Yet, certain regions in these sand states are actually leading the country in its turn to a more positive housing market. Let’s look at one such region: the Miami/Fort Lauderdale market. When talking about Miami/Fort Lauderdale housing prices, most people discuss the collapse in values the area experienced since 2006. However, prices in the region have actually already stabilized and could actually appreciate in 2012.

As an example: Though Zillow has projected 4% declines in several other Florida regions, they believe that the prices in the Miami/Fort Lauderdale market will remain stable over the next 12 months.

Standard & Poors, after analyzing the peak gains in regions across the country, explained:

“Miami had the highest peak and has retained a lot of the gains it made.”

Bank of America looked at the non-distressed housing market in regions across the country and discovered:

“Home prices in many non-distressed markets are already and unexpectedly on the rise … Within those non-distressed markets, Miami experienced the most rapid price growth in 2011 at 7%.”

The National Association of Realtors (NAR) released their fourth quarter Median Sales Price Report for Condos and Coops which showed that condo prices in the Miami/Fort Lauderdale market have increased in each of the last four quarters.

Bottom Line

What we believe to be true about certain markets may no longer be the case. Check with a local real estate professional to make sure you are keeping current on the part of the housing market that matters to you.

Interest Rates Should Be Stable
With a faltering economy nationally and worldwide, including pessimistic estimates for employment, there is little chance that the Fed will risk increasing rates which would jeopardize any recovery. Couple that with a Presidential Election in November and conventional wisdom says we’ll see rates hovering in the same neighborhood for most of 2012.

Mortgage Costs Will Increase
Quietly tucked away in those bills passed in Congress to extend the payroll tax cuts before the holidays was an increase of 10 basis points in the guarantee fees on loans sold to Fannie Mae and Freddie Mac. That will translate into .10% higher interest rates (which would be $4000 extra on a $200,000 loan over 30 years). Interestingly enough, the additional revenue is not going to Fannie or Freddie to help with defaulted loans, but rather going to the US Treasury to make up for the payroll tax cut….go figure.

The Mortgage Interest Deduction Will Be Challenged
Look for people of a certain income level to lose their write off as a measure to increase revenue. Taking away from the wealthy as a way to raise governmental revenue is politically strategic. It is unlikely everyone will lose the deduction (political suicide), but that top 1%…watch out.

Loan Products Will Expand
Common sense lending will start creeping back. Large down payments will liberalize credit and income standards. This will likely begin with local banks who are comfortable with appraised values. I’m not calling for a return to the madness, but some loans that are low risk are not being done today. Anticipate some lenders expanding their guidelines.

Don’t be shocked by a lowering of FHA loan limits and/or an increase in the FHA Up Front Mortgage Insurance Premium either. Overall, mortgages should give people more reasons to buy homes in 2012 as the economic recovery is strongly tied to housing. Given that most people vote their own personal economy rather than policy beliefs, I expect support by those who are looking to be re-elected.

Dr. Alex Villacorta, Director of Research and Analytics at Clear Capital explained last week:

“The housing market has yet to demonstrate the fundamentals necessary to overcome a seasonal slowdown over the next six months, which drives our projected 3.2 percent drop in national home prices through the first quarter of 2012.”

HousingWire quotes analysts at JPMorgan Chase:

“Home prices could dip another 6% to 7%, before hitting rock bottom in early 2012.”

Bottom Line

If you are thinking of selling, it would be wise to put your house on the market before prices fall again.

An overview: VA mortgages are bundled, securitized and sold in the secondary market with the backing of the Federal Government. In order to insure these mortgages, the government charges a type of insurance premium, called a VA Funding Fee, which is typically added to the loan amount (thereby financed).

Remember, too, that the VA (subject to some restrictions) will insure loans up to 100% of the purchase price for the home.

What is happening next week? On loans that close effective October 1, that Funding Fee is being reduced. Because it is typical that the fee is financed into the loan, the VA is effectively lowering the monthly cost (because the loan amount is lower) AND the amount that will be paid back when the home is sold (again, because the loan amount is lower). It’s a win/win for the verteran.

If you have any questions about purchasing a home with a VA loan or if you already have one and are considering a refinance of it because of the low interest rates, reach out to your favorite mortgage professional and explore the possibilities. There has never been a better time!

Vacation Homes

Last week Market Watch published an article discussing the vacation home market. Dan White, president of Daniel A. White & Associates, a wealth-management firm in the Philadelphia area, was quoted in the article.

“A lot of people are worried about the [stock] market today because of the volatility and the fact we could be going into a double-dip recession. They’re looking for other avenues. Real estate, if we’re not at the bottom [in prices], people think we’re pretty darn close.”

