“Three consecutive monthly declines is unprecedented for our report, and on first blush an indication that the foreclosure tide may be turning,” said James J. Saccacio, chief executive officer of RealtyTrac. “However, the fundamental forces driving foreclosure activity in this housing downturn—high-risk mortgages, negative equity, and unemployment—continue to loom over any nascent recovery. And despite all the efforts and resources directed at helping homeowners avoid foreclosure, we continue to see foreclosure activity levels that are substantially higher than a year ago in most states.” 

Nevada, California, Florida post top state foreclosure rates
Despite a 26% decrease in foreclosure activity from the previous month, Nevada continued to document the nation’s highest state foreclosure rate—one in every 80 housing units received a foreclosure filing in October. A total of 13,842 Nevada properties received a foreclosure filing during the month, a 4% decrease from October 2008 and the first ever year-over-year decrease in Nevada since RealtyTrac began tabulating the year-over-year change in January 2006. Nevada default notices were down 10% from October 2008, and scheduled foreclosure auctions were down 6% from October 2008, while bank repossessions were up 8% from October 2008. A new foreclosure mediation program implemented by state law (AB 149) in July may be slowing the inflow of distressed properties into the foreclosure pipeline. 

With one in every 156 housing units receiving a foreclosure filing in October, California posted the nation’s second highest state foreclosure rate for the second month in a row. A total of 85,420 California properties received a foreclosure filing during the month, a decrease of 1% from the previous month but still nearly 50% above the total reported in October 2008. The state’s default notices and scheduled foreclosure auctions were up 120% and 73% respectively from October 2008, when California foreclosure activity was in the midst of a three-month trough after a law (SB 1137) requiring lenders to give distressed homeowners extra notification before initiating foreclosure took effect in September 2008. 

Florida posted the third highest state foreclosure rate, with one in every 168 housing units receiving a foreclosure filing in October. A total of 51,911 Florida properties received a foreclosure filing during the month, a nearly 6% decrease from the previous month and a decrease of 4% from October 2008. It was the first year-over-year decrease in overall Florida foreclosure activity since July 2006. 

Other states with foreclosure rates ranking among the nation’s 10 highest were Arizona, Idaho, Illinois, Michigan, Georgia, Maryland and Utah. 

Four states account for more than 50 percent of national total
Four states accounted for 52% of the nation’s total foreclosure activity in October: California, Florida, Illinois and Michigan. 

Illinois posted the third highest state total after California and Florida, with 19,946 properties receiving a foreclosure filing in October—a 56% spike from the previous month and the highest monthly total for Illinois since RealtyTrac began issuing its report in January 2005. The state’s foreclosure rate jumped from No. 11 in September to No. 6 in October, and it was the only state with a foreclosure rate in the top 10 to post a monthly increase in foreclosure activity. A recent state law (SB 2513) that gives distressed homeowners an extra grace period to seek counseling to help avoid foreclosure may have created some pent-up foreclosure activity in the state. After the law went into effect in April, Illinois foreclosure activity decreased for three straight months before beginning to climb again. 

Michigan registered the fourth highest state foreclosure activity total despite a nearly 2% decrease from the previous month. A total of 16,468 Michigan properties received a foreclosure filing in October, an increase of nearly 45% from October 2008. 

Other states with totals among the 10 highest in the country were Nevada (13,842), Arizona (13,345), Georgia (12,468), Texas (11,798), Ohio (11,646) and New Jersey (7,435). 

Three states account for all top 10 metro foreclosure rates
Despite a 27% decrease in foreclosure activity from the previous month, Las Vegas continued to document the nation’s highest foreclosure rate among metropolitan areas with a population of at least 200,000. One in every 68 Las Vegas housing units received a foreclosure filing in October—more than five times the national average. 

Seven of the top 10 metro foreclosure rates were in California, led by Vallejo-Fairfield at No. 2 and Modesto at No. 3, both with one in every 81 housing units receiving a foreclosure filing. Other California cities in the top 10 were Riverside-San Bernardino-Ontario at No. 4 (one in 83), Bakersfield at No. 6 (one in 97), Merced at No. 7 (one in 100), Stockton at No 8 (one in 116), and Sacramento-Arden-Arcade-Roseville at No. 10 (one in 130). 

Metro areas in Florida accounted for the remaining two spots in the top 10: Cape Coral-Fort Myers at No. 5 (one in 92) and Orlando-Kissimmee at No. 9 (one in 117). 

For more information, visit www.realtytrac.com. 

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com. 

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A “short sale” is a sale where the bank accepts as full value a price that’s less than what’s owed on the property. The debt is forgiven (although not always without some tax consequences), a foreclosure is avoided, a buyer gets a good deal on a property, the bank saves thousands of dollars in legal fees and the real estate agent makes a commission. Elegant. Practical. Simple. But as we’ll see, not really quite so simple. 

Short sales were never intended to be a mass market solution. Rather, they were relatively rare occurrences that took place when an unfortunate homeowner had a financial catastrophe—a job loss, a divorce, a medical problem—at precisely the same time his or her home lost significant value. When that happened, a loss mitigation manager at a bank would research the market, review the homeowner’s financial documents, carefully consider whether the borrower and loan in question met the criteria to justify a short sale and act accordingly. 

This approach worked well when there was one request a week or every few months. But with over 1.1 million homes in various stages of foreclosure in the RealtyTrac database, the workload for these loss mitigation managers has exploded from several a month to hundreds a week, with no drop-off in the amount of paperwork or research needed. So there are unavoidable delays in simply processing the volume of paperwork. 

But it gets worse. Each lending institution has slightly different versions of short sale forms. Property valuations, even—perhaps especially—appraisals, are in a state of flux, so loss mitigation managers are struggling to determine whether a short sale offer is reasonable or just plain silly. And there are some accounting issues: in many cases, lenders may opt to decline a good short sale offer today so that they can defer the loss (even though it may be a much greater loss) to a subsequent quarter—or even later. 

And there’s more. A second loan on a property makes it much more than twice as difficult to execute the sale. The second loan either needs to be negotiated away completely or satisfied with some nominal payment. In other cases, the holder of the primary mortgage may find it better financially to foreclose, wipe out the second lien, and simply use that amount as a discount to sell the property at a profit. Similarly, if there’s mortgage insurance on the note, the investor may decide it’s better to foreclose, collect the insurance, and let the insurer worry about getting value for the house. 

So why all the hype? Well, with the REO pipeline clogged and choking, and loan modification programs failing to make a dent in foreclosure numbers, short sales represent an opportunity to feed the demand for discounted properties while reducing the number of foreclosures. What can you do to help make this happen? What does the government have in mind? We’ll cover all that and more in next month’s column. 

Rick Sharga is senior vice president at RealtyTrac. 

For more information, visit www.realtytrac.com. 

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RISMEDIA, November 10, 2009—That is one of the most common objections to purchasing real estate where there is a community Association requiring the payment of regular dues and fees. These can range from less than a hundred dollars per month, if for example the only service is streetscaping, to upwards of a couple of thousand dollars for a luxury penthouse. Depending on square footage and amenities, most fees range between $250 and $750. 

Taken out of context, the amount can seem outrageous. But, when considered from a prospective of value received, you can be pretty certain that you are getting one of the last great bargains. 

When evaluating the HOA monthly fee, it is important to consider three things: how was the number arrived at, what does it cover, can anything be done for less? 

1. How is the HOA fee determined? 

In California, and probably most other states, developers must obtain state approvals before their projects can be offered to prospective buyers. Part of the submission process for developments with an Owners Association is the creation of a detailed budget for the operation and maintenance of the common area and the provision of necessary services. 

