Home Resales, Leading Index Probably Rose: U.S. Economy Preview

Home resales in the U.S. probably rose in June and a gauge of the economic outlook improved, signaling the recession may soon be over, economists said before reports this week.
By: Shobhana Chandra: Bloomberg.com
Purchases of previously owned homes climbed to an annual rate of 4.83 million, the highest level since October, according to the median of 57 estimates in a Bloomberg survey before the National Association of Realtors’ report on July 23. Figures tomorrow may show the index of leading indicators climbed for a third consecutive month.

Mounting evidence that housing is stabilizing is bolstering forecasts that government stimulus efforts will gain traction in coming months and lift the economy from the worst slump in five decades. Other reports may show rising joblessness is weighing on Americans’ moods, tempering optimism about any rebound.

“The end of the recession could be pretty close,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “We’re getting near the bottom in housing. It’ll still be a very gradual recovery for the economy, with a labor market that’s very weak.”

Reports last week corroborated that the housing slump, now in its fourth year, is dissipating. Housing starts unexpectedly jumped in June to the highest level since November as construction of single-family dwellings climbed by the most since 2004. Building permits, indicating future construction, rose the most in a year.

Signs of Stability

The National Association of Home Builders/Wells Fargo index of builder confidence increased this month to the highest level since September.

One reason for the projected increase in home resales is that prospective buyers are taking advantage of the plunge in prices caused by the foreclosure crisis. Filings reached a record in the first half of 2009, according to RealtyTrac Inc., an Irvine, California-based seller of default data. More than 1.5 million properties got a default or auction notice or were seized by banks in the six months through June.

The New York-based Conference Board’s leading index, which points to the direction of the economy over the next three to six months, rose 0.5 percent last month after a 1.2 percent increase in May, according to the survey median.

The jump in building permits was probably one of the biggest contributors to the predicted gain in the leading index, economists said. Fewer jobless claims and higher stock prices were also likely drivers.

Stocks Rise

Stocks have gained on optimism an economic recovery is at hand. The Standard & Poor’s 500 Index is up 39 percent since reaching a 12-year low on March 9.

A July 24 report may show the Reuters/University of Michigan final index of consumer sentiment fell in July after four consecutive gains, economists predicted. A preliminary reading dropped to the lowest level since March.

The U.S. has lost about 6.5 million jobs since the recession began in December 2007. Economists in a separate survey taken by Bloomberg this month predicted the jobless rate will reach 10 percent by year-end from 9.5 percent in June.

Federal Reserve officials thought the economy was “still quite weak and vulnerable to further adverse shocks,” according to minutes of their June meeting released last week. Even so, the report also said “the economic contraction was slowing and that the decline in activity could cease before long.”

Companies seeing an improvement include CSX Corp., the third-largest U.S. railroad. Jacksonville, Florida-based CSX reported second-quarter profit that topped analysts’ forecasts, and said demand for hauling most freight is stabilizing. Railroad traffic is considered an economic bellwether.

“We’re seeing pretty good stabilization in our markets,” Chief Executive Officer Michael Ward said in an interview last week. “We don’t see any further deterioration, and we see some incremental improvement in the near future.”



Bloomberg Survey

================================================================
Release Period Prior Median
Indicator Date Value Forecast
================================================================
LEI MOM% 7/20 June 1.2% 0.5%
Initial Claims ,000’s 7/23 18-Jul 522 560
Cont. Claims ,000’s 7/23 11-Jul 6273 6390
Exist Homes Mlns 7/23 June 4.77 4.83
Exist Homes MOM% 7/23 June 2.4% 1.3%
U of Mich Conf. Index 7/24 July F 64.6 65.0
================================================================
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Using the Rout in Housing to Lower Taxes

New Tools Help Owners Get Reduced Valuations; Saving Big in New Jersey
By: M.P. MCQUEEN: WSJ.com
Kim Davidson lives in Bonita, Calif., a San Diego suburb hit hard by tumbling property values. Earlier this year, she made the best of a bad situation and appealed her tax assessment. The county reduced her annual tax bill by more than $1,000 to $3,500.

“I did the whole thing online and walked [my application] down to the mailbox, and a month and a half later, I learned I saved all that money,” says Ms. Davidson, a 44-year-old account manager for a business consulting firm, who purchased the home last year. “It was incredible.”

Tens of thousands of homeowners across the country are trying to wring something positive from an epic real-estate crash. In Cuyahoga County, Ohio, which includes Cleveland, hit hard by rising unemployment and foreclosures, nearly 23,000 property owners applied for property-tax reductions this year, up from an annual average of 1,700. Appeals in California’s Sacramento County soared to 12,000 in 2008 from a typical rate of 1,800 a year earlier.

The number of property owners seeking a tax reduction in Clark County, Nevada, which includes Las Vegas, soared to 6,000 this year from about 1,000 annually in recent years. About three-quarters of those who filed appeals succeeded in having their valuations lowered, most by 30% to 40%, county officials say. The county already had reduced valuations across the board for the vast majority of its residential property owners, says Michele Shafe, assistant director of the Clark County Assessor’s office. She said staffers had to work overtime and Saturdays to keep up with demand for reassessments.

Many of the Nevada appeals came from homeowners in recent developments. “That is where people were paying $400,000 for homes that are now worth maybe $150,000,” Ms. Shafe says.

Many homes nationwide were last appraised prior to the housing crash and are valued for tax purposes at levels higher than today’s home prices. “If you have a three-year period between assessments and the last one was in 2007, your assessment is still at the top of the market,” says Jacqueline Byers, director of research for the National Association of Counties in Washington, D.C.

Homeowners who want to appeal their assessment in many cases can handle the process themselves, although it’s important to be prepared before going in front of an appeals board, tax experts say. People who want help can hire a property-tax consultant or attorney, but should expect to pay a fee, often 25% to 50% of the amount saved in the first year. And enlisting the service of a real-estate appraiser can cost up to several hundred dollars.

There are also a growing number of local and national online services that use automated property-valuation models to help consumers determine whether they may be able to reduce their property taxes. Initial evaluations are often free at these sites, which include EasyTaxFix.com and LowerMyAssessment.com. For a fee of $50 to $100, users can obtain forms with data already filled in and instructions on how to appeal, and a list of recent sales of comparable properties. Ms. Davidson of Bonita used EasyTaxFix.com to help with her appeal.

