Tuesday, December 23, 2008

How Much are Home Prices Dropping?

It depends on the indicator you're looking at, NAR Research says. Among the main indicators are those provided by NAR, Freddie Mac, the Federal Housing Finance Agency (Formerly OFHEO), and Case-Schiller. Each one is different because it looks at different data sets and uses different assumptions. An explanation of the differences, which will help you interpret news and other reports on home price trends, is available online from NAR.

Commercial Real Estate Is at a Standstill

Lending is nearly frozen and job losses are curtailing demand for commercial space, though default rates remain low, says NAR. Read more >

Tuesday, December 16, 2008

NAR International Real Estate Transactions Report

International transactions in the production and consumption of goods and services are expanding. In calendar year 2007, the U.S. exported $1.15 Trillion of goods and $0.5 Trillion of services; and the U.S. imported $1.97 Trillion of goods and $0.378 Trillion of services. With the expansion of international trade, the flow of people across borders has also increased rapidly, and, therefore, the demand for real estate in both residential and commercial sectors in conjunction with international transactions has been on the rise. The New Mexico report presents recent economic and demographic data related to international business activity directly associated with the state.

Deadline Nears for Dropping Jumbo Loan Limits

As of January 1, the maximum for loans that Fannie Mae and Freddie Mac are willing to buy will decline from $729,750 to $625,500 in the nation's priciest areas. Read more >

Study Shows Housing Values Have Climbed

A recent government report shows that housing values have actually increased over the last 5 years. Find out which markets have gained the most, some by nearly 80 percent.Read more >

Pending Home Sales Hold in Stable Range

NAR's forward-looking pending home sales index eased against a deteriorating economic backdrop but remains in a stable range, the association says. The index, based on contracts signed in October, slipped 0.7 percent to 88.9 from an upwardly revised reading of 89.5 in September, and is 1.0 percent below October 2007, when it was 89.8. "Despite the turmoil in the economy, the overall level of pending home sales has been remarkably stable over the past year, holding in a generally narrow range," says Lawrence Yun, NAR chief economist. "We did see a spike in August when mortgage conditions temporarily improved, which underscores two things: there is pent-up demand, and buyers will enter the market when they have access to safe, affordable mortgages."

Is Your Property Tax Bill Too High?

Income tax, sales tax, estate tax, excise tax, alternative minimum tax...and just when you thought you'd paid them all...along comes your property tax bill as a homeowner. But did you know that the National Taxpayers Union estimates that as many as 60% of homes are assessed for too high of a value, resulting in an incorrectly larger property tax bill? Chances are good you might be in that group of people paying too much, so taking the time to review your property tax bill could save you a nice chunk of change.
The good news is that it's easy.
First, contact your local tax assessor's office and ask for someone in the reassessment area. Find out when appeals are heard, and how the process for submitting a property tax appeal works. Additionally, ask for a copy of your property card. Review the card and confirm that the basic information about your property is correct. For example, is the square footage and number of rooms for your home accurate? If the number is incorrect, the county may change the assessment without a formal appeal. If everything on the property card is correct but the assessed value still seems too high, your next step is to gather the following documentation to support an appeal. And don't be surprised if the assessed value is lower than what you think the market value for your home is--many counties use a formula which uses a percentage of market value to determine assessed value. Ask what the formula is, because an assessment which is less than market value still might be too high.If you have a current appraisal that supports the value being lower using recent market-value information, many counties will accept a copy of the appraisal with the appeal. If the appraisal is outdated, you can order a new one--just call me for a referral to a great appraiser. You can also visit the local assessor's office or search online, and look through the public records for other homes that have similar features to yours, but have lower assessments. Additionally, contact me to get in touch with a great Realtor who knows your area. They will be able to give you current market information for your neighborhood, and help you see how your market value and assessed value stacks up against your neighbors'.

Thursday, December 11, 2008

November 2008 Home Sales Report

For November there were 1,121 new detached residential listings that entered the market. This number is down 20.5% from last month, and down 18% from November of last year. New homes on the market tend to decrease in the winter months. Despite the decrease in new listings, the overall market inventory remains over 5,700, only 3.5 % lower than it was this time last year. There were a combined 904 Pending and Closed Sales in the Greater Albuquerque market area for November 2008. This total is down… click here for more.

Tuesday, December 2, 2008

Albuquerque Included in Safe Havens in Real Estate List

According to an article posted on Kiplinger.com, Albuquerque is one of six cities classified as a real estate safe haven. Using data from Fiserv Lending Solutions, a home-price research company, six U.S. cities were found with slow, steady growth. These cities' local economies have kept unemployment and foreclosure rates below average. Plus, their affordability index (a measure of home prices versus family income) is low. To read more, click HERE.

Wednesday, November 26, 2008

2008 Cost vs. Value Report

Remodeling magazine's annual report shows that maintenance-related projects and moderately priced upgrades are providing stable paybacks, even in a slower market.
click here for more.

Tuesday, November 25, 2008

Albuquerque, N.M. and other Safe Havens in Real Estate

While other midsize cities have fallen prey to rampant speculation, Albuquerque has hovered below the national real estate radar and largely avoided the subprime mortgage debacle. An influx of tech companies such as Eclipse Aviation, Hewlett Packard and Intel has helped fuel this Southwestern city's economy and attracted a young creative class.
Active retirees and immigrants have also migrated to the area, ensuring a well-rounded housing market. Experts project 9% population growth between 2006 and 2011, compared to 6% nationally... click here for more.

Tuesday, November 18, 2008

Latest Housing Report on Sales, Prices

Find out which markets are posting the largest sales gains and declines, and a snapshot of sales by region, based on NAR's housing data. Read more >

Albuquerque Included in Top 10 Most Promising Housing Markets

Housing Predictor, which provides housing forecasts in 250 markets, has identified 10 markets that have avoided the subprime crisis and have thriving economies. Read more >

New Mexico Deeds of Trust

New Mexico officially became a Deeds of Trust State...
Click here for summary of differences.

Thursday, November 13, 2008

Requirements for a Short Sale

Typically a Short Sale package (for a conventional loan) will include the following:
Hardship Letter, Copy of Listing Agreement, 2 Months Bank statements (all accounts including retirement and 401K), 2 months paycheck stubs, estimated HUD statement, payoff quote from senior lien, letter of authorization to release information to Realtor.

Wednesday, November 12, 2008

Housing Can Save the Economy
During a presentation at NAR’s Annual Conference, NAR Chief Economist Lawrence Yun predicts “If housing prices stabilize, the current recession could be mild and recovery could come in the second half of 2009.” Read more >

More First-Time Buyers Entering the Market
"First-time buyers are much more flexible because they aren't concerned about selling an existing home," says Lawrence Yun, NAR chief economist. Read more >

Don't Get Tripped Up by Mortgage Fraud
With mortgage fraud schemes becoming more varied and complex, we need to remain vigilant about staying on the right side of the law. Read more >

Tuesday, November 11, 2008

Big banks step up efforts to modify mortgages

Click here
Citigroup to help at-risk borrowers stay in homes
Gov't to announce new loan aid effort...
An industry official who worked on the plan said the new approach will allow lenders to modify more delinquent loans by establishing criteria to speed up the process. The official spoke on condition of anonymity because details had not been announced.

Wednesday, November 5, 2008

Beware of Unapproved Downpayment Programs
Federal law that took effect Oct. 1 prohibits FHA from accepting seller-funded downpayments. Be aware that programs are being created to get around this restriction. Some are being set up as earned-income programs in which a buyer asks a seller to enroll in a "property alliance" for a fee. After an administrative cost is paid to the program, the fee goes to the buyer as a commission that can theoretically be considered as earned income. While HUD does recognize earned income, these programs are not considered legitimate means of earned income for meeting the downpayment requirement for FHA-insured mortgages. For more info contact Jerome Nagy, 202/383-1233.

