By By Chris Farrell
Business Week updated 12/13/2010 7:00:00 PM ET 2010-12-14T00:00:00

A pall has settled over the U.S. housing market. The first-time home buyer's credit has dried up, and home prices are down 29 percent from their 2006 peak. On Dec. 9 the latest release of the Federal Reserve's Flow of Funds data shows the value of homeowner equity in the third quarter of this year at $6.4 trillion -- 52 percent lower than four years ago.

Judging by the learned consensus at holiday parties -- where homeowners swap sorry tales of underwater mortgages and bleak sales -- don't count on things getting better in months to come. Hanging over the market is an ominous combination of a weak economic recovery, near 10 percent unemployment rate, an inventory of 8 million or so distressed properties, and uncertainty over the legality of foreclosures by major mortgage loan servicers. Celia Chen of Moody's Analytics (MCO) expects the S&P/Case-Shiller home price index will drop 8 percent from the second quarter of 2010 to the third quarter of 2011. Morgan Stanley's (MS) housing analysts, led by Oliver Chang, figure home prices will decline somewhere from 6 percent to 11 percent before finding bottom.

But does that mean it's a bad idea to buy a home? I don't believe so, based on some dispassionate analysis. For the long-term homeowner [or patient investor), a home appears to be one of the better investments around, with minimal downside risk. "Housing is priced to earn its historic real rate of return of 0.5 percent to 1 percent and interest rates are low," says Morris Davis, professor of real estate and urban land economics at the University of Wisconsin-Madison. "Now may be a once-in-a-lifetime time to buy."

Think of the rental and ownership markets as competing for the household shelter dollar. Richard Green, director of the Lusk Center for Real Estate at the University of Southern California, says that equation clearly favors owning. Even more striking, Green says he's "hard-pressed to think of a time when owning on a cash-flow basis looks so reasonable relative to renting."

Take this back-of-the-envelope calculation: Green notes the median U.S. house price is $170,500. The most recent American Housing Survey data [2008) put the median rent at $808 a month and the CPI-Rent index has been essentially flat since then. The cash-flow cost of renting is $9,696 per year. On the homeownership side, Green assumes an interest rate on a 30-year fixed-rate mortgage is 4.5 percent and that the buyer makes a 20 percent down payment. He assumes the buyer could have made 10 percent on the downpayment if it was invested elsewhere, the so-called opportunity cost of capital. Property taxes are 1 percent of house value, marginal income tax rates [state and local] are 25 percent, maintenance costs are 1 percent per year, and amortized closing costs are another 1 percent per year. Taken altogether, the cash cost of owning is $12,162 per year. Looks like renting still beats owning, right?

Not really. The typical apartment is smaller than the typical house, 1,300 square feet for the median rental unit vs. 1,800 square feet for the median home. Thus, owning the median home is about 10 percent less per square foot than renting the median rental unit. "You need no home price appreciation to still be ahead financially with owning," he says. "Your after-tax, out-of-pocket cost of owning is less than the out-of-pocket cost of renting."

Morris Davis agrees housing is fairly priced compared with renting. The rent-price ratio is the equivalent of a stock's dividend yield, but with a home price rather than a stock's market capitalization as the denominator. Davis, along with economists Andreas Lehnert and Robert Martin, tapped into a national home-price database and created a rent-price ratio dating back to 1960. They found the ratio fluctuated in a fairly narrow range for much of the period from 1960 to 1995, averaging 5.29 percent. Yet from 1995 to 2006 the mass mania for housing drove the ratio down to an all-time low of 3.5 percent -- a clear signal housing was overvalued and renting financially attractive. [The signal may have been clear, but it was ignored.] The ratio has since climbed back up to 4.86 percent in the third quarter of 2010.

There's another trend working in homeownership's favor: "Housing is a hedge against inflation," says Davis. During the inflationary 1970s the annualized real rate of home price appreciation -- that is, above inflation -- was 4.35 percent for the decade, according to research by Davis and Jonathan Heathcote, economist at the Federal Reserve Bank of Minneapolis. In sharp contrast, from 1960 to 1970 the real annual return was 0.62 percent. Thanks to the potent combination of leverage and inflation, the average homeowner in 1970 earned a total real return on equity of 5 times by 1980. [The inflation-adjusted national median home price declined from 1969 to 1970, one of the few times that's happened before the recent housing market implosion.]

Of course the current rate of inflation is extremely low. The consumer price index for the 12 months ending in October has risen 1.2 percent. [The 0.3 percent drop in the shelter component of the CPI is one reason the index is so low.) The core rate of consumer inflation -- the CPI minus volatile food and energy -- is up a mere 0.6 percent over the same period. It's the lowest increase recorded since the index began in 1957. Federal Reserve Board Chairman Ben Bernanke has warned "inflation that is too low can pose risks to the economy -- especially when the economy is struggling. In the most extreme case, very low inflation can morph in deflation [falling prices and wages], which can contribute to long periods of economic stagnation."

Little wonder the Fed would like to see a higher rate of inflation. Many Wall Street analysts and professional Fed-watchers believe the central bank will succeed, especially since it launched its $600 billion bond-buying program. The economic recovery should also allow more companies to boost prices over time, assuming a modest rebound and slow decline in the unemployment rate over the next several years. While the odds of a reprise of a 1970s double-digit inflation rate is extremely remote, even relatively modest rates of inflation cut into the cost of fixed-rate debt since borrowers pay back lenders with depreciated dollars.

The housing market bust has taken optimists to the woodshed many times over the past several years. The litany of negatives weighing on the market remains daunting. So the safe forecast remains "Plenty could still go wrong." But real estate market valuations suggest the odds may well favor the intrepid.

