Latest HouseHunt Random Survey Finds Encouraging Signs - First Time Buyers Taking Advantage of $8,000 Tax Credit

Like the legendary phoenix which rose renewed from its ashes, the U.S. housing market appears to be on the verge of emerging from the worst real estate market in three years. Several encouraging signs are there.

Just consider: A surge in sales activity was reported in many areas in the past three months; first-time buyers continue to bring vitality to the marketplace all across the country; buyers with good credit are able to get mortgage financing; inventories of unsold homes are flat or decreasing in many areas, and listings with the lowest prices in nearly a decade are being cherry-picked in many communities, according to HouseHunt’s latest random survey of current market conditions across the country. Even repeat buyers are starting to leave the sidelines.

Many HouseHunt member-agents interviewed in this quarterly survey also reported they are using the government’s $8,000 tax credit incentive for first-time buyers as an effective marketing tool. The credit – which expires on November 30 of 2009 – can be claimed on the purchaser’s tax return and does not require repayment unless the home is resold within three years. Every dollar of the tax credit reduces income taxes by one dollar. A person is considered a first-time buyer if he/she has not had an ownership interest in a home for at least three years.

Case in point: “I’ve sent out nearly 1,100 tax credit and FHA mailings to prospects on my client list,” said Teri Arbogast of Keller Williams Properties in Weston, FL, exclusive HouseHunt member-agent for Plantation, Davie and Southwest Ranches. “The tax credit is a tremendous marketing tool and is producing good results. It also provides a sense of urgency for buyers. Currently, I’m working with several qualified buyers. My business has definitely picked up in the past three months. People feel like that now is a really good time to buy a home.”

Unemployment, the economy, short sales and foreclosures have forced sellers to lower their prices, Arbogast added. Her average home price is $350,000, down 15-20% in the past year. Average time on the market from listing to contract is more than 120 days.

Also reporting a surge in buyer activity is John Alfasi of RE/MAX Allegiance, exclusive HouseHunt member-Agent in Fredericksburg, VA. He described his market as “robust” and said the average time on the market required to sell a listing is down from 150 days to 90 days. “Our inventory of unsold homes is also down. We have experiencing lots of traffic on distressed properties, mostly short sales and foreclosures.,” he said. Average home price is $225,000. “We still have job growth here and several military bases are being expanded. This gives us both the $8,000 tax credit for first-time buyers and terrific VA financing for new and repeat buyers in the military,” he said. Even though average home prices are down 15-20%, he said sellers are getting 90-95% of their asking prices.

Another area benefiting from military buyers, retirees and first-time buyer clients and financing is the beach community of Oceanside, CA. Chris Montano of Real Estate Traditions, exclusive HouseHunt member- agent for Oceanside, reports an active market: “We have more buyers than sellers and a limited supply of properties,” he said. “Average time on the market is 10-30 days, and that’s decreasing. Good properties are generally picked up as soon as they are listed, many times receiving multiple offers higher than the asking price,” Montano said. ”Oceanside is the last affordable beach community in Southern California. The average home price is $250,000. Although we’re down 25-30% in the past year, any market rebound is expected to benefit the entire area.” Camp Pendleton Marine Base is adjacent to the city.

Lois Johnson of Keller Williams Realty Greater Omaha, exclusive HouseHunt member-agent for Bellevue, NE, reports a significant improvement in both sales and activity since the holidays: “Younger buyers are coming out of the closet after hearing about the $8,000 tax credit. More people are thinking about buying or selling a home. So far, financing does not seem to be a problem for them even though 100% financing is gone and FHA has changed. We’re also getting good leads from the Internet.” Johnson said her market is about 50-50 between buyers and sellers. Average price of an existing home is $175,000. “Time on the market from listing to contract averages 60-90 days, and this is decreasing.”

James Hendricks of Equity Trust Group, exclusive HouseHunt member-agent for Portland, OR, said he has experienced a surge in activity in the first quarter of 2009: “Absolutely! I have as many buyers under contract now as I had in the last six months. Homes priced competitively in the $200,000 and $400,000 range are in demand.” Hendricks said there is still a 12 to 14 month supply on the market but he expects this figure to improve this spring. “This is the best time in many, many years for first-time and move-up buyers and investors to purchase a home,” he said. “So far, financing is available.”

Eva Kallick of Prudential Americana Group Realtors, exclusive HouseHunt member-agent for West Henderson, NV, in the Las Vegas metro area, also noted an increase in activity: “It’s a wonderful time for qualified buyers to be in the market — and yes, qualified buyers have funds to cover down payments and closing costs. Home prices dropped 30% in one year after a sharp run-up. Current levels have not been seen since 2003. Average price is $225,000. Greatest activity is coming from first-time buyers, Kallick added.

