Realty Reality: March 2009

Tuesday, March 31, 2009

Special Tax Break Available for New Car Purchases This Year

WASHINGTON — The Internal Revenue Service (IRS) announced today that taxpayers who buy a new passenger vehicle this year may be entitled to deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns next year.

“For those thinking about buying a new car this year, this deduction may give them a little more drive to make their purchase this year,” said IRS Commissioner Doug Shulman. “This deduction enables taxpayers to buy now and get cash back later on their tax returns.”

The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.

The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.

IRS also alerted taxpayers that the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, to qualify for the deduction.

The special deduction is available regardless of whether a taxpayer itemizes deductions on their return. The IRS reminded taxpayers the deduction may not be taken on 2008 tax returns.

Source: IRS - IR-2009-30

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Monday, March 30, 2009

2008 Second-Home Sales Decline; More Buyers Pay Cash

The combination of vacation- and investment-home sales slipped to 30 percent of all existing- and new-home transactions in 2008, according to the National Association of Realtors®(NAR).

However, more than four out of 10 investment buyers and more than three in 10 vacation-home buyers paid cash for their properties, with large percentages indicating that portfolio diversification was a factor in their purchase decision.

The market share of homes purchased for investment was 21 percent last year, unchanged from 2007, while another 9 percent were vacation homes, compared with a 12 percent market share in 2007. The total share of second homes declined from 33 percent of all transactions in 2007. In 2005, the peak year for home speculation, 40 percent of sales were second homes.

NAR’s 2008 Investment and Vacation Home Buyers Survey shows vacation-home sales dropped 30.8 percent to 512,000 last year from 740,000 in 2007, while investment-home sales fell 17.2 percent to 1.12 million in 2008 from 1.35 million in 2007. Primary residence sales declined 13.2 percent to 3.77 million in 2008 from 4.34 million in 2007.

Lawrence Yun, NAR chief economist, said the findings are understandable given the economic backdrop. “We expected vacation-home sales to fall given the impact of a declining economy on discretionary purchases,” he said. “A steady share of investment-home sales results from buyers taking advantage of deeply discounted prices in many areas, with a smaller portion of new homes in the sales mix.”

Despite weakening second home purchases in 2008, the long-term demand looks favorable because there are large numbers of people in the prime years for buying a second home. Currently, 39.2 million people in the United States are ages 50 to 59 – a group that dominated sales in the first part of this decade. An additional 44.8 million people are between 40 and 49, and another 40.7 million are 30 to 39.

“While economic factors can affect sales from one year to the next, the fundamental demand from these large population groups will remain,” Yun said. “Given that most people become interested in buying a second home in their 40s, the bulge of population approaching middle age should drive the second-home market over the next decade.”

The median price of a vacation home was $150,000 in 2008, down 23.1 percent from $195,000 in 2007. The typical investment property cost $108,000 last year, which is 28.0 percent below the 2007 median of $150,000.

“As in the market for primary residences, it appears that many sales of deeply discounted distressed homes are pulling down the median price in the second-home market as well,” Yun said.

In this environment, NAR says it’s important to work with a Realtor® who is knowledgeable about the local market to solve potential problems and navigate the transaction process.

Yun said lifestyle considerations are the single most important factor in the vacation home market. “People are buying weekend homes or recreational property to use themselves or for a family retreat – investment considerations are secondary for most vacation-home buyers with relatively modest interest in renting.”

The typical vacation-home buyer in 2008 was 46 years old, had a median household income of $97,200, and purchased a property that was a median of 316 miles from their primary residence; 35 percent were within 100 miles and 36 percent were 500 miles or more.

When asked about their reasons for purchasing a vacation home, 89 percent of buyers wanted to use the home for vacation or as a family retreat; 27 percent to diversify investments; 27 percent to rent to others; 26 percent to use as a primary residence in the future; and 17 percent for use by a family member, friend or relative.