Developers want to project the most positive scenarios in order to keep HOA dues low and not discourage prospective buyers. And, they are also aware that a $500 per month Association fee equates to another $100,000 that the buyer could have spent for the home. The higher the Association fee, the less the borrower/buyer can spend. 

On the other side, the State wants to establish a realistic budget that will allow for proper funding well into the future. For the consumer, that process of compromising means that the budget is as realistic as it can be at the time it was created. 

The main thing to keep in mind is that the developer will be paying the Association fees on all unsold property within the Association. The developer is not the one benefiting from high fees so there is no reason to blame them. 

2. What does the HOA fee is cover? 

It’s also important to consider what is included. Amenities very widely from project to project; high-rises cost more to operate and maintain than low rise buildings. 

One of the responsibilities associated with real estate ownership is the obligation to maintain and protect the improvements from deterioration, damage, weathering, etc. Living out in the burbs you need a garage full of tools and a lot of weekends to stay ahead of nature. 

Depending on the type of development, there could be a need for a lot of landscape maintenance. That takes labor, and labor is expensive 

If there are common areas such as a lobby, pool, gym, or even hallways, they need to be cleaned regularly, maintained occasionally, painted often, and replaced over time. Garages must be swept and windows washed. 

Then there is liability, property and other forms of insurance, and possibly a security force. 

What utilities are included? Are water, sewer, electric, gas, trash and cable billed individually or are some paid collectively through the Association? 

Then there is usually a management Association looking after things, paying the bills, and communicating all of that to the homeowners. 

3. Can it be done for less? 

Add it all up and you’ll see that the economies of scale allow for a high level of service at a true cost far lower than you could do it yourself. 

And remember, it is your building and your Association. You want to protect your investment and to have the kind of amenities that will allow for profitable reselling in the future. Serve on your Association board. If you can economize, you can lower your HOA fee. 

But, don’t lose sight of the fact that you are paying for important services with a volume discount. It isn’t just an expense; it’s protecting your investment.

George W. Mantor is known as “The Real Estate Professor” for his wealth building formula, Lx2+(U²)xTFP=$? and consumer education efforts. During a career that has spanned more than three decades, he has amassed experience in new home and resale residential real estate, resort marketing, and commercial and investment property. He is currently the founder and president of The Associates Financial Group, a real estate consulting firm.

Mantor can be reached at GWMantor@aol.com.

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Consumer credit fell by $14.8 billion to $2.46 trillion in September, down 4.7% compared with a year ago. Outstanding credit can fall if consumers pay off balances, or if lenders write off bad loans. 

Outstanding balances have fallen in 12 of the past 14 months. Credit fell a revised $9.9 billion in August, revised down from the original estimate of a $12 billion drop. Before the steady decline during this recession, outstanding consumer debt had more than tripled in the 16 years between 1992 and 2007. The figures are not adjusted for inflation. 

Although consumer debts have fallen by $126 billion since July 2008, household wealth has tumbled by $11 trillion, said Joshua Shapiro, chief economist for MFR Inc. Consumers have only begun to deleverage. The figures do not include mortgages or other debts backed by real estate, such as home-equity loans. 

The decline in September was led by another huge drop in revolving debt, such as credit cards, which fell $9.9 billion to $889 billion, or a 13.3% annual rate.

Nonrevolving debt — such as auto loans, student loans and other personal loans — fell $4.9 billion to $1.57 trillion, or a 3.7% annual rate. Nonrevolving debts had increased in August at a 0.2% pace, largely because of higher auto sales due to the cash-for-clunkers subsidy. For the third quarter, outstanding debt fell at a 6.1% annual rate after a 6.6% annual decline in the second quarter, which was the largest percentage decline since 1980. Credit-card debt fell at a record 10% annual rate in the third quarter after sinking at a 9.7% pace in the second quarter and 9.6% in the first quarter. Nonrevolving debt fell at a 3.8% annual rate in the third quarter. 

(c) 2009, MarketWatch.com Inc.

Distributed by McClatchy-Tribune Information Services. 

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Year-over-year home values in the United States declined for the 11th consecutive quarter, falling 6.9% to a Zillow Home Value Index of $190,400. However, the rate of year-over-year decline shrank for the third quarter in a row, meaning home values did not decline as dramatically year-over-year in the third quarter as they did in the second or the first. 

In addition, the Zillow Home Value Index remained relatively flat in the short term, declining 0.4% from the end of the second quarter to the end of the third quarter. The Zillow Home Value Index measures the value of all homes in an area, and the Q3 Zillow Real Estate Market Reports encompass 156 metropolitan statistical areas (MSAs). 

Foreclosure re-sales remained high, making up more than one-fifth (21.4%) of all U.S. home sales in September, and made up the majority of sales in several MSAs including the Merced, Calif. MSA (74.2%), the Stockton, Calif. MSA (69.3%), the Madera, Calif. MSA (68.7%), the El Centro, Calif. MSA (68.1%) and the Las Vegas MSA (67.5%). Additionally, 26.9% of home sales nationwide sold for less than what the seller originally paid. 

“The decline in the percentage of homeowners with negative equity is a positive sign, and is directly attributable to the stabilization of home values from the second quarter to the third,” said Zillow Chief Economist Stan Humphries. “It is also attributable to many homeowners who were previously underwater on their mortgage losing their homes to foreclosure. 

“The next several months will be critical to the housing market. Previously, we’d been expecting to see increasing foreclosure rates during the real estate market’s slow winter season, a confluence of events that would likely drive inventory up and prices down. But now, with the extension of the $8,000 first-time homebuyer tax credit and a new $6,500 credit for some repeat homebuyers, we could see a bump in demand that could partially offset the increased supply of foreclosed homes on the market. The credits are likely to bring continued stabilization in prices over this period, versus the price declines that we almost certainly would see otherwise. Whether this stabilization will be sustainable after the tax credits expire, however, is yet to be seen. Some of the demand that we are buying with tax credits we are also borrowing from the future, and will likely have to pay for later in the form of weaker-than-normal demand.” 

Some markets across the country showed encouraging signs in the third quarter. Home values increased year-over-year in 24 of 156 MSAs and remained flat in an additional 16. Only nine MSAs – including the Merced, Calif., State College, Penn., and Salisbury, Md. MSAs – showed increasing year-over-year declines. 

The Milwaukee and Boston metropolitan statistical areas were the largest markets to show positive year-over-year changes in home values, with the Zillow Home Value Index rising 2.6% in Milwaukee and 1.6% in Boston. 

For more information, visit www.Zillow.com. 

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com. 

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Example 1:
Jane purchased a home in 2002, lived there for 5 years as her primary home, moved out in 2007, and turned that home into a rental property. If Jane decides to buy a new primary residence today, she would qualify for the $6,500 tax credit based on the fact that she lived in the same residence as her primary home for at least five consecutive years out of the past eight.

Example 2:
Harry purchased a home in 2004, and lived there for the past 5 years as his primary home. If Harry decides to buy a new primary residence today, he would qualify for the $6,500 tax credit based on the fact that he lived in the same residence as his primary home for at least five consecutive years out of the past eight.

Example 3:
Nicole purchased a home in 2006, and lived there for the past 3 years as her primary home. If Nicole decides to buy a new primary residence today, she would not qualify for the $6,500 tax credit based on the fact that she did not live in the same residence as her primary home for at least five consecutive years out of the past eight. 

The tax credit applies to homes purchased for less than $800,000 before May 1, 2010. “If you sign a binding contract to purchase a home before May 1st, you would need to close on the transaction before July 1, 2010,” Nicholas said. “It works kind of like a gift certificate that can be redeemed for cash. You simply file a form with the IRS right after you buy your home, and the IRS will send you a check for the full amount of your credit.” 

