Help Coming in March for Underwater Homeowners

A long-awaited federal program will soon allow more Phoenix-area homeowners to refinance their mortgages and lower their payments in spite of owing far more than their homes are now worth.
The expansion of the Home Affordable Refinancing Plan will allow for new home loans in March, according to new details from the U.S. Department of Housing and Urban Development, and homeowners are already lining up to apply.

President Barack Obama announced the plan in October, and borrowers have awaited the details since.The program targets homeowners who bought during the housing boom and have been unable to refinance up until now because their homes are no longer worth enough to secure a new mortgage through traditional refinancing.

An earlier version of HARP allowed homeowners with mortgages backed by two federal loan agencies to refinance, but only if their new loans were no more than 125 percent of their home's current value. In metro Phoenix, where values have plunged by more than half since the market's peak in 2006, that limit left many borrowers out.

The update to the program, which lenders refer to as HARP 2.0, lifts that loan-to-value restriction completely.The goal is to help homeowner save money and fend off foreclosures by lowering payments.

For a typical $250,000 mortgage, a switch from a 6 percent rate to current rates of about 4 percent would cut the monthly payment by about $300.

Matt Oliver of Peoria-based Lund Mortgage said despite the delay, some bigger banks have already refinanced borrowers deeply underwater and are now holding the loans, waiting to turn them over to the federal mortgage agencies Fannie Mae and Freddie Mac.

Albert Hasson was able to get his bank, Flagstar, to approve a refinance on his Phoenix-area home in late December even though the refinancing program was stalled at the time."The expanded HARP program is only semistalled," Hasson said.  He said other homeowners should call their servicers now to see if they can be approved early.

To qualify
The expanded refinancing program is available only to those with mortgages backed by Fannie Mae and Freddie Mac, but the two entities back more than half of all mortgages.

Eligible homeowners can have missed only one payment in the past year and must still bring in enough monthly income to afford their lower payment.

Some borrowers will be required to show proof they have the income to pay the lower mortgage payments, but the guidelines aren't clear on who will be required to do this.

HUD Secretary Shaun Donovan told The Arizona Republic in October that part of the goal of expanding the refinancing program is to reward homeowners who have continued to pay their mortgages despite huge drops in their home's values and potentially prevent more homeowners from walking away. Estimates show nearly half of Arizona's mortgage holders are underwater.

The previous HARP plan, which allowed homeowners to refinance if their loan-to-value ratio was 125 percent or lower, had the same intent. But it helped few metro Phoenix homeowners because home values in the region have plummeted 60 percent during the crash.

While the program will be expanded, some borrowers aren't eligible.  Kim Baker has been in her Phoenix home for more than five years and owes at least 40 percent more on her mortgage than what her house is worth. She can't refinance to reduce her 6.5 percent interest rate because her loan isn't backed by Fannie or Freddie. She wants the federal government to give lenders an incentive to help homeowners like her, too."Otherwise, we're stuck," she said. "Can't sell, can't re-fi, can't lower our payment, can't move to a cheaper house down the street. We didn't want to walk away or foreclose. So we keep paying every month hoping the economy turns around and maybe in several years we'll break even."

New guidelines

Much of the delay introducing the expanded refinancing program has been because of slow negotiations with lenders, and it is still not clear if the nation's biggest banks will participate, market watchers say.

The government struggled to get big lenders to cooperate with another program, a loan-modification plan that would reduce payments for struggling homeowners.

It's likely to take lenders a few months to implement the expanded refinancing program, so it may not be clear until summer whether the program will be more successful.

Government officials say it has taken longer than expected to work out details with lenders on the expanded refinancing plan. The federal government has several hurdles to overcome with lenders and the mortgage market to make the new program work.

Currently, most loans are bundled together as securities and resold to investors, who make money off homeowner interest payments.But the market doesn't currently deal with loans that are intentionally issued on homes that are worth less than the amount of the loan. It's not clear yet whether the federal government will create new securities to sell to investors or add a portfolio to hold the loans in.

The federal government also has to negotiate with lenders holding second mortgages on a home so they won't stall or stop the new refinancing program. Under the program, those lenders can get a small settlement when the loan is refinanced.

The expanded HARP program also now is open to investor-owned properties.

Homeowners can check to see if their loan is backed by Fannie or Freddie at www.makinghomeaffordable.gov.

Jay Luber, president of Galaxy Lending, said it appears the new HARP will reduce rates, fees and the terms of a loan, ultimately providing a more affordable and less risky mortgage.

Source: azcentral.com

Turning Foreclosures in Rentals

Federal officials hope to launch a pilot program in early 2012 to convert government-owned foreclosures into rental properties.

The program, which was cited by Federal Reserve Chairman Ben Bernanke last week as one way to address the housing crisis, would sell foreclosed homes now owned by Fannie Mae and Freddie Mac to investors in bulk. The properties would then be converted into rentals.

The initiative began back in August, when the Federal Housing Finance Agency, the Treasury Department and the U.S. Department of Housing and Urban Development announced they were seeking suggestions on ways to dispose of repossessed homes now owned by Fannie Mae, Freddie Mac and the Federal Housing Administration.

In addition to getting the properties off the government's books, officials are hoping putting the homes back into productive use will stabilize neighborhoods and housing values. Also, it is looking to expand the supply of rentals, which are increasingly in demand.

The agency is not releasing details on how the rental program would work, instead saying it is "proceeding prudently but with a sense of urgency to lay the groundwork for the development of good initial transactions in early 2012."

Administration officials said they are continuing to work with the agency to develop the program.

Housing, stocks, gold and oil: Hot or not in 2012?

Until now, most foreclosed homes have been sold individually because investors have demanded bigger discounts to buy large numbers of properties.

But federal officials are warily eyeing the expected surge in foreclosures as banks ramp up their action against delinquent homeowners. The process had been stalled since late 2010 when banks' shoddy paperwork practices came to light.

He urged lawmakers to ramp up their efforts to fix the housing market, placing particular emphasis on the problem of vacant homes on the market.

"Restoring the health of the housing market is a necessary part of a broader strategy for economic recovery," he said.

Bernanke's comments launched a full-court press by Federal Reserve officials last week to raise awareness of the continuing problems plaguing the housing market.

His proposals were quickly followed by Fed Governors Sarah Bloom Raskin, who spoke on ramping up enforcement of mortgage servicers, and Elizabeth Duke, who said Fannie Mae and Freddie Mac could do more to help heal the housing market.

Meanwhile, New York Fed President William Dudley gave a speech that touched on a wide range of housing policies -- including principal reduction and mortgage refinancing -- that he believes will boost the economy.

The Fed has already tried to boost real estate sales by pushing mortgage rates down to record lows through massive bond-buying programs.

But the renewed push for housing help indicates that the Fed, which has basically run out of monetary policy ammunition to revive the real estate market, is urging the federal government to ramp up its efforts.

11 Must-Knows About Early Mortgage Pay-off

Q: Will I save money if I make my regular monthly payment early?

Q: How do I know if my mortgage is "simple interest"?

A: Your note will say that interest accrues daily. Also, the monthly payment on a SIM varies month to month, so if your payment is always the same, you do not have a SIM.

Article continues below

Q: What is the best time of the month to make an extra payment?

A: If you include it with your regular payment and pay before the grace period, the extra payment will be applied to the current balance. If you make the extra payment after the grace period, it might be applied to the current balance, or it might not be credited until the following month, depending on the systems/policies of the servicer. You should find out where the servicer's cutoff is for receiving credit in the current month.

Q: If I make a large extra payment, will my future scheduled payments be lower?

A: On a fixed-rate mortgage, the scheduled payment is not affected by the extra payment. You just pay down the balance faster. On an adjustable-rate mortgage, the scheduled payment remains the same until the next rate adjustment. At that point, the payment is recalculated based on the reduced balance, the new rate and the original term. So unless it is offset by a rate increase, the payment will drop.

Q: Would I be better off investing excess funds rather than paying down the loan balance?

A: Not very likely. Paying down the loan balance is an investment carrying a yield equal to the mortgage rate, with no default risk. There are no riskless investments today that pay a yield that even comes close.

Q: Would this apply to a high-tax-bracket borrower who deducts mortgage interest payments?

A: Yes, what matters is the after-tax yield on the mortgage repayment relative to other investments, and the tax-rate adjustment affects them equally.

Q: Isn't it better to make extra payments in the early years of a mortgage when the regular payment goes largely to interest than in later years when most of it goes to principal?

A: No, the return on investment is not affected by where the mortgage is in its life cycle. While the allocation of scheduled payments between principal and interest changes over the life of the mortgage, extra payments go entirely to principal, no matter what stage of its life cycle the mortgage is in.

Q: Is there a way to escape a prepayment penalty clause?

A: No, the clause is there to protect the lender, or the ultimate investor if the loan was sold, which it probably was. Investors pay extra for the protection. I have never heard of a case where a prepayment penalty clause was voluntarily waived.

Q: Should seniors close to retirement pay off their mortgage?

A: It is a prudent move if they have the assets to do it, because the rate they are paying on their mortgage is higher than the return they can earn on assets having a high degree of safety. Paying off their mortgage also clears the way for a reverse mortgage in the future, should the need for additional income arise.

Q: If I have two mortgages, which do I pay down first?

A: In general, pay down the mortgage carrying the higher rate. However, if that mortgage is fixed-rate while the lower-rate mortgage is adjustable-rate, the decision must consider the possibility that the rate on the adjustable will increase in the future.

Q: Is a biweekly payment mortgage a painless way to pay it off sooner?

A: Making half the monthly payment every two weeks is not painless, because it requires an extra monthly payment every year, and the lender will charge you for the privilege. An alternative approach that is equally effective, and which is entirely within your control, is to increase your scheduled monthly payment by 1/12 of the payment.

Nishu Sood, director of Wall Street's Deutsche Bank Securities, used the term "revulsion" to describe the current phase of metro Phoenix's housing market.

"Revulsion," as in many people are averse to the very product that got the nation in trouble in the first place.

Sood was the lead speaker at the Scottsdale-based Land Advisors' third annual housing forecast for the Phoenix area, presented to a group of the region's top real-estate executives.

He was quick to point out that revulsion was the last phase in the "bubble" cycle before recovery for the region's housing market.

He said if Land Advisors would have asked him to speak about Phoenix's housing market in the years between 2006-10, everyone attending would have needed a shot of bourbon to make it through his negative evaluations and projections.

This week, Sood said he felt more positive about Phoenix's housing market and its oncoming recovery than he did about many other parts of the country.

That's something that made the executive sitting next to me smile with relief. This is the same man who brought in a Corona at the start of the 3 p.m conference because he thought he would need it to get through another negative forecast.

Sood's evolution of the housing bubble includes these cycles:

A change in the mortgage business and upgrades in technology during the 1990s made it easier to make and obtain loans.

In 2002, home prices started to climb, though most people were more concerned about dot.com stocks.

By 2004, housing euphoria had begun, and home prices were soaring.

Then, in 2005-06, came the explosion of the housing market. One later speaker said that's when "anyone who could fog a mirror with their breath could get a mortgage to buy a home."

In 2007-08, the painful market reversal hit. Some had expected it, but few were prepared for its carnage.

The financial crisis followed in 2008-09. It continues to shake the world.

And the current situation: revulsion. Sood said many people now are distrustful and averse to housing.

But, he said, the next and, one hopes, the last phase of housing bubble will be the recovery.

Speakers also included Land Advisors CEO Greg Vogel, Avatar Properties President Carl Mulac, Cromford Report founder and analyst Mike Orr, and the CEO of homebuilder Taylor Morrison, Sheryl Palmer.

None of them believes full recovery will come in 2012. But most agree it could start next year and be in full swing by 2014

US Announces Help for Underwater Homeowners

The Federal Housing Finance Agency, which oversees mortgage finance sources Fannie Mae and Freddie Mac, said it was easing the terms of the two-year-old Home Affordable Refinance Program, which helps borrowers who have been making mortgage payments on time but have not been able to refinance as home values have dropped.

To help underwater borrowers, or those whose loans are worth more than their homes, FHFA said it will scrap a cap that prohibits any homeowners whose mortgage exceeds 125 percent of the property's value from participating in HARP, which is targeted at loans backed by Fannie Mae and Freddie Mac.

"Our goal in pursuing these changes is to create refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets," FHFA's acting director, Edward DeMarco, said in a statement.

After meeting with DeMarco earlier this month, one lawmaker said the expanded program could help as many as 600,000 to one million borrowers. But that is only a fraction of the estimated 11 million homeowners who are underwater.

President Barack Obama is expected to promote the initiative during a speech Monday in Las Vegas. Obama will also use the trip to raise money for his re-election campaign.

