The New York Times

End is nigh for certain tax exemptions:

Currently, any debt forgiven by a lender in a short sale, loan modification, or foreclosure is exempt from federal taxation.  However, that exemption is scheduled to expire Jan. 1, 2013.

Making sense of the story

• Borrowers will have to count mortgage relief from lenders as income on their federal tax returns, if the exemption is allowed to expire.  That means, for example, a borrower would have to pay taxes on a $100,000 reduction in principal owed on a loan, or a $20,000 write-off in the amount owed after a short sale.
  
   
• An extension of the tax exemption – established under the Mortgage Forgiveness Debt Relief Act of 2007 – is a strong possibility.  But given that Congress will have to grapple with serious fiscal issues after the November elections, there is no guarantee the exemption will emerge from those negotiations intact.
  
   
• The Debt Relief Act exemption applies only to canceled mortgage debt used to buy, build, or improve a primary residence, not a second home.  The maximum exemption is $2 million.
  
   
• Reinstating the tax would undercut the the effect of the National Mortgage Settlement reached earlier this year in the federal government’s investigation into banks’ mishandling of foreclosure documents. 
  
   

Under the terms of the settlement, five of the biggest mortgage lenders must put some $17 billion toward debt relief that enables borrowers to stay in their homes. Smaller portions are reserved for short sales and refinancing.

New Home Sales Best In Over Two Years: 

New U.S. single-family home sales surged in September to the highest level in nearly 2-1/2 years, further evidence the housing market recovery is gaining steam.

The Commerce Department said on Wednesday that new home sales increased 5.7 percent to a seasonally adjusted 389,000-unit annual rate -- the fastest pace since April 2010, when sales were boosted by a tax credit for first-time home buyers.

The median price of a new home jumped  11.7 percent from a year ago.

In a separate report, the National Association of Realtors said that Pending Home Sales increased by 0.3% on a month-over-month basis and jumped 14.5 percent from a year ago.

   Mercury News

California home prices rise in September; sales fall:

A continued shortage of available homes for sale lowered California home sales in September, while the median price reached the highest level in more than four years, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported this week.

Making sense of the story

• “Sales in the inland and coastal markets continue to move in different directions.  Low inventory – especially in distressed areas – is dampening sales activity,” said C.A.R. President LeFrancis Arnold.  “In many of these areas, there is a one- to two-month supply of REO homes on the market. "The Inland Empire and the Central Valley have experienced double-digit sales declines compared with last year.  Meanwhile, sales were higher in San Diego and most Bay Area counties, where the economies appear to be growing faster than the rest of the state.”
  
   
• Sales in September were down 5.2 percent compared with August and down 1.2 percent from September 2011.
  
   
• The statewide median price of an existing, single-family detached home inched up 0.3 percent from August’s $343,820 median price to $345,000 in September.
  
   
• California’s housing inventory eased slightly in September, with the Unsold Inventory Index for existing, single-family detached homes edging up to 3.7 months, up from a revised 3.2 months in August and 5.3 months in September 2011.  The index indicates the number of months needed to sell the supply of homes on the market at the current sales rate.  A six- to seven-month supply is considered normal.
  
   
• Homes sold faster in September, with the median number of days it took to sell a single-family home falling to 39.3 days in September 2012 from 41.1 days in August and down from a revised 54.2 days for the same period a year ago.

Average Home Price Jumps 11.3% from Last Year: 

More good news about the housing market: Inventories are lower, prices are higher and the number of days a home is on the market has decreased.

According to the  Existing Home Sales report that was just released, the median price paid for a previously occupied home rose 11.3 percent from a year earlier to $183,900.

Tight inventories have helped support home prices in recent months, which could help economic growth by making consumers more comfortable about their finances. The nation's stock of existing homes for sale fell 3.3 percent last month to 2.32 million units. At the current pace of sales, inventories would be exhausted in 5.9 months, the lowest rate since March 2006, the National Association of Realtors said.

The median time previously owned homes spent on market was 70 days in September, down 30.7 percent from a year ago. Also helping prices - the share of distressed sales fell to 24 percent in September, down from 30 percent in the same month of 2011.