Copyright © 2010 Bloomberg L.P.All rights reserved.

Survey shows Americans still believe
buying a home is a good financial decision

Nearly eight out of 10 respondents in a recent survey believe buying a home is a good financial decision, despite ongoing challenges with the economy and housing market.

The eighth annual Housing Opportunity Pulse Survey, conducted for the National Association of REALTORS®, measures how affordable housing issues affect consumers.

Pollsters found job security concerns to be the highest since the survey’s inception, with 70 percent of Americans saying job layoffs and unemployment are a big problem in their area; eight in 10 cite these issues as a barrier to homeownership.

"The real issue facing the nation’s economy right now is that many Americans can’t find meaningful work to support their families," said NAR President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. "While a job recovery is what’s needed right now to get the economy and housing market back on the right track, owning a home continues to be part of the American Dream and one of the best long-term investments in your future."

Despite economic uncertainty, 68 percent of those surveyed still believe now is a good time to buy a home; while that number is down from last year (75 percent) it’s up from 2008 (66 percent) and 2007 (59 percent).

Among other key findings:

• Respondents see the recession and job losses as the main reasons for the foreclosure problem, a shift from last year when they were more likely to blame homeowners who bought homes they could not afford.
• A majority of renters say that owning a home at some point in the future is either one of their highest priorities (39 percent) or a moderate priority (24 percent). Just 21 percent of renters say that owning a home is not a priority at all.
• Frustration with banks is up: now a majority worry that banks have made it too hard to qualify for a home mortgage loan.
• 51 percent of respondents say foreclosures remain a big or moderate problem in their area. While there has been a significant drop in the percentage of those surveyed who say foreclosures have increased, 51 percent say that the rate of foreclosures is about the same as it was last year.
• Most of those surveyed say that it is harder to sell a home in their neighborhood than it was a year ago.
• Looking forward, 70 percent expect real estate sales in their neighborhood to remain about the same over the next few months. A nearly identical number (69 percent), also expect home values to remain the same.
• Nearly one-quarter (23 percent) are now very concerned about the number of homes and condos for sale in their area—a number that is up 7 points from last year.
• Most respondents are more concerned about the drop in home values than they are about home costs being too high. Still, cost remains the significant barrier to many who would otherwise like to buy a home.

The survey was conducted by American Strategies and Myers Research & Strategic Services for NAR’s Housing Opportunity Program. The telephone survey reflects responses from 1,209 urban and suburban adults in the top 25 metropolitan statistical areas.

NAR's Housing Opportunity Program, www.realtor.org/housingopportunity, was created in 2002 to encourage local Realtor® associations to create initiatives that help increase housing opportunities available to consumers and make affordable housing more readily available in their communities.

NWREporter December 2010 :: Northwest Multiple Listing Service.

WASHINGTON —
Congress has extended a policy that allows homeowners in pricey real estate markets to secure government-backed mortgages of nearly $730,000.

Lawmakers have voted to keep the maximum size of loans guaranteed by Fannie Mae and Freddie Mac and the Federal Housing Administration at the current level through the end of 2011.

Those limits apply in expensive areas like New York and San Francisco. Without the change, the limits would have fallen to about $625,000. The limit was $417,000 before 2008 and remains at that level in most of the country.

The measure was included in a temporary spending bill that lawmakers sent to President Barack Obama early Thursday.

Real estate agents, mortgage bankers and homebuilders lobbied to keep the upper limit in high-priced markets, arguing that the housing market would suffer if the limits were not extended. Critics argued that lower limits would help wean the housing market off government support.

Keeping the current limit will help about 60,000 borrowers annually, estimated Mahesh Swaminathan, a mortgage analyst with Credit Suisse.

Even though relatively few borrowers will be assisted, Guy Cecala, publisher of trade publication Inside Mortgage Finance, said lawmakers are focused on keeping the struggling housing industry happy.

"Nobody wants to oppose or upset the Realtors and the homebuilders in an election year," he said.

Anything above the limit set by Congress falls into a category known as "jumbo" loans. They made up 5 percent of the mortgage market this year, down from a typical level of about 18 percent, according to Inside Mortgage Finance, a trade publication.

During the financial crisis, mortgage lenders became far less willing to make those loans. In December 2008, borrowers who wanted a jumbo loan were paying 1.8 percentage points higher on their mortgage rates than convential government-backed loans, according to financial publisher HSH Associates.

That gap narrowed as the crisis eased. As of last week, borrowers who receive jumbo loans were paying a premium of 0.8 percentage points, according to HSH. That's still above a pre-crisis level of 0.25 percentage points.

http://seattletimes.nwsource.com/html/businesstechnology/2013036531_apuscongressmortgagelimits.html?syndication=rss

Enough with the doom and gloom about homeownership.

Sure, maybe there's more pain to come in the housing market. But when Time magazine starts running covers that declare "Owning a home may no longer make economic sense," it's time to say: Enough is enough. This is what "capitulation" looks like. Everyone has given up.

After all, at the peak of the bubble five years ago, Time had a different take. "Home Sweet Home," declared its cover then, as it celebrated the boom and asked: "Will your house make you rich?"

But it's not enough just to be contrarian. So here are 10 reasons why it's good to buy a home.

1. You can get a good deal. Especially if you play hardball. This is a buyer's market. Most of the other buyers have now vanished, as the tax credits on purchases have just expired. We're four to five years into the biggest housing bust in modern history. And prices have come down a long way– about 30% from their peak, according to Standard & Poor's Case-Shiller Index, which tracks home prices in 20 big cities. Yes, it's mixed. New York is only down 20%. Arizona has halved. Will prices fall further? Sure, they could. You'll never catch the bottom. It doesn't really matter so much in the long haul.