2009 Conforming Loan Limit Guidance
Fannie Mae and Freddie Mac have each released guidance on conforming loan limits for high cost areas that are scheduled to take effect in 2009. Unless Congress acts during a lame-duck session after the election, conforming loan limits in some high cost areas will go down. For 2008, the loan limits are 125 percent of the area median house price, up to $729,750, but not less than $417,000. Starting in 2009, the limits will be 115 percent of area median, up to $625,5000, but not less than $417,000. NAR supports making the 2008 limits permanent. For more info contact Jeff Lischer, 202/383-1117.

2009 VA High-Cost Loan Limit Set at $1,094,625
The limit for loans backed by the U.S. Department of Veterans Affairs in high-cost areas like California and Washington, D.C., is equal to 125 percent of the local area median home price, capped at 175 percent of the conforming loan limit. For the remainder of 2008 that conforming loan limit is $729,750. For 2009, that limit will be $625,500. Therefore, the loan limit for 2009 will be $1,094,625. The limit could go higher in Alaska, Hawaii, Guam, and the U.S. Virgin Islands. Access a VA notice on the loan limit online. For more info contact Megan Booth, 202/383-1222.

Wednesday, October 29, 2008

Housing Stimulus Can't Wait

When Senate Banking Committee Chair Christopher Dodd (D-Conn.) conducted a hearing last week on the credit crisis, he took aim at banks' intention to use funds from the massive $700 billion federal rescue to shore up their financial position rather than tackle the liquidity problem in the mortgage market that was so core to the government's goal in passing its bill... click here for more.

Tuesday, October 28, 2008

Home Sales Rise as Affordability Improves

Existing-home sales rose 5.5 percent in September, with several markets showing signs of a rebound, according to NAR's latest research report. Find out how sales fared regionally. Read more >

$2,000 Property Tax Exemption

In these challenging financial times, don't forget that every household in New Mexico is eligible for a $2,000 head-of-family exemption off the value of your home for property tax purposes, BUT YOU MUST ASK FOR IT.
Call your County Assessor’s office to request the exemption.

Thursday, October 23, 2008

Albuquerque Home Sales 3rd Quarter 2008 Market Reports

Click here for the 3rd Quarter 2008 Market Reports

US working on plan to help homeowners refinance

AP - The federal government is working on a loan-guarantee plan that could help many homeowners escape foreclosure, a banking regulator told Congress Thursday. At the same time former Federal Reserve Chairman Alan Greenspan said the financial crisis will get worse before it gets better... click for more.

Wednesday, October 22, 2008

Financing still available for buyers with bad credit

Though loan terms and underwriting standards have tightened, residential financing is still available for buyers with less than perfect credit histories. Read more >

Commercial Real Estate: Ready to Tank

Commercial real estate has been strangely impervious to the housing crash, but its luck is about to run out. Economists and industry analysts say the recession and credit crunch pretty much ensure a bad year for commercial real estate in 2009, and at best a tepid recovery in 2010... click here for more.

Monday, October 20, 2008

Home construction falls sharply in September

AP - WASHINGTON - Construction of new homes plunged by a bigger-than-expected amount in September as builders slashed production yet again, putting the country on track to build the fewest homes this year in more than six decades... click here for more.

Tuesday, October 14, 2008

September 2008 Albuquerque Home Sales Market Report

Just click here for the full report.

Flood Insurance Extended

President Bush signed into law a continuing resolution that extended authority for the National Flood Insurance Program through March 6, 2009. Congress has been debating long-term reauthorization of the flood insurance program with many reforms supported by NAR, but no agreement had been reached before the program was scheduled to expire. Had it expired, no flood insurance policies could have been issued, effectively barring property owners from getting a mortgage in federally designated flood zones. As part of insurer and commercial coalitions NAR weighed in and backed an extension until Congress could more fully consider long-term re-authorization and reform.

Short Sale Results in Tax Liability for Sellers

The IRS properly imposed a penalty on a taxpayer for failing to include as income almost $75,000 in debt forgiveness in his 2003 tax return when he sold his property in a short sale, ruled the United States Tax Court, affirming the IRS's decision. Note: In December 2007, President Bush signed into law the "Mortgage Forgiveness Debt Relief Act of 2007." The law applies to debt forgiven in 2007, 2008, or 2009. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, may qualify for this relief, the IRS says.

Pending Home Sales Jump in August

Pending home sales activity surged as buyers took advantage of low home prices and affordable interest rates, NAR's forward looking Pending Home Sales Index shows. The Index jumped 7.4 percent in August to 93.4 from an upwardly revised reading of 87.0 in July. The latest Index number is 8.8 percent higher than August 2007, when it stood at 85.8. The index is at the highest level since June 2007 when it stood at 101.4. “What we’re seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island and the Washington, D.C., region,” says NAR Chief Economist Lawrence Yun.

Credit markets see more gradual improvements

(AP) NEW YORK - The government's efforts to crank open the credit markets have led to some mild improvements in lending rates and Treasury bill yields. But it will probably take months, and perhaps a few years, before lending returns to healthier levels... click here for more.

Monday, October 13, 2008

Calls for 90-day moratorium on foreclosures

TOLEDO, Ohio - Democratic Barack Obama on Monday called for more immediate steps to heal the nation's ailing economy, proposing a 90-day moratorium on home foreclosures at some banks and a two-year tax break for businesses that create new jobs... click here for more.

Thursday, October 9, 2008

Thoughts on the “Bail Out” and Ways to Keep Your Money Safe

Last Month I mentioned that when market conditions deteriorate, fraud and scams will become more common. The mere fact that we will be doing a lot more short sales increases the opportunity for both deliberate and accidental fraud. Before we address that, let’s take a look at our current market conditions, and the potential effects of the bail out.
The first thing we need to get a handle on is the size of the problem, and how the size of the bailout relates to it. The numbers are so big that most folks just can’t comprehend them. This provides a fertile field for rumors, lies and scams to grow.
Here is a quick example: I have heard parts of several local and national radio talk shows where the following idea was being discussed as a serious solution to our problem.
Back when the Government was “only” putting up $ 85 Billion to bail out AIG insurance, the idea went: if we took the $ 85 Billion, and divided that amount between the 200 Million tax payers, each would get $ 425 Thousand Dollars. A man and wife would get $ 850 Thousand.
The argument went that each of us could pay off our mortgages (mortgage crisis solved), buy new Cars, Homes, Electronics…, and the economy would be stimulated.
At the times I heard these I was driving, and couldn’t do the math, but intuitively this didn’t seem like it could be possible. My first thought was that for the Government to have $ 425 Thousand dollars to give to each of us, they would first have had to take it from us in the form of taxes. It didn’t seem reasonable that we had each given the Government that much money in taxes.
While I was listening, no one ever called in and disputed the validity of this argument. In fairness, that may have happened after I tuned out, but I never heard it.
Then a couple of days later I got an email putting forth the same idea, and I did the math:
$ 85,000,000,000 Billion Dollars = $ 850 Dollars
200,000,000 Million People 2 People

Remember from Junior High math class how you can cancel out zeros on the top and bottom of a fraction?
The fact is that if the $ 85 Billion were equally divided between 200 Million people, each would only get $ 425 Dollars (Not Thousand). I think the fact that so many adults with a minimum of a high school education could get so caught up in this thinking says a lot about how we got here to begin with.
So, now that we are talking about another $ 840 Billion in bailout (700 Billion going to buy up bad mortgages), how much is that per person? If we stay with 200 Million taxpayers, it works out to $ 4,200 each.
In my mind, these are not the numbers we need to be looking at if we want to get a handle on this problem.
My question was: What does $ 700 Billion represent in terms of the size of the problem?
The best answer I can come up with, is that $ 700 Billion represents about 5% of the mortgages out there. Some sources have said (hopefully they are wrong) this represents only 5% of the delinquent mortgages. One of the big problems is getting to the correct information. There are so many sources putting out wrong information, as in the example above, that it is hard to be sure about the true facts.
In any case, let’s take the high road and assume that the $ 700 Billion represents 5% of all mortgages out there.
According to the Mortgage Bankers Association September 13th report, 4.39% of all mortgages on 1-4 family homes are delinquent, and another 1% are already in foreclosure!
According to Standard and Poors, last year (2007) sub-prime loans (421 Billion) represented 16.8% of all loans made (2.5 Trillion). Overall, they estimate that sub-prime mortgages represent 13.5% of all existing mortgages.
According to CNN Moneyline, we are seeing a spike in sub-prime defaults with 11.2% of the loans made in 2007 defaulting BEFORE THE FIRST INTEREST RATE ADJUSTMENT!
I will leave it to you to decide if you think the “Bail Out” will be enough to fix the problem. I am pretty sure the government knows this is just the first bite at the apple, as they raised the Federal Debt Ceiling by more than twice the amount of the “Bail Out” as part of the “Bail Out” package.

