You better believe it — the real estate market is back. It’s time to buy again, and here are the 6 cities with the most affordable homes, according to a new report from Deutsche Bank.

1. Atlanta, GA

Rent as % of after tax mortgage payment: 151.2% Median home price change, 2006-2010: -33.2%

In Atlanta, the average monthly rent is about 50 percent more than the average after-tax mortgage payment. Plus, home prices in Atlanta have dropped nearly 14 percent yearover-year in February, creating a great opportunity for buyers to cash in

2. Orlando, FL

Rent as % of after tax mortgage payment: 137.2% Median home price change, 2006-2010: -51.3%

Orlando saw a larger drop in home prices during the past year than any of Florida’s other metro areas, according to a Florida REALTORS® report cited by the Orlando Sentinel.

3. Rochester, NY

Rent as % of after tax mortgage payment: 136.0% Median home price change, 2006-2010: 3.6%

While housing prices in Rochester–the second-largest economy in the state–inched up slightly between 2006 and 2010, the city still favors home ownership over renting.

4. Cleveland

Rent as % of after tax mortgage payment: 132.6% Median home price change, 2006-2010: -14.8%

It costs about 24 percent less to buy a home in Cleveland than it does to rent.

5. Tampa – St. Petersburg

Rent as % of after tax mortgage payment: 131.6% Median home price change, 2006-2010: -41.4%

Tampa-St. Petersburg was one of the most overbuilt states during the housing boom and it ranks ninth in the country for foreclosures. But it’s still an attractive spot for retirees, and with dropping home prices it’s now more affordable to own than rent here.

6. LAS VEGAS

Rent as % of after tax mortgage payment: 125.1% Median home price change, 2006-2010: -56.5%

Empty homes and condos blanket Las Vegas, but a comeback is in sight. More than half of sales in Las Vegas are from cash buyers, signaling investors have re-emerged. A strong rental market also means renting out properties still offer a good return.

Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.

By Shawn Tully, senior editor-at-large.

From his wide-rimmed cowboy hat to his roper boots, Mike Castleman fits moviedom’s image of the lanky Texas rancher. On a recent March evening, Castleman is feeding cattle biscuits to his two pet longhorn steers, Big Buddy and Little Buddy, on his 460-acre Bar Ten Creek Ranch in Dripping Springs, a hamlet outside Austin in the Texas Hill Country. The spread is a medley of meandering streams, craggy cliffs, and centuries-old oaks. But even in this pastoral setting, his mind keeps returning to a subject he knows as well as any expert around: the housing market. “I’m a dirt-road economist who sees what’s happening on the ground, and in 35 years I’ve never seen a shortage of new construction like the one I’m seeing today,” declares Castleman, 70, now offering a biscuit to his miniature donkey Thumper. “The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses. And in most markets the price of new homes is fixin’ to rise, not fall.”
Castleman is in a unique position to know. As the founder and CEO of a company called Metrostudy, he’s spent more than three decades tracking real-time data on the country’s inventory of new homes. Each quarter he dispatches 500 inspectors to literally drive through 45,000 subdivisions from Baltimore to Sacramento. The inspectors examine 5 million finished lots, one at a time, and record whether they contain a house that’s under
construction, one that’s finished and for sale, or a home that’s sold. Metrostudy covers 19 states, or around 65%
of the U.S. housing market, including all the ones hardest hit by the crash: Florida, California, Arizona, and
Nevada. The company’s client list includes virtually every major homebuilder and bank — from Pulte (PHM) and KB Home (KBH) to Bank of America (BAC) and Wells Fargo (WFC).
The key figures that Metrostudy collects, and that those clients prize, are the number of homes that are vacant and for sale in each city, and the number of months it takes to sell all of them. Together those figures measure inventory — the key metric in determining whether a market has a surplus or a shortage of new housing.