In terms of location, 26 percent of vacation homes were purchased in small towns, 23 percent in a rural area, 23 percent in resorts, 20 percent in a suburb, and 8 percent in an urban area or central city.

Seventy percent of vacation homes purchased in 2008 were detached single-family homes, 18 percent condos, 5 percent townhouses or rowhouses, and 7 percent other.

Sixty-nine percent of vacation home buyers and 84 percent of investment home buyers purchased existing homes; the rest purchased new homes.

Investment-home buyers in 2008 had a median age of 47, earned $85,000, and bought a home that was fairly close to their primary residence – a median distance of 19 miles.

When asked about the most important reasons for purchasing an investment home, 58 percent said to provide rental income; 38 percent to diversify investments; 19 percent for use by a family member, friend or relative; and 15 percent to use for vacations or as a family retreat.

Twenty-eight percent of investment homes were purchased in a suburb and another 20 percent in an urban or central city area, 23 percent in a rural area, 22 percent in a small town, and 6 percent in a resort area.

Sixty-four percent of investment homes purchased in 2008 were detached single-family homes, 22 percent condos, 8 percent townhouses or rowhouses, and 6 percent other.

Vacation-home buyers plan to keep their property for a median of 12 years; 58 percent plan to keep their vacation home for 11 years or more. Investment buyers plan to hold their property for a median of five years.

Eight in 10 second-home buyers consider it a good time to invest in real estate, compared with 71 percent of primary residence buyers.

The size of the second-home market is significant. NAR’s analysis of U.S. Census Bureau data shows there are 8.1 million vacation homes and 40.5 million investment units in the United States, compared with 75.5 million owner-occupied homes.

NAR’s 2008 Investment and Vacation Home Buyers Survey, conducted in March 2009, includes answers from 1,924 usable responses. The survey controlled for age and income, based on information from the larger 2008 NAR Profile of Home Buyers and Sellers, to limit any biases in the characteristics of respondents.

The 2008 Investment and Vacation Home Buyers Survey can be ordered by calling 800-874-6500, or online at www.realtor.org/newresearch. The report is free for NAR members, but the cost is $125 for non-members.

Friday, March 27, 2009

NAR Warns of Rental Property Scam

The National Association of Realtors®’(NAR) name is being used as part of a property rental scam in which rental property is offered to consumers, who are led to believe that NAR is functioning as an intermediary to receive rental deposits from prospective tenants.

“NAR is not involved in this business and has contacted law enforcement officials to request that the matter be investigated. We encourage any consumers who may be affected to file a complaint,” said NAR President Charles McMillan.

The scam claims that on receipt of a deposit, NAR will deliver the keys to the property to the tenant. Prospective tenants are instructed to send money via Western Union to NAR’s purported agent in the United Kingdom.

Some of the listings have been posted on Craigslist, which reportedly has had difficulty in tracing the original listings. NAR does not have an escrow service, or function as an intermediary to receive rental deposits.

Some of the scam listings also refer to or propose using a “Residential Lease Package” that includes a form lease that purports to be a document prepared by or otherwise associated with NAR. NAR was not involved in creating or producing the “Residential Lease Package” or other lease form, and does not recommend, support, or encourage use of those documents.

Consumers who have encountered this scam may file a complaint with the Internet Crime Complaint Center, sponsored by the Federal Bureau of Investigation and the National White Collar Crime Center.

“Our mission is not only to protect consumers in the real estate transaction, but also guard them against fraud,” McMillan said.

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.

First $2,400 of Unemployment Benefits Tax Free for 2009

WASHINGTON — All or part of unemployment benefits received in 2009 will be tax free for many unemployed workers, according to the Internal Revenue Service(IRS).