How to Keep Your Money Safe
Over the last two weeks I have been inundated with calls from students and others wanting to know what they should do with their money. Primarily, they seem to be concerned about money in their 401Ks and similar retirement accounts which are heavily invested in securities. They are also concerned about whether they can depend on FDIC insurance, and if it is safe to keep their money in the banks.
I don’t consider myself qualified to answer stock market questions as I do not invest there. FDIC insurance is probably not my strongest subject either. I do have the feeling that if the Government fails to back up the banking system we will be in a total financial collapse and the word money itself will no longer have the same meaning.
What I can do is share with you what I have done with my own money and why, leaving it up to you to make your own judgments about where you want to go.
My money was invested in residential real estate. I liquidated a substantial portion of my portfolio, starting in early 2006, with the last property sold in July of 2007.
I did this because I felt that we were at a market top, and that values had a good chance of declining from those levels. Said another way, I converted these assets to cash, because I felt that cash had a higher potential to hold its value than Real Estate.
Many who have called over the last few days now feel that the stocks held in their 401Ks (or other retirement accounts) are at risk of further decline from present levels. If you agree with this line of thinking, you can convert your stocks to cash by selling them on the open market.
If your money is inside a 401K, you probably have the option of a guaranteed interest fund or government security fund inside the 401K. You can immediately instruct your 401K administrator to move your funds from their present investment into the safest, most guaranteed fund they have, still inside the 401K. All with no tax consequences.
This will end your risk with regard to stock market declines as selling my real estate ended my risk with regard to its decline.
Now the problem is, we both have money sitting in a LOW INTEREST (1% to 3%) account. This not being a satisfactory long term rate of return, our next goal should be to reinvest that money into something that is both safe, and provides a “better” rate of return.
If your money is in a 401K, you will have very limited options as to what you can invest in. Most 401Ks have only a few stock, bond, or guaranteed interest funds in which you are allowed to invest.
You can rectify this problem by “Rolling Over” these funds into a Self Directed IRA. This can be done with no tax consequences.
The two IRA custodians I know of in Albuquerque that will allow true self direction of an IRA are: Sunwest Trust and Zia Trust.
Once you move your funds to a truly self directed IRA, you may want to “park it” in a guaranteed interest fund until you can make a Real Estate Secured investment as I am about to explain. Or, you may decide that you prefer to be invested in the stock, bond gold stocks or other securities.
Even if you prefer to invest in stocks etc. you will have a wider range of choices inside a self directed IRA than you will in a typical 401K plan.
Now, the thing that may be confusing at this point is the fact that I sold Real Estate because the risk of price decline was too high, and am now going to explain that I reinvested in Real Estate Secured investments.
In fact, what I have re-invested my money in would rightfully be classified as SUB-PRIME MORTGAGES. I think at this point looking at the specifics is the best way to clear up the confusion.
One of the properties I liquidated in 2006 was a single family residence, held by my self directed IRA. That sale netted my IRA approximately $100,000 (net equity).
The position my IRA had in the house was such that a 10% decline in market value would have resulted in a 20% decline in my net equity. Said another way, I had a 50% equity position in the property. If it was a $ 200,000 house, then I would have owed $ 100,000 on it. If we ignore closing costs (as I will do for the remainder of the examples), selling a $ 200,000 house would pay off our $ 100,000 loan, and leave us with $ 100,000 cash.
A 10% reduction in the value of a $ 200,000 house will make it a $ 180,000 house, which will leave me only $ 80,000 net equity after paying off the $ 100,000 loan. If I had $ 100,000 in equity, and now only have $ 80,000, I have suffered a 20% loss due to only a 10% decline in market value.
For comparison to the next section on re-investment in Sub-Prime mortgages: A 50% decline in market value of this house would have resulted in a 100% loss of my net equity.
Remember, leverage cuts both ways: it makes you money in an appreciating market, and it costs you money in a depreciating market.
The $ 100,000 netted from the sale of the above property was used to Purchase an existing $ 95,000 Real Estate Contract, and to create a $ 25,000 2nd mortgage. Both situations involved homeowners who were then being foreclosed on. Both parties paying on these notes had, by any definition “bad credit” therefore I refer to them as Sub-Prime loans.
The $ 95,000 Real Estate Contract bears interest at 8.5% per annum with monthly payments of $ 970, and a balloon payment in five years. It is in first position on a NE Heights home that had a market value of $ 250,000 at the time my IRA purchased it. Because my IRA paid only $ 75,000 for this Real Estate Contract, it will receive a 15.14% return on invested funds if the contract is paid as agreed.
Of course, the payments may not be made as agreed, and I may be forced to take the property. If that happens, I will have $ 75,000 invested in what was a $ 250,000 property.
Now to compare the market value risk of this situation to that of the house discussed above, let’s consider the 50% decline in market value that would have totally wiped out our equity in the earlier example.
If this house went down 50% in value, it would be worth $ 125,000. Since I only have $ 75,000 invested in it, I stand to make a $ 50,000 profit even after a 50% price decline.
So, with this investment, I have moved money from a position where a 50% decline in value would have entirely wiped out my equity, to a position where it will still be safe even if prices decline by more than 50%.
The $ 25,000 second mortgage I created is in almost the exact same situation. In this case, there was a homeowner who was in foreclosure. She owed approximately $ 80,000 on a property worth about $ 250,000. She needed $ 25,000 to make up her back payments and pay some other bills. I directed my IRA to make her a $ 25,000 second mortgage at 12% interest, $ 250 per month payment, and a 5 year balloon. When you throw in Origination fee and discount points, the loan should yield about 13% if paid as agreed.
Again, however, the payments may not be made as agreed. If this happens, I will have $ 105,000 invested ($ 80,000 first mortgage + $ 25,000 loaned) and will own a house that was worth $ 250,000.
Using the same math as the first example, if prices fall by 50%, this house will also be worth $ 125,000. Since I only have $ 105,000 invested in it, I stand to make a $ 20,000 profit even after a 50% price decline.
Up to this point, we have only been dealing with the risk of market value decline. Investing as described above provides some additional risk reduction as well.
First, I don’t have to worry about whether FDIC will come through or not. I have made my bet on the value of those houses not going below what I have invested in them. Everything is in my hands, win, lose or draw.
Second is the concept of protecting your money from external liability such as Legal or Medical liability, creditors etc. Think of how much money people spend in Attorney and CPA fees setting up and maintaining Private Trusts to protect their assets. Did you know that money inside an IRA is as well protected as it would be in a trust for only a small percentage of the cost?
Finally, let’s think for a moment about some of the fraud and theft that occurs in any down market. I realize that this is very unlikely to happen to any of us as individuals, but it is almost certain to happen to some among us.
Consider for a moment how much harder it would be for a dishonest person with evil intent to steal a mortgage, than it would be cash, or securities that can be sold and moved with the push of a button.
Transferring a mortgage, real estate contract or real estate itself, requires notarized signatures and recorded documents, as compared to the push of a few buttons for cash or securities.
And if someone with truly evil intent and talent does fraudulently transfer a mortgage or other real estate instrument, at least you have a chance to try and recover the asset. Real Estate and Mortgages don’t just vanish, the way cash does.