Such online services may be able to give you a convenient ballpark estimate of whether your home is overassessed. Tax officials say these sites’ results can be supplemented with information from other sources, such as local real-estate agents. Government tax officials also warn that scam artists have been trolling developments in California and elsewhere touting phony property-tax reduction services in direct mailings.

Nick Osnato, a real-estate appraiser in Egg Harbor Township, N.J., says he conducted his own appeal in March and succeeded in getting his tax assessment lowered by $30,000, saving him about $150 a month in property taxes.

“I looked for sales of homes that were the same size as mine, with the same lot, but that had a lower assessment. That’s it,” he says. Mr. Osnato estimates home values in New Jersey are down between 10% and 20% from a year ago, depending on the area.

Winning an appeal mainly requires producing enough evidence to convince the tax assessor or an appeals board that your property assessment is based on inaccurate or outdated information, or is unfairly high compared to similar properties. In some areas, homeowners have as little as two weeks to file a notice of appeal after receiving their tax bill, but 30 to 60 days is more common. That means homeowners have to be ready to scramble when the tax bill comes.

Check on whether you qualify for special property-tax reduction programs such as special exemptions for people age 65 and over. Then, examine property records for inaccuracies, especially square footage. The assessor keeps on file a property record-card that contains your lot number, zoning category, address, sales records, land value and dimensions, as well as significant features as recorded by the town appraiser. Check it closely for errors, including inaccurate descriptions of the property (say, a three-car garage instead of two). Also check whether significant defects like a leaky basement, which could lower the value of the property, are on record. Nowadays, many municipalities put this information online.

While you are at it, check the assessor’s math, particularly with respect to assessment formulas. Some areas use full-market value, replacement value or sales price. Others use a fraction of the market value.

Next, locate three to five comparable properties and check your property against them, making adjustments for differences. Sales data are available from your local government, or a licensed real-estate agent.

“Look for disparities that cannot be explained away, like the age of other properties or better lot configuration, or view. If those things can’t explain why the assessment is so much higher than others, you may have grounds to appeal on equitability,” says Pete Sepp, spokesman for the National Taxpayers Union, an advocacy group.

If you think your property value is unfairly high, your next step is to contact your local assessor. If the property information on record is inaccurate, the assessor may be able to lower your assessment without a formal appeal. But if an appeal before an appeals or equalization board is necessary, you will have to produce evidence to support your complaint. Bring an appraiser’s report, if you have one, and records of comparable sales along with any other supporting documentation, such as photos, a surveyor’s report and contractors’ estimates. If your appeal is turned down, additional appeals usually are heard by a state court.

For more information about how to file an appeal, a brochure is available for $6.95 from the National Taxpayers Union at www.ntu.org.

Experts say there are few drawbacks to applying to reduce your tax assessment. However, if you made additions and improvements to your home that were never properly recorded with your town—usually through a building permit—you might not receive a reduction, and could conceivably face an increased assessment.

Robert Chambers, administrator of the Cuyahoga County Board of Revision, which handles appeals in the Cleveland area, says the most common mistake homeowners make is failing to bring enough evidence about the house.

“Most of the time if a person is denied, it is because of lack of evidence,” Mr. Chambers says. “They say here is a similar bungalow or ranch, but they don’t adjust for age, square footage, etcetera, which is everything that a certified appraiser must do,” he says.

He suggests refraining from using a hearing as a forum to vent your rage at high taxes. “You are filing a legal affidavit that says the auditor’s value is wrong and I have evidence to show you that,” he says.
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Foreclosure scams targeted in U.S., state and local crackdown

Under Operation Loan Lies, 189 lawsuits, cease-and-desist orders and other legal actions have been filed in 20 states.
By: Nathan Olivarez-Giles: latimes.com
In Southern California, prosecutors have moved against 14 firms and 21 people.

For Rene Ruelas, the calls came faster than weeds sprouting in the yard of an empty house.

Foreclosure was looming for the Buena Park home that Ruelas shared with his wife, Rose, and four children. The longshore mechanic was headed into his fourth month without a paycheck because of a workers' compensation dispute as he recovered from his second knee surgery in a year. He was desperate.

"They made it seem so simple," he said of the telephone solicitations that began late last year. "They said they were given my information from the bank and that I just had to pay the money upfront and they'd do all the footwork."

Ruelas said he paid about $4,000 over five weeks to a company that never even contacted his lender to modify his home loan.

Now Ruelas and his family are on the cover of a DVD the Federal Trade Commission is sending out in an effort to curb the calls and mailers that have helped dupe hundreds of thousands of homeowners out of hundreds of millions of dollars.

The DVD - along with a flurry of lawsuits - was unveiled Wednesday as a part of Operation Loan Lies, a nationwide crackdown by federal, state and local authorities on those who prey on homeowners desperate for mortgage relief.

"At the moment, there are more scammers than there are government officials going after them," California Atty. Gen. Jerry Brown said at a news conference in downtown Los Angeles. "There are more of these rats coming out of these holes than we can stomp on, but we'll keep doing the best we can."

Although the announcement was made Wednesday, the operation has been underway for weeks, FTC Chairman Jon Leibowitz said.

So far, 189 lawsuits, cease-and-desist orders and other legal actions have been filed in 20 states as a result of Operation Loan Lies, officials said.

In Southern California, prosecutors have taken legal action against 14 companies and 21 people accused of running loan-modification scams that ripped off thousands of struggling homeowners looking to avoid foreclosure.

In documents filed in U.S. District Court in Los Angeles and Orange counties, Brown and the FTC alleged that the California firms charged $500 to $5,500 in upfront fees, often promising to get lenders to modify mortgages to make payments more affordable - and never delivered.

For a upfront fee of $3,500, one alleged victim was promised a 40% reduction in her mortgage principal and a $2,000 reduction in her monthly payment by U.S. Homeowners Assistance, one of the lawsuits said. After learning in April 2008 that her loan modification request had been denied, the woman discovered that the Irvine company had forged her signature and falsified her financial information, the suit said.

Leibowitz said that homeowners should be wary of loan consultants requiring payment before services are performed. Federal and California lawmakers are working on rules to block loan modification services from demanding upfront payments.