Lynn Fink of Coldwell Banker in Birmingham, MI, exclusive HouseHunt member-agent for Bloomfield Hills, reports that the $8,000 first-time buyer tax incentive is helping to attract customers but that overall activity in this suburban Detroit market is being impacted by 22% unemployment, falling prices and reluctant lenders. “Loans are difficult to get but available to buyers with good credit scores,” she said. “Many people are leaving the area because of the auto industry cutbacks. Our average price is $300,000. One bright spot is that movie production companies are coming here to make movies, utilizing existing plants, factories and the state’s natural resources.”

Trying to find qualified buyers is also a challenge for Brian Burke of Kenna Real Estate in Highlands Ranch, CO, exclusive HouseHunt member-agent for Highlands Ranch and Lone Tree in suburban Denver. “Our sales activity is up since the holidays and good quality homes are selling quickly in the $300,000 price range. The problem is trying to find qualified people. That’s the missing piece of the puzzle. Home prices are up five to 10% over last year and our inventory of unsold homes is down 40%, compared to last year. We also have a huge influx of people looking to lease and/or doing lease-options.

Optimistic of increased activity this summer is Sue West of Elliott Realty/GMAC Real Estate, exclusive HouseHunt member-agent for Carolina Shores, SC, in the Myrtle Beach area: “Our business since the holidays has been better than the last half of 2007 and all of 2008. We’re getting tons of inquiries, especially from Baby Boomers moving to this area for our quality of life. Our lenders are anxious to work with our clients, so financing should not be a problem. Our average price is $200,000.” West added: “Our weather is good, our people are nice and our taxes are fair. The South shall rise again!”

Finally, Lee Seaton of Prudential Real Estate Professionals, exclusive HouseHunt member agent for Eugene, OR, hired a professional staging consultant to help sellers attract buyers to their properties. “The consultant devotes two hours to tour each property, consult with the owners, and prepare a plan to better utilize furniture placement and recommend cosmetic improvements, if needed. We want the property to show well as possible,” Seaton explained. “People are feeling better about the economy and are once again attending open houses. Our inventory of unsold homes has dropped from a 17 to 12-month supply.” Average home price is $225,000.

Michael Bearden, president and CEO of HouseHunt, Inc., said he is very encouraged with the increase in buyer activity in recent months and urged member-agents to take full advantage of opportunities in their own communities: “Historically, national housing recoveries start in local neighborhoods and spread through communties across the country like a slow tide. Bankruptcy and foreclosure signs disappear as homes are sold and pent-up demand catches up with supply. The steady drumbeat of plant closings and layoff announcements publicized in the media will subside and lenders—who are already more selective to meet tougher qualifying standards — will actively welcome new and repeat business once again.”

HouseHunt, Inc., a consumer-oriented Internet firm that provides free information and services to homeowners, home buyers and home sellers in 47 states through its member-agents and through its primary web site HouseHunt.com, measures seven critical components of housing sales activity every quarter.

For example, preliminary results from HouseHunt’s national first quarter survey show that sellers outnumber buyers two-to-one; 88% of sellers report that it is taking more than 60 days, on average, to sell a house; first-time buyers are accounting for 65% of existing home transactions; there is a good selection of homes for sale in virtually every community; most sellers have experienced at least some negative appreciation in the past 12 months; nearly one-half of sellers are getting multiple offers; and 35% of sellers are getting at least 95% of their asking prices.

Nationally, existing home sales in February increased 5.1% over January, according to the National Association of Realtors. Lawrence Yun, NAR economist, said distressed sales accounted for 40 to 45% of transactions. He said first-time buyers accounted for about half of all sales. “Recovery in the West – led by California– is much stronger than expected ”he said. The nation’s inventory of unsold homes remained at 9.7 months in February. A six-month supply is considered balanced between supply and demand.

Presented by Jeff Anthony and Casey Wood

http://www.househunt.com/realestate-markettrends/summ.php?region=National&mktid=GA-Marietta

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“First in, first out” is a popular phrase in the Florida real estate industry. In a state hit early by the economic downturn, there’s hope it will be on the leading edge of a recovery.

Construction and real estate play big roles in the state’s economy. With the collapse of the housing market, Florida was one of the first states to feel the effects of the recession.

On Florida’s Gulf Coast, the area around Cape Coral is sometimes called “ground zero” of the nation’s housing crisis. Last year, it led the nation in foreclosures.

It’s not hard to find neighborhoods that have been devastated. On one block of Northwest Second Avenue, at least half of the houses on the street are vacant. There are a few sale signs. High weeds grow under the palm trees at one house. Others have their windows and doors covered by storm shutters.

Emerging Signs Of Hope

But those who follow the real estate market here are starting to see some signs of hope. Brett Ellis, a real estate agent with RE/MAX, sums it up: “Sales are picking up and the inventory is going down.”

The increase in sales has been especially notable in Cape Coral. The Florida Association of Realtors reported a 43 percent increase in January over last year’s sales in Lee County.