We will be covering all of this and more in the upcoming class: Real Estate the IRA solution on the 23rd of this month. Zia Trust will be providing space for the class in their office which will be passed on to the student in the form of a 25% price reduction on tuition. Also Zia Trust will have trust officers on hand to answer questions about the services they provide. Seating is limited to 15, so make your reservations early by giving me a call.
Until next month,

Wednesday, October 8, 2008

Fed, central banks cut rates to aid world economy

The Fed's action will reduce borrowing costs almost immediately for U.S. bank customers whose home equity and other floating-rate loans are tied to the prime interest rate. Bank of America, Wells Fargo and other banks cut their prime rate by half a point to 4.5 percent after the Fed announcement... click here for more.

Saturday, October 4, 2008

For bailout to work, housing market needs to mend

(AP) NEW YORK - Washington's financial bailout plan is now law. So the credit spigot will start flowing again, banks will resume lending, and an economic recovery can begin, right?... read more here.

Friday, October 3, 2008

Thank you REALTORS! Congress Passes, Bush Signs the Economic Stabilization Bill

Dear Brandon,

On behalf of the National Association of Realtors, I want to offer my heartfelt appreciation for responding to our Call For Action on the Emergency Economic Stabilization Act of 2008. Because of concerned members like you, who recognized the need for quick action, Congress has passed this important bill, and President Bush already has signed it into law.
We realize this bill is not perfect. However, we believe the additions made by the Senate, raising the FDIC insurance limit and several other measures that will benefit and protect taxpayers, make it a more favorable solution than the previous proposal.
NAR will continue to work with Congress and the Administration to make sure the measures included in this bill are implemented quickly. We will provide you with additional information on how you can help in the days and weeks ahead.
Thank you, again, for your participation and support of our advocacy efforts. You truly are the "Voice for Real Estate."


Richard F. Gaylord
2008 NAR President
National Association of Realtors

Historic bailout bill approved

AP - With the economy on the brink and elections looming, Congress approved an unprecedented $700 billion government bailout of the battered financial industry on Friday and sent it to President Bush who quickly signed it... click for more.

Thursday, October 2, 2008

Politics aside

· In this current marketplace, how does a 100% return on an investment sound and …
· Separating Facts from Myths.

Monday, September 29th, 2008 was the biggest drop on Wall Street in its history.

Tuesday, September 30th, 2008 was the third largest gain on Wall Street in its history.

The stock market’s volatility is directly impacted by “speculation” … is the economy going to improve or not, is unemployment going to go up or down, is the price of oil going to increase or decrease … and the list goes on and on. In the course of one day, records are set, as proven above.

Some Important Facts:

Mortgage loans are still available in abundance to the qualified borrowers.
Even though interest rates have increased slightly, FHA, VA, Conventional, and Jumbo loans are at historical lows.

Politics aside, Dave Ramsey, a popular Radio and TV financial advisor, was interviewed last night, September 30th, on Fox News Network, CNN, CNBC, (amongst others) and was asked: “In this current market turmoil, where would you advise people to invest their money?” He said, without hesitation: “The real estate market. There are great buys out there. There is an abundance of money available for those who qualify (have you heard that before) and the rates of return, purchased wisely, can be remarkable.”

Forbes.com reports:
Starting in 2010, housing price appreciation in metro Albuquerque is projected to lead the nation, due to job and economic growth, along with other factors. Housing starts are anticipated to increase by 26.6%, with single family increases of 26.4% and multi-family increases of 27.1%. How that correlates into overall market appreciation is not certain, but it can’t be a bad thing.
Money will be coming into the metro economy from baby boomer parents who move once the last child departs the nest. Albuquerque placed seventh on the list of cities attractive to this target group, due to our outdoor activities, arts, and moderately priced homes.

∙ Now to the scenario of a 100% return on our investment …

If someone were to buy a $200,000.00 home and elected to put 10% down, their investment would total $20,000.00.
Let’s say that the Forbes start “speculation” (remember that term in my opening bullet point) is overzealous and a more conservative “market appreciation” (not 0.00 % … not 26.4%) … let’s say … 10.00% (for this example).
That $200,000.00 home is now worth $220,000.00. ($200,000.00 x 1.10% = $220,000.00.)
Again, you invested $20,000.00 … in the course of 1 year … you earned $20,000.00. My math = $100.00% return. If accurate …Not bad, if you ask me.
The bonus…every day they can enjoy owning their new home (and that is FREE)!

A great resource in tight times!

Here's a website with valuable information on all things financial... all sorts of money-saving tips.

Tuesday, September 30, 2008

IRS Provides Homeownership Credit Guidance

Click IRS guidance to take advantage of the $7,500 homeownership tax credit. The IRS material, IR-2008-106, explains how individuals who use the credit will reflect it on their tax returns and receive the benefit from any refund. NAR has also created a summary of how the credit works.

Existing-home Sales Slide on Tight Mortgages

Existing-home sales were down in August following a healthy gain in July as tight mortgage credit curtailed activity, click here. Sales rose in the Midwest and South but fell in the Northeast and West. Nationally, existing-home sales, including single-family, townhome, and condo, declined 2.2 percent to a seasonally adjusted annual rate of 4.91 million units from an upwardly revised pace of 5.02 million in July. "Sales reflect higher interest rates before the government takeover of Freddie Mac and Fannie Mae," says NAR Chief Economist Lawrence Yun.

Monday, September 29, 2008

Financial crisis: What you should know

The financial crisis has sparked confusion over whether Americans' investments and bank accounts are safe. Here's what you should know about how the crisis might affect you... click here.

Sunday, September 28, 2008

Who wins, who loses under proposed bailout plan?

WASHINGTON (AP) - The proposal to bail out U.S. financial markets to the tune of up to $700 billion creates a lot of potential short-term winners, as well as some losers... click here for more.

$700B rescue plan finalized; House to vote Monday

AP - Congressional leaders and the White House agreed Sunday to a $700 billion rescue of the ailing financial industry after lawmakers insisted on sharing spending controls with the Bush administration. The biggest U.S. bailout in history won the tentative support of both presidential candidates and goes to the House for a vote Monday... click here for more.

Wednesday, September 24, 2008

$700 Billion for What?

Click here for the reality behind the government’s proposed “investment” in the financial markets and what’s at stake for homeowners and taxpayers.

What's a Short Sale?

A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed.

Tuesday, September 23, 2008

Dire warnings fail to sway senators on big bailout

AP - Senators dug in their heels Tuesday, pushing back against dire warnings from the government's top economic officials of recession, layoffs and lost homes if Congress doesn't quickly approve the Bush administration's emergency $700 billion financial bailout plan...
click here for more.

Foreclosure Investing in an IRA - What You Need To Know

By Jeffrey Roth, Equity Trust Company
Investing in a foreclosure property with your IRA can be a great way to increase your available funds to make deals and possibly grow any earnings tax-free. Yeah, tax-free earnings. For those veteran investors (and learned newbies), tax-free earnings is exactly what you have been looking for. That is one of many benefits of investing with your self-directed IRA that can help build your wealth portfolio. Here are a few points everyone needs to know to help get started:

1) Get that foreclosure. Your IRA can purchase a foreclosure property which could free up other available funds for additional investments. Notice the 'Your IRA' part of that statement. Since your IRA owns the property, all expenses that go into the property must come from the IRA account. Because of this, your IRA can reap certain tax advantages (#4). If your IRA doesn't have enough to own and maintain an investment property outright, you could always own a specified portion of a home through a partnership (undivided interest) or look into non-recourse loans.

2) Go ahead, sell it or rent it out! If you decide to rent or sell a property, that decision is completely up to you. Either way, it will help you reach your investing goals if you’re using a self-directed IRA. The funds received from a sale or income from renters would go directly toward growing your IRA account, which in turn, will help you make more out of your investments.