Hundreds of thousands of homeowners have been victimized by loan modification scams, Leibowitz said, estimating monetary losses in the hundreds of millions of dollars. And the fraudulent schemes are more rampant in Southern California than in any other part of the U.S., he said.

"Part of the reason why we're out here today is because California consumers have been among the most hard hit and also because a lot of these malefactors are based in Orange County," Leibowitz said. "It's one of the hotbeds of mortgage scam activity."

Brown and the FTC are demanding millions in civil penalties and restitution for homeowners as well as permanent injunctions to prevent the defendants and companies from offering mortgage-relief programs.

Firms named in the California suits included U.S. Homeowners Assistance (also known as Statewide Financial Group Inc.); We Beat All Rates; U.S. Homeowners Preservation Center; U.S. Foreclosure Relief Corp. (also known as Lighthouse Services and California Foreclosure Specialists), based in Orange; Home Relief Services, with offices in Irvine, Newport Beach and Anaheim; RMR Group Loss Mitigation, with offices in Newport Beach, Orange, Huntington Beach, Corona and Fresno, and its lawyers at Shippey & Associates and Arthur Aldridge; United First Inc., based in Los Angeles; Payment Relief Services Inc. of Costa Mesa (also known as Mercury Financial Services Corp.); and Living Water Lending of Newport Beach.

Representatives for the accused companies and individuals did not return requests for comment.
Twenty-three state and local agencies from 18 states are working with the FTC under the effort, and that number is expected to grow dramatically by the end of the year, Leibowitz said.

The Ruelas family was lucky. The FTC directed them to free counseling offered by the U.S. Department of Housing and Urban Development, which helped save their home of 13 years.

"The only thing real in that deal was my money on the table," Ruelas said. "Everything else was a lie. What matters is that we still have our house and hopefully I'll return back to work next month."
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Southland home sales highest since late ’06; median price up again

Southern California home sales rose in June to the highest level in 30 months as the number of deals above $500,000 continued to climb.
DQNews.com
June’s sales gain, plus another rise in the region’s median sale price, indicate buyers responded to price cuts on mid- to high-end homes and found it easier to secure financing for pricier abodes, a real estate information service reported.

A total of 23,262 new and resale houses and condos closed escrow in San Diego, Orange, Los Angeles, Ventura, Riverside and San Bernardino counties last month. That was up 12.0 percent from 20,775 in May and up 29.0 percent from a revised 18,032 a year ago, according to San Diego-based MDA DataQuick.

Sales have increased year-over-year for 12 consecutive months.

June’s sales were the highest for that month since 2006, when 31,602 homes sold, but were 17.7 percent below the average June sales total since 1988, when DataQuick’s statistics begin. June sales peaked at 40,156 in 2005 and hit a low last year.

Foreclosures remained a major force in June, but their impact on the resale market eased for the third consecutive month.

Foreclosure resales – homes sold in June that had been foreclosed on in the prior 12 months – represented 45.3 percent of Southland resales last month, down from 49.7 percent in May and down from a peak 56.7 percent in February this year. Last month’s level was the lowest since foreclosure resales were 43.7 percent of resales in July 2008.

As the influence of deeply discounted foreclosures in lower-cost areas has waned in recent months, sales in higher-cost housing markets have increased and accounted for a greater share of total transactions.

Resales of single-family houses priced $500,000 and above rose to 19.6 percent of all existing houses sold in June, up from 18.0 percent in May but still down from 29.2 a year ago. The last time the $500,000-plus market made up more than 19 percent of sales was last October, when it was 19.9 percent. Sales of $500,000-plus houses dipped to as little as 13.4 percent of sales in January this year.

The recent shift toward higher-cost markets contributing more to overall sales has put upward pressure on the region’s median sale price – the point where half of the homes sold for more and half for less. The median dived sharply over the past year not just because of price depreciation but because of a shift toward an unusually large share of sales occurring in lower-cost, foreclosure-heavy areas.

The median price paid for all new and resale houses and condos sold in the Southland last month was $265,000, up 6.4 percent from $249,000 in May but down 26.4 percent from $360,000 a year ago. It was the second consecutive month in which the median rose on a month-to-month basis. Before May’s 0.8 percent increase over April, the median hadn’t risen from one month to the next since July 2007.

Last month’s median was the highest since it was $278,000 last December, but it stood 47.5 percent below the peak $505,000 median reached in spring and summer of 2007.

“The rising median should still be viewed mainly as a sign the market’s moving back toward a more normal distribution of sales across the home price spectrum. Sales in many higher-cost neighborhoods couldn’t have gotten much lower, so this recent uptick in activity should come as no surprise. The recession and problem mortgages are fueling more high-end distress, hence more high-end ‘bargains.’ What’s missing, still, is a wide-open financing spigot for the would-be buyers of these more expensive homes,” said John Walsh, DataQuick president.

There were signs last month that credit was flowing a bit more easily for high-end buyers: The share of Southland purchase loans above $417,000 rose to 14.8 percent in June, the highest since it was 15.6 percent last August. “Jumbo” mortgages needed to buy pricier homes have been more expensive and much harder to obtain since August 2007, when the credit crunch hit. Before then, nearly 40 percent of Southland sales were financed with jumbo loans, then defined as over $417,000.

Bank of America makes the most home purchase loans in Southern California with about 20 percent of the market. Wells Fargo has 10 percent of the market.

In lower-cost “starter” housing markets, many first-time buyers continued to choose government-insured FHA financing. Such loans were used to finance 36.8 percent of home purchases last month, down slightly from 37.4 percent in May but up from 19.7 percent a year ago.

Absentee buyers, including investors who will have their property tax bills sent to a different address, bought 18.6 percent of the Southland homes sold last month. That’s up from 16.1 percent a year ago but down from 19.5 percent in May. The monthly average since 2000: 15 percent. Southland homebuyers appearing in public records with “LLC” in their names, meaning a limited liability company (used by some investor groups), accounted for about 1.5 percent of June home sales (345 sales). That’s down from a high of 2 percent in April but still well above the average of 0.6% of monthly sales this decade.

MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The year-ago numbers for Orange County and the region have been revised to include a late data update.

