By Steve Schaefer
Forbes.com
updated 30/12/2011

It turns out “Don’t Mess With Texas,” is more than just a slogan. At least judging by the state’s ability to rebound from the Great Recession, and its dominance over the rankings in a new report highlighting the best-performing U.S. cities.

San Antonio heads up the Milken Institute’s 2011 Best-Performing Cities index, but is just one of four Texas cities in the top five and nine of the 25 best in the country. The Lone Star State grades out well in job creation, according to the report, which found that Texas employers were responsible for one of every five U.S. jobs created from June 2010 to June 2011.

Ross DeVol, the Milken Institute’s chief research officer, leads the team that compiles the index and said that a number of factors lie behind Texas’ success, some unique to the region and others that cities elsewhere in the U.S. can try to emulate.

For one thing, many Texas metro areas are benefiting from the military’s Base Realignment and Consolidation process, which has brought more families near the state’s armed forces facilities, from San Antonio’s Lackland Air Force Base to Killeen’s Fort Hood. Those families need housing, health care and other services, DeVol points out.

Texas is also seeing a surge in IT equipment and software employment. DeVol highlights Apple’s expansion in Austin, where the company is said to be getting chips for its iPad, as well as significant presences from the likes of AT&T, IBM and Advanced Micro Devices.

“Given the depth of the Great Recession,” DeVol says, “businesses have become more focused on cost.” Texas, which has no state income tax, is very understanding of “the need for companies to be competitive,” he adds, citing streamlined processes that allow employers to get new facilities up and running faster and aggressive recruiting of out-of-state businesses to cities where they can hire qualified workers for less than in New York, California, Massachusetts or many other states.

The cost issue is also a big factor in Utah, the only state other than Texas to put more than one metro area among the 25 best performers. Provo touts the educated workforce stemming from Brigham Young University, while Salt Lake City was a big gainer in a year when its mining presence was greeted with big demand for gold and silver. Both, along with Ogden and Logan (Utah-Idaho), which topped the Milken Institute’s list of best-performing small cities, offer low-cost destinations for employers focused on keeping expenses in line.

Utah also benefits by having plenty of room for development, an issue that limits the potential for growth in some larger metro areas like the one around New York. While DeVol points out that the NYC area was hurt by the loss of financial services jobs in 2011 – a trend that has continued with cuts announced at Bank of America, Morgan Stanley and others this fall – he also notes that many bigger metro areas did not fall off as much as others during the Great Recession.

While that means those economies proved more resilient to the downturn, it also means they are not springing back off a depressed base. To wit, none of the 10 largest metros cracked the top 10 Best-Performing Cities for the first time since 2008.

In terms of movers, Merced, Calif. saw the biggest gain from a year ago, rising 105 spots to 63rd, thanks to a correction in one of the housing markets hit hardest by the bubble’s collapse. Among decliners, BP’s oil spill in the Gulf of Mexico happened in 2010, but the decreased drilling activity in the Gulf persists and continues to hamper drilling-service centers like Lafayette, La., which dropped 82 places to 93rd.

The Milken Institute’s index ranks cities based on growth in jobs, wages and salaries, and technology output. It weighs those factors over a five-year span to account for varying business cycles and the latest year’s performance, and then adds 12-month job growth performance to account for recent momentum.

Cities in Texas measure strongly across all those categories, and its “assertive recruiting” of out-of-state businesses adds to the state’s “secret sauce,” but DeVol acknowledges that it also has another big chip in its favor: the state happens to be sitting on a gigantic pile of natural resources. While the Milken Institute touts the other sectors bolstering Texas economies, increased oil and gas exploration, in large part thanks to new drilling techniques, remains a crucial source of fuel for the state’s growth engine.

Reporting by Lucia Mutikani; Editing by Padraic Cassidy
Thursday 29 Dec, 2011
Reuters

Pending sales of existing homes surged to a 1-1/2 year high in November, an industry group said on Thursday, offering more signs of a tentative recovery in the housing market.

The National Association of Realtors’ Pending Home Sales Index, based on contracts signed in November, increased 7.3 percent to 100.1 — the highest level since April 2010.

Economists polled by Reuters had expected pending sales to rise only 2 percent. Pending sales lead existing home sales by a month or two.

Recent data on home sales and construction have been fairly upbeat, suggesting an improvement in the sector, but prices continue to trend lower.

