U.S. Housing May Be Turning Around, Shiller Says (Update1)

An improvement in home prices suggests the U.S. property market may be recovering, said Robert Shiller, a professor of economics at Yale University in New Haven, Connecticut.
By: Vincent Del Giudice: Bloomberg.com
“We might be seeing a turnaround,” Shiller said today in an interview on Bloomberg Radio and Bloomberg Television. “I say ‘might’ because there’s still a pretty weak economy out there.”

Shiller is co-creator of the S&P/Case-Shiller home-price index, which fell 15.4 percent in June from a year earlier, the smallest decline since April 2008. On a month-over-month basis, the index rose by the most in four years. The report was issued yesterday.

The month-over-month increase in home prices is “quite striking,” Shiller said. “The sense that something is changing is definitely in the air.”

Speaking about the broader economy, “recessions are generally ‘V’ shaped,” Shiller said. “Probably something like that will happen again,” even though a “disappointing recovery” is possible, he said.

The longest economic contraction since the end of World War II has claimed 6.7 million jobs since December 2007. Stocks are “a tad overpriced by historical standards,” Shiller said. The Standard & Poor’s 500 Index has surged about 51 percent from a 12-year low on March 9.
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Positive Signs: Home Prices on an Upswing in Second Quarter 2009

Data through June 2009, released by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index improved in the second quarter of 2009.
RISMEDIA
The S&P/Case-Shiller U.S. National Home Price Index- which covers all nine U.S. census divisions- recorded a 14.9% decline in the 2nd quarter of 2009 versus the 2nd quarter of 2008. While still a substantial negative annual rate of return, this is an improvement over the record decline of 19.1% reported in the 1st quarter of the year. The 10-City and 20-City Composites recorded annual declines of 15.1% and 15.4%, respectively. These are also improvements from their recent respective record losses of -19.4% and -19.1%.

“For the second month in a row, we’re seeing some positive signs,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “The U.S. National Composite rose in the 2nd quarter compared to the 1st quarter of 2009. This is the first time we have seen a positive quarter-over-quarter print in three years. Both the 10-City and 20-City Composites posted monthly increases, as did most of the cities. As seen in both seasonally adjusted and unadjusted data, there are hints of an upward turn from a bottom. However, some of the hardest hit cities, especially in the Sun Belt, show continued weakness.”

As of the 2nd quarter of 2009, average home prices across the United States are at similar levels to what they were in early 2003. From the peak in the second quarter of 2006, average home prices are down 30.2%.

The 10-City and 20-City Composites posted their second consecutive monthly increases. Both indices were up 1.4% in June over May, and up 0.5% in May over April. Eighteen of the 20 metro areas saw improvement in their annual returns compared to those of May. Looking at the monthly data, the same 18 metro areas reported positive returns in June.

In spite of the recent positive data, the overall numbers remain weak, with all metro areas and the two composites posting negative annual returns, and 15 out of the 20 metro areas reporting double digit annual declines. While not alone, Las Vegas and Detroit continue to be two markets that are struggling severely. These are the only two markets that fell in June and saw deterioration in their annual rates of return. Since their relative peaks they have fallen 54.3% and 45.3%, respectively.

More upbeat news is seen in the monthly data across other markets; Dallas and Denver have reported four consecutive months of positive returns. In addition to the two composites, 13 of the MSAs reported positive monthly returns for June that were greater than +1.0%.

The table below summarizes the results for June 2009. The S&P/Case-Shiller Home Price Indices are revised for the 24 prior months, based on the receipt of additional source data.