Where is fair value? Fund manager Jeremy Grantham at GMO, who predicted the bust with remarkable accuracy, said two years ago that home prices needed to fall another 17% to reach fair value in relation to household incomes. Case-Shiller since then: Down 18%.

2. Mortgages are cheap. You can get a 30-year loan for around 4.3%. What's not to like? These are the lowest rates on record. As recently as two years ago they were about 6.3%. That drop slashes your monthly repayment by a fifth. If inflation picks up, you won't see these mortgage rates again in your lifetime. And if we get deflation, and rates fall further, you can refi.

3. You'll save on taxes. You can deduct the mortgage interest from your income taxes. You can deduct your real estate taxes. And you'll get a tax break on capital gains–if any–when you sell. Sure, you'll need to do your math. You'll only get the income tax break if you itemize your deductions, and many people may be better off taking the standard deduction instead. The breaks are more valuable the more you earn, and the bigger your mortgage. But many people will find that these tax breaks mean owning costs them less, often a lot less, than renting.

4. It'll be yours. You can have the kitchen and bathrooms you want. You can move the walls, build an extension–zoning permitted–or paint everything bright orange. Few landlords are so indulgent; for renters, these types of changes are often impossible. You'll feel better about your own place if you own it than if you rent. Many years ago, when I was working for a political campaign in England, I toured a working-class northern town. Mrs. Thatcher had just begun selling off public housing to the tenants. "You can tell the ones that have been bought," said my local guide. "They've painted the front door. It's the first thing people do when they buy." It was a small sign that said something big.

5. You'll get a better home. In many parts of the country it can be really hard to find a good rental. All the best places are sold as condos. Money talks. Once again, this is a case by case issue: In Miami right now there are so many vacant luxury condos that owners will rent them out for a fraction of the cost of owning. But few places are so favored. Generally speaking, if you want the best home in the best neighborhood, you're better off buying.

6. It offers some inflation protection. No, it's not perfect. But studies by Professor Karl "Chip" Case (of Case-Shiller), and others, suggest that over the long-term housing has tended to beat inflation by a couple of percentage points a year. That's valuable inflation insurance, especially if you're young and raising a family and thinking about the next 30 or 40 years. In the recent past, inflation-protected government bonds, or TIPS, offered an easier form of inflation insurance. But yields there have plummeted of late. That also makes homeownership look a little better by contrast.

7. It's risk capital. No, your home isn't the stock market and you shouldn't view it as the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too. One lesson from the last few years is that stocks are incredibly hard for most normal people to own in large quantities–for practical as well as psychological reasons. Equity in a home is another way of linking part of your portfolio to the long-term growth of the economy–if it happens–and still managing to sleep at night.

8. It's forced savings. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future? A lot of people won't. Most, I dare say. Once again, you have to do your math, but the part of your mortgage payment that goes to principal repayment isn't a cost. You're just paying yourself by building equity. As a forced monthly saving, it's a good discipline.

9. There is a lot to choose from. There is a glut of homes in most of the country. The National Association of Realtors puts the current inventory at around 4 million homes. That's below last year's peak, but well above typical levels, and enough for about a year's worth of sales. More keeping coming onto the market, too, as the banks slowly unload their inventory of unsold properties. That means great choice, as well as great prices.

10. Sooner or later, the market will clear. Demand and supply will meet. The population is forecast to grow by more than 100 million people over the next 40 years. That means maybe 40 million new households looking for homes. Meanwhile, this housing glut will work itself out. Many of the homes will be bought. But many more will simply be destroyed–either deliberately, or by inaction. This is already happening. Even two years ago, when I toured the housing slump in western Florida, I saw bankrupt condo developments that were fast becoming derelict. And, finally, a lot of the "glut" simply won't matter: It's concentrated in a few areas, like Florida and Nevada. Unless you live there, the glut won't have any long-term impact on housing supply in your town.

http://online.wsj.com/article/SB10001424052748703376504575492023471133674.html?mod=WSJ_newsreel_personalFinance

4. Bellevue, WA WINNER
Top 100 rank: 4
Population: 124,000
Unemployment: 5.8%
Compare Bellevue to Top 10 Best Places

If forested cityscapes are your thing, this is your kind of place. Bellevue's compact downtown bristles with new skyscrapers that seem to hover above Lake Washington -- and when the clouds part, mountain views loom.
Real estate isn't a bargain, but the town's jobless rate is more than two points below that of the Seattle metro area, thanks to a recent influx of jobs from such employers as Microsoft (which has moved 6,500 positions here), T-Mobile, Verizon, and Expedia. In fact, Bellevue has more jobs than it does residents.

And the population is diverse: Nearly a quarter of residents are Asian, and nearly a third are foreign born.

The town's high schools consistently land at the top of state rankings. There's also an embarrassment of arts and entertainment, including a philharmonic orchestra, fine arts museum, botanical garden, youth theater, annual jazz festival, and 74 (!) parks. --Jessica Levine
www.cnnmoney.com

By J.W. ELPHINSTONE
AP Real Estate Writer

NEW YORK —
Rates on 30-year fixed mortgages backed off from yearly lows this week, but still remain historically cheap.

Mortgage finance company Freddie Mac says the average rate rose to 4.75 percent, up from 4.72 percent last week. The rate hit 4.71 percent in December, the lowest since Freddie Mac began keeping records in 1971.