By Margaret Chadbourn
Tue Dec 27, 2011
Reuters

Brian Keith is busier than ever as the architecture firm he works for rushes to wrap up work on a 300-unit apartment complex in Dallas.

The project is one of dozens the firm, JHP Architecture, has on its hands — a surge of business driven by a rise in demand in the United States for rental properties.

The increased demand has forced JHP to expand, and it expects to keep hiring at least through the first quarter.

“We’re seeing overall work come back and there’s a backlog of contracts to go through,” said Keith, director of urban design and planning at JHP. “There’s strong

interest in multi-family units and plenty of pent-up demand.”

With U.S. unemployment at a lofty 8.6 percent, home foreclosures rising and property prices under pressure, more and more Americans have given up the dream of owning, opting instead to rent, a shift that is remaking the face of the U.S. housing industry.

The percentage of Americans who own their home dropped from a peak of 69.2 percent in late 2004 to a 13-year low of 65.9 percent in the second quarter. It edged up to 66.3 percent in the third quarter of this year.

On the flip side, the percentage of rental properties that are empty fell to 9.8 percent in the third quarter from 10.3 percent a year earlier.

In a recent report, Oliver Chang, an analyst at Morgan Stanley, dubbed 2012 “The Year of the Landlord.”

“Rents are rising, vacancies are falling, household formations are growing and rental supply is limited,” the Morgan Stanley report stated. “We believe the demand for rental properties will continue to grow.”

Groundbreaking for new housing jumped 9.3 percent in November to the highest level in 19 months, fueling optimism that the battered housing market was regaining its footing.

The gains, however, were almost solely in multifamily housing. Groundbreaking for structures with five or more units shot up more than 30 percent from October to now stand at nearly double the year-ago level.

Prices reflect the shift in demand. Rental costs are up 2.4 percent over the last year, compared with an increase of just 0.6 percent in 2010.

Steve Blitz, senior economist at ITG Investment Research, says the lure of higher returns is spurring the development of apartment buildings. He argued the next “boom” in residential construction has already started.

“The reason rents were rising is that through the past 15 years there has been an under-building of rental properties because typical renters were increasingly able to garner cheap financing to buy a house,” he wrote in a research note.

While the rise in demand is great news for builders and developers, it remains unclear what the pick-up in homebuilding will mean for the economy as a whole.

“Residential construction will be a plus to GDP in 2012, but house price declines will be a negative. So net, net housing will be neutral or a small drag on the economy,” said Mark Zandi, chief economist at Moody’s Analytics.

At its peak at the end of 2005, homebuilding accounted for about 6.2 percent of overall economic activity. Now, it is only about 2.4 percent.

U.S. housing starts in April 2009 hit their lowest level on records dating to January 1959. While multifamily starts have given them a lift, 2011 may be the weakest year ever for construction of single-family homes.

“Business is slightly down from last year,” said Bill Zach, a third-generation homebuilder. His family business, the Zach Building Co. in the Milwaukee, Wisconsin, area, is mainly focused on single-family units.

To Zach, that his firm is still in business when so many of his competitors have gone bust represents some success.

“It used to be my competition was every guy that owned a pick-up truck and called himself a builder. Hundreds of them,” Zach said. “That’s no longer the case, those guys are dropping by the wayside.”

But there are signs of a turn and signals that the housing market may be close to finding a bottom.

The Architecture Billings Index, a gauge of future construction, picked up last month, breaking above the 50 level to signal growth in billings.

And the stock of homebuilders, as measured by a Dow Jones index, has shot up more than 30 percent since early October.

“Residential construction is finally beginning to rise from its post-recession lows,” said Joseph Lavorgna, chief U.S. economist for Deutsche Bank. “The true test for starts and (building) permits, as well as most of the sales metrics, will come during the spring buying season.”

(Reporting by Margaret Chadbourn; Editing by Tim Ahmann and Leslie Adler)

By Morgan Brennan
Forbes.com   updated 23/12/2011

The housing bust came late to Boise, Idaho. While home prices in other cities around the U.S. began their drastic descent in 2007, Bosie’s home prices didn’t start feeling a price pinch until the end of 2008. Housing in Idaho’s capital wasn’t hit particularly hard by the subprime mortgage crisis, but it certainly was affected by the economic downturn. High unemployment and a wave of job loss-related foreclosures have caused home prices in the City of Trees and its surrounding suburbs to plunge.