The typical monthly mortgage payment that Southern California buyers committed themselves to paying was $1,193 last month, up from $1,052 the previous month, and down from $1,762 a year ago. Adjusted for inflation, current payments are 46.0 percent below typical payments in the spring of 1989, the peak of the prior real estate cycle. They are 55.7 percent below the current cycle's peak in July 2007.

Indicators of market distress continue to move in different directions. Foreclosure activity remains near record levels, while financing with adjustable-rate mortgages is near the all-time low but has recently edged higher. Financing with multiple mortgages is low, down payment sizes and flipping rates are stable, and non-owner occupied buying is above-average in some markets, MDA DataQuick reported.


Sales Volume Median Price
All homes Jun-08 Jun-09 %Chng Jun-08 Jun-09 %Chng
Los Angeles 5,678 7,636 34.5% $415,000 $320,000 -22.9%
Orange 2,538 2,958 16.5% $470,000 $418,000 -11.1%
Riverside 3,757 4,694 24.9% $275,000 $185,000 -32.7%
San Bernardino 2,215 3,438 55.2% $240,000 $140,000 -41.7%
San Diego 3,077 3,692 20.0% $370,000 $314,250 -15.1%
Ventura 767 844 10.0% $420,000 $365,000 -13.1%
SoCal 18,032 23,262 29.0% $360,000 $265,000 -26.4%
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Tips for Parents Buying Homes for Children

With home prices low, now could be a good time for parents to give their children a home or even an investment property.
REALTOR®Magazine
Here are some suggestions for managing the tax consequences from Mark Luscombe, tax analyst with Wolters Kluwer.

· Give a cash gift. Individuals are allowed to gift up to $13,000 per person in a
  given year without incurring gift tax. That means a couple could give their
  offspring and spouse $52,000 in a single year to go toward a down payment.

· Lend money. The government requires that family members meet or exceed minimum
  loan rates to avoid having the loan be considered a gift. The rates are currently
  low. One way to handle this is for parent to use the $52,000 gift exclusion to
  forgive both interest and principal.

· Use a trust. Set up a qualified personal residence trust, or QPRT. You’ll need an
  attorney to handle this transaction, but in a nutshell, parents put the home they
  want to give their children into a trust. At the end of a pre-set term, the home
  passes to the children with no taxes due.

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Pending Home Sales Show Uptrend

Pending home sales rise for fourth consecutive month with very favorable housing affordability and a first-time buyer tax credit boosting activity.
By: Walt Molony: NATIONAL ASSOCIATION of REALTORS®
Pending home sales show a sustained uptrend, rising for four consecutive months with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the National Association of Realtors®.

The Pending Home Sales Index,1 a forward-looking indicator based on contracts signed in May, increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004.

Lawrence Yun, NAR chief economist, cautions that there could be delays in the number of contracts that go to closing. “Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” he said. “Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”

The Pending Home Sales Index in the Northeast rose 3.1 percent to 80.9 in May and is 6.8 percent above a year ago. In the Midwest the index slipped 1.3 percent to 89.2 but is 11.4 percent above May 2008. The index in the South declined 1.7 percent to 92.6 in May but is 7.9 percent higher than a year ago. In the West the index rose 2.2 percent to 96.9 and is 0.7 percent above May 2008.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said the appraisal issue is complicated. “We see that distressed homes often are selling for 20 percent less than normal homes in the same area, but some appraisals don’t distinguish between traditional homes and distressed property,” he said. “In many cases appraisers from outside the area are being used, but as everyone knows real estate is local and appraisals should be done by an expert with local expertise.”

McMillan said sellers shouldn’t hesitate to speak with an appraiser about their home. “Sellers should feel free to tell an appraiser about improvements and renovations to their home, and how it compares with other homes in the neighborhood,” he said.

“Also, if recent sales in the neighborhood were discounted, but not similar to your home in terms of quality or condition, that should be pointed out. It wouldn’t hurt to put all this in writing, especially if an appraiser is not familiar with your area. A Realtor® could offer guidance and information to help you with this process.”

NAR’s Housing Affordability Index2 remains at historic highs. The affordability index fell to 171.6 in May from an upwardly revised 178.8 in April, which was the highest on record dating back to 1970. “Under these conditions the typical family would devote only 14.6 percent of gross income to mortgage principal and interest, which is one of the lowest percentages on record,” Yun said.

The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income.

A median-income family, earning $60,800, could afford a home costing $296,700 in May with a 20 percent downpayment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small downpayments are roughly 80 percent of what a median-income family can afford. The affordable price was significantly higher than the median existing single-family home price in May, which was $172,900.

The first-time buyer tax credit also is benefiting the market. “Strong activity by entry level buyers is helping to absorb inventory and allow some existing owners to make a trade,” Yun said.

Existing-home sales should trend up through the end of the year, with normal local market differences. “The big question is how much the appraisal issue will impact the ability of contracts to go to closing,” Yun said. “We are currently conducting a study to assess the degree to which new appraisal rules are impacting home sales.”

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
# # #
1 The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

2 The Housing Affordability Index is a relative index where a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced existing single-family home, taking into account the relationship between median home price, average effective interest rate for loans closed on existing homes, and median family income. The higher the index, the better housing affordability is for buyers.

The calculation assumes a downpayment of 20 percent and a qualifying ratio of 25 percent of gross income for mortgage principle and interest payments. The index is a general gauge with conditions varying widely around the country. Affordability conditions are lower for first-time buyers with smaller downpayments and less income.

Monthly publication of the index began in 1981 with annual data calculated back to 1970.
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Want $8,000 back on your taxes? First Time Home Buyer Tax Credit

2009 Tax Credit for First Time Home Buyers.
By: Keller Williams Realty, Inc.
Would you like $8000 back on your taxes this year?

We've been hearing a lot of questions about the new tax credit. Who qualifies? How does it work? How long will it last? Here, we’re taking an in-depth look at the $8,000 tax credit for first time home buyers.

According to the new legislation, a first time home buyer is defined as someone who has not owned a principle residence in the past three years. Those three years are counted up to the date you take possession of the house you buy in 2009. This means that even if you’ve owned a home in the past, you can still take advantage of the tax credit as long as you haven’t purchased a primary residence since 2006.