Today Castleman is witnessing an extraordinary reversal of the new-home glut that helped sink prices just a few years ago. In the 41 cities Metrostudy covers, a total of 78,000 houses are now either vacant and for sale, or
under construction. That’s less than one-fourth of the 343,000 units in those two categories at the peak of the
frenzy in mid-2006, and well below the level of a decade ago. “If we had anything like normal levels of buying,
those houses would sell in 2½ months,” says Castleman. “We’d see an incredible shortage. And that’s where we’re heading.”
If all the noise you’re hearing about housing has you totally confused, join the crowd. One day you’ll read that
owning a home has never been more affordable. The next day you’ll see news that housing starts have plunged to nearly their lowest level in half a century, as headlines announced in March. After four years of falling prices and surging foreclosures, it’s hard to know what to think. Even Robert Shiller and Karl Case can’t agree. The two economists, who together created the widely followed S&P/Case-Shiller Home Price indices, are right now offering sharply contrasting views of housing’s future. Shiller recently warned that the chances were high for a further double-digit drop in U.S. home prices. But in an interview with Fortune, Case took a far brighter view: “The lack of new home building is a huge help that a lot of people are ignoring,” says Case.
“People think I’m crazy to be optimistic, but housing is looking like the little engine that could.”
To see where real estate is truly headed, it’s critical to keep your eye firmly on the fundamentals that, over time,
always determine the course of prices and construction.

During the last decade’s historic run-up in prices, Fortune repeatedly warned that things were moving too fast. In a cover story titled “Is the Housing Boom Over?,” this writer’s analysis found that the basic forces that govern the market — the cost of owning vs. renting and the level of new construction — were in bubble territory. Eventually reality set in, and prices plummeted. Our current view focuses on those same fundamentals — only now they’re pointing in the opposite direction.
So let’s state it simply and forcibly: Housing is back. Two basic factors are laying the foundation for dramatic
recovery in residential real estate. The first is the historic drop in new construction that so amazes Castleman.
The second is a steep decline in prices, on the order of 30% nationwide since 2006, and as much as 55% in the
hardest-hit markets. The story of this downturn has been an astonishing flight from the traditional American
approach of buying new houses to an embrace of renting. But the new affordability will gradually lure
Americans back to buying homes. And the return of the homeowner will start raising prices in many markets this
year.
Of course, home prices are low and home construction is weak for a reason: incredibly low demand. For our
scenario to play out, America will need a decent economy, with job creation and consumer confidence continuing to claw their way back to normal.  One big fear is that today’s tight credit standards will chill the market. But we’re really returning to the standards that prevailed before the craze, and those requirements didn’t stop prices and homebuilding from rising in a good economy. “The credit standards are now at about historical levels, excluding the bubble period,” says Mark Zandi, chief economist for Moody’s Analytics. “We saw prices rising with fundamentals in those periods, and itwill happen again.”
To see why, let’s examine the remarkable shift in home affordability. A new study by Deutsche Bank measures
affordability in two ways: first, the share of income Americans are paying to own a home. And second, the cost of owning vs. renting. On the first metric, the analysis finds that homeowners now pay just 9.8% of their income in after-tax mortgage, tax, and insurance payments. That’s down from 17.2% at the bubble’s peak in 2007, and by far the lowest number in the Deutsche Bank database, going back to 1999. The second measure, the cost of owning compared with renting, should also inspire potential buyers. In 28 out of 54 major markets, it’s now cheaper to pay a mortgage and other major costs than to rent the same house. What’s most compelling is that in all of the distressed markets, owning now wins by a wide margin — a stunning reversal from four years ago. It now costs 34% less than renting in Atlanta. In Miami the average rent is now $1,031 a month, vs. the $856 it costs to carry a ranch house or
stucco cottage as an owner.