This year alone Boise homes suffered a drastic 13.4 percent loss in value. Next year won’t offer relief either, with prices projected to slip another 2.5 percent. These drops landed Idaho’s capital city on our watch list of Cities Where Home Prices Are Falling Dangerously.
 
“Prices in Boise proper specifically haven’t come down quite as much as people expect but in other areas around the city, prices have come down as much as 50 percent from where they were a few years ago,” says Cristina Pescaru, a Realtor with Gold Key Real Estate in Boise. “I think we absolutely haven’t seen the bottom of the market here.”

The folks at Local Market Monitor, a Cary, N.C.-based real-estate research company, compiled a list of the cities that suffered relatively big home price hits this year with more projected through the next 12 months. LMM sifted through market data for more than 300 Metropolitan Statistical Areas (MSAs) and Metropolitan Divisions (MSADs), as defined by the U.S. Office of Management and Budget. The company, which releases quarterly housing market reports, crunched home prices from October 2010 through September 2011 and calculated price projections through September of next year. For its projections, LMM took into account job growth and unemployment rates, population growth, sales and rental prices, and something called “Equilibrium Home Price,” which is a gauge of where the average home price should realistically lie based on economic data versus where it actually is.
 
Every one of the 13 markets that made our list suffers from a glut of foreclosures. “Foreclosures are continuing to weigh down home prices in hard-hit foreclosure markets as the average sales prices of foreclosure-related sales drop,” explains Daren Blomquist of RealtyTrac, an Irvine, Calif.-based foreclosure listing site. Cities that made our list like Arizona’s Phoenix and California’s hard-up hubs Stockton, Fresno and Bakersfield also rank among RealtyTrac’s top 20 metro foreclosure rates. Fifty percent or more of all completed home sales this year in these cities were distressed (either preforeclosure or bank-owned) – a factor that pulls the prices of non-distressed homes both in terms of appraisals and home seller efforts to compete for buyers.
 
Not surprisingly, the nation’s foreclosure capital, Las Vegas, experienced the worst price drops of any major metro this year. The Sin City’s home values slid 15.2 percent versus last year and Local Market Monitor expects another 5 percent drop during the next 12 months. More than half of all completed sales were distressed.
 
Another foreclosure-studded state where home prices continue to get hammered is Florida. Orlando and Jacksonville lost 11 percent and 9 percent of their home values this year, with 9.4 percent and 7.7 percent losses predicted in months to come. The Metropolitan Division that includes West Palm Beach also landed on our list. Despite close proximity to posh Miami Beach and Palm Beach where higher-end sales have been frequent this year, the less expensive West Pam Beach area continues to struggle.
 
Ingo Winzer, founder and president of Local Market Monitor, says two things are driving the dive in Sunshine State markets: too much inventory and not enough jobs. Construction backstopped a sizeable chunk of Florida’s local economies, as developers built spec homes for an anticipated deluge of Baby Boomer snowbirds that, thanks to the current economy, have yet to retire. “First, a lot of homes were built, maybe more than should have been built, and second, while population growth in Florida will eventually sop up those properties, right now there’s no work so we have large numbers of homes sitting empty . causing prices to fall,” he says.
 
There is some hope to be had by owners located in other cities across the country: the home price hemorrhages nearly every market experienced in the past several years are subsiding. Nationally, prices dropped only about 4.5 percent this year. Compared to the roughly 35 percent loss the U.S. housing market as a whole has taken since the economic downturn, this year’s drop, while agonizing, means the freefall is over. “A lot of markets are still going to have some problems economically, but overall I think in most of the country’s cities, we are seeing a bottom in home prices,” says Winzer. He cautions that a bottom in no way translates to a speedy price recovery. Rather he expects prices to hover at these lower levels for years

msnbc.com staff and news service reports
updated 23/12/2011

New U.S. single-family home sales rose to a seven-month high in November and the months’ supply of houses on the market was the lowest in 5-1/2 years, adding to signs of a budding recovery in the sector.

The Commerce Department said on Friday sales rose 1.6 percent to a seasonally adjusted  annual rate of 315,000 units. Octobers’ sales pace was revised up to 310,000 units from the previously reported 307,000 units.

Economists polled by Reuters had forecast sales at a 313,000-unit rate. In the 12 months through November, new home sales were up 9.8 percent.