In his office, Ellis says the increase has been more than 70 percent, and half of those sales are taking place in Cape Coral. It’s an upward trend that’s been taking shape over the past year. After a devastating 2007, prices began dropping in 2008 and the market responded.

“Buyers got their confidence up, their moxie up in 2008,” Ellis says. “They recognized good value; they jumped on it. The banks responded, everyone responded, the market moved and the transactions started flowing again — even the short sales and the foreclosures.”

A year ago, the median price for a home in Lee County was more than $225,000. Today, it’s less than $100,000. Those steep price declines have encouraged first-time homebuyers with good credit, and lots of investors.

In recent months, prices have begun to flatten out. In some desirable locations, Ellis says, they may even soon begin to rise.

Hard To Sell When There’s A Smell

More than three-quarters of the homes sold in Lee County in the past year, Ellis says, were distressed sales — properties that were either in foreclosure or on the way. And more are coming on the market daily.

Ellis stops by one house in foreclosure to prepare a price opinion so it can be put back on the market. It’s a three-bedroom, two-bath house that’s clearly seen better days. Christmas lights still hang out front. Orange trees, heavy with unpicked fruit are in the backyard.

As he steps into the house, Ellis says: “One of the things I look for is, are the appliances here? What does the flooring look like? In this particular home, I detect a slight sense of dog in his property and if you can smell it, it’s hard to sell it.”

Foreclosures have actually showed signs they may be declining in Lee County. Even optimists like Ellis hesitate to make too much of the recent downturn, however, in part because of the large numbers of adjustable-rate mortgages that are due to reset in 2010 and 2011.

But in the meantime, foreclosures are being finalized and deeds conveyed in Lee County at a record pace. On some days, more than 100 foreclosed properties are sold at courthouse auctions.

Signs of A Shrinking Inventory

And here’s a positive sign: Even with hundreds of foreclosed properties coming on the market each month, the inventory of houses that are for sale is shrinking.

At current rates, there’s now just over a 12-month supply of houses for sale in Cape Coral. That’s still higher than the three- to six-month inventory typical of a healthy housing market.

But Jeff Tumbarello, who studies the market for the Southwest Florida Real Estate Investment Association, says it’s becoming harder to find real bargains.

Attracting Investors

Matt Zacharias, a general contractor from Lancaster, Pa., had some luck. He recently bought a three-bedroom, two-bath home with a pool and its own boat dock. He paid $182,000. Sixteen months ago, the house sold for more than $500,000.

“The market down here, the prices are just too good to be true,” Zacharias says. “I had to come down and check it out for myself. One thing led to another and here we are — I’m actually going to look at another property later as another investment property.”

Zacharias says some of his friends from Lancaster are also looking at properties in the area.

But a resurging housing market doesn’t mean the recession has relented. Lee County’s unemployment rate is one of the highest in the state, at 10 percent. There are plenty of vacant storefronts along with the vacant houses. Declining assessments have left Cape Coral’s city government with little choice but to lay off workers and to cut services.

Affordable Housing Returns

Mayor Jim Burch, however, prefers to dwell on the positives. Just a few years ago, he and other elected officials worried about how, with rising costs, housing in the city was being priced beyond the means of teachers and police officers.

“It’s kind of solved that problem,” he says. “Affordable housing is back. That also attracts business. It also attracts residents to come into our area. We should take advantage of that and we will.”

Burch isn’t quite ready to say that Cape Coral has reached the bottom of the housing market, but he believes it’s probably not far away. “We do believe in the first in, first out theory: We were the first in, without a doubt and we think, right now, we’re getting ready to be the first one to come out of this,” he says.

A Cautionary Tale

Economist Hank Fishkind, like others who watch the housing market, notes it’s not possible to know you’ve hit the bottom except in hindsight, after prices have begun to rise. He agrees though that Cape Coral is probably close to the bottom.

And eventually, Fishkind says, most of the city’s oversupply of houses will be absorbed by the market. “I think there’s no doubt about that,” he says, “but it will be the houses that are in the best of locations. There are some houses that are in such far-flung locations in such scattered development patterns, that there may be very little demand for them at any price. Some houses will be abandoned.”

A cautionary tale likes just 50 miles south of Cape Coral. Golden Gate Estates was planned in the early 1960s as the world’s largest subdivision, with some 400,000 homes. Eventually, it went bust. Today a few thousand homes are scattered across the 172-square-mile area.

The rest of it has been reclaimed as a nature preserve.

by Greg Allen

http://www.npr.org/templates/story/story.php?storyId=101511417

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Late yesterday the Federal Reserve announced an increase in the discount rate, not the more important federal funds rate. Let me type that again: The Fed did not increase the all-important federal funds rate. So what is the discount rate and what, if anything, is the significance of this?

The discount rate is what banks pay to borrow directly from the Federal Reserve. The term “discount” is a misnomer as there’s no discount. In fact, it is by design a somewhat punitive rate designed to encourage banks to tap other sources of funds rather than relying on the Fed. The Fed is still — and always — the lender of last resort, but it’s a little more costly to use that lifeline now. This is just another step to mop up liquidity and reign in the liquidity programs created by the Fed in response to the seizing up of credit markets.