The income limitation for single tax payers went up from $75,000 under the old rules to $125,000 under the new rules. For married tax payers, the income limitation went up from $150,000 to $225,000. “This means that more people will qualify for the credit – especially in parts of the country with higher costs of living,” Nicholas said. “This should help stimulate parts of the housing market that may not have been impacted by the old version of the credit.” 

There are many creative ways of structuring your home purchase transaction in ways that maximize the benefits of the credit. Here are a few examples: 

-The credit applies to 1-4 unit homes as long as you live in one of the units as your primary residence – you could live in one unit and rent out the others

-If two unmarried individuals buy a home, and only one of the individuals qualifies for the credit based on their income or past home ownership status, the individual who qualifies for the credit can claim the full credit. (Note: In the case of married couples, both spouses must qualify for the credit).

-The credit applies even if you have co-signers on your mortgage loan 

For more information, visit www.CMPSInstitute.org. 

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-Stage it virtually. This option is aimed at empty homes, because photos of bare walls and floors can make online shoppers lose interest. You just snap photos of the empty rooms and send them to a virtual stager, who uses computer imagery to “furnish” them. The photos can be posted online or used in marketing materials. Prices range from around $200 for three rooms to $325 for five rooms, although rates vary by city.

-Pay for a plan, but provide the muscle. Many stagers will work as consultants, touring your house and offering suggestions on presenting it. Barb Schwarz, founder of the International Association of Home Staging Professionals, says the average fee for a consultation is $350. Then it’s up to you to do the cleaning, decluttering and rearranging. Kiplinger’s suggests renting a portable storage unit if you have a lot of stuff to store. One company, PODS, will deliver the unit to your driveway for $75, transport it to a secure storage facility for another $75 and charge you a monthly storage fee of around $150, depending on where you live, the time of year and other factors.

-Add some pizzazz. Sometimes a few decorative extras can update or neutralize a home’s decor. You may be able to negotiate with a staging company for decor items such as wall art, area rugs, lamps or other accessories.

-Focus on a few rooms. Hire a stager to redo just the entryway, main living area, kitchen or master bedroom. Stagers usually charge $75 to $125 an hour. Ignore secondary rooms, or do them yourself once you’ve seen how the pro works. 

(c) 2009, Akron Beacon Journal (Akron, Ohio).

Distributed by McClatchy-Tribune Information Services.

The survey, the fifth annual Energy Pulse® survey conducted by Shelton Group, found that consumers are reverting to their old priorities as the recession wanes- perhaps at the expense of the environment. 

“Energy efficiency is back to playing second fiddle, competing with more visible and exciting home improvement projects,” said Suzanne Shelton, whose firm conducted the study. “Anyone selling energy-efficient products must either focus heavily on the aesthetic or comfort aspects of their products or play up their environmental benefits in a big way.” 

The survey, which polled 504 Americans by telephone in September 2009, asked consumers: “Assuming you were suddenly given $10,000 to make home improvements, which two of the following would you choose?” The top answers were: 

-Refinish the kitchen or bathroom (37%)
-Replace carpet or add hardwood or tile (33%)
-Replace windows (31%)
-Replace HVAC/furnace (23%)

Last year’s top answers were:
-Replace windows (35%)
-Replace HVAC/furnace (27%)
-Remodel kitchen or bathroom (26%)
-Replace carpet or add hardwood or tile (25%) 

Among the survey’s other findings:
-Consumers are willing to watch their energy bills go up more than 70%, on average, before feeling forced to make energy-efficient home improvements. Respondents said their bills would need to go up an average of $129 a month to make them undertake renovations. “We call this phenomenon the ‘Apathy Gap,’ the price people are willing to pay to do nothing,” Shelton said. “Here consumers are willing to waste more than $1,500 a year, or more than $4 a day, before they’ll take action. For that same amount, a homeowner could install insulation or purchase one or two new ENERGY STAR® appliances to start seeing immediate savings.” 

-There is a lot of pent-up demand for solar power. The survey asked, “How likely would you be to buy a solar electricity system for your home, knowing that a mid-size system that would provide around 63% of the average household’s electricity, costs $35,000 to $40,000 that could be offset by a $2,000 federal tax incentive along with additional rebates in many states.” 

Twenty-eight percent said they would be likely or very likely to buy such a system. Fewer than 1% reported they already had such a system. “This indicates an enormous potential market for solar,” Shelton said. “Consumers have been waiting for solar to become more accessible and more affordable. Now, with prices projected to fall even further, and with new federal tax incentives greater than they’ve ever been – up to 30% of the cost of the system for qualifying taxpayers- solar power will be on the rise.” 

-Consumers have good intentions – but not very good follow-through. Surveys over the past five years, including this year, show consistently large discrepancies between intentions and actions. Every year, for example, around 20% or more consumers say they’re planning to get an energy audit, yet the percentage of U.S. homeowners who’ve actually gotten one has languished in the 10-15% range. 

“That’s why we now refer to home energy audits as the ‘colonoscopy’ of energy efficiency,” Shelton said. “Everyone knows they should get one, but too few actually do.” 

For more information, visit www.sheltongroupinc.com. 

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com. 

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Maria Patterson: Please begin by explaining what the 203k program is.
Dennis Walsh: The FHA Section 203k program was originally introduced by HUD in 1978 as a program to rehabilitate and repair single-family homes. HUD considers this an important tool for revitalizing neighborhoods and increasing homeownership. What’s unique about the 203k is that it’s a single mortgage loan that provides funds to purchase a home and make repairs and improvements. It’s intended for owner-occupants to purchase and renovate one- to four-unit residential and mixed-use properties. A simpler version, the Streamline 203k, was introduced in 2005. This version offers less documentation and lower loan fees for renovations that don’t exceed $35,000. 

MP: Why does today’s market present the ‘perfect storm’ conditions for the 203k program?
DW: The reality is, the market has changed and, as always, change brings new opportunities. First, look at all the distressed properties out there that need repair and renovation. So many of these homes haven’t been properly maintained and others have been damaged somewhere along the line—the furnace is missing, the kitchen is gone, or the carpeting rolled up and carried away. 

Secondly, conventional financing is simply out of reach for the majority of people. Without 20% or 25% to put down on a home and a perfect credit score, most Americans can’t get a conventional loan. However, with less-than-perfect credit and as little as 3.5% down, you can get an FHA loan, including the 203k. FHA financing opens up home-buying opportunities for many more people. 

Teresa Walsh: Keep in mind that with FHA financing, it’s critical that the house meet certain code standards—if it doesn’t, you can’t get an FHA loan. There are lots of homes out there that could be sold if the needed work was done. And most people recognize that homes needing repair and updating are some of the best deals available—great homes in great neighborhoods that need a little love.

So the question is, how does a buyer take advantage of a great deal on a home that needs work done? Where does the money come from to make the improvements? Some might run up charge cards at higher interest rates, or tap into savings or even retirement funds, but that’s usually not the best financial decision. The 203k loan offers an ideal solution. 

MP: Given these advantages, why haven’t 203k loans been more prevalent?
DW: There was no need to go through the process of FHA loan approval a few years back. We went through a long period of time where mortgage money was easily available to almost anyone who could fog a mirror—so use of FHA financing all but disappeared. It’s a whole new world now and, as a result, the use of FHA financing has grown to record levels. 

It’s also about awareness. You may have noticed that the U.S. government has not won many marketing awards! The FHA has had no mandate or funds allocated for marketing the 203k loan or providing training and support to real estate professionals. 