3) Tax-Advantages! The two types of IRAs, Traditional and Roth, have different tax advantages. With a Traditional IRA investment, you would not have to pay tax on any earnings until you started making qualified distributions at 59.5 years old. The idea is that you could possibly be in a lower tax bracket at that time and enjoy the fruits of your labor with less tax applied than you do today. The Roth IRA allows you to grow all earnings tax free (meaning you never have to pay tax on it) since the money used to fund the account is 'after-tax'. Paying tax later at a lower rate (Traditional) or not ever paying tax on earnings (Roth) makes that foreclosure investment look even better, doesn't it?

4) Where’s your IRA at? To invest in foreclosures with your IRA it must be a self-directed IRA. Unfortunately, most financial institutions will not allow you to self-direct your IRA investments because they want you to invest in their stocks, mutual funds, and bonds portfolio. To get out of that trap and start choosing where your money is invested (i.e. foreclosures), you need the assistance of a qualified and experienced self-directed IRA custodian. A custodian acts on your behalf to facilitate your self-directed investments through IRAs, 401ks and other small business retirement accounts.

5) Do your research. Self-directing IRA investments in real estate is perfectly legal and has been since 1974. You should be aware of the guidelines the IRS has published about IRAs (IRS Publication 590). You wouldn't invest in a home without knowing about the property, would you? Knowing your investment funding options should be treated the same way. Consult your financial team (custodian, CPA, and/or lawyer) to learn as much as you can to maximize your investment's tax benefits. Do some homework, find the right self-directed IRA custodian, and free up additional capital to start growing your foreclosure investments tax-free! Using a self-directed IRA is a great way to build out your investment portfolio and reach your financial goals. Jeffrey A. Roth is the Real Estate Channel Manager at Equity Trust Company. Equity Trust Company is an experienced self-directed IRA custodian with 34 years of service and is recognized as an industry leader with over $3 billion in managed assets. Learn more about self-directed IRAs at www.trustetc.com.

Monday, September 22, 2008

U.S. Ripple Effect

As the U.S. begins moving out from under the housing crunch, other world markets are just beginning to feel the "overseas aftershock" of the global financial system, according to the Sept. 4 Business Week online magazine. What do bad home loans in Alpharetta, Ga. have to do with office buildings in London or Tokyo? "Plenty," says Business Week. Global lenders, wary of further credit problems are denying credit to many builders and/or instituting tougher terms on commercial property loans. This, in turn, impacts employment markets, which impact rents and causes developers to rethink plans. The whole global commercial property market has slowed with the value of commercial real estate transactions worldwide at only $306 billion for the first six months of 2008--about half the amount for the same period in 2007, according to Real Capital Analytics. But it's not just the U.S. subprime mortgage situation at play. An overall softer economy and weak consumer confidence has hurt smaller developers--particularly those is markets that heated up quickly, including those servicing U.S. outsourcing (think IT); a U.S. sector that is slowing along the overall economy. In spite of all this, Business Week notes that opportunities exist, especially for those with cash. Sovereign wealth funds (SWF), which are state-owned entities that manage savings for investment purposes, are key players in commercial real estate and are flush with cash. According to an article in the April Real Estate Forum, SWF have grown from about $500 billion to more than $3 trillion since the 1990s, with projections of tripling that amount by 2012. Go to pg. 10 to read the full article.
NAR International Operations

Saturday, September 20, 2008

Rescue plan seeks $700B to buy bad mortgages

WASHINGTON (AP) - The Federal Government is asking Congress to let the government buy $700 billion in toxic mortgages in the largest financial bailout since the Great Depression, according to a draft of the plan obtained Saturday by The Associated Press.

The plan would give the government broad power to buy the bad debt of any U.S. financial institution for the next two years. It would raise the statutory limit on the national debt from $10.6 trillion to $11.3 trillion to make room for the massive rescue. The proposal does not specify what the government would get in return from financial companies for the federal assistance.

"We're going to work with Congress to get a bill done quickly," President Bush said at the White House. Without discussing details of the plan, he said, "This is a big package because it was a big problem."

The White House and congressional leaders hoped the developing legislation could pass as early as next week.
Administration officials and members of Congress were to negotiate throughout the weekend.

The plan is designed to let faltering financial institutions unload their distressed mortgage-related assets on the government, and in turn the taxpayer, in a bid to avoid dire economic consequences.

Bush said he worried the financial troubles "could ripple throughout" the economy and affect average citizens. "The risk of doing nothing far outweighs the risk of the package, and over time we're going to get a lot of the money back."
He added, "People are beginning to doubt our system, people were losing confidence and I understand it's important to have confidence in our financial system."
"In my judgment, based upon the advice of a lot of people who know how markets work, this problem wasn't going to be contained to just the financial community," the president said. He said he was concerned about "Main Street" and that what happens on "Wall Street" affects "Main Street."

Sen. Chuck Schumer, D-N.Y., called the proposal "a good foundation," but raised concerns it "includes no visible protection for taxpayers or homeowners."

Democrats are insisting the rescue include mortgage help to let struggling homeowners avoid foreclosures. They also are also considering attaching additional middle-class assistance to the legislation despite a request from Bush to avoid adding controversial items that could delay action. An expansion of jobless benefits was one possibility.

Asked about the chances of adding such items, Bush sidestepped the question, saying only that now was not the time for political posturing. "The cleaner the better," he said about legislation he hopes Congress sends back to him at the White House.

If passed by Congress, the plan would give the Treasury secretary broad power to buy and sell the mortgage-related investments without any additional involvement by lawmakers. The proposal, however, would require that the congressional committees with oversight on budget, tax and financial services issues be briefed within three months of the government's first use of the rescue power, and every six months after that.

While the proposal contains no requirement that the government receive anything from banks in return for unloading their bad assets, it would allow the Treasury Department to designate financial institutions as "agents of the government," and mandate that they perform any "reasonable duties" that might entail.

In a briefing to lawmakers Friday, Paulson and Federal Reserve Chairman Ben Bernanke painted a grave picture of an economy on the edge of a major recession and telling them that action was urgent and imperative.

In a session with House Democrats, they described a plan where the government would in essence set up reverse auctions, putting up money for a class of distressed assets - such as loans that are delinquent but not in default - and financial institutions would compete for how little they would accept for the investments, said Rep. Brad Sherman, D-Calif., who participated in the conference call.

"You give them good cash; they give you the worst of the worst," Sherman said. A critic of the plan, he complained that Bush and his economic advisers were trying to panic lawmakers into rubber-stamping it.

Paulson said the new troubled-asset relief program must be large enough to have the necessary impact while protecting taxpayers as much as possible.

"I am convinced that this bold approach will cost American families far less than the alternative - a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion," Paulson said. "The financial security of all Americans ... depends on our ability to restore our financial institutions to a sound footing."

Administration officials hoped the rescue plan could be finalized this weekend, to lend calm to Monday morning's market openings, said Keith Hennessey, the director of the president's economic council. The goal is to have something passed by Congress by the end of next week, when lawmakers recess for the elections.

Tuesday, September 16, 2008

NAR Forecast: Home Sales to Stay in Narrow Range

The level of home sales is expected to show little movement in the months ahead, NAR projects. The association's pending home sales index for July fell 3.2 percent to 86.5 from an upwardly revised reading of 89.4 in June. "Pending home sales are oscillating month-to-month, with the long-term trend essentially flat," says NAR Chief Economist Lawrence Yun. "Overly stringent lending criteria imposed by Fannie Mae and Freddie Mac in the past month no doubt held back contract signings."