Essentially, Mom just raised the rent on her 20-something child. Mom is still Mom. She’s not kicking you out, she’s just saying it’s time for you to get your own place. And she’s encouraging that by leaving a copy of the local rental listings and a note telling you the rent she’s charging will be more than what those nice apartments down the street will charge.

Most importantly to consumers, the discount rate does not — I repeat, does not — have any direct impact on interest rates paid for loans (or sadly, earned on deposits). Could this lead to higher mortgage rates? If the market takes this move to believe the Fed is closer to raising the federal funds rate or the rate paid on excess reserves, then yes. After the initial shock wears off, this may prove to have little impact on mortgage rates compared to the inflation data and other rosier economic reports that have been coming out. What is certain to be far more impactful to mortgage rates is when the Fed stops buying mortgage-backed securities at the end of March. I expect a half-percentage point increase in mortgage rates relative to yields on 10-year U.S. Treasury notes when that happens.

Does this mean the Fed is closer to hiking short-term rates? I don’t believe so. If anything, this will buy them even more time before doing so. The Fed has been very consistent about saying rates will stay low for an extended period of time and raising the federal funds rate or the rate on excess reserves clearly appears to be the last lever they want to pull, waiting for further economic and employment improvement to materialize.

If I may digress just a bit, I had quite the déjà vu feeling yesterday when the announcement was made. I happened to be at a meeting in a hotel when the Federal Reserve’s press release popped into my e-mail inbox. I immediately recalled the day in Aug. 2007 when the Fed initially cut the discount rate — but not the federal funds rate — in an effort to ease funding pressures for banks. This was when the credit crunch had first grabbed a hold of the markets. What was I doing at the time? I was in a meeting … at the same hotel.

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In his annual letter to shareholders issued today, Berkshire Hathaway chairman Warren Buffet (right) gave this optimistic and characteristically down-home assessment of the U.S. housing market:

The industry is in shambles for two reasons, the first of which must be lived with if the U.S. economy is to recover. This reason concerns U.S. housing starts (including apartment units). In 2009, starts were 554,000, by far the lowest number in the 50 years for which we have data. Paradoxically, this is good news.

 People thought it was good news a few years back when housing starts – the supply side of the picture – were running about two million annually. But household formations – the demand side – only amounted to about 1.2 million. After a few years of such imbalances, the country unsurprisingly ended up with far too many houses.

There were three ways to cure this overhang: (1) blow up a lot of houses, a tactic similar to the destruction of autos that occurred with the “cash-for-clunkers” program; (2) speed up household formations by, say, encouraging teenagers to cohabitate, a program not likely to suffer from a lack of volunteers or; (3) reduce new housing starts to a number far below the rate of household formations.

Our country has wisely selected the third option, which means that within a year or so residential housing problems should largely be behind us, the exceptions being only high-value houses and those in certain localities where overbuilding was particularly egregious. Prices will remain far below “bubble” levels, of course, but for every seller (or lender) hurt by this there will be a buyer who benefits. Indeed, many families that couldn’t afford to buy an appropriate home a few years ago now find it well within their means because the bubble burst.

Buffett’s full letter is available here (.pdf format).

Paul Maidment is Editor, Forbes Media 
http://blogs.forbes.com/streettalk/2010/02/27/buffett-on-the-housing-market/

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How is 2010 shaping up?

    There are a number of events that occurred recently that show our nation and our industry is showing improvement.  Americans are more attuned to what is occurring around them locally, regionally and nationally.  They are discovering that they are not alone in their concerns for their wellbeing and the forces that are impacting their lives.  People are making local decisions that have national impact. This has resulted in a newfound positive energy that is swelling up inside folks just like you and me.  For example, the miracle in Massachusetts, Ford motor company turning an annual profit for the first time since 2005, and resurgence in positive trending in consumer confidence all contribute to the cautiously positive attitude that Americans are beginning to exhibit.  People are finding that these new individuals who are being raised up to represent us appear to have good common sense.  As individual Americans voice their opinions, they realize they are being heard loud and clear by other mainstream Americans.  Hopefully these Americans will make a positive difference in our future and our business will show positive improvement long term.

