2012 Real Estate Market in Review

For many sellers, lenders, appraisers, home inspectors, title and escrow companies, and, of course, real estate agents, 2012 was another very difficult year. The stabilization that so many industry observers had been looking for seems to have occurred this past year. The good news is for home buyers and investors. If you're buying a home to live in or to use as an investment, 2013 looks like it'll be another terrific year.
Here's a recap of what's happened in the 2012 real estate market:
--Roughly 23 percent of homeowners are underwater or are nearly underwater with their mortgages, according to third quarter of 2012 data from CoreLogic.
--Zillow estimates that U.S. homes gained $1.3 trillion in value during 2012, the first year of cumulative gains since 2006. The Case/Shiller Housing Index showed that home prices rose about 2 percent in much of the country. Anything in positive territory is a big gain for homeowners.
--New home sales remain extremely low, with only an estimated 368,000 sold in 2012, according to projections from the Department of Housing and Urban Development (HUD). Still, that's up about 17 percent from a year earlier. The median sales price of new homes was $237,700 in October, due to the supply of new homes being very low. At the current rate of sale, the 147,000 new homes on the market would sell in 4.8 months, a historic low rate.
--But existing home sales reached an adjusted annual rate of 5.04 million in November, up 14.4 percent from a year ago, according to the latest figures from the NAR. While NAR concurs that home values are rising, about 22 percent of home sales were foreclosures and short sales, which sold for deep discounts. Still, even the percentage of distressed sales is down from 24 percent a year ago. And the number of homes on the market is now as low as it was back in 2001.
--Millions of homes have received foreclosure notices in 2012, though the number of foreclosure notices is falling. In better news, Hope Now is reporting that nearly 6 million loan modifications have been done since 2007 through its network of more than 40 mortgage lenders.
--Mortgage interest rates fell in 2012 to historic lows. As we went to press, you could get a 30-year loan for around 3.35 percent, a 15-year loan at less than 3 percent and a 10-year loan for around 2.85 percent. All of this assumes you have excellent credit and at least 20 percent equity in the property.
--Despite ultra-low interest rates, millions of homeowners remain in financial jeopardy, unable to afford their payments, and unable to refinance because of declining or negative equity in their homes.
--The good news is that HARP 2.0 has kicked into gear, and as lenders get used to working with borrowers on its terms, more homeowners are qualifying for a refinance. (Go to MakingHomeAffordable.gov for details on a HARP refinance.)
--Another year has gone by with no ideas on what to do about Fannie Mae and Freddie Mac. Nearly two years ago, the government was required by law to introduce a plan on what to do with these secondary market behemoths. But political infighting and the depressed housing market has kept any new ideas from taking root. Now, everyone is engaged on the fiscal cliff, and Fannie and Freddie are starting to pay back the Treasury with all profits going to pay down the debt. We don't expect much to happen here in 2013.

When we look back over 2012, it's clear that the residential real estate ship has turned.

(Ilyce R. Glink's latest book is "Buy, Close, Move In!" Samuel J. Tamkin is a Chicago-based real estate attorney.)

Homeless Families in New Jersey

I am working with a family with children where both parents lost their job and I am selling thier home. Now that we are near settlement, having exhausted their savings, they have no place to go. This is the hard part of my job. I have been researching options and am open to suggestions! 
In my research I found that between 2008 and 2010, the number of homeless families in New Jersey increased by 40.1% (from 1,580 to 2,215) and the number of homeless children increased by 13.9% (from 3,601 to 4,100). With shelters operating at capacity statewide, the number of persons in families and single households staying in motels with county vouchers has risen 15.6% to 1,457. In addition, there were 1,596 children living doubled up with family or friends, in permanent supportive housing, or in a non-voucher subsidized motel in 2010. Common factors contributing to homelessness in 2010 were unemployment (31.3%), eviction (25.7%), and the high cost of housing (22.3%). Since 2008, there has been an increase in the number of homeless persons accessing mainstream benefits, with the overall percent of homeless individuals receiving benefits remaining constant. Food stamps provided aid to 3,844 or 45.4% of surveyed individuals in 2010.

There has got to be a better way.

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4 Things to Consider Before Converting Basement

Finished space can add resale value, but only if done right. If you're fortunate enough to have a basement in your home, you may have the potential for a substantial amount of additional living space right below your feet. But if you're thinking of converting that cold and unappealing area to a warm and cozy new space, there are several things you'll want to take into consideration first.

