Thursday, January 27, 2011

Study Predicts What's in Store for Former Real Estate Boom Towns

In former home-building hot spots, the housing bust has created a new kind of declining city, different from the nation’s traditional rusting centers of industry that could languish for years.

Although the causes of the decline in these metropolitan areas are distinct from the loss of employment from shrinking manufacturing and industry in some of the nation’s old industrial powerhouses, these areas could experience fates similar to places such as Cleveland and Detroit, with neighborhoods experiencing high rates of vacancies for a very long time, according to a recently released study.

“Some neighborhoods are going to suffer tremendously or are never going to come back or come back very, very slowly,” said James R. Follain, senior fellow at the Rockefeller Institute of Government and author of the study published by the Research Institute for Housing America, a division of the Mortgage Bankers Association.

Potential candidates for long-term decline named by the study are the areas hit hardest by the drop in home prices in recent years. They include Las Vegas, Miami and several inland California metropolitan areas that grew rapidly during the boom, such as Stockton and Modesto.

A traditional city in decline is one that has suffered a sustained population drop, leaving behind empty houses, apartment buildings, offices and storefronts. Cleveland and Detroit, for instance, suffered from the erosion of manufacturing and the loss of residents, who left in search of jobs.

Instead of eroding a particular industry, however, the housing bust left a glut of homes because of overbuilding and the foreclosure crisis. Follain argues that the future of these cities is threatened in similar ways to that of Rust Belt cities. “Long-vacant neighborhoods are going to develop, and we can imagine what can happen,” he said, including potentially higher crime and lower property taxes.

In California, some coastal cities are already seeing a housing market recovery. But inland areas that were built on optimistic assumptions of continued population growth and ever-climbing home values are facing a much more difficult recovery.

Celia Chen, a housing economist with Moody’s, predicts that a full recovery in parts of California, Nevada, Arizona and Florida won’t occur until 2030. “The housing boom elevated home prices in a number of areas far, far above what can be supported by the economic fundamentals, and so prices have fallen significantly, and they will remain below their previous peaks easily for a decade, or even two decades,” Chen said.

Some experts contend that foreclosures, which have pierced neighborhoods of all income levels throughout the country, are quickly turning developments on the outskirts of metropolitan areas into the nation’s newest slums. Complicating any recovery for these beaten-down areas is the difficulty in predicting which neighborhoods will fare worst. That uncertainty could lead to increasing skepticism by buyers and lenders looking to make loans on homes in these areas.

“If you are looking at this from the perspective of a home buyer or a lender, it is one thing to say you are in a market where home prices may drop 10 percent or 20 percent,” said Michael Fratantoni, vice president of research and economics with the mortgage bankers group. “That is different from the idea that 80 percent to 90 percent of the value could evaporate. That changes the whole nature of the business.”

Still, the future of these regions remains a point of contention. Economist John Husing argues that the inland regions of California don’t have a long-term problem.

“What has driven the Inland Empire economy is, for the last 30 years, simply the fact that the rest of Southern California is completely out of dirt,” Husing said. “Right now the price differential between coastal counties and inland counties is $100,000. People will ultimately respond to that.”

The development of industrial facilities to handle cargo from Southern California’s ports will also continue inland because they require lots of space, said Husing, principal of Economics & Politics Inc. in Redlands. Such development, he said, will create jobs for workers who will need housing.

(c) 2011, Los Angeles Times.

Best & Worst Real Estate Markets

More than 15 states are projected to experience housing inflation or appreciation during the year, according to Housing Predictor, which releases an annual report of its choices for best and worst housing markets. 

The top five housing markets are: 

1. Portland, Maine
2. Kansas City, Kan.
3. Tri-Cities, Wash.
4. Omaha, Neb.
5. Fargo, N.D.

However, not all markets will fare well in 2011, with the foreclosure crisis particularly still battering some areas as well as high unemployment and overbuilding during the boom era that has led to high home inventories. 

The top 5 worst markets, according to Housing Predictor, are:

1. Bend, Ore.
2. Las Vegas
3. Atlantic City, N.J.
4. Miami, Fla.
5. Medford, Ore.

View all 25 best and 25 worst markets that made the list in the Housing Predictor report.

