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"The federal tax credit for homebuyers, which expires on April 30th, may make housing even more affordable for some families already in the middle of the home buying process. In fact, the Federal Reserve's March 3rd regional economic review noted that several districts attributed stronger home sales to the homebuyer tax credit.

The third-straight drop in sales on a month-to-month basis was unexpected. “The housing market remains very, very distressed,” wrote Dan Greenhaus, chief economist for Miller Tabak & Co.

“There may have been some weather-related issues playing havoc with the sales data but clearly, these results are extremely unnerving,” wrote Jennifer Lee, an economist for BMO Capital Markets. “There is nothing positive to glean from this report.”

U.S. stock markets fell after release of the report, which coincided with release of congressional testimony by Federal Reserve Chairman Ben Bernanke, who said the economy remains fragile and needs low interest rates for an extended period of time.

Data on sales for December 2009 were revised higher to a seasonally adjusted annual rate of 348,000, up from 342,000 previously reported.

Sales of new homes are down 6.1% compared with January 2009’s 329,000 units, which was the previous record low. The number of homes for sale rose 0.4% to 234,000 in January. At the January sales pace, it would take 9.1 months to sell that inventory, up from 8.0 months in December and the highest monthly supply since May.

Sales had risen fairly steadily in the first half of 2009 before plateauing last fall. Seasonally adjusted sales have now fallen three months in a row.

With mortgage rates still very low and prices down, most analysts had concluded that the recent decline in sales was due to the impending expiration of the first-time home buyers’ credit in November.

As it happened, Congress extended the tax credit through June and expanded it to include repeat buyers. But the tax credit didn’t help sales in January. Sales of new homes are recorded once a sales contract is signed, not at closing. Some homes are sold before ground is broken on construction.

Details
Home builders had been slashing their inventory of unsold homes for more than a year to a 38-year low before January’s 1,000 increase. The number of homes for sale that are under construction fell to a record low of 100,000.

Builders have cut back on production of new homes, but they still face headwinds from unsold existing-homes as foreclosures continue to mount up. If a home isn’t sold before it’s finished, it’s taking a record 14.2 months to sell it after completion—a reflection of the mismatch between more expensively priced homes in the inventory and lower-priced homes that have been selling.

The median sales price of a new home sold in January was $203,500, down 2.4% compared with a year earlier. Cheaper homes were selling better than expensive ones: 47% of sales were for less than $200,000, up from 43% in December. Meanwhile, 38% of sales were for $200,000 to $400,000, down from 41% in December.

Sales were down in three of four regions: down 35% in the Northeast, down 12% in the West and down 10% in the South. January’s sales were up 2% in the Midwest, the government’s data showed.

(c) 2010, MarketWatch.com Inc.

Reprint from Realty Trac, Rick Sharga

As we enter a new year — and begin a new decade — it’s a good time to take a look ahead and try to answer some of the most frequently asked questions about the foreclosure market.

Overall, we expect an ample supply of discounted foreclosures to be available in 2010, but pent-up demand and record-low cost of ownership will ensure the best deals will be snatched up quickly by well-prepared bargain hunters. Most local markets won’t experience a double-dip in home prices during the year, but the prime buying conditions in place now may be gone by year’s end.

Question 1: What’s the outlook for foreclosure activity in 2010?
It’s likely that we’ll set a new record in terms of overall foreclosure activity for the fourth consecutive year. Over 1.3 million U.S. households received a foreclosure notice in 2007; over 2.3 million received notices in 2008; and although the 2009 numbers haven’t been completely counted at the writing of this article, there will be somewhere in the vicinity of 2.8 to 3 million households in foreclosure. We’re likely to see more than this in 2010, with the number of homeowners in foreclosure probably exceeding 3.5 million, before the trend begins to reverse itself sometime in 2011.

Question 2: Will we see a flood of REOs?
Investors, home buyers and real estate professionals have all been anxiously awaiting a tidal wave of REOs for the past two years. Instead, inventory levels have remained frustratingly low, even in some of the hardest-hit foreclosure markets. Expect more of the same in 2010.

What this means for buyers and sellers is that there will be limited availability of REOs, albeit at higher-than-normal levels. No flood, but a good chance that the trickle on the market today will grow to a more steady stream. While this makes it less likely that we’ll see a “double dip” in home prices, we also won’t see much price appreciation until these distressed assets are finally gobbled up. The most likely scenario is a long, relatively flat period of recovery in the housing market.

Question 3: Will there be a surge in Short Sales?
A big frustration for potential foreclosure buyers has been the difficulty in buying a property via short sale. Agents have questioned why banks reject a short sale offer 20 percent below the mortgage amount only to spend tens of thousands of dollars to foreclose on the home and then sell it as an REO at a 50 percent discount.

We’ll see an increase in the number of short sales if the Treasury Department has anything to say about it: Lenders participating in the Obama Administration’s loan modification program will be strongly encouraged to offer any homeowner who doesn’t meet the requirements for HAMP a short sale opportunity as an alternative to foreclosure.