1. Is it safe?

One of the very first things you want to look at with any basement conversion is safety, and that can take a lot of different forms. Is there convenient and safe access from inside the house in the form of a stairway that meets current building codes, or is there an exterior entrance that works for what you want to use the space for? Is there a sufficient amount of headroom? Would structural supports for the upper floors be in the way, and if so, can they be moved or altered to allow for the necessary space? If you'll be creating a sleeping room, is there safe and legal egress?

2. Is it dry?

Now we get down to what's a big issue in a lot of basements, and that's moisture. Newer homes are often designed with the proper drainage systems and exterior waterproofing to keep the basement areas dry and ready for building, but many older homes had basements -- "cellars" -- that were designed for cool storage and were never really intended to be occupied. If you have a basement with ongoing or seasonal moisture issues, you need to consult with an experienced excavation contractor before you get started on a conversion project. See what it would take to have a drain installed and have the exterior walls properly waterproofed, and perhaps have the exterior grade adjusted to change the flow of water runoff around the exterior of the home. In some cases, you may need to change gutters and downspouts to channel roof water to a different location, or possibly install a sump pump to handle seasonal water issues. No matter what, be sure that your basement moisture issues are handled before you start closing things up.

3. What will the space be used for?

Once you've determined that you have a space that's safe and dry, decide what you want to use the converted basement area for. That will make a big difference in your design, and also in your construction costs. For example, it may be a big game room, in which case you need little more than wall, floor and ceiling finishes. On the other hand, you may be looking at a bedroom or two, perhaps for guests, with a full bathroom and maybe even small kitchen facilities. In that case, you've got plumbing issues to consider, as well as a lot more electrical wiring, and also ventilation. Some basement spaces are even used as rentals in order to generate a little additional income. If that's your intention, you'll need to take into consideration what the access will be for your tenants, so as to provide privacy for them and for yourselves. You'll need to talk with your plumber and electrician about how the electrical and plumbing services will be split and metered to the spaces. And, of course, you'll need to confirm with your local jurisdictions that having renters is a legal use of the space.

4. Finishing the space

Options abound for the actual finishing of the space itself. One of the first considerations is insulating it, so that it's warm and energy efficient, as well as quieter. The preferred insulation method used by many of today's builders and remodelers is extruded polystyrene insulation. Extruded polystyrene is a high-density, water-resistant, closed-cell foam available in sheets, typically blue or pink, as opposed to the expanded polystyrene -- commonly known as beadboard -- which is white and is comprised of small round foam pellets fused together. Expanded polystyrene has a lower R-value, and is not approved for moisture contact applications. You can apply 1 1/2-inch polystyrene (R-value of 7.5) or 2-inch (R-10) directly to the walls with adhesive. The sheets are 2 feet by 8 feet, and the long edges are notched to accept furring strips every 2 feet. You can then install drywall or other wall finish materials directly to the furring or, depending on the level of insulation you want to achieve, you can add a second layer of rigid foam to the furring, then add your wall finish. Conduit can be attached to the walls first for electrical wiring, and the polystyrene is easy to route out as needed over the conduit. Obstacles such as posts or other structural supports can be framed around using two-by-fours. Horizontal duct runs and large horizontal plumbing runs can be framed into overhead soffits. If there's a sufficient amount of headroom, a suspended ceiling allows for the installation of decorative, sound-deadening tiles that are easily removable to allow access to overhead utilities.

Basement conversions can be a very rewarding use of existing space, and they can add a lot of resale value to your home -- but only if they're done right. If you have any questions about moisture control, insulation, structural issues, zoning or anything else, be sure to get them answered by the pros before you get started!

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Fannie and Freddie Set Timeline Requirements for Short Sales

By Carrie Bay DSnews

Beginning June 15, real estate agents working with distressed homeowners whose loans are backed by Fannie Mae and Freddie Mac should expect to receive a decision on a short sale offer within 30-60 days.