The article also explained some purchasers are seeing this as an opportunity to buy a vacation/retirement home:

“Some baby boomers are seizing an opportunity to get a deal on a vacation home they can enjoy now but that’s also a home that eventually will become their primary residence when they retire.”

Luxury Homes

Along with the vacation home market, the luxury market has also made a comeback. HousingWire reported on the luxury market last month:

“In the nation’s top 20 markets, million-dollar property sales rose 18% in 2010 with a 21% increase in California, said Laurie Moore-Moore, CEO of The Institute for Luxury Home Marketing, a Dallas-based firm…

In Miami, 517 properties sold for $2 million or more during the first seven months of 2011, up nearly 16% from a year earlier.”

Bottom Line

If you are in a position to move-up to the home of your dreams or have been thinking about a vacation home for the family, now might be the time to make the move.

I have suggested that sellers who need to sell within the next 18 months had a ‘window of opportunity’ to sell at higher prices. They needed to put their houses up for sale immediately before a flood of distressed properties were introduced to the market. This window is beginning to close. The paperwork challenges faced by banks that caused a delay in the foreclosure process over the last ten months are starting to clear. It seems that these houses are now coming to the market.

RealtyTrac reported in their September Foreclosure Report:

“Default notices were filed for the first time on a  total of 78,880 U.S. properties in August, a nine-month high and a 33 percent  increase from July — the biggest month-over-month increase since August 2007.”

James Saccacio, chief executive officer of RealtyTrac explained:

“The big increase in new foreclosure actions may be a signal that lenders are starting to push through some of the foreclosures delayed by robo-signing and other documentation problems. It also foreshadows more bank repossessions in the coming months as these new foreclosures make their way through the process.”

Diana Olick, of CNBC’s Realty Check quoted a spokesperson for Bank of America:

“ Strong gains like that from July to August demonstrate our progress – primarily in judicial states — clearing more volume to advance to foreclosure once we pass the numerous quality controls we have in place and exhaust all options with homeowners.”

The impact will be felt from coast to coast. New Jersey Superior Court Judge Mary Jacobson recently cleared the way for the top banks to resume foreclosures in the state. The impact this will have on the number of distressed properties can be clearly seen in these statistics reported by Housing Wire:

“In October, New Jersey had the 24th highest foreclosure rate in the country, with servicers filing roughly 5,200 foreclosures that month, according to RealtyTrac. By July, the Garden State’s foreclosure rate dropped to 42nd with just 1,112 filings last month.”

ForeclosureRadar, which handles research in California, Oregon, Washington, Arizona and Nevada, last week reported:

“Foreclosure starts rose in every state.”

Bottom Line

If you currently are selling your home, price it to compel a buyer to purchase it now. Waiting will cause you to compete with an increased number of distressed properties which sell at dramatically discounted prices.

I am truly excited that the banks are beginning to see that a short sale in many cases is a better alternative to foreclosing on a property. It makes more sense to sell the property at a higher price. At the same time, the banks are creating less vacant REOs (Real Estate Owned, i.e. foreclosures owned by banks) which have blighted neighborhoods and negatively impacted  surrounding property values for the last several years 

It is also satisfying that so many of my fellow real estate professionals like myself are taking the time to get properly trained to facilitate these transactions to a successful closing. As Certified Distressed Property Experts, we are prepared to assist homeowners with one of the most devastating financial challenges that a family or an individual can face.

However, today I don’t want to speak to the financial aspects of the surge in short sales. Instead, I want to address the impact it has on the families living in these homes. They have found themselves in over their heads. In many cases, they can’t afford the mortgage and are trapped – unable to sell because the mortgage exceeds the home’s value. They may believe that they are left with only one alternative – allow the home to proceed to foreclosure. Fortunately, there are other much better options for these families.

Let’s look at the consequences that the foreclosure decision places on the family. The day will come that someone in an official capacity knocks on the door and notifies the family it is being evicted immediately. No matter how well they have prepared, at that moment, spouses look to each other in embarrassment. There is a big difference between imagining how this moment might feel and actually experiencing it. 

And, in so many cases, there are children involved. The official stands there as a mother or father gets on a knee and explains to their son or daughter that they must go pack up some of their toys and belongings in a hurry because the family must leave – now!

The short sale process avoids these situations. The family plans around a set closing date. The children are made aware of the move months in advance, and the parents have time to lessen the pain of that move. 

Short sales make good financial sense for all involved. They also allow families to exit an extremely difficult situation – WITH DIGNITY.