Source: “Best and Worst Real Estate Markets Announced in 2011,” (Jan. 17, 2011)

Tuesday, January 25, 2011

Tips for Buying Foreclosures

1. Work with an agent who has access to foreclosure information. 
Many home buyers assume that all agents have access to foreclosure listings. It's important to ask. 

2. Bank-owned properties generally close faster than short sales. 
While short sales can be bargains, they also can take a lot longer. Some banks will negotiate in a timely manner on short sales, but most will prioritize properties they have already repossessed. 

3. Always offer less than the asking price. 
Don't assume that banks are firm on their price. Asset managers responsible for liquidating bank-owned propertiesare often willing to consider a lower offer. 

4. Ask the bank to pay your closing costs. 
The worst that can happen is that they say no. Sometimes buyers are surprised to find that banks can be quite accommodating when they want to. 

5. Get pre-approved from the right bank. 
When making an offer on a short sale, it's often strategically helpful to be pre-approved by the same bank. During negotiations, this may tip the scales in your favor.

Wednesday, January 19, 2011

Year-End 2010 U.S. Foreclosure Market Report

RealtyTrac, a leading online marketplace for foreclosure properties, released its Year-End 2010 U.S. Foreclosure Market Report, which shows a total of 3,825,637 foreclosure filings—default notices, scheduled auctions and bank repossessions—were reported on a record 2,871,891 U.S. properties in 2010, an increase of nearly 2% from 2009 and an increase of 23% from 2008. The report also shows that 2.23% of all U.S. housing units (one in 45) received at least one foreclosure filing during the year, up from 2.21% in 2009, 1.84% in 2008, 1.03% in 2007 and 0.58% in 2006.
Foreclosure filings were reported on 257,747 U.S. properties in December, a decrease of nearly 2% from the previous month and down 26% from December 2009—the biggest annual drop in foreclosure activity since RealtyTrac began publishing its foreclosure report in January 2005 and giving December the lowest monthly total since June 2008.
December Default notices (NOD, LIS) decreased 4% from the previous month and were down 35% from December 2009; Scheduled foreclosure auctions (NTS, NFS) decreased 3% from the previous month and were down 20% from December 2009; and bank repossessions (REO) increased nearly 4% from the previous month—thanks in part to substantial month-over-month increases in some states such as Nevada (71% increase), Arizona (52% increase) and California (47% increase)—but were still down 24% from December 2009.
Foreclosure filings were reported on 799,064 U.S. properties in the fourth quarter, a 14% decrease from the previous quarter and an 8% decrease from the fourth quarter of 2009. The fourth quarter total was the lowest quarterly total since Q4 2008.
“Total properties receiving foreclosure filings would have easily exceeded 3 million in 2010 had it not been for the fourth quarter drop in foreclosure activity—triggered primarily by the continuing controversy surrounding foreclosure documentation and procedures that prompted many major lenders to temporarily halt some foreclosure proceedings,” said James J. Saccacio, chief executive officer of RealtyTrac. “Even so, 2010 foreclosure activity still hit a record high for our report, and many of the foreclosure proceedings that were stopped in late 2010—which we estimate may be as high as a quarter million—will likely be re-started and add to the numbers in early 2011.”
Nevada, Arizona, Florida post top state foreclosure rates
More than 9% of Nevada housing units (one in 11) received at least one foreclosure filing in 2010, giving it the nation’s highest state foreclosure rate for the fourth consecutive year despite a 5% decrease in foreclosure activity from 2009. Nevada foreclosure activity in December increased 18% from the previous month and was up 14% from December 2009. Fourth quarter foreclosure activity in Nevada decreased nearly 7% from the previous quarter but increased 19% from the fourth quarter of 2009.
Arizona registered the nation’s second highest state foreclosure rate for the second year in a row, with 5.73% of its housing units (one in 17) receiving at least one foreclosure filing in 2010, and Florida registered the nation’s third highest foreclosure rate, with 5.51% of its housing units (one in 18) receiving at least one foreclosure filing during the year.
Other states with 2010 foreclosure rates ranking among the nation’s 10 highest were California (4.08%), Utah (3.44%), Georgia (3.25%), Michigan (3.00%), Idaho (2.98%), Illinois (2.87%), and Colorado (2.51%).
California, Florida, Arizona, Illinois and Michigan account for half of national total
Five states accounted for 51% of the nation’s total foreclosure activity in 2010: California, Florida, Arizona, Illinois and Michigan. Together these five states documented nearly 1.5 million properties receiving a foreclosure filing during the year despite annual decreases in the three states with the most foreclosure activity.
A total of 546,669 California properties received a foreclosure filing in 2010, a decrease of nearly 14% from 2009 but still the largest state total. After hitting a two-year low in November, California foreclosure activity rebounded nearly 15% higher in December but was still down 18% from December 2009.
Florida posted the nation’s second biggest total in 2010, with 485,286 properties receiving a foreclosure filing—a 6% decrease from 2009. Florida foreclosure activity in December hit the lowest monthly level since July 2007, down 22% from the previous month and down nearly 54% from December 2009.
A total of 155,878 Arizona properties received a foreclosure filing in 2010, a 4% decrease from 2009 but the third biggest state total for the third straight year. Arizona foreclosure activity in December jumped nearly 31% higher from a 32-month low in November, but was still down nearly 33% from December 2009.
Illinois posted the fourth biggest state total, with 151,304 properties receiving a foreclosure filing in 2010, and Michigan posted the fifth biggest state total, with 135,874 properties receiving a foreclosure filing during the year. Foreclosure activity in both states increased about 15% from 2009.
Other states with 2010 totals among the 10 biggest in the country were Georgia (130,966), Texas (118,923), Ohio (108,160), Nevada (106,160), and New Jersey (64,808).