The low-hanging fruit has already been picked over the past year and now there are concerns that there may be a shortage of  housing in some areas which has fueled buyer interest in acting sooner rather than later.

Short sale fraud “heating up,” expert says:

A panel of short sale experts presenting at CALIFORNIA REALTOR® EXPO 2012 in Anaheim last week said that “fraud is heating up like a wildfire right now ...” and “we’ve got to be aware that this fraud is changing directions, jumping containment lines.”

Making sense of the story

• Short sales involve the selling of a home for less than is owed on its mortgage.
  
   
• Among the most common forms of fraud are: Flopping, non-arm’s length transaction, side agreements, and false information.
  
   
• Flopping: Scammers arrange to buy a home at an artificially deflated price intending to flip it immediately at its actual value.
  
   
• Non-arm’s length transactions: The buyer in a short sale is related to the seller by blood, marriage, or some type of business or personal affiliation.  This istypically arranged by an underwater borrower to regain ownership of the property free from the mortgage debt.
  
   
• Side agreements: In addition to payments included in a lender’s “approval letter,” the buyer and seller have side agreements to pay off junior liens, short sale negotiators’ fees, or other third-party fees.
  
   
• False information: The transaction includes phony details in the closing settlement statement, or HUD-1, to hide buried costs and fees.

  Orange County Register

Short sale fraud “heating up,” expert says:

A panel of short sale experts presenting at CALIFORNIA REALTOR® EXPO 2012 in Anaheim last week said that “fraud is heating up like a wildfire right now ...” and “we’ve got to be aware that this fraud is changing directions, jumping containment lines.”

Making sense of the story

• Short sales involve the selling of a home for less than is owed on its mortgage.
  
   
• Among the most common forms of fraud are: Flopping, non-arm’s length transaction, side agreements, and false information.
  
   
• Flopping: Scammers arrange to buy a home at an artificially deflated price intending to flip it immediately at its actual value.
  
   
• Non-arm’s length transactions: The buyer in a short sale is related to the seller by blood, marriage, or some type of business or personal affiliation.  This istypically arranged by an underwater borrower to regain ownership of the property free from the mortgage debt.
  
   
• Side agreements: In addition to payments included in a lender’s “approval letter,” the buyer and seller have side agreements to pay off junior liens, short sale negotiators’ fees, or other third-party fees.
  
   

False information: The transaction includes phony details in the closing settlement statement, or HUD-1, to hide buried costs and fees.

Obama administration releases September housing scorecard:

The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury recently released the September edition of the Obama Administration's Housing Scorecard, which continues to show signs that the housing market is strengthening.  Home equity has increased by $860 billion since the end of 2011, and August had the highest level of existing home sales in more than two years – although officials caution that the overall recovery remains fragile. 

  
The September Housing Scorecard features key data on the health of the housing market and the impact of the Administration’s foreclosure prevention programs, including:

• Rising home values have brought homeowner equity to its highest level since the third quarter of 2008 and helped lift 1.3 million families above water. Homeowner equity jumped $406 billion, or 5.9 percent, to $7,275 billion in the second quarter of 2012.  After a sharp first quarter rise, total equity has grown to $863 billion, or 13.5 percent, since the end of 2011. The number of underwater borrowers has declined by 11 percent since the end of last year, from 12.1 million in the 4th quarter of 2011 to 10.8 million in the second quarter of 2012.
• Nearly 1.3 million homeowner assistance actions have taken place through the Making Home Affordable Program, while the Federal Housing Administration (FHA) has offered more than 1.4 million loss mitigation and early delinquency interventions.

As of August, more than one million homeowners have received a permanent HAMP modification, saving approximately $539 on their mortgage payments each month and an estimated $15 billion to date.

  San Diego Union Tribune

When will the housing market be "corrected?"

The housing recovery in California is expected to continue through to 2013, but the market won't be "corrected" until as far off as 2017, according to the California Housing Market Forecast released by the CALIFORNIA ASSOCIATION OF REALTORS.

 

Making sense of the story

 

• Homes sales and prices are expected to keep rising, but lower-than-normal inventory levels and underwater mortgages are key hindrances to a faster recovery, according to Leslie Appleton-Young, chief economist with the CALIFORNIA ASSOCIATION OF REALTORS®.
  