Coming on the heels of data this week showing a rise in sales of previously owned homes and surge in housing starts, the report implied a recovery was starting to take shape in the housing market.

But there’s a long way to go for housing, which has been in a deep hole for the past few years. Friday’s sales rate was less than half the 700,000 new homes that economists say should be sold to sustain a healthy housing market.

It’s also below the 323,000 homes sold last year — the worst year for sales on records dating back to 1963.

The housing market, which triggered the 2007-09 recession, remains constrained by an oversupply of unsold homes, falling prices and high unemployment.

Sales were up in two of the four regions, with the number of homes sold in the Midwest the highest since November 2009.

The median sales price for a new home fell 3.8 percent to $214,100 last month. Compared to November last year, the median price was down 2.5 percent.

There were a record low 158,000 new homes on the market last month, and at November’s sales pace, it will take six months to clear them – the shortest amount of time since March 2006. That compared to 6.2 months in October.

A six-month supply is generally considered ideal, with higher readings indicating steep price declines.

Reuters and The Associated Press contributed to this report.

By Lucia Mutikani
Wed 21 Dec, 2011
Reuters

Home sales rose in November, adding to hints of recovery, but updated data showed the housing crash was much deeper than previously thought.

The National Association of Realtors said on Wednesday that sales of previously owned homes increased 4 percent from October to an annual rate of 4.42 million units.

At November’s sales pace, the 2.58 million unsold homes on the market represented a 7.0 month’s supply, the lowest since February 2007 and a sign the backlog of inventory that has been weighing on the market was clearing.

The rise in sales and drop in inventory was the latest suggestion the housing sector, which triggered the 2007-09 recession, may be on the cusp of a recovery. Data on Tuesday showed housing starts scaled a 1-1/2 year high in November.

“The housing market is finding its bottom, and that will translate into more growth in GDP and less of a drag on consumer confidence,” said Robert Dye, chief economist at Comerica in Dallas. “But we still have a long, long way to go.”

The pickup in sales, however, is coming off a deeper trough.

NAR said it had overstated sales from 2007 through 2010 by 14.3 percent. Sales over that period averaged 4.42 million units a year, not 5.16 million, and they bottomed at a 3.30 million-unit pace in July 2010, rather than 3.86 million, underscoring the depth of the downturn.

The group blamed double-counting of properties, builders selling homes through real estate brokers and geographic population shifts as among the reasons for its mismeasurement.

RISKS ABOUND

A housing recovery could help underpin what already appears to be a quickening of U.S. economic growth. During normal times, economists estimate that one out of every eight jobs in the economy is generated by housing-related activity.

Lawrence Yun, the chief economist for the Realtors’ group, said existing home sales for 2011 were expected to total 4.25 million units, up from 4.19 million units last year.

While the U.S. economy appears to be gathering strength, the global backdrop remains troubling with much of the world slowing down and Europe sliding into an almost certain recession.

In addition, lawmakers have yet to break an impasse over extending a payroll tax cut for 160 million U.S. workers that expires at year end. Economists have warned a failure to keep the tax cut in place could hit the economy hard.

Stocks on Wall Street were little moved by the housing data as persistent worries over the European debt crisis dominated sentiment. U.S. stock indexes fell as weak results from technology giant Oracle Corp (ORCL.O) weighed on the mood.

U.S. government debt prices also fell, while the dollar was up against the euro.

Oracle pinned its disappointing results on the increased scrutiny its customers were applying to their investment spending, a potentially bearish sign for the economic outlook.

INVENTORY STILL BLOATED

While the inventory of unsold homes fell in November, market conditions are still troubled and analysts warned that a stream of foreclosed properties coming onto the market would likely keep prices under pressure.

The median sales price rose 2.1 percent from October, but was still down 3.5 percent from a year ago at $164,200.

Distressed properties, foreclosures and short sales which typically occur at deep discounts, accounted for 29 percent of sales last month, up from 28 percent in October.

The number of new foreclosures jumped by more than 21 percent in the third quarter as banks moved more aggressively after a pause that began late last year, a bank regulator said.

Last month, a third of pending existing home sales contracts were canceled, the NAR said. That was unchanged from October but way above the year-ago level of 9 percent, a suggestion that bank lending remains tight.

“We expect months’ supply to head higher as inventory enters the market,” said Michelle Meyer, a senior economist at Bank of America Merrill Lynch. “With a sluggish economic recovery, low consumer confidence and tight credit conditions, it will be difficult to clear the excess inventory.”