“This morning we learned that a record 5.6 million people were receiving unemployment benefits in the middle of March. This underscores the need for the relief provided by the American Recovery and Reinvestment Act, which includes making the first $2,400 of unemployment insurance exempt from tax,” said IRS Commissioner Doug Shulman. “I urge all unemployed workers to take this special tax break into account as they plan their tax withholding and quarterly estimated tax payments for the year. This change offers a helping hand to millions of Americans who are out of work and struggling to make ends meet.”

Under the American Recovery and Reinvestment Act, enacted last month, every person who receives unemployment benefits during 2009 is eligible to exclude the first $2,400 of these benefits when they file their tax return next year. For a married couple, the exclusion applies to each spouse, separately. Thus, if both spouses receive unemployment benefits during 2009, each may exclude from income the first $2,400 of benefits they receive.

The new law doesn’t affect the return taxpayers are filling out now. Unemployment benefits received in 2008 and prior years remain fully taxable.

Unemployed workers can choose to have income tax withheld from their unemployment benefit payments. Withholding on these payments is voluntary. However, choosing this option may help avoid a surprise year-end tax bill or a possible penalty for having paid too little tax during the year. Those who choose this option will have a flat 10 percent tax withheld from their benefits.

Unemployed workers who expect to receive more than $2,400 in benefits this year should consider having tax withheld from their benefit payments in excess of that amount. Those unemployed workers who have already chosen to have tax taken out of their benefits, should consider the $2,400 exclusion in determining whether to continue to have tax withheld.

Use Form W-4V, Voluntary Withholding Request, or the equivalent form provided by the payer to request withholding to begin or end. Form W-4V is also available on IRS.gov or by calling the IRS toll-free at 1-800-TAX-FORM (829-3676).

Source: IRS - IR-2009-29

Monday, March 23, 2009

Existing-Home Sales Rise In February

Existing-home sales increased in February, reversing losses in January. Even so, sales activity remains relatively soft, reflecting additional layoffs and buyers waiting for housing provisions in the economic stimulus package to take effect, according to the National Association of Realtors®(NAR).

Existing-home sales – including single-family, townhomes, condominiums and co-ops – rose 5.1 percent to a seasonally adjusted annual rate[1] of 4.72 million units in February from a pace of 4.49 million units in January, but are 4.6 percent below the 4.95 million-unit level in February 2008. Seasonal adjustment factors are more volatile in winter months, but sales rates over the past few months show dampened sales activity.

Lawrence Yun, NAR chief economist, said first-time buyers accounted for half of all home sales last month, with activity concentrated in lower price ranges. “Because entry level buyers are shopping for bargains, distressed sales accounted for 40 to 45 percent of transactions in February,” he said. “Our analysis shows that distressed homes typically are selling for 20 percent less than the normal market price, and this naturally is drawing down the overall median price.”

The national median existing-home price[2] for all housing types was $165,400 in February, down 15.5 percent from a year ago when the median was $195,800 and conditions were close to normal; the median is where half of the homes sold for more and half sold for less. “Given the downward distortion in price comparisons due to distressed sales, it’s important for owners to keep in mind that this doesn’t equate to a similar loss of value for traditional homes in good condition,” Yun explained.

Yun said a recovery in the West is much stronger than expected. “Strong sales gains in the West are led by California, where the median listing price is beginning to rise for the first time in three years,” he said.

NAR President Charles McMillan, said home shopping activity has picked up with housing affordability at a record high. “The number of buyers looking for homes rose 5 percent in February, and also was 5 percent above a year ago,” he said. “It appears most of the increase in buyer traffic occurred in the latter part of the month after the $8,000 first-time buyer tax credit was put in place. At the same time, mortgage purchase applications have risen, so we expect to see sales picking up around late spring.”

McMillan noted that more potential buyers are learning about the tax credit, just as the traditional spring home-buying season begins. “In this changing market, smart buyers and sellers consult with Realtors® who can advise them about current conditions in their area, and counsel them on the best way to move forward,” he said.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage edged up to 5.13 percent in February from a record low 5.05 percent in January; the rate was 5.92 percent in February 2008. Last month’s average mortgage rate was the second lowest since data collection began in 1971. Last week the rate further declined to 4.98 percent.

