NEW YORK (CNNMoney) — Housing markets struggled through another tough quarter, this time during the spring buying season, the strongest time of year for home sellers.

Prices of existing homes fell 2.8% in the three months ended June 30 compared with the same period in 2010, according to a report issued Wednesday by the National Association of Realtors (NAR).

For Lawrence Yun, NAR’s chief economist, the report was a continuation of a trend that began in 2009.

“Median home prices have been moving up and down in a relatively narrow range in many markets, which shows a stabilization trend,” he said in a statement. “Markets showing consistent price stability or increases are those with solid labor market conditions, such as in Washington, San Antonio, or Fargo, N.D.”

Prices have bounced around a bit the past two years but have wound up in about the same place. The median price for all existing homes sold during the quarter was $171,900, almost matching the price level of all of 2009 — $172,100.

Sales volume was off 5.4% compared with a quarter earlier to an annualized rate of 4.86 million units, and was down 12.7% from the second quarter of 2010.

The sales volume decline came despite some of the best buying conditions ever. Interest rates stayed very low throughout the quarter. NAR’s Affordability Index — a calculation based on home prices, interest rates and family income — was at its third highest level in history, trailing only the preceding two quarters.
Unemployment worse than you think

The stagnant economy, with a slow recovery in hiring, has hurt sales. Another big headwind is the strict underwriting standards lenders are applying to mortgage applicants in the wake of the financial crisis.

There could be “a more rapid sales recovery if banks get back into the business of lending to more creditworthy borrowers,” said Yun.

There’s good reason that buyers are not acting, according to Anthony Sanders, director of real estate entrepreneurship at George Mason University.

“I wouldn’t advise anyone to buy at this time,” he said. “I felt there was a glimmer of hope that the [Obama] administration and Congress would work together to create jobs again. But after the debt ceiling debate, I’d be scared to death if I was a homebuyer.”

The latest turmoil in the financial markets, the S&P downgrade of U.S. debt and the increasingly dire budget prospects faced by some eurozone nations could choke off home sales even further, he said.
Housing recovery slips out of sight

The most expensive of the 150 metro area markets that NAR reported on was San Jose, Calif. at $610,000, followed by Honolulu at $609,500 and Anaheim, Calif., at $536,700.

The cheapest market was Youngstown, Ohio at $74,800, with Toledo, Ohio, at $75,200, and Ocala, Fla., at $79,800, close behind.

Cape Coral, Fla. recorded the biggest year-over-year gain, 17.9% to $110,900. Elmira, N.Y. had the second biggest increase, 16.1% to $115,200, and Dallas came in 12.5% higher at $151,500.

The biggest loser was Salem, Ore, where prices plummeted a whopping 22.6% compared with 12 months earlier to $136,800. Next was Minneapolis, where prices plunged 17.7% to $145,000, and Toledo, with a 17.3% slide

Home Sales Down

Sales of previously occupied homes fell in June for a 3rd straight month to a seasonally adjusted annual rate of 4.77 million, the National Association of Realtors said yesterday.

At last month’s sales pace, it would take 9 1/2 months to clear those homes. Analysts say a healthy supply can be cleared in six months.

Housing Market Double Dip

House prices dropped to levels below the 2009 housing bust bottom in the first quarter confirming fears of a housing market double dip, dropping 4.2 percent from the previous three months, according to an industry report released Tuesday.

Prices have not been this low in the S&P Case-Shiller national home price index since the middle of 2002.

It was the third straight quarterly drop for the index, which was down 5.1% from a year earlier. National prices are now down 32.7% from their peak set five years ago.The S&P and Case-Shiller national home price index covers 80% of the housing market.

“This month’s report is marked by the confirmation of a housing market double dip in home prices across much of the nation,” said David Blitzer, spokesman for Standard and Poor’s.