There’s also the fact that the 203k approval process is also a little more complicated than a conventional loan. For example, you’re required to secure renovation costs from an established, licensed contractor and deliver a package of the proper paperwork to the lender to secure FHA approval. This can be challenging for the average buyer, as well as agents without the training and resources. 

MP: Is an FHA loan a government loan? Will an increase in FHA lending add to the country’s deficit and overall economic problems?
DW: The great news for taxpayers is that this is not a program that requires the federal government to allocate billions of dollars of support. The FHA does not actually provide mortgage funds, but instead provides lenders with insurance that protects them against losses in the event of homeowner mortgage default. This reduces the lenders’ risk, allowing them to offer loans to buyers with less-than-perfect credit and with lower down payments. Lenders must follow specific guidelines established by FHA to qualify for this insurance. 

The FHA is funded entirely by proceeds from mortgage insurance included in the mortgage payments. As a result, the FHA is the only government agency that is entirely self-funded—operating at no cost to the American taxpayers! Additionally, the home construction and community development driven by FHA programs stimulate the economy through job creation, tax revenues and more. 

MP: What’s the concept behind RE-buildUSA?
DW: RE-buildUSA is designed to simplify the 203k loan process for everyone involved—to drive greater awareness, provide training and a support platform to allow real estate professionals to work most successfully with buyers, lenders, contractors and inspectors. 

Realtors involved in the program receive training to earn a 203k Specialist designation, a membership program for ongoing support and a technology program to facilitate 203k projects. We will work with Lowe’s to provide premier service to RE-buildUSA members and their customers. 

MP: Mark, why was it important for Lowe’s to get involved with RE-buildUSA?
Mark Malone: We, at Lowe’s, fully understand and empathize with each agent out there trying to keep and grow their business in today’s economy. We are here to support their business any way we can, and 203k presents new opportunities for Realtors to build business. We want Lowe’s to be the back-pocket resource for all things home improvement, so it’s a natural for us to be involved in RE-buildUSA. 

MP: Has RE-buildUSA officially launched?
DW: The first phase of our website, re-buildusa.com, is now live, with additional development under way. We’re scheduled to be launching the password-protected membership area some time in December. 

To become a 203k Specialist, an agent must complete approximately five hours of interactive self-paced coursework online. They then gain membership in the RE-buildUSA program, which helps them reach consumers interested in the 203k program, plus continued training and support. 

MP: What does an agent receive for becoming a member of RE-buildUSA?
TW: Agents will be featured in an online membership directory so that home buyers interested in working with a 203k Specialist can go to RE-buildUSA.com and find them. Members will also be able to identify themselves as a 203k Specialist on their websites and in their marketing. Members can access the RE-buildUSA membership site to download forms, checklists and sample marketing materials, as well as forums and a blog, highlighting up-to-date news, trends and best practices. RE-buildUSA is a one-stop shop for members, providing them with access to marketing materials, inspectors, lenders and a direct connection to Lowe’s to help their customers coordinate the bidding and renovation activities. 

MP: If I’m a real estate professional, why do I want to become a 203k Specialist?
DW: We’re showing real estate professionals how the 203k program works because it will help them sell more homes and help more Americans move into homeownership. We’re also excited that we can work together as an industry to reduce the inventory of foreclosed homes and get our housing industry back to greater stability. 

TW: When the market started to turn, a lot of agents steered away from listing foreclosures because it’s difficult business. There are a lot of out-of-pocket expenses, loads of paperwork, security issues and other challenges. Many other agents steered away from short sales because they didn’t want to deal with those headaches. Those, however, who recognized the opportunity and jumped in with both feet, are reaping the benefits today. So, I advise agents not to sit back and pass up the opportunity that now presents itself with the 203k program. Right now, the door is wide open all across America. 
DW: I think it’s also important to recognize that while this is a here-and-now opportunity, it’s also a long-term opportunity as well. Many people are not aware that more than 80% of the homes in America were built before 1990—that’s over 100 million homes that are 20 years old or older. Almost every one of these homes need some amount of repair and updating. It’s our belief that almost every single real estate professional is going to need the education we provide through RE-buildUSA to offer expertise in the 203k as well as other similar loan programs that come along in the future. 

MP: How is Lowe’s helping Realtors in today’s difficult market?
MM: Lowe’s has three main ways in which we help Realtors close more business. First, our free marketing tool, available to all Realtors, allows agents to send 10%-off coupons to their clients before they buy to help them envision how they can turn that house into a home. Second, we know what an effect foreclosures and distressed properties have had on housing and we want to empower agents to get those homes fixed up as quickly and cost effectively as possible. Realtors can download a 10%-off coupon to pass along to a trusted contractor or use it themselves to get these distressed properties to a presentable and, hopefully, sellable state. Third, and probably the most exciting, RE-buildUSA will help deliver a turnkey solution for agents who have buyers utilizing the 203k loan. 

MP: If I’m a consumer, why do I want to work with a 203k Specialist?
TW: First off, most consumers don’t really understand the program, what improvements can be made, how to find a lender, steps in the process…there are an awful lot of questions that need to be asked and answered. A RE-buildUSA 203k Specialist will help them understand 203k details and options, evaluate available properties, compare neighborhoods and introduce them to an FHA-approved 203k lender. They’ll also coordinate the appropriate home inspection and help them evaluate the renovation work and the potential impact on the value of the home.

Just as in short sales and foreclosures, home buyers find it very difficult to wade into these waters without the help of an expert. 

MP: How will a buyer benefit by choosing to work through Lowe’s for their 203k improvements?
MM: Safety, satisfaction and savings. All of Lowe’s installers are licensed*, bonded and insured so you can trust our team with the safety and the security of your buyer’s new home. We also stand behind the quality of our work with a 100% satisfaction guarantee. Don’t forget, the everyday low prices of the product in our stores insure home buyers will get the most value for their hard-earned dollars. 

MP: How will working with a 203k Specialist benefit the lender?
DW: Lenders tell us all the time that it’s very difficult to work with a consumer or agent who doesn’t understand the program. They also agree that working with real estate agents supported by RE-buildUSA training and resources will make life much easier for them—leading to smoother loan approvals and closings. Because of this, a number of lenders are already gearing up to work more closely as partners with RE-buildUSA members. 

MP: Why is the 203k program a critical program for today’s particular market conditions?
MM: We know that this is a different real estate landscape than we have ever dealt with before. Consumers are not in the same mindset as three or four years ago. More first-time home buyers are entering the market than ever before and we all need to be ready to help them learn how to make a house a home. Realtors are repositioning themselves to be even more of a trusted resource for home buyers, many of whom are gun-shy as they re-enter the market. Lowe’s is committed to the partnership we have with the National Association of Realtors and now with RE-buildUSA. We want to support Realtors in any way we can. 
DW: I hear a number of agents telling buyers and sellers that we’re in a “correcting market” and waiting for things to return to “normal.” So what does the typical buyer or seller do? They’ll most likely sit back and wait until the market’s corrected! 

We’re in a different market—a new market with new realities and new opportunities. Agents who are the first on the block to become 203k Specialists can take advantage of these opportunities right here, right now—and position themselves for the future as well. RE-buildUSA is about all of us working together to solve today’s problems and making a long-term investment in the stability of America’s housing industry and economy. 

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“I just love her,” Gordon said. The two women—and their two dogs—bonded quickly after Thalacker moved in last December. Both have busy independent lives, but they still find time to share one or two meals a week, plus occasional bike rides, wine, ice cream and sometimes “American Idol.” 

Their living arrangement is short-term. “When she finishes her practicum she’ll look for a job. I don’t know where she’ll find one,” Gordon said. “But I might keep her forever,” she added with a laugh. 