Total housing inventory at the end of February rose 5.2 percent to 3.80 million existing homes available for sale, which represents a 9.7-month supply[3] at the current sales pace, unchanged from January. In the six months prior to February, the total number of homes for sale had steadily declined from a record level last July.

Single-family home sales rose 4.4 percent to a seasonally adjusted annual rate of 4.23 million in February from a level of 4.05 million in January, but are 3.6 percent below the 4.39 million-unit pace in February 2008. The median existing single-family home price was $164,600 in February, down 15.0 percent from a year ago.

Existing condominium and co-op sales increased 11.4 percent to a seasonally adjusted annual rate of 490,000 units in February from 440,000 units in January, but are 13.1 percent lower than the 564,000-unit pace a year ago. The median existing condo price[4] was $172,200 in February, which is 18.7 percent lower than February 2008.

Regionally, existing-home sales in the Northeast jumped 15.6 percent to an annual pace of 740,000 in February, but are 14.9 percent below February 2008. The median price in the Northeast was $251,200, down 4.8 percent from a year ago.

Existing-home sales in the Midwest increased 1.0 percent in February to a pace of 1.04 million but are 14.0 percent lower than a year ago. The median price in the Midwest was $131,000, which is 7.8 percent below February 2008.

In the South, existing-home sales rose 6.1 percent to an annual pace of 1.74 million in February but are 11.2 percent below February 2008. The median price in the South was $146,700, down 10.0 percent from a year ago.

Existing-home sales in the West increased 2.6 percent to an annual rate of 1.20 million in February and remain 30.4 percent higher than a year ago. The median price in the West was $204,600, which is 30.3 percent below February 2008.

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.

# # #

NOTE: References to performance in states or metro areas are from unpublished raw data used to analyze regional trends; please contact your local association of Realtors® for more information.

1 The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 to 90 percent of total home sales, are based on a much larger sample – more than 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.

Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.

2 The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns. Changes in the composition of sales can distort median price data. Year-ago median and mean prices sometimes are revised in an automated process if more data is received than was originally reported.

3 Total inventory and month’s supply data are available back through 1999, while single-family inventory and month’s supply are available back to 1982.

4 Because there is a concentration of condos in high-cost metro areas, the national median condo price generally is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes.

Existing-home sales for March will be released April 23. The next Pending Home Sales Index & Forecast is scheduled for April 1; release times are 10 a.m. EDT.

Information about NAR is available at www.realtor.org. This and other news releases are posted in the News Media section. Statistical data in this release, other tables and surveys also may be found by clicking on Research.

Wednesday, March 18, 2009

First-Time Homebuyers Have Several Options to Maximize New Tax Credit

WASHINGTON — As part of the Treasury Department’s consumer outreach effort and with the April 15 individual tax filing deadline approaching, the Internal Revenue Service (IRS) today began a concerted effort to educate taxpayers about additional options at their disposal to claim the new $8,000 first-time homebuyer credit for 2009 home purchases. For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.

The Treasury Department encourages taxpayers to explore these options to maximize their credit and get their money back as fast as possible.

“The new credit can get money in the pockets of first-time homebuyers quickly,” said IRS Commissioner Doug Shulman. “For people who recently purchased a home or are considering buying in the next few months, there are several different ways that they can get this tax credit even if they’ve already filed their tax return.”

First-time homebuyers represent a significant portion of existing single-family home sales. The expansion in the first-time homebuyer credit will make it easier for first-time homebuyers to enter the housing market this year.

Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year.

The filing options to consider are:

File an extension. Taxpayers who haven’t yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.

File now, amend later. Taxpayers due a sizable refund for their 2008 tax return but who also are considering buying a house in the next few months can file their return now and claim the credit later. Taxpayers would file their 2008 tax forms as usual, then follow up with an amended return later this year to claim the homebuyer credit.