Not all markets will bounce back equally, of course.  Housing resembles the weather: The exact conditions are different in every city. But in general the big U.S. markets fall into two different climate zones right now.  We’ll call them the “nondistressed markets” and the “foreclosure markets.” A more detailed look shows why the forecast for both is favorable.
Nondistressed markets: Ready for launch
No cities went untouched by the collapse in prices over the past few years. But markets such as Northern Virginia, Indianapolis, Minneapolis, San Diego, the San Francisco suburbs, and virtually all of Texas held up reasonably well. In those areas prices spiked far less than in bubble cities — the foreclosure markets we’ll get to shortly — chiefly because they didn’t get nearly as many speculators who thought they could flip the homes or rent them to snowbirds.
The nondistressed markets will be able to get prices rising and construction growing far faster than the harder-hit areas for a simple reason: Although some of these markets are still suffering from foreclosures, they don’t need to work through the big overhang haunting a Las Vegas or a Phoenix. The number of new homes for sale or in the pipeline is extraordinarily low in nondistressed markets. San Diego is typical. It has just 921 freestanding homes for sale or under construction, compared with 4,425 in late 2005. The challenge for these cities is to generate enough demand to reduce inventories of existing, or resale, homes. In the entire country the resale supply stands at 3.5 million houses and condos. That’s a fairly high number, since it would take more than eight months to sell those properties; seven months or below is the threshold for a strong market.
But in the nondistressed cities, the existing home inventory is lower, closer to seven months on average.  So a modest increase in demand will translate into strong gains in both prices and new construction. That should happen quickly, because most of those markets — including Silicon Valley, Northern Virginia, and Texas — are now showing good job growth.
Zandi of Moody’s Analytics expects that prices will rise three to four points faster than inflation for the next few
years in virtually all of the nondistressed markets. His view is that prices will increase in line with rents, which
are now growing briskly because apartments are in short supply. Those higher rents will encourage buyers to cross the street from an apartment to a home of their own.
In Northern Virginia, Chris Bratz, an engineer, and his wife, Amy DiElsi, a publicist, are planning to leave their rental apartment and become homeowners for the first time. The main reason? Buying has simply become a far better deal than renting. “The market got completely inflated, then it crashed, so prices are coming back to where they should be,” says Chris. As the couple have watched prices fall, they have also watched the rent on their apartment spiral upward, reaching $2,700 a month.
They calculate that they should be able to purchase a townhouse for between $400,000 and $500,000 and pay
less per month for a mortgage. The nondistressed markets will also lead the way in construction. Zandi predicts that for the nation as a whole, single-family housing “starts” — measured when a builder pours a foundation for a new home — will rise from 470,000 in 2010 to as much as 700,000 this year. A large portion of that activity will happen in nondistressed markets where a tightening supply of resale houses will start making new homes look like a good deal. “Our main competition is from resales,” says Jeff Mezger, CEO of KB Home. “The prices of those homes have
stayed so low, because of low demand, that it’s hampered the ability of builders to sell new houses.”
But many would-be buyers simply prefer a brand-new house. Eventually they’ll move from renters to buyers,
and the trend will accelerate now that prices are no longer dropping. In Minneapolis, Yuan Qu and her husband, Xiang Chen, a researcher at the University of Minnesota, just moved from a two-bedroom rental to a new light-blue four-bedroom ranch with a chocolate colored roof on a spacious corner lot. They paid $400,000, a bargain price compared with a few years ago. The couple, both in their early thirties, moved to Minnesota from China six years ago. “We wanted to buy a house, and we’ve been waiting and waiting and waiting,” says Qu. “The prices went down for so long, we finally thought they couldn’t keep falling.” For Qu the only choice was new construction. “We’re not very handy people,” she admits.
The true disaster areas for housing since the bubble burst have been Sunbelt cities such as Las Vegas, Phoenix, and Miami — places that boasted great job and population growth in the mid-2000s, only to suffer a housing crash that swamped them with empty homes and condos and crushed their economies. But people always want to live in those sunny locales, and their job markets are starting to recover, albeit slowly. In foreclosure markets the inventory problem is far greater because it includes not just traditional resale homes but millions of distressed properties. Fortunately those houses are now such a screaming deal that investors, including lots of mom-and-pop buyers, are purchasing them at a rapid pace. To be sure, some foreclosure markets won’t rebound for years because they’re both
vastly overbuilt and far from big job centers; a prime example is California’s Inland Empire, a real estate disaster zone 80 miles east of Los Angeles.  But the outlook is brightening for Phoenix, Las Vegas, Miami, and parts of Northern California. A big positive is the tiny supply of new homes entering the market. Phoenix, for example, has a total of just 8,100 new homes that are either for sale or under construction, down from 53,000 in mid-2006. The big test in thesecities is absorbing the steady stream of distressed properties. The foreclosures put downward pressure on the market far out of proportion to their numbers because of markdown pricing. “We had levels of
inventory even higher than this in 1990 and 1991,” says MIT economist William Wheaton. “But they were traditional listings, not foreclosures, so they didn’t create the big discounts you get with foreclosures.”
Wheaton reckons that we’ll see a flow of around 1 million foreclosures a year, at a fairly even pace, from now
through 2013. That figure is frequently cited as evidence that the market is doomed for years in most foreclosure
markets. Not so. The reason is that the vast bulk of those units, probably over 600,000, according to Gleb
Nechayev, an economist with real estate firm CB Richard Ellis (CBG), are being converted to rentals either by investors or their current owners. Those properties are finding plenty of renters, since the rental market is still extremely strong across the country.
Remember, the millions who lost their homes to foreclosure still need somewhere to live.
A typical investor is Alex Barbalat, a Russian immigrant who’s purchased seven homes east of San Francisco in
the towns of Bay Point, Antioch, and Pittsburg. His average purchase price is around $100,000 for homes
that once sold for between $300,000 and $500,000. But he has no trouble finding renters, since his tenants can
commute to jobs in San Francisco on the BART transit system. Barbalat is pocketing rental yields on the prices
he paid of around 12%, and he’s in no hurry to sell. “I’m holding them until prices drastically rise,” he says.
Investment funds are also entering the game. Dotan Y.  Melech looks for bargains in Las Vegas for UnitedAMS,
a firm he co-founded that manages apartments and other real estate investments. The firm has raised more
than $20 million from outside investors to purchase distressed properties. So far, Melech has bought around
300 houses and plans to purchase another 200 this year. He has no trouble renting the houses he buys, since, he estimates, occupancy rates in Las Vegas are touching 95%. The “cap rate,” or return on investment after all expenses, is between 8% and 10% — twice the rate on 10-year Treasuries. Melech rents to people who lost their homes but are reliable renters. “A lot of people can’t be buyers because their credit got hurt,” he says.
Even with investors jumping in, buying activity in foreclosure markets hasn’t yet increased enough to bring
inventories down. It will soon. Zandi thinks prices will fall a couple of percentage points lower in the distressed
markets in the short run. “But that will be overshooting,” he says. “It’s like an elastic band. If prices do drop this
year, they will need to bounce back because they’ll be far too low compared with rents and replacement cost.”
Renters will come off the sidelines to purchase homes in the years ahead, precisely the opposite trend of the past
few years.

