year fixed-rate mortgage loans experienced a decline.

The rate for 15-year fixed loan fell to below three percent for the first time in history. Now that the three percent barrier has been broken, there is no telling as to how long mortgage loans will continue to drop in the near future. 30-year fixed-rate loans dropped to 3.75 percent.

When crunching the numbers, the new 30-year fixed-rate of 3.75 percent could potentially provide a savings of more than sixteen thousand dollars over the thirty years when compared to the average mortgage loan rate from the previous year. Those that opt to refinance with a new 15-year fixed-rate loan will enjoy a savings of at least thirty-seven dollars per month. Those that refinance will have a monthly payment of approximately $689 for every one hundred thousand dollars that is borrowed.

The drop in mortgage loan rates has little to do with the housing market here in the United States. Rather, it has much to do with the unstable European market.

Economists believe that there has never been a better time to buy a home, and many house flippers agree. Mortgage loan rates are half of what they were at the peak of the residential real estate bubble, and homes have never been more affordable.

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Mortgage Lender Adds to Spanish Banking Crisis

The rest of Europe is watching very closely as Spain’s economy continues to spin out of control. The situation went from really bad to unbelievably worse on Friday after the nation’s biggest mortgage lender Bankia announced that it would need a bailout of more than twenty-three billion euros. The bank had been absolutely decimated by delinquent mortgage loans.

Spain is doing everything in its power to prevent the bank from collapsing and then folding, as such an event could have a very dangerous impact on the banking industry in Spain and throughout Europe. Bankia is not the only bank facing a desperate situation. Banco Popular and Bankinter are both facing a mountain of delinquent loans, and could be next to fall.

The reality is that Spain does not have the funding to cover the more than one trillion euros in deposits at these banks, and is desperate for Europe’s help. While the banking system faces an uncertain future, the country’s residential real estate market is facing a very difficult situation as well.

Many of the bad loans held by those banks in crisis are mortgage loans. Most economists believe that the bursting of Spain’s real estate bubble has led to the current situation, and that its impact may be even greater worldwide. They are likening the current crisis to that which crippled the United States economy for the last five to six years.

It has yet to be seen as to whether or not Spain’s banks will face similar lawsuits and criminal charges like those in the United States following the banking and real estate crisis there.

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United States Still Struggling with Underwater Mortgages

Although all signs are pointing to growth in the United States residential real estate market, nearly a third of all homeowners are still faced with underwater mortgages. That means that roughly sixteen million people owe more on their home than it is actually worth.

The high number of underwater mortgages continues to be a major factor in preventing any kind of major growth in the market, despite record affordability. Many potential homeowners are hesitant to enter the market after seeing the struggle of those stuck with a loan that is tens of thousands more than the value of their home.

Some economists and residential real estate market analysts, however, believe that the current number of homes listed as underwater is deceivingly high. They believe that the overall percentage will soon drop, as it included those homes that will finally be processed as foreclosures after extensive delays.

Surprisingly, ninety percent of homeowners with underwater mortgages make on-time payments, and have no intentions of foreclosing on their homes. The remaining ten percent have been late on their payments by as many as ninety days.

While some homeowners are stuck with underwater mortgages, investors are now eyeing the market again in hopes of flipping homes for profit. With mortgage rates at all-time lows, and housing prices in many states having just hit what many believe to be the bottom, the market for buying and selling homes looks to be regaining strength. Many investors, however, are opting to rent homes that they buy with the intentions of selling the home for larger profit down the road.

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Mortgage Rates Drop to New Record Low

The mortgage rates keep dropping, and the residential real estate market continues to grow more affordable. For the third straight week, mortgage rates fell to an all-time record low for both 30-year and 15-year mortgages.

With prices having already hit what many economists believe to be the bottom, the residential property market has become incredibly favorable to buyers. As can be expected, more buyers are looking to enter the market by purchasing a home. Those that are able to qualify for either a 30-year or 15-year mortgage loan are enjoying some of the best deals on homes in years.

The current rate for 30-year fixed-rate mortgage loans is 3.79%. For 15-year fixed-rate mortgage loans, the current rate dropped to 3.04%. The decline in both mortgage loan rates has put them at the lowest they have ever been since mortgages first began in the 1950s.

New homebuyers aren’t the only ones benefiting from the low mortgage rates. Those looking to refinance are also reaping the benefits. Most of those looking to refinance are option for 15-year fixed-rate mortgage loans.

While many believe that the market has hit the bottom, home sales are still relatively low due to the difficulty that many buyers are having in getting approved for a mortgage.

With that said, construction is on the rise for residential properties. Many economists believe the construction of new properties to be a very positive sign for the market. There is hope that the market will finally start to see some strong gains in the next year, and as long as the mortgage rates remain at their current low levels, it is very likely that those gains will take place.

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