Falling home prices should give aspiring homeowners the upper hand this spring, but in a growing number of locations, it doesn’t feel like a buyer’s market, writes The Wall Street Journal.

Blame the nearly five-year slide of home prices. Those declines, which accelerated over the past two quarters, have left many sellers unable or unwilling to lower their prices. Meanwhile, buyers remain gun shy about agreeing to any purchase without getting a deep discount.

That dynamic has fueled buyers’ appetites for bank-owned foreclosures. Those homes often hit the market at bargain prices, but they are being snapped up by investors who are paying in cash.

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When the argument of owning versus renting comes up, usually tax deductions are quoted as the major advantage of owning the property.

Clearly, tax deductions have little value for those who do not make enough to actually owe any taxes. However, for many families (and single adults who own the property) mortgage and property tax related deductions can dramatically reduce their tax bill.

As with every endeavor, there’s the right way to do things and there’s the wrong way. I’ve stumbled upon this article that neatly explains the right way to claim homeowner’s deductions. Hope this helps.

Here are five essential need-to-knows about home-related income tax tips to help you get the most tax-reducing bang out of your home-owning buck — and to avoid hefty home ownership-related tax traps.

Read the tips >>>

This is something people with an access to cash ask me all the time. And as annoying as it sounds, my answer during the boom and during the slowdown is always the same: it depends.

Also, it depends a lot more on the investor’s personal qualities (or his ability to hire a reliable manager for the newly acquired property) than it is often given credit to. By that I mean if the person is really ready to be a landlord.

Ask yourself these questions: Do you mind panicked calls at 3 a.m. to deal with stopped-up showers or heat pumps that are on the fritz? Do you have a cushion of cash to tide you over during vacant periods and cover costs like advertising and vetting tenants? Can you afford to put down a hefty down payment to obtain financing? And do you plan to own for a few years so you can benefit from the boost in equity you’ll get as you pay down the mortgage, even if it takes a while for home prices to rise again?

If the answer to all of these questions is yes, then you can go shopping. Ask the current owners for copies of all rental receipts, as well as all bills, including utilities, water and sewer, property management and taxes.

Then you’ll have to do some figuring so you can compare the income potential of your targeted properties.

Read the entire article on WSJ website >>>

There was never so much confusion about appraisals and value of the property as it is nowadays. After years of inflated housing prices we finally started seeing some realistic numbers. This, however, upset sellers and buyers alike, as well as some Realtors.

It’s another byproduct of the housing bust: Appraisals have become yet another complication in the effort to close a deal. Stories abound of deals upended by appraisals that are dramatically lower than a buyer’s offer. Industry observers blame lower appraisals on declining housing values. They also say lenders are more conservative, wanting to ensure buyers make good, given the foreclosure crisis.
Meanwhile, the process used to hire appraisers has been undergoing nationwide reform in the wake of the housing bust to avoid what was widely seen as cozy relationships between lending officers and appraisers that some believe exacerbated the housing bubble.
As a result of that reform, no longer can a loan officer call an appraiser directly. The point is to ensure that a lending officer can’t influence an appraiser to assign a particular value to a home to ensure the sale will close.
“Generally speaking, there had to be a firewall between lenders and appraisers to prevent the kind of activity that led up to the run-up of the housing bubble,” said Ken Chitester, a spokesman for the Chicago-based Appraisal Institute and its 24,000 members.
For buyers, an appraisal coming in lower than an offer can be a deal breaker unless a seller comes down in price or the buyer can put down more money. In some cases, the deals fall apart amid uncertainty about a property’s value.

Read the entire article here >>>

Since the onset of the mortgage crisis, home buyers have shied away from adjustable-rate mortgages (ARMs) because they are wary of the risks, but these loan products are slowly gaining back lost market share. This was announced the chief economist of Freddie Mac.

Remember all news outlets being flooded by experts screaming about how “the economy is never going to be the same”; “this is the end of financial world as we know it”, etc.?

Well, we’re not even close to where we used to be in 2000-2006, but things are coming back to normal. Or, at least business is slowly moving back to normal. CITI just announced profit, and now we’re talking about people being comfortable again with ARMs?! In fact, while some of us may not have realized it, ARMs were never wiped out of the mortgage business landscape.

In June 2004, ARMs hit a peak share of 40 percent of the home-purchase market but by early 2009, that share had fallen to just 3 percent. Today, ARMs are financing approximately 7 percent of new home-purchase loans, according to an annual study released by Freddie Mac Tuesday.

Freddie expects ARMs to “gradually gain back some favor with mortgage borrowers, rising to an average 9 percent share of the home-purchase market in 2011.”

Based on Freddie Mac’s newly published ARM study, for the third consecutive year, lenders quoted an initial rate that was above the fully-indexed rate on most ARM products. This means that even if short-term Treasury rates remain where they are, the first-rate adjustment would actually lower a homeowner’s mortgage payment.

In early January 2011, the interest rate savings between the initial start rate for traditional 1-year ARMs and 30-year fixed loans amounted to about 1.5 percentage points, compared to 0.8 percentage points in January 2010, Freddie Mac reported.

The GSE found that 5/1 hybrid ARMs continue to be the most popular loan product offered by lenders. Nearly all of the ARM lenders participating in the survey offered such a loan.

The second most popular adjustable-rate loan among lenders was the 3/1 hybrid ARM, with more than seven in 10 lenders offering the product. Only 9 percent of lenders offered a 3/3 ARM loan, which adjusts once every three years.