Housing Market Double Dip-Brief Recovery

The housing market went through a brief recovery period starting in mid-2009. Home prices recovered nearly 5% of their earlier losses. After home-buyer tax credits, which were in effect during the rebound, expired last April, the slump resumed leading to the recently released reports of a housing market double dip.

“The rebound in prices seen in 2009 and 2010 was largely due to the first-time home buyers tax credit,” said Blitzer. “Excluding the results of that policy, there has been no recovery or even stabilization in home prices during or after the recent recession.”

A separate S&P/Case-Shiller index covering twenty major urban areas also fell in March, this being a straight eight monthly decline.

This is the second month of the post-recession housing market double dip for the twenty city index. Home prices reached their highest levels in July 2006,but then started a declined that lasted till June of 2010, adjusted for seasonal differences, have plunged every month since.

Mortgage Applications Rise

Mortgage applications increased 5.3% from one week earlier, according to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending April 15, 2011.

The Market Composite Index, a measure of mortgage loan application volume, increased 5.3% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 5.9% compared with the previous week.

Refinance Index

The Refinance Index increased 2.7% from the previous week. The seasonally adjusted Purchase Index increased 10.0% to its highest level since December 3, 2010, driven largely by a 17.6% increase in Government purchase applications. The unadjusted Purchase Index increased 10.9% compared with the previous week and was 11.4% lower than the same week one year ago.

Purchase application volume jumped last week largely due to another sharp increase in applications for government loans. Borrowers were likely motivated to apply for loans before the scheduled increase in FHA insurance premiums, said Michael Fratantoni, MBA’s Vice President of Research and Economics.  “Refinance activity increased somewhat, as rates dropped to their lowest level in a month towards the end of the week.”  The four week moving average for the seasonally adjusted Market Index is down 2.9%.

Moving Average

The four week moving average is up 2.5% for the seasonally adjusted Purchase Index, while this average is down 5.7% for the Refinance Index.  The refinance share of mortgage activity decreased to 58.5% of total applications from 60.3% the previous week. This is the lowest refinance share since May 7, 2010. The adjustable-rate mortgage (ARM) share of activity increased to 6.5% from 5.9% of total applications from the previous week.

For Fannie/Freddie lenders to approve a mortgage to finance purchase of a condo, a large majority of the units — 70% — have to be already sold or under contract to individuals. Before 2009, the threshold was 51%.

If more than 30% are still owned by the company that built the complex or sponsored its conversion from rental units, the mortgage will be denied, no matter how qualified the buyer is.  Fannie and Freddie have also increased their emphasis on income relative to debt.  If someone’s total debt payments exceed 45% of income, the mortgage will be denied. In 2009, the limit was 55%.

Foreclosure

Some borrowers lost homes to foreclosure but then diligently rebuilt their financial health. Despite high credit scores, ample assets and income and steady employment, lenders are not allowed to finance their Fannie/Freddie mortgages if their foreclosures happened any time within the past seven years.

Fannie and Freddie Requirements

Before spring last year, the wait time was five years.  Fannie and Freddie also have gotten stricter in how they factor in missed payments on credit cards, auto loans and other debts in which the balances do not have to be paid off every month.  They used to be okay with a missed payment or two. Now, one missed payment will hit your debt-to-income ratio, because banks will add 5% of your outstanding loan balance to the debt part of the calculation.

Housing Drops Again
The Standard & Poor’s/Case-Shiller composite index of 20 metropolitan areas declined 0.8 percent in September from August
on a seasonally adjusted basis.  Economists polled by Reuters had expected a decline of 0.3 percent.  S&P, which publishes
the indexes, also said home prices in the 20 cities index rose 0.6 percent from September 2009, slower than the 1.1 percent
expected.  

Housing Drops again-Washing and Las Vegas Post Gains

The index has risen 5.9 percent from their April 2009 bottom. But it remains nearly 28.6 percent below its
July 2006 peak.  Prices in San Francisco and Los Angeles, which had been increasing, both fell in August from July.
Washington and Las Vegas were the only metro areas to post gains in monthly prices.