“There is still a bumpy road ahead for the housing market,” she said.

(Additional reporting by David Clarke; Writing by Lucia Mutikani and Tim Ahmann; Editing by Neil Stempleman)

By Tara-Nicholle Nelson
updated 21/12/2011
Forbes

By now, you’ve probably heard the age-old rules of thumb about translating home listings from real estate lingo to plain English: “cozy” = tiny, “needs TLC” = needs massive repairs, and “all original details” could mean beautiful moldings or moldy linoleum, depending on the home.

Almost everything about the real estate market has changed over the last few years, though, so we thought it was time to provide you with an updated real estate lingo decoder that accounts for those changes in the market. Here are 14 line items of real estate jargon, divided into two buckets and decoded for the post-recession house hunter.

Bucket No. 1: Transaction signals
Distressed properties – foreclosures and short sales – make up about a third of the homes currently on the market, and these transactions have their own flow, timelines and challenges compared with “regular” equity sales. So, it only makes sense that listing agents have developed a set of abbreviations to brief prospective buyers on what they can expect and should be prepared for if they make an effort to buy such a home, with just a glance at the listing:

1. REO: Real estate owned by the bank/mortgage servicer, this acronym refers to homes that were foreclosed and repossessed by the former owner’s bank. It also signals that buying this property will involve doing a deal with the bank; possibly dealing with a different escrow timeline, offer process or contract forms than a non-REO sale; and almost always taking the place in as-is condition, among other things. Oh, yeah – and it might also involve one more thing: a great deal.

2. S/S, Subject to bank approval: What once stood for stainless steel is now being used to describe a short sale – a property whose seller anticipates will net them less than they owe on the home. Short sales are often described as “subject to bank approval,” which simply points out the obvious truth about these transactions, that the seller has very little control over whether the bank will allow the transaction or what price and terms the bank will approve of, and that the transaction might very well take the better part of your natural life could take six months or longer to close. Talk to your agent for more details about short sales, and to determine how you can tell the success-prone short sales from those that are less likely to close.

3. Pre-approved short sale: Many knowledgeable agents say no short sale is truly “pre-approved” unless and until the bank looks at a specific buyer’s offer and the seller’s financials at the same time, but some listing agents designate a short sale as “pre-approved” when a previous short sale application was approved at a given price, but fell out of contract for some other reason.

4. Motivated seller: This is a perennial term in listing parlance, but against the backdrop of the current market, translates to something like, “Have mercy on me.” I kid; this phrase often signals a seller’s flexibility in pricing and/or urgency in timing.

5. Coveted: In a word, “expensive.” No, seriously, even on today’s market, many locales have a neighborhood (or a few) which have been relatively recession-proof, have been fairly immune to the foreclosure epidemic and have seen home values continue to rise. If you see the word “coveted” in a listing, chances are you’re house hunting in that sort of neighborhood, or there’s something about the individual property the home’s seller is trying to position as unique and desirable, as compared to competing listings (i.e., the view, location of the lot, or floor plan).

6. BOM, often accompanied by “No fault of the house:” Homes go in and fall out of escrows on today’s market constantly, often due to things the seller has no control over. BOM indicates a home that was in contract to be sold, but is now “Back on the Market.” “No fault of the house” may describe a situation in which the buyer lost interest in the home after a long short sale process or failed to get final loan approval, as contrasted to a situation in which the home’s inspection turned up deal-killing problems or the property failed to appraise at the purchase price.

7. Not a short sale, not a foreclosure: Sellers on regular equity transactions are often more negotiable on items like price and repairs, and are certainly able to close the transaction (i.e., let the buyer move in) sooner than sellers of REOs and short sale properties. Some also pride themselves on having maintained their homes in better condition than the distressed homes on the market. For buyers that seek quick certainty and closure, non-distressed homes can be especially attractive.

Bucket #2: All about the Benjamins
The government’s role in financing homes has grown exponentially over the housing recession, so the alphabet soup of government housing and home financing agencies, their guidelines and programs is now more important to understand than ever.

8. OO/NOO: Owner-Occupied and Non-Owner Occupied. You’ll see this on listings in two different ways. First, the vast majority of home loans must comply with government loan insurance guidelines, including guidelines around how much of a condo complex must be owner-occupied (i.e., 75 percent, minimum, in most cases). Also, some bank-owned property sellers will consider offers from owners who plan to occupy the property if they buy it as much as a week or 10 days before they will look at NOO or investor offers.

