Posts Tagged ‘United States’

Homeownership rate experiences biggest drop in 70 years!

The U.S. homeownership rate experienced its biggest drop in 2010 in 70 years, dropping to 65.1%, down from 66.2% in 2000, according to data from the Census Bureau.

The decline came even as the nation added 15.8 million housing units, increasing the total housing inventory by 13.6%, the Census Bureau said Thursday.

Eleven states suffered declines of at least two percentage points in their homeownership rates, led by South Carolina, with a decrease of 2.88 percentage points.

Nevada, the state that experienced the biggest housing boom in the nation over the past decade, saw its homeownership rate fall by 2.09 percentage points. The state’s housing units grew by 41.9% from 2000 to 2010. Housing growth outpaced population growth — which was already the fastest in the nation — by almost 7 percentage points.

Nevada, also registered the biggest growth in vacancy rates. The state’s vacancy rate, a measure of the share of unoccupied units on the Census survey, rose by 5.1 percentage points in 2010 from 10 years earlier. It stood at 14.3% at the end of 2010.

That increase “was almost completely driven by the increase in Clark County,” said Ellen Wilson, a statistician in the Census Bureau’s Economic and Housing Statistics Division, on a conference call Thursday. Clark County, home to Las Vegas, saw a 6.4 percentage point increase in vacant units.

Nevada’s vacancy rate was followed by Florida, (up 4.2 percentage points); Michigan (up 4 percentage points); and Georgia (up 3.9 percentage points).

The 10 states with the highest housing unit growth rates were in the West and South. After Nevada, Arizona clocked the second-largest gain, as its housing inventory rose by 29.9%, followed by Utah, with a 27.5% gain, and Idaho, with a 26.5% increase.

California had the most total housing units in 2010, as it did in 2000, with an inventory of 13.68 million units. Texas was next, with 9.98 million units, followed by Florida, which gained enough housing units to surpass New York.

Source: Liz Enochs

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Should You Rent or Buy?

Consider these factors before you make a big move in 2011.

Downsizing is a big part of many baby boomers’ retirement plans, but the flat housing market and still-shaky economy have put many moving plans on hold.

2011 isn’t expected to bring higher home prices, so now may be a good buying opportunity, housing experts say. Still, renting may be an attractive option if money is tight or if you’re not sure where you’d like to plant your retirement roots. A third of respondents in a recent Fannie Mae housing survey said they would be more likely to rent their next home if they moved.

Here are some factors to consider as you weigh whether renting or buying is best for you.

Four Reasons to Rent

An easy trial: Renting a home or apartment is an ideal way to test-drive a new community. You get the flavor of a new location without the financial commitment of home ownership — and you can always buy later. Vacationing where you may want to retire is another smart way to audition an area.

Flexibility: If something changes in your life, such as an unexpected job relocation or family needs, or if you just plain don’t like your new neighborhood, it’s a lot easier to walk away from a short-term lease than a home you own.

Less maintenance: Renting means you relinquish many of the responsibilities of home ownership. If something breaks, you can call your landlord instead of hiring a costly repairman.

More to invest: If you sell your current home and rent instead, you can invest the sale proceeds to boost your retirement nest egg.

Four Reasons to Buy

It’s a buyer’s market: While the sluggish housing market is painful for many sellers, lower prices in many areas make it a good time to buy. The NAR (National Association of Realtors) expects prices to stay flat in 2011.

Low mortgage rates: If you need to borrow to buy a home, mortgage rates are at historic lows.

Tax advantages: Under current law, most homeowners can deduct property taxes and mortgage interest, which lowers your overall tax bill.

Build equity: The housing market may not move much in 2011, but many properties can be snapped up for bargain prices. If you plan to stay put, you have time to build equity as the housing market rebounds. Historically, home prices rise over time, so a purchase at today’s lower prices can be a great investment if you plan to stay in the home for many years.

National Association of Realtors spokesman Walter Molony says a recent survey by his group found “a preponderance of baby boomers buying single-family homes.”

You also can borrow against the equity in your home using a home equity loan or line of credit, and the interest paid may be tax-deductible, too.