The average rate on a 15-year fixed-rate mortgage edged up to 4.2 percent, up from its all-time low of 4.17 percent set last week.

A Federal Reserve program to reduce borrowing costs for consumers pushed rates down to extraordinarily low levels last year. Rates were expected to rise after the campaign ended this spring, but have declined instead over the past two months as investors shifted money into the safety of U.S. Treasury bonds.

Concerns over the European debt crisis and the volatile stock market have made U.S. Treasury debt more attractive. And mortgage rates tend to follow the yield on U.S. Treasury debt.

Low mortgage rates could help buoy housing demand after the expiration of federal tax credits. First-time buyers could get a credit of up to $8,000, while current owners who bought and moved into another home could qualify for a credit of up to $6,500. Buyers had until April 30 to get a signed sales contract and until June 30 to complete the sale.

Home sales started to lag after the credits' deadline. But a recent report offered a sign that buyers are finally taking advantage of low rates. The number of customers applying for refinance and purchase mortgages climbed 18 percent last week after falling sharply the month before, the Mortgage Bankers Association said Wednesday.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

Rates on five-year, adjustable-rate mortgages averaged 3.89 percent, down from 3.92 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 3.82 percent from 3.91 percent. That was the lowest average since May 2004.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.

The nationwide fee for loans in Freddie Mac's survey averaged 0.7 a point for 30-year, 15-year and 5-year loans. The average fee for 1-year loans was 0.6 of a point.

NWMLS, KIRKLAND, WA, May 5, 2010 – "While the tax credit has gone away, the buyers haven't," observed OB Jacobi, a board member of the Northwest Multiple Listing Service. Commenting on the MLS summary report for April, Jacobi described the tax incentives, which expired April 30, with being the "lubricant the market needed," but credits rising consumer confidence with "driving the engine now."

Northwest MLS member brokers reported 9,438 pending sales during April, an increase of more than 36 percent from the same month a year ago. Of these mutually accepted offers, 7,368 of them were in the four county Puget Sound region – the highest volume in this area since August 2006.

Two counties, Grant and Pacific, reported a twofold increase in the number of units sold last month versus a year ago.

MLS figures show inventory is nearly equal to year-ago levels, closed sales jumped almost 51 percent, and sales prices in many areas reflect little variation during the past six months.

Commenting on the latest report, two industry leaders referred to market stability. "The home buyer tax credit did what it was designed to do; it helped with stabilizing the housing market which in turn helped stimulate economic recovery," said J. Lennox Scott, chairman and CEO of John L. Scott Real Estate.

"It's exciting to see the stability of the real estate market continue to improve," said NWMLS director Bobbie Chipman, co-managing broker for Coldwell Banker Bain-Tacoma/Puyallup. "The tax credit seems to have accomplished its purpose," she added, noting, "It motivated home buyers to enter the market place, creating a synergy that should propel us through the summer months."

Brokers were also upbeat when commenting on inventory and the pace of sales. NWMLS members added 12,664 new listings of single family homes and condominiums during April, up from 10,824 for the same period a year ago. At month's end, with these additions, there were 39,999 active listings in the MLS database, about the same number as a year ago when inventory totaled 40,147 listings.

With pending sales outperforming a year ago (9,438 for last month compared to 6,918 for April 2009), the months' supply (an industry indicator of sales velocity) is shrinking. System-wide, there's about a 4.24 month supply, meaning at the current sales rate, if no other homes were put on the market it would take just over four months to exhaust the supply. For the four-county Puget Sound market, there is a supply of about 3.5 months.

Chipman said the current ratio of listings to pending sales speaks favorably to market growth. "Whereas listings were static compared to April '09, the number of pending sales increased more than 36 percent." That dynamic should keep buyers motivated, she stated.

Scott said the positive effects of the tax credit were first felt in the more affordable price ranges, accounting for about half of all housing sales. "We then saw increased sales activity move up the price points. This activity combined with the $6,500 tax credit motivated many repeat buyers to jump off the fence and make a move to their next new home. As a result, the mid price ranges saw an uptick in sales, followed by some additional sales in the upper end," Scott reported.

NWMLS figures show big gains in the number of high-end sales. Last month, members reported 93 closed sales of homes priced at $1 million or more, improving on the year-ago total of 52 such sales. Through the first four months of 2010, the number of closed sales that fetched $1 million or more increased 65 percent from a year ago (304 versus 184 transactions).

Closed sales area-wide jumped nearly 51 percent from a year ago. Members notched 5,243 closings during April, up from the year-ago total of 3,478. Condo sales jumped nearly 74 percent last month for all counties combined. In King County, the number of condo sales nearly doubled, rising from 238 transactions to 454 closed sales.

Prices continue to show modest dips from a year ago, with the overall median price, at $261,000, down 3.3 percent from twelve months ago. Compared to January, half the counties in the MLS service area are showing increases in median prices.

In King County, the median price for last month's sales (including single family homes and condos combined) was $340,000. That's down $10,000 (2.86 percent) from a year ago. For single family homes, the median price on last month's closed sales was $375,000, only $5,000 (1.32 percent) less than a year ago. The median selling price increased in MLS map areas encompassing Seattle, North King County and the Eastside.

Jacobi, the president of Windermere Real Estate Co., said the tax credit had only a moderate impact on activity during April. "We saw lots of activity among first-time buyers who knew they were not going to make the deadline for the (tax) credit, as well as an upswing in higher-end sales that did not qualify for the credits." What that means, he says, is buyers are ready to purchase at the right price. "I can't overemphasize the importance of pricing a home correctly," he stated.

