Real Estate

A Thomson Reuters/University of Michigan survey published last week suggests that most homeowners think the worst is over, and don't anticipate further declines in the value of their properties in 2010.

Just 15% of homeowners surveyed in January expected their homes to decline in value over the next year, the lowest level since early 2007. It should be noted that the last time a lower percentage of homeowners expected their homes to fall in value, home prices promptly tanked.

The house sits behind an upholstery shop on the corner, and while I'm too young to know for sure, I'll bet the upholstery shop has thrived since the streetcar ran down Gladstone Street in the 1950s. The house, like mine, was built in the first few decades of the 20th century. An old grande dame, she is, brilliant with leaded glass windows and gingerbread detailing and a formal dining room and built-ins that must have had the real estate agents in a tizzy four years ago when the market was so hot she was flipped twice in a season, sold last for $417,000 -- nearly three times what we'd paid for our house, a block away, in 2002.

When she was first for sale my husband, who's worked for a few of the city's top residential real estate agents, called his old friends, dreaming of an investment -- he loves how enormous and elegant she is. I told him it was a foreclosure waiting to happen: even pre-crash I could see it couldn't work. The numbers just didn't make sense; the house had been a rental for many years and, despite its great "bones," there were problems that would prevent even the slummiest of landlords from breaking even.

An investigation by the nonprofit journalism operation, ProPublica, raises intriguing questions about reasons desperate homeowners are being turned away for the very government program aimed at helping them.

Some of the problems ProPublica uncovered echo complaints WalletPop heard when we wrote about troubles with the federal Home Affordable Modification Program last year: trial modifications being extended just as they are completed, and loans being denied because an income decline is considered temporary.

That temporary hardship, the focus of ProPublica's latest story, was not intended to be legitimate grounds for denial, as was clearly explained by the Treasury Department in a December memo. Now, JPMorgan Chase -- which was involved in all of the cases the investigation uncovered -- has acknowledged its error and encouraged anyone denied for that reason to reapply. A spokeswoman told ProPublica that the company "adapts as quickly as possible" to the Treasury guideline missives.

As of the end of 2009, the government reported, more than 900,000 trial modifications had been started, but only 66,465 had transitioned into permanent breaks for the borrowers. The report also showed JP Morgan Chase was second only to Bank of America as a participant in the federal HAMP program.

If you're a homeowner, go outside after dinner and count the cars parked in driveways, on the street and in garages. Divide that number by the number of households on your walk. Got a number close to two, or more? You've got a situation ripe for foreclosure, according to a statistical analysis conducted by the National Resources Defense Council. What's more, car ownership is a better predictor of foreclosure than average credit scores, income or a host of demographic factors; it's the best predictor of all, the NRDC concludes.

If you're looking for cities where the population, jobs and household income are growing -- imagine that -- then head for Texas. Or Tennessee, North Carolina or Georgia. They are among a small group of states that have shown surprising expansion, despite the recession, according to a survey on the nation's highest-growth areas. The study, dubbed "9 from 2009," was conducted by Little Rock, Ark.-based data firm Gadberry Group, and included only areas larger than 10,000 occupied households that met certain growth requirements.

The reasons these nine cities managed to grow amid the bruising recession is that they have booming industries, stable housing markets and quality-of-life amenities, such as good schools and proximity to jobs and recreational areas.

Come this June, as WalletPop has reported, new government rules take effect that are designed to make it easier for distressed homeowners to get not only that often-elusive, three-month trial mortgage loan modification, but also the much more sought after (and relatively seldom gotten) permanent mortgage modification.

But new rules and regulations, while helpful, are only part of the picture. As with many other things in life, having the right attitude and a firm plan in place before paying a visit to your questionably friendly neighborhood loan officer may greatly enhance your chances of getting that loan modification.

Although the President claimed in his State of the Union address that the worst of the economic storm has passed us by, he apparently didn't consult with bankers who answered the January survey of senior loan officers conducted by the Federal Reserve.

Had Mr. Obama done so, he'd have found out that, in fact, when it comes to mortgage loans, bankers are not exactly upbeat about the near term future.

In fact, according to the survey, credit standards are still being tightened as bankers expect delinquencies to continue to rise.

For prime real estate loans, 17 % of banks say they tightened their standards, while 30% of banks answered the same way about non-traditional loans.

In these uncertain times potential homebuyers continue to sit on the sidelines because they are concerned that a job loss could kill their dreams to own a home.

Innovative job loss mortgage insurance is being offered through mortgage lenders, real estate agents, new-home builders and state and local housing agencies. In many cases this protection is being offered free to the homebuyer as part of their home purchase.

One real estate agent even put out a press release about the "Worry Free" Mortgage Protection."