Consider the example of Michael Dynda, a retired Air Force avionics technician who now works for a government contractor in Las Vegas. Dynda, 49, is a first-time buyer who put off purchasing for years, in part because prices were falling so rapidly in Las Vegas, with no bottom in sight. But last year the combination of bargain prices and low mortgage rates became too good to resist. He ended up purchasing a 2,300-square-foot stucco home for $240,000, or about half what it would have fetched in 2007. Dynda got a 4.38% home loan, and pays the same amount on his mortgage as on the rent on the house he left to become a homeowner. “The timing was about as good as it could get,” says Dynda.
Back on the ranch, Mike Castleman is lounging in his creek-front mansion, built from “a hundred tons of fine central Texas limestone.” As he shows off his collectionof custom-made guitars, including one crafted to resemble the skin of a rattlesnake, the homespun housing guru once again returns to his favorite topic.  Castleman claims that this recovery will look like all the others: It will bring a severe shortage of housing. He invokes the livestock business to explain. “It takes three years between the time a bull mates with a cow and when you get a calf ready for market,” he says. “That’s how it is in housing too. We’ll get a big surge in demand and the drywall companies will take a long time to ramp up, and it will take years to get new lots approved.
Buyers will show up looking for a house in a subdivision, and all the houses will be sold. The builders will tell them
it will take six months to deliver a house.” But those folks, says Castleman, will be set on buying a place.
“And they’ll want it so bad they’ll bid the prices up!” In other words: Beat the crowd.