There are two types of homes on today's market, according to Jacobi: Well priced homes in good condition that are selling within 30 days, and over-priced homes that will be sitting on the market a long time. He cited the example of a 2-bedroom home in Laurelhurst with a view of the lake that sold last month in two days for the asking price. "It was not an entry-level home, but it was in immaculate condition and at $717,000, was very well-priced for the neighborhood."

Chipman echoed Jacobi's advice. "As long as sellers remain realistic about the market value of their homes and the expectations of buyers, the strength of the market will grow." She also reported an uptick in new construction activity as some builders have resumed buying land at reasonable prices. "If buyers want to have a variety of houses from which to choose, this is a good time for them to look," Chipman suggested, adding, "The combination of current availability and incredibly low interest rates offers home buyers a tremendous opportunity."

Scott agreed, saying, "Moving forward, local home buyers will continue to experience a purchase power advantage thanks to historically low interest rates and lower adjusted home prices."

Northwest Multiple Listing Service, owned by its member brokers, is the largest full-service MLS in the Northwest. Its membership includes more than 24,000 brokers and agents. The organization, based in Kirkland, currently serves 21 counties in Western and Central Washington.

Statistical Summary by Counties: Market Activity Summary - April 2010

April 2010 Single Family Homes + Condos	LISTINGS		PENDING SALES	CLOSED SALES
	New Listings	Total Active	#Pending Sales	# Closings	Average Price	Median Price
King	5054	12986	3855	2096	$408,715	$340,000
Snohomish	1886	5357	1529	869	$297,564	$273,000
Pierce	1876	5906	1549	784	$237,767	$215,000
Kitsap	554	1924	435	263	$278,915	$228,500
Mason	193	783	80	49	$216,383	$187,000
Skagit	284	1254	177	117	$251,755	$220,000
GraysHarbor	175	923	114	81	$139,511	$128,900
Lewis	148	763	88	53	$155,353	$155,000
Cowlitz	170	657	128	62	$188,356	$180,000
Grant	149	662	140	68	$170,878	$156,700
Thurston	609	1886	456	259	$242,161	$226,850
San Juan	66	463	11	13	$476,331	$380,000
Island	245	1107	131	98	$292,660	$254,206
Kittitas	112	528	64	37	$315,321	$242,000
Jefferson	121	624	35	33	$341,682	$299,000
Okanogan	94	422	31	15	$218,560	$157,500
Whatcom	532	2036	372	203	$263,806	$240,000
Clark	70	283	60	47	$229,265	$202,000
Pacific	70	412	43	23	$164,822	$127,000
Ferry	9	44	5	0	0	0
Clallam	48	195	32	15	$194,410	$183,000
Others	199	784	103	58	$211,034	$195,450
MLS TOTAL	12,664	39,999	9,438	5,243	$317,565	$261,000

4-County Puget Sound Region Pending Sales (SFH + Condo combined)
(Totals include King, Snohomish, Pierce & Kitsap counties)

	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
2000	3706	4778	5903	5116	5490	5079	4928	5432	4569	4675	4126	3166
2001	4334	5056	5722	5399	5631	5568	5434	5544	4040	4387	4155	3430
2002	4293	4735	5569	5436	6131	5212	5525	6215	5394	5777	4966	4153
2003	4746	5290	6889	6837	7148	7202	7673	7135	6698	6552	4904	4454
2004	4521	6284	8073	7910	7888	8186	7583	7464	6984	6761	6228	5195
2005	5426	6833	8801	8420	8610	8896	8207	8784	7561	7157	6188	4837
2006	5275	6032	8174	7651	8411	8094	7121	7692	6216	6403	5292	4346
2007	4869	6239	7192	6974	7311	6876	6371	5580	4153	4447	3896	2975
2008	3291	4167	4520	4624	4526	4765	4580	4584	4445	3346	2841	2432
2009	3250	3407	4262	5372	5498	5963	5551	5764	5825	5702	3829	3440
2010	4381	5211	6821	7368

__________
Copyright © 2010
ALL RIGHTS RESERVED

If you want to claim the first-time buyer credit, you'll have to hurry.

The clock is ticking on the federal homebuyer tax credit.

Homebuyers still have time to buy a home and meet the deadlines, but they will need to act soon and be proactive throughout the transaction.

The homebuyer tax credit is worth 10 percent of the home's sale price, up to $8,000 for buyers who haven't owned a home in the previous three years and up to $6,500 for buyers who have owned and occupied a principal residence for at least five consecutive years during the eight-year period that ends on the day the new home is purchased.

Here are some tips for last-minute buyers:

• The buyer must enter into a binding contract to purchase the home on or before April 30 of this year. The term "binding contract" isn't defined in the homebuyer tax credit law and may be subject to interpretation. Generally, the term refers to an agreement that's signed by both parties and has a deposit in escrow, according to Randi Bennett, an escrow officer at First Centennial Title Co. of Nevada in Reno.
• The purchase must close within 60 days after the binding contract deadline. In this context, that means June 30, not June 29, according to the IRS. The discrepancy between 60 calendar days and two months occurs due to a financial fiction that every month equals 30 days.
• Certain U.S. military, foreign service and intelligence service personnel have an extra year to claim the homebuyer tax credit. These buyers must enter into a binding contact on or before April 30, 2011, and close on or before June 30, 2011.

• Buyers should be "upfront with their Realtor about their must-haves and their wish list," says Allyson Bernard, owner of Real Estate Professionals of Connecticut. Buyers who aren't realistic could find themselves up against the deadline with fewer houses from which to choose.
• Harsh weather may be "a help or a hindrance," Bernard says. Buyers who are willing to trudge through snow to find a house may have an advantage over buyers who wait until the weather improves.
• Contract contingencies allow buyers some breathing room to take care of big items such as financing, inspections and the sale of their current home, Bernard says. But contingencies shouldn't be an excuse to delay once the deal is pending.

