REAL Trends Housing Market Report:

The housing market recovery continued in December with significant improvement in both unit sales and average prices

Report shows housing recovery continuing even without direct benefit of tax credit. Unit sales up 17.1 percent in December 2009 over December 2008 while average price of homes sold rises 0.6 percent for first gain in four years.

Home sales rose 17.1 percent across the nation in December 2009 compared to the same month in 2008, according to the REAL Trends Housing Market Report. This gain came despite the loss of urgency from first-time homebuyers since the related tax credit that was set to expire at the end of November was extended through April 2010. More surprising is that the average price of homes sold rose 0.6 percent – the first gain in over four years. Every region of the country showed gains in home sales with the Northeast leading with an increase of 29.8 percent in units. The Midwest was next with unit sales up 19.2 percent over the same month a year ago.

On the price front, the average price of homes sold rose 2.1% in the Midwest its best showing since 2005 and the South showed a price gain of 0.9 percent from December 2008 to December 2009. Only the Northeast showed a price decline and it was only 1.3%.

The results were surprising given that mortgage applications for purchase were down in November. Most forecasts called for a sharp reduction in sales on a year over year basis due to the expiration of the first-time homebuyers tax credit and the resultant extension to April 30, 2010. “While the results for December 2009 were down substantially from November 2009, the fact that every region showed double-digit improvement in sales and that sales prices actually went up marginally shows evidence that the housing market is beginning the process of stabilization,” said Steve Murray, editor of REAL Trends and author of the REAL Trends Housing Market Report. “Many forecasts predicted a sharp slowdown in December sales and virtually no forecasts indicated an increase in the average prices of homes sold.”

“We do expect that these results will weaken somewhat in the next few months because the first quarter is historically a slow period for homebuying and the deadline for the homebuyer tax credit has been extended until April 30, which is when first-time homebuyers and eligible existing homeowners need to be under contract in order to qualify for the tax credit. However it now appears that the short-term softness may be offset by strengthening consumer ds December/November Housing Market Report

demand for housing. Other factors that may boost housing are the rise in mortgage rates over the past month that is usually a signal for consumers to act and the high rates of affordability that continue to exist in most markets.  “It is also recognized that the fourth quarter of 2008 and first quarter of 2009 were the worst quarters for housing sales so that the November and December 2009 results, while very strong and encouraging, were in comparison to some of the worst months in housing sales recorded in the last decade.”

About the REAL Trends Housing Market Report

REAL Trends’ analysis of closed home sales data is pulled from real estate brokers representing more than 35 percent of all home sales throughout the country. The REAL Trends Housing Market Report collects actual closed housing sales data each month directly from brokerage firms. With all 50 states covered and results from thousands of brokerage firms in every metropolitan area, the sample size and geographical reach of the study exceeds virtually every other report issued about the housing market.

I just read an article by James J. Saccacio, chief executive officer of RealtyTrac, that I wanted to share.  I have copied and pasted it below for you to read.

One of the most common questions asked of real estate professionals these days is some variation of the following: “Is now a good time to buy a foreclosure?”

 I get this question routinely as CEO of RealtyTrac, and my short answer is simply “check with your local real estate agent.” I say that because the most accurate answer to the question is based on local market conditions and the individual financial status of the prospective buyers — two pieces of information best determined by a good local real estate agent.

 Unfortunately, however, some agents are still steering their clients away from foreclosures simply because those agents don’t understand how foreclosures work.

 That’s regrettable because I believe that the coming months could represent one of the best opportunities in our lifetimes to buy or invest in real estate — specifically foreclosures. The free market metronome tends to swing to extremes before settling back into a reasonable rhythm. What we saw over the past few years in many parts of the country was a real estate market ratcheted up to an unsustainable rate. Homes were far overvalued and overpriced, builders scrambled to meet future supply based on demand artificially inflated by speculative buyers — who relied on risky loans that were provided by lenders with risk analysis clouded by seemingly insatiable demand from investors in the secondary mortgage market.

 Now, the market has moved back to the other end of the spectrum and everything is slowing to a snail’s pace: home prices in many areas are plummeting, builders are inactive, and many prospective buyers and investors are sitting on the sidelines and waiting as the inventory of homes for sale balloons. That makes the market all the more attractive to fiscally sound buyers and investors because it gives them an ideal environment in which to find the best property at the best price to fit their wants and needs — they shouldn’t settle for anything less.