But even the White House is uncertain about how many homeowners it could help. White House economist Gene Sperling said Monday it was too early to project how many struggling borrowers would "benefit from the changes announced today or could be announced in the future."

The New York Times reported Monday that the initiative was part of a program the president would be rolling out to address the nation's economic woes in the face of congressional Republicans' reluctance to pass his jobs plan.

It is the latest White House effort to deal with a key factor stalling the economy -- a crippled housing market -- and adding to political liabilities for Obama, whose re-election bid is already imperiled by stubbornly high U.S. unemployment.

It remained unclear whether the Obama administration's revised approach, which falls short of an overarching plan that some experts have said is needed, will provide enough of a boost to the battered housing market to spur the stagnant U.S. economic recovery.

Earlier federal programs to curb housing foreclosures have failed to yield the benefits initially promised.

To encourage banks to participate in the program, FHFA is revamping it to protect lenders from having to buy back HARP loans if underwriting problems are later found. Banks will only have to verify that borrowers have made at least six of their last mortgage payments and the new rules eliminate the need for appraisals in most cases.

FHFA said government-controlled Fannie Mae and Freddie Mac will waive certain fees for borrowers that refinance into loans with a shorter term, such as 15 years, aiming to spur homeowners to pay down the amount they owe at a faster rate.

HARP, one of the Obama administration's anti-foreclosure efforts, was unveiled in March 2009 and was expected to help as many as 5 million borrowers. So far, however, only about 894,000 borrowers have refinanced their loans through the program.

FHFA said it will extend the effort until Dec. 31, 2013. The program is limited to loans that Fannie Mae and Freddie Mac guaranteed before June 2009.

The Federal Reserve weighed in on what to do about housing Monday, too. A top Fed official said the nation's central bank could do more to drive interest rates lower to help housing, Rueters reported. The remarks by New York Fed president William Dudley marked the second time in a week that a Fed policy maker highlighted the possibility that the U.S. central bank could do more to support the housing market. 

Investors See Bigger Profits from Rising Rents

Rental demand and prices continue to soar, and investors are cashing in. Rents are rising at a 5.17 percent annual rate — up from last year’s 4.72 percent rate. If rents continue to grow at their current pace, they won’t be too far behind the record-high reached in 2000 of 6.18 percent, according to Axiometrics Inc.

The rental market has added about 1.4 million new renters this year, some of whom were former home owners who faced foreclosure or a short sale. Renters are increasingly showing an appetite for single-family homes owned by investors. 

As such, the number of investors in the market is growing. Investors make up anywhere between 20 and 40 percent of monthly existing home sales, according to home-sale data. With home prices and interest rates low, more aspiring investors are jumping in. Nearly 60 percent of investors in a recent survey by Realtor.com considered themselves newcomers to real estate investing. 

Agency Encourages Short Sales by Offering Money

The state agency is offering homeowners $4,500 and to pay their 3 percent closing costs if they work with their lender to complete a short sale instead of losing their home to foreclosure. But, of course, like the principal-reduction loan modifications the Housing Department has been trying to use the money for, it's all up to the lenders whether the deals go through.

The Arizona Housing Department's annual 2011 housing forum starts today at the Talking Stick Resort in Scottsdale. The conference draws housing advocates, counselors, builders, lenders and government officials from not only Arizona but other states and Washington, D.C. The purpose of the meeting is to discuss the tough issues facing housing. Of course, now there are many, including a growing number of homeless people in Arizona.

Housing Director Michael Trailor said the state agency will start taking applications for the short-sale program today. Go to housingaz.com to apply. It's the same site that is taking applications for the principal-reduction loan-modification program and unemployment mortgage aid, both of which also are being funded by federal money from the Hardest Hit Housing program.

The Arizona housing agency has been able to persuade lenders only to match their principal reductions to modify six loans, so far. The program was launched a year ago, and Trailor said as many as 30,000 Arizona homeowners should qualify.

He said the miserable results, because of lender's reluctance to cut principal and Fannie Mae and Freddie Mac's policy not to reduce loan amounts, have been a frustrating and time-wasting effort for his agency during the past year.

So, to try to spend some of the money to help homeowners, the agency received approval from the U.S. Treasury Department to start the short-sale program.

The Housing Department is also expanding its program to cover mortgage payments for more unemployed and underemployed homeowners who are eligible.

"We want to spend this money to help homeowners, but we need lenders' help," Trailor said. "Anyone who thinks they are eligible should immediately apply at our website."

Statewide MLS?

An agreement for the Arizona Association of Realtors and its member groups to buy the Arizona Regional Multiple Listing Service, or ARMLS, is on hold. The deal would have given Arizona the largest statewide MLS in the country. But after a year of research and surveys to members to see how it could work, the Southeast Valley Realtors Association voted against it.

Six Mistakes Housing Investors Make

Investors used to aim for rents that were 1% of the purchase price, or $1,000 a month for a $100,000 home—an annual gross return of 12%—says Michael McCreary. His firm, McCreary Realty, manages about 300 properties in the Atlanta area. Today, he says, some of his investors are getting as much as 2% of the purchase price.

In general, though, average returns after expenses are far less, more like 5% to 6% of the property value, says Ingo Winzer, president of Local Market Monitor, a real-estate forecasting firm. But that still is well above what many other investments yield.

Before you start scouring for deals, keep in mind that owning rental properties is time-consuming, expensive and fraught with challenges, and many investors lose money. You will want to avoid falling into one of these common traps.

• Mistake 1: Confusing a cheap deal for a good deal.

It is true that you can buy some homes for ridiculously low prices—but that doesn't mean you can rent them out. Homes in deserted subdivisions aren't any more appealing to renters than they are to buyers. The same is true for less-attractive properties or those in less-desirable school districts.

Knowing the potential rent isn't enough. Before you buy a property, you should also factor in closing costs of 3% to 6%, the costs to fix up the place and maintain it, and your holding costs. Then add the profit you expect to make (and more closing costs, if you intend to turn around and sell it). Only then can you figure out what you can afford to pay.

• Mistake 3: Forgetting that time is money.

In real estate, "time is your biggest enemy," says David Hicks, co-president of HomeVestors of America, a franchiser whose motto is "We Buy Ugly Houses." You lose money when your property is empty, whether you are painting it or between tenants. You also lose if you buy in the fall and can't replace the roof until spring. You may be better off accepting a lower rent than waiting for a higher-paying tenant.

• Mistake 4: Assuming you will sit back and watch the rent roll in.

"When you become a landlord, you become a rent collector," says Mark Kreditor of Get There First Realty, which manages 1,600 rentals in the Dallas-Fort Worth area.

Just like homeowners who can't pay the mortgage, tenants lose their jobs and stop paying the rent. Evicting them can take several weeks, and some steal appliances or other property. Mr. Kreditor says that once or twice a month, a tenant removes a home's copper tubing on the way out the door to sell the copper for its meltdown value.

You will need to screen prospective tenants carefully—or pay someone to do it for you.

• Mistake 5: Underestimating repair costs.

As with all homes, you will be making lots of repairs. You may find wood rot or mold when you remove that cracked bathtub. Carpet in rental homes typically must be replaced every five years, and you may have to repaint after every tenant. Tony A. Drost, president of the National Association of Residential Property Managers, or Narpm, suggests setting aside six months of expenses so that you will have funds if a major repair is needed.

• Mistake 6: Assuming that owning a rental is the same as owning a home.

You might put up with flaws in a home that a renter wouldn't tolerate. In addition, many states and communities have strict (and complex) laws for landlords, even if you own only one property. A property manager can handle most of the headaches, but you should expect to pay one up to a month of rent for finding and screening tenants—and up to 10% of the monthly rent for management fees.

You can find property managers through the websites of trade groups Narpm and the Institute of Real Estate Management. In addition, many communities have local Real Estate Investor Associations, which can provide support.

Phoenix Real Estate Market Starting to Stage a Comeback

The event drew a crowd of more than 170 participants and was held Wednesday at the Camelback Inn.

ARMLS CEO Bob Bemis said he wanted to combine the expertise of both the commercial and residential communities so that everyone could get a better picture of what truly is going on across the real estate spectrum.

“The residential and commercial people don’t talk as much as they should,” Bemis said.

Michael Orr, creator of the Cromford Report that includes in-depth local residential research, said he’s not sure the market will return to normal as we know it. He’s only willing to place a few bets on the next three or four months, which look modestly positive for home sales except when it comes to prices.

“They’re definitely not going up, but they’re not going down either,” Orr said.

Don’t get too excited, he said. Prices are not going to turn around quickly, but they could next year.

Foreclosures are dropping rapidly and are at the lowest level since September 2007. Short sales, he said, will be the largest part of the sales market for the time being.

“We’ve already been through the worst,” he said.

Scott Golba, who owns a property management firm and is an expert on residential rentals, was practically jubilant.

Secrets to Getting a Mortgage with So-So Credit

Getting a mortgage can be tough these days -- even people with near-perfect credit have been rejected for loans. But for some lucky borrowers, things aren't as bad as the doom-and-gloom crowd says.

At a recent press conference, Federal Reserve Chairman Ben Bernanke said lending standards for mortgages have tightened so considerably that "the bottom third of people who might have qualified for a prime mortgage in terms of, say, FICO scores a few years ago -- cannot qualify today."

Indeed, roughly one-in-four mortgage applicants was denied in 2010, up from about 18% in 2003, according to data from the Federal Financial Institutions Examination Council. And those are just the ones that apply -- many discouraged potential borrowers don't even bother to apply anymore.

Yet, there is money to lend. Bob Ryan, the acting commissioner for the U.S. Department of Housing and Urban Development, or HUD, recently said that mortgage money "is flowing, it's stable, it's tightened from the boom years, but it's there."

And many of those potential home buyers sitting on the sidelines may just have a shot at it -- as long as they take a few crucial steps.

"The belief is that you can't get a mortgage at all -- but you can," Keith Gumbinger, of the mortgage information provider HSH Associates.

Most of the major mortgage underwriters have only returned to the more prudent standards of the days before the housing bubble. Now, according to Tuck Bradford, a branch manager with lender Mortgage Master, borrowers usually must meet four criteria in order to get a mortgage backed by Fannie Mae or Freddie Mac, the two government-run mortgage giants:

• The ability to make a 20% down payment, plus closing costs.
• A good credit score. Borrowers usually need a minimum credit score of 620.
• Enough income to afford payments. The general rule of thumb: no more than 28% of your gross income should go toward housing costs.
• A loan-to-value ratio of 80%. Lenders want the home value to far exceed the mortgage balance because if a borrower defaults, the bank sells the home to recoup the loss.

In today's market, however, even having all four of these factors in place doesn't always guarantee that you will get a loan.

Steve Habetz, a loan officer in Westport, Conn. had a client who was seeking to refinance but he had a single blemish scarring an otherwise spotless credit report. The client had a couple million dollars in assets, high income, ample home equity -- and a strong credit score of 700.

"This guy was a Boy Scout when it came to paying debts," said Habetz. "He had never been late."

Yet, Habetz couldn't get him a mortgage. The problem: an investment property the client had owned and tried to unload but couldn't (thanks to the housing bust). He eventually resorted to a short sale -- a deal in which the proceeds of the sale are insufficient to pay the amount owed on the mortgage and the bank agrees to forgive the losses.

Not only did the short sale lop 100 points or so off his credit score, but it also resulted in an automatic rejection of his refinance application.

"It's maddening," said Habetz. "Other than that one detail, he's very low risk. Because he had the short sale, he's out of the box for two years."

But, for every client like Habertz's who gets rejected, there are those who have been much luckier at landing mortgage loans. And typically, they have turned to the Federal Housing Administration for help.

"The FHA is just about as free and easy as it was in the go-go days," said Gumbinger.

Squatter Nation: 5 years without a mortgage payment

Standards for these loans, insured by the FHA and issued by regular mortgage lenders, are flexible and aimed at making mortgage borrowing easier, especially for working-class Americans.

For years, the FHA had no minimum credit score requirement at all. Now though, it requires a minimum of 580 to qualify for a 3.5%-down loan and 500 for a 10%-down mortgage.

In practice, however, some banks will impose higher standards, according to Scott Sheldon, a loan officer with First California Mortgage in Sonoma County, Calif.

"We FHA lenders have to protect ourselves and we've been going with a 640 minimum for a 3.5% mortgage," he said.

Sheldon had one client who seemed like an impossible case. The client was buying a home in Healdsburg, California, the heart of Sonoma's wine country. His credit score was just over 600, he was paying alimony and child support and he only had enough money for a small down payment. And there was one additional tiny problem: He had just emerged from bankruptcy in April 2009.

In other ways, he was low-risk borrower. He grossed $10,000 a month, ample enough to satisfy debt-to-income guidelines on the $315,000 home he was buying, and he was able to document a stable work history.