Roommates as compatible as Gordon and Thalacker are rare, but their circumstances are increasingly common. Last year’s stock-market crash and recession, which wiped out jobs and slashed incomes, have prompted many to look for new sources of revenue. For homeowners, that can mean turning a spare bedroom into a cash cow. 

Roommate postings on Craigslist have increased 160% nationwide over the past 24 months, and 80% in the Minneapolis area over the same period, according to spokeswoman Susan MacTavish Best. There’s no way to track how many of today’s new roommates were brought together by economic forces, said Marilyn Bruin, associate professor in the University of Minnesota’s housing studies program. “I haven’t seen any data, but I totally believe it’s an economic strategy. It makes sense.” 

The trend mirrors what happened during and after the last economic meltdown, the Great Depression. “Housing was scarce, and renting of homes was not all that uncommon,” said Clifford Clark, a professor of history and American studies at Carleton College in Northfield, Minn. “My grandmother took in boarders.” 

Gordon, who has lived in her Scandia, Minn., home for 28 years, never would have anticipated adding a roommate at this stage of her life. But fate threw her some curveballs. Several years ago, her husband, a physician, developed a serious illness, so Gordon left her job as a food stylist to care for him. Three years ago, he died. Then, “the economy tanked. I saw my savings disappear.” She had forged a new career as a newspaper columnist and cookbook author, but she wanted to boost her income. “I’m 55 now—it’s not so easy to get a job. I thought, ‘OK, what have I got that I can make work for me?’” One thing she had was a master suite she was no longer using. After her husband’s death, Gordon started sleeping in a loft bedroom “closer to the core of the house,” she said. So she sought a roommate via Craigslist. 

The first person who responded was a scam artist. The second had eight dogs. The third was Thalacker. “I was new to Minnesota, from a really small town,” said Thalacker. “People said, ‘What do you mean, you’re going to live with some lady you met on the Internet?’” When Thalacker came to meet Gordon and see the house, she felt at home immediately. “She was cooking, the dogs were going crazy, it was kind of chaotic, and I thought, ‘This is perfect.’” 

(c) 2009, Star Tribune (Minneapolis)

Distributed by McClatchy-Tribune Information Services. 

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Housing industry insiders fear the tax credit’s expiration will hurt the residential market’s recovery. Analysts attribute close to 20% of home sales nationally this year to buyers eligible for the tax credit, and the National Association of Realtors claims first-time buyers account for 50% of all sales. 

While Congress is moving toward extending, expanding or replacing the tax credit, the Senate is expected to vote soon on a bill co-sponsored by Georgia Republican Johnny Isakson that would extend the deadline five months to April 30, 2010, and make the credit available to all new homebuyers, not just to first-timers. The new legislation would extend the $8,000 credit for first-time buyers and create a $6,500 credit for others so long as they have owned a home for at least five consecutive years since 2001. 

“I think it is critical that the credit continue in some form,” said Molly Bridges, president of the Savannah Board of Realtors. “Traditionally, the market slows down at the holidays, and it’s important to keep the momentum going. We don’t want a pause.” 

The housing credit’s impact is particularly pronounced in the Savannah area. The number of first-time buyers locally is unavailable, but pricing and loan trends indicate they could make up more than 40% of the market. Homes priced under $200,000 have outsold those priced above that number by almost a 2-to-1 margin this year, with homes priced for $100,000 to $149,999- “starter homes”- outpacing all others. And almost half of the houses financed locally this year were done with loans backed by the Federal Housing Administration or the Veterans Administration, which cater to first-time buyers. 

A drop in local building permit applications in September offered a glimpse of what a creditless future could look like. Permits tripled in Chatham County during the summer months as builders began construction on homes that could be completed in time to be bought and occupied ahead of the Nov. 30 tax credit deadline. Permit numbers dropped drastically in August and September, a trend the head of the local homebuilders association, Matthew Young, said reflected the industry’s wait-and-see approach to the post-tax credit market. “If they don’t extend” the credit, Young said, “they will wait and see what sales are like after that.” 

Analysts opposed to a tax-credit extension question how many of the buyers the $8,000 handout actually coaxed into the market. An economist with the Brookings Institution, a nonprofit public policy organization, estimates 85% of those who have used the credit would have bought a home anyway, given low prices and mortgage rates. Of about 2 million buyers who would make use of the credit were it extended through 2010, 1.6 million would buy even without the credit, the economist estimates. 

Local Realtors disagree. “I know personally of plenty of people who have bought just because of the tax credit,” Bridges said. “They were on the fence, worried about the economy and their jobs and not ready to jump in, but the credit pushed them over the edge and got them buying.” The revamped tax credit proposal would be a major infusion for the market, Bridges said. The new legislation would make the credit available to “move-up” buyers- current homeowners looking to sell their homes and buy more expensive residences- and to those with incomes as high as $125,000 a year. “The move-up folks would be more willing to sell their homes at lower prices,” Bridges said. “Everybody would benefit.” 

That includes builders, said Fred Williams of Fred Williams Homebuilder Inc.

“Broadening the credit would definitely help,” Williams said. “The lower-price houses were the ones being built with the summer permits. If the credit expands, the builders would build bigger, more expensive homes.” 

Copyright (c) 2009, Savannah Morning News, Ga.

Distributed by McClatchy-Tribune Information Services. 

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“The market’s momentum continued in September, as many homebuyers took advantage of the federal tax credit,” said C.A.R. president James Liptak. “The success of the federal tax credit is clear. Nearly 70% of first-time homebuyers report that the tax credit was ‘the most important’ or a ‘very important’ factor in their decision to buy a home. 

Closed escrow sales of existing, single-family detached homes in California totaled 530,520 in September at a seasonally adjusted annualized rate, according to information collected by C.A.R. from more than 90 local Realtor associations statewide. Statewide home resale activity increased 2.1% from the revised 519,530 sales pace recorded in September 2008. Sales in September 2009 increased 0.6% compared with the previous month. 

The statewide sales figure represents what the total number of homes sold during 2009 would be if sales maintained the September pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales. 

The median price of an existing, single-family detached home in California during September 2009 was $296,090, a 7.3% decrease from the revised $319,310 median for September 2008, C.A.R. reported. The September 2009 median price rose 1.1% compared with August’s $292,960 median price. 

“A new milestone was reached in September, when five C.A.R. regions reported positive year-to-year increases in the median price, the first such increase since January 2008,” said C.A.R. Vice President and Chief Economist Leslie-Appleton-Young. “September also marked the seventh consecutive month of month-to-month increases in the statewide median price and the first single-digit decline in the year-to-year median price since October 2007, after 22 consecutive months of double-digit decreases. “Efforts by the government to stimulate housing and the economy clearly are impacting the market. Sales have exceeded 500,000 homes for 13 consecutive months, and now are 33.1% higher on a year-to-date basis compared with 2008,” added Appleton-Young. 

Highlights of C.A.R.’s resale housing figures for September 2009: 

-C.A.R.’s Unsold Inventory Index for existing, single-family detached homes in September 2009 was 4.2 months, compared with 6.5 months (revised) for the same period a year ago. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

-Thirty-year fixed-mortgage interest rates averaged 5.06% during September 2009, compared with 6.04% in September 2008, according to Freddie Mac. Adjustable-mortgage interest rates averaged 4.59% in September 2009, compared with 5.14% in September 2008.

-The median number of days it took to sell a single-family home was 33.6 days in September 2009, compared with 46.2 days (revised) for the same period a year ago. 