Housing Drops Again-Job Worries

Prices rose in many cities from April through July, mostly boosted by government tax credits which have since expired. Job worries
and record high foreclosures are dampening buyer demand and weighing on prices.  The national quarterly index, which measures home prices
in the nine U.S. census regions, dropped 2 percent in the third quarter from the previous quarter.

You’ve probably heard that the nation’s banks had a $21.6 billion profit during the second quarter, reason enough to celebrate with big executive bonuses for our financial leaders. But before we break out the champagne it might be good to mention that the profits enjoyed by our bankers are no more believable than Bernie Madoff’s sworn testimony.

To untangle what’s going on we have to start with the idea that a sound financial system is crucial to the economy and thus to everyone. If that means a few rules must be bent to create the fiction of bank stability, so be it. Unfortunately, the financial system remains painfully and deeply unsettled, a reality which impacts home prices and foreclosure practices nationwide.

In The Beginning
In 2008 the government created the TARP program, $700 billion largely set aside to prop up big lenders. Happily, most of the money was unneeded, “only” $190 billion remains outstanding and much of what’s unpaid is related to non-banks such as GM and AIG.

However, less visible and perhaps equally important was a quiet accounting change.

“Rule 157” used to say that assets on lender books should be appraised as if they were being sold today, the “mark-to-market” valuation method. This was a great rule when values were increasing, but if left in place during down times it would force banks and others to show huge mortgage and property losses. So, of course, the rule was changed, replaced by what the Wall Street Journal calls the “mark to wish” standard.

Bankers certainly knew what was going on. As Sheila Blair, head of the Federal Deposit Insurance Corporation explains, “the difficulty in determining the value of mortgage-related assets and, therefore, the balance-sheet strength of large banks and non-bank financial institutions ultimately led these institutions to become wary of lending to one another, even on a short-term basis.”

Mortgage Relief
Almost 435,000 homes have been saved from foreclosure under the government’s Making Home Affordable program. This is certainly good news for legions of borrowers and there’s another beneficiary as well: Lenders have been helped because nearly 435,000 once-distressed loans are now performing.

Under the Making Home Affordable program lenders cut rates, stretch loan terms and sometime forgive principal so that monthly mortgage payments will total no more than 38 percent of a borrower’s monthly income. Uncle Sam then chips in with a subsidy so that borrowers only make payments equal to 31 percent of their monthly income. The result: Lower monthly costs for borrowers, fewer foreclosures, better-looking lender books, and higher stock prices.

The Profit Illusion
Given the unprecedented level of federal assistance, it’s hardly a surprise that the fortunes of the lender community have begun to improve, even if much of the “improvement” does not reflect marketplace realities.

Here’s an example: Smith took out an option ARM loan in 2006 which allowed negative amortization. The interest not paid each month was added to the loan amount. For accounting purposes such interest was treated as taxable “income” even though it was not actually collected. With “higher” income lenders could also report “higher” profits.

Now we have the reverse situation. When an option ARM is foreclosed the principal balance is likely to be larger than the original loan amount, meaning the loss is magnified. This is a major problem because Fitch Ratings reports that “start” periods for option ARMs worth $134 billion will end in 2010 and 2011. Fitch also reports that the average monthly payment will rise 63 percent, an increase many borrowers will be unable to afford. The result is that the value of such loans on lender books is now greatly overstated.

Delayed Foreclosures
When a home is sold at foreclosure the loan is retired at the value the lender is able to get from the transaction. For example, a home with a $200,000 mortgage balance might be sold at foreclosure with the lender getting $150,000 from the sale. In today’s market foreclosure losses can be substantial, especially in major foreclosure centers such as Nevada, Arizona and Florida.

If a borrower is delinquent but not foreclosed then there’s no lower value to report, a $50,000 “savings” in our example. Lenders thus have a financial incentive to carry delinquent borrowers and support state rules which delay foreclosures.