The same goes for married tax payers - they must both be first time home buyers. For non-married joint buyers, only one of them needs to be a first time home buyer, or someone who hasn’t owned a primary residence in the past three years.

Qualifying homes include:

    · New homes
    · Homes that are being re-sold
    · Condos
    · Townhomes

The main restriction is that the credit is only for those who buy a home as their primary residence. So investors looking to buy a rental property would not qualify for the credit. However owning a vacation home or a rental property already does not neccessarily disqualify you from taking advantage of the credit (as long as you haven’t owned a primary residence in the past three years).

A Look at the Numbers

The tax credit is equal to 10% of the purchase price of the home, up to $8,000. The amount of the credit you can qualify for is related to how much money you earn. Here’s how the credit is scaled:

    · Single home buyers earning 95K or less qualify. If you make 75K or less, you
      qualify for 100% of the $8000. If you make halfway, 85K, you qualify for 50%
      or $4000. The credit phases out gradually between 75K and 95K of income. For
      example, if you make halfway between the income limits, 85K, you qualify for
      up to half of the credit.

    · The same rate applies for married couples and joint buyers whose incomes
      limits are doubled to $150,000 to $170,000. Married couples or joint buyers
      whose incomes are less would receive the full $8000 credit.  At an income
      level of  $160,000, halfway between 150 and 170, the buyers would receive half
      the credit – or $4,000.  And the credit phases out altogether at $170,000.

This credit represent a significant amount of money. One of the biggest points of difference for the new credit from the one congress passed in July of 2008, is that the new credit does not have to be paid back.

In addition, it's refundable, which means that if you’ve paid all your taxes as you go with an automatic payroll deduction, you would receive an $8,000 check from the IRS.

If you're committed to buying a house in 2009 and want to use the $8000 tax credit for a downpayment, consult with your certified public accountant.

In Summary

Qualifying home buyers will need to make their home purchase between January 1, 2009 and December 1, 2009. And the home has to remain their principal residence for the following three years.

The new tax credit coupled with historically low mortgage rates and rising affordability, offers buyers a great opportunity if they act fast.

If you’re interested in learning more about the new tax credit or about homes in your area, speak with me soon.
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First-Time Buyers' Tax Credit

Summary of First-Time Homebuyer Tax Credit
By; Marcie Geffner: Thirdage.com
The government's first-time homebuyer tax credit is not really a credit, it's a loan that will need to be repaid. Make sure you read the fine print.

If you're planning to buy a home in the next 10 months, you may be eager to take advantage of the federal government's latest effort to jump-start the nation's moribund housing markets: A tax credit of up to $7,500 for certain homebuyers.

The credit may appear to be an attractive opportunity, but you should be sure you read the fine print before you elect to claim it on your federal tax return.

"The big story is that it is not a credit. It is a loan, and you are going to have to pay it back, so you'd better make sure that you have the money," says John W. Roth, senior tax analyst at CCH Group, a Riverwoods, Ill.-based company that provides tax software, services and information.

"If you claim the credit, you could end up with some tax issues a couple of years down the road because of the tax liability, and if you sell the house, there is a possibility that you could have a bigger tax bill."

With that warning in mind, here's a summary of the rules.

First-time homebuyer tax credit rules

1. The tax credit is not a deduction

2. The tax credit is repayable to the federal government

3. Selling your home before the 15 years are up?

4. The credit also will be written off if you die before it's repaid

5. The tax credit is restricted to 'first-time homebuyers

6. The tax credit may be taken only for the purchase of a principal residence

7. Modified adjusted gross income limits

8. Some may get a partial credit

9. Technically, the credit is equal to 10 percent of the purchase price of the home

10. The home must be purchased on or after April 9, 2008

11. Buying a home in 2009?

12. The credit cannot be used with mortgage-revenue bond financing

1. The tax credit is not a deduction, but rather a true credit in the sense that your federal income tax liability will be reduced dollar-for-dollar up to the amount of the credit you're entitled to take. For example, if you owed federal income tax of $8,000 and you took the maximum credit of $7,500, your tax bill would be cut to $500. The credit is also refundable: If you owed, for instance, $1,500 in income tax and, again, you took the maximum credit, your tax liability would be zeroed out and you'd get a check for $6,000 from the government.

2. The tax credit is repayable to the federal government. The total credit is divided into small bits of 6.67 percent, each of which is due annually for 15 years. That means if you claimed the maximum credit of $7,500, you'd have an additional tax liability of $502.50 each year for 15 years. No interest is charged.

3. If you sell your home before the 15 years are up, the remainder of the credit that you haven't yet repaid will become due. If you sell your home at a loss, the government will write off the balance of the credit that you still owe.

4. The credit also will be written off if you die before it's repaid. Special rules apply to transfers of property between spouses or incident to divorce; or if the home is subject to "involuntary conversion," such as being destroyed by a natural disaster; or is seized by a government authority though the exercise of eminent domain.

5. The tax credit is restricted to "first-time homebuyers," but the definition includes anyone who didn't have an ownership interest in a principal residence during the prior three years. If you're married, you and your spouse must fit that definition. An ownership interest in an investment property or vacation home is not a disqualification. The rules aren't entirely clear as to how the tax credit will be allocated if two unmarried people buy a home together and only one of them meets the definition.

6. The tax credit may be taken only for the purchase of a principal residence, which means a home where you plan to live most of the time. The home may be a detached house, condominium, town house, manufactured (aka mobile) home or houseboat. It must be located in the United States. A home purchased from a "related party" (e.g., a parent or sibling) is not eligible.
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Mortgage Applications Increase as Rates Decline

Mortgage applications bounced back last week after nearly a month in the doldrums when the number of applications fell to a seven-month low.
By: Mortgage Bankers Association: REALTOR®Magazine
The market index compiled by the Mortgage Bankers Association rose 6.6 percent on a seasonally adjusted basis to 548.2 points from 514.4 points the previous week.

On an unadjusted basis, the index increased 6 percent compared with the previous week and rose 17.2 percent compared with the same week a year ago.

Both purchases and refinances were up with the purchase share increasing 7.3 percent and refinances rising 5.9 percent.