The Economy:  I am encouraged about the future of real estate and I hope you are too!  All of the indicators point to an improving market.  Below are some examples of the optimism in the air:

• The spread between layoff and new job creation is beginning narrow
• South Florida has stabilized and property values are rising
• Orlando and Tampa areas’ single family housing is stable and rising in price
• Housing inventory as it relates to months of inventory on the market, is narrowing
• The Federal Reserve did not raise interest rates and will hold them at current levels for the near future
• The condo market continues to soften slightly in price; however, it has almost reached the bottom in pricing and purchases of condominiums are increasing
• Corporate profits continue to improved and fourth quarter profits for 2009 are anticipated to be huge
• Credit is still tight
• Corporate America will begin hiring in the future but gradually.  Full employment is not forecasted until 2016
• GDP growth will be between 2.5 to 3% for 2010, fourth quarter report will be adjusted downward
• Corporate inventory is replenishing, future inventories replacement will be gradual
• Teenage unemployment continues to remain high
• College graduates are working hard to become employed and when they find employment they are in most cases disciplining themselves to stay employed
• Consumers are embracing frugal spending behavior
• Stock markets will move up and down in the near term; however, long term the market will continue upwards to be above 11,000 during 2010
• Most economists are no longer forecasting a double dip recession

• The value of the dollar may have reached its floor and will begin to strengthen
• Inflation is still flat, but expect some movement upward later in the year
• Banks profits continue to improve
• Jumbo finance rate has softened considerably
• Appraisals are becoming more realistic
• Cost of a barrel of oil is still in the normal range and supply is still greater than demand
• Unit number of housing sales continue to grow
• Unit number of foreclosures will continue to increase; a decrease will lag behind improved employment numbers
• People are relocating to areas where hiring is occurring providing opportunities

   The public is returning to the marketplace for housing.  As our economy improves, consumers will increase home sale opportunities.  It is great to be positioned to help those consumers that are returning to the market.  The Southern Region wishes the best for everyone during 2010.

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In these metro areas, both modest incomes and stable real estate markets are improving the outlook for borrowers.

No American city fully sidestepped the housing foreclosure problem. But tell-tale boarded-up windows and lines of once-glittering condominiums standing empty are images largely absent from several metro areas. And many of these real estate markets are well-poised to recover.

The cities coming back strongest from the foreclosure crisis are those that didn’t see massive price inflation as the housing bubble swelled (the national peak was the second quarter of 2006, but different areas peaked at slightly different times), as well as blue-collar towns with modest economies. This is according to data provided to Forbes by Lender Processing Services (LPS), a mortgage-industry service provider.

In Depth: Cities Recovering From The Foreclosure Crisis

Full Ranking: Recovering Cities

Texas cities with housing prices that never overheated, such as Austin and San Antonio, as well as former manufacturing centers including Buffalo, N.Y. and Harrisburg, Pa., join Midwestern cities like Wichita, Kan., and St. Louis, Mo., in showing signs that they’re not as harmed by the foreclosures gripping the rest of the country.

“The upper Northeast and Midwest cities didn’t have much of a boom, so they didn’t have much of a decline,” says Michael Fratantoni, vice president of research at the Mortgage Bankers Association, the professional association for real estate financiers, based in Washington. “The Texas markets have also fared better than the rest of the country. The energy sector has been a source of jobs, even through this downturn.

But a slowing rate of foreclosures in a particular city doesn’t tell the entire story. Because of government pressure to limit foreclosures and modify delinquent loans, a new group of bad loans–those that are 90 days or more past due–are weighing down the market, and many of these borrowers have only temporarily stalled foreclosure. In 2009, of loans that were seriously delinquent (three or more months behind on payments), 200,000 more each month fell further behind on payments than entered foreclosure, according to LPS.

“‘Foreclosure crisis’ is a misnomer. It’s not a foreclosure crisis, it’s a nonpayment crisis,” says Ted Jadlos, senior managing director of the Applied Analytics group at LPS. “Foreclosures are just the symptom. It’s truly about how many people are missing payments.”

Where fewer borrowers are falling behind on payments, the market has a better chance of rebounding. More than half of delinquent loans that are restructured end up in foreclosure a year later, according to LPS.

Behind the Numbers
To find the cities that are recovering best from the foreclosure crisis, we used data from LPS to determine how many of all loans were foreclosed in each of America’s 100 largest Metropolitan Statistical Areas–census-defined regions used by the government to collect statistics. The fewer foreclosures, the higher the city ranked.

We then factored in the percentage of loans where borrowers were three months late, or more, on their payments. More than half of these bad loans end up in the foreclosure process, so fewer delinquencies means fewer eventual foreclosures. In metros without a high percentage of these delinquencies, the tide of foreclosures flooding the market will be stemmed sooner.

Both of these measures were determined based on a six-month rolling average as of October 2009.

Finally, to assess whether borrowers are keeping up with their payments or starting to slip, we factored in what LPS calls the deterioration ratio, the percentage of loans that are descending further into delinquency to those that are improving. A deterioration ratio of 2.5, for example, means that for every loan that is becoming more current, there are 2.5 that are falling further behind on payments. In other words, the lower the deterioration ratio, the higher the city’s ranking.

The full list of the cities best equipped to emerge from the real estate crisis was determined by averaging the rankings for each of these measures for each city.

Lower Volatility, Easier Recovery
What all of the markets in the top 20% of our rankings have in common is where they are not. Of all the country’s foreclosures, nearly half are concentrated in California, Florida, Nevada and Arizona. None of these states are represented in our top 20.