If you or someone you know is having a problem paying their mortgage please send this post to them or have them call me at 908-251-7996 or email at Larry@NJPropertyOnline.com. I have a moral and legal responsibility to treat their information with total security.

View the full list or to find out more information about Bernardsville New Jersey and Homes for Sale in Somerset County, NJ call Larry Paruta at 908-251-7996 or send me an email at Larry@NJPropertyOnline.com.

In their never ending quest to “simplify” the confusion surrounding the borrowing of money, the Fed has released their Final Rule for Risk Based Pricing Notices, as well as Adverse Action Notices. More paper work filled with CYA, legal terminology that winds up baffling people more than giving them any clarity. Let’s take a peek….

Risk Based Pricing Notices are required under the Fair Credit Reporting Act (FCRA), and now, because of provisions in the Dodd-Frank Act, they must include language that relates to credit scores IF those scores were used to determine the interest rate (and resultant APR) given the customer. Also, the language can’t simply be “the lower your credit score, the higher rate you will pay”. That would be too easy. You see…lower credit scores have statistically proven to have higher defaults (more risk), so charging those clients more makes sense. But in the world we live in, the government wants to inundate the customer with mumbo jumbo, and insists on a form that gives the following information:

1. The credit score used in making the credit decision;
2. The range of possible credit scores under the model used to generate the credit score;
3. All of the key factors that adversely affected the credit score. Note that the risk-based pricing notice generally may not list more than four key factors. However, if one of the key factors is the number of inquiries made with respect to the consumer report, up to five key factors may be used.
4. The date on which the credit score was created; and
5. The name of the consumer reporting agency or other person that provided the credit score.

Further, if there is more than one borrower, each receives their own, personalized disclosure.

Adverse Action Notices are basically Rejection Letters. They used to say things like “your file was turned down because your credit/income/assets/appraisal does not fit the guidelines under which we approve borrowers”. Now, when credit scores are a reason for denial the language is slightly more confusing but essentially the same 5 things stated above for Risk Based Pricing. But, the really good news is that they added up to 5 different, new forms to tell the consumer where they can inquire about the score in their “consumer report” (the new term that replaces the old “credit report”).

Who gets paid for this stuff?  More paper work, more muddied explanations, all to protect the consumer? Or to protect the jobs of the bureaucrats and law makers? Am I alone in thinking that often the efforts to protect wind up frustrating instead? Simply stated, if your credit is bad because you made late payments, you can be turned down or your may be approved and be forced to pay a higher rate. Now, if your credit score is bad because of errors in the credit report, you should be directed on how to fix it. But that’s a topic for a different day.

When the pervasive sentiment among even real estate and mortgage professionals is that home prices will continue to move downward and that mortgage interest rates don’t appear to be jumping significantly any time soon, the question remains… “Why would anyone that doesn’t have to buy now, buy now?”

One commenter to a previous blog post even went so far as to challenge the entire industry for promoting the “hurry up and buy” approach by asserting that buyers who listened to that advice six months ago are bemoaning taking that advice. That made me think: “Are people who bought six, eight, ten months ago kicking themselves because their home is worth less now than when they bought it?”

With that thought in my mind, I called some of my recent buyers and this is the feedback I received:

“Last year at this time, I was cooped up in a small apartment. Today, I am planning our Fourth of July celebration with 25 friends and family in our new home. Regrets? Are you kidding? We couldn’t be happier.”

“We are glad we now have a place of our own. We have a few friends looking to buy and we are helping to get them excited. Five years ago, we couldn’t afford it….now, we have our American Dream.”

“We were crammed into my in-laws’ home with no real privacy or room for the kids to just be kids. Now, they have a backyard to play in and they have settled in to their new school and made new friends. We couldn’t be happier.”

“Yeah, I realize, I might have been able to buy a home for $10,000 less if I waited, but there are two things to remember. One, what memories would we have missed if we weren’t here? And two, I am not selling my home now. Who cares what it is worth until we look to move again in 5-7 years? By then, we believe everything will be back to normal. Right now, we have a payment we can comfortable manage and we have a home to build roots and a foundation. I would urge everyone to do it, if they can.”

A home does remain a good long term investment. However, first and foremost, it really is a place for pride, peace, preference, and pleasure. We need to be reminded of the emotional component to buying a home may be more than simply the financial benefits. And from a financial perspective…who in your life is a better financial mentor? Donald Trump or Uncle Joe? Warren Buffet or your local newspaper writer who makes $40,000 a year? Remember, conventional wisdom breeds mediocre results (at best).