Amend the 2008 tax return. Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return.

Claim the credit in 2009 rather than 2008. For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.
The IRS reminds taxpayers the amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000, or $150,000 for joint filers. Taxpayers can claim 10 percent of the purchase price up to $8,000, or $4,000 for married individuals filing separately.

IRS.gov provides more information, including guidance for people who bought their first homes in 2008. To learn more about the overall implementation of the Recovery Act, visit www.Recovery.gov.
Source: IRS IR-2009-27

Monday, March 16, 2009

New Law Extends Net Operating Loss Carryback for Small Businesses

IRS To Ensure Refunds Paid Timely

WASHINGTON — The Internal Revenue Service(IRS) announced today that small businesses with deductions exceeding their income in 2008 can use a new net operating loss tax provision to get a refund of taxes paid in prior years.

To accommodate the change in tax law, the IRS today updated the instructions for two key forms — Forms 1045 and 1139 — that small businesses can use to make use of the special carryback provision for tax year 2008. These forms are used to accelerate the payment of refunds.

The new provision, enacted as part of the American Recovery and Reinvestment Act of 2009, enables small businesses with a net operating loss (NOL) in 2008 to elect to offset this loss against income earned in up to five prior years. Typically, an NOL can be carried back for only two years. The IRS released legal guidance today in Revenue Procedure 2009-19 outlining specific details. Some taxpayers must make the election to use this special carryback by April 17, 2009.

“The new net operating loss provisions could throw a lifeline to struggling businesses, providing them with a quick infusion of cash,” said IRS Commissioner Doug Shulman. “We want to make it as easy as possible for small businesses to take advantage of these key tax benefits.”

With the economic downturn and the new law, the IRS expects record numbers of small businesses to be eligible for the refunds. The IRS is putting in special steps to ensure timely processing of these refunds to help small businesses during this difficult period.

Small businesses with large losses in 2008 may be able to benefit fully from those losses now, rather than waiting until claiming them on future tax returns.

The normal two-year carryback remains available if the small business does not elect the special carryback provision. If the loss exceeds the income for the carryback period, the taxpayer can continue to carry forward the remaining balance of the NOL for up to 20 years.

For small businesses that use a fiscal year, this special carryback may be used for an NOL in either a tax year that ends in 2008 or a tax year that begins in 2008. Once a taxpayer makes this election, it may not be changed.

To qualify for the new five-year carryback provision, a small business must have no greater than an average of $15 million in gross receipts over a three-year period ending with the tax year of the NOL. Businesses with more than $15 million in gross receipts still qualify to carry back their 2008 NOL for two years.

There are several methods that a small business uses to elect the new provision as detailed in the Revenue Procedure.

If a small business previously elected to waive the carryback of 2008 NOL but now wants to elect this special carryback, the small business may revoke its previous election to waive the carryback. The election revocation must be made on or before April 17, 2009.

Generally small businesses that are not corporations (including sole proprietorships filing schedule C with their Form 1040) may accelerate a refund by using Form 1045, Application for Tentative Refund.

Corporations with NOLs may also accelerate a refund by using Form 1139, Corporation Application for Tentative Refund.

The IRS will be closely monitoring these filings and will provide additional staff as needed to process these forms. The IRS will work to issue refunds within 45 days or even earlier to the degree possible.

In addition, questions and answers have been posted on this Web site. Small businesses that file Form 1040 can also call 1-800-829-1040 with NOL questions. Corporations can contact 1-800-829-4933 with NOL questions.

Form 1045 or Form 1139, whichever the taxpayer uses, generally must be filed within one year after the end of the tax year of the NOL. In addition, the current year’s tax return must be filed by the date the Form 1045 or Form 1139 is filed. Form 1045 and Form 1139 are filed at the same place the taxpayer’s return is filed, as listed on the return instructions.