The client knew he had to raise his credit score above the 600 level in order to improve his chances. So he paid a credit repair service, Lexington Law, about $500 to find and correct errors in his records. That helped boost his score above 640.

How foreclosure impacts your credit scoreThe client got the loan and closed on a home a couple weeks ago. The bankruptcy made it tough -- but not impossible.As Melanie Roussell, a spokeswoman for the FHA explained, the agency is willing to overlook a blemish on a credit report -- even a big one -- if other factors are favorable. In today's unforgiving housing market, that's music to a borrower's ears.

Affordability Reaches Highest Level in 20 Years

Homes are more affordable to more families, according to the latest index for the first quarter of 2011 that shows affordability reaching its highest level in more than 20 years.

Nearly 75 percent of all new and existing homes sold in the first quarter of 2011 were affordable to families earning the national median income of $64,400, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index. The previous high was set in the fourth quarter of 2010 with 73.9 percent.

"With interest rates remaining at historically low levels, today's report indicates that home ownership is within reach of more households than it has been for more than two decades," says Bob Nielsen, chairman of the National Association of Home Builders.

The most affordable metro housing market in the nation? Syracuse, N.Y., in which 94.5 percent of all homes sold were affordable to households earning the area's median family income of $64,300.

Other metro cities ranking high on the affordability index were Youngstown-Warren-Boardman, Ohio-Pa.; Indianapolis-Carmel, Ind.; Warren-Troy-Farmington Hills, Mich.; and Toledo, Ohio.

Meanwhile, the least affordable major housing market for the first quarter of 2011 was New York-White Plains-Wayne, N.Y.-N.J.

Source: Realtormag.com

8 Factors that Devalue a Good Home

If you're considering selling your home, there are a number of factors you should consider regarding the resale value of your property. Some of these issues may devalue your home or scare some potential buyers away entirely, even if your home is an otherwise outstanding property.

Consider these eight factors when listing your home:

1. Location, location, location
Many real estate television shows repeat this phrase over and over. Buying a home in an area that provides residents with access to services and effective transportation is important — though many buyers don't wish to live too close to airports and busy roads for fear of noise.

Visual appeal is another concern. Cell phone towers and power lines can be seen as eyesores — or possibly even having potential health hazards. Local school closures can also deter potential buyers who have children or who are considering having children in the near future. Some buyers may be leery of purchasing homes that are on flood plains.

To ensure maximum resale potential, consider how many of these types of issues exist near the properties you're considering. Remember, though, there's no way of knowing exactly how a neighborhood will evolve over time.

2. Good renovations gone bad
If your home looks like a DIY nightmare, this can definitely devalue your home. Though putting money into renovations generally increases the value of a home, poorly done renovations can have the opposite effect. If buyers feel that the renovations will have to be redone, there's a good chance they'll make a lower offer or keep looking for a move-in ready home.

3. Overly creative customization
That bright pink feature wall might have seemed like a good idea at the time, but the truth is that unusual paint choices — both inside and outside the home — can turn buyers off, even if your customization is the cutting edge trend in current home design magazines. Customizing spaces so that they may not be functional to future buyers, like turning the garage into a home gym or a granny apartment, might make some buyers reluctant to buy your property.

The same can be said for unique landscaping choices or renovations that are too high scale for the house. A professional chef's kitchen or marble bathrooms in a modest home suited to first-time buyers won't likely provide a good return-on-investment.

4. Unappealing curb appeal
The first thing potential buyers will see is the exterior of the property. If the house appears to be outdated or in poor repair on the outside, people will assume it is the same for the inside. Water features or swimming pools and overly landscaped green space may turn off some buyers since people tend to associate high maintenance yards with expensive upkeep and unnecessary headaches. Old fences and sheds can also devalue your home, especially if they look like they're in dire need of replacement. Keep the gardens weeded and the lawn mowed so that potential buyers can see how nice the property is, inside and out.

5. Pets gone wild
Many people won't mind buying a home that has had resident animals, but no one wants to live with constant reminders of former owners' pets. Damage to carpets, walls or a strong smell of animals will put off some buyers — especially those with allergies. Consider letting your pets live elsewhere while the property is for sale. Also, a good cleaning and repairing of any visible damage will help to mitigate the potential devaluation of your home associated with pet ownership.

7. Sinister reputation
Well-known crimes, deaths or even urban legends associated with your house or neighborhood can decrease the value of a home immensely. Most people don't want to live in a home where they feel that something awful has happened, much less move in with your alleged resident ghost! Though these kinds of issues may be out of your control, they may certainly have an impact on the resale value of your home.

8. Frightful Foreclosures
Many buyers are leery of purchasing foreclosures that are being sold on an "as-is" basis. The fear is that the home could be a money pit or require a huge amount of repairs before being move-in ready. Some good homes may be available through foreclosures, but it's important to do your research, ask lots of questions and don't be afraid to bargain. It's also crucial that you get a home inspection so that you know exactly what you're getting into. There's a good chance that some work will be required when buying a foreclosure, but you may get great value for your money if you're willing to put in a little work.

The bottom line
Neighborhoods change over time, so there's no way to be totally sure when you buy a property how the area will look in the years to come. However, you should always make your best efforts to address any issues with your property that are within your control. Play up your home's strong points and get involved with your real-estate agent to ensure that any special features of your home and neighborhood have been highlighted.

Rising Home Sales Point to Recovery

Existing home sales rose 3.7% from February to a seasonally adjusted annual rate of 5.1 million, the National Association of Realtors reported Wednesday. That marked the sixth monthly rise for existing home sales in the past eight months. "We're clearly on a recovery path," says Lawrence Yun, NAR chief economist.

Yet median prices in March dropped 5.9% from March 2010 to $159,600. Distressed homes accounted for 40% of sales, up from 35% a year ago, the NAR says. Distressed homes, such as those in foreclosure, typically sell at a 20% discount and pull down market prices.

"At this point, we're likely to see a steady improvement in sales," says economist Joel Naroff of Naroff Economic Advisors. But prices will continue to come under pressure because of so many distressed homes. Many economists expect U.S. home prices to fall 5% to 7% this year. Some economists predict steeper declines.

For now, investors are driving much of the increase in existing home sales. They're snapping up distressed homes, fixing them up and selling them for a slight profit, or turning them into rentals, says Patrick Newport, economist at IHS Global Insight.  Investors accounted for 22% of sales activity in March, the NAR says, up from 19% a year ago. Thirty-five percent of March sales were all-cash deals, a record.

Investors are seizing on low prices and strong rental demand, says Paul Dales, U.S. economist at Capital Economics. Rents have edged up in recent months after staying fairly stable for two years, he says. There are also more renters after millions of people lost homes to foreclosure.

There are signs that non-investor buyers are getting more active. Applications for mortgages to buy homes, according to the Mortgage Bankers Association's Purchases index, have risen 10% over a seven-week period, Newport says.

"This pickup in demand should show up in improved existing home sales in April and May, unless lending conditions tighten," he says.

Tight credit is already restraining demand, Yun says. The NAR says the average credit score for loans bought by government-backed mortgage giants Freddie Mac and Fannie Mae is now about 760, up from 720 in 2007.

High unemployment and underwater mortgages are also hurting demand. Almost 25% of homeowners with a mortgage owe more than their homes are worth. "This means many households that want to move can't," Dales says.

Home sales may rise this year, but "a meaningful recovery is a few years away," he says.

Source: USAToday.com

Phoenix Among 11 Comeback Cities

Rental Houses Heading Up in Price

In this depressed housing market, not everyone is losing money. Many landlords are finding the rental market for houses is a great place to make money.

It's a classic example of supply and demand. As more and more families lose their homes to short sale and foreclosure, they have to go somewhere. With the high demand, landlords are raising rent.

In the Valley, 55 percent of houses for sale are considered distressed properties, meaning a shortsale or foreclosure. Those previous homeowners are shut out of the buyer pool for the next three to five years, which means they need for a house to rent. That's great news for landlords.

Realtor Shar Rundio says 75 percent of the calls to her office are not from those looking to buy or sell but from families desperately needing somewhere to live.

Take, for example, a newly listed rental property in Gilbert.

"We listed a pretty basic three bedroom, two bath house," Rundio said. "As soon as the property hit the market, we saw an enormous amount of activity, probably 50 calls and five applications within the week, and some of those people hadn't even seen the property."

What's even more surprising: Some of those rental applications are offering more than the asking price. It sounds like the Valley housing market during the boom of 2005.

"We're seeing that if properties are priced well, about $1200 a month is kind of the hot number, they're moving very quickly," Rundio said.

Nationwide, experts say 2010 was the best in 15 years for landlords. Many people are still skittish about buying and are waiting out the roller coaster market.

"They're being less picky on what's important in a rental property," Rundio said. "They're trying to stay in a school district, and they're trying to find something to work for their family for the time being."

Experts are advising renters to sign a lease as long as possible to lock in current prices. Rates are up 5 percent over last year, and with this demand, they expect rental rates to keep going up.

Source: kpho.com

White House Plans to Revamp Mortgage Market

More than two years after the government seized Fannie Mae and Freddie Mac, the Obama administration will recommend phasing out the housing-finance giants and gradually reducing the government's footprint in the mortgage market, according to people familiar with the matter.

The administration is expected to include three options for a post-Fannie and Freddie world when it releases a long-awaited proposal for the future of the nation's $10.6 trillion mortgage market, which could come as soon as Friday. Together with federal agencies, Fannie and Freddie have accounted for nine of 10 new loan originations in the past year.

The White House's "white paper" will begin what promises to be a prolonged and fiery debate about the future of how homes are financed across the U.S. Any wind-down of Fannie and Freddie would happen gradually to avoid roiling markets, and the central, unanswered question is what kind of federal function, if any, the administration and Congress will invent to take their place.

Steps to reduce the government role in the mortgage market likely would raise borrowing costs for home buyers, adding pressure on the still-fragile U.S. housing markets. Consequently, analysts believe any transition could take years and would be driven by the pace of the housing market's recovery.

The fight over how to restructure the housing-finance system has roiled Washington, and yet both parties have been hesitant to propose detailed legislation.

For conservatives, Fannie and Freddie played a starring role in the financial crisis, and any solution that is viewed as replicating their function could face fierce opposition from some Republicans. But more moderate Republicans may resist such an approach and could join Democrats who have said a federal role is necessary to ensure broad access to home ownership.

While advancing one detailed plan risks providing fodder for partisan battles, offering multiple proposals may help the administration force those views into the open, said Michael Barr, a former assistant Treasury secretary in the Obama administration.

"If you focus on the steps everybody agrees on—here are the 10 things you've got to do—that gives people a chance to unite behind a set of steps," he said. A list of options he added, has the benefit of forcing Republicans "to come up with their own plan, and make their own mistakes."

The administration's proposal to Congress is likely to assess the merits and drawbacks of each of the three options. The most conservative would propose no government role in the mortgage market beyond existing federal agencies, such as the Federal Housing Administration.

The two others would create a way for the government to backstop part of the secondary mortgage market, a role long- filled by Fannie and Freddie. Under one, that government backstop would kick in primarily during periods of market stress; under the other, the government would play a role at all times.

For 40 years, the housing-finance system has featured a blend of public and private entities. Fannie and Freddie buy mortgages from banks and other originators, repackage them for sale as securities and make investors whole when borrowers default. Investors long assumed the two shareholder-owned firms had an implied federal guarantee, which let them borrow at below-market rates and facilitate 30-year fixed-rate loans.

As the recent housing bubble inflated, Fannie and Freddie joined private lenders in loosening standards. Mounting defaults wiped out the pair's razor-thin capital reserves, spurring the government to take over both. The White House has committed unlimited amounts of aid to ensure that the firms meet their obligations to debt and securities holders. So far, taxpayers are on the hook for $134 billion.

Treasury Secretary Timothy Geithner told PBS's Charlie Rose earlier this month that the housing-finance business was a "mess" and that the administration's plan would "crowd private capital" back in. That, he said, would curb the government role and leave "a system that will not be vulnerable to the really tragic colossal failures" of the past.

The administration's paper will focus on three levers to help withdraw the government from the mortgage market, each of which promises to raise costs for borrowers. Officials are likely to call for lower maximum loan limits for mortgages Fannie and Freddie can purchase. Limits are set at $417,000 nationally but Congress approved emergency measures two years ago raising the limits to as much as $729,750 in high-cost areas. Unless Congress passes a third extension, they will fall to $625,500 in October.

Policy makers could also encourage Fannie and Freddie to steadily raise fees they charge banks to guarantee mortgages. As the fees rise, loans offered by private lenders that aren't government-backed will become more competitive. And they could push for gradual increases in the minimum down payments on government-backed loans.