Thursday, January 13, 2011

It's That Time Again for New Year Re-resolutions!

Every New Year, millions of Americans resolve to improve their lives. Unfortunately, many of these New Year's resolutions will fall by the wayside and by mid-month, they will have been forgotten. For those vowing to get their finances in order, Eleanor Blayney, CFP, consumer advocate for Certified Financial Planner Board of Standards Inc., has a solution for making sure financial to-do lists get done in 2011: start over and keep it simple.

"The key to keeping financial New Year's resolutions is to apply the principle of 'little and often,'" said Blayney. "Grandiose goals need to be whittled down into goals with specific, actionable steps, and there must be a commitment to updating these new goals frequently." 

According to Blayney, the usual financial resolutions can be given new life as smaller and more attainable "Re-Solutions" for 2011. For example:

• Live within your means: Turn this goal into a reachable action by committing to avoid all overdraft and late fees in 2011. Keeping monthly tabs on current account balances and credit card payment dates is an easy, simple way to avoid these fees. 

• Get out of debt: Breaking this goal into baby steps can change this resolution into a big financial stride forward. Start by paying off more than required on credit cards, auto loans and mortgage – even if it is only a few dollars. Use auto-pay systems to make regular extra payments, and increase the amount of the payments at regular intervals. Once the auto-transfers are set up, the goal will begin to take care of itself. 

• Save more: Here is another resolution that is best accomplished a bit at a time. For working Americans, there is no excuse for not having money to save this year, thanks to a recent tax change. Starting with the first paychecks in 2011, the amount of employee contribution to Social Security will go down by 2%, giving most individuals a slight increase in their take-home pay (at $50,000 annual gross wages, paid every two weeks, it will amount to about $38 per paycheck). Have this money automatically put into a money market account. After a year, the account will have accumulated around $1,000, which can be invested or used as an emergency fund. 

• Prepare a will: This is a perennial "must-do" for many New Year's resolvers, but one that is rarely kept. There seem to be so many "what ifs" that people often feel overwhelmed. By applying the "little and often" rule, this important task can be broken down and completed. First, understand that estate planning is a not a one-time event, but a lifelong process. Wills, trusts and beneficiary designations will need to be reviewed and adjusted to changing life circumstances every few years. Second, when creating an estate plan, forget about the "what ifs," and keep the focus narrow. The only question that needs to be answered is: "If I died today, how should my affairs be handled?"

Tuesday, January 11, 2011

What's Happening in Your Local Market?

December 2010 Market Report for Albuquerque Areas

  • Closed sales for detached single-family homes in the month of December climbed to 505, up 7.68 percent from the previous month.
  • Pending home sales for December show an increase of 13.45 percent from the previous year.
  • The median sale price for single-family detached homes saw a year-over-year increase for the 4th consecutive month. The average sale price for the same homes shows a year-over-year increase for the 6th consecutive month.