Average mortgage rates were as follows:

*30-year fixed-rate mortgages decreased to 5.44 percent from 5.50 percent.
*15-year fixed-rate mortgages decreased to 4.93 percent from 4.99 percent.
*1-year ARMs remained unchanged at 6.54 percent.
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Southern California home prices rise slightly in May

The median price was $249,000, which is up less than 1% from $247,000 in April. It was the first month-to-month gain since July 2007.
By: Peter Y. Hong: latimes.com
Southern California's median home price rose slightly in May for the first time in nearly two years. But the increase was more reflective of a change in the types of homes sold than an end to falling values, a real estate research firm reported Wednesday.

The $249,000 median price in May was up less than 1% from April's $247,000 figure, and marked the fifth-straight month the median has held at roughly $250,000, according to San Diego-based MDA DataQuick.

The modest rise reflects increasing purchases at the high end of the housing market, where sales have been virtually frozen. For much of the last year, most home sales have occurred in the low end of the housing market, with banks unloading foreclosed properties at deep discounts, dragging the median price down.

Now, more expensive properties are selling, which raises the median, through a market paradox: many of those homes sold after owners cut prices to lure buyers. Still, stirring sales activity at the high end is a sign that the market is crawling toward equilibrium.

"As more sellers get realistic, more buyers get off the fence and more lenders offer reasonable terms for high-end purchase financing, we'll see a more normal share of sales in the more established, higher-cost areas that have been nearly comatose," said John Walsh, president of San Diego-based MDA DataQuick.

A slowly growing number of buyers like Geoff Graham, 40, is changing the mix of homes sold. Graham and his husband, James Tee, 35, bought a new three-bedroom row house in San Diego's Hillcrest neighborhood last month for $750,000.

The couple had admired the place a year ago but couldn't believe the seller wanted $995,000. "I thought, 'What a cool place, but who in the world would ever pay so much money for it ?' " Graham said.

The answer was no one.

In January, Graham and Tee saw that another row house in the development had sold for $760,000 and decided that price was within their comfort zone. The $10,000 state tax credit for new-home purchases also "made us feel a little more comfortable paying that price," Graham said.

Homes priced at $500,000 and above accounted for 17% of Southland home sales in May, up from 15% in April, DataQuick reported.

The median price is the level at which half of the homes are sold at higher prices and half at lower prices. As higher-priced homes have trickled into the sales mix, foreclosures are less dominant. In May, foreclosed homes accounted for 50% of sales, down from 54% in April and a peak of 57% in February.

The April-to-May Southern California median price increase was the first month-to-month gain since July 2007, when it moved from $502,000 to $505,000, which was the market's peak.

May's price was a 51% drop from that peak, and it was down 33% from the May 2008 median price of $370,000.

Lower prices continued to drive purchases: the 20,775 Southern California homes sold in May was up 1% from April and 23% above the May 2008 sales total.

The housing market "is starting to reach the bottom; prices have reached levels where they make sense again," said Christopher Thornberg, a Los Angeles economist who was an early forecaster of the housing bubble.

"But hitting the bottom is different from coming off the bottom," he said, noting that prices will probably remain low as long as "we still have a massive wave of foreclosures to deal with."

About 150,000 homes in California were in some stage of foreclosure in May, according to ForeclosureRadar, an online seller of default data.

The median price climbed most in the region's more affluent counties. Orange County posted the largest monthly median price increase among the Southern California counties. Its $410,000 median price was up 8% over its April median of $380,000. Ventura County's median was up 4% in May, to $355,000 from $340,000 in April. San Diego also saw a modest 2% price increase in May, to $295,000 from $290,000 in April.

Those counties rank first, second and third, respectively, in household income among the six counties, according to the U.S. Census Bureau.

The median home price in May essentially matched April's figure in Los Angeles ($300,000), Riverside ($180,000) and San Bernardino ($137,000) counties.

San Diego County may be a bit ahead of the local housing market curve: Its median sale price peaked at $517,500 in November 2005. That peak occurred 1 1/2 years before Los Angeles County hit its high median price in May 2007, at $550,000, according to DataQuick.

Those 18 additional months of price declines may have worn down the resistance of some San Diego sellers who until recently had expected to sell properties for near-peak prices. Kris Berg, a San Diego broker who works in the Scripps Ranch community, said homes in her area listed for around $700,000 are now selling quickly.

Those same homes might have sold for more than $900,000 at the height of the market, and until recently sellers continued to demand such prices, with few if any takers.

"A year ago, two years ago, so many sellers were still insisting their house was special. Now, the ones who want to sell are getting it; they're pricing their homes more appropriately," Berg said.
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Vampire power costs

There's a lot of interest in the fact that many electronic devices in our homes are using energy even while they are turned off or not being used.
By: Lori Bongiorno: YAHOO! GREEN
But, how much money do these energy vampires really suck up?

For many people, the standby power used by one device will seem minuscule, but the costs can add up when you take into account just how many things we all have plugged in. What's more, many households, have multiple televisions, computers, cordless phones, and others.

All told, the money wasted by an average U.S. household on standby power each year could easily be used to purchase an iPod Shuffle or in some cases even a Nano.

Below is a list of the annual average costs for many household gadgets that are turned off and plugged in. Just add up the costs for everything you have plugged in at home to find out how much standby power costs you each year.

Keep in mind that these are just averages, and in some categories there are big differences between most and least efficient products. How much energy each of your devices consumes will depend on both the device itself and your local electricity costs.

We calculated the following averages based on energy use stats from the Lawrence Berkeley National Laboratory and American Council for an Energy-Efficient Economy using a price of 11 cents per kilowatt-hour.

Home Entertainment

* CRT TV: $1.00
* LCD TV: $2.97
* Plasma TV: $2.97
* DVD: $1.53
* VCR: $4.63
* Digital cable box: $17.65
* Satellite cable box: $15.50
* DVR: $36.63
* Digital cable box with DVR: $43.01
* Set-top satellite box with DVR: $27.52
* Video game console: $1.00
* Portable stereo: $1.64
* AM/FM tuner: $1.11
* CD player: $4.99

Home Office

* Desktop computer: $3.96
* Laptop computer: $8.81
* Laptop charger (unattached to laptop): $4.38
* LCD monitor: $1.12
* Printer: $1.98
* Multifunction printer, scanner, copier: $5.21
* Computer speakers: $1.98

Other

* Coffee maker: $1.12
* Microwave oven: $3.05
* Cordless phone: $1.98
* Answering machine: $1.99
* Power tool: $3.96
* Handheld vacuum: $2.97
* Electric toothbrush: $1.98
* Cell phone charger (unattached to phone): $0.26

Costs start adding up when you take into account electronics that may be left on when you're not using them.