9. FHA: Short for the Federal Housing Administration, which backs the popular 3.5 percent down home loan program. FHA guidelines also include somewhat strict condition and homeowners’ association dictates, so if a home’s seller notes that they are not taking FHA loans, they might be saying that the property has condition or other issues which disqualify it for FHA financing.

10. Fannie, Freddie: Fannie Mae and Freddie Mac, federally controlled company/agency hybrids that now back most non-FHA (conventional) home loans, and thus provide the guidelines most conventional loans must meet, including guidelines around seller incentives like how much closing cost credit a buyer can receive.
11. DPA/DAP: Down-Payment Assistance or Down-Payment Assistance Program.

12. FTH/FTB: First-time homebuyer/First-time buyer. Cities, states and large employers like universities tend to be the last bastion of these programs which offer mortgage financing or down payment assistance, usually to people who have not owned a home in the relevant city or state anytime in the preceding three years.

13. HUD: The federal department of Housing and Urban Development, which governs the guidelines for FHA loans, acts as a seller of homes which were foreclosed on and repossessed for non-payment of FHA-backed loans, and publishes the Good Faith Estimate and settlement statement forms every buyer and borrower will be provided at the time they shop for a loan and close their home purchase, respectively.

14. HFA: Short for Housing Finance Administration, this acronym refers to a loose body of state and regional agencies that offer an array of financing and counseling programs. These vary by state, from down payment assistance for first-time buyers to the Hardest Hit Funds that offer foreclosure relief assistance and principal reducing loan modifications to unemployed and underwater homeowners in the states hardest hit by the foreclosure crisis.

CNBC recently reported that millions of Americans who lost their homes in foreclosure are driving demand in the rental market. So much so that Oliver Chang, Morgan Stanley’s head of U.S. housing strategy and research believes it is time for institutions such as hedge funds and private equity to enter the Single Family Rental market.

October 2011

Are the rumors true that the U.S. government is going into the landlord business? Probably not, but Wall Street might.

Mortgage giants Fannie Mae and Freddie Mac, along with the Federal Housing Administration (FHA), are currently holding approximately 250,000 foreclosed homes. That’s roughly half of all unsold, repossessed properties – making the federal government the largest owner of REO (bank-owned) inventory in the country!

Plus, these government-backed agencies may soon be forced to repossess 830,000 more homes currently in some stage of foreclosure.

What’s a government to do with so many distressed properties?

Unloading them into the market would only further depress values, while damaging the fragile U.S. economy that depends on real estate stability. Holding the homes vacant leaves them vulnerable to vandalism and disrepair.

One suggested solution is for the government to mimic successful real estate investors and rent them out! Millions of former homeowners who lost their homes to foreclosure are now becoming renters and need housing. The cash flow on rental property is at all time highs so it would be a profitable business. But who will profit?

The FHFA (regulator of Fannie and Freddie) have been accepting RFI’s (Requests for Information) from the public for ideas on what to do with all the government-owned foreclosed homes.

At first glance, it sounds like the government genuinely cares about our opinion. In reality, unless you’ve got a billion bucks in your pocket and some insider handshakes, you probably won’t get to play this game.

Even if you submitted your RFI, corporations with billions of dollars will most likely win the opportunity to buy Fannie and Freddie’s inventory at rock bottom prices. In fact, it appears that the RFI process was actually set up by them.

If they get their way, investors from the private-equity and hedge fund community, like Goldman Sachs and company, will instantly become the largest land owners and landlords in the country. They will get to buy US taxpayer-owned properties in bulk for pennies on the dollar. It would be the greatest transfer of wealth from the public to the private sector if Fannie and Freddie are allowed to sell off their massive portfolio of foreclosures to private investors on Wall Street.

If the US taxpayer technically owns these properties, shouldn’t qualified U.S. citizens be the benefactors? If properties are going to be released for pennies on the dollar, shouldn’t the free market be involved in that? And, if the properties were meant to be rented, shouldn’t experienced real estate professionals handle it instead of Wall Street? We already know what happens when those guys dabble in industries they don’t understand.

It’s not too late to put up a fight. The FHFA is still reviewing the proposals and has not yet made a final decision. Members of Congress need to know they can’t get away with this without serious backlash from their constituents!