Thursday, January 6, 2011

Getting Your Credit in Shape for Today's Tight Lending

Many home buyers now and into the foreseeable future will face tight lending standards and will need to improve their credit score to get prequalified or preapproved for mortgages. Be aware of the following steps you can take for some speedy credit repair to gain lender approval and the best possible rates, especially if you are months away from a purchase:

Credit Card Wisdom
-Paying revolving credit cards down is generally more beneficial than, for example, paying down student loans, mortgage or auto loans.
-Always leave a 30% or higher gap between what you owe on the card and the card’s limit. Lenders look for this minimum gap.
-Use cards with care even if you pay off balances each month because depending upon statement dates, the lender may see big balances.
-Pay down the cards closest to their limits first for speedier credit repair. The lending bank will then see the “gap” it wants to see.
-Do not ask a creditor to lower credit limits. Generally, carrying smaller balances on several cards is better than one large balance on one card.
-Check your credit card limits to make sure the report is correct. Limits may not be reported on all cards.
-Never make a late payment on credit cards or any loan.

Protesting Items
-Protest any unjust negatives, such as late payments, collections that are not yours, and any items not reported as “paid as agreed,” if you paid on time and in full.
-Protest items listed as unpaid that were included in a bankruptcy, and items older than seven years (10 for bankruptcy).
-Focus first on the larger, newer negatives listed on the report.

It is important not to worry about smaller items like incorrect address information or an old employer listed as current. This is, of course, unless there is the possibility of identity theft or the file is mixed with someone else’s.

This is certainly not an all-inclusive list of the steps that can be taken to improve a credit score, but it is a great start to focus on scores before attempting to get preapproved and purchase a home.

Tuesday, January 4, 2011

Where is America Moving? Top Migration Trends Seen in 2010

According to the 2010 Atlas Van Lines Migration Patterns study, more Americans are on the move. In 2010, Atlas saw increases in the number of household moves, a possible sign that the economy is improving. Atlas' annual study has tracked the nation's moves since 1993.

For some states, outbound moves were high. Due to high unemployment, especially with declining manufacturing and automotive jobs, residents of the Rust Belt continue to relocate elsewhere. States adjacent to the Rust Belt saw a great increase in the number of inbound moves.

For the first time in two years, Kentucky joined its surrounding Mideast states—North Carolina, Maryland, and Washington, D.C.—as inbound states. For the fifth year in a row, Washington, D.C. had the highest percentage of inbound moves, while Ohio came out the clear leader in the highest percentage of outbound moves.

Regardless of economic highs and lows, several states have remained constant in status for 10 or more years. California, Kansas and South Carolina have been balanced, Indiana has been outbound, and Alaska and North Carolina have remained inbound. 

As the year progressed, Atlas saw increases in the monthly totals of household moves. Summer months continued to see the highest number of moves per season. Overall, the total for 2010 was 74,541. 

"Every year we look forward to sharing the results of the Atlas migration study; it is a great bellwether for the economic situation of the country," said Jack Griffin, president and COO of Atlas World Group. "The results are especially promising this year, as the number of moves has increased, with monthly numbers higher than last year's."

Here's a closer look at relocation patterns in 2010 as identified in the Atlas study:

Much of the West continues in a balanced state. For the first time in three years, Idaho moves from an outbound state to a balanced state, joining California, Oregon, Washington, Nevada, Montana, Colorado, Utah and Arizona. 

Déjà Vu 
For several states, economic ups and downs have had little influence on the number of residents moving in or out of that state. For ten or more years, six states - California, Alaska, North Carolina, Kansas, South Carolina and Indiana - have remained constant in their inbound, outbound or balanced status in Atlas' annual study. 

Silver Lining
Despite high foreclosure rates and poor housing sales, a large pocket of southeastern states - including Florida, Alabama, Georgia and South Carolina - saw no drastic increase in the number of outbound moves; in fact, they remained balanced in their number of outbound and inbound moves. A reason for the balance could be these states' popularity as a retirement destination. 

For full results of the migration study and to view a map and annual histories for each state, visit

Monday, January 3, 2011

Tips for Saving on Taxes; It's Never Too Early

An extension of the Bush tax cuts gives Americans more options as they do year-end tax planning. Specifically, the bill extended the charitable IRA contribution and state and local sales tax deduction for 2010. Because the tax rates are extended, deferring compensation is an option for taxpayers who have that flexibility. 