 Foreclosures are the cream of the crop in such a real estate market because they typically represent the most motivated sellers and therefore give the biggest advantage to buyers. But buying a foreclosure can be one of the most complicated real estate transactions a buyer can make. Unlike a traditional real estate deal, buying a property in default or directly from the bank is not an endeavor for the faint of heart — which is precisely why foreclosure buyers need the help of an educated and experienced agent.

 Pitfalls vary when it comes to buying foreclosures, but they’re still a good option for many buyers — particularly in a market where banks and owners in default or more willing than ever to negotiate. Here are some tips to help you and your clients navigate the turbulent foreclosure waters:

 Avoid Outstanding Liens
How do you know a good foreclosure from a bad one? Certainly bargains exist, and buyers can get great deals, fix the house up, live in it or sell for a profit. But making money can be tricky in a real estate market cascading downward with the bottom nowhere in sight.

 First, there’s the complex business of unpaid liens, including mortgage debt, taxes, construction loans, home equity lines of credit and possibly a second or third mortgage. Any or all of these financial obligations could become your clients’ responsibility when they purchase a foreclosure property. Unless the property goes through a foreclosure auction and becomes a bank-owned, REO, or real estate owned, the outstanding foreclosure liens and fees could be simply transferred to the new owner. Don’t let your clients fall into the same financial trap as the previous owner.

 Understand Home Value
In a depreciating market, it’s hard to known when you’ve reached the bottom of the market. It’s hard to predict where home values will be five or 10 years from now, but one thing is certain in 2008 — home prices are falling in most U.S. cities and buyers are nervous. No one knows when the housing crisis will stabilize. So encourage your clients to factor in falling prices into any offer they submit on a foreclosed property.

 Does it Pencil Out?
This is a great opportunity to buy for those who have the cash. If your clients are planning on renting out the property long-term or even reselling it for a quick profit, make sure they consider the carrying costs — including sales commissions, marketing costs, vacancies, taxes, insurance and maintenance costs. Once you’ve calculated all those expenses, add an additional 10 to 15 percent on top of the carrying costs for unknown expenses and hidden costs. If they don’t build in a “surprise fund” your clients might be the next foreclosure statistic. In short, buyers and investors must have a substantial amount of cash in order to turn a profit in this dicey foreclosure market.

 Beat the Bank
Lenders are drowning in defaults. Banks — particularly in hard-hit real estate markets such as Arizona, California, Florida, Michigan, Ohio and Nevada — are slashing prices to lure buyers back into the market. So now is the time to make deals with the banks. Lenders are motivated to cut a deal, especially in areas where they have large inventories of unsold properties. If your clients have a good credit score and are buying a bank-owned home, many banks will offer them below-market rate loans. Unlike paying down with points, this doesn’t cost anything in fees, and it gives them the ability to spend more for a home: Since present dollars are more valuable than future dollars, the real value of the loan, over its life, will be less.

 Pay Attention to Foreclosure Concentration
In this battered foreclosure market, choosing the right neighborhood is more important than ever. Your clients should avoid neighborhoods overrun with foreclosures, particularly newer subdivisions in exurban areas where developers overbuilt. Neighborhoods with a high concentration of foreclosure will offer investors good prices, but those neighborhoods are the most likely to suffer further depreciation. Investors will be tempted to buy foreclosures in these areas, because they offer the steepest discounts but they also carry the most risk. Look for foreclosure in well established neighborhoods with good schools and easy access to transportation.

 Foreclosure Financing
Require your clients to be pre-approved for a loan before you help them shop for a foreclosure. Financing on an investment or second home has always been more difficult — and more expensive — than financing a primary residence. Lenders typically charge higher interest rates and require a larger down payment for investment or second homes.

 Plan an Exit Strategy
Finances aren’t the only reason your clients might need to divest their foreclosure investment. Job transfers, illness, death, divorce are just a few unexpected circumstances that can force them to sell. Whether they decide to rent or sell their foreclosure for a profit, some forward thinking on your part can help them transition through the hard times.

 Despite the myriad obstacles, investors and homebuyers can locate great foreclosure deals, but they need to make their move now. This is the time of opportunity — and you can help them seize it. The foreclosure bargains will not last forever. These are the good old days we have all been waiting for.

• We are all waiting for the treasury to start buying up bad mortgages...
• Banks are waiting for the government to start buying bad securities before they approve short sales...
• Homeowners who are in trouble are somehow going to benefit form the $700 Billion bailout...