Measure to help bring stability to home values and accelerate sale of vacant properties

In an effort to stabilize home values and improve conditions in communities where foreclosure activity is high, HUD Secretary Shaun Donovan today announced a temporary policy that will expand access to FHA mortgage insurance and allow for the quick resale of foreclosed properties. The announcement is part of the Obama administration commitment to addressing foreclosure. Just yesterday, Secretary Donovan announced $2 billion in Neighborhood Stabilization Program grants to local communities and nonprofit housing developers to combat the effects of vacant and abandoned homes.

“As a result of the tightened credit market, FHA-insured mortgage financing is often the only means of financing available to potential homebuyers,” said Donovan. “FHA has an unprecedented opportunity to fulfill its mission by helping many homebuyers find affordable housing while contributing to neighborhood stabilization.”

With certain exceptions, FHA currently prohibits insuring a mortgage on a home owned by the seller for less than 90 days. This temporary waiver will give FHA borrowers access to a broader array of recently foreclosed properties.

“This change in policy is temporary and will have very strict conditions and guidelines to assure that predatory practices are not allowed,” Donovan said.

In today’s market, FHA research finds that acquiring, rehabilitating and the reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

“FHA borrowers, because of the restrictions we are now lifting, have often been shut out from buying affordable properties,” said FHA Commissioner David H. Stevens. “This action will enable our borrowers, especially first-time buyers, to take advantage of this opportunity.”

The waiver will take effect on February 1, 2010 and is effective for one year, unless otherwise extended or withdrawn by the FHA Commissioner. To protect FHA borrowers against predatory practices of “flipping” where properties are quickly resold at inflated prices to unsuspecting borrowers, this waiver is limited to those sales meeting the following general conditions:

• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction.
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the waiver will only apply if the lender meets specific conditions.
• The waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Specific conditions and other details of this new temporary policy are in the text of the waiver, available on HUD’s website.

1. Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
   • The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
   • If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
   • This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
   • The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.
2. Update the combination of FICO scores and down payments for new borrowers.
   • New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
   • This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
   • This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.
3. Reduce allowable seller concessions from 6% to 3%
   • The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
   • This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.
4. Increase enforcement on FHA lenders
   • Publicly report lender performance rankings to complement currently available Neighborhood Watch data – Will be available on the HUD website on February 1.
     • This is an operational change to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
   • Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
     • Implement Credit Watch termination through lender underwriting ID in addition to originating ID.
     • This change is included in a Mortgagee Letter to be released tomorrow, January 21st, and is effective immediately.
   • Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process
     • Specifications of this change will be posted in March, and after a notice and comment period, would go into effect in early summer.
   • HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes:
     • Amendment of section 256 of the National Housing Act to apply indemnification provisions to all Direct Endorsement lenders. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite
     • Legislative authority permitting HUD maximum flexibility to establish separate “areas” for purposes of review and termination under the Credit Watch initiative. This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches

In addition to the changes proposed today, the FHA is continuing to review its overall response to housing market conditions, and continuing to evaluate its mortgage insurance underwriting standards and its measures to help distressed and underwater borrowers through FHA/HAMP and other FHA initiatives going forward.

Senators Agree To Extend Homebuyer Tax Credit

STEPHEN OHLEMACHER, Associated Press Writer

WASHINGTON — Senators have agreed to extend a popular tax credit for first-time homebuyers and to offer a reduced credit to some repeat buyers.