Accelerated refunds paid via Form 1045 or Form 1139 is described as “tentative” because the applications for refunds are potentially subject to review at a later date. Form 1045 Instructions and Form 1139 Instructions provide more information on the accelerated refund option.

Related Items:

IRS Information Related to the American Recovery and Reinvestment Act of 2009

Source: IRS IR-2009-26

Friday, March 13, 2009

Stewart vs. Cramer

John Stewart, Comedy Central, took on Jim Cramer, CNBC, yesterday John's "The Daily Show". Over the past several days they have been taking verbal shots at each other on camera which culminated in their face-to-face in a 12-minute meeting on the Comedy Central TV Channel.

I was surprised, but the discussion was basically substantive. Stewart, funny quips aside, conducted a serious, heartfelt interview and discussion; calling out Cramer and the network on it's failure to forewarn the public about the current financial crisis and to adequately investigate the business people they were interviewing and relying on for news. Cramer was relatively humble and forthright about his and his business news colleagues' shortcomings.

See the entire video segment on hulu.com: http://www.hulu.com/watch/62203/the-daily-show-with-jon-stewart-thu-mar-12-2009

Thursday, March 12, 2009

Realtors Recommend Responsible Lending Princip

Realtors® care about protecting consumers from unfair lending practices and are important allies in those efforts. That is the message National Association of Realtors®(NAR) President Charles McMillan delivered to the House Financial Services Committee’s Subcommittee on Financial Institutions and Consumer Credit in testimony today.

“As we have seen recently, abusive lending erodes confidence in the nation’s housing system, strips equity from homeowners and damages local and national economies,” said McMillan.

In 2005 NAR adopted a set of Responsible Lending Principles to encourage lending practices that ensure consumers have affordable mortgage choices and are protected in the real estate transaction. The principles also call for ensuring strong underwriting, eliminating prepayment penalties, eliminating mortgage flipping, strengthening enforcement against predatory and abusive lending practices, and maintaining the independence of appraisers and the appraisal process.

While NAR’s written testimony further detailed the responsible lending practices that NAR has advocated for many years, the focus of McMillan’s testimony was appraisal independence. “Realtors® believe that a strong and independent appraisal industry is vital to restoring faith in the mortgage origination process,” said McMillan.

With a record of supporting legislation that strikes the proper balance of oversight and consumer protection, NAR has endorsed legislation that would strengthen the independence of the appraisal process by ensuring appraisers serve as an unbiased arbiter of a property’s value.

To protect consumers, NAR recommended that lenders be required to inform each borrower of how property value was determined and provide them with a copy of each appraisal at no additional cost. NAR also called for stronger penalties against anyone who improperly influences the appraisal process, federal support for better state enforcement, and enhanced education and qualifications for appraisers.

“The irresponsible and abusive lending that occurred during the past few years has taken a toll on our communities and our nation. Now is the time to correct these problems to ensure we do not face the same circumstances in the future,” McMillan said. “Realtors® are proud to encourage responsible lending and we stand ready to work with Congress to ensure that the nightmare of foreclosures does not overshadow the American Dream of homeownership. As the leading advocate for homeownership and the real estate industry, NAR will continue to address issues facing Americans who are trying to purchase a home, protect their current home or preserve investment opportunities in residential and commercial properties.”

Source: NAR

Friday, March 06, 2009

HUD To Seek Comment on RESPA's "Required Use" Definition

All Other RESPA Provisions Remain on Implementation Track

WASHINGTON- The U.S. Department of Housing and Urban Development(HUD) today announced that it intends to seek further public comment on how it should define the scope of a prohibited practice called "required use" under the Real Estate Settlement Procedures Act (RESPA). HUD will delay the planned implementation of RESPA's required use provision for 90 days, or until July 16th, as it solicits public comment on whether to withdraw its new definition that would have taken effect in January.