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“We welcome efforts taken by Congress to extend the First-Time Homebuyer Tax Credit for a limited period. This credit has brought new families into the housing market and contributed to three consecutive months of rising home prices nationwide,” said Secretaries Geithner and Donovan. “In extending the credit, we urge Congress to include strict measures to combat tax fraud and protect responsible homeowners. We also urge Congress to act swiftly to extend the loan limits that currently apply to most mortgages, helping make rates more affordable for middle-class families. Finally, we will work with Congress to identify a financing source for the Housing Trust Fund, which will help provide decent housing for families hardest hit by the current economic downturn.” 

“These three measures will help support our efforts to stabilize the housing market by providing support for the recovery in housing prices, keeping mortgage rates low, and helping people who can afford their homes to avoid foreclosure,” said Secretary Geithner. 

HUD Secretary Shaun Donovan said, “These three measures provide comprehensive support to our recovering housing market and continued access to affordable housing. While extending the tax credit and higher loan limits will help promote homeownership, funding the Housing Trust Fund will provide assistance to renter households impacted by the economic crisis.” 

Secretary Geithner and Secretary Donovan announced their support for three key housing measures: 

-Extend the First-Time Homebuyer Credit, with strong anti-fraud measures. The Administration supports a limited extension of the First-Time Homebuyer Tax Credit, which is currently set to expire on December 1. This credit has made the difference in bringing new families into the housing market. Those buyers, in turn, have reduced the inventory of unsold homes and contributed to three months in a row of increases in home prices nationwide. A stronger housing market benefits homeowners and strengthens the financial system. In order to reinforce the progress already made this year, the Administration urges Congress to extend the Credit for a limited period. In doing so, we urge the Congress to include effective measures to combat tax fraud, including setting a minimum age for home purchase and requiring documentary proof of the purchase in order to receive the credit. 

-Extend Loan Limits for Mortgage Loans. The Administration supports a one-year extension of the current loan limits for the Federal Housing Administration, Fannie Mae, and Freddie Mac. This extension is vital in helping support the continued availability of affordable mortgages for many working families and aiding the recovery in the housing markets. Under present law, the current loan limits will expire on December 31. Families are already applying for mortgages that are being turned down or priced higher due to this impending deadline. The extension of the loan limits is being considered in the upcoming Continuing Resolution, and we urge Congress to enact the extensions immediately in order to assure the smooth supply of capital to the housing market. 

-Secure Financing for the Housing Trust Fund. The Administration is committed to working with the Congress to fund the Housing Trust Fund. This Fund is an important source of support for extremely low income families who otherwise cannot afford decent housing. The Fund was created in the 2008 HERA legislation, but has not had an effective funding source and so has not been able to fulfill its important mission. While the President’s Budget proposed to fund the Housing Trust Fund for $1 billion, and fully offset it within the Budget, the Administration is announcing that it will actively work with Congress to identify a specific offset to assure that level of financing for the Fund. 

For more information, visit www.ustreas.gov or www.hud.gov. 

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Even though it’s challenging, calculating the best time to take benefits is well worth it, especially given that Social Security represents about one-third of the average retiree’s income. 

What’s key is evaluating the so-called break-even period to determine whether it would be better to delay Social Security benefits (delaying them means a higher monthly benefit), take a reduced benefit early, or start them at “normal” retirement age. Of course, there’s a good reason why so few people really do the calculations. 

“When to begin Social Security retirement benefits is a challenging question that vexes many financial planners and clients,” Michael Kitces, editor of The Kitces Report, wrote in a recent issue. Living beyond the break-even point can produce large amounts of wealth relative to the risk. But delaying Social Security benefits does represent a serious risk, Kitces said: If you wait and then pass away before claiming your benefit, it really messes things up for your widow. Still, there are situations in which delaying Social Security retirement benefits can pay off significantly. 

“Is it better to begin payments early, or to delay Social Security and forfeit current payments to receive a larger income stream in the future?” he said. “Although the analysis of such a question would seem relatively straightforward, the complex rules of Social Security make the evaluation more difficult, especially when evaluating the implications of living beyond the so-called ‘break-even’ point.” 

Putting if off can pay off
One of the biggest risks to your retirement plan is unexpected longevity—living longer than you expect and having to fund additional years of retirement. “The decision to delay Social Security provides tremendous additional value, at the exact time that it is needed,” Kitces said. 

Another risk: High inflation. “To the extent that inflation turns out to be unexpectedly high, delaying Social Security benefits also turns out to be an effective inflation hedge, because the value of delaying increases in higher inflation environments,” he wrote. Though not the case now, during high inflation, which many predict on the horizon, you would get larger cost-of-living adjustments. 

Also, a low rate of return on investments poses a risk. “The decision to delay benefits also turns out to be an indirect hedge to poor returns in the portfolio,” Kitces wrote. 

How to decide
“At the most basic level, the decision about whether or not to delay Social Security retirement benefits represents a very straight-forward trade-off,” Kitces wrote. “You can either receive cash payments now, in your pocket, to spend or invest however you choose, or you can give up those payments in exchange for receiving a higher stream of income for life at a future date.” 

Here are the things you should consider to make a more informed decision: 

1. What’s your normal retirement age?
The first order of business: You need to know what your normal retirement age, or NRA, is. If you were born in 1937 or earlier, it’s 65. If you were born in 1960 or later, it’s 67. And if you were born between 1938 and 1959, it’s somewhere in between. Of note: If you were born in 1943, your NRA is 66. And since it’s now 2009, that means anyone born in 1943 is now at NRA, the age at which you can receive your full Social Security benefit. 

Once you know your NRA, you can calculate how much Social Security benefits will be increased or decreased if you choose to take your benefit later or earlier than your NRA. Take your benefit before NRA, and it’s reduced by 5/9ths of 1 percent for each month the benefits begin early, up to a maximum of 36 months before your NRA. Take your benefit after your NRA and the benefit is adjusted upward, depending on the year in which you were born, due to the “delayed retirement credit.” With delayed retirement credits, at least under current law, a person can receive his or her largest benefit by retiring at age 70. A person born in January of 1943, for instance, who waited until 50 months after reaching full retirement age would have a benefit of about 132% of their primary insurance amount. 

2. Will you be working?
Next, you need to determine whether you’ll be working, especially if you have not yet reached full or normal retirement age, according to Kitces. Because of Social Security’s earnings test, Kitces says it’s almost always a bad idea to take Social Security benefits early if you have earned income greater than the earnings test threshold. Social Security withholds benefits if your earnings exceed a certain level, called a “retirement earnings test exempt amount,” and if you are under your NRA. 

But it’s also important to note that one of two different exempt amounts applies, depending on the year in which you reach your NRA. Under the earnings test, your Social Security benefits are reduced by $1 for every $2 of earned income that you have in excess of $14,160 per year. But if your NRA is 2009, your benefit is reduced $1 for every $3 of earned income in excess of $37,680. 

3. How’s your health?
At the end of the day, Kitces said the most significant factor in the entire process of evaluating the decision to delay Social Security is whether you’re likely to live long enough to receive value from higher monthly benefits. The shorter your life expectancy, be it because of health, genetic, or other relevant factors, the less prospective value to delaying Social Security. If you’re not expected to live long enough to reach the break-even point, “it will virtually always make sense to begin benefits as soon as possible, and get as many payments as possible,” Kitces said. 

The tradeoffs
If you don’t plan to automatically defer benefits or start benefits early, Kitces said, “you have to evaluate the prospective tradeoffs between electing benefits early, or delaying benefits with the risk of not living to the break-even period and the opportunity for wealth creation by living beyond it.” 

To do this, you first have to pick a conservative growth rate, as well as an assumption for inflation. What’s more, you need to look at your retirement cash-flow needs and other income sources and investments, the risks you might face in retirement, and your longevity. Once you have a sense of the tradeoffs, you can come up with the best possible answer for your situation, rather than the rule-of-thumb case. 

