Trying for a Bigger Tax Credit

Reluctant potential home buyers could be in line for some additional tax and financing enticements, either through a post-election lame duck congressional session or from the next Congress arriving in January. Though House and Senate leaders have not agreed on whether to hold a session immediately after the election, national housing industry trade groups are pressing hard for a second round of emergency economic stimulus legislation, ideally before the end of December. The rationale is that the housing debacle was the trigger for the current economic mess, and until the housing market is put back on track — and the huge backlog of unsold new and existing homes is reduced — a serious recession may be unavoidable. NAHB President and CEO Jerry Howard says that reinstituting downpayment assistance for FHA home buyers, and improving it by tying it to higher credit scores, would help crash-strapped purchasers acquire some of the unsold new houses now weighing down local markets. (www.washingtonpost.com)
Washington Post (10/25/08); Kenneth R. Harney

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Housing Healthier Near Thriving Metros

As housing prices near a bottom — perhaps by late next year — homes closer to cities with thriving economies and mass transit will outperform outer-ring suburbs and “exurban areas,” where high gas prices are making long car commutes prohibitively expensive, according to a new report released by the Urban Land Institute and PricewaterhouseCoopers. The report, based on responses from 600 real estate experts, is focused on commercial real estate, but it also includes an overview of housing markets. Changing consumer preferences could increase demand for condos in urban areas, many of which now have a glut of such properties. At some point, unsold high-end Miami condos overlooking the Atlantic will be “good buys,” the report predicts, noting that ocean views “always find a market.” So-called “24-hour cities" like New York, Boston, Chicago, San Francisco and Washington, D.C. should also benefit from mass transit systems that can free residents from car dependence, the report said. “Fast-growing Sunbelt cities had pooh-poohed mass transit in their rapid expansions, enabled by interstate highway building during the 1960s and 1970s,” the report said. “Virtually no one contemplated the consequences of car dependence until populations began to overwhelm road capacities.” The Sunbelt is also plagued by water issues. Water issues pose a challenge to further growth in areas dependent on the Colorado River and throughout the Southwest, the report said. Continued growth in areas like Las Vegas, Phoenix and Southern California will require increased conservation and new sources of water. (www.inman.com)
Inman News (10/21/08)

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Housing Downturn Could Be Approaching Bottom

An unusual September jump in home sales, together with the biggest monthly drop yet in prices, could be early signs that California’s San Diego County is seeing the bottom approaching in its three-year housing downturn. MDA DataQuick reported that the median price for all homes dropped $22,000 from August to stand at $328,000 last month, the lowest since June 2002. The figure represented a 34.6% drop from the all-time peak of $517,500 set in November 2005. Sales jumped 56.4% to 3,366 transactions from year-ago levels, a reflection of the very low sales completed in September 2007 in reaction to the credit crunch and subprime mortgage crisis. The figures were interpreted as good news by Christopher Thornberg, an economist with Beacon Economics, who said that sales of low-priced properties are attracting investors. “That’s a good thing, because these are the guys who will determine where the bottom is,” Thornberg said. “When they think prices have reached a point where they can buy stuff and rent it out and sell in three or four years and make money, they’ll move in. This was never an if, it was always a when, and now it’s starting to happen.” He added, “It’s the beginning of a recovery — it’s not the recovery …There’s a bottom ahead, we’re not there yet, but it’s clear we’re coming in for the landing.” (www.signonsandiego.com)
San Diego Union-Tribune (10/21/08); Roger Showley

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Bargain Hunters Trickle Back to U.S. Housing Market

In the Phoenix suburbs, a five-bedroom home with a large yard and swimming pool attracted a handful of prospective buyers on a recent weekend afternoon, lured by a reduction from $1,095,000 to $998,000 in the asking price and desert mountain views. As he wandered out to the pool with his wife, Elliott Farber, who just relocated from Boston, voiced the cautious optimism of someone who has watched the market fall and thinks it just might be time to jump in. “You have to be a savvy shopper,” he said. “I think the market hasn’t bottomed out yet. At the same time, there’s some (price) threshold…where you have people who just want what they want.” While sales of existing and new homes continue to fall across the U.S. and the credit crisis makes mortgages harder to get than they used to be, tumbling prices have begun to lure a few credit-worthy bargain hunters into the market. (www.reuters.com)
Reuters (10/23/08); Tim Gaynor

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Other Woes Make Foreclosure Crisis Hard to Break

More than 4 million home owners with a mortgage were at least one month behind on their payments at the end of June, according to the latest data from the Mortgage Bankers Association, and a record 500,000 had entered the foreclosure process. “We are behind the curve. We are falling behind,” Sheila Bair, head of the Federal Deposit Insurance Corp., told a Senate hearing on Oct. 23. “There has been some progress, but it’s not been enough, and we need to act. And we need to act quickly, and we need to act dramatically to have more wide-scale, systematic (loan) modifications….” Currently, more than 30% of properties in the foreclosure process are owned by someone with a different address, indicating that the home is likely owned by an investor, according to foreclosure listing service RealtyTrac Inc. Government programs to help home owners are specifically designed not to help such investors, though in reality it may be hard to weed them out. Roughly one-third of all subprime loans modified in the third quarter of last year were delinquent again within 10 months, according to a Credit Suisse report released last month. The Federal Housing Administration says it has helped about 400,000 borrowers refinance over the past year, though only about 1% were behind on their loans. This month, the FHA started the “Hope for Homeowners” program, which was included in legislation passed over the summer by Congress. It is designed to let another 400,000 troubled home owners swap their mortgages for traditional 30-year fixed-rate mortgages, but only if lenders agree to reduce the value of a loan and take a loss. In Washington, the FDIC’s Bair has proposed a plan in which the government would provide guarantees for mortgages that have been reworked by banks, lowering payments to more affordable levels. (www.buffalonews.com)
Buffalo News (10/26/08); Alan Zibel, Associated Press

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For Some, Housing Crisis Is Unbearable

Over the past three months, a record number of Californians have lost their homes to foreclosure, and some of those financial losses are turning into human tragedies, as reports of suicide and other desperate behavior emerge. In one case, 53-year-old Wanda Dunn apparently set her house afire and shot herself in the head after facing eviction from the only home she’d ever known. “She’d grown up in the house, from what I understand, and lived there her whole life, so it was all she had,” said a neighbor. “I talked with another of the neighbors down the street, and through the grapevine he’d heard that she really didn’t know what to do if she’d lost her house.” Dunn had inherited her bungalow in the North Pasadena neighborhood named Bungalow Heaven and lost it after she stopped working because of a disability; she had also made bad financial decisions. The new owner let Dunn rent the yellow stucco bungalow, but he lost the house when the subprime meltdown sent California’s real estate into a tailspin. Beverly Hills psychologist Kenneth Siegel says Californians are especially attached to their homes. “California represented for many of us the pinnacle of the effects of hard work,” Siegel said, “of the ability to pull ourselves up by our bootstraps.” Owning a home, he said, “represented the physical manifestation of all we have done and how hard we have worked.” (www.npr.org)
National Public Radio (10/27/08); Karen Grigsby Bates

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