The GSEs issued new guidelines Tuesday that fall under the Servicing Alignment Initiative rolled out last fall and aim to bring greater transparency to the short sale process and expedite decisions related to these pre-foreclosure sales.
Not only is a short sale an effective foreclosure alternative when home retention is no longer an option, but it keeps homes occupied and helps to maintain stable communities, according to the Federal Housing Finance Agency (FHFA).
Addressing real estate practitioners’ No. 1 complaint about short sales, FHFA directed Fannie Mae and Freddie Mac to establish a new uniform set of minimum response times that servicers must follow in order to facilitate more efficient short sale transactions.
The GSEs’ new short sale timelines require servicers to make a decision within 30 days of receiving either an offer on a property under the companies’ traditional short sale programs or a completed Borrower Response Package (BRP) requesting short sale consideration, whether it’s through the federal government’s Home Affordable Foreclosure Alternative (HAFA) program or a GSE program.

If more than 30 days are needed, servicers must provide the borrower with weekly status updates and come to a decision no later than 60 days from the date the BRP or offer was received.
According to the GSEs, this 30-day add-on will provide some leeway for servicers who may need more time to obtain a broker price opinion (BPO) or a private mortgage insurer’s approval for a short sale. All decisions must be made within 60 days.
In the event a servicer makes a counteroffer, the borrower is expected to respond within five business days. The servicer must then respond within 10 business days of receiving the borrower’s response.
The GSEs plan to use the new short sale timelines to evaluate servicer compliance with the Servicing Alignment Initiative.
Edward DeMarco, acting director of the FHFA, says the GSEs new borrower communication and timeline requirements for short sales “set minimum standards and provide clear expectations regarding these important foreclosure alternatives.”
GSE servicers must comply with the new minimum communication time frames for all short sale evaluations conducted on or after June 15, 2012, although servicers are encouraged to begin implementing the new requirements sooner.
“I applaud Fannie and Freddie for finally coming out with real guidance with real world timelines for their servicers,” commented Anthony Lamacchia, broker/owner of McGeough Lamacchia Realty Inc., which specializes in short sales. “There is no question that this will help short sales and the market as a whole.”
Last year Freddie Mac completed 45,623 short sales, a 140 percent increase since 2009. Fannie Mae’s short sale completions shot up by 101 percent over the same period, totaling around 79,800 in 2011.

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FHA will keep funding flips - Waiver for 90-day resales extended through 2012

Waiver for 90-day resales extended through 2012
By Inman News, Wednesday, December 28, 2011.

Inman News®


For the second year in a row, the Federal Housing Administration is extending a temporary waiver of its "anti-flipping" rule, meaning homebuyers relying on FHA-insured financing will continue to be able to buy homes that have changed hands in the last 90 days.

The waiver is a boon for investors seeking to rehab and flip properties, because it expands the pool of eligible borrowers to include those relying on FHA-backed loans, popular with first-time homebuyers and others who lack the cash to make large down payments.

In extending the waiver through 2012, FHA said all transactions must continue to be arms-length. In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will apply only if the lender can document the justification for the increase in value, FHA said.

FHA instituted the anti-flipping rule in 2003 to protect its mutual mortgage insurance program from losses on homes that were merely flipped, rather than rehabbed. Homes repossessed by Fannie Mae, Freddie Mac, and state- and federally chartered financial institutions were exempt from the rule.

In February 2010, the Obama administration waived the waiting period for resales -- including homes purchased and rehabbed by private investors -- in the hopes of stabilizing home prices and revitalizing communities hit by foreclosures.

It often takes less than 90 days to acquire, rehabilitate and sell properties, the Department of Housing and Urban Development said at the time. Some sellers of rehabbed properties had been reluctant to enter into contracts with FHA buyers because of the cost of holding a property for 90 days, HUD said

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10 ways to keep lid on energy bills

By Paul Bianchina (edited by Clara Lyons)
Inman News™

No one likes wasting money, especially in these tough economic times. So it certainly makes sense -- dollars and cents -- to make a small investment of time and supplies to close up those heat-wasting air leaks around your home. It'll pay back big dividends in reduced energy bills and a warmer, more comfortable house this winter. So let's look at some of the areas where those drafts may be lurking, and see how to take care of them.

1. Doors and windows: This should be an obvious one. If you can see gaps between your siding and your windows or exterior doors, close them up with a bead of clear or paintable acrylic latex caulk. Larger gaps can be filled with foam backer rod before applying the caulking.