Second Liens
If you look at the latest numbers for the Making Home Affordable program you can see that there were 1.5 million eligible borrowers. That compares with 3.1 eligible million mortgages — or better than two per borrower. In other words, many of the homeowners now in trouble purchased real estate with “piggyback” financing. This meant they could buy with less down and also avoid the cost and bother of mortgage insurance — good news, as it turns out, for the mortgage insurance companies.

Laurie Goodman, a leading analyst with the Amherst Securities Group, tells us that second liens worth $1.01 trillion are outstanding according to Federal Reserve data. Of these liens, says Goodman, $751 billion are held by commercial banks and $435 billion are owned by the top four commercial banks.

In a foreclosure situation the rule is that the first lender must be paid off entirely before a dime is paid to second lien holders such as those who own second mortgages or home equity lines of credit (HELOCs).

Given that the value of many homes is less than the balance of the first mortgage, just how many second-lien holders will get paid in the event of foreclosure? Or, to put this another way, is the $751 billion in second liens held by the nation’s banks really worth reported values?

Many of the largest banks are also the largest servicers, an arrangement which can create a considerable conflict.

“Often,” says Gretchen Morgenson, writing in The New York Times, “the same bank that services a primary mortgage owned by another institution also owns a second mortgage or home equity line of credit on the same property. When that borrower has trouble meeting both payments, the servicer has an interest in making sure that amounts owed on the second lien, which it owns, continue to be paid even if the first loan, which it has no interest in, slides into delinquency.” (See: In This Play, One Role Is Enough, August 14, 2010)

How does a servicer protect the second lien holder? According to Naked Capitalism, servicers don’t foreclose on borrowers with second liens at the same rate as they foreclose on borrowers without a second lien. If all borrowers were foreclosed equally, lenders would be forced to immediately write off large numbers of second liens.

Reserves
Lenders are required to set aside money for loss reserves. How much to set aside is a matter of discretion, there’s no absolute rule. Curiously, in the second quarter when lenders had profits of $21.6 billion they also reduced loan reserve contributions by $27.1 billion when compared with a year earlier.

Lenders might argue that credit quality has improved and thus less money should be set aside for losses, but the reality is that foreclosure filings have been above 300,000 per month for nearly a year and a half according to Jim Saccacio, Chairman and CEO at RealtyTrac.com.

“Like an iceberg, a large portion of the foreclosure problem is hidden from view,” says Saccacio. “But the problems are there, they’re real, and everyone has to understand that they have yet to go away.”

The Bottom Line
Despite glowing profit reports, the lending system remains troubled. At best, what we have is a holding operation which has prevented the financial system from appearing significantly worse. That’s a victory — consider the alternative. Unfortunately at some point real values will have to be shown on lender books and those values are not what we see today.

The hope is that the national fudging process can continue until property values increase for real, raising the value of lender loan portfolios no matter what accounting system is used. The good news is that some increases in home values have begun to be reported. The National Association of Realtors says July home prices were 0.9 percent higher than a year ago. TheCase-Shiller Index shows that home prices across the country rose 4.4% in the second quarter. The Federal Housing Finance Agency says home prices increased .9% in the second quarter when compared with the first three months of the year.
So the race is on: Will higher real estate values take hold before lender accountants have to fess up? Stay tuned.

Is the Recession Over

Is the Recession Over, and more importantly have you missed the boat on the perfect opportunity to make a killing in the real estate market.

Here’s what Chris McLaughlin the noted distressed real estate attorney and short sale expert has to say on the current state of the economy, the real estate market and the stock market:

I’ve heard it all. But the 3 biggest whoppers keep coming
back, over and over again.

#1: The recession is over. Right. We believe the media
about as much as we do the politicians. It ain’t
over with unemployment numbers still piling up new
bodies on the heap every week. And foreclosures
still hitting record highs (no, “slowing slightly”
doesn’t count – they’re still growing every day!).