Foreclosures were distributed more broadly across the Northeast, Midwest and Southern states. Therefore, metros like Knoxville, Tenn., (fifth on our list) and Raleigh, N.C., (sixth) have had fewer foreclosures all along–and should resurface with stronger real-estate markets because of it.

“It’s really a low-volatility list,” says Fratantoni. “These cities really aren’t the centers of foreclosure activity.”

Housing in most coastal cities has proved volatile because these areas offer limited room for growth or new construction, supply that can’t meet demand and housing prices driven by factors other than inflation and building costs. But some places on the coast, like Portland, Ore., No. 14 on our list, have vibrant enough economies that foreclosures never flooded the market. Only 1.6% of loans there are in foreclosure–better than three-fourths of the metros we surveyed.

“Portland is really a beneficiary of a huge demographic boom,” says Fratantoni. “It’s trendy for young adults and others to go there because it’s become a tech center.”

The Blue-Collar Effect
It may seem odd that cities with relatively low-income families, like 10th-place Wichita, Kan., with a median household income of only $40,101 (compare that with $75,035 in San Diego and $71,361 in Honolulu), seem to be bucking foreclosures. But delinquencies and foreclosures have crept into higher-priced markets, while affordable housing is benefiting from government stimulus and recovering faster.

“You may have first-time home buyers entering the market at the low end,” says Fratantoni. “Also, you have extremely low mortgage rates, the First Time Homebuyer Tax Credit and a number of factors really benefiting the lower-priced market.”

While the cities on this list provide a snapshot of the metros that have best dodged foreclosures, more importantly, because these are some of the cities least touched by housing inflation and the subsequent bust, they give a clue as to the underlying health of the economy–separate from the wild card the housing crisis threw in.

“These are good markets to look at,” says Jadlos. “They represent a cross-section of the United States, in my book.”

In Depth: Cities Recovering From The Foreclosure Crisis

Full Ranking: Recovering Cities

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Short sales, bank-owned homes are bargains but tricky to buy.

Forbes: Welcome, gentlemen, to another discussion of the economy, real estate and housing markets.

To begin, I just want a baseline check of your moods. Are houses a good bargain and in your view is the market now heading upward? Or are we still in an overpriced market with plenty of downside?

Spencer Rascoff, Zillow: Unfortunately I think the housing bulls are getting ahead of themselves. I’m still seeing a lot of worrying signs based on high levels of negative equity (meaning owners whose homes are worth less than they paid for them, representing around 25% of all mortgage holders), millions more foreclosures that haven’t yet come onto the market (over 1.2 million owners are 90 or more days overdue on their mortgages but aren’t yet in foreclosure) and likely higher mortgage rates in 2010. I remain a dispassionate, sober housing bear.

Michael Feder, Radar Logic: Spencer is correct, but there is evidence, as I’ve said, that those (factors he mentioned), like most elements of real estate, may depend very much on location.

There is some real evidence that markets have stabilized. For the most part, buying activity is up and the only price declines we are seeing are those we would expect seasonally. The wild card is, of course, inventory and more specifically, foreclosures. But that’s not a simple equation. Yes, foreclosures are looming, but they appear to be impacting the lower-end markets and the overbuilt states most aggressively.

So, on the one hand, if a set of measures can be undertaken to “fix” the distress, then the effect of distressed mortgages may be contained and all the signs are positive. On the other hand, continued arrival of distressed supply may be concentrated in some, as opposed to all, markets and even in those in certain price ranges.

Pat Lashinsky, ZIPRealty: We are starting to see some signs of stabilization–lower inventory levels, homes selling for closer to their asking prices and fewer reductions being taken by sellers. And in most markets we don’t see a lot of support for saying the market is overpriced. So we are probably at a point where there may be a little more pressure on prices coming, but volumes should stay strong as long as there is not an interest-rate spike, and we should kind of bounce along the bottom in the near-term.

Donald Trump Jr., Trump Organization: I like prices today if I am looking at it as a true investor and not for the fast flip. There are few deals today that I wouldn’t be happy with in 10 to 20 years, so the real analysis is the opportunity cost of one deal versus the next.

Forbes: Doesn’t seem like any of us are hugely optimistic about the short term.

Don, when you’re looking at values, what are you comparing house prices to? The underlying rents? Future rents? Or are you comparing home prices with stuff like the buying power of purchasers, which would be affected by income and mortgage rates?

Trump: It really depends on the asset. (It can be) sales prices to future underlying rents or even future sales prices. It really depends on your business model and what you are most comfortable with as an investor.

Lashinsky: I think that the key to Spencer’s point will be whether the current/new tax credit is enough to help spur activity to get through many of these issues, and then what happens when the program expires. That’s the real question to me.

One thing that has me hopeful is that a number of banks have programs to try and sell more homes as short sales rather then full-on foreclosures, or REOs (sales of homes by banks following a foreclosure).