2009 Q2 2009 Q2/2009 Q1 2009 Q1/2008 Q4 1-Year
Level Change (%) Change (%) Change (%)
U.S. National
Index 132.64 2.9% -7.4% -14.9%
June 2009 June/May May/April 1-Year
Metropolitan Level Change (%) Change (%) Change (%)
Area
Atlanta 107.52 1.5% 0.5% -13.7%
Boston 152.71 2.6% 1.6% -5.9%
Charlotte 120.66 0.7% 0.9% -9.6%
Chicago 124.99 1.1% 1.1% -16.7%
Cleveland 106.38 4.2% 4.1% -3.0%
Dallas 119.68 2.7% 1.9% -2.2%
Denver 126.92 2.5% 1.3% -3.6%
Detroit 69.49 -0.8% 0.2% -25.0%
Las Vegas 107.31 -2.0% -2.6% -32.4%
Los Angeles 160.90 1.1% -0.1% -17.8%
Miami 145.37 0.5% -0.8% -23.4%
Minneapolis 113.48 3.1% 1.1% -19.8%
New York 171.49 0.4% 0.2% -11.9%
Phoenix 104.73 1.1% -0.9% -31.6%
Portland 148.47 1.0% 0.1% -15.2%
San Diego 147.31 1.6% 0.4% -16.0%
San Francisco 124.70 3.8% 1.4% -22.0%
Seattle 149.53 0.4% -0.3% -16.1%
Tampa 140.90 0.4% 0.0% -19.5%
Washington 174.32 2.8% 1.3% -11.8%
Composite-10 153.20 1.4% 0.5% -15.1%
Composite-20 141.86 1.4% 0.5% -15.4%
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.California Existing-Home Sales Up 12% in July

Sales of existing single-family homes in California increased 12% in July from the same time a year ago, as the state’s median price rose for the fifth straight month.
By: Jim Carlton: WSJ.com
Sales increased to 553,910 on a seasonally adjusted, annualized basis from a revised sales pace of 494,390 in July 2008, according to a report released Tuesday by the California Association of Realtors. The inventory of unsold houses continued to drop, to 3.9 months supply in July from 6.9 months at the same time a year ago.

Median prices were off 19.6% from July 2008 to $285,480, but were up 3.9% from June—continuing a string of back-to-back sequential price increases that began in March. Officials with the Realtors’ group credited first-time buyers for much of the buying volume, helping the under-$500,000 segment of the market to jump to include 74% of statewide sales from 43% when the California housing market went into a slump two years ago.

Few experts say California’s housing market is out of the woods, though. One threat is the prospect of more foreclosures flooding the market, as the state struggles with an unemployment rate of 11.9% as of July.

And Realtors’ officials say they are concerned sales have become overly tied to first-time buyers and a federal tax credit they have used for their purchases. Indeed, James Liptak, president of the association, said nearly 40% of first-time buyers said they would not have purchased a home without the tax credit, and called for Congress to extend it beyond a Dec. 1 deadline as well as open it up to all buyers, not just first-timers.

Leslie Appleton-Young, chief economist of the association, said the high end of the California market remains soft with weak sales and prices as credit remains tight for jumbo loans.
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Start house-hunting now to qualify for tax credit for first-time home buyers

First-time home buyers had better get a move on if they hope to take advantage of the $8,000 federal tax credit.
By: Lew Sichelman: latimes.com
The window of opportunity is closing rapidly.

To qualify for the credit, any transaction involving a first-time buyer must close before midnight Nov. 30, when the valuable tax benefit expires. And because the buying and lending processes can be slow, you're going to need every bit of that time to close escrow.

Although the end of November might seem a long way off, Diane Dilzell, president of the New Jersey Assn. of Realtors, rightly points out that it takes weeks, if not months, to manage the logistics involved in a real estate transaction. It's also important to realize that any of a number of things can go haywire along the way.

"Unique circumstances can be encountered in any transaction, so it is important to account for those factors," said Dilzell, a broker at Pinnacle Realtors in Bedminster, N.J. "Since numerous third parties are involved, delays can be expected no matter how swiftly you act."

Another complicating factor: closed offices during the Thanksgiving holiday. With Thanksgiving this year falling on Nov. 26, that removes four days right before the deadline.

Undoubtedly, some escrow agents will scrap vacation plans to handle what is expected to be a crush of settlements. But that highlights yet another potential pitfall: There may be so many buyers trying to close at the last minute that there might not be enough room for them all.