#2: The stock market’s recovering. If so, it’s the worst
“recovery” in history. Stock markets in China and
Europe are delivering up to SIX DOLLARS IN PROFIT
for every ONE ours is! Why? Our economy still has tons
of bad subprime loans and are gonna go South.

Other economies may be saddled with dunderhead politicos
too, but not subprime defaults. Our stock market is
limping along like an anemic bum in the gutter, looking
for bottles to turn in for change.

#3: Foreclosures are down. What a spin-job that was!
We simply threw a few less houses on the bonfire this
month than last. Does that mean there are less? No!
In fact, if you compare it with the same month of the
previous year, when the economy was crashing big-time,
the rate is UP 18% this year!

If you search out media stories in the Great Depression,
they also constantly broadcasted “recovery is just around
the corner.”

For 8 miserable years.

Look, you can actually make a ton of cash in these bad times
and the worse ones to come. Truth is, there are more
millionaires made in recessions than any other times. The
main reason being, when things fall apart, there are smart
people positioned to pick them up…

…for pennies on the dollar. But there’s even more money
being made by spotting these opportunities and flipping
them to other investors.

There where over 95, 000 homes foreclosed in the month of August 2010 alone, what this means is that it is not too late to consider entering the property market in search of a bargain property. The old adage goes something like this: Don’t wait to buy real estate, Buy real estate and wait!!

Don’t loose this once in a lifetime opportunity to ensure your financial future. If you don’t know how to avail of this opportunity then check out the info offered by the expert Chris McLaughlin here. Click Here For Real Estate Info.

Homes repossessed by the banks or sold at auction increased 25% in August 2010 over the same month in 2009.

95,364 homes where repossessed in the month of August 2010 alone. That figure was an increase on 3% on July 2010 and an increase of 25% on august 2009.

We are looking at over 1 million foreclosures this year 2010 and while this is a huge hit for the economy imagine the effect this is having socially with 1 million families losing their homes, moving their children from schools and friends, getting rid of pets and forming deep fiscal scars in their psychic.

All this turbulence in the housing market despite the news from Wall Street that the recession is over.

The reality for the economy and the housing market is that until the jobs market shows signs of new life the only good economic news will be for the wealthy who are making a killing picking up distressed properties, equities and other investments.

And even if you do have a decent job and some down payment money saved up and find a bargain piece of real estate that you would like to buy chances are that unless your credit is excellent you will have trouble finding a mortgage at any of the touted rates.

First thing to do if you are looking for finance is check out your credit to make sure that some long forgotten utility or cell phone bill or a couple of hundred bucks isn’t depressing your credit score.

There are a number of websites where you can get a free credit report. If you don’t want to do a Google search for a free credit score you can click here for a free trial that will give you a free copy of your credit report. If you don’t want to keep up the service just cancel and you will have gotten your credit report and score and you will not be charged a cent.

Another great credit tip is don’t keep large balances on your cards or even on one card. It is better to spread out your balance over a number of cards to ensure that no card is running a balance over 25% of your credit limit

Rent to Own

With the recent negative economic situation and its effect on the housing market, homeowners have been stuck trying to sell their homes, and have had to watch as their home value slipped and they had to keep making payments on their home. A rent to own agreement might be a way for a homeowner stuck with an unmovable home in the current depressed real estate market.

On the other side of the table, the economic situation has affected many potential buyers of homes as well; due to job losses, missed mortgage payments, heavy debt, and ultimately, bad credit, they have been unable to procure a mortgage for a new home. Couple this with the fact that banks hit a standstill where they were not making loans and it is a slow recovery for them as well. For people who are finding it hard to get a home loan in the current market a rent to own situation might be worth considering.

Rent to Own-Win Win

A solution for both homeowner and potential homeowner would be a “Rent to Own Home”, which is basically an arrangement whereas the homeowner allows a tenant  who is in reality a potential buyer for the home to rent their home, with an option to purchase that home at some preset future date  in at a priced agreed in advance in the rent to own contract agreement.