"If you run into a problem and you no longer want to buy that house, it's great that you had those contingencies to protect you, but you may not have time to find another property," she says.

• Anecdotal reports suggest that some buyers have included a tax-credit contingency in the purchase contract. Whether that's a necessary protection to make sure the deal closes on time depends on the situation and local practices. Either way, buyers should read the contract to make sure the closing will occur before the deadline.
• Buyers should get preapproved for a mortgage, because glitches such as a mistake on a credit report or a lender's request for tax returns that must be retrieved from the IRS can cause a delay, says Patti Ketcham, owner of Ketcham Realty Group in Tallahassee, Fla.

"You don't want to wait until the last minute, because you could end up shooting yourself in the foot over something that's no one's fault, but you just run out of time," she says.

• Buyers also should allow extra time in case the mortgage lender requires a second appraisal, which can delay final loan approval.

"The appraisal process in residential lending is going through some painful changes. It is not uncommon to have a mortgage lender require more than one appraisal," Ketcham says.

• Buyers should line up homeowners insurance as soon as the house is under contract. Homeowners insurance is usually routine, but some states have special disaster-related issues. A big storm, earthquake or fire can trigger a moratorium on new policies.
• Buyers should be aware that short sales, in which the seller needs a lender's approval to sell the home for less than the loan balance, are typically subject to lengthy delays. For instance, one typical requirement is that the final closing statement must be sent to the bank for final approval. That can take five to 10 business days, Bennett says.

It's an unfortunate irony for homeowners who have experienced a financial hardship, but Ketcham suggests that buyers who want to claim the tax credit should set some firm deadlines or avoid short-sale homes.

"If the home they fall in love with is a short sale, they need to have a very serious talk with their Realtor with the calendar in front of them and say, 'If we don't have an answer by this date, we need to look for another house,'" she says.

KIRKLAND, WA, March 4, 2010 – Northwest Multiple Listing Service members reported strong gains in home sales during February, with brokers pointing to several encouraging signs for a busy spring season. Improving consumer confidence and a looming deadline for homebuyer tax credits are helping to boost activity, according to NWMLS officials.

"We are entering what is traditionally our busiest home selling season," said NWMLS director OB Jacobi, general manager of Windermere Real Estate Company. "With the first job increase since 2008 and closed sales in King County up about 45 percent, there is every indication that our market is in recovery," he added. Jacobi reported "significant traffic" at open houses, which he attributes to the first-time homebuyer tax credit and rising consumer confidence.

Pending sales (offers made and accepted, but not yet closed) jumped nearly 45 percent last month compared to a year ago, marking the 11th straight month of month-over-month increases. Twelve of the 21 counties in the MLS market area reported double-digit gains in pending sales, led by San Juan County (up 85.7 percent), Snohomish County (up nearly 71 percent) and King County (up nearly 63 percent).

Closed sales also outperformed year-ago totals, rising 33.5 percent. Members tallied 3,214 completed transactions last month, up from the 2,407 closed sales for February 2009.

Prices, while showing signs of stabilizing, still lagged year-ago figures. Area-wide, the median price for last month’s closed sales of single family homes and condominiums (combined) was $260,000, down about 6.5 percent from a year ago. The median price for single family homes (excluding condos) dipped 4.6 percent, while condo prices declined nearly 9 percent.

In the four-county Puget Sound region, the median price for single family homes that sold and closed last month was $297,000, down about 2.6 percent from the year-ago figure of $305,000. Condo prices in the area fell 7.7 percent, from the year-ago selling price of $253,000 to $233,500 for last month’s sales.

MLS members added 10,663 new listings to inventory last month, bringing the total number of active listings in the system to 36,350. That total is down 7.5 percent from the same month a year ago, creating a more balanced market that favors neither buyers nor sellers.

Move-up buyers are accounting for some of the surge in activity. Brokers credit the combination of a $6,500 tax incentive for qualified repeat buyers and thawing jumbo loan market as factors in spurring activity for this segment.

"Over the past 90 days there has been a buildup of positive momentum in the housing market and we continue to see evidence that the tax credit extension/expansion is working," remarked J. Lennox Scott, chairman and CEO of John L. Scott, Inc.

Scott noted higher priced areas, such as Mercer Island, Redmond, and Issaquah, are seeing an uptick in home sales – suggesting more move-up buyers are engaging in the market. "Historically low interest rates continue to be a motivating factor which when combined with the tax credit give buyers a significant purchasing power advantage," he commented.

Interest rates on jumbo loans (more than $567,500 in King, Snohomish and Pierce counties) fell to 5.79 percent on a 30-year fixed-rate loan in the past few weeks. That’s a five-year low, according to Informa Research Services, whose clients include the nation’s top 25 banks.

Noting the peak real estate season is approaching, MLS director Meribeth Hutchings, pointed to several encouraging signs. "Homes are more affordable, mortgage rates are at all-time lows, and employment in the state appears to be on the rise," said Hutchings, the broker at Windermere Real Estate/Lake Stevens. "All signs point to a strong spring," she added.

Earlier in the week, the state Employment Security Department reported the state’s economy "picked up some steam in January," adding an estimated 12,400 jobs – the first monthly gain since November 2008.

NWMLS Dick Beeson, broker/owner of Windermere Real Estate/Commencement Associates in Tacoma, attributes the lift in activity to lower prices and a hopeful jobs picture. He said the price point of new listings in some areas is 10-to-15 percent lower than the asking price of new listings added at this time a year ago, which is opening up opportunities for more buyers.