The caveats
If you’re married, you’ll need to figure out what impact your decision regarding the timing of your Social Security benefits will have on both spousal benefits and widow’s benefits. Also, you’ll need to figure the effect of taxes on your decision.

“Social Security benefits have their own unique rules for determining the amount of benefits that will be subject to taxation, and there is significant interplay between the taxation of Social Security benefits and other aspects of the client’s planning situation that may create taxable income and affect the taxability of Social Security,” Kitces said. 

There you have it. You can certainly take Social Security early if you want. But given that Social Security might represent one of your largest assets and perhaps your most dependable income stream, wouldn’t you rather know that you had it as close to right as possible? 

(c) 2009, MarketWatch.com Inc.

Distributed by McClatchy-Tribune Information Services. 

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This is the clearest sign to date that the economic contraction and the recession ended some time this summer. Public policy has had a strong hand in getting the economy back from the brink of disaster and moving the economy into positive territory. Additional public policy attention is needed, however, to get the labor market unclogged, jobs growing, and the unemployment rate falling in the near future, after large-scale policy efforts did the same for financial markets and economic production. 

The consumer is back. Consumption spending increased by 3.4% this quarter, its strongest growth since the first quarter of 2007. This was largely due to a 22.3% jump in spending on consumer durables, such as cars. Car sales jumped 56.4% in the third quarter of 2009 with the help of the additional incentives, known as “Cash for Clunkers.” Consumer spending on a number of other items also increased at a healthy rate. Spending on recreational goods grew by 13.8%, furniture spending by 6.5%, and other goods by a respectable 6.2%. Food spending, a non-durable goods item, rose by 5.0% in the third quarter. 

There are encouraging signs, based on one quarter of data that the housing slump seems to have come to an end. The housing market expanded for the first time in almost four years. Spending on new homes increased by a strong 23.4% in the third quarter, the first increase since the fourth quarter of 2005. This is also the largest gain in more than two decades since the second quarter of 1986. The increase in spending on housing was aided by price declines during the previous years and low interest rates and the momentum in the housing market could thus very well last. 

Much of the momentum in consumer spending came from increased after-tax income in the prior quarters. Families had received tax cuts, additional Social Security benefits, and more unemployment insurance benefits since early spring. They spent some of this money in the third quarter, thus contributing to strong economic growth. The personal saving rate fell to 3.3% in the third quarter of 2009, down from 4.9% in the second quarter, and its lowest level since the second quarter of 2008. 

About the author
Christian E. Weller is Associate Professor, Department of Public Policy and Public Affairs, University of Massachusetts-Boston, and a Senior Fellow at the Center for American Progress. 

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Nearly one-third of these landlords (32%) say they have lowered rents over the past 18 months, according to an informal survey of association members. 

Tracey Benson, president of The National Association of Independent Landlords, points out that in today’s tough economy, renters absolutely should approach their landlords if they need help making ends meet.

“Just like everyone else in this recession, landlords are trying hard to pay their mortgage and cover their bills. As long as renters pay on time and take good care of where they’re living, landlords will work with them,” Benson said. 

Of those landlords willing to negotiate, 61% said they would drop rents up to 5%, and another 29% said they would take off up to 10%; the handful of those remaining said they would consider even steeper discounts. 

Benson said renters and landlords have much to gain by working together: “Often if renters can’t pay all of their rent, they don’t pay anything at all—hoping the problem will just go away—but that strategy of avoidance just compounds their troubles, hurts their credit rating and adds to their stress level. Landlords today understand what’s going on. They don’t want an empty home any more than a renter wants to be asked to leave.” 

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Over that time period, the number of seniors using the company’s online calculator has increased nearly 90% from the previous quarter. This significant increase in older homeowners researching a reverse mortgage mirrors the growth in reverse mortgages overall.

This increase is also likely driven by conditions in the marketplace that are reducing the amount of money seniors can gain through a reverse mortgage. Many then are seeking relief now to maximize their equity. These factors include new HUD (U.S. Department of Housing and Urban Development) regulations that slashed reverse mortgage proceeds by 10%, a continued decline in self-reported home values and federal legislation whose expiration at the end of this year will significantly reduce reverse mortgage limits even further.

“Older Americans continue to feel the lingering effects of the recession more than other segments of the population and a growing number of them are actively looking for ways to generate additional cash in retirement,” said Eric Bachman, founder and CEO of Golden Gateway Financial. “Unfortunately, these individuals stand to lose even more leverage and equity in their own homes when the temporary increase on mortgage limits expires at the end of this year. Seniors need this higher limit renewed as another tool that can help them find their financial footing.”

Recent HUD regulation changes resulted in an across-the-board 10% reduction in reverse mortgage proceeds available to seniors. At the same time, seniors are reporting a growing decline in their estimated home value. While the latest S&P/Case-Shiller Home Price Indices highlights a slowing drop in home values across the country, seniors seem to be gaining momentum. The decline in senior home values was reported at 1.4% between the first and second quarters of this year, but it dropped steeply to nearly 10%, or an average loss of almost $40,000 between the second and third quarters of 2009.

This is troubling for seniors because the amount of money available through a reverse mortgage is directly tied to the value of their home and the equity they hold in it. Further compounding this reduction in available equity is temporary legislation that increased reverse mortgage limits to $625,500. When this expires at the end of 2009, limits will fall back to $417,000, further reducing the amount of reverse mortgage proceeds available to borrowers.

Additional observations from the data include:

-The average age of users remained roughly consistent
-Self-reported senior home values dropped nearly 10% by almost $40,000 between the second and third quarters of 2009
-The median reported home value dropped below $300,000 for the first time in more than a year
-The average existing mortgage debt fell by approximately $8,000 from the previous quarter

Reverse Mortgage Calculator National Averages

Q1 ‘09       Q2 ‘09        Q3 ‘09

Average age                                     69.5            69.3            69.4
Average home value                     $413,371   $407,557   $369,762
Median home value                      $300,00   $300,000  $270,000
Percent with existing mortgage 49.9%        49.8%          51.3%
Average existing mortgage debt $161,265 $152,455 $144,497
Average max up-front payment $143,872 $151,089 $136,711
Average max monthly payment $922           $1097      $993

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Starting in 2010, the rules governing the conversion of a traditional IRA into a Roth IRA will allow anyone—regardless of income—to switch their existing retirement savings account. The change in 2010 “has the potential to be a fairly big deal,” said Rande Spiegelman, vice president of financial planning at the Charles Schwab Center for Financial Research. Depending on your financial circumstances, converting your traditional IRA to a Roth IRA might be a smart move, but consumers should do their homework first. “Look before you leap,” Spiegelman said. “Just because you can do it doesn’t necessarily mean you should.” 

The benefits of a Roth IRA are substantial. Here’s why: 

-Contributions to a Roth aren’t tax-deductible, but earnings can be withdrawn tax-free if you’re at least 59 1/2 years old and have had the Roth for at least five years.

-There’s no mandatory distribution age as there is with a traditional IRA, which means if you don’t need the money, you can leave it in the Roth to continue growing.

-In a traditional IRA, contributions are tax-deductible and taxes are paid when earnings are withdrawn. Withdrawals can begin at age 59 1/2 and are mandatory by age 701/2 because Uncle Sam wants the income taxes due him. 

Despite the benefits, the decision to convert your IRA shouldn’t be automatic. As a general rule, tax planners advise against paying a tax today that you can defer until a later date. But there are always exceptions, and converting to a Roth IRA now may well be one of them. When you move from a traditional IRA to a Roth IRA, you pay income tax on the amount converted. But for 2010 only, you can spread the income over two years. So if you converted a $100,000 traditional IRA in 2010, you could report $50,000 in ordinary income in 2011 and $50,000 in 2012. “The tax hit is real and it’s permanent,” Spiegelman said.