As much as we sometimes like to revel in an avalanche of bad news, asserting that gloomy days for real estate will follow us perpetually, here’s something very positive to brighten up the beginning of the year.

An overwhelming majority of foreign investors think that U.S. real estate market offers better opportunities now than it did 10 years ago. Let me repeat this again: foreign investors have so much trust in our market, that they are willing to bet their money on it. And they think today is the day to do it; and that today presents a better opportunity than yesterday, and many yesterdays before.

According to researchers at University of Wisconsin-Madison, more than 60 percent of respondents, at a margin of over 54 percentage points over second-ranked China, said the U.S. offers the best potential for capital appreciation.

That was the highest positive response to that question since it was first asked in 2000, and a big reversal from the record-low 2006 response of just 23 percent.

And if this is not convincing enough, the same survey claims that a full 72 percent of respondents said they planned to invest even more capital in the U.S. this year than they did in 2010.

Also, when ranked among all the countries targeted for foreign real estate investment in 2011, the U.S. score was quadruple that of the No. 2 choice, the United Kingdom.

Not surprisingly, foreign investors are willing to bet their money on New York City and Washington D.C. Multi-family units are their number 1 choice, followed by retail, hotel and office spaces.

The downside of this foreign interest in our real estate market is the narrow targeting. A few investors are considering to put their money in Mississippi or even Midwest, for that matter. In fact, my fellow Chicagoans should be really disappointed. The top five cities that foreign investors are eying are: New York, Washington D.C., Boston, San Francisco and Los Angeles. So much for the Second City…

As Chicago Tribune’s Antonio Olivio reports, one of the biggest challenges for the next mayor of Chicago is going to be maintaining of a strong middle class. Unemployment in Chicago area hovers at 9.8 percent and the housing market remains depressed. Manufacturing is unlikely to come back to Chicago and although more and more Chicago-based companies are hiring, they are more likely to look for their new workforce in other countries, not here in their backyard.

Also, Chicago is in the midst of trying to integrate a number of low-income residents after many of shameful project buildings have been torn down.

For years, miles of high-rise public housing buildings stretched across the city’s skyline, blocking off entire neighborhoods from any hopes of improvement and further defining Chicago as an urban failure.

Today, much of the city’s stability rides on the success of the $1.6 billion effort launched by Daley in 2000 to tear down those public housing towers, sending thousands of Chicago’s poorest residents to new neighborhoods.

As part of the Chicago Housing Authority’s Plan for Transformation, the mixed-income developments going up in those neighborhoods are meant to be cornerstones for further growth, luring urban pioneers whose presence there would then attract new stores, restaurants, better schools and even more residential development.

The plan has worked in some neighborhoods, most notably, the area near the Gold Coast that was home to the infamous Cabrini-Green housing complex. Synonymous for decades with urban despair, the community has been transformed to a bustling center of urban chic, even before the CHA began demolishing the last high-rise building there last month.

But in other Plan for Transformation communities, the weak economy has altered plans for new development, generating concerns about an effort that has been blamed for destabilizing some neighborhoods.

Read full article here >>>>

The annual consumer credit forecast from U.S. credit bureau TransUnion predicts a 20 percent drop in national mortgage loan delinquencies by the end of 2011.

TransUnion predicts that the number of delinquent accounts — 60 or more days past due — will drop to 4.98 percent from an expected 6.21 percent at the conclusion of 2010.

The projected decrease would more than double the 9.87 percent yearly decline that is expected between the end of 2009 and 2010 (from 6.89 percent to 6.21 percent).

TransUnion anticipates at least double-digit declines in mortgage delinquencies in every state and the District of Columbia through 2011.

Dear colleagues, valued customers and friends,

One of the greatest joys of this season is the opportunity to say “Thank you”! All of us with USA Realty Group wishing you and all those close to you a joyous Holiday Season! Thank you for being our partner, customer, supporter and friend!

We all know that 2010 has been a difficult year for many of us. On the other hand, it also has brought in us great ingenuity, persistence, and resilience.

We live in very challenging times and are confronted by so many things that can easily get in the way of our optimism. However, we at USA Realty Group have no doubts that future is bright for our friends in real estate business, as well as all American businesses and American people.

In this most magical of seasons, may you find peace, love and much happiness!

Thank you for being with us in 2010 and we look forward to working with you in 2011!

Sincerely,

Lina Conner
Borker/Owner

According to a release by Capital Economics, the sharp fall in residential property prices in the third quarter means that housing in the United States has become even more undervalued.

Capital Economics has concluded that house prices are now 17 percent undervalued relative to disposable income per capita. Housing has never before looked as undervalued.

Looking at the data included in the index compiled by the Federal Housing Finance Agency (FHFA), residential home prices are 14 percent undervalued.

The housing affordability index from the National Association of Realtors (NAR) remains close to its record high. Capital Economics explained that NAR’s affordability assessment indicates that a median income household with a 20 percent down payment can now more easily afford the monthly mortgage payments on a median-priced home than at any time in the last 30 years.

However, theoretical affordability and eligibility for a loan are two mutually exclusive categories. First of all, even though from the Realtor’s perspective we regard current market situation as “undervalued”, considering how much home prices were inflated, I’d say current prices are just a little bit below what they should be.

Also, many potential homeowners with W-2s, despite having sufficient and clearly proven income, are still getting denied when it comes to loans. This is not helping homes to gain any more value, nor is it helping the entire economy.