While Fannie and Freddie are already on track to reduce their combined $1.5 trillion mortgage portfolios by 10% annually, the paper could also recommend accelerating that run-off if market conditions can support it.

Housing and Treasury aides met Tuesday with President Barack Obama to review their report. Top administration officials have publicly discussed the merits of a limited but explicit government guarantee of securities backed by certain types of mortgages. The housing and banking industries have advanced proposals arguing that such a guarantee is needed to maintain a healthy market, particularly for long-term, fixed-rate loans that remain a keystone of U.S. housing.

Others argue that because investors might assume the government will step in during a crisis, it is better to make guarantees explicit and charge up front for them. Industry and academic proposals have called for a new entity to regulate the market and any government guarantees, just as the Federal Deposit Insurance Corp. charges fees to insure deposits and handle bank failures.

But some economists and regulators have warned any new government backstops would put too much risk on taxpayers. In exchange for guaranteeing loans, policy makers could face pressure to under-price guarantees. Any options must also navigate a mortgage market that has grown increasingly consolidated and risks shifting the "too-big-to-fail" risks from Fannie and Freddie to U.S. megabanks.

Source: Wall Street Journal

Home Ownership Offers Plenty of Tax Benefits

While renting offers zero tax breaks, buying a home offers several tax benefits that can make homeownership more affordable. Real estate professionals need to be careful in providing detailed tax advice to clients to avoid lawsuits, but you can ensure clients have the information they need to understand the all of the tax benefits of home ownership.

The following is a few of the tax benefits to home ownership, according to Stephen Fishman, an author and lawyer who specializes in small business, tax and intellectual property law.

▪ Home mortgage interest deduction: Home owners can take an itemized deduction on interest paid on a mortgage or mortgages of up to $1 million for a principal residence and/or second home. This deduction could potentially reduce the cost of borrowing by one-third or more.
▪ Property tax deduction: Home owners can deduct from their federal income taxes the state and local property taxes that you pay on the home.
▪ Deductible home buying expenses: Several closing costs in a home purchase are also deductible, such as loan origination fees (points), prorated interest on a new loan, and prorated property taxes paid at settlement.
▪ $250,000/$500,000 home-sale exclusion: Home owners who have lived in their home for two of the prior five years prior to its sale do not have to pay income tax on the majority of their profit - $250,000 for single home owners and $500,000 for married homeowners who file jointly.
▪ 14 days of free rental income: Home owners can rent the home up to 14 days during the year and pay no tax at all on the rental income.

 

Buying a Home Now is a No-Brainer

Is now the right time to invest in a house?

Trick question. Actually, it's two questions.

Question No. 1: Is now the time to buy?

Question No. 2: Is buying a house a good investment?

The first answer is easy: With a few exceptions, if you have 20% to put down and good credit, now is a great time to buy. That's been the case all year, and I'd argue that we're probably closer to the end than to the beginning of the really great time. Let me explain.

Back in January home prices had dropped 28% from their peak. More important, interest rates were at historical lows. By locking in a mortgage for 15 or 30 years on a value-priced home, you were getting an incredible deal, even if home prices decreased. (I took my advice and bought a New York City apartment.)

At the time, I thought that prices and rates were more likely to rise than fall. I was half right: Home values have been inching up since the spring, but mortgage rates, incredibly, dropped further.

By August (the latest numbers available) the median home price had risen 1% over a year ago, but 30-year rates had dropped a half-point to 4.5%. Assuming 20% down and a 30-year mortgage, the total cost of owning a median-priced home is now down $16,000 from a year ago.

Home values may waffle over the coming year, but because Americans take out such large, long mortgages, rates are what really matter. And I am more likely to grow hair than see 30-year mortgage rates drop below 4%. It's far more likely that rates (and the cost of ownership) will rise.

Now for question No. 2: Is a house a good investment?

First, it depends on what you mean by investment. If your definition is strictly about dollars returned, a house probably won't be a great use of your capital. If you bought the median-priced house today with 20% down, to recoup your total costs (and I'm not including property taxes and maintenance here) over three decades, the home's value would have to rise about 3% a year.

That's likely, but you'll almost certainly (we all hope) do much better than that in the stock market. The fact is, however, that that's the normal case for housing; the booms that began after World War II and in the late 1990s were the exceptions.

Of course, there are places where you might do better. I bought my condo in Manhattan, a small island that, by virtue of the business done on it, has a sustained demand for property. And smaller, energy-efficient housing in cities or inner suburbs around San Francisco or Chicago is likely to be in higher demand than big, outer suburban homes with long commutes to Las Vegas or Atlanta.

According to urban and environmental planning professor William Lucy of the University of Virginia, this move toward urbanization in American housing is the reversal of a trend that's been in place since 1945. Keep it in mind when making your buying decisions.

That said, the key point to remember is this: Buying a fairly priced home at today's rates may be the best deal you will ever get. And who knows? It may even turn out to be a good investment.

Source: CNN.com, Ali Velshi

5 Predictions for 2011

Freddie Mac analysts point to five features that they believe will likely characterize the 2011 housing and mortgage markets:

1. Low mortgage rates. With Fed observers expecting the central bank to keep the federal funds rate at its current target range of 0 percent to 0.25 percent for most (or all) of 2011, relatively low mortgage rates will be a feature of the 2011 mortgage market. Thirty-year fixed-rate loans are likely to remain below 5 percent throughout the year, and initial rates of 5/1 hybrid adjustable-rate mortgages will likely remain below 4 percent in 2011.

2. Prices have hit bottom. House prices are likely to begin a gradual, but sustained recovery in the second half of 2011.

3. Housing will remain affordable. With affordability high, many first-time buyers will be attracted to the housing market in the New Year, likely translating into more home sales in 2011 than in 2010.

4. Refinances will dwindle. Many eligible borrowers have already refinanced and the federal Making Home Affordable refinance program is expiring on June 30. While fixed-rate loans are likely to remain low, they will move up gradually, making it even less likely that refinances will be attractive to most home owners.

5. Delinquency rates will decline. Based on the last several business cycles, the share of loans that are 90 or more days delinquent or in foreclosure proceedings — known as the "seriously delinquent rate" — generally crests within a year of the start of the recovery in payroll employment, and this economic recovery appears to fit within that pattern. Payrolls began to rise last January, and by the spring the seriously delinquent rate had begun to fall.

Source: Freddie Mac (12/09/2010)

Mortgage Rates Rise Slightly from Record Low

Rates on 30-year fixed mortgages rose slightly from their lowest level in decades, inching up to a national average of 4.21 percent.

Mortgage buyer Freddie Mac says the average rate for 30-year fixed loans was up from 4.19 percent the previous week. That was the lowest level on records dating back to 1971.

The average rate on 15-year fixed loans rose to 3.64 percent. That was up from 3.62 percent a weak earlier, the lowest weekly average on records dating back to 1991.

Rates have been falling since April. The latest declines are largely because investors have been buying up Treasury bonds in anticipation of the Federal Reserve's likely move to buy Treasurys to stimulate the economy. That demand lowers Treasury yields, which mortgage rates tend to track.

Low rates haven't helped the struggling housing market, which recorded its worst summer in more than a decade. But they have led to a modest surge in refinancing.

To calculate average mortgage rates, Freddie Mac collects rates from lenders around the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a given day.

Rates on five-year adjustable-rate mortgages averaged 3.45 percent, up from 3.47 percent a week earlier. Rates on one-year adjustable-rate mortgages fell to an average of 3.3 percent from 3.43 percent.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for loans in Freddie Mac's survey averaged 0.8 a point for 30-year. It averaged 0.7 of a point for 15-year and 1-year mortgages and 0.6 of a point for 5-year mortgages.

Source: Associated Press

The Best Cities to Own and Best to Rent a Home

Who are the luckiest renters of all? With housing prices still slipping in many cities, you might argue that any renter is lucky. After all, they're sidestepping the worst collapse in home values in decades. Housing prices in an around big U.S. cities are down 25% to 30%, and aren't bouncing back. Values are up 2.1% this year, but in June they began slipping again, according to housing data firm Radar Logic. 

The luckiest renters of all live in a relatively small handful of cities. These are places where rents are the smallest fraction of what it costs to purchase a home. In those places renters can afford to live in homes that most couldn't possibly purchase. There are also some cities where homeowners are getting the better financial deal. These are cities where rents are likely to be quite a bit higher than the after-tax cost of owning. In those places, renting is like throwing your money away.

So the luckiest renters in the country live in San Francisco, New York, Washington, and Los Angeles. Two other towns, Boston and San Diego, are close behind. The luckiest owners, meanwhile, live in the big cities in the Southern U.S., including two places that have been battered by the housing collapse: Miami and Phoenix.

Sorry, Las Vegas and Chicago. Despite the damage done to your housing markets, you're still in the uncomfortable middle. The cost of renting and the cost of owning are more likely to be in balance in those metropolises. If you're moving to one of them for only a short while, rent. If you're planning to settle down, buy. Says who? Two of the best-known housing-data firms, Trulia.com and Zillow.com, recently studied their buy vs. rent date in a few dozen of the largest cities in the U.S. Forbes itself follows buy-vs.-rent data for high-end neighborhoods in 10 of the largest cities in the U.S.

The three sources each use different methodologies, and come to different conclusions about which cities offer renters the better deals vs. which cities offer homeowners the better deals. Forbes sought out the areas where the three sources agree, and came up with six cities that are best for renters and six that are best for homeowners.

In San Francisco the cost of purchasing a home is 20 to 30 times annual rent, meaning that renters are getting the better deal. In New York, similarly, the ratio is 17 to 35 times. In contrast, some Miami homes will cost you only eight or nine times what it would cost you to rent them for a year. In Phoenix, purchase prices are around 10 times annual rent.

That doesn't mean San Francisco and New York will remain renters' havens forever. These are cities that thrive in economic booms, driven as they are by enormous financial services and technology industries. Rents are already beginning to climb again in New York, relative to purchase prices. Manhattan brokerage CitiHabitats says rents on the island were up solidly in August from a year earlier. Two-bedroom apartments in Chelsea were renting for an average of $4,500 a month in August, up almost 7% from a year earlier. In the coveted West Village, rents were up 14%.

Even so, large numbers of people moving into new homes in New York are refusing to buy, fearful of falling values there. The Corcoran Group surveyed its agents recently and discovered that 29% report having been asked by buyers to submit purchase bids with backup rental offers stapled to them. Somewhere between 10% and 30% of for-sale Corcoran listings, meanwhile, are simultaneously being offered up for rent.

Veteran Corcoran agent Tim Cass says all the nervous buyers crowding into the rental market are precisely what is driving rents up. "The problem right now is so many first-time buyers are in the rental market, and I think some are being short-sighted," says Cass. If rents rise 14% a year--not unheard of during an economic boom in New York--renting in 2015 will cost nearly double what it does today. And if that happens, you can bet asking prices for for-sale homes will rise smartly as well.

Source: Forbes.com

Where is the Shadow Industry?

For the last year, the real estate industry has been talking about shadow inventory and the coming flood of distressed properties. Where are they?

Here’s what’s happening, according to a recent paper by Alan Mallach, a senior fellow the Brookings Institution:

· Some delinquencies have been resolved through loan modifications or people working out the problems on their own.
· Banks are getting better at managing short sales.
· Investors are aggressively buying up properties, sometimes in bulk, directly from the banks or at courthouse auctions so they don’t hit the market.

The likeliest outcome, Mallach predicts, is a steady flow of foreclosures over a long timeframe that will prevent another crash in home prices, but will probably lead to low or no appreciation in home prices.
 

Source: Wall Street Journal

Mortgages Under 5% are Back in Bloom

The possibility of securing a mortgage rate below 5% has greatly improved in recent weeks, in a positive sign for would-be home buyers.

Home mortgage rates fell for the sixth straight week, according to two key measures, with one of them pointing to a sub-5% rate for the 30-year fixed loan for the second week in a row.

Freddie Mac's (FRE, Fortune 500) weekly report said the 30-year rate slipped to 4.87% for the week ended Thursday, the lowest since May. According to the mortgage backer, last week's rates stood at 4.94%.

Mortgage tracker Bankrate.com said the average 30-year fixed loan slipped to 5.22% from 5.25% the previous week. The 15-year fixed rate also fell, Bankrate said, to 4.6% from 4.64% the week before.

The 30-year rate is influenced by the benchmark 10-year note's yield, which moves in the opposite direction of its price. Treasury prices have risen over the past week as $78 billion worth of auctions received above-average demand.

"Another disappointing employment report had investors questioning the strength and sustainability of the economic rebound," the Bankrate report said. "The resulting uncertainty drove investors into the safety of government and mortgage-backed bonds."

"Not even a substantial auction of government debt has been enough to derail the streak of declining mortgage rates," the Bankrate report said.