HUD's notice will inform consumers and the mortgage industry of its intent to further delay the effective date of the required use definition and seek additional public comment as a result of a legal challenge led by the National Association of Home Builders. New rulemaking would give HUD the opportunity to present for public consideration a new proposal based upon HUD's reevaluation of the provision and desire to provide better consumer protections.

Last year, HUD proposed changing this required use definition to help consumers shop more effectively for homes, mortgages and settlement services that are best for them, free from the influence of disingenuous discounts and incentives that steer consumers to the use of affiliated businesses. HUD's final rule revised the definition of "required use" to enhance consumer protections against certain practices conducted by affiliated business arrangements.

HUD believes that some businesses have used the affiliated business arrangement exception under Section 8 of RESPA to steer consumers to affiliated settlement service providers that may not provide the best mortgage products or settlement services for those consumers. A number of such complaints concern builders, who are in a position to refer settlement service business to their affiliated mortgage and title companies.

To read HUD's rule, visit HUD's website.

Source: HUD No. 09-020

Wednesday, March 04, 2009

Federal Reserve Beige Book March 2009 Report

Reports from the twelve Federal Reserve Districts suggest that national economic conditions deteriorated further during the reporting period of January through late February. Ten of the twelve reports indicated weaker conditions or declines in economic activity; the exceptions were Philadelphia and Chicago, which reported that their regional economies "remained weak." The deterioration was broad based, with only a few sectors such as basic food production and pharmaceuticals appearing to be exceptions. Looking ahead, contacts from various Districts rate the prospects for near-term improvement in economic conditions as poor, with a significant pickup not expected before late 2009 or early 2010

Consumer spending remained sluggish on net, although many Districts noted some improvement in January and February compared with a dismal holiday spending season. Travel and tourist activity fell noticeably in key destinations, as did activity for a wide range of nonfinancial services, with substantial job cuts noted in many instances. Reports on manufacturing activity suggested steep declines in activity in some sectors and pronounced declines overall. Conditions weakened somewhat for agricultural producers and substantially for extractors of natural resources, with reduced global demand cited as an underlying determinant in both cases. Markets for residential real estate remained largely stagnant, with only minimal and scattered signs of stabilization emerging in some areas, while demand for commercial real estate weakened significantly. Reports from banks and other financial institutions indicated further drops in business loan demand, a slight deterioration in credit quality for businesses and households, and continued tight credit availability.

Upward price pressures continued to ease across a broad spectrum of final goods and services. This was largely associated with lower prices for energy and assorted raw materials compared with earlier periods, but also with weak final demand more generally, which spurred price discounting for items other than energy and food. With rising layoffs and hiring freezes, unemployment has risen in all areas, reducing or eliminating upward wage pressures. A number of reports pointed to outright reductions in hourly compensation costs, through wage reductions and reduction or elimination of some employment benefits.

In the Philadelphia (Third District) region, business conditions in the Third District remained weak in February. Manufacturers, on balance, reported declines in shipments and new orders. Retailers indicated that sales were nearly steady but below the level of a year ago. Motor vehicle dealers reported continued declines in sales. Bank loan volume has risen very slightly in recent weeks, but credit quality has continued to deteriorate. Residential real estate sales and construction remained low but appeared to be close to steady. Commercial real estate investment and construction activity have been moving down. Service-sector activity has generally declined in recent weeks. Business firms in the region reported decreases in most input costs and output prices in February.

The outlook among Third District businesses is generally not bright, although there has been some improvement since the last Beige Book. Manufacturers forecast increases in shipments and orders during the next six months. Retailers expect sales to remain slow while consumers remain concerned about job security. Auto dealers see no indications of improvement in sales. Bankers expect lending to move up slowly during the year. Residential real estate agents and home builders expect sales to remain slow through most of the year. Contacts in commercial real estate expect leasing and purchase activity to fall further this year, and they expect vacancies to rise. Service-sector firms expect activity to be slow through most of the year.