Moreover, if you're banking on Congress to extend the tax credit or possibly even expand it, the odds are against you, at least right now.

Even though there's always a chance that lawmakers will do the unexpected, House and Senate leaders have said they will not take up any expiring provisions until they have completed work on healthcare-reform legislation. Moreover, with many signs indicating that the moribund market is starting to awaken, many legislators might decide that housing no longer needs a shot in the arm.

And don't expect to sneak a Dec. 1 closing past the Internal Revenue Service either. That's fraud, and the nation's tax collector has any number of sophisticated screening tools to quickly identify returns that may contain fraudulent claims.

What's more, the IRS has vowed to go after taxpayers who try to pull a fast one. "We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction," says Eileen Mayer, the agency's chief criminal investigator.

Buyers with specific questions about the tax credit should consult with a qualified tax advisor. But here's a brief rundown of the rules.

A first-timer is defined as anyone who has not owned a principal residence during the three years immediately before the purchase. The house doesn't qualify for the credit, though, if the buyer sells it before the end of the year.

Vacation homes and investment properties do not qualify; only main residences, new or resale, which can be a single-family house, town house, condominium, manufactured (or mobile) home or even a houseboat. If you hire a contractor to build the house rather than buy from a builder, the house is still treated as having been purchased.

Purchases must be arm's-length transactions. The seller cannot be a parent, grandparent, child, grandchild or spouse. Legal residents who file U.S. tax returns qualify for the credit, but those who are undocumented immigrants or nonresidents do not.

Married people filing as such cannot claim the credit if either spouse has owned a main residence within the last three years, but unmarried joint purchasers - say, a parent and his son - may allocate the credit in any way they see fit as long as it does not exceed the $8,000 maximum.

Speaking of maximum, the tax credit is equal to 10% of the purchase price up to $8,000. But there are income limits. For single taxpayers, the ceiling is $75,000; for married taxpayers filing jointly, it is $150,000. For those with modified adjusted gross incomes above those limits, the tax credit is reduced on a sliding-scale basis to zero when the income exceeds $95,000 for single payers and $170,000 for married payers.

To assist would-be buyers who need help with down-payment and closing costs, the government will allow those who finance their purchases with a federally insured loan to apply their anticipated credit immediately toward the transaction rather than waiting until they file their 2009 taxes to receive a refund.

Under guidelines announced by the Federal Housing Administration, nonprofits and FHA-approved lenders are permitted to make short-term loans to qualified borrowers in the amount they would otherwise receive as a refund.

The law permits taxpayers to treat purchases that take place this year as though they occurred on Dec. 31, 2008. You can apply the tax credit against your 2008 return if that will bring you the largest credit amount (depending on your modified adjusted gross income). To do so, you must file an amended return for 2008.
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Economists Call for Bernanke to Stay, Say Recession Is Over

Economists are nearly unanimous that Bernanke should be reappointed to another term as Fed chairman, while most said the recession has ended.
By: PHIL IZZO: WSJ.com
Economists are nearly unanimous that Ben Bernanke should be reappointed to another term as Federal Reserve chairman, and they said there is a 71% chance that President Barack Obama will ask him to stay on, according to a survey.

Meanwhile, the majority of the economists The Wall Street Journal surveyed during the past few days said the recession that began in December 2007 is now over. Battling the downturn defined most of Mr. Bernanke's term, which began in early 2006 and expires in January, and economists say his handling of the crisis has earned him four more years as Fed chief.

"He deserves a lot of credit for stabilizing the financial markets," said Joseph Carson of AllianceBernstein. "Confidence in recovery would be damaged if he was not reappointed."

The Journal surveyed 52 economists; 47 responded.

After months of uncertainty, economists are finally seeing a break in the clouds. Forecasts were revised upward for every period, with 27 economists saying the recession had ended and 11 seeing a trough this month or next. Gross domestic product in the third quarter is now expected to show 2.4% growth at a seasonally adjusted annual rate amid signs of life in the manufacturing sector, partly spurred by inventory adjustments and strong demand for the "cash for clunkers" car-rebate program.