Rates are returning to levels not seen since the spring when, in an effort to cap mortgage rates, the Federal Reserve began a campaign to buy back $300 billion in Treasurys. The Fed hoped that it would spark demand and keep yields -- and therefore, mortgage rates -- in check.

Mortgage rates fell as refinancings abounded. But those benefits seemed to wear off, as rates started on a tear in the summer. By June, the benchmark 10-year bond's yield had increased steadily to hover around 4%.

Now the central bank has less than $15 billion left to spend on its buyback program, which led some investors to worry that yields would soar again. So far, that's not the case.

On Wednesday, reports said Democratic congressional leaders were working to extend a $8,000 tax credit for first-time home buyers past the Nov. 30 expiration date and could even make it available to current homeowners who buy a new house.

Homeowners have received a boost from both the tax credit and the lower rates -- last year, the average 30-year fixed mortgage rate was 6.2%, according to Bankrate.

To translate the difference in mortgage rate into dollars, consider a $200,000 loan. At last year's rate of 6.2%, the monthly payment would be $1,224.94, or $124 higher than the monthly payment at the current rate.

The low rates helped mortgage applications surge by 16.4% last week, according to a separate report.

Source: money.cnn.com

7 Tips For Buying A Home In A Down Market

Prospective buyers have an edge in a down market, but this doesn't mean they are guaranteed to make money on the properties they buy. When real estate sales are slow and there is a glut of homes for sale, buyers have an opportunity to pick up a house on the cheap. The operative word here is "opportunity". There are times when you should pounce and times when you should show restraint and avoid an impulse buy. Knowing the difference could save you thousands of dollars.

Tip No.1: Do Your Homework. Buyers generally have the advantage in a down market, but this doesn't mean you should walk into a transaction blindly. Prospective buyers should search the internet for listings, inquire with a realtor and check the local newspapers to gain insight on a particular area. Many national and local real estate agents make their listings available on the internet. The objective of this research is to get to know the price range for the area. You want to get a sense of what a low price would be for your desired area.

Tip No.2: Get Your Ducks in a Row. To make sure that you're able to pounce on a deal at a moment's notice, it makes sense to get pre-approved for a mortgage and to have an attorney on retainer to handle the closing paperwork.
It also makes sense to line up a home inspector and an insurance agent. These professionals can provide valuable information to the buyer about what parts of the home might need repairs and what it will cost to insure.

Phoenix Area Home Sales Show Promising Trends

April figures for existing-home sales in metro Phoenix reveal several promising shifts for those searching for signs of a housing-market recovery.

The overall number of home sales in the region continued to hover near record levels last month.

Beneath the sales figures were other encouraging numbers:

• Foreclosures did not dominate sales of existing homes in the Valley for the first time in more than a year.

• The number of investors purchasing homes from lenders dropped.

• More buyers purchased homes with the intent of living in them.

• More buyers financed their purchases with long-term mortgages.

April sales included the last wave of first-time buyers who rushed to buy before a federal tax credit expired. Many did not want to purchase foreclosure homes.

More than 1.8 million people nationally, most of them first-time buyers, used the tax credit to purchase homes, according to early government- and housing-industry estimates. The figures haven't been broken down by state yet, but Phoenix-area real-estate agents have seen a significant increase in first-time buyers.

The return of average buyers to the market suggests more people are buying for the long haul rather than for a quick resale. The shift away from foreclosures also means more Valley homeowners were able to sell their houses last month.

"It appears foreclosures may have finally made their downward turn," said Tom Ruff, analyst for real-estate-research firm Information Market. "The number of home sales might drop now, but prices could go up."

The uptick in first-time buyers may be temporary. But the shift from a market dominated by foreclosures and speculative buying may be more lasting.

Foreclosures and pre-foreclosures in the Valley also fell in April. So far in May, the number of bank-owned home sales is down compared with April.

Ruff calculated April's buyers and sellers through an analysis of property records. Bank-owned foreclosure homes accounted for about 33 percent of all Valley home sales last month. Foreclosures accounted for more than 50 percent of Phoenix-area home sales during 2009.

These new trends could mean there are more long-term buyers vs. short-term speculators buying homes in the Valley now, which could lead to home-price increases in the future.

Here's the breakdown of metro Phoenix's 8,955 home sales in April:

• Only 650 were new-home sales, and the median price of those houses was $213,483.

• Regular sales of existing homes totaled 5,287. The median price of these houses purchased from homeowners was $150,000.

• The remaining 3,018 home sales from the tally were bank-owned foreclosures, which had an overall median price of $106,000.

• The overall median price for all homes sales was $135,000.

• About 34 percent of all homebuyers paid cash.

• About 15 percent of all homes were purchased by investors who signed real-estate documents saying they intended to rent the property to tenants. A year ago, 20 percent of all Valley homebuyers recorded as investors. The rate was 19 percent in January of this year.

• Nearly half of the 5,953 homebuyers who financed their purchase through mortgages used Federal Housing Administration loans, which are primarily obtained by first-time buyers.

Tax credit

The federal tax credit expired April 30, so most last-minute sales for people trying to beat the deadline closed last month.

First-time homebuyers were eligible for an $8,000 credit, and existing-home owners were eligible for a $6,500 credit. Buyers had to have signed contracts by the deadline to receive the credit but have until June 30 to finalize their purchases. Those lagging home sales will show up in Valley figures for May and June.

Real-estate agents say it appears that in Phoenix, first-time buyers were the biggest group to tap the tax credit because they didn't need to sell a home to buy another. But a drop in foreclosures means regular homes will be drawing more attention from buyers. More demand for non-foreclosure homes will drive up values.

Investors

Investor purchases are dropping along with the number of inexpensive foreclosure homes for sale.

Among those investors still buying homes, some have shifted to short sales, which are recorded as regular sales and fetch higher prices than foreclosure homes, real-estate agents say.

The number of actual investors in the Valley is always higher than the number tallied on real-estate documents. Some investors fail to disclose the home is not their primary residence.

During the height of the Valley foreclosure-sales boom in April 2009, more than 60 percent of all home purchases were made by investors, according to realty industry estimates. Then, there were 8,156 home sales in the region, and the overall median price was $126,000.

Vicki Cox Golder, president of the National Association of Realtors, said there has been a change in housing-market psychology. "Buyer confidence is back, and homebuyers have long-term views," said Golder, a Tucson real-estate agent. "The typical buyer plans to stay in their home for 10 years, so we've put the flipping mentality behind us."

Good Debt vs. Bad Debt

The amount of personal debt in this country is ever-increasing, and a large part of the reason is that credit has never been easier to get. Whereas credit card issuers previously looked for customers who could repay, today card issuers relish the chance to reel in those who'll continuously charge beyond their means at 18 percent or 20 percent.

But debt is a complex concept. Not all of it is good -- a fact a surprising number of Americans fail to realize until they're in the hole -- and yet not all of it is bad. When used intelligently, debt can be of tremendous assistance in building wealth.

One of the secrets, therefore, to being smart with your money is to differentiate between good debt and bad debt. While the differences often seem logical, it is a logic that apparently is missed by many Americans.

"When you buy something that goes down in value immediately, that's bad debt," says David Bach, CEO of Finish Rich Inc., and author of "The Finish Rich Workbook." "If it has no potential to increase in value, that's bad debt."

Good debt

"Good debt is investment debt that creates value; for example, student loans, real estate loans, home mortgages and business loans," says Eric Gelb, CEO of Gateway Financial Advisors and author of "Getting Started in Asset Allocation."

Robert D. Manning, a professor of finance at the Rochester Institute of Technology, also recommends taking on debts that are tax-deductible and debts that produce more wealth in the long run.

"If you are talking about reducing current debt, that's where it starts to get nuanced," says Manning. "If you take a home equity loan because you have 17 percent credit card, and you go with a 6 percent loan that's tax-deductible, that's good debt."

These general rules of thumb set some clear delineations -- buying a home or refinancing to get rid of excessively high rates is usually good debt, as is generating debt to buy high-return stocks, bonds and other investments.

Bad debt

The concept of bad debt comes in when discussing the purchase of disposable items or durable goods using high-interest credit cards and not paying the balance in full.

"The trouble is most people are not organized enough to retire the entire balance before the due date," says Gelb.

Every month that you make a partial payment on your credit account you are charged interest. The disposable or durable item you purchased continues to lose value, and the amount you paid for it continues to increase.

"When you buy clothes, they're probably worth less than 50 percent what you pay for them when you walk out the door," says Bach. "So if you borrowed to pay for them, that's bad debt."

source: bankrate.com

Credit rating effect

Not to mention what that debt could potentially do to your credit rating. "Total personal debt should not exceed 36 percent of your total income," says Gelb.

Keeping the debt-to-income ratio in mind, it's also important not to miss payments. "Missed payments are trouble," he says. "A representative of Citibank said if you don't pay within 30 days, they report that to the credit bureaus."

When it comes to buying durable goods that won't contribute to wealth generation, Bach offers a basic rule of thumb. "My grandma used to say that if you're going to buy something that doesn't go up in value, and you can't afford to pay cash, then you can't afford it."

Exacerbating the bad debt factor is that people will apply for store credit for the savings offers that say if you open a credit card account today, you can take 10 percent to 20 percent off the cost of your purchase. What people often don't realize is how much of that savings will be destroyed by the high interest rate on the card if they fail to pay for the items immediately.

"You can open a store credit card account," says Bach, "and what they're not telling you is that after the first few months, the rate jumps to 20 percent or greater."

Driving into debt

Another bad debt area is auto debt. While most people need an automobile, and the ultimate cost of an auto is higher than many people can pay in one lump sum, the way people go about it -- namely, purchasing more car than they need -- turns it into bad debt.

When is it worth it?

"What we would normally consider bad debt can turn into good debt in certain circumstances," says Catie Fitzgerald, a personal finance coach and registered investment adviser in Henderson, Nev. "If you use debt to buy a car that gets better gas mileage than your old vehicle, you could end up better off financially."

Bach considers auto debt a Catch-22. "People borrow to buy cars before homes," says Bach, "and that's unfortunate. For most people, their first major loan is a car loan. That's guaranteed to go down in value. So you really want to borrow less. For example, instead of rushing out to borrow to buy a $50,000 BMW, you'd be better off buying a $25,000 car."

The best debt

The best type of debt is debt that builds wealth over the long run, and the No. 1 example of that is mortgage debt.

"Home values have increased an average of 6.5 percent a year over the past 30 years," says Bach. "So when you borrow to buy a home, chances are that's good debt. You'll build value."

Bach heavily promotes the idea of homeownership, saying that everyone needs to own where they live. "About 40 percent of Americans are renters," says Bach, "and the fastest way to wealth in America is buying where you live."

Bach cites some shocking numbers to back this up. "The average renter has a median net worth of $4,000, and the average homeowner has a median net worth of about $150,000."

Manning also emphasizes what a good time this is to build wealth through debt. "This is the most advantageous time ever to be in debt," says Manning, "in terms of opportunities to get low-interest loans or to renegotiate or refinance."

Duh, debt?

One of the reasons so many Americans seem mired in bad debt (Bach reports that the average American carries approximately $8,400 in credit card debt) is that financial education is pratically nonexistent. "This type of commonsense stuff isn't taught in school," says Bach, "and most Americans don't realize how bad high-rate credit cards are hurting them."

Fitzgerald advises teaching your children the difference between good debt (debt that's used to buy assets that grow in value over time) and bad debt (debt that's used to buy things that will lose value) early on.

Gelb opts for a more hands-on approach. "Give your children an allowance (without strings) beginning when they're in kindergarten and offer them the opportunity to perform extra jobs around the house for money. Stop buying them everything, and teach them how to make choices with their own money-buying decisions." The mistakes they make will help them learn and grow.

"People are getting in debt before they have a job," says Manning. "Education is important. We used to encourage kids to save, and that has been missed. Students now refer to their credit cards as 'yuppie food stamps'. They see cards as entitlement, and see they will be in debt all their lives."

Fitzgerald recommends teaching by example. Treat credit cards like emergency safety nets and your children will likely learn some money management skills. "If you have to use your credit card, immediately revise your budget, paring back on nonessential spending. Allocate the saved dollars to a pay-off plan to bring your debt balance down to zero as soon as possible," she says.

How Foreclosure Impacts Your Credit Score

If you're delinquent on your mortgage, your credit score will suffer. Everyone knows that. The question is, by how much?

Until recently, those answers were hard to come by. Credit bureaus were uncommunicative about expressing, in points, just how much impact different foreclosure types of mortgage delinquencies have on scores.

Recently, Fair Isaac, which developed FICO scores, pulled back the curtain a bit, revealing some estimates of point-score declines following mortgage delinquency problems.