Here's a small sampling:

* Desktop computer: $71.00
* Video game console: $23.10
* VCR: $7.69
* DVD player: $7.46
* CD player: $8.53

There's little consumers can do about set-top cable, satellite, and DVR/TiVo boxes. Television shows can't be taped if boxes are unplugged and it typically takes a long time to reboot boxes. Since it's not practical to unplug them, the best you can do is remember to turn off the box when you're not actively watching TV.

When you add up how much money every U.S. household spends on standy power it amounts to about $4 billion a year of wasted energy.

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Bernanke Easing Mortgage Rates for Consumer-Driven Rebound

U.S. Federal Reserve Chairman Ben Bernanke is delivering what he promised five months ago, record- low mortgage rates and a refinancing boom that’s putting cash in consumers’ pockets.
By: Kathleen M. Howley: Bloomberg.com
Fixed 30-year mortgage rates fell to a record low for the second consecutive week last week, hitting 4.78 percent, Freddie Mac said yesterday in a statement. The rates are the lowest in records dating to 1971, and come after Bernanke told Congress in November that helping the most creditworthy borrowers was essential to reviving the economy.

Mortgage applications in the U.S. rose for the fourth straight week last week as a decline in borrowing costs spurred homeowners to refinance, while purchases of new houses unexpectedly rose in February. The Fed’s effort to bring down fixed rates may give consumers as much as $25 billion, said Mark Zandi, chief economist of Moody’s Economy.com.

“It certainly gives further fuel to consumer spending,” said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies in Cambridge, Massachusetts. “It puts more money into circulation.”

The extra cash may help boost first-quarter consumer spending by 1 percent to 1.5 percent, said Barton Biggs, managing partner at New York-based hedge fund Traxis Partners LLC. Consumer spending accounts for about two-thirds of the U.S. economy.

Creditworthy Borrowers

Bernanke signaled the Fed’s effort to bring down fixed mortgage rates in Nov. 18 testimony to the U.S. House of Representatives’ Committee on Financial Services.

“It is imperative that all banking organizations and their regulators work together to ensure that the needs of creditworthy borrowers are met,” he said.

One week later, the Fed said it would buy up to $500 billion in home-loan securities, causing the biggest one-day drop in mortgage rates in at least seven years, according to Bankrate.com. On March 18, the central bank almost tripled the size of the program to up to $1.25 trillion in purchases during 2009. The intent is to lower rates and make real estate financing easier to get, the Fed said.

The plan to buy mortgage bonds this year is succeeding where $11.6 trillion of government lending, spending, and guarantees so far have failed.

‘Successful Effort’

“This has been the most successful effort, at least so far in this crisis, to shore up the economy,” said Zandi.

Bernanke’s mortgage purchase program may help curb a recession that is in its second year and being driven by the highest jobless rate in a quarter century and shrinking household wealth.

“If you throw enough money at one credit market, you will bring down the price,” said Gerald O’Driscoll, a senior fellow at the Cato Institute and former vice president of the Dallas Federal Reserve. “They are targeting the mortgage market in an attempt to speed the process of establishing a floor in the price of housing.”

Homeowners who refinance with a half-point drop in fixed rates may save $150 a month on a $300,000 mortgage, said Stephen Stanley, chief economist at RBS Securities Inc. in Greenwich, Connecticut, and a former Fed economist.

Home Prices

Cheaper financing may also help spark a turnaround in the housing market. Sales of previously owned homes rose 5.1 percent to 4.72 million at an annualized pace in February from the prior month as low mortgage rates spurred demand, the National Association of Realtors said. The NAR’s affordability index rose to a record in January, helped by lower home values and mortgage rates. The median U.S. home price in February was $165,400, the NAR said in a March 23 report, down 28 percent from its 2006 high.

Bernanke cited lower mortgage rates in testimony in February as evidence that Fed policies were working, noting that rates had fallen “nearly 1 percentage point” since the program was announced.

On April 1, Federal Reserve Bank of Cleveland President Sandra Pianalto said the Fed’s program was resulting in “encouraging signs” for the economy. Besides falling rates, “we are also beginning to see a resurgence in refinancing activity in the residential mortgage markets, spurred on by these lower rates,” she said.

The bankers’ group boosted its forecast for 2009 home-loan originations by $800 billion to $2.78 trillion last month as a wave of refinancing and low interest rates spur homeowners to seek out new loans. Refinancing will increase to $1.96 trillion in 2009 and purchase originations will total $821 billion, the group said.

The London interbank offered rate, or Libor, for three- month dollar loans dropped to 1.17 percent yesterday, down from 1.43 percent at the start of the year, showing banks have become more willing to lend.

TED Spread

The so-called TED spread, the gap between what banks and the Treasury pay to borrow money for three months, shrank to 96 basis points from 1.35 percentage points on Dec. 31. It touched a yearly low of 91 basis points on Feb. 2. The gauge reached a high of 4.64 percentage points in October, up from 1.35 percentage points on Sept. 12, the last trading day before Lehman Brothers Holdings Inc. filed for bankruptcy.

U.S. home prices fell 6.3 percent in January from a year ago, the smallest decline in five months, according to the Federal Housing Finance Agency in Washington.

“We have seen evidence that home sales are bottoming,” said Jim O’Sullivan, senior economist with UBS Securities LLC, in Stamford, Connecticut. “This should be positive.”
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Existing-home sales rise on deep discounting

Sales up 5.1% in February while prices drop 15.5% in past year, NAR says
By: Rex Nutting: MarketWatch.com
Sales of U.S. pre-owned homes rose 5.1% to a seasonally adjusted annual rate of 4.72 million in February, boosted by "deep" price discounts, the National Association of Realtors reported Monday.

It was the largest percentage gain since July 2003.

Sales are down 4.6% in the past year, the industry trade group reported. February's sales increased in all four regions as tracked by the NAR.