1. Short sales are not going anywhere - banks are going to have to clean up their own messes so expect to see them go through the roof.
2. There is no bailout for a bad mortgage, either a non-sale solution, short sale or foreclosure will be the only way out.  
3. There is very little chance that we as taxpayers will ever see any kind of a return on these investments (not that we ever would have) unless Paulson has something extraordinary up his sleeve.
   You need to see this breaking news story, it is unbelievable (if anything in finance is unbelievable anymore).
   • We are all waiting for the treasury to start buying up bad mortgages...
   • Banks are waiting for the government to start buying bad securities before they approve short sales...
   • Homeowners who are in trouble are somehow going to benefit form the $700 Billion bailout...

If you are having trouble making your mortgage payment, waiting for help from the government is probably not an option, the problem is simply too big, and politics is involved.  You may want to consider a Short Sale.  Lance Davis on the Les Bailey and Associates Real Estate is our "Short Sale Expert", he can help you evaluate options to save your credit rating, so call him today at 907-689-6497.

• First time homebuyers who purchase a principal residence between 4-9-08 and 7-1-09 qualify for the tax credit.  (It’s retroactive for buyers who have already closed—great reason to contact them and let them know about the new benefit.)
• The maximum credit is $7500 OR 10% of the purchase price if lower than a $75,000 sales price.
• If home is purchased in 2009, homebuyer can elect to amend 2008 tax returns and claim a tax credit.
• Tax credit is “Recaptured” by the IRS, and REALLY an interest-free loan and paid back evenly over a 15-year time period.  For instance, a $7500 “credit” is paid back at $500 per year. Homebuyers skip a year before payments start.
• Always advise your clients to check with an accountant to make sure this tax incentive truly works in their favor.

It depends on if you are a Democrat, Republican, Independent, or Non-Partisans, and your personal mindset.  During a political season, each side of the political spectrum attempts to paint the other party as the cause of all the problems, and articulate they have the solutions.  This is particularly so in our current political season, as the declining economy has become the primary issue in the current political campaign.  When things are bad in the economy, the political party in the White House usually gets the blame.

This was true when Jimmy Carter occupied the White House, and we had double digit unemployment, and interest rate approaching 18%, and it is true during our current political season, as President George Bush, and the Republican running for President, John McCain, have been blamed for all the current economic woes.

However it is my opinion neither party should be saddled with the blunt of the blame, collectively they share equally in our problems, given the partisanship and political infighting between our political parties.  Our current Congress has been a "do-nothing" Congress.  Yes our president receives credit for much of the successes and failures, but unfairly so.  President Bill Clinton received credit for a good economy during his last term in office, however he had a Republican Congress, and was forced to enact  Republican agenda.  Conversely, George Bush during his last term had a Democratic Congress, and has been unable to enact much of what he had hoped to accomplish.

The current problem with the economic bailout of Fannie Mae and Freddie Mac are good examples.  Many Republicans sounded the warning bell alarm that Fannie Mae/Freddie Mac were in finical difficult, and endanger of economic failure.  Political differences and infighting between the parties kept our congress from enacting laws and programs that would advert the  current economic crisis.

A Democratic Congress and Republican Presidency serve as a system of "checks and balances" according to some peoples way of thinking, and we Americans seem to like to keep the White House and Congress in the hands of different political parties for this reason.

So who has the answers?  Nigher party does in my opinion, our economy is a fast moving train, and unfortunately we do not have an engineer at the wheel driving that train.  We have become a world economy, as what happens here in our country, effect people in other parts of the world, and there economies and economic problems effect us as well.  Yes Congress, if they act together, and put aside partisanship, can do much to effect the economic situation, but they do not control it.

Real Estate Values, the ability of Buyers to borrow money, and other economic issues are an ever  moving target.  They go up and they go down, just like the stock market on Wall Street.  People still have to Buy and Sell real estate, we still need places to live and raise our families, and it does not matter if a Democrat, a Republican, or an Independent occupy the White House and Congress.  I am convinced we as a people can survive them all, and Real Estate is still a good investment.

Does this mean we should not be political?  No, much can be done to clean up our political system, and force our political system to enact laws to the betterment of our country and economic situation.  One of the biggest things we as a nation could do is rewrite and simplify our tax code.

Are we to remain a "Free Market Society" that is driven by the economic principles of "Supply and Demand", or are we going to evolve into a more Socialistic or Communist society and economy?  This is the only road I see we as a nation can possibly travel down that can possibly have a lasting effect on real estate values.