Other Considerations: Before moving to your next home, you may need to sell your current property. Depending on current prices in your area and when you first bought the home, you may have to sell at a loss.

“We’ve seen three years of declining prices, and it’s flat this year, so for some people who purchased, especially if they did so during the housing boom, it will take longer to get back where they started from,” Molony says.

For a ballpark estimate of your home’s value, try online services such as Zillow.com or Yahoo! Real Estate. For a more accurate assessment, contact a local real estate agent for an analysis of your home and the most recent sales in your neighborhood.

If you lost your job or had credit troubles during the recession, be prepared to face stricter lending retirements when you shop for a mortgage. Before you start looking, make sure you understand your credit standing. If it lacks gusto, make some improvements before you approach lenders for a mortgage.

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The Consequences of Walking Away

Have you had a conversation with someone in the last 30 days about the consequences of walking away from your mortgage?

If the answer is yes, you are not alone.

With an estimated 11 million people underwater on their mortgage, (owing more on their mortgage than their home is worth), even the most credit-worthy consumers are considering walking away from their mortgage.

“Walking away from a mortgage,” or what’s known as a strategic default, usually results in either a short sale or foreclosure and many people in this position are asking one simple question:

What are the consequences of walking away from a mortgage?

Walking Away from a Mortgage: The Consequences

Generally speaking, if you are considering walking away from a mortgage the major consequences will include:

  • Impaired credit
  • Deficiency risks
  • Tax consequences
  • Moving costs
  • Professional implications

Impaired Credit

Most people are aware that walking away from a mortgage will mean their credit score will take a hit. What most people may not be aware of is between short selling and foreclosure, there is very little difference in how much your credit score is impacted.  The main difference between a short sale and foreclosure is how soon you can qualify to buy a home again after the event, not how many points your credit score went down.

In addition to your credit score taking damage points, it is also common for credit card companies to cancel credit cards or lower your credit limit as a result of missing mortgage payments.  It is also common that it will become more difficult to obtain financing for larger ticket items such as autos or furniture — or any other type of revolving account after walking away from a mortgage.

Deficiency Risks

Depending on which state you live in, there are varying deficiency risks associated with walking away from your mortgage. (See anti-deficiency laws by state)

Translation: Your lender may sue you for the difference between what you owe and what your short sale or foreclosure proceeds were.

Anti-deficiency protection is limited to a minority of states and for most states in the U.S., there is no protection for homeowners from a lender pursuing the difference between what they owe and what the home sells for in foreclosure.

Further, even if your state has anti-deficiency laws in place, don’t think you are free from deficiency risk.  Whether you have deficiency risk or not, depends on factors such as: whether you have a second mortgage; did you refinance and take cash out; is your mortgage the one you got when you originally bought the house, and more.

Which is why when it comes to managing your deficiency risk, keep this saying in mind:

Nothing is more expensive than cheap legal advice.

If you are concerned that you may have deficiency risk, you should speak with a real estate lawyer who can provide legal advice for your particular situation.  Only a real estate attorney can accurately provide you the specific advice for your situation. Don’t rely on your neighbor’s advice or your brother-in-law who just short-sold his house and recommends that you should be okay by just walking away.

Tax Consequences

If you are considering walking away from a mortgage on your primary residence, there is a chance that you may have some tax liability.  If you are considering walking away from a mortgage on a second home or investment property, there can be a significant tax liability and you should consult your tax accountant.

Moving Costs

One of the commonly under-estimated consequences of walking away from a mortgage is the expense and process of moving.  Some of the common concerns related to moving include:

  • Moving into a rental — perhaps after decades of being a homeowner.
  • Possibly explaining to the landlord any credit report concerns as a result of missed mortgage payments.
  • Paying for moving expenses. Utilities, deposits, moving trucks and other expenses can add up fast.
  • Moving family members school, work or community activities they have gotten used to.

Many of the people I have talked with who have went through the process of walking away from a mortgage cited “moving” as the one consequence they hadn’t fully considered before actually doing it.

Professional Implications

Depending on what you do for a living, you may have professional consequences as a result from walking away from a mortgage.  The number of professions where your credit profile matters has grown over the last decade and if you are in a situation where your credit profile matters, you should know what the professional implications are before you walk. After all, you don’t want to lose your house and your job at the same time.