The choice of estate tax method is new. The bill extends earlier provisions for energy credits and extends the American Opportunity Credit. Edward Karl, vice president of taxation for the American Institute of Certified Public Accountants, and other members of the AICPA tax staff suggest taxpayers consider the tax saving ideas below to cut their tax bills. 

Top Off Retirement Accounts 
Taxpayers can boost their retirement savings in a tax-efficient manner by contributing up to $5,000 to an Individual Retirement Account or Roth IRA if they are under 50 or $6,000 if they are 50 or older. 

Claim the Saver's Credit 
Lower-income taxpayers should remember to take the Saver's Credit for contributions they made to an employer-sponsored retirement plan, such as a 401(k) plan, or individual retirement vehicles, such as a traditional or Roth IRA. Taxpayers get a credit for up to half of what they contribute, although the maximum credit is $1,000 or $2,000 for couples.

Convert a Traditional IRA to a Roth IRA 
Taxpayers who convert a traditional IRA to a Roth IRA in 2010 do not have to pay the tax due on the conversion in 2010. They can decide in 2011 if they want to defer 50 percent of the income to 2011 and 50 percent to 2012. While taxpayers can delay the payment decision as late as Oct. 15, 2011, they have to pay the tax when their taxes are due in April 2011.

Contribute to Charities Tax Free 
The new law allows taxpayers who are 70½ or older to make contributions to charitable organizations directly from IRAs without paying tax on the amount contributed from the IRA. Taxpayers can make these contributions during January of 2011 and have them apply to their 2010 taxes. Each taxpayer can contribute up to $100,000 for 2010 and 2011. Contributions for 2010 can be made until the due date of the 2010 return, which is April 18 for most taxpayers filing federal tax returns.

Offset Education Costs 
Among the tax rules that taxpayers can use to offset 2010 education costs are the following:

• The American Opportunity Credit offers eligible taxpayers up to $2,500 per student for qualifying 2010 tuition and expenses, including books and computer equipment. The American Opportunity Credit can be used by students for the first four years of post-secondary education expenses. Importantly, taxpayers who pay no taxes may qualify for a refund of up to $1,000. The new tax law extends the American Opportunity Credit through 2012. 

• An "above-the-line" deduction offers eligible taxpayers as much as $2,500 for interest paid on student loans, even if they don't itemize deductions. The new tax law extends this deduction and increases the phase-out range.

• Section 529 college savings plans give parents, grandparents and others a way to contribute after-tax dollars in order to have earnings and interest accumulate free of federal, and in some cases, state taxes. No federal income taxes are paid on withdrawals from the accounts.

Take Tax Credits for Energy-Efficient Home Improvements 
Homeowners who installed certain energy-efficient heating and air conditioning systems, water heaters, doors and windows, insulation and roofs are eligible to receive a credit to help reduce the costs. Taxpayers who did not take advantage of the credit in 2010 have an opportunity to do so in 2011, under the new tax law. A credit is available for homeowners who invest in green energy equipment, too. Such equipment includes solar electric systems, solar hot water heaters, geothermal heat pumps and wind turbines. 

Consider Deducting State and Local Sales Taxes 
Taxpayers can choose to take an itemized deduction for state and local general sales taxes on their 2010 taxes instead of the itemized deduction for state and local income taxes. 

Taking a deduction for sales taxes can mean a lower tax bill for taxpayers who make such a major purchase as a motor vehicle during the year or who live in states that do not have an income tax. The new tax law extends this option through 2011.

Choose Best Estate Tax Method 
Taxpayers, who inherited property in 2010 when no estate tax applies, get nine months under the new tax law to choose whether to use the new estate tax rules (35 percent top rate and $5 million exemption) or no estate tax with the estate's assets generally being subject to the carryover basis rules. Carryover basis rules result in a transfer of the decedent's adjusted basis (typically, the owner's original purchase price) to the beneficiaries. Historically, the basis of an estate’s assets have been established using stepped-up basis rules, which consider basis to be the fair market value of the assets at the time of the owner's death. 

Defer Compensation 
Since tax rates will remain at current levels for the next two years, taxpayers may want to consider deferring payments into 2011 from such compensation sources as pensions, retirement plans and stock options.