    
• Home sales are forecasted to rise 1.3 percent to 530,000 units next year, based on the projected tally of 523,300 units this year. That's a slower growth than that of 2011 to 2012, which is roughly 5 percent.

• The momentum in prices also is expected to carry through to 2013, a result of pent-up demand for a limited housing supply. The median price could rise 5.7 percent to $335,000 in 2013. That's lower than the projected price growth from 2011 to 2012, an estimated 11 percent. The state has a 3.2 months' worth of housing inventory, significantly lower than the 16 months'-plus supply of saw roughly four years ago.

• “Pent-up demand from first-time buyers will compete with investors and all-cash offers on lower-priced properties, while multiple offers and aggressive bidding will continue to be the norm in mid- to upper-price range homes,” said Appleton-Young in the report.

• Appleton-Young says what underwater borrowers throughout the state will do -- be it selling or holding -- will have a big effect on next year's housing recovery.

Other things to watch next year that will have a bearing on the housing market include: policies related to the state,local and federal governments; and housing and monetary policies, Appleton-Young said.

  San Francisco Chronicle

Shortage of California homes up for sale:

After years of having too many homes and not enough buyers, real estate agents in California now have the opposite problem – too many buyers and not enough homes for sale.

Making sense of the story

• The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported Monday that its statewide inventory of unsold homes index for existing, single-family detached homes fell to 3.2 months in August from 3.5 months in July and 5.2 months in August 2011.
  
   
• The index reflects the number of months needed to sell the supply of homes on the market at the current sales rate.  A six- to seven-month supply is considered normal.  When the number goes higher, inventory is plentiful and it’s considered a buyer’s market.  When the number goes lower, the advantage goes to the seller.
  
   
• Declining inventory helps explain why the statewide median price of an existing, single-family detached home rose to $343,820 in August, up 3 percent from July and up 15.5 percent from August 2011, according to C.A.R.
  
   
• Nationwide, the inventory of homes for sale also has declined.  In July, there was a 6.4-month supply of homes compared with 9.3 months in July 2011.  The current number is in line with the long-term average, according to the NATIONAL ASSOCIATION OF REALTORS®.  However, NAR also acknowledges there are “acute shortages” in places such as California, Arizona, Nevada, and parts of Florida.
  
   
• Also constraining supply is the fact that so many homeowners are underwater – or owe more than their homes are worth – and unable to sell without taking a loss.  As prices rise, more homes will increase in value, but it’s going to take time.  Meanwhile, there are still a lot of homes that are not likely to come onto the market.
  
   

At some point, the balance will tip, but it’s hard to predict when.  When banks decide prices are high enough, they will start unloading houses they have been sitting on, according to the chief economist for Trulia.

California consumer confidence at a 5-year high:

 

The California Composite Index of Consumer Confidence increased to 94.2 in the third quarter of 2012 compared with the second quarter revised reading of 89, according to Chapman University. Consumer confidence has been increasing steadily since hitting a low of 57.6 in the second quarter of 2008 and has been hovering between readings of 80 and 90 since the first quarter of 2010. The current reading of 94.2 is the highest overall consumer confidence since the beginning of the recession in the fourth quarter of 2007. An index level below 100, however, reflects a higher percentage of pessimistic consumers versus those who are optimistic.

The California Composite Index is generated based on three indices: Consumers’ outlook on current and future economic conditions, and an index measuring consumers’ spending plan.

 The current economic conditions index increased from a revised May reading of 80.9 to 86.8 in August 2012. The index measuring future economic conditions increased significantly to a reading of 105.6 in August 2012 from a revised reading of 93.6 in May. Recent improvement in the job market positively affected consumers’ assessment of the current economic conditions and the outlook about future economic activity.

 The index measuring consumers’ planned spending on big-ticket items, however, decreased substantially from the revised May reading of 96.0. The decline in this index in August 2012 to a reading of 86.1 may be due to high and volatile gasoline prices. Higher gas prices are reducing consumers’ disposable income and negatively affecting consumers’ planned spending.