Go Vote, it is your obligation as a Home Owner, and American.

Many experts are predicting an upturn in market confidence once congress agrees on a plan to deal recent challenges in the financial markets.

Realizing this, we recently sent Lance Davis, a member of the Les Bailey & Associates Real Estate Team to Orlando, Florida, where he attended a course, and became a Certified Distressed Property Expert (CDPE).  As a Team, we needed to become experts in helping our Customers and Clients avoid foreclosure.  We now have to knowledge and tools to help our clients, and Lance is the 1st Realtor in Alaska to obtain this designation.  If you are interested in talking with Lance, you can email him at Team@RealEstateInAK.com, or give him a call at 907-689-6487.

The following is a reprint from the National Association of Realtors magazine.  There are some great links with helpful information for those who may be facing possible forclosure.  However your first step should be to contact Lance Davis, our local expert.

Concerned About Your Existing Mortgage?

In 2000, as housing prices grew out of reach for buyers, more creative financing crept in and subprime lending became big business. Wall Street wanted its hands on more of these loans, and the hot housing market spawned a wave of new subprime companies. By 2004, 75 percent of borrowers were buying a home without using a down payment or proving income.

But by 2006 the subprime market started falling apart; Borrowers were defaulting on loans and subprime companies were going out of business. Bitner says these are some factors that caused the subprime market to crumble:

1. Greed. Mortgage brokers made more money if they sold loans with higher fees and interest rates. So borrowers would often be steered toward riskier products, even if a more traditional (and less risky) loan were available. "My income was directly proportional to the revenue I generated, and subprime was three to five times more profitable than any other type of loan we securitized," Bitner says. "I saw no logical reason to sell something that made less money and carried no competitive advantage."

2. Rampant fraud. Bitner estimates that more than 70 percent of all brokered loan applications submitted to his company were in some way deceptive, which meant everything had to be double-checked and verified. "The practice of massaging loans, making them appear different from what they are, became standard operating procedure," Bitner says. "With little accountability for their actions, brokers [were] left to decide how far they're willing to go."

The following is a reprint from the National Association of Realtor Magazine.  It helps understand the economic bailout in layman terms.

I thought I would take a moment to talk about what is - and what isn’t going on in the real estate market today.

I do recognize that in some areas of the country things are very bad.  In fact I was recently at a Star Power meeting in with other top Realtors and was gasping at the market being presented by an agent from Ft Myers Florida with in some cases over 9 years supply of homes.

But here in South Central Alaska, things are slow and steady.  In some areas prices are up as much as 3 - 4% such as Eagle River and Anchorage, while in others area, such as Palmer and Wasilla, prices are down 3-5%.  But this is good news, when you compare it to other parts of the country, where home owners have seen the market and value of their home decline as much as 30 to 40 %.  The issue is loans, and buyers obtaining financing,  and really I have not noticed too much change other than credit scores are more important than ever.  All of the "stupid loans” are gone, and while the pay option arms had a purpose - particularly for someone who might move in less than 5 years - they are not being sold to buyers without good credit and a good down payment.

All markets are local, and while what happens almost anywhere these days effect the economy all over the world to some degree, housing markets are basically driven by the supply and demand and local economic conditions.   When the demand is up and supply is down, prices are up.  Conversely when the supply is up, and the demand is down, prices fall downwards. Basically we have a fairly balanced market; it is neither a Buyers Market or a Sellers Market.  Market values in Alaska continue to appreciate at a reasonable rate of about 2 -3 % annually.  When compared to the double digit appreciation rates of a couple years ago, this may be a snails pace to some, but the current appreciation rates are healthy.  It is precisely because Alaska did not go through much of the craziness some real estate markets went through, with zero down interest only loans, and annual appreciation rates of 25 – 30%, that we are not experiencing much of the doom and gloom we hear and read about in the news media.

What has changed is the loans need to make sense, and if so they are still being given.   As Eagle River’s top selling Prudential real estate team, we are having a slower year than last year, but homes are still selling.  In the heyday over 7 million homes sold across  the USA and there will be close around 5 million USA homes sold this year.  That’s still five million homes; and people still have to buy and sell; at the end of the day we all need a place to live and that is what housing has always and will always provide.  This will never change.

So I wanted to let you know we are still here and not going anyplace.  I am investing more in my team now than ever before and as with all things, this too will change.  We will be ready to work with you on all your real estate needs whether now or in the future.