Here are the average hit your credit will take:

30 days late: 40 - 110 points

90 days late: 70 - 135 points

Foreclosure, short sale or deed-in-lieu: 85 - 160

Bankruptcy: 130 - 240

To come to these figures, Fair Isaac created two hypothetical consumers, one who starts out with a fair-to-middling score of 680 and the other with a very good one of 780. (FICO scores range from 300 to 850.)

The hypothetical person with the 780 FICO has 10 credit accounts versus six for the 580, plus a longer credit history, lower utilization of total credit limit and no missed payments on any account. The other consumer has two slightly damaged accounts. Neither have any accounts in collection or adverse public records.

See the chart above to see how each scenario affected each borrower.

Notice that for both borrowers a single one-time black mark results in steep drops, but it is when they fall further behind that things get really harsh, according to Craig Watts, a spokesman for Fair Isaac.

"The lending industry tends to regard an account differently when it has become 90 or more days late," he said, "The likelihood that consumers will resume paying their overdue obligations drops off significantly after the delinquencies have reached 90 days."

One reason credit companies were so closed-mouthed is that they often can't definitively state how much each delinquencies will affect scores because there are too many variables.

Some borrowers will fall much more steeply than others for the same payment problem, according to Maxine Sweet, vice president for public education at Experian, one of the nation's main credit bureaus.

"If you picture someone who has just one mortgage and one other credit account versus a mature credit user like me with 15 accounts, if they miss one payment that would impact their scores a lot more," she said. "For me, one missed payment would just be a blip."

The point loss also depends on the borrower's starting point: People with very high credit scores have more to lose than low-score borrowers; the impact of a single blemish on an 800 score is more than on a 500.

Of course, it just gets worse when you face foreclosure.

Mortgage borrowers can lose their homes three basic ways: a foreclosure; a short sale, where the home is sold for less than than is owed and the bank (generally) forgives the difference; or a deed-in-lieu, in which the borrower gives back the property and the bank again forgives any unpaid balance.

Sweet said credit bureaus generally slash scores equally for those three resolutions to someone losing their home. The important factor, she said, is that "it's reported that you paid less on a settled account."

Some borrowers may think that because they never missed a payment, they can "walk away" from their homes with relatively little impact on scores. Not true. "When a deed-in-lieu or short sale is reported as a partial payment, it's treated as a serious delinquency," Watts said, "just like a foreclosure."

Even if borrowers made payments faithfully for years before short selling or doing a deed-in-lieu, their credit score will still take a hit. The total decline will run about 85 points for the 680 score borrower to as much as 160 for the 780 score.

Mortgage debt, combined with other financial problems, can send borrowers into bankruptcy, the worst thing that can happen to your credit score.

The effects are long-lasting, according to Sweet. In a Chapter 13 bankruptcy, which involves partial repayment over several years, the stain will take seven years to remove. A Chapter 7 bankruptcy, which involves liquidation, takes 10 years to get over.

Absorbing a big credit-score hit can make many transactions more costly. It's not just paying more for credit card debt and auto loans, insurance can cost more as well.

The average savings for someone with a good versus mediocre credit score is about $115 a year for auto insurance and $60 for home, according to Loretta Sorters, of the Insurance Information Institute.

A low credit score can even make it harder to rent a home because landlords often use credit scores to weed out prospective renters.

Despite the problems a poor credit score can cause, Experian's Sweet recommends that people who are in financial dead ends, like totally unaffordable mortgages, it's better to recognize that and cut your losses quickly; don't prolong the problem.

"You need to do what you need to do to get your finances back in order," she said. "Don't worry about your credit score." 

Source: http://money.cnn.com/2010/04/22/real_estate/foreclosure_credit_score/index.htm

9 Homebuying Mistakes to Avoid

Buying a home is perhaps the most arduous, expensive and, ultimately, valuable acquisition you'll ever complete, here are a few tips on common mistakes to avoid.

1. Going solo.  Buying a house is a complex transaction.  It should be a team effort.  You'll need a real estate agent, lender, inspector, insurer and other team members to help you through each step of the way.

2. Love at first sight.  If you believe in fairy tales you probably shouldn't be buying a home.  You won't live happily ever after if you emote your way through the home buying process.  Buy a home that fits your budget and your lifestyle.

3. 'Loanless' shopping.  Being pre-qualified gives you a general idea of how much you can afford to borrow.  It's better to be pre-approved for a given loan.  Sellers will take you more seriously and you'll stay on budget.

4. Overbuying. Home buyers buying more than they could truly afford, in part, led to the collapse of the housing market.  Analyze all your monthly costs including debts, food, transportation, entertainment, and savings.  Your total monthly debts, including your mortgage, should not exceed 36 percent of your income before taxes.

5. Misplaced trust.  You are engaged in what's likely your most valuable acquistion ever.  It's a business transaction.  Ask family, friends, co-workers, professionals and others you trust for referrals.

6. Accepting oral agreements.  Get it in writing.  The rate lock, the home inspection, disclosures, the contract.  Always.  Should a dispute arise, you've got the details documented.

7. Skipping the fine print.  Understand what's really in any document before pciking up a pen.  Get documents in advance, take time to read them and ask questions. 

8. Forgetting or betting on resale.  Avoid buying a home that costs 50 percent more than neighboring homes.  Reconsider buying the most expensive home on the block.  Neighbors' lower home values will weaken yours. 

9. Making an unconditional offer.  Protect yourself with these contingencies:

• Mortgage Financing.  You may be pre-approved but is the house?  A formal appraisal confirms or not that there is sufficient value in the home to warrant the loan.  If the house appraises lower than the sales price, the loan may be declined.
• Inspection.  Never buy an existing or new home without a thorough home inspection.  Walk through the home with the inspector to learn more about the house and any concerns he or she may have.
• Insurance. Confirm you can get adequate insurance coverage.  In some areas, or following certain disasters, it can be difficult to get types of hazard insurance.
  Source: Realtytimes.com
   

AZ Housing Market to Get a Boost?  Anti-Flipping Rule Lifted

The Valley's real estate market could soon be getting a boost, as the Federal Housing Administration recently lifted its anti-flipping rule for one year.

Some say this could open the floodgates for buyers, creating new opportunities for investors like Barry Hart.

Hart is an investor who purchases Valley homes to resale or "flip."

Up until now he's had to find cash buyers or wait 90 days to sell because of the FHA's anti-flipping rule.

Officials hope the move will reduce the enormous number of foreclosed homes on the market.

"Properties are not being maintained, they're deteriorating, and HUD has issued the lifting of the ban to target that," said Valley realtor Toni Coursey.

To prevent inflated home values, the lift comes with a 20 percent rule.

"The seller of the property cannot list it for 20 percent or more of their acquisition cost, so they can't profit more than 20 percent on the sale," Coursey explained.

But the problem is, not all lenders are recognizing the ban lift.

"They want to see how the market is driven by this waiver lift, and secondly they want to make sure they have total control of their paper (money)," said Doug Peveto, a mortgage banker with Magnifund Group.

According to Peveto, financing may be tough, but it's not impossible.

"There are multiple lenders within this vacinity that have the capability to take a flip home and allow it to go through FHA financing," he said.

That's good news for Hart, who's hoping to start moving homes fast.
Source: ABC15.com

What Time's the Right Time?  Hitting a profit 'sweet spot' from property flipping.

Issues on people's minds: The ways in which property "flippers" may be getting frustrated and how to calculate where the maximum gain from flipping might come.

Source: RealEstateJournal.com

Mortgage Modifications on the Rise

The number of permanent mortgage modifications under the federal Making Home Affordable program jumped 75 percent last month nationally and nearly 70 percent in Arizona and the Valley.

A year ago this week, President Barack Obama was at Dobson High School in Mesa to announce federal initiatives to help distressed homeowners and reduce foreclosures. The Making Home Affordable program has been widely criticized for not helping enough homeowners avoid foreclosure.

Nationally, 66,465 permanent modifications were reported last year. January activity brings that total to 116,297.However, permanent modifications remain far behind the 1 million trial modifications initiated since the program’s inception, and more than 61,400 homeowners have dropped out of the program.

Through Dec. 31, 4,137 permanent modifications were reported in Arizona, including 3,453 in the Valley. Including January, permanent modifications jumped to 7,000 in Arizona, including 5,834 in the Valley.

The median savings to borrowers with permanent modifications is more than $500 per month.  An estimated 3.4 million mortgages nationally are at least 60 days delinquent and deemed eligible for the modification program, up from 3.35 million as of Dec. 31.

“Our goal has always been to ensure broad access to affordable mortgage credit, stabilize home sales and prices, stem damage to hard-hit neighborhoods, and provide responsible homeowners who are struggling the chance to stay in their homes,” said Meg Reilly, Treasury spokeswoman.

Arizona remains among states with both the highest mortgage delinquency rates and the highest mortgage modification activity under the program.

“(The federal program) was designed to target responsible homeowners who live in their homes and can sustain a mortgage at reduced monthly payment levels,” Reilly said. “Modifications might not be the right option for all homeowners. It is just one program in a much broader strategy to stabilize the housing market.”

All modifications start in a trial phase, she said. If after a three- to five-month trial phase the borrower has submitted all documents, been deemed eligible and stayed current on their monthly payments, the modification becomes permanent, she said. 

“The increase in permanent modifications (in January) is largely due to the high number of people who hit the end of their trial phase,” Reilly said.

Bank of America, one of the largest participants in the federal modification program, says it quadrupled the total number of completed modifications in the past month. More than 12,700 bank customers now have permanent modifications, up from 3,200 as of Dec. 31.

“In the past month, our concerted customer outreach initiative has driven a substantial increase in the rate of conversions from trial to permanent modifications, as we anticipated in our recent reports of (program) progress,” said Jack Schakett, credit loss mitigation strategies executive for Bank of America Home Loans.

Source: East Valley Tribune

Move-Down Buyers Can Be Eligible for Tax Credit too.

Move up, move down, move sideways; it just doesn't matter. Whichever direction you move, financially, you may still qualify for the new tax credit available to current homeowners. It is unfortunate that the credit has too often been characterized as a credit for "move-up" homeowners. The phrase carries the implication that the new home must cost more than the sale price of the former one. Indeed, even the November 6 White House Press Release said that the credit would be available to qualified homeowners who "wish to step up to a new home." Same implication.

So, it is worth emphasizing that the credit is equally available to homeowners who are moving down, cost-wise.

The move-down homebuyer is not an unusual phenomenon. For years retirees have been known to move from a larger home to one that is smaller and often less expensive. Moreover, it is reasonable to think that current economic conditions may lead to even more move-down buyers. Just as thousands of families have found it necessary or desirable to downsize with respect to their cars and their general lifestyle, so it may be when it comes to considering the costs of owning and maintaining a larger house than they really need.

The same requirements apply to both move-down and move-up buyers.

First of all, the previous home must have been occupied as the buyer's principal residence for at least five consecutive years out of the past eight years. Two examples: (1) Suppose that during the past eight years you occupied the property for three years, then rented it out for two years (perhaps because of a job transfer or temporary assignment), and then occupied it again for three years up until now. Even though you had occupied the property as your principal residence for six of the past eight years, you would not be eligible because you had not occupied it for five consecutive years. (I'm not saying this makes sense; I'm just reporting on the requirements.) (2) Suppose you bought a home eight (or more) years ago, you occupied it as a principal residence until two years ago when you sold it. Would you qualify? Yes, because you had occupied it as a principal residence for at least five consecutive years of the past eight.

There are important issues of timing as well. You must have purchased (that is closed on) the replacement home sometime after 11/6/2009 and before 4/30/2010. With one exception: the new home will also qualify if you had entered into a binding contract no later than April 30, 2010 and you closed no later than June 30, 2010.

The time the previous home sold doesn't matter. Indeed, it doesn't even have to be sold. You might, for example, keep it as a rental.

The tax credit is for 10% of the purchase price up to a maximum credit of $6,500 for joint filers and $3,250 for those filing separately. There is a full credit for singles whose income does not exceed $125,000 and for couples whose income is no more than $225,000. A phase-out applies to higher incomes up to $145,000 and $245,000 respectively.

The cost of the new home may not exceed $800,000.

The new home must be used as a principal residence for a three year period subsequent to closing, or else the credit must be repaid.

This program won't help everyone, of course; but it's pretty nice for those to whom it applies.

Maricopa County Market Report

Buying a Home in Time to Get Credit

House hunting usually slows down this time of year, as people put their searches on hold during the holidays.

This winter could be different, however, thanks to the extension — and expansion — of the first-time homebuyer tax credit.

"We're going to see far more interest in the fourth quarter than we generally do because of the tax credit," says Heather Fernandez, vice president of Trulia.com, a real-estate search engine. Traffic surged on the site on Nov. 5, the day Congress approved the credit extension, she says.