But short sales won’t be a panacea, either. In many cases, the presence of a second loan will make negotiating a short sale much more difficult; in other cases, the owner of the primary loan might foreclose on the home, wipe out the second loan, and sell the home, using the amount of the second loan as a “market discount” to move the property.

Question 4: Is now a good time to invest in foreclosures?
What all of this means to foreclosure buyers and investors is that the process will require more diligence, persistence and patience. But there has never been a market with as much — or as varied — inventory to choose from, and the combination of deeply discounted pricing and historically low interest rates make many deals once-in-a-lifetime opportunities.

Whether you’re a wholesale investor looking to buy, rehab and resell, or a buy-and-hold investor looking for a cash flow property to rent out, 2010 marks the beginning of a decade of unprecedented opportunity.  

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

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

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

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

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

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

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

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

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

This program won't help everyone, of course; but it's pretty nice for those to whom it applies.        Written by Bob Hunt, Realty Times

FORECLOSURE ACTIVITY SLOWS FOR THIRD STRAIGHT MONTH

RealtyTrac®, one of the leading online marketplace for foreclosure properties, released its October 2009 U.S. Foreclosure Market Report™ which shows foreclosure filings, default notices, scheduled foreclosure auctions and bank repossessions, were reported on 332,292 U.S. properties during the month, a decrease of 3 percent from the previous month but still up nearly 19 percent from October 2008

CALIFORNIA , NEVADA & FLORIDA ACCOUNT FOR ALL TOP 10 FORECLOSURE RATES

#1 Las Vegas, NV (1 in every 68 homes)

#2 Vallejo-Fairfield, CA (1 in every 81 homes)

#3 Modesto, CA (1 in every 81 homes)

#4 Riverside-San Bernardino-Ontario, CA (1 in every 83 homes)

#5 Cape Coral-Fort Myers, FL (1 in every 92 homes)

#6 Bakersfield, CA (1 in every 97 homes)

#7 Merced, CA (1 in every 100 homes)

#8 Stockton, CA (1 in every 116 homes)

#9 Orlando-Kissimmee, FL (1 in every 117 homes)

#10 Sacramento-Arden-Arcade-Roseville, CA (1 in every 130 homes)

RISMEDIA, November 24, 2009—Driven by the first-time buyer tax credit, existing home sales showed another big gain in October 2009 with a strong uptrend established over the past seven months, while inventories continue to decline, according to the National Association of Realtors.

Existing-home sales, including single-family, townhomes, condominiums and co-ops, surged 10.1% to a seasonally adjusted annual rate of 6.10 million units in October.  Sales activity is at the highest pace since February 2007 when it hit 6.55 million.

Lawrence Yun, NAR chief economist, was surprised at the size of the gain. “Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month, and similarly robust sales may be occurring in November,” he said. “With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer.”

Now that the tax credit has been extended and expanded, potential buyers have until April 30 to have a contract in place. “There is still a large pent-up demand that can be tapped before the tax credit expires.

Historically low interest rates also are boosting the market. “Mortgage interest rates last month were the third lowest on record dating back to 1971,” Yun noted. According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.95% in October from 5.06% in September; the rate was 6.20% in October 2008. Last week, Freddie Mac reporter the 30-year rate dropped to 4.83%.

NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz., said strong demand by first-time buyers is creating some unusual conditions. “In parts of the country, especially in Southwestern states but also in Florida and suburban Washington, D.C., we’ve been getting many reports of multiple bids in the lower price ranges with foreclosed properties getting absorbed quickly,” she said. “In fact, low-end inventory has become very tight in many areas (Trilogy in Rio Vista) and in some cases buyers are becoming more aggressive. In this kind of environment it’s important to work with a Realtor who can walk you through the process and help you negotiate a satisfactory deal.”

Total housing inventory at the end of October fell to 3.57 million existing homes available for sale, which represents a 7.0-month supply at the current sales pace, down from an 8.0-month supply in September. Unsold inventory totals are 14.9% below a year ago.

The national median existing-home price for all housing types was $173,100 in October, down 7.1% from October 2008. Distressed properties, which accounted for 30% of sales in October, continue to downwardly distort the median price because they usually sell at a discount relative to traditional homes in the same area.

“In the second half of 2010, if home values show consistent stabilization or even a modest increase, then home sales could remain at normal healthy levels because consumers would no longer be worried about a price overcorrection,” Yun said. He added that low home prices also are contributing to extremely favorable affordability conditions. “With the abnormal drop in home prices over the past few years, the price-to-income ratio has fallen below the historic trend line,” Yun said. “This is adding to the buying power of the typical family, with affordability conditions this year at the highest on record dating back to 1970, but prices are beginning to flatten and are poised to rise next year.”

West
Existing-home sales in the West increased 1.6% to an annual rate of 1.31 million in October and are 12.0% above a year ago. The median price in the West was $220,200, which is 14.7% below October 2008.