Sunday, September 14, 2008

Banks seen offering plan to restore confidence

NEW YORK (AP) - As the outlook for Lehman Brothers' future appeared to dim Sunday, U.S. and foreign banks joined forces to create a plan aimed at inoculating the global financial system against the investment bank's possible failure, a top investment banking official said.
Banks are in tense talks to create a pool of money worth up to $50 billion to lend troubled financial companies, the official said on condition of anonymity because the discussions were ongoing. And officials at the U.S. Treasury and the Federal Reserve are expected to say they are prepared to be more generous in the Fed's emergency lending program for commercial and investment banks .
The plan comes as top government officials and Wall Street executives hold marathon meetings to save Lehman Brothers, whose shares have tumbled 95 percent in the past year over worries that it does not have enough money to cover losses from its real estate holdings.
The meetings have failed to find a buyer for the troubled 158-year-old investment bank, raising concerns that its likely collapse would disrupt global financial markets.
The official also said the Treasury Department and the Fed are pushing Bank of America Corp. (BAC) (BAC) to buy Merrill Lynch & Co. (MER) (MERPO), though talks are still preliminary.
On Friday, Merrill Lynch's shares fell as investors fretted it might be the next investment bank to come under pressure from its portfolio of risky mortgage-backed securities.
Global banks and brokerages have written down more than $300 billion since the subprime mortgage crisis undermined the credit markets beginning last August.
Expectations that Lehman would survive as a company dimmed Sunday afternoon after Barclays PLC (BCS) withdrew its bid to buy the investment bank. Barclays' and Bank of America Corp. were considered front-runners to buy Lehman.
The Lehman talks originally were aimed at selling the investment bank in whole or in part. The deal was tripping on the potential buyers' insistence that they receive the same kind of help that Bear Stearns Cos.' got last March when JP Morgan Chase & Co. bought the securities firm with a $29 billion Fed-backed loan.
Treasury Secretary Henry Paulson has said the government will not help close a Lehman deal.
Lehman declined to comment on the talks.
If no deal were reached, it raised the specter of a bankruptcy and liquidation of the investment bank. Bankers and investment banking officials briefed on the talks described them as being both complicated and fluid. Hope was dwindling that an agreement could be brokered or that new bidders might emerge. They spoke on condition of anonymity because talks were ongoing.
There were signs that Lehman Brothers might be edging closer to a bankruptcy filing, with several reports that it has hired Weil, Gotshal & Manges, the law firm that handled the collapse of investment firm Drexel Burnham Lambert in 1990.
Moreover, there was also an emergency trading session being held at the International Swaps and Derivatives Association to "reduce risk associated with a potential Lehman Brothers Holdings Inc. (LEH) (LEH) bankruptcy." The ISDA, which arranges trades for derivatives, said it was allowing customers to make trades and unwind positions linked to Lehman - but that those trades would be voided if no filing occurs before midnight.
Government officials and executives from several Wall Street banks were huddled at the New York Fed's downtown Manhattan headquarters for a third day seeking a solution to Lehman's financial crisis. Failure could prompt skittish investors to unload shares of financial companies, a contagion that might affect stock markets around the world when they reopen Monday.
Dow Jones industrial futures fell 2.5 percent Sunday, indicating a sharply lower open for the blue chip index Monday morning. Asian markets will begin trading Sunday night Eastern time.
Paulson, Timothy Geithner, president of the New York Fed, and Securities and Exchange Commission Chairman Christopher Cox were among those taking part in the meetings. Federal Reserve Chairman Ben Bernanke is actively engaged in the deliberations but wasn't in attendance.
Paulson's tough bargaining stance received support from outside observers Sunday, who argued that the government had no choice but to draw a line in the sand.
"If Treasury put money into the Lehman deal, then going forward no deal would get done without Treasury help," said Mark Zandi, chief economist at Moody's Economy.com. "Every potential buyer would wait until Treasury stepped in and that would mean Treasury would be on the hook for a lot more bailouts."
The current situation is different from Bear Stearns' situation six months ago.
In Lehman's case, financial markets have been aware of Lehman's problems for a much longer period and have had time to prepare. Investment banks also now have the ability to obtain emergency loans directly from the Fed, a crucial support that they did not have back in March when Bear Stearns was rescued.
In the Lehman talks, bankers and government officials were also trying to tackle a broader agenda that includes problems at American International Group Inc. (AIG) and Washington Mutual Inc. (WM), said the investment bank officials, who were briefed on the talks.
AIG, the world's largest insurer, and WaMu, the nation's biggest savings bank, have taken steep losses during the past year from risky investments. The Wall Street Journal reported Sunday that American International Group Inc. plans to disclose a restructuring by early Monday that's likely to include the disposal of major assets including its aircraft-leasing business and other holdings.
Lehman put itself on the block earlier last week. Bad bets on real-estate holdings - which have factored into bank failures and caused other financial companies to founder - have thrust the firm in peril. It has been dogged by growing doubts about whether other financial institutions would continue to do business with it.
Richard S. Fuld, Lehman's longtime CEO, pitched a plan to shareholders Wednesday that would spin off Lehman's soured real estate holdings into a separately traded company. He would then raise cash by selling a majority stake in the company's unit that manages money for people and institutions. That division includes asset manager Neuberger Berman.
AP Business Writer Raphael Satter contributed to this story from London.

Tuesday, September 9, 2008

Making Sense of the Fannie & Freddie Takeover + Good news for Albuquerque

The Federal Government has announced that it has taken control of Fannie Mae and Freddie Mac, which own or guarantee almost half of the country's $12 trillion in outstanding home mortgage debt. They play a vital role in the U.S. economy by making fair and affordable mortgage loans available for home buyers and owners. They support the housing market by purchasing mortgage loans from the banks that originate them, giving the banks the cash to make more loans. They package those loans into securities and ensure repayment. They sell the securities to investors around the world, or retain them for their own portfolios.

The Federal Government's sweeping takeover of mortgage market giants is expected to have positive short-term benefits to the real estate market and opens the door for the industry to shape the restructuring of the companies.

Allowing either Fannie or Freddie to fail would hurt us all... Our ability to get home and auto loans, and even hamper economic growth and job creation.

What the Plan Involves

Under the Treasury Department's action, the two government-sponsored enterprises are placed in a government conservatorship and overseen by two government-appointed chiefs, former Merrill Lynch vice chairman Herbert Allison at Fannie Mae and former U.S. Bancorp CFO David Moffett at Freddie Mac.

Daniel Mudd, who led Fannie Mae for the last few years, and Richard Syron, his counterpart at Freddie Mac, have been relieved of their jobs.

The federal government is taking up to an 80 percent stake in the companies and will review their financial condition on a quarterly basis, injecting money into their operations as needed. The government is directing the companies to help stabilize housing markets by requiring them to increase their mortgage funding over the next year and a half.

For the long-term, the companies and their regulator, the Federal Housing Finance Agency, will begin planning for a major reorganization of their operations, away from their current 100-percent, privately owned model.

According to news reports, one of the models being discussed is something akin to a public utility, in which the government sets limits on the amount of annual return on equity to shareholders.

Positive Real Estate Impact

For the real estate industry, the short term impact is expected to be positive. With the government now explicitly backing the companies' mortgage obligations, the market for the GSE securities will be treated more like Treasurys, thereby exerting downward pressure on rates.

That will help drive a positive cycle of investment as investors return to the market, further lowering rates and generating funds to lenders to expand their mortgage loan operations. That is expected to help speed up housing sales in markets across the country and help stabilize home prices.

The main down side to the federal intervention will be felt by the companies' current shareholders, who will no longer receive dividend payments and whose holdings are diluted by the equity stake of the federal government.
— REALTOR® Magazine Online

Part of the Problem

At one point earlier this year, as the credit crunch worsened, the two companies were responsible for about 80% of all loans being originated in the U.S. But the rise of foreclosures weakened their balance sheets and raised their borrowing costs, reducing their ability to support the market. As the housing downturn worsened, the two companies came to be seen as part of the problem instead of part of the solution.

Technically, Fannie and Freddie have been placed under "conservatorship," a term that ordinarily means they are being stabilized with the objective of returning them to normal operation.

Taxpayers at Risk

It's impossible to say how much the effective takeover of Fannie and Freddie will cost taxpayers. If housing prices begin to recover and foreclosure rates don't get too high, the cost to the government could be very small or zero, because Treasury will earn a return on its preferred shares and get all its secured loans repaid.

Still, the deal is likely to draw criticism because it puts taxpayers at risk while boosting the value of Fannie and Freddie's bonds and mortgage-backed securities, which are held by banks and other investors around the world. Asian central banks, in particular, are large holders.