The new law extends the tax credit for first-time homebuyers and opens it up to some existing homeowners as well: The credit is now up to $8,000 for first-time buyers and up to $6,500 for repeat buyers.

All buyers must have a binding contract on a house in place on or before April 30. The purchase must be for a principal residence and must close on or before June 30.

To be considered a first-time homebuyer, an individual must not have owned a home in the past three years. And to be eligible, existing homeowners need to have lived in the same principal residence for five consecutive years during the eight-year period that ends when the new home is purchased.

Income limits have risen as well. According to the Internal Revenue Service's Web site, www.irs.gov, the homebuyer tax credit phases out for individuals with modified adjusted gross incomes between $125,000 and $145,000, and between $225,000 and $245,000 for people filing joint returns.

The inclusion of move-up buyers might inspire homeowners to list their house if they've been putting it off, says Carolyn Warren, a Seattle mortgage broker.

"If people love their home, it's not going to entice them to sell," Warren says. "If they've had it in the back of their minds and really would like to move up, it might push them into doing it sooner than later."

If you're thinking of purchasing a home, here are five tips:

Don't procrastinate
Start your house search now. Getting an early start will give you a better chance of finding the right house before the credit deadline.

When first-time buyers thought that the credit would expire Nov. 30, people scrambled to find properties in September and October, says Pat Lashinsky, chief executive of ZipRealty, a residential real-estate brokerage firm. In some cases, "there wasn't inventory that fit people's needs," he says. In some markets, including Phoenix, Chicago and parts of California, for example, properties had multiple bidders, Lashinsky adds.

Before you start house hunting, get preapproved for a mortgage, says Eddie Fadel, a Miami-based mortgage banker. And do a realistic assessment of what you can afford.

Buyers who have to sell an existing home should price it aggressively from the beginning to drum up interest and get a buyer as soon as possible, Fernandez says.

Don't count on another extension
The credit won't be available forever, Fadel says.

"This is a medication for the housing crisis," he says, "Once the patient — which is the housing market — is cured, there will be no medication needed."

Be mindful of interest rates
Interest rates are low right now, but will likely rise next year, Warren says. Higher rates will affect your monthly mortgage payments, thus the affordability of the house you are buying.

"It's pretty universally accepted that rates will be higher next year," she says. "What is unknown is how fast and by how much" they will rise.

Average rates on 30-year fixed-rate mortgages have been hovering around 5%. But when the Federal Reserve stops buying large amounts of mortgage-backed securities next year, interest rates could rise, Warren points out. The Fed plans to end its purchase program in March.

Communicate with your lender
Make sure you're speaking with your lender regularly to avoid any delays. If the lender asks for any additional documentation, turn it in as soon as possible, says Doug Heddings, a New York-based real-estate agent with Charles Rutenberg Realty.

And think twice before pursuing a short sale. That's where someone sells a home for less than what he or she owes on a mortgage, with permission of the lender. The process can be lengthy and unpredictable because the homeowner's lender has to approve any deal, Warren says, and it can get complicated when there is a second mortgage associated with the property.

Don't take shortcuts
Don't forgo any of the steps you would normally take just to make the tax-credit deadline. That means making sure the house is a good fit and is in the right location and getting a home inspection, Lashinsky says. Skipping steps could cost you in the long run.

"Don't let the tax credit get you to make a decision to buy a house that you wouldn't otherwise want to buy," he says. "Don't shortcut the process to get the tax credit."

Appeals of property valuations soar in Maricopa County

Amid market slump, owners dispute tax assessor's data

The Maricopa County Assessor's Office is working its way through the largest wave of property-valuation appeals in nearly two decades as real-estate values continue to decline and owners try to save money in the lagging economy.

Appeals have been growing for the past five years, but they have leaped by nearly 50 percent in the past two years alone.

Maricopa County Assessor Keith Russell said his office saw 13,251 appeals in 2007 for residential, commercial and vacant land. As property values began to fall, the number of appeals rose to 17,213 last year and to 19,801 this year. The biggest spike over those three years was for commercial appeals, followed by residential.

In 2005, when property prices were rising rapidly and assessments had not caught up to market value, total appeals were nearly half of what they are today.

The final deadline to appeal your property valuation this year is Dec. 15.

This year's valuations were established in January and mailed to owners in February. But the taxes based on those valuations aren't due to be paid until the fall of 2010, an 18-month lag that creates a disconnect between the value the county puts on a property and what an owner considers its value in today's market.

Valuation notices indicate both a "full cash value" and a "limited property value," the two categories by which various property taxes are determined. The full cash value, which is intended to closely resemble market value, can be appealed. If you don't think you could have sold your home on Jan. 1 for the full cash value listed on the valuation, you may want to consider an appeal.

Over the past couple of decades, appeals have typically risen when the market declined, Russell said.

"When we don't have as much money coming in, we all look at the bottom line, whether that's insurance being paid for the car or property taxes," he said.

Appeals hit record numbers during the late 1980s and into the 1990s when, Russell said, the Assessor's Office was flooded with as many as 28,000 a year.

Ira Friedman, the county assessor at the time, and others blamed unregulated tax consultants, saying they were making millions of dollars filing appeals on behalf of developers and corporations. The consultants typically received a percentage of the savings.

Others, including some of the tax consultants, attributed the number of appeals to the real-estate crash and savings-and-loan crisis, which put developers, real-estate companies and mortgage-loan companies out of business, depressed real-estate values, brought construction to a halt and led to the prosecution of Charles H Keating Jr. and others.

This year, the deadline to file a free administrative appeal with the Assessor's Office passed in April, but there are still a few more weeks to file an appeal in Arizona Tax Court. No attorney is required, but there is a filing fee of $142.

Former Gilbert Mayor Steve Berman is among those who have filed a court appeal. His home was assessed at $858,300, but he believes it's now worth closer to $500,000.

"That $300,000 difference is what some people's entire house costs," Berman said. "It'd be like paying taxes on an extra house or an extra couple of houses."

He said if he wins, it could save him hundreds of dollars a month. He won't know exactly how much until the tax rate for 2010 taxes is set next August and he receives his tax bill next September.

The trial is Nov. 18.

"If my house was assessed at $200,000 and the current value was $150,000, I don't know if I'd go through the baloney," he said. "But, in this case, the magnitude is just so big."

Assessor's Office spokesman Paul Petersen said residential appeals are up particularly in the higher-value areas of Scottsdale and north Phoenix. Residents there stand to save more money because they are often arguing a larger discrepancy.

However, the amount of taxes an individual may save by arguing that a home should be valued at $50,000 or $300,000 less will vary widely depending on the city, school district and even flood-control district in which that person lives and the taxes each district levies.

Petersen said the biggest spike in appeals over the past year has come with commercial property because valuations haven't fallen as quickly as the market for those types of property. Last year, there were 6,841 commercial appeals. This year, there have been 8,978.

There also is more money at stake in those cases, he said.

"The median value for a single-family home has dropped 40 percent in the last two years, by our numbers, but in commercial and vacant land, they tend to lag behind," he said. "We haven't seen the drop yet, but it's coming."

Russell said his staff of 300 tries to catch errors in the computer-generated full-cash valuations. They spot-check and, for example, look out for a home that increased in value by 20 percent when the rest of the homes in the neighborhood increased by 10 percent.

But he admitted that with 1.5 million parcels of land in the county, they don't find everything.

He said his office welcomes appeals. "We're going to make a mistake, and if somebody brings that to our attention, I'm tickled," he said. "We want to get it right. That's why we mail those values out."

Russell said the valuations that will be mailed out in February will likely show declines in every area. "Values for most single-family homes, and most properties in general, are going to see a reduction next year," he said. "People need to look at that notice and say, "Hey, is this reasonable?' "

Source: AZcentral.com

Save Water, Feel Good.

Find and plug leaks
Leaks account for 14% of the water used inside homes. “Some homes lose thousands of gallons to leaks. Over time it can add up and be significant,” Cooley says. There are a few simple ways to check for leaks and repair them:

• Uncover mystery leaks. Turn off all water-using appliances and go outside to your water meter. Using a bit of tape or a felt pen, mark the current location of the meter’s needle (the city of San Diego shows how to read a water meter here.) Check back in an hour. If the needle moved, indicating a leak, ask if your water supplier will send a technician to inspect.
• Spot toilet leaks. Put a few drops of food coloring into the water in your toilet tank (not the bowl). Return in an hour. If the color appears in the bowl, one of the in-tank components — probably the flapper ($2-$5 at hardware stores) — is leaking and needs replacing. (Get instructions at the hardware store) Some utilities offer dye tablets or leak-detection kits free to customers.
• Stop dripping faucets. If you have a dripping faucet, you probably hear it or see it. Call a plumber or tackle the job yourself with support and instructions from your hardware store.
• Insulate pipes.  Frozen pipes that burst, sending a flood into your home, are huge water wasters. Insulate exposed pipes and shut off the water when you’re gone for an extended period in winter.
• Stop leaks outdoors. Patch or replace worn hoses; install new gaskets in leaky hose connections and repair or replace leaking outdoor faucets (called “bibbs”). Install nozzles on garden hoses so the water runs only when and where you need it.
• Read up. American Water, a multistate utility, offers this online guide to finding leaks.

Source: msn.com

Home resales hold steady in September

Valley home resale transactions held steady in September with 6,135 sales recorded in Maricopa County, compared with 5,995 sales in August, according to a report from Arizona State University.

Home foreclosure activity also remained about the same, with lenders foreclosing on 2,935 single-family homes in September - down slightly from 3,085 foreclosures in August.

ASU Realty Studies director Jay Butler, in a report issued Tuesday, said an excess of 6,100 home sales is considered strong activity for September, which is typically a slow month for the housing market.

But September's housing market was anything but typical, Butler added, because about half of the resale transactions involved bank-repossessed homes.

"The market is following its structural pattern, but the reasons for it are different," he said.

That pattern is a seasonal one in which home sales peak in June or July, and then dip to an annual low in January or February. What's different this year is that home foreclosures continue to drive the majority of sales, as they have throughout 2009.

Sales activity was up significantly from September 2008, when the market recorded only about 4,600 home resales.

Though still a problem, the number of foreclosures decreased somewhat from just over 3,650 a year earlier.

Unfortunately, Butler said, the past year's home sales data suggest a winter surge in foreclosures could be forthcoming.

Foreclosure activity increased dramatically in February, hitting a then-record high of about 4,300 foreclosures.

Butler said it's likely the surge resulted from financially struggling homeowners finally giving up after resolving to continue making loan payments through the holiday season.

Declining prices, especially in the lower end of the market, continued to attract investor and homeowner interest, he added.

The median single-family home price in September was $140,000, up from $138,000 in August - a considerable drop from the median price of $180,000 in September 2008.

Source: Arizona Republic, Craig Anderson Oct. 13, 2009

Fight looming on tax break to buy houses

Can the market function without $8,000 credit for first-time home buyers?

When Congress passed an $8,000 tax credit for first-time home buyers last winter, it was intended as a dose of shock therapy during a crisis. Now the question is becoming whether the housing market can function without it.  As many as 40 percent of all home buyers this year will qualify for the credit. It is on track to cost the government $15 billion, more than twice the amount that was projected when Congress passed the stimulus bill in February.

In the view of the real estate industry and some economists, all that money is well spent. They contend the credit is doing what it was meant to do, encouraging a recovery in the housing market that is gathering steam. Analysts say the credit is directly responsible for several hundred thousand home sales.

Skeptics argue that most of the money is going to people who would have bought a home anyway. And they contend that unless it is allowed to expire on schedule in late November, the tax credit is likely to become one more expensive government program that refuses to die.

The real estate industry, including the powerful 1.1 million-member National Association of Realtors, wants Congress to extend the credit at least through next summer. The group hopes to expand the program to $15,000 and to allow all buyers, not just those who have been out of the market for at least three years, to qualify. The price tag on that plan: $50 billion to $100 billion.

‘A no-brainer’
Joseph and Chassity Myers are among the two million buyers eligible for the credit this year. The newlywedsheard they could get money from the government for something they were tempted to do anyway.  “It was a no-brainer,” said Mr. Myers, a commercial underwriter. “Owning something is the American family dream.”  The couple bought a two-bedroom condominium here in the spring for $171,000 and amended their 2008 taxes immediately, receiving their windfall by direct deposit a few weeks later. Their home is now a monument to the government’s generosity. They bought a leather couch, a kitchen table, a bed, television stand, china cabinet, kitchen table, coffee table, grill and patio set.“We did exactly what the government wanted us to do,” said Ms. Myers, a third grade teacher. “We stimulated the economy.”