Buying a home is a very emotional process, and allowing emotions to get the best of you can cause you to make any number of mistakes.  There are eight common emotional mistakes that people make when buying a home.  Avoiding these pitfalls will help you find the best home-sweet-home.  

Mistake 1: Falling in love with a house you can't afford  Once you've fallen in love with a particular home, it's hard to go back. You start dreaming about how great your life would be if you had all the wonderful things it offered, the lovely, tree-lined streets, the jetted bathtub, the spacious kitchen with professional-grade appliances. However, if you can't or won't be able to afford that house, you're just hurting yourself.

To avoid the temptation to get in over your head financially, or the disappointment of feeling like you're settling for less than you deserve, it's best to only look at homes in your price range.  Why not start your search at the low end of your price range, if what you find there satisfies you, there's no need to go higher. Remember, when you buy another $10,000 worth of house, you're paying an extra $10,000 plus interest, which might come out to double that amount or more over the life of your loan.

Mistake 2: Thinking that a particular house is the only one that will suit you

Unless you are a high-end buyer looking at custom homes, chances are that for any home you find that you like, there are quite a few others that are nearly identical to it. Most neighborhoods have multiple homes that are the same model. Further, most neighborhoods are full of homes that were all constructed by the same builder, so even if you can't find an identical model for sale, you can probably find a house with many of the same features.  Even when you have a long list of must-haves, there are probably several homes out there that can meet your needs. Another house in the same area might be similar enough to meet your needs but be less expensive.

Mistake 3: Being so desperate to become a homeowner that you buy a place that doesn't suit you

When you've been looking for a while and you're not seeing anything you like, or worse, you're getting outbid on the houses you do want, it's easy to start thinking that what you really want simply won't happen. If you move into a house you'll end up hating, the transaction expenses to get rid of it will be costly. You'll have to pay an agent's commission and you'll have to pay closing costs for the mortgage on your new house. You'll also deal with the hassle and expense of moving yet again. Or if you decide to try to make the best of what you have, remember that alterations and renovations are expensive, time-consuming and stressful. The best advice is to wait to correct your vision for your future to what you actually need, not want.

Mistake 4: Overlooking important flaws in the structure, appearance or location of the house

For any of the three reasons we just discussed, you might be tempted to ignore major problems with the house that will be difficult, expensive or impossible to change. Carefully consider your options before you make a commitment, and consider waiting until something better comes along. New houses come on the market every day.

Mistake 5: Thinking you're a handyman when you're not

Don't buy a fixer-upper that's more than you can handle in terms of time, money or ability. For example, if you think you can do the work yourself then realize you can't once you get started, any repairs or upgrades you were planning to make will probably cost twice as much once you factor in the labor, and that may not be in your budget.  Honestly evaluate your abilities, your budget and how soon you need to move before purchasing a property that isn't move-in ready.

Mistake 6: Putting in an offer before carefully considering all the pros and cons of the property

In a hot market, or even a hot submarket, with dirt-cheap, bank-owned properties during a housing slump, it may be necessary to pull the trigger very quickly if you find a home you like.  However, you have to balance the need to make a quick decision with the need to make sure the home will be right for you.  Don't neglect important steps like making sure the neighborhood feels safe at night as well as during the day and investigating possible noise issues like a nearby train.  Ideally you'll be able to take at least a night to sleep on the decision.  How well you sleep that night and how you feel about the home in the morning will tell you a lot about whether the decision you're about to make is the right one. Taking the time to consider the decision also gives you a chance to research how much the property is really worth and offer an appropriate price.

Mistake 7: Being too slow to pull the trigger

It's a tough balancing act to make sure you make a careful decision yet don't take too long to make it. Losing out on a property that you were almost ready to make an offer on because someone beat you to it can be heartbreaking.  If you don't pull the trigger quickly, someone else might, and you'll have to keep looking. Don't underestimate how time-consuming and routine-disrupting house shopping can be.

Mistake 8: Offering more than a house is worth

If there's a lot of competition in your market and you find a place you really like, it's all too easy to get sucked into a bidding war, or to try to preempt a bidding war by offering a high price in the first place. There are a couple of potential problems with this. First, if the house doesn't appraise at or above the amount of your offer, the bank won't give you the loan unless the seller reduces the price or you pay cash for the difference.  If this happens, the shortfall on your bid as opposed to your mortgage will have to be paid out of pocket.  Second, when you go to sell the house, if market conditions are similar to or worse than they were when you purchased, you may find yourself upside down on the mortgage and unable to sell. Make sure the purchase price for the home you buy is reasonable for both the house and the location by examining comparable sales and getting your agent's opinion before making an offer.

Conclusion

Even knowing all of these things, it's still hard to act on them. You may still find yourself making decisions based on emotion during the home-buying process.  Slow down, overcome your emotions and, ultimately, make a home-purchase decision that's good for both your feelings and your finances.