The tax credit provides up to $8,000 to first-time homebuyers but is set to expire at the end of November. A spokeswoman for Senate Majority Leader Harry Reid said senators agreed Wednesday to extend the existing tax credit for first-time homebuyers while offering a reduced credit of up to $6,500 to repeat buyers who have owned their current homes for at least five years.

A congressional aide said the tax credits would be available to homebuyers who sign sales agreements by the end of April. They would have until the end of June to close on their new homes. The aide, who spoke on condition of anonymity, was not authorized to publicly discuss the deal.

That Credit has been agreed upon by the Senators, it will be submitted to the House of Representatives for approval and on to the President to rubber stamp!

How to know if yours is match made in heaven

 By Dian Hymer – Assembling the right team of professionals to assist you during a home purchase orsale is imperative, particularly in today’s challenging home-sale market. Selecting the right real estate agent can be critical to your ultimate success.

As in any business, there are good agents and agents who aren’t so good. Don’t confuse years in the business or number of homes sold with quality service. Some top performing agents provide their clients with excellent service. Agents who do a lot of business have a wealth of experience to draw from that can be helpful when problems arise.

However, some agents are more interested in making a commission than they are in satisfying their clients.  They might sign up the listing promising to sell your home quickly for the best price possible. After that, you may see or hear little from that agent. Rather, you’ll interact with assistants who may or may not have the experience needed to adequately take care of your needs.

Make certain before you list your home for sale or select an agent to represent you as a buyer that you fully understand what your agent will and will not do for you.

Find out if you’ll be working one-on-one with your agent or if others will be involved.  There are some facets of your home purchase or sale that don’t require an agent’s expertise, like managing paperwork or copying house keys. An assistant can take care of these sorts of things. However, your agent shouldoversee the marketing if you’re a seller and the house hunting if you’re a buyer. Your agent should review all disclosures and reports, negotiate the purchase contract and do whatever is required to facilitate a successful closing.

Your real estate agent owes you a duty to put your best interest ahead of anyone else’s in the transaction, even above the agent’s own interest in collecting a commission. This means advising you against accepting or making an offer if it’s unwise.

It’s easy to be won over by an agent’s enthusiasm about your home. You want to work with an agent who feels positively about your home and who believes it can be sold in the current market if properly priced and prepared for sale. However, you’ll be disappointed if the agent’s interview demeanor disappears after you commit to working together.

If you don’t already have an agent who you’d like to work with again, ask for references from friends whose opinions you trust. You may want to interview several agents until you find one that you feel will do a good job and with whom you have a good rapport.

HOUSE HUNTING TIP: Don’t underestimate the importance of good rapport and mutual trust. You’ll be working with your agent for some time. Invariably problems crop up during a transaction. Working through the tough spots is far easier if you hire an agent that you respect, trust and with whom you communicate well.

Have agents you interview provide references of people they have represented recently. Call or e-mail these people and ask them what they liked most and least about working with the agent, and if they would work with the agent again. The qualities you’re looking for in an agent include: good communication skills, diligence, determination, promptness, trustworthiness, persistence and responsiveness.

Some agents take on too much work, leaving them unable to return calls promptly. In one instance, a buyer’s agent had an offer to present on a listing. After calling the listing agent three times, leaving messages each time, she resorted to calling the office manager to arrange for her offer to be presented.

THE CLOSING: Don’t let this happen to you. Trust your instincts

Housing affordability remained near an 18-year high during the second quarter, according to the latest National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) released this month.

The index, which measures the share of new and resale homes affordable to families earning the national median income of $64,000, showed that the housing affordability was up from 55 percent during the second quarter of 2008 to 72.3 second quarter percent this year, and down slightly from 72.5 percent in first-quarter 2009.

The increase in affordability — along with the $8,000 federal tax credit for homebuyers — is stimulating demand, particularly among young, first-time buyers, said NAHB Chairman Joe Robson in a statement. He encouraged an extension and expansion of the program to stimulate activity in the trade-up market.