Expiration of credit looms
Mortgage applications increased nearly 10 percent for the week ending Sept. 3 from late August, the largest gain since early April and the latest of many signs of life in real estate. The upturn can be attributed to several factors: the return of confidence, very low mortgage rates, and prices in some markets that are at decade-low levels. But the looming expiration of the tax credit on Nov. 30 seems to be playing a role too, particularly in relatively low-cost markets like Phoenix, Las Vegas and Dallas.

Since then, another seven units have sold, including the one bought by the Myerses. Brian Denbow, who works for a subprime auto financing firm, also was spurred to action by the credit. He too intends to use the money for furniture. Five of the buyers did not qualify for the credit for various reasons.

The Lawn at Bluffview remains nowhere near full. Potential buyers “just want a deal,” said the sales agent, Beverly Bell. Two weeks ago, the price of the unsold units was cut 10 percent.

The National Association of Realtors estimates that about 350,000 sales this year would not have happened without the lure of the tax credit. Moody’s Economy.com used computer modeling to put the number at 400,000.

The government’s efforts to directly reward home buyers began more than a year ago with a $7,500 tax credit that had to be repaid over 15 years. Last winter, amid fears of another Great Depression, the Senate came up with a much sweeter $15,000 package as part of the stimulus bill. That measure was ultimately reduced to the $8,000 credit.

Now the sponsor of the original Senate bill, Johnny Isakson, Republican of Georgia, is back with a new bill that would give a maximum $15,000 credit to any buyer who stays in a home for at least two years.

“The problem now is not first-time buyers, it’s the move-up market — the guy transferred from Chicago to Atlanta who can’t sell his house,” said Mr. Isakson, a former real estate agent.

Without a new and more generous credit, he warned, there would be a downward spiral of home sales and more foreclosures, provoking a second recession.

The real estate industry is lobbying heavily for the bill, but acknowledges that in an atmosphere that is less crisis-driven than last winter it will almost certainly have to settle for less.

“There will be a lot of water under the bridge, a lot of compromise, between now” and a final bill, said Richard A. Smith, chairman of the Business Roundtable’s Housing Working Group.

Divided
Economists are sharply split on the merits of another round of government help.

Mark Zandi, chief economist of Moody’s Economy.com, favors expanding the credit to all home buyers, even investors, into next summer. “The risks of not doing something like this are too great,” he said. “I don’t think the coast is clear.”

James Glassman of JPMorgan Chase echoed those views but said he favored continuing to restrict the credit to first-time buyers.

On the other side of the issue is the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute. It labeled the original credit as one of the worst provisions of the stimulus package, on the grounds that the money is a bonus for people who would buy a house anyway. The center has an even dimmer view of extending the credit to all buyers.

“Is this the best way to spend money we don’t have?” asked senior fellow Roberton Williams.

Dean Baker of the Center for Economic and Policy Research called the credit “a questionable redistributive policy” from renters to home buyers, but said that he used it himself when he bought a house.  He wrote on his blog: “Thank you very much, suckers!”

This article, “Fight Looms in Congress on Tax Break for Home Buyers,” first appeared in The New York Times.

Existing homes selling fast - record fast

The volume of home re-sales has been on the upswing for four consecutive months.

NEW YORK (CNNMoney.com) -- Sales of existing homes rose in July for the fourth consecutive month, lending support to economists who argue a recovery is near.

Sales of previously owned single-family homes were up 7.2% compared with June and 5% from July 2008, The National Association of Realtors (NAR) reported Friday. The monthly gain was the largest on record for existing-home sales, which NAR has tracked since 1999.

"The housing market has decisively turned for the better," said Lawrence Yun, NAR's chief economist. "A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales."

July home sales hit an annualized rate of 5.24 million proprieties, marking the first breach of the 5 million annualized rate mark since last September, when they hit 5.1 million. Since then, they have stayed in a very narrow range, bouncing between between January's low of 4.49 million and October's high of 4.94 million.

The July performance far exceeded expectations: A consensus of real estate experts had forecast sales of 5 million.

Of course, homes should be selling. Prices have fallen more than 32% from their peaks, set in the summer of 2006. Plus, mortgage rates near historic lows makes the cost of purchasing a home lower than they've been in nearly 20 years.

"In some recovering markets like San Diego, Las Vegas, Phoenix and Orlando, the demand for foreclosed and lower priced homes has spiked, and a lack of inventory is becoming a common complaint," Yun said.

Overall though, the national inventory rose by more than 7% to 4.09 million units. That will continue to keep prices low, according to Mike Larson, a housing analyst with Weiss Research.

"There's a bifurcation of the market," he said. "There's excess supply putting downward pressure on prices and people respond to the lower prices by buying homes."

Housing is its most affordable in many years, he pointed out. "Falling prices is not part of the problem, they're part of the solution," he said.

Hurting home sales have been stubborn increases in job losses. More than 6.7 million jobs have been lost since the beginning of 2008.

That's one reason why Robert Dye, a senior economist for PNC Financial Services (PNC, Fortune 500), is keeping his optimism in check.

"I wouldn't go overboard on this number," he said. "The economy is still healing and will continue to run into some bumps. But it does bode very well for the future and shows buyer confidence is increasing."

There is one potential bump, however: The looming end of the first-time homebuyers credit. The credit gave first-time homebuyers an up to $8,000 refund on their taxes if they close on a deal before Dec. 1. That credit has been motivating buyers, and when it expires, demand could dry up.

"Just like with the cash-for-clunkers program, we run the risk of a letdown as the program runs its course," Dye said.

Regionally, the strongest market was the Northeast, where sales soared by 13.4% to an annualized rate of 930,000. That was 3.3% higher than last July. The median price of homes sold during the month was $236,700, off 15% from last year.

Midwest sales rose 10.9% to a 1.22 million rate, 8% higher year-over-year. Prices there have sunk 5.9% over the past 12 months to a median of $157,200.

In the South, sales were up 7.1% from June and 5.4% from last July to a rate of 1.95 million. Price have dropped 7.1% to $164,500 over the past 12 months.

The only region reporting a slip in sales was the West, where they fell 1.7% to a rate of 1.13 million. That was ahead of last July, however, by 1.8%. The median price there was $202,300, a whopping 28% below what is was a year ago.

 http://money.cnn.com/2009/08/21/real_estate/home_sales_rise_in_July/index.htm?postversion=2009082110

YourWayHomeAZ

This state program provides home buyers with an interest free 22% loan from the county towards a home purchase.  After 5-15 years the loan is then wiped clean with the owner owing nothing back to the county.  Am I Eligible? Call to see if YOU qualify 480.236.2796

Click here for more information

http://realtytimes.com/rtpages/20090821_rates.htm

Low-priced foreclosures incite bidding wars

Each time Lance and Kelli Thorson thought they had found their first home, someone would outbid them. It's already happened at least 15 times.

This wasn't how it was supposed to be in a depressed housing market like Phoenix. Buyers are supposed to be able to walk in, and get pretty much whatever they want. Now, the Thorsons have taken up a tactic not seen since the heydays of the housing bubble - they are making offers on homes before they've seen them, as many as three per day.

"It's frustrating because we've jumped through all the hoops and there still isn't a reward," Kelli Thorson said.

In Phoenix suburbs and other areas of the nation saturated with foreclosed homes, low prices for bank-owned properties.are sparking bidding wars that drive up sale prices, entice investors and frustrate traditional buyers who make dozens of offers and still can't land a home.

Experts say the environment is strikingly similar to what they saw at the height of the real estate bubble.

"This market is about as abnormal as the hypermarket that we came out of a few years ago," said Jay Butler, director of the Realty Studies program at Arizona State University.

Just as they did during the boom period, investors now are stocking up on homes, driving up prices and forcing traditional buyers to the sidelines in some areas, Butler said.

Because they often pay cash and buy several houses at once, investors are attractive to banks trying to shed dozens of foreclosures, he said. Traditional buyers add time and hassle to the process because they have to be approved for a mortgage.

The market won't stabilize until investor influence diminishes and it is once again driven by buyers who plan to live in the home, Butler said.

The problem is centered in newer, lower-priced communities affordable for young families and other first-time home buyers. They're the same neighborhoods that were overrun with foreclosures as mortgage rates adjusted and home values dropped.

Homes are now listed at much lower prices than when they were sold just a few years ago. In the Phoenix area, the median resale home price last month was $125,000, down from a peak of nearly $265,000 three years ago. Prices have risen from a low of $115,500 in April, when agents say they began seeing a buying frenzy.

Real estate agents have been noticing the problem for the past two to three months, said Walter Molony, a spokesman for the National Association of Realtors.

It is especially acute in heavy foreclosure areas such as Las Vegas, Phoenix, southern California and southern Florida, where prices are correcting to levels well below their peak during the boom, Molony said. In those areas, it's not uncommon for sellers to get multiple offers.

The Thorsons thought they were ideal home buyers. They saved money, have good credit and little debt. But at house after house, the prices are being bid up above the asking price.

They made an offer on one bank-owned house, only to hear a counter offer that was $33,000 above the initial asking price of $117,000.

Federal legislation designed to help people stay in their homes has slowed the flow of foreclosures into the market, lowering the inventory and increasing the demand for remaining homes.

In Maricopa County, which includes metropolitan Phoenix, nearly 32,000 homes are on the market, down 30 percent from January.

In the Las Vegas area, home inventories are down nearly 10 percent since March, according to data from the Greater Las Vegas Association of Realtors. Last month, 4,702 homes were sold in southern Nevada, a record number; 74 percent were foreclosures.

Las Vegas real estate agent Jonathan Abbinante said he has clients who are making three offers a day on homes they've never seen. If they get a response, they'll check out the house and decide whether to continue or back out.

He said he sees a similar frenzy for houses he's selling.

"I sell homes right over the Internet," Abbinante said. "That's what I did in 2004."

Bidding wars often result in prices higher than a home's appraised value, putting traditional buyers at a disadvantage against cash buyers who don't need an appraisal to secure a loan. That's happening a lot lately, said Jerry Lou Davis, a real-estate agent in foreclosure-heavy Merced, Calif. She saw similar activity early in the housing bubble.

For the Thorsons, with a lease expiring next month and a second child on the way, the pressure to find a home is growing. Kelli is eager to paint and decorate. She already has plans mapped out for their 2-year-old daughter's room.

"Buying a first home is supposed to be a really exciting thing to do for a family," Lance Thorson said. "But all the hoops you have to jump through kind of take away from that excitement."

http://www.azcentral.com/business/articles/2009/07/20/20090720home-buyingfrenzy20-ON.html

Valley's home sales up in June

Here are some more positive signs from metropolitan Phoenix's housing market, which may not be recovering but doesn't appear to be deteriorating any more.

Home sales climbed again in June to reach 9,614, according to the Information Market/Cromford Report survey. That's an 11 percent increase from May's home sales. June is the sixth straight month home sales have climbed in the Valley.

The median Valley resale-home price also climbed in June, the first monthly price increase since late 2007. Last month, the median ticked up to $125,000 from $122,000 in May.

Foreclosures also climbed in June after dropping off for a few months. There were 5,149 trustee sales or foreclosures in the Valley, compared with 3,809 in May.

 Pre-foreclosures, or notice of trustee sales, continue to hover around 8,700.

But, so far, the additional foreclosures aren't creating an oversupply problem for the housing market.

Mike Orr, publisher of the Cromford Report, said the number of lender-owned properties listed for sale in the Arizona Regional Multiple Listing Service fell to 5,150 in June from 5,475 in May.

"So, the supply was huge, but the demand was even greater," Orr said about Valley foreclosure homes.  Also, the average price per square foot of foreclosures sold by lenders during June climbed to $65.64 in June from $63.77 in May.

HUD-fund changes 

First-time home buyers trying to purchase Valley foreclosure houses through a federal program should now find it easier.

In April, Arizona received $121 million in Neighborhood Stabilization funds from the U.S. Department of Housing and Urban Development. But for people to receive the funds to help them buy foreclosures, the federal agency was requiring lenders to discount their foreclosure properties 15 percent off the appraised value.

That was a major sticking point for many lenders, particularly in the Valley where investors are willing to pay cash and the full-appraisal price.

So, HUD recently changed to 1 percent the discount required by lenders.

The Arizona Housing Department recently launched its Neighborhood Stabilization program for home buyers to purchase foreclosure properties in Maricopa and Pima counties.

Qualifying buyers can receive up to 22 percent of the purchase price on certain foreclosure homes.

The state agency reports more than 20 families are in the process of purchasing a foreclosure home through its Neighborhood Stabilization program.

Check out the Web site www.YourWayHomeAZ .com to see if you qualify for the money to buy a foreclosure home.

http://www.azcentral.com/arizonarepublic/business/articles/2009/07/08/20090708biz-catherine0709.html