One group that won't be getting any kind of a bailout: Fannie and Freddie's ordinary common shareholders. They stand last in line for any money the two companies make. Share prices of both Fannie and Freddie have lost more than 90% of their value over the past year, in anticipation of a takeover. In after-market trading on Sept. 5, as word of the conservatorship plans leaked out, Fannie shares were trading around $5.50, down from $70 a year ago, while Freddie Shares were at about $4, down from $65 a year ago.

Candidates Weigh In

Senator John McCain, the Republican Presidential candidate, said at a rally in Albuquerque: "We need to keep people in their homes, but we can't allow this to turn into a bailout of Wall Street speculators." Doug Holtz-Eakin, McCain's top economic adviser, said that longer term, "We believe these institutions should not be making money" through government support. "They have to shrink to a point where they are not a threat, that they are not operating essentially as a big hedge fund."

Senator Barack Obama, the Democratic Presidential candidate, released a statement on Sept. 7 saying, "Given the substantial role that Fannie Mae and Freddie Mac play in our housing system, I believe that some form of intervention is necessary to prevent a larger and deeper crisis throughout our entire economy." He said he wasn't yet ready to say whether Treasury's solution was the right one.
by Peter Coy and Theo Francis

Good news for Albuquerque
by Forbes.com

Believe it or not, in the future people will be buying and selling homes. Some of them will even make a profit.

It's not so crazy an idea. Consider Albuquerque, N.M. The mid-sized Southwestern city has experienced housing price declines since a peak in the third quarter of 2007, job growth has been flat, and housing starts are expected to fade by 45% through the end of 2008. Nevertheless, it's a city that home builders and economists are bullish about for 2010 and beyond.

According to analysts at Moody's Economy.com, Albuquerque's job growth through 2012 is projected at an average annual rate of 1.6%, fueled in large part by its low costs and local business expansion. Housing starts in the city are expected to reverse course in 2009, growing by 26.6%, according to the National Association of Home Builders (NAHB). This means builders have high hopes for 2010 and 2011, when those homes will be completed and on the market.

It's the same story in several other cities: more tough times to come in the short term, but potential for a recovery and a rise in prices in the long term.

Behind The Numbers

To determine where house prices are expected to rise next, Forbes.com looked at projections for housing starts from the NAHB and job-growth figures from Moody's Economy.com, for the 100 largest metro areas in the U.S. The estimates are based on the cost structures of business in the respective cities and the composition of the local economies.
Housing start projections from the NAHB may seem like wishful thinking, but the NAHB data are filled with laggards, signifying some realistic thinking. Housing starts in Las Vegas are expected to drop by 32% in 2008 and actually get worse in 2009, falling by a further 43%.

In overbuilt, highly leveraged Phoenix, starts are predicted to fall 50% this year and descend another 11% more in 2009.

Because houses take six months to two years to build, that means home builders aren't expecting profits in the Vegas or Phoenix market until past 2011.

"These are some of the most overbuilt markets," says Robert Denk, an economist at the NAHB. "There are some markets that got really out of hand and they're going to be in trouble for a couple years still." He cites Cape Coral, Fla., as the poster child of overbuilding exuberance. "They built 10 years of housing in two years." The prognosis isn't as bad elsewhere.

Texas On The Rise?

Centex, one of Texas' largest homebuilders, has been stung by overextension into Michigan and Colorado, as well as big bets on the vacation-home market in Texas. In July, the builder reported losses of $150 million.
There's a bright spot, however.San Antonio and Austin, Texas, have largely avoided the real estate crash, with price increases of 2.5% and 4.1% in year-over-year terms, respectively, according to the NAR. This is driven in part by the fact that the two markets are expecting building slowdowns of 24.7% and 28.2%, respectively, through the end of the year, as home builders are bearish about the remainder of 2008 and 2009 in the sales market or cannot find financing. Builders as a whole are taping their wounds and cutting back production, adopting a wait-and-see approach to home prices in the coming year.
But for the start of 2010 and into 2011, builders expect a more vibrant market for sellers. For homes built in 2009, which would come off the conveyor belt in 2010 and 2011, the NAHB forecasts a 9.6% increase in Austin and a 20.9% increase in San Antonio above 2008 levels. Much of that has to do with expected job growth in all non-farm sectors.

Recovery In Obvious Places

At this point, it's clear the subprime contagion won't be contained in the next year, based on the acceleration of home price drops and foreclosures nationwide. But when the bad vintages of loans finally come off the books, the cities where prices are expected to rebound are largely those with vibrant economies.
"The logic is pretty straightforward," says Mark Zandi, chief economist at Moody's Economy.com. "People will spend as much on housing as their income will allow them. House prices are very closely tied to household income over the long run when you look at business cycles."

This means that recovery is likely in the cards for even the hardest-hit spots. Cities like Atlanta and Colorado Springs, may be reeling from high defaults and foreclosures, but from 2007 through 2012, their economies are expected to experience 2% and 1.6% average annual job growth. That means more in-migration and more money in the economy, factors that help businesses grow and profit--and put more money in residents' pockets.

As local economies grow bigger and more dynamic, land values increase because the value of what can be produced on that land increases. When land prices go up, home values go up.

Home prices moving up; it sort of makes one nostalgic.

Provided by:
Brandon DENT : (505) 550-6388
REALTOR® : 1-877-821-8054 (toll free)
MyPropertyNow.com (All a Buyer and Seller needs)


Sunday, September 7, 2008

Officials announce takeover of mortgage giants

AP - The Bush administration, acting to avert the potential for major financial turmoil, announced Sunday that the federal government was taking control of mortgage giants Fannie Mae and Freddie Mac... click for more.

Tuesday, September 2, 2008

Forbes says Albuquerque will lead nation in home appreciation

N e w M e x i c o B u s i n e s s W e e k l y

Forbes.com has named Albuquerque as the top market where home prices are likely to rise.
The city has experienced housing price declines since they peaked in the third quarter of 2007, and job growth has been flat. Housing starts are expected to drop by 45 percent through 2008, according to Forbes.
But Albuquerque is also a city about which homebuilders and economists are “bullish,” writes Matt Woolsey, author of the Forbes.com article.
Moody’s site Economy.com is projecting Albuquerque’s job growth through 2012 to be 1.6 percent annually, fueled by low costs and local business expansion, according to Forbes. Housing starts are expected to grow here by 26.6 percent in 2009, according to the National Association of Home Builders.
In 2006, Forbes ranked Albuquerque as the Nation’s Best City for Business and Careers. Earlier this year, the city was ranked 13th best in the nation for that same category.

Monday, August 25, 2008

Existing-homes sales rise, inventory swells

By Patrick Rucker Mon Aug 25, 1:07 PM ET

WASHINGTON (Reuters) - Sales of previously owned U.S. homes ticked higher in July thanks to lower prices, but record inventory suggested the battered housing market is unlikely to recover soon, a trade group report showed on Monday.
Home resales rose 3.1 percent to a 5 million-unit annual rate, according to the National Association of Realtors. While that topped analysts' expectations of a pace of 4.90 million, the overall picture was mixed.
The median national home price declined 7.1 percent from a year ago to $212,400 and the inventory of homes for sale rose to 4.67 million which would take 11.2 months to clear at the current sales pace. That matched a record set in April.
The data points to a generally weak but stable market since the volume of sales has hovered around 5 million for 10 months despite gyrations in price and inventory, said Michael Englund, chief economist with Action Economics in Boulder, Colorado.
"Generally we have re-established the sideways pattern in existing home sales since October, which given the general down draft in a lot of housing data it is certainly good news that we seem to have some kind of floor," he said.
U.S. stocks initially pared losses after the data but the benchmark S&P 500 index was down almost 2 percent at mid-day on concerns about the health of financial industry. Yields on the benchmark 10-year Treasury were lower and the dollar was little changed.
Sales have rebounded in many markets in the West and Florida recently where prices have tumbled, but it is too soon to call a bottom for those regions, Realtors' chief economist Lawrence Yun said. "There is still too much uncertainty," he said.
Other analysts agreed that the July data was a relief after months of grim news for housing, which enjoyed five boom years before prices begin to slide in 2006. Compared to a year ago, the median existing home price was off 7.1 percent.
"Right now the sign is encouraging, not that it's over, but you're starting to see a bottom," said David Wyss, chief economist for Standard & Poor's in New York.
"Prices have come down more than we have expected, but sales and starts have actually held up better. That may be a sign of realism out there, that people have accepted the fact they can't get as much for the house as they thought they could."
(Reporting by Patrick Rucker; Editing by Tom Hals)

Monday, August 11, 2008

Federal Reserve finds deepening credit crisis

WASHINGTON (AP) - More banks are tightening lending standards on home mortgages and other consumer and business loans as a deepening credit crisis exerts a heavier toll on the economy.