A better-than-expected employment report for July, where employers cut 247,000 jobs and the jobless rate fell for the first time in 15 months, suggests the worst is over. The unemployment rate is still expected to rise to 9.9% by December, but economists forecast that the economy will shed far fewer jobs over the next 12 months than they had forecast last month.

Many of the economists said there is little to be gained by changing the Fed chairman, especially considering the massive task at hand for the central bank as the economy emerges from the recession.

"Continuity is critical as we emerge from this crisis. Otherwise we could slip back in again," said Diane Swonk of Mesirow Financial. "Bernanke is the best suited to undo what has been done when the time comes."

The Fed has taken unprecedented steps in an effort to avoid another Great Depression, and its exit strategy remains a key question. Some hints may emerge as the central bank's August policy meeting comes to an end Wednesday. The Fed's key policy-making tool, the federal-funds rate, isn't likely to change at this meeting or any time soon.

Only six economists expect the Fed to raise the federal-funds rate, now between 0% and 0.25%, this year. Most expect an increase at some point in 2010, but more than a quarter of respondents don't see the rate moving until 2011 or later.

"The exit strategy will be very, very slow and cautious," said John Silvia of Wells Fargo. "The Fed will unwind the balance sheet before they raise the fed funds rates."

The Fed's balance sheet - the total value of all its loans and securities holdings - had more than doubled during the course of the crisis to more than $2 trillion, as lending facilities expanded in an effort to unfreeze credit markets. But as markets get back to normal, demand already has begun to wane, and the balance sheet has started to shrink. Now the composition of the balance sheet has begun to shift to Treasurys, mortgage-backed securities and agency debt as the Fed moves through a $1.75 trillion program announced in March to bring down long-term interest rates.

The Fed is deciding at this week's meeting whether to let that program run its course and how best to communicate its intentions to markets.

Whatever the Fed decides, the economists expressed some confidence that the central bank will be dealing with how to manage a recovery, not another recession. They expect GDP growth to remain above 2% at an annualized rate through the first half of next year, and they put the chances at just 20% of a "double-dip" second downturn before 2010.

But some said a recovery could make Mr. Bernanke's road to reappointment more rocky. "Once it is perceived that the economy is on its way to recovery, it gives Obama the opportunity to put in his own person," Mr. Silvia said. "It could be like Great Britain at the end of World War II. 'Thank you for all the hard work, Mr. Churchill, but we're going to bring someone else in to handle the next phase.'" Former president George W. Bush appointed Mr. Bernanke to succeed the departing Alan Greenspan. Presidents appoint Fed chiefs to four-year terms, and there are no term limits. Mr. Bernanke's term expires Jan. 31.

Though the economists were overwhelmingly supportive of Mr. Bernanke, they don't think his tenure was without mistakes. A slow initial response to the credit squeeze and the decision to let Lehman Brothers fail were cited as the biggest errors.
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6 Real Estate Investment Basics

Miami real estate investor Kenneth D. Rosen outlines his “Big Six” investing guidelines in his new book, Investing in Income Properties.
By: Matthew Haggman: REALTOR®Magazine
Here are his six principles in a nutshell. He says all of them need to be present to make a deal worth doing. “If one’s not there, you stop and you don’t buy,” he says.

Location. “A” locations are in areas where there is little land left to build on and the neighborhood has a certain prestige.

No-frills design with quality construction. He looks for three or four parking spaces per 1,000 square feet, no more than 15 percent of space devoted to common areas, and simple but visually pleasing design.

Few or no vacancies. Buildings with lots of small offices are easier to keep full than those that rely on renting out entire floors to one tenant.

Potential for appreciation. Older buildings with lower rents have the most upside potential. As leases expire, the new owner can raise the rent.

Available financing. Find a financial pro to help negotiate the right provisions.