What does all this mean to real estate owners and investors?

If you are thinking that the housing crisis will continue indefinitely, think again. Obama will need to clean up the housing mess if he hopes to get re-elected next year. One way to do that is to sell off the government-owned inventory to large financial institutions who would rent them.

Another way he’s doing that is putting pressure on banks to modify loans or accept short sales.

These actions will dramatically reduce inventory, which will most-likely increase demand. More demand means higher prices, which is good for owners and sellers – not as good for buyers.

If you are a looking to buy discounted property, don’t wait just because you’re expecting future lower prices from a double dip recession in housing. Due to government interference, the opposite could be true.

By: Kathy Fettke, renowned real estate professional and host of her own radio show on KABC in LA; and Greg Uehling, property consultant in Australia.

Sales of existing homes in September were up a whopping 11.3% from last year at this time, according to data released by the National Association of Realtors (NAR) this morning. That’s significant, considering buyers were eligible for the $7000 first-time homebuyer credit until the end of September last year. Remember? The tax credit allowed a first-time buyer to put just $7000 down on a $200,000 home purchase using an FHA loan, and then receive $7000 back from the government – essentially a no money down deal.

And even more enticing: a buyer of a $100,000 property could have put $3500 down and still be reimbursed the $7000! They could receive $3500 cash back from the government for buying a home with no money down.

The fact that this year’s sales were up 11% in September compared to last year, without the $7000 tax credit, is a very positive sign.

When we get October sales data next month, we will finally be able to compare apples to apples, since last October the tax credit was expired. We’ll have a better gauge of the real estate market with less government interference.

Also of interest in NAR’s report: contract failures were double this month compared to this time last year. This tells us the demand is there, but financing is not. Not surprisingly, one of the main culprits is government interference again – this time regarding appraisal policies.

The new HVCC laws prohibit realtors and mortgage brokers from choosing their appraiser, and instead, are required to use a third party appraisal management company. While this was created to protect the consumer, in reality, the opposite is true. Now the consumer pays more for a less accurate appraisal.

Why? The appraisal management company acts as a middle man, and therefore takes half the appraisal fee. This makes it difficult for experienced appraisers to stay in business, so many closed up shop.

As a result, new and inexperienced appraisers willing to work for half the fee are being assigned to the job. Often they are sent out of town, driving hours to a location they don’t know or understand.

Being new to the market, they don’t know a good neighborhood from a bad one, and are forced to rely on recent sales. When 30% of sales are from distressed property, the comparative values will often come in lower then market value.

Low pay also requires appraisers to get the job done in half the time, eliminating the time for proper research. Are they comparing a beat up house with a fully renovated one? Is one vandalized in a high crime area, while the other is in great shape in a good school district? They may not have the time, knowledge or resources to find out. This, of course, results in lower appraisals on higher-valued properties, and buyers are simply unwilling or unable to pay the difference in cash.

Even if the appraisals came in right, contracts might still get cancelled. Banks don’t have a secondary market to sell off their loans to anymore, so they no longer have an unlimited supply of money to lend. This is one of the reasons qualified buyers are denied loans for no good reason. Many banks just don’t have the capital.

That’s why 30% of sales are going to cash buyers

Investors know that when financing is tight, the masses can’t buy and prices decline. In many areas, they can purchase property at half the cost to build. They’re happy to pay cash now and refinance later.

If you have cash or a self-directed IRA, certainly consider buying high income-producing real estate today. You can enjoy the cash flow now, and then when financing loosens up, more buyers will be in the market and inventory will burn off. Since building has come to a halt, there will actually be a shortage of homes, which will increase home prices at least to the cost to build

Institutional lenders are getting into that game now, allocating some of the billions of dollars they’ve had sitting on the sidelines to pick up discounted properties.

The little guy is benefiting from low home prices too. 32% of buyers are purchasing a home for the first time. These folks are locking in a historically low interest rate (4.1%) with a fixed payment for 30 years on reduced home prices. This is a welcome relief to former renters who were watching their lease payments increase every year.

In fact, in many parts of the US, it costs much less to own than to rent. In these areas, new homeowners are increasing their monthly cash flow while paying down their mortgage. If they keep that up, someday they will join the ranks of comfortable retirees who own their homes free & clear.

By: Kathy Fettke, renowned real estate professional and host of her own radio show on KABC in LA; and Greg Uehling, property consultant in Australia.