• They paid too much for their house, and bought it at the top of the market
• They have not owned it long enough to build equity, or perhaps they had an Adjustable Rate or Interest only Mortgage.
• Another reason may be they had a zero down mortgage, and financed all the closing cost into the loan, and as such have not built enough equity.
• Some Seller took out a second loan to remodel or pay college tuition for a child
• Others may unfortunately be going through an expensive divorce that is eating away at community assets

The list of reasons are endless.  Many such sellers consider drastic steps, such as turning the keys back over to the Bank, or perhaps filing for bankrupt.  Either of which will trash the credit of the seller for years to come.

A typical Sellers situation may look something like this:  The Seller purchased the property three years ago at the top of the market for $300,000, financing in their loan origination fee, and other closing cost.  Two years ago the eldest child went to college, and they refinanced, pulling out $30,000 equity to pay college tuition.  Now there has been a downturn in the market, and because they had an Adjustiable Rate Mortgage, their loan payment has increased by $500 a month.  They can no longer make ends meet, and have to sell.  Their current mortgage payoff is $330,000, however the Realtor tells them the market value of their home is only $300,000.  Additionally it will cost them about $25,000 to sell their property.  Anyway you slice it, these Sellers are upside down by about $55,000.  They are considering filing bankrupty, or simply turning the keys back into the bank.

Such sellers may qualify for a little know secret banks do not readily advertise, it is refered to in the Real Estate community as the "Short Sale Process".  Basically the bank does not want to become the owner of your house, they are not in the business of owning real estate holdings, they are in the money lending.  Therefore the bank may be willing to forgive the seller of the difference, and allow the property to be sold for current market value.  Often times in is more cost effective for the Bank to cut their losses and move on, rather than go through the foreclosure process.

The "Short Sell Process" requires a Realtor who is familiar with the process, and can help the Seller navigate through this complicate process.  Further the Seller and the Property both need to qualify.  If a seller has a 2nd or 3rd note on the property, it becomes much more difficult to get all the variouse lenders to agree to participate.

If you would like more information on the Short Sale Process, please feel free to contact us.

Alaska investors do not have to worry about the market crashing here as in the above senerio.  One of the reasons was the "Flipping Phenomone" never really took root here.  Sure there were a few investors who purchased and fixed up houses and sold them, this has always been the case.  Yet buyers were not going into new subdivisions, entering into contracts with builders, and then selling the house just as it was being completed.    Market values here in the Anchorage and Mat-Su area are still appreciating at about 3% per year; a good healthy appreciation rate.  A recent national study ranked Alaska as one of the lowest places in the nation where a decline in the housing market was probable.  In fact there was only a 2% chance market values in Alaska would decline.  Said another way, there is a 98% chance market values will continue to appreciate.

Each Spring wives give their husbands "honey-do" lists and tell their husbands "it's time to put the home on the market."  Each Spring the number of listings and/or inventory in the Multiple Listing Service doubles and even triples.  During the Spring and Summer months, buyers have a lot more homes to choose from than during the winter months.  With that said, there is generally the same amount of buyers in the winter months than in the summer months.

What does that mean to you as a seller? 

It's quite simple...less inventory in the winter months with the same amount of buyers in the market, means your home has a lot fewer properties to compete against and more of a chance it will be picked by a buyer.  With the same amount of buyers looking at fewer homes, it generally equates to a shorter marketing time for Sellers.

Therefore, the winter months generally yield good sales.  In fact, January is traditionally the second best month for home sales in Alaska.  The winter months are a good time to sell a home for the most amount of money, in the least amount of time, and with the least hassle.

If you currently have a home you need to sell before you can build your new home, don't worry, Les Bailey and Associates has a "Guaranteed Purchase Program" to ensure you get into your new construction home.  If you are interested in this program, you can contact Les Bailey and Associates on the web at www.LesBaileyandAssociates.com or www.RealEstateInAk.com. 

From the time you decide to start a new construction home and enter into a Purchase and Sale Agreement, you can expect approximately 140 to 180 days for completion of your new home.  During this time, you won't make a single mortgage payment on your new home because the Builder assumes all interest in your lot and construction loan during the construction process.  That essentially buys you approximately 6 months to get your current home sold if you need to do so.  Keep in mind, it takes more than only placing a For Sale sign in your yard to get your home sold now.  It is crucial you list your home with a top producing realtor with an agressive marketing system.  Don't just list with any realtor because most realtors can't afford to agressively market your home.  Make sure you do your homework and list with a realtor with a proven marketing system.