This would benefit the homeowner by having someone renting their home, making their monthly payments, taking care of the home and even potentially making repairs.

Rent to Own-FSBO

This works for you if you are selling your house on your own in a For Sale By Owner/ FSBO format, or if you are listed with a realtor, this opens up a whole new market for you – buyers who cannot qualify for a mortgage now, but perhaps they will be in 6-24 months down the road.

As a potential buyer of a home, a Rent to Own is an ideal situation, as it permits you to “try before you buy” to see if you like the home, the neighborhood, the schools, etc.

Rent to Own-Real Estate Attorney

As a caveat to both types of individuals described above, always check out the local rules/laws in your state, town, or municipality, as there are big differences depending on where you live. You’ll want to confer with a real estate agent and perhaps a real estate attorney as well.

For both Buyers and Sellers of Homes, Rent to Own may be your best option in any type of economy. Rent to Own could just be the solution to your problem.

Regardless of whether you are a homeowner who cannot sell a home because of negative equity or a buyer shut out of the housing market because of credit issues a rent to own purchase agreement might be an ideal short term solution to your problem.

There has been no shortage of encouraging numbers in recent housing data. New home sales rose 14.8% in April. Existing home sales were up 7.6%. And pending home sales? They were up 6%. Meanwhile housing starts gained 5.8%. And that’s enough of the good news.

The tax credit has expired, so we’re back to reality. And the reality is that the government can’t use tax credits to buy prosperity in the housing market. Not when a record number of foreclosures are waiting around the corner. The little glimmer of hope we saw is about to be overtaken by the grim fact that the housing market is too fundamentally weak to stand on its own.

And homebuilders see the writing on the wall. Yes, housing starts were up 5.8%. But at the same time, housing permits fell 11.5%. And yes, pending home sales rose 6%… but mortgage applications fell 4.1% last week alone. And the unintended consequence of the tax credit: it brought more home sellers to the market… the inventory of unsold homes rose 11.4% in April. Springtime is officially over in the housing market.

And looking ahead, foreclosures will climb. The National Association of Realtors estimates a record 1.1 million foreclosures this year.

Now we have to give credit where credit is due. The tax credit brought an estimated 1 million buyers to the housing market…which no doubt stemmed a lot of foreclosures. So the future could have looked a lot cloudier.

But at the end of the day, sentiment about the housing market is bleak. Strategic defaults continue to climb. Homeowners have reached a point of indifference…that is even worse than anxiety. And there is such a backlog of properties in default that those homeowners will sit expense free in their homes for easily a year before foreclosure proceedings are completed.

Now, don’t be surprised if we see sustained strength in some of the housing data for the next couple of months. It’s no reason for confidence, though. The government’s tax credit required a contract by April 30, and a closing by June 30. Because existing home sales are counted at the time of closing, this data will have a steady run through the June reading. But after that, expect a precipitous drop.

The bottom line: the tax credit may have only succeeded in affecting “the timing, not the total, of home purchases”, according to Barron’s.

And in the midst of all this misfortune, some are still surprisingly upbeat. Toll Brothers (the largest luxury home builder in the country) increased their land holdings for the first time in four years, according to Bloomberg. And Chairman Robert Toll is optimistic, “The past few months’ activity has been driven by an increase in confidence among our buyers”. That may be the case, but, none the less, the company is not immune to the perils of the housing market. They are sitting on $3 billion in inventory, and that inventory will pose a challenge, particularly since volume this year is expected to be just 30% of that of 2005, according to Morningstar analyst Eric Landry.

But it’s not just Toll Brothers. Now is not the time to buy into any housing stocks. As the lingering effects of the stimulus fades, and the glut of foreclosures rises to the surface, we will find another housing low soon enough. Just wait.

Disclosure: No positions

Article written by Brian Rezny