"The plethora of shorts sales and foreclosures has diluted the price point of many homes that are selling, making appraisals more challenging," Beeson reported. He believes the tax credit has "helped only marginally." The real potential of a recovered housing market, according to Beeson, will come with new employment for many displaced workers. Recent employment gains and reports of rising consumer confidence are encouraging, he noted.

"We can see and hear the rumblings of pent-up demand from buyers," Beeson commented, adding he expects spring and summer sales to outpace last year because there are such good price values in the market. He said they are reminding buyers of the possibility of rising mortgage interest rates due to the Federal Reserve’s plan to stop buying mortgages by the end of March.

Northwest Multiple Listing Service, owned by its member brokers, is the largest full-service MLS in the Northwest. Its membership includes more than 24,000 brokers and agents. The organization, based in Kirkland, currently serves 21 counties in western and central Washington. Ferry and Clallam counties are now included in the monthly statistical reports.

Statistical Summary by Counties: Market Activity Summary - February 2010

February 2010 Single Family Homes + Condos	LISTINGS		PENDING SALES	CLOSED SALES
	New Listings	Total Active	#Pending Sales	# Closings	Average Price	Median Price
King	4122	11539	2621	1255	$429,288	$343,500
Snohomish	1759	5177	1133	574	$297,372	$269,000
Pierce	1567	5609	1132	477	$233,131	$217,800
Kitsap	493	1714	325	139	$293,016	$240,000
Mason	142	670	54	39	$178,489	$145,000
Skagit	207	1164	120	61	$250,013	$229,900
Grays Harbor	187	817	91	39	$184,388	$155,000
Lewis	123	701	56	33	$146,765	$126,900
Cowlitz	156	677	70	55	$152,153	$147,000
Grant	155	650	60	31	$155,963	$148,000
Thurston	528	1683	310	183	$251,521	$232,995
San Juan	37	417	13	5	$536,600	$475,000
Island	199	967	88	63	$287,529	$252,000
Kittitas	112	453	54	29	$248,862	$214,000
Jefferson	95	514	26	5	$212,880	$210,000
Okanogan	42	345	11	11	$204,184	$169,000
Whatcom	462	1751	270	135	$270,996	$241,000
Clark	58	270	49	20	$230,307	$212,500
Pacific	58	343	32	15	$162,683	$130,000
Ferry	4	41	2	0	0	0
Clallam	24	181	12	10	$156,400	$173,500
Others	133	667	61	35	$217,918	$200,000
MLS TOTAL	10,663	36,350	6,590	3,214	$323,275	$260,000

4-County Puget Sound Region Pending Sales (SFH + Condo combined)
(Totals include King, Snohomish, Pierce & Kitsap counties)

	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
2000	3706	4778	5903	5116	5490	5079	4928	5432	4569	4675	4126	3166
2001	4334	5056	5722	5399	5631	5568	5434	5544	4040	4387	4155	3430
2002	4293	4735	5569	5436	6131	5212	5525	6215	5394	5777	4966	4153
2003	4746	5290	6889	6837	7148	7202	7673	7135	6698	6552	4904	4454
2004	4521	6284	8073	7910	7888	8186	7583	7464	6984	6761	6228	5195
2005	5426	6833	8801	8420	8610	8896	8207	8784	7561	7157	6188	4837
2006	5275	6032	8174	7651	8411	8094	7121	7692	6216	6403	5292	4346
2007	4869	6239	7192	6974	7311	6876	6371	5580	4153	4447	3896	2975
2008	3291	4167	4520	4624	4526	4765	4580	4584	4445	3346	2841	2432
2009	3250	3407	4262	5372	5498	5963	5551	5764	5825	5702	3829	3440
2010	4381	5211

__________
Copyright © 2010
ALL RIGHTS RESERVED
This material may not be published, broadcast, rewritten or redistributed without prior permission.

Many homeowners are losing money because they’re determined not to sell for less than they paid, but that faulty logic can be costly.

By Marilyn Kennedy Melia of Bankrate.com

Many home sellers are losing money -- precisely because they're determined not to lose money. So why won't your home sell?

One reason homes are languishing on the market is that owners are suffering from “sunk cost fallacy,” says Ohio State University economist John Kagel.

This fallacy describes the reluctance people have to sell for less than they paid or put into a home, even when hanging on and waiting for the right price will ultimately prove costly.

It can be hard to shake this faulty logic, even when homeowners’ income has dropped precipitously or they're living off a limited amount of money, like a severance package, says financial planner William Suplee of Structured Asset Management in Paoli, Pa.

Here are three questions to determine whether you could benefit by losing money on a home sale:

1. Will you slash your housing costs with a move?
Owners under financial pressure who could find relief on their monthly cash flow by moving to a lower-cost home that they either buy or rent are the ones grappling with the sunk cost fallacy.

Suplee tries to help owners get a clear view of their best option by preparing spreadsheets that lay out the costs of different living arrangements.

Don't forget all the ancillary expenses, like commuting costs, that go along with a particular housing choice, adds D. Scott Neal, a financial planner in Lexington, Ky.

Laying out the annual costs of staying in a home that cost his client $800,000 several years ago was the only way to convince her that she would soon deplete her savings if she stayed put, says Rick Kahler, a financial planner in Rapid City, S.D.

Even though she'd probably sell for about $300,000 less than she paid, the monthly outlay was unsustainable, Kahler says. The pain of loss is softened somewhat, he adds, because she can buy a home that is also valued at less than it was several years ago. And the recently passed tax credit of up to $6,500 for repeat buyers under certain income levels also applies to many people in this position.