Sale price based on existing income. Avoid buying based on projected income.
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U.S. Economy: New-Home Sales Climb 11%, Most in Eight Years

Purchases of new homes in the U.S. climbed 11 percent in June, the biggest gain in eight years, underscoring evidence that the deepest housing slump since the Great Depression is starting to stabilize.
By: Courtney Schlisserman and Bob Willis: Bloomberg.com
Sales increased to a 384,000 annual pace, higher than every forecast in a Bloomberg News survey and the most since November, figures from the Commerce Department showed today in Washington. The number of houses on the market dropped to the lowest level in more than a decade.

Deutsche Bank Securities Inc. and Goldman Sachs Group Inc. economists said today’s figures signal an end to the slide in home construction and sales. While that means the drag on economic growth will turn to a stimulus in the second half of the year, property values are likely to continue falling and rising unemployment will temper the recovery, analysts said.

“We’re barely past the housing bottom, this thing is still fragile,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York. “It’s not premature to talk about home prices bottoming - it’s somewhere in the next three to six months. There is light at the end of the tunnel.”

Builders’ stocks jumped, with the Standard and Poor’s Supercomposite Homebuilding Index gaining 2.3 percent. The broader S&P 500 Stock Index was up 0.1 percent at 980.35 at 10:10 a.m. in New York. Treasuries, which fell earlier in the day, remained lower, with benchmark 10-year note yields rising to 3.75 percent from 3.66 percent at last week’s close.

Construction Recovers

The Commerce Department earlier this month reported that builders began work on 582,000 residential properties at an annual rate in June, the most since November. Home construction has subtracted from U.S. gross domestic product every quarter since the start of 2006.

The jump in sales signals the U.S. economy is on the way to recovery, said Rebecca Blank, under secretary for economic affairs at the Commerce Department.

“Across the board this is good news,” Blank, formerly a fellow at the Brookings Institution in Washington, said in an interview. “It’s what you would expect to see at the beginning of a recovery.”

Standard Pacific Corp., the U.S. homebuilder that gets most of its revenue from California, is among companies seeing stabilization. It’s net loss, the 11th consecutive drop, narrowed to $23.1 million in the second quarter from $249 million a year earlier, the Irvine, California-based company said last week. Revenue fell 29 percent.

Smaller Losses

“While we still obviously have not achieved the level of profitability that we ultimately need, we are a lot closer than we were a couple of quarters ago and believe that we are in pretty good shape in the short run,” Chief Executive Officer Ken Campbell said in a July 22 statement.

While prices continue to fall, the pace of the decline is easing. The S&P/Case Shiller index of 20 major metropolitan areas tomorrow may show property values fell 17.9 percent in May from a year earlier, according to the median forecast in a Bloomberg survey. The measure was down 18.1 percent in the 12 months ended April.

“In terms of residential investment and home sales and housing starts, I think it has” bottomed, said Jan Hatzius, chief U.S. economist at Goldman Sachs in New York, referring to the housing slump. “We still have a period of declines ahead of us” in prices, he also said.

The decline in prices and a drop in mortgage rates have started to lure buyers even amid the surge in unemployment, which reached a quarter-century high of 9.5 percent in June.

Economists’ Forecasts

Economists had forecast new home sales would rise to a 352,000, according to the median of 62 projections in a Bloomberg News survey. Estimates ranged from 335,000 to 377,000. Commerce revised May’s reading up to a 346,000 rate from a previously reported 342,000.

The median price of a new home decreased 12 percent to $206,200 from $234,300 in June 2008. Last month’s value compares with $219,000 in May.

Builders had 281,000 houses on the market last month, down 4.1 percent from May and the fewest since February 1998. The number of unsold properties fell a record 36 percent from June 2008. It would take 8.8 months to sell all homes at the current sales pace, the lowest level since October 2007.

Foreclosure filings reached a record in the first half of the year, providing competition for homebuilders and pushing down the value of all houses. Also, rising unemployment, which economists forecast will top 10 percent by early 2010, threatens to restrain any recovery in housing.

Fed Efforts

Federal Reserve policy makers have committed to a $1.25 trillion program to purchase securities backed by home loans in an effort to put a floor under the housing market and lower borrowing costs. Those purchases, as well as direct government purchases of Treasuries, drove the rate on 30-year mortgages to a record-low 4.78 percent in April, according to figures from Freddie Mac. Rates have since hovered around 5 percent.