"The ability to provide home buyers a viable solution to the uncertainty associated with purchasing a home eliminates one of the major obstacles preventing buyers from taking advantage of once in a lifetime purchasing opportunities," Lance Mohr, a Tampa broker, stated. "Interest rates remain near historic lows even as the cost of buying a new or existing home continue to drop; combined with federal tax incentives this is literally one of the best buying opportunities presented in decades. Unfortunately, the fear of job loss and economic uncertainty has prevented many would-be buyers from acting on their desire to purchase a home."

The real estate downturn that dominated 2009 leaves many on unfamiliar ground at tax time. Where better to look for advice than in suburban Los Angeles, where property values took a particularly vicious dive. There, Woodland Hills investment adviser Mark Kennedy shared his tips with WalletPop:

On Foreclosure: "Homeowners here are really getting screwed. If they do what's called a deed in lieu of foreclosure, their credit gets slammed, just like a foreclosure, and then, even if the bank forgives you, the IRS does not. Say you borrowed $500,000 and the house now is only worth $300,000. You would get a deficiency 1099 from the IRS for that difference. Doesn't make sense, but that's the rule."

If you are fence sitting about whether to buy that house, you may not want to wait too much longer: If government officials can be believed, the more than year-long federal support of mortgages, which brought rates to post World War II lows, is slated to end within the next couple of months.

Should this happen, mortgage rates are expected to climb. By how much, no one seems certain. Though fears are already being expressed by some, that any hefty increase in the 30-year fixed rate mortgage could cut any developing real estate market recovery off at the knees.

But forget the macro implications and let's keep to the micro ones: that would be you.

Mortgage modifications have turned out to be far more difficult than the Obama administration apparently initially thought they'd be. Many homeowners complain they can't get lenders to award them permanent modifications after a required three-month trial. Servicers often blame the borrowers for submitting incomplete applications and other documents. And there goes any hope of a permanent mortgage modification.

Until now! (Or this June, to be exact).

New England's largest real estate company announced plans to team up with the region's largest food retailer to develop small real estate offices based in supermarkets in Massachusetts, Connecticut, Rhode Island, and New Hampshire. Well, why not? If it's convenient to have your bank's ATM machine right near the checkout, why not someone in the supermarket to remind you that your pantry is minuscule for all the groceries you just bought, and besides, you hate your kitchen?

RE/MAX of New England expects to open up to 17 realty offices in Stop & Shop stores. Personally, I think this takes the one-stop shopping experience a bit too far. Won't the ice cream melt while an agent yammers on about what a great time this is to buy a house? In any event, this marks the first time that a major real estate brand has partnered with a large consumer retailer to house real estate offices in its retail spaces.

The practical side of this arrangement is that RE/MAX is selling franchises for these mini-offices, and realty brokers might find the rent near the meat counter a better bargain than leasing a commercial office space. And you can't deny the foot traffic, especially when it's double coupon day.

While in this economy almost every business is willing to take a gamble on the off-chance it might work, the sales logic here of mixing grocery shopping with home-buying does seem to be flawed, according to several real estate practitioners.

Older home owners and the builders of senior housing have a bit of a communication gap, according to a recent survey.

These potential buyers say they want non-slip floors but don't much care about lever doorknobs. Builders say they have those easy-to-open knobs covered but aren't so sure about the floors.

The builders are going green; the buyers say great -- but won't pay extra for it. A third of the consumers want lower kitchen cabinets, emergency call buttons and wood-burning fireplaces. Only about one in 10 providers routinely offer those amenities. Three-quarters of the suppliers build wider doorways; only half the consumers want them.

That supply-and-demand chasm for senior housing was unearthed by the survey, titled "55+ Housing: Builders, Buyers and Beyond".

WalletPop wondered how the results might change builders' plans. But the response of one of the survey's sponsors, MetLife, is, basically, that consumers don't know what's good for them.

With all the hype about how home ownership is dead and real estate is no longer a good investment, it's useful to look at some numbers.

Instead of all the headlines and hysteria, numbers can tell us -- with some objectivity -- whether real estate is attractively priced.

Today's Wall Street Journal reports (subscription required) that "The average cap rate for office properties in central business districts jumped to 8.8% in December from 8.56% in November. The December number was the highest rate for that category since May 2003. Meanwhile, average cap rates for apartment buildings was 7.36% in December, up from 7.09% in November."

I am always somewhat amused when I read how so-called "experts" are "surprised" or "shocked" or "baffled" (lots of other expressions pop up when dealing with the economy in particular) when economic news turns out not to be what they had anticipated...even though it would seem pretty obvious to anyone with a keen observational eye that there is nothing really surprising by the latest set of statistics at all.

Take the just released government report on new home sales. They have hit a nine-month low. Apparently some analysts that had been "surveyed by Briefing.com had expected December sales of new home to hit an annual rate of 366,000." Instead, the figure was actually 342,000 last month, down 7.6 % from the previous month.