Forbes: REO is for “real estate owned,” if I recall correctly. And a short sale is where the bank decides not to foreclose, but rather to allow the homeowner to sell the property for less than the outstanding amount owed on the mortgage.

Lashinsky: Yes. Homes that are sold as REOs generally go for a greater discount than traditional listings or short sales. A pure foreclosure sale is likely to weigh on the values of surrounding homes. So opting for more short-sales would be beneficial for the banks and for the market.

Forbes: That’s pretty important, because the Wall Street Journal ran a story on its front page just before Thanksgiving about how one in four Americans is “underwater” now–that means their home is worth less than the outstanding amount they owe to the banks. It’s particularly bad in some states. Nevada and Arizona are the worst, with 65% and 48% of homeowners there, respectively, underwater. It’s 35% in California. Does anybody want to dispute the Wall Street Journal’s figures, which come from First American CoreLogic?

Feder: It’s not about disputing figures. It’s about looking into them. If you dig into those numbers a little you find that they are somewhat concentrated in states like Nevada and that the degree to which homes are under water varies based on the price range. The recession has hit some people and places harder than others. It’s those concentrations that drive the averages. In general, the story is not a new one and the article might have tried harder to push beyond the headline.

Rascoff: Zillow’s numbers on negative equity foot very closely with the First American data: “21% of all owners of single-family homes with mortgages were underwater at the end of Q3, compared to 23% at the end of Q2.”

Forbes: What do you guys think about Pat’s point, that the important thing is that banks are increasingly happy to allow homes that are underwater to trade in short sales, which preserve value, rather than foreclose and sell them at auction? Should our readers look at short sales first when they shop for homes? And should our government try to encourage more banks to pursue short sales rather than pump up the housing market by expanding the Making Home Affordable plan?

Rascoff: The problem is that short sales can be very complicated and frustrating to buyers. Pat knows this better than I, but short sales are usually best for patient, sophisticated buyers.

Trump: Agreed.

Lashinsky: Spencer is absolutely right, short sales in their current form are the most frustrating for buyers. The prices have not been agreed upon, and if there is a secondary lien holder, the deals rarely get done.

The banks, however, are working to create programs where they will pre-agree to what they will take, and in some cases they are even paying the current homeowners a small fee to work with them to get the home sold and to leave with minimal cost.

If I were looking for a home and wanted a deal, I would start by looking at REOs, then look at short sales, then traditional listings. I probably would end up buying a traditional or short-sale listing. I’d expect to see the biggest discount (and most risk) with REOs; short sales more complicated and longer process (than traditional sales); traditional sales a smoother process but probably paying a little more.

Forbes: Pat, I’ll bet some of your agents are becoming expert in these. It strikes me that a buyer would have to depend heavily on an agent in a short sale. We can’t all be Don Trump Jr. when we buy real estate, unfortunately.

Lashinsky: Realistically, most buyers absolutely need to work with an agent to successfully get through the short-sale process. Our experts have had to become very good at this just because of current conditions. Knowing what the bank wants and needs in its package, being able to present how you came up with the price you are offering, and general market condition overviews are all important when it comes to getting a short sale accepted and closed. And you are right, there are less then a handful of Don Trump Jr.’s out there!

Trump: Thanks, after this last cycle even we need a bit of an ego boost.

Forbes: Pat, have you considered offering short-sale assistance as a premium service?

Lashinsky: We offer short-sale assistance as part of our normal service offering. It definitely takes more work and effort on the agent’s part to make this work and to bring deals together, but we do a fair number of short-sale deals every month

Forbes: OK, so short sales are a good thing. Could falling prices also be a good thing? I’ve been studying prices in 10 cities around the country and I’m startled by how expensive housing still seems, compared to underlying rents, particularly in Los Angeles and San Francisco.

How many people who talk with your agents say they would buy if prices fell a little more? Could falling prices in a few of the really expensive markets help? Or would that just scare off sellers and keep them in Spencer’s “shadow inventory” category?

Lashinsky: Believe it or not, right now for many of our clients they would buy if they could get an offer accepted or find the right property at the price they are currently seeking. We see pretty good buyer confidence right now that prices are near the bottom. Affordability right now is already so good–prices are down 20% to 40%, interest rates at near all-time lows, plus rents and incomes that have not fallen as fast as home prices.

Feder: That’s the set of forces we’ve been seeing in the numbers since late August. The market is about levels of agreement between buyers and sellers and we’ve seen a lot more of that lately. Remember the season. If these views hold, we could see some real strength in the Spring.

Lashinsky: And if prices do fall more, it will keep more sellers on the sidelines for as long as possible, and they are already waiting. The number only matters to the homeowners who would like to sell their homes right now. Just like paper stock profits or losses, they only matter when you redeem them.

Trump: Except it they (homeowners) paid too much to begin with and are hemorrhaging cash. The gains and losses are tabulated at the sale, but no one can bleed forever.