The Federal Reserve said Monday the percentage of banks reporting tighter lending standards rose across various loan types in its July survey. In April, the central bank had found that the percentage of banks reporting tighter lending standards was already near historic highs.

The new survey, conducted in early July, found that about 75 percent of the banks surveyed indicated they had tightened their lending standards for prime mortgages. That was up from about 60 percent of banks who said they were tightening lending standards for prime mortgages in the previous survey.

The Fed's July survey covered 50 banks which hold about 80 percent of the residential mortgages on the books of all commercial banks.

Out of this group of 50 banks, 32 said they were still originating so-called nontraditional home mortgages. Among these 32 banks, about 85 percent said they had tightened their lending standards, up from 75 percent who said they were tightening lending standards for nontraditional mortgages in the April survey.

The Fed defines nontraditional mortgages as adjustable-rate mortgages with multiple payment options, interest-only loans and "Alt-A" mortgages that require limited verification of income.

The Fed survey found that only seven of the 50 banks said they were still participating in subprime mortgages, loans made to borrowers with weak credit histories. Of those seven, six said they had tightened lending standards on subprime loans with only one saying it had left standards basically unchanged for subprime loans.

The survey found that most banks were reporting tighter lending standards across a broad swath of consumer and business loans over the past three months.

For home equity lines of credit, 80 percent of the banks surveyed said they had tightened their lending standards in this area.

For credit cards, the percentage of domestic banks reporting tighter lending standards was about 65 percent, more than double the 30 percent who reported they were tightening lending standards for credit cards three months ago.

Analysts said that the big jump in higher standards for credit card debt could represent a serious threat to the already weak economy, given that consumer spending accounts for two-thirds of total economic activity.

Harm Bandholz, an economist with UniCredit Markets, said that the tightening in bank standards for credit cards and other types of consumer loans would be "another nail in the coffin of the U.S. consumer, who is already suffering from the weak labor market, high inflation and falling house prices."

David Wyss, chief economist for Standard & Poor's in New York, said the tighter lending standards reflect the huge loan losses that banks have already suffered. Those losses have depleted the capital they need as reserves against future losses and made it more difficult for the banks to sell their mortgages and other loans as asset-backed securities, a process that provides them with money to make new loans.

Wyss said he did not believe bank lending will start to pick up until next spring when he is forecasting that the economy will begin to rebound.

"The country is probably going through the most severe credit crunch since 1991-92," Wyss said, referring to a time when banks and savings and loans came under severe pressure while the economy was in a recession. "I think bank credit is going to remain tight for a while."
The current credit crisis hit with force a year ago with rising defaults in the market for subprime mortgage loans. The credit problems have since spread from subprime loans, mortgages provided to borrowers with weak credit histories, to other types of mortgages and other kinds of loans.

The country's major financial institutions have reported billions of dollars in losses and financial markets remain unsettled with investors concerned about potential losses that have yet to be disclosed.

Saturday, August 9, 2008

2nd Quarter NM Homes Sales
Statewide the number of homes sold is down nearly 28% from 2nd quarter 2007, however, both average and median prices are up from last year. Click here for complete 2nd quarter statistics.

Entry for August 7, 2008
How the New First-Time Buyer Tax Credit Works
Under the new housing bill, home buyers who have not owned a home in the last three years will be eligible for a tax credit. Find out if your buyers qualify. Read more >

Little-Known Loans for Buyers
Federally-sponsored mortgage programs can help borrowers with stable jobs, but no savings. Read more >

Fed Issues Rules to Prevent Abusive Lending
The Federal Reserve has adopted rules to prevent unfair or deceptive practices by lenders and to protect home buyers from the kind of loans that drove many into foreclosure. The new rules apply to all lenders and not just to banks supervised by the Fed. Some of the new rules require lenders to escrow money to pay taxes and insurance for risky borrowers, document borrower's income before a loan is issued, limit and-in some cases-ban prepayment penalties, prohibit lenders from making a loan without considering a borrower's ability to repay a home loan from sources other than the home's value, and require mortgage advertising to contain information about rates, monthly payments, and other features of the loan. Most of the rules are expected to take effect Oct.1, 2009. Escrow requirements won't go into effect until April 1, 2010. The rules do not apply to home equity lines of credit, construction loans, bridge loans, or reverse mortgage loans.

Entry for August 1, 2008
Great News!!
President Bush just signed into law the Housing and Economic Recovery Act of 2008. This is a major victory for REALTORS®, consumers, and our nation. Homebuyers will soon have access to more affordable financing, and first-time homebuyers (those who have not owned a home for three years) will receive a tax-credit to help them enter the market. For more details on all of the provisions in the new law, please use the link below. http://www.realtor.org/gapublic.nsf/pages/hr_3221_key_provisions?OpenDocument

Entry for July 29, 2008
Existing Home Sales Drop Nationally
NAR reports single-family, townhome and condo purchases fell 2.6 percent in June and are down more than 15 percent from the same period last year. Read more >

Foreclosure Activity Continues to Rise
According to RealtyTrac's Q2 2008 U.S. Foreclosure Market Report, New Mexico ranked among the bottom half of the states for its second quarter filings. The report defines foreclosure filings as default notices, auction sale notices and bank repossessions. New Mexico ranked No. 37 among the 50 states, with 1,150 total filings, which is a 2.7 percent decrease from the previous quarter but a 60 percent increase over the second quarter 2007.

FHA Adds Enhancements to FHASecure Initiative
The Federal Housing Administration recently implemented NAR-backed enhancements to the FHASecure Initiative which will give FHA flexibility to insure mortgages for borrowers who were late on some payments or received a principal write-down from their lender. FHASecure gives home owners with non-FHA adjustable rate mortgages the ability to refinance into a FHA-insured mortgage. With the new FHASecure criteria, lenders may voluntarily write down the outstanding subprime mortgage principal balances to a 97 percent or 90 percent LTV ratio depending on the borrowers' circumstances. FHA will also encourage lenders to make other arrangements, such as subordinate financing, to fill the gap between the existing loan balances and the FHA-insurable loan amount. The refinanced loan amount backed by the FHA would be based upon a new appraisal, performed by an FHA-approved appraiser. In February, NAR had sent a letter to the Secretary of Housing and Urban Development recommending many of these enhancements. Questions? Contact Jerome Nagy, 202-383-1233 Entry for July 29, 2008 FHA/GSE Legislation Passes On Monday, the U.S. Senate passed a final bill on FHA and GSE that NAR had long fought for, after deliberations and negotiations for the past few weeks. The House passed the identical bill on Wednesday, July 23. For more information, read the bill summary. The President has said he will sign the legislation into law. This bi-partisan legislation, NAR believes, will aid in calming mortgage markets, strengthen housing markets, and stabilizing our economy. The new loan limits are now set at $625,500 for the GSEs and FHA, as well as a $7,500 home ownership tax credit. The legislation also includes broad GSE Reform, FHA Reform, development of a National Affordable Housing Trust Fund, and creates a new FHA program to help homeowners at risk for foreclosure.
(c) 2008, REALTORS® Association of New Mexico. All rights reserved.2201 Brothers Road, Santa Fe, New Mexico 87505 800-224-2282 Fax: 505-983-8809

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