Source Beige Book

Click here for the Federal Reserve March 2009 Beige Book [Beige Book Archives]

See related blog articles:
Federal Reserve Beige Book For Economic Conditions (What is the "Beige Book"?)
The Federal Reserve - Making Sense In Plain English

Tuesday, March 03, 2009

Pending Home Sales Down but Housing Affordability at Record

Pending home sales declined on the heels of a weakening economy and with some buyers waiting for clarity on housing stimulus provisions, according to the National Association of Realtors®(NAR).

The Pending Home Sales Index, [1] a forward-looking indicator based on contracts signed in January, fell 7.7 percent to 80.4 from a downwardly revised reading of 87.1 in December, and is 6.4 percent below January 2008 when it was 85.9. The index is at the lowest level since tracking began in 2001, when the index value was set at 100.

Lawrence Yun, NAR chief economist, said the downturn in the economy also weighed heavily on the data. “Even with many serious potential home buyers on the sidelines waiting for passage of the stimulus bill, job losses and weak consumer confidence were a natural drag on home sales,” he said. “We expect similarly soft home sales in the near term, but buyers are expected to respond to much improved affordability conditions and from the $8,000 first-time buyer tax credit.”

The PHSI in the Northeast dropped 12.7 percent to 57.8 in January and is 19.7 percent below a year ago. In the Midwest the index declined 9.2 percent to 72.6 and is 13.8 percent below January 2008. The index in the South fell 11.9 percent to 82.2 in January and is 9.1 percent below a year ago. In the West the index rose 2.4 percent to 103.6 and is 13.5 percent higher than January 2008.

NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said it’s ironic with the weak housing market that affordability conditions have improved dramatically. “Housing affordability is at a record high – the buying power of a typical family has risen significantly,” he said. “With the drop in interest rates, a median-income family can afford a home costing $20,000 more than a year ago for the same monthly mortgage payment. With the strong housing stimulus, we are hopeful inventory will get trimmed and which will help prices stabilize in many areas by the end of this year.”

NAR’s Housing Affordability Index rose 13.6 percentage points in January to 166.8, a new record high.[2] The HAI, a broad index of affordability using consistent values and assumptions over time, shows that the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970.

The HAI indicates a median-income family, earning $59,800, could afford a home costing $283,400 in January 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 that amount. A year ago, the typical family could afford a home costing $263,300.

Yun added, “Conditions have been aligning very favorably for home buyers with the exception of consumer confidence. But I am hopeful that sales will turn around by late spring and early summer because history suggests that home sales can rise even in times of job losses when housing affordability rises.”

# # #

1The 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.

Each March, NAR Research conducts a review of PHSI seasonal adjustment factors and fine-tunes data for the past three years.

2The 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.

Existing-home sales for February will be released March 23; the next Pending Home Sales Index will be on April 1.

Sunday, March 01, 2009

Real Estate Cyber Tips - March 2009

CYBER MAGIC TRICKS

TRICK#1

SEE WHERE YOUR FRIENDS ARE RIGHT NOW!
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TRICK#2

MAKE YOUR PHOTO TALK!
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GREAT PLACES!

GREAT PLACE #1

NO STRINGS ATTACHED!
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GREAT PLACE #2

HOW SECURE IS YOUR COMPUTER?
Most of us now protect ourselves online and when using e-mail with a myriad of programs to keep the viruses and malware at bay. However other vulnerabilities are always lurking – particularly in the form of un-patched software. These folks give you a fast way to scan your PC for the most common programs and vulnerabilities, checking to see if your PC has at least minimum security protection against known patched vulnerabilities. It first checks for insecure versions of common programs installed on your PC. Then the program can assist you with updating, patching, and protecting your PC. It runs through your browser. So no installation or download is required. And best of all it’s on the house.
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The information contained in Real Estate CyberTips is believed to be true and correct but no warranties or guarantees are provided and readers should rely solely on their own information and advisors in connection with any sites, services or products reviewed. All content Copyright 2009, RECS. All rights reserved.

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