Forbes: Economist Robert Shiller would remind us that the loss in paper value on a house is an important factor in homeowners’ psychology. If a consumer knows he’s underwater or losing equity value in his home, it has a much stronger effect on his confidence than if, say, the value of his retirement accounts and stocks begins to plunge.

Feder: Well that’s one point on which we agree with Dr. Shiller.

Forbes: What about government? You guys have talked passionately about how the economy needs the backing of a strong housing market. Should the government be stepping in to boost the market? Would it do any good?

Rascoff: The tax credit already has been extended, and expanded, until mid-2010. But even the most optimistic estimates expect it will generate 300,000 to 400,000 incremental transactions, which is still a drop in the bucket considering that most experts predict 3 million new foreclosures in 2010.

Forbes: So it is a fait accompli that the tax credit will endure through 2010?

Lashinsky: The credit was signed and extended until April 30, 2010 with a closing date on June 30, 2010.

Rascoff: Regarding the tax credit, an important question is how many first time buyers it will bring into the market, versus trade-up buyers. The original tax credit, which expired in the fall of 2009, only helped first-timers. The new one also applies to existing homeowners who have been in their homes for five or more years. The problem with applying the credit to existing homeowners is that those people have to sell their houses in order to buy. So even if it does stimulate existing owners to go out and buy, it also results in new inventory coming onto the market. That was the beauty of the original tax credit–since it only applied to first-time buyers, it didn’t cause new inventory to enter the market.

Forbes: Last question: Is it wise to shop for a home between Thanksgiving and New Year’s Day?

Feder: Why not? If you find a home you love that you can afford, why not buy it now? Personally, I think people should buy homes whenever they have the means. The trouble comes when they start buying houses as investments.

Trump: It’s typically a dead time. Most buyers will not be getting offers, so if you find the right deal, it may be the only offer a seller will see for weeks, if not months.

Lashinsky: If you’re looking for a home, it’s a great time to keep looking. If you find a house that meets your needs and desires, it’s a great time to buy. Home sellers on the market at this time of year are motivated, there are fewer buyers to compete with and being in a new home is a great way to start the new year.

Rascoff: The pros are that there are fewer other buyers and motivated sellers. The con is there’s less time for Christmas shopping

Forbes: Well, these days we may need less time for that. But thanks, guys, for another great talk. If you’re a reader who’d like to ask our panel a question, feel free to email me or to post your question to the comments section.

http://www.forbes.com/2009/12/07/real-estate-advisor-personal-finance-housing-buy.html

Stephane Fitch, 12.07.09, 05:33 PM EST

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Tracking of Consumer Confidence

Consumer Confidence continued to soften during the month of October. The reasons for the continued softening are as follows:

• Concern over job security
• Consumers do not have the means to increase spending for big ticket items: cars, houses and major appliances
• Tight credit
• Teenage unemployment at 52%
• Unemployment continues to rise

Consumers who are not worried about job loss or finding a new job are embracing frugal spending behavior.

Remember to share with the consumer that it is the absolute perfect time to buy or sell a property. Home prices and home sales are increasing. Interest rates are inching upward very slowly. They are encouraged to act on the opportunity that is in front of them. Remember there is still around 90% of the workforce that is employed and we need to help them with their housing needs.

Recent Gross Domestic Product numbers are in for the quarter ending in September. The GDP is being reported to be up 3.5% for the first time in 8 quarters. This is the first quarter moving the nation in the direction of an economic recovery. The GDP is made up of three parts of the economy: consumer spending, corporate investment for expansion and Government spending. Consumer spending softened slightly, corporate investment is flat and will be for the next quarter; however, government spending was up substantially. The downside on the government spending is that the funds were borrowed. Also, the current level of government spending cannot be sustained for the long term and therefore the consumer spending and corporate investment will need to begin to grow in order to sustain the increase in GDP as government spending will begin to subside.

There are still many positive indicators for our economy:

• Stock market will move up and down in the near term; however, long term the market will continue upwards for the near future
• The value of the dollar may have reached its floor and will begin to strengthen
• China may have been reporting the growth in their economy falsely thereby highlighting the strength of the U.S. economy
• Interest rates may increase near the end of the second quarter 2010 as inflation begins kicking in
• Banks continue to grow stronger due to earnings of 3% on the margin received when loaning capital on borrowed federal funds
• Appraisals may become more realistic as Congress modifies regulations relaxing the current restrictive policy
• Cost of a barrel of oil still in the normal range and there is nothing near term that will cause a quick run-up in the price
• Unit number of housing sales continue to grow
• Extension of the first time homebuyers tax credit is a possibility

The public is returning to the marketplace for housing but is still concerned about the future of our economy. Let’s assure them that now is a great time to buy the home of their dreams. Go out there and meet someone you have never met before and tell them the great news about buying or selling! Folks need your help to make that decision, we encourage you to help them with their decision to either buy or sell.

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