2. Do you know what a realistic price is?
Recognizing that conditions dictate selling at a loss doesn't mean that you're ready to accept any offer, however.

Indeed, experts stress that the only way to proceed confidently with selling at a loss is to thoroughly research the housing market in your area.

Ask your agent to provide lots of recent prices on sales of comparable homes. In some states, agents can also provide very recent sales data by getting the prices of homes under contract, says John Huggins, president of Coldwell Banker Legacy Real Estate Group in Bowling Green, Ky. Home sellers can also ask to tour other other homes for sale to get an idea of how their home compares with properties being offered at various price levels, he says.

Homeowners who owe more in mortgage than they can likely net in a sale must investigate whether they'll have to add in their own cash to pay off the loan, or whether the mortgage lender will agree to accept a lower amount. In cases where owners have to pay out-of-pocket to sell, that outlay could alter the advantage of moving, Neal says.

3. If you hold out, could you avoid a loss?
Going against the natural inclination to avoid loss means that you’ve analyzed the cost of holding the property and are reasonably confident prices won’t spring back up.

The National Association of Realtors forecasts that home prices nationwide will end 2010 with an increase of just under 4% from the end of 2009.

Moody’s Economy.com predicts that prices will stabilize in mid-2010, but that there will be no appreciation. Economy.com’s housing economist Celia Chen says that she expects some middle and higher-end housing to be at risk for further decline this year, and that some homeowners will not see prices return to what they paid for at least several years.

Real-estate trends are local, Huggins adds. He advises looking at prices of similar homes in your area and gauging demand against inventory.

When he prepares spreadsheets for homeowners to examine the costs of holding versus moving, Suplee asks, “What rate of appreciation does the house need for a holding strategy to make sense?” Then, he asks for an honest determination of how plausible it would be to see that appreciation.

Why foreclosures rise even as the economy expands

About 1 in every 7 home loans was either past due or in foreclosure at the end of the third quarter. Here’s what you need to know about the continuing mortgage crisis.

By Luke Mullins of U.S. News & World Report

"Despite the recession ending in midsummer, the decline in mortgage performance continues," said Jay Brinkmann, the MBA's chief economist. "Job losses continue to increase and drive up delinquencies and foreclosures, because mortgages are paid with paychecks, not percentage-point increases in GDP." Here are six things you need to know about the development:

1. Moving upstream: The MBA report provides an inside look into the evolution of the forclosure crisis. Initial problems in the mortgage market were largely rooted in subprime loans and other exotic products. But with the national unemployment rate hitting 10.2 percent in October, the eroding labor market has emerged as the most fundamental factor behind the mortgage crisis. A job loss, after all, can prevent even borrowers with sound credit histories from paying the mortgage.

"The infection is spreading out, and it is now prime borrowers that are in trouble," says Mark Zandi, the chief economist at Moody's Economy.com. From the third quarter of 2008 through the same period this year, the rate of foreclosure starts increased 0.53 percentage points for prime loans — made to borrowers with good credit — while it fell 0.47 percentage points for subprime loans, the MBA said in the survey.

2. Regional concentrations: Regional concentrations of problem loans are striking. Nevada, Florida, Arizona and California — four states at the center of the housing boom and bust — accounted for 43 percent of all third-quarter foreclosure starts. In addition, one in every four home loans in Florida is either past due or in foreclosure. "That's an amazing number," says Patrick Newport, U.S. economist at IHS Global Insight.

3. Shadow inventory: The figures are a discouraging development for a housing market that has demonstrated recent, if tentative, signs of stability. While the National Association of Realtors' existing home sales report shows that the backlog of unsold properties has decreased in recent months, future foreclosure sales will ensure that a steady supply of discounted homes hits the market in coming years. "We continue to believe that nearly 6 (million) foreclosed homes will enter the market over the next three years, which will keep inventory of existing homes elevated," Michelle Meyer, an economist at Barclays Capital, said in a report. "Foreclosures remain the biggest hurdle to the housing recovery."

4. Hole in the rescue: It's important to note that mortgage delinquencies continue breaking records in the face of Uncle Sam's sweeping effort to keep struggling borrowers in their homes. Although the initiative has put more than 650,000 borrowers into trial loan modifications, there is growing concern that the Obama administration's initiative isn't well-suited for today's housing crisis. For example, although unemployment is the key force behind current delinquencies, borrowers who can't make mortgage payments because of a job loss can't participate in the program. Observers in growing numbers have called this a key shortcoming of the Obama administration's housing rescue.

"It increasingly appears that (Uncle Sam's housing rescue) is targeted at the housing crisis as it existed six months ago, rather than as it exists right now," a congressional oversight panel said in a report released Oct. 9. In addition, the effort does not sufficiently address the issue of borrowers who are significantly underwater, meaning they owe more on their mortgage than their home is worth, Zandi says.

5. Modifying modifications: Because of these issues, "it is important for policymakers to consider how to modify the modification program so that it can work better," Zandi says. One possibility could be through programs that allow struggling borrowers to relinquish ownership of their property but remain there as renters. Similar efforts have been launched at Fannie Mae and Freddie Mac.

6. Reversing the trend: Mortgage delinquency rates aren't expected to stabilize until the labor market does. Newport expects the unemployment rate to peak in the first quarter of 2010 at roughly 10.5 percent. But even after the unemployment rate peaks, don't expect delinquency rates to shoot back to earth immediately. "The (delinquency) rate is going to stay up there for quite awhile because the job market is going to be really weak for a while," Newport says.