2. Exterior penetrations: Some of these areas are going to be obvious, while some may take a little bit of searching. Some examples of exterior penetrations where air can leak into the house include exterior faucets, dryer vents, exterior electrical outlets, exterior light fixtures, holes that have been drilled for phone and TV cables, conduit penetrations, exit points for plumbing drains, and penetrations for air conditioning lines. Closing these penetrations may require a variety of different techniques, including caulk, expanding spray foam, or, in the case of electrical boxes and fixtures, specific gaskets that are designed to fit the boxes.

3. Exhaust-vent covers: Dryer vents, range hood vents, bath fan vents, and other interior ventilation equipment typically terminate outside the house in a plastic or metal cover that has one or more louvers on it. The louvers are designed to be in the closed position whenever the fan is not in use, so that outside air doesn't leak in. Check all of these louvers to be sure they're closing completely, with no air leaks. If they aren't, you can adjust the spring tension to hold them closed more tightly; add foam weatherstripping tape for a more air-tight seal; or replace the entire vent cap with a new one.

4. Gaps around interior vents and recessed lights: Inside your home, heated air can be leaking out around that same ventilation equipment, where vent pipes pass through the walls or ceiling, or where vent covers meet wall and ceiling surfaces. Recessed light fixtures can also be real air-leakers. Around the vent pipes and recessed light cans, seal any gaps with caulking. For the vent covers and recessed light covers, remove the covers, then adjust the springs and/or add foam weatherstripping tape to create a tight seal between the cover and the ceiling.

5. Heat-duct penetrations: Gaps around heating-duct cans where they pass through the floor or wall allow cold air to enter from the crawl space, while gaps around ceiling-duct cans allow heated air to escape into the attic. To close those drafts, first remove the register, then use a combination of caulking and/or metallic duct sealant tape to close any gaps between the sheet metal cans and the floor, wall or ceiling surface.

6. Fireplaces and woodstoves: Lots of gaps can occur around these appliances. With a conventional fireplace, keep the damper closed except when burning a fire to prevent heated air from escaping up the chimney. Consider investing in a set of air-tight doors, which close off the air leaks and also make your fires more efficient. Look for gaps around woodstove and gas fireplace flue pipes, and air leaks around masonry chimneys. Use a metal collar if necessary around flue pipe penetrations, and seal gaps with heat-resistant sealant specially formulated for this application.

7. Attic and crawl space hatches: These can be real air losers if they're not weatherstripped, so take care of that with some foam tape. Make sure the hatches are insulated as well.

8. Interior doors to unheated spaces: If you have any interior doors that lead to unheated spaces, including basements, garages or attics, be sure the doors are weatherstripped to prevent air leakage. If possible, replace older, hollow-core doors with solid-core or, better yet, insulated metal doors.

9. Sill plates and penetrations: This one's not as easy to deal with, but it's well worth the effort to try to do whatever you can with it. Air can leak both into and out of the house through gaps where the sill plate meets the foundation or the siding, and around plumbing and wiring penetrations drilled through wall plates in various areas. If you have a gap between your siding and the bottom of your exterior wall, especially in older homes where the use of sill sealers was not a common practice, consider closing up this big air gap with a bead of caulking or expanding foam. In the basement, crawl space and attic, if you can access any of the pipes and wires that pass through the wall plates, seal the penetrations with expanding foam.

10. Deregulation has come to the energy market, creating opportunities to save money on your energy bill and still get your bill from the same provider. Paste this url into your browser and see if your area is included:
http://energy.5linx.com/Default.aspx?language=en-US&strRIN=L432054

Know someone who is thinking of buying or selling real estate?
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The Time to Buy is NOW!

The signs have been there: record-low interest rates and reasonably priced homes.

This week, the Wall Street Journal presents two factors that make now “an excellent time to buy a house.” First, the ratio of home prices to yearly rents is close to its pre-bubble average. Second, when mortgage rates are considered, houses are the most affordable they have been in decades.
The article goes on to explain that whether or not buying is a better deal than renting depends on the relationship between prices and rents, the cost of financing and other factors. The good news is that the numbers all seem to be heading in the right direction.

According to Moody’s Analytics, the nationwide ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble. With all things being equal, a lower ratio means buying is preferable to renting. Even though the price/rent ratio is not as low as it has been, house payments are more affordable than they have been in decades because mortgage interest rates are so low.

And, despite public opinions otherwise, mortgage money is available according to information in the article attributed to Stan Humphries, chief economist at Zillow, a home and real estate consumer website.

The article closes with this advice: “When prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.”

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