Fed Chairman Bernanke said July 21 that the economy is showing “tentative signs of stabilization” and the “decline in housing activity appears to have moderated.”

Another incentive is the $8,000 tax credit for first-time buyers that is part of the Obama administration’s economic stimulus plan. Purchases have to be completed before Dec. 1.
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Energy efficiency incentives likely to grow

An unprecedented push by the U.S. government to widen rewards for energy-conscious homeowners is underway. An example: FHA loans offering 5% larger mortgages to buyers who plan on making renovations.
By: Kenneth R. Harney: latimes.com
You're probably familiar with some of the federal government's incentives for home energy efficiency - heftier tax credits for solar panels, solar water heaters, geothermal heat pumps, heavy-duty insulation, windows, air conditioning and the like.

But these are just the beginning of an unprecedented push by the government that's getting underway for energy conservation in housing.

At the Department of Housing and Urban Development, a new generation of mortgages designed to encourage energy efficiency is being rolled out, starting with Federal Housing Administration loans that offer 5% larger mortgages to people who plan on making energy-efficiency improvements.

For example, if you qualify for a $300,000 FHA mortgage, the FHA might now be able offer you an additional $15,000 if the extra money is used to substantially lower the property's annual energy consumption.

HUD Secretary Shaun Donovan wants the FHA to offer additional incentives. One of the possibilities: Give loan applicants credit on their qualifying incomes for a home loan in exchange for documentable savings in annual energy expenditures.

Meanwhile, the House of Representatives has passed a massive energy conservation and emissions control bill. Though the American Clean Energy and Security Act is better known for its more controversial "cap-and-trade" carbon emissions program, the bill also contains a section devoted to creating incentives for consumers and federal agencies to build and finance energy-efficient dwellings.

Among the key housing-related provisions in the bill:

* The FHA is directed to insure a minimum of 50,000 new energy-efficient mortgages during the coming three years. An energy-efficient house is defined as one in which energy consumption is reduced by 20% following renovations.

* Fannie Mae and Freddie Mac are directed to develop mortgage products and more flexible underwriting guidelines to reward energy-conscious borrowers and builders.

The two companies also would be required to help establish a secondary market for energy-efficient and location-efficient mortgages for moderate- and lower-income home buyers. The new generation of loans would increase the qualifying incomes of applicants by at least one dollar for every dollar of projected energy savings from renovations, green construction or efficient design.

Similar concessions on loan applicants' incomes would be extended for properties located in areas close to employment centers or mass transit lines. No concessions would be made for homes in far-flung neighborhoods that eat into family incomes because of long commutes, which would add to carbon emissions.

* Real estate appraisers would be required to take energy improvements and the money they save into account as they value houses. For example, if you spent $30,000 on a series of major upgrades, an appraiser would need to consider the annual cost savings in energy produced and the effect, if any, on market value. States would require licensed appraisers to undergo additional professional training to equip them for their new energy-efficiency valuation responsibilities.

* Federal financial regulators would be directed to support the establishment of privately run "green banking centers" inside banks and credit unions. The centers, which presumably could be unmanned kiosks or staffed offices, would help consumers understand how best to obtain financing for energy-conserving home improvements, second and primary mortgages, and energy audits and ratings.

HUD would also be authorized to conduct "renewable energy home product expos" to educate the public about the latest technologies and financing concepts.

* State governments would be required to ensure that homeowners whose energy technologies allowed them to get "off the grid" - no longer fully dependent on utilities to provide them power - are not denied property hazard coverage by insurance companies.

With all this emphasis on energy efficiency and reduction of real estate-related emissions, is there any evidence that home buyers will take part? Will they use mortgages that encourage energy efficiency or even pay more for houses that are loaded with the latest energy-saving technologies? The jury is out because much of this is prospective and hasn't yet been signed into law.

But maybe there's going to be some extra green in green.

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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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