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Housing picture still mostly dark

>>According to S&P/Case-Shiller, the average sale price of a home was about the same in November as in October, which can be seen as a good sign. Sales of existing homes also improved. But sales of newly built homes fell over 11 percent in November to their lowest point in seven months, according to the Commerce Department.

One reason: The number of vacant homes is at a record high—11 percent of all housing units. At the same time, rental vacancies were also at a record level—slightly more than 11 percent of units on the market.

Self-defense: Congress has extended the home buyer tax credit from this November 30 to April 30, 2010, or to June 30, if a buyer is under contract by April 30. The move may ease the pain for owners, as well as buyers, because it makes homes easier to sell.

No longer just for first-time buyers, the new law allows a credit of $6,500 to those who buy a replacement home after November 6, 2009, or 10 percent of the price of the replacement home, whichever is less. First-time buyers still get a credit of $8,000 or 10% of the purchase price, whichever is less. For purchases after 11/6, income limits were raised.

Some bright spots appear

• The National Association of Realtors reports that October sales of existing homes jumped 10.1 percent over September sales. Two reasons: Congress extended the $8,000 credit to some home buyers, and prices were low—over 7 percent lower than in October 2008.

• Both houses of Congress have passed a bill that would extend and enlarge the current home-buying credit program. Currently, first-time home buyers earning up to $75,000 a year individually or $150,000 jointly get a tax credit of $8,000, through November 30. The new bill is more generous: It raises the income limit to $225,000, offers a $6,500 tax credit to people who already own homes and buy a new one, and extends the program through April, 2010. Sounds good at first. But the bill has been criticized as a waste of money. Its effect may be only short-term, and it does little or nothing to reduce the number of foreclosures or the number of homes on the market.

• Fannie Mae has launched a “Deed for Lease” program that allows home owners threatened by foreclosure—and who don’t qualify for loan modifications—to transfer their property to Fannie Mae in return for a lease. The arrangement has the twin benefits of permitting troubled homeowners to stay in their homes, while holding down the number of foreclosures and the widespread losses that go with foreclosures.

Home prices slide

>>As the fourth quarter began, the median sales price for existing single-family homes nationwide was $178,300 — about 15 percent less than a year earlier (source: National Association of Realtors). Home sales—up for four months straight—slipped 2.7 percent in August.

The big issue in the housing market right now is whether Congress will extend the $8,000 tax credit for first-time home buyers.  The current deadline is November 30. There may be a clue in the fact that a bill moving quickly through Congress extends the tax credit for one year to military service people. If that passes, which analysts say seems likely, it will create an argument for offering the same deal to others.

Self-defense: If you plan to buy a home, but can’t make the November 30 deadline, ask your representatives in Congress to vote for an extension.

Who can steal your home?

>> Practically anyone—the theft is remarkably easy: Somebody goes to your town hall and finds out who owns your home. This person buys a set of property transfer papers from any stationery store. Then he or she forges your signature on the forms, files them with the local recorder’s office, and asks for a deed. The alleged owner can now put your home on the market at a low-ball price and sell it out from under you.

Wait! Doesn’t the recorder of deeds have to ask the thief to prove his or her identity? In lots of states, no. And even in states that do require proof, the thief can simply present a false ID document, alleging that he or she is you. This type of theft is growing fast and may soon come to a street near you.

Self-defense: Obviously, check your property records to make sure they’re correct. Encourage your local deed-recording office to install a computer program that automatically alerts homeowners about a pending transfer of ownership. Be on the lookout for mailed information about a loan you don’t recognize, then immediately alert your district attorney’s office and the FBI. Keep the papers for evidence.

Looking better, but still not good

>> The National Association of Realtors (NAR) reports that its index of pending home sales rose sharply from first-quarter lows. Reinforcing that report, the Commerce Department said that June sales of new single-family homes rose by 11 percent. Good news. But there’s no shortage of bad news:

• The NAR said that the median price for a single-family house was $169,000 at the end of the first quarter—a 14 percent drop from a year earlier.
• According to Zillow.com, about 22 percent of U.S. homeowners are “under water,” meaning that the market value of their home is less than the balance on their mortgage.
• The number of foreclosures rose by 24 percent in the first quarter, compared with the same period in 2008. The Center for Responsible Lending projects 2.4 million foreclosures for all of 2009.

All of which suggests a dark picture, despite recent glints of light. But there’s more than one way to look at the numbers:

If you’re a buyer, the good news is that homes are more affordable now than in many years (not counting January, 2009).

If you’re a seller, it’s good that several factors are attracting buyers: low prices, historically low mortgage rates, and an $8,000 tax credit for first-home buyers who buy before December 1, 2009. Also, the Department of Housing and Urban Development is giving out $731 million to 48 states to buy and renovate vacant foreclosed homes. Some of the money will be used to help low- and moderate-income people buy these homes.

What’s bad in all this is why homes are so cheap. Mainly, it’s the financial threat posed by the overhang: About 14 million houses, condos, and apartments in the U.S. stand empty. Optimists say it will take two years to sell off that inventory; pessimists say it’ll take more like four.

 A lot depends on the trend in unemployment. It doesn’t look good. The national average rate is over nine percent, and economists say we haven’t seen the worst of it. One reason for their pessimism lies in what the unemployment rate does not show: the roughly 700,000 who have given up looking for work and another 700,000 or so who work part-time, but want full-time work. These people, which include many white-collar professionals, are not counted in the Labor Department’s statistics. Many economists predict that by 2010, the real unemployment rate may top 10 percent or more.

Self-defense: Despite the bad news, there will still be plenty of people willing and able to buy. If you’re among them, here are a few things you should not do:

New rewards for using less energy

>> Federal stimulus money: Get some for yourself by making home improvements that improve your home’s energy efficiency. For adding insulation, storm doors and two-pane windows, central air conditioning, and things like an energy-efficient furnace, heat pump, or boiler, you can get a credit of up to $1,500. Also, tax credits of up to 30% of the cost are available for solar panels, solar water heaters, and a small wind energy system. Get the details at www.energy.gov/energyefficiency/index.htm.

It will take more than prayers.

>> The wave of foreclosures sweeping the country has not spared houses of worship. Hundreds of churches across the country have been hit with foreclosure notices in just the last few months. Donations are also dropping as unemployment—and fear of unemployment—keep rising. Thousands of churches are behind on mortgage payments.

Self-defense: Check wth your church leaders to see how you can help.


The good and bad news for buyers and sellers.


Copyright © 2009 Richard Evans and Andrew Bromberg