Walking Away from a Mortgage: The Single Biggest Mistake You Can Make

When making the decision to walk away from a mortgage, the consequences are certainly something to consider as part of the decision process.  And in my our experience of handling many short sales for our Clients we discovered that  there is one big mistake that you can make in the process:

Not being fully informed of what the consequences are of walking away from a mortgage.

Once you have educated yourself about the consequences and researched all of the possible options…

… the choice is still yours.

Source: Justin McHood of Academy Mortgage.

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Could the Mortgage Deduction Get Chopped?

As the U.S. government looks under every rock for more spending cuts, here’s an intriguing thought: What happens if Washington takes this opportunity to take down the tax break on mortgage interest?

 “We believe there is a growing risk that the mortgage interest deduction could fall victim to the deficit reduction mantra,” MF Global said in a research note.

We know fiscal asceticism is the new black, but Congress doesn’t have the guts to take on the popular mortgage tax break, which defenders say makes the cost of homes within reach for Americans. The real-estate and mortgage industries also would fight tooth or nail if the deduction moves to the chopping block.

“At this point, we view this more as a headline risk than a real threat,” MF Global said in its note. “Yet curtailing the mortgage interest deduction has been part of President Obama’s budget proposal and it was one of the bi-partisan deficit reduction commission’s recommendations. So we cannot rule out these threats.”

True, everyone from the International Monetary Fund to the Tax Policy Center to the White House fiscal commission have called for the U.S. to cap, redesign or simply get rid of the deduction. The IMF called the mortgage tax break  “expensive and regressive.” But this comes up every few years or so, before everyone realizes it’s impossible to hack away at a cherished part of the tax code.

Critics of the mortgage tax break says the country simply can’t afford to turn down billions of dollars a year for federal and state coffers. The mortgage deduction also may push people to take on risky mortgage they can’t afford, say critics, and isn’t equitable because the deduction applies to taxpayers who itemize their deductions – and benefits higher-income households more.

The National Association of Realtors (NAR) has shown increasing alarm over the possibility of eliminating the deduction over the past months. Last year, the NAR declared eliminating the deduction would decrease home values by as much as 15 percent. The NAR also asked its 1.1 million members to contact their senators and congressmen and voice their concerns over the potential of eliminating or altering the deduction.

As a Homeowner and a Member of the NAR I sent the following letter to my congressmen asking for his support to urge Congress to preserve, protect and defend the mortgage interest deduction before they whittle it down at the expense of other more expedient budget cuts.

Consider the consequences if homeowners and buyers lose the time-honored and cherished mortgage interest deduction. This tax deduction built the dream of homeownership in America. The bottom line is you may well lose personally, and for certain so will your business if it is eliminated or significantly reduced in any way.

We must speak loudly and clearly with one voice to ensure the further recovery of our economy and the housing market and educate every legislator about how much the mortgage interest deduction matters to us.  Therefore, I urge everyone to take action to Preserve, Protect and Defend the mortgage interest deduction.  No economic recovery is possible without a vibrant housing market.

Please Take Action Today!

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Underwater Mortgage Crisis Lingers

On Tuesday, data released by CoreLogic Inc., a leading provider of information, analytics and business services, stated that nearly 23.1% or 11.1 million of all U.S. residential mortgage properties were underwater in the 4th quarter of 2010. The figures stood even higher than the 22.5% or 10.8 million households’ loans that were underwater in the preceding quarter.

The total amount of underwater mortgages was $751 billion in the fourth reported quarter, up from $744 billion in the earlier quarter, but down from $800 billion in the year-ago quarter. CoreLogic used data related to 48 million properties with a mortgage (85% of all mortgages in the U.S.) as the base.

In December, home prices had fallen to its lowest point since the housing bust. This was the driving factor behind the 3% rise in underwater mortgages during the quarter. Additionally, about 2.4 million borrowers’ home value was merely 5% more than the loan value (close to underwater).