Sales of foreclosed properties or short sales accounted for about 45% of transactions last month the real estate trade group said. Distressed homes are selling for 20% below "normal market prices," the realtors said.

Economists surveyed by MarketWatch had been expecting sales to drop to a pace of 4.45million units from January's 4.49 million annual rate. See Economic Preview.

The median sales price dropped 15.5% in the past year to $165,400 - the second-largest year-over-year price decline on record, coming on the heels of January's 17.5% drop.

Inventories of unsold homes on the market rose by 5.2% to 3.80 million, equating to a 9.7-month supply at the February sales pace. Inventories, which are not seasonally adjusted, typically rise about 5% in February.

Inventories of existing homes can be fluid, as home owners or banks owning foreclosed homes wait for better market conditions before putting their houses up for sale. Any uptick in sales or prices could unleash a wave of homes on the market.

The realtors track only homes offered and sold through the multiple-listing services. Many foreclosures are handled through auctions or are being held off the market until prices improve.

The increase in sales is "obviously good news for the industry and the economy," even if sales remained "very soft," said Lawrence Yun, chief economist for the industry group.

He said he expects that provisions in the recently enacted economic-stimulus package would boost sales by about 1 million this year. The stimulus includes an $8,000 tax credit for first-time home buyers.

February details

Sales of single-family homes rose 4.4%. Condo sales also increased, up 11.4%.

Sales of single-family homes and condos increased by 15.6% in the Northeast, by 6.1% in the South, by 2.6% in the West and by 1% in the Midwest.

Sales in the West are up 30.3% compared with February 2008. In the past year, sales are down 10% in the South, 7.8% in the Midwest and 4.8% in the Northeast.
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Five warnings to heed if you're trying to buy a short-sale house

Short sales, slow sales
Check out short sale properties, but get ready to play the waiting game
By: Amy Hoak: MarketWatch.com
Those searching for the best housing bargains on the market might consider buying a short-sale property. But there’s an important qualification for buyers interested in going this route: They need plenty of patience...

In a short sale, a homeowner's lender agrees to accept less than is owed on the mortgage for the property. It's a useful alternative for borrowers underwater on their mortgage and on their way to foreclosure. As home prices continue to decline, short sales have become a viable option for those who need to sell.

"Over the past three to six months, the servicers have really become aware that short sales are the best way to reduce their losses... when a modification is not an option," said Travis Hamel Olsen, president of National Short Sale Center, a company that facilitates short sales nationwide on behalf of homeowners and real estate agents. The short-sale option also is less damaging to a seller's credit than a foreclosure, he said.

A short sale can also be attractive to a home buyer since the lender will often accept bids on the property that can be 10% or more below the market value, determined by the prices of comparable, nearby properties, Olsen said.

Although the mortgage balance is probably greater than the price a seller could expect in a traditional sale, the lender may be willing to take less than it's owed in a short sale if it can avoid the further expenses of foreclosing and taking over the property. The savings, however, often come at the expense of a home buyer's time.

"Short sales should be called long sales," said Leslie Tyler, vice president of marketing for ZipRealty. "In some cases, it could take months for a buyer to hear back from a lender."

For Kristine and John Williams the savings seem to be worth the wait.

Kristine Williams says they've found "the perfect house" in Brentwood, Calif., although the process is taking longer than they originally thought. The couple waited four months for an answer from the bank, and then had to revise their bid lower as the market continued to sour.

Their current bid is $550,000, on a home that was appraised at about $1 million three years ago. They're hopeful the current bid will be successful, but realize it could be months before they find out if the offer is accepted.

"In general, it takes a minimum of two months to get a response from the bank whether they will accept or counter your offer," said Rob Jenson, CEO of The Jenson Group, a Las Vegas-based real-estate firm. "That process could take longer."

Are the savings worth it to you? Consider these five caveats before shopping for a short sale:

1. You'll wait in the dark

Perhaps just as frustrating as the wait time is the fact that you likely won't be privy to details as the deal is progressing. That could mean going months without an update.

Banks are "ramping up their capability for short sales," said Dennis Green, general manager of ForeclosurePoint.com. But it hasn't made the process much easier.

"Where our buyers have been the most frustrated is the lack of status or information," Tyler said. Saying "we want an answer by this Friday or we're going walk... doesn't make a difference," Jenson said.

There are reasons for the wait: A lender could be considering multiple offers. If the seller had both a first and second mortgage, that could also make the process more complicated. The Williamses ran into both scenarios, slowing their process down - and that's not unusual. The homeowner also has to prove their financial hardship to the lender.

2. Banks will make you a deal, but within reason

There are deals to be found in short sales - but don't expect outright steals. A buyer needs to make a fair offer, based on comparable homes that have been sold recently, Jenson said. The offer should be aggressive, but not ridiculous, he said.

"The misconception is that banks should be happy to get it off the books," he said. "They are, but to a certain point."

Homes that have already been foreclosed on may be even less expensive than a short sale, Tyler said. But bank-owned properties also might be in worse shape, especially if the foreclosure home has been sitting vacant for some time, she added. It's important to consider the cost of necessary repairs before buying any distressed property.

3. Sales are 'as is'

In a short sale, it isn't likely that you will get allowances from the seller for repairs that are needed, as you might in a traditional sale, Jenson said. Do a home inspection and know what you're getting into, but remember that your bid is for the property "as is."

"The seller will not give you a credit for repairs," he said. "The last thing they will do is make repairs."

4. Have a back-up plan

Even if you decide to bid on a short-sale property, it might be best to keep looking anyway.

"There is no guarantee with short sales, and if the buyer is smart they will put an offer on a short sale they like and continue to look at properties that interest them," Olsen said. It isn't uncommon for people to find a home they like better and kill the short-sale deal, Green said.

That said, when a offer is accepted and earnest money is put down, remember that you risk losing those funds if you decide to walk away and buy another home, he added. It may take months before the deal closes, even after the offer is accepted.

5. It's not only about price

"One thing to not lose sight of is you're buying a house to live in. Buy a house you like," Tyler said. She recommends that prospective buyers remain open to properties of all types - short sales, bank owned and traditional sales - and compare prices and features.

A short sale is only a bargain if it's a home that you truly want to live in - not something you're drawn to only because of its low price tag.
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