If you’re considering converting your IRA, here’s a checklist to go through before deciding:

Your tax bracket
Try to determine what tax bracket you’ll be in when you retire, and whether it will be higher or lower than your current bracket. “The people that Roth conversions are the best deal for are those who can pay the conversion taxes out of non-IRA assets, have at least 10 years to let the money grow before using it and will be in the same or higher tax bracket in retirement,” said Jean Keener, a Texas-based financial planner.

On the other hand, “if you think you’ll be in a lower income tax bracket, the taxes you pay today could end up being higher than the taxes you’d pay when you’re ready to make withdrawals,” Spiegelman said. So in that situation, it might not benefit you to convert your IRA. “It wouldn’t make sense to pay at a higher rate today if you can wait and pay less tax,” Spiegelman said.

What’s more, the taxes you pay now would reduce the amount of money available to you to grow. If the amount you convert would bump you into a higher tax bracket, consider converting only the amount that allows you to stay within the same tax bracket.

Paying the tax
Make sure you know where you’ll get the funds to pay the conversion tax. “If you take money out of the IRA to pay the conversion taxes, it can be costly,” said Ken Kilday, a certified financial planner and wealth manager at USAA. “You compound it in the wrong direction.” Plus, if you’re under 591/2 and tap your IRA, you’ll also be hit with a 10% penalty. “You’re amplifying the taxes vs. amplifying the tax-free growth,” Kilday said.

Your timetable
James Smith, certified public accountant, says to ask yourself: “How many years from today until I start to get the money out? “The more years I have, the more years there are for that money to build up even more money, which may overcome the tax difference,” said Smith, managing partner at Smith, Jackson, Boyer & Bovard PLLC in Dallas.

(c) 2009, The Dallas Morning News.

Distributed by McClatchy-Tribune Information Services.

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But five of those Top 10 metro areas reported decreasing foreclosure activity from the third quarter of 2008, while many other metro areas with Top 50 foreclosure rates reported sharp increases in foreclosure activity.

“Rising unemployment and a new variety of mortgage resets continued to gradually shift the nation’s foreclosure epicenters in the third quarter away from the hot spots of the last two years and toward some metro areas that had avoided the brunt of the first foreclosure wave,” said James J. Saccacio, chief executive officer of RealtyTrac. “While toxic subprime mortgages drove much of that first wave of foreclosures, high unemployment and exotic Alt-A Option ARMs are spreading the foreclosure flood to more metro areas in 2009.”

New foreclosure hot spots flare up

Among the top 50 metro foreclosure rates, the three biggest year-over-year increases were in Boise City-Nampa, Idaho, and Provo-Orem and Salt Lake City in Utah. In several states the largest increases were posted in cities not previously a focal point for foreclosure activity. The Chico metro area posted the biggest year-over-year increase in California, with foreclosure activity up 98% from the third quarter of 2008. The medium-sized metro about 100 miles north of Sacramento had a 12.8% unemployment rate in August, above the state and national averages.

A similar trend was seen in cities like Reno-Sparks, Nev., with an 80% year-over-year increase in foreclosure activity, Prescott, Ariz., with a 77% increase, Jacksonville, Fla., with a 64% increase, Rockford, Ill., with a 64% increase, and Lansing-East Lansing, Mich., with a 41% increase.

Top metro foreclosure rates

Las Vegas posted the nation’s highest metro foreclosure rate, with 5.13% (one in 20) of its housing units receiving a foreclosure filing during the quarter—nearly seven times the national average. A total of 40,408 Las Vegas properties received a foreclosure filing during the quarter, an increase of nearly 9% from the previous quarter and an increase of nearly 54% from the third quarter of 2008.

Despite a 13% decrease in foreclosure activity from the previous quarter, Merced, Calif., posted the nation’s second highest foreclosure rate, with 3.72% (one in 27) of its housing units receiving a foreclosure filing during the third quarter. A total of 3,092 Merced properties received a foreclosure filing during the quarter, down 11% from the third quarter of 2008.

Foreclosure activity in the Cape Coral-Fort Myers metro area in Florida also decreased from the previous quarter and from the third quarter of 2008, but the metro area still registered the nation’s third highest metro foreclosure rate—with 3.67% (one in 27) of its housing units receiving a foreclosure filing during the quarter. A total of 13,206 Cape Coral-Fort Myers properties received a foreclosure filing during the quarter, a decrease of 5% from the previous quarter and down 2% from the third quarter of 2008.

Other metro areas in the top 10 were the California cities of Stockton (3.53%), Modesto (3.39%), Riverside-San Bernardino (3.37%), Bakersfield (2.88%), and Vallejo-Fairfield (2.85%), along with the Reno-Sparks metro area in Nevada (2.67%) and the Florida metro areas of Port St. Lucie (2.63%) and Orlando-Kissimmee (2.57%).

For more information, visit www.realtytrac.com.

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Existing home sales rose 34% last month with a total of 14,419 homes sold statewide compared to 10,778 homes sold in September 2008, according to Florida Realtors. Statewide existing home sales last month increased 4.1% over statewide sales activity in August.

Florida Realtors also reported a 77% increase in statewide sales of existing condos in September compared to the previous year’s sales figure; statewide existing condo sales last month rose 8.9% over the total units sold in August.

All of Florida’s metropolitan statistical areas (MSAs) reported increased existing home sales in September; all but one MSA also showed gains in condo sales. A majority of the state’s MSAs have reported increased sales for 15 consecutive months.

Florida’s median sales price for existing homes last month was $142,000; a year ago, it was $174,900 for a 19% decrease. Housing industry analysts with the National Association of Realtors (NAR) note that sales of foreclosures and other distressed properties continue to downwardly distort the median price because they generally sell at a discount relative to traditional homes. The median is the midpoint; half the homes sold for more, half for less.

The national median sales price for existing single-family homes in August 2009 was $177,500, down 12.1% from a year earlier, according to NAR. In Massachusetts, the statewide median resales price was $315,000 in August; in California, it was $292,960; in Maryland, it was $265,862; and in New York, it was $205,000.

NAR’s latest industry outlook notes positive signs in the housing sector, but adds that extension of the federal first-time homebuyer tax credit would help sustain a fragile recovery. “Now that the market is showing some momentum, we have an opportunity to achieve a more rapid and broader stabilization in home prices,” said NAR Chief Economist Lawrence Yun. The outlook for home sales and prices depends on whether the tax credit is extended, he said, describing it as “the best tool in our arsenal to encourage financially qualified buyers to stimulate the economy and help reduce the budget deficit.”

In Florida’s year-to-year comparison for condos, 5,088 units sold statewide last month compared to 2,870 units in September 2008 for a 77% increase. The statewide existing condo median sales price last month was $102,500; in September 2008 it was $153,500 for a 33% decrease. The national median existing condo price was $179,300 in August 2009, according to NAR.

Interest rates for a 30-year fixed-rate mortgage averaged 5.06% last month, a significant drop from the average rate of 6.04% in September 2008, according to Freddie Mac. FAR’s sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.

Among the state’s smaller markets, the Pensacola MSA reported a total of 275 homes sold in September compared to 267 homes a year earlier for a 3% increase. The market’s existing home median sales price last month was $135,000; a year ago it was $146,900 for an 8% decrease. A total of 48 condos sold in the MSA in September, up 41% over the 34 units sold in September 2008. The existing condo median price last month was $190,000; a year earlier, it was $180,000 for a 6% gain.

For more information, visit www.floridarealtors.org.

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