As per CoreLogic’s report, Nevada had the highest rate of underwater mortgage. About 65% of the mortgaged home property in Nevada was underwater, followed by 51% in Arizona, 47% in Florida, 36% in Michigan and 32% in California. However, there were just nine states that had less than 10% of their total mortgaged home property underwater.

When a mortgage is underwater, the homeowner cannot refinance the loan and has almost no alternative but to continue making payments with a hope that the property will finally regain its original value. But with high levels of foreclosure and unemployment, home prices are further expected to fall by another 5%-10% this year.

With further declines in home prices, the biggest rises in underwater mortgages are expected in Alabama, Idaho and Oregon as they have the largest number of properties that are close to underwater presently.

Moreover, underwater mortgage slows down home sales. Homeowners, who would have otherwise sold their houses, will now wait for the home prices to rise before selling. Also, at times the mortgage providers do not allow the borrowers to sell their property at lower price than owed on the mortgage.

Further, many banks require about 20% of the home value as down payment, which again makes it increasingly difficult for the home owners to sell their property. However, Obama administration is planning for a 10% down payment requirement on loans guaranteed by Fannie Mae and Freddie Mac.

At present, underwater mortgage is one of the menacing problems confronted by the U.S. financial markets. Despite the introduction of Home Affordable Modification Program (HAMP) by the government in 2008, underwater mortgage problem has not diminished.

Currently, state attorneys general are trying to resolve issues related to improper mortgage foreclosures with various large mortgage providers such as JPMorgan Chase & Co. and Bank of America Corporation.

We believe that until underwater mortgages fall and foreclosure mess is resolved, the recovery in the housing and mortgage markets will remain very slow.

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Is NOW a good time to become a Real Estate Agent?

New Real Estate AgentsIf you are an individual who has considered getting into the Real Estate business, you have probably asked yourself a hundred times, if NOW is a good time to become a licensed Realtor. Everyone around you is probably telling you NO, but if you asked any successful Realtors, they would probably tell you different.

If you asked any successful Realtors they would tell you that NOW is in fact the perfect time to become an agent. How is this possible you might ask? Upon asking many successful Realtors if NOW would be a good time to become a Realtor, they would presumably tell you that if you can survive and make money in this market, when the market takes a turn for the better, you will reap the benefits of all the hard work you put in during the not so easy market.

Keep in mind, if you are considering getting into the market now, you will have to work much harder than you would, and you will have to affiliate yourself with a Company that can offer you the Management support, the training, and the high tech products and services that the Consumers want these days. As a new Agent, training and Broker Manager Support should be at the top of your list because this will be the key to your success.

Many of the agents, who have been in the Market since it was at its peak will most likely tell you to reconsider Real Estate and not get involved at this time. The truth is this market has taken a toll on these agents, causing a lot of them to give up, finding new careers or an easier ways of making money. Back in the 1990’s, it seemed like properties sold themselves, and agents just got buyers in the door, people would come to them. Now days, the agent has to seek out the client, put in actual work, so to speak. Most of them are not used to this, and just don’t put in the effort they should and consequently they end up out of the Business.

Being an agent takes a certain type of person. You have to keep a positive attitude no matter what kind of market it is. I know that becoming a Realtor in this Market can work for a new agent. Being educated on the market conditions and the high tech products and services that the Consumers want will help you to become a successful agent, if not now than when the Market picks up again. Hard work in this business really pays off, no matter how rocky the real estate market may be. Just like in a good market, you only get what you put into it.

Therefore, if you are considering becoming an agent, simply because you think it’s a lot of money, for so little work then now is not a good market for you. You have to be willing to put in the hard work in order for it to payoff the way you expect. Even in a good market, the harder you work, the more successful you will be. I often remind my Fellow Agents and Broker that Real Estate is the highest paying hard work and the lowest paying easy work.

The “Market” should never determine how successful you will be in any given market. Don’t let the media and all these news reports on the Market scare you. Take all the necessary training classes and speak with your Broker or Manager anytime you start to feel frustrated. If you work with the right Company you always have the support that you need right at your finger tips.

So the next time you ask yourself , if NOW is a good time to become a licensed Realtor, the answer to this question is YES! Take a chance and reap the benefits of this lucrative Business that we call Real Estate. I did!

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