Nationally, according to the NAHB report, Indianapolis ranked as the most affordable housing market in the nation during the second quarter, with an estimated 95 percent of all new and existing homes sold in that quarter affordable to families earning the area’s median income of $68,100 — it is the 16th consecutive quarter that Indianapolis has topped this list.

Among the other housing markets with high affordability rankings: Youngstown-Warren-Boardman, Ohio-Pa.; Detroit-Livonia-Dearborn, Mich.; Dayton, Ohio; and Grand Rapids-Wyoming, Mich.

The California Building Industry Association noted that homes became less affordable in 16 of California’s 28 metro areas included in the NAHB report, with 62.7 percent of homes affordable to median-income families in that state. That is down from 64.4 percent in first-quarter 2009.

The San Francisco-San Mateo-Marin metro area was ranked as the least-affordable metro in the nation, with 26.9 percent of the homes sold affordable to a median-income family, down from 32.1 percent in first-quarter 2009.

Madera County was ranked as the most affordable area in the state, with 84.4 percent affordability compared with 80.4 percent in first-quarter 2009.

And a separate report by the California Association of Realtors, the First-Time Buyer Housing Affordability Index, found that 67 percent of households could afford to purchase an entry-level home in California in the second quarter, compared with 69 percent in the first quarter and 49 percent in second-quarter 2008.

InmanNews

By Jeff Bater – WASHINGTON –

New-home sales soared in June from the previous month, the third increase in a row and supplying fresh evidence the housing market is beginning to recover from its long crisis.

Sales of single-family homes increased by 11.0% to a seasonally adjusted annual rate of 384,000 compared to the prior month, the Commerce Department said Monday. Though, year-over-year, new-home sales were 21.3% lower than the level in June 2008.

The median price for a new home was $206,200 in June, down 12.0% from $234,300 in June 2008. On a monthly basis, the price fell from May 2009′s $219,000. 

Economists surveyed by Dow Jones Newswires expected June sales to climb just 2.3% to 350,000.

The increase was the fourth in six months, as buyers take advantage of falling prices. It appears newhome sales reached a bottom in January, at a level of 329,000, and that the market is beginning to recover slowly. The level of 384,000 in June was the highest since 390,000 last November.

Home construction unexpectedly rose in June, the government said July 17. Housing starts increased 3.6% to a seasonally adjusted 582,000 annual rate compared to the prior month. The starts data also showed building permits surged, and single-family starts made their biggest climb in four years.

May new-home sales rose 2.4% to an annual rate to 346,000, Monday’s data showed. Originally, the government said May sales fell, sliding 0.6% to 342,000. April sales climbed 1.8%.

A recovery of the housing market will be slow. New homes are in competition with used homes, which are cheaper these days because of foreclosures.

Prices are down because of too much supply. The ratio of houses for sale to houses sold in June was 8.8. But inventories are shrinking. The ratio was 10.2 in May. At the end of June, there were an estimated 281,000 homes for sale. That’s below 293,000 for sale at the end of May.

Cheaper prices and historically low mortgage rates are offsetting tight credit and a high unemployment rate. Another lure, for first-time buyers, is a government tax credit.

Regionally last month, new-home sales rose 29.2% in the Northeast, 43.1% in the Midwest, and 22.6% in the West. Sales in the South were down 5.3%.

An estimated 36,000 homes were actually sold in June, up from 33,000 in May, based on figures not seasonally adjusted.

By Hubble Smith -

Sales of single-family homes, condos and townhomes reached a record 4,702 in June, topping the previous record of 4,414 set in June 2004, the Greater Las Vegas Association of Realtors reported Wednesday. 

The record was announced the same day a new survey showed more than half of potential homebuyers nationally say they’re still not prepared to jump into the market. 

Locally, Realtors sold 3,785 single-family homes during the month, up 16.3 percent from May and up 70 percent from June 2008.  Condo and townhome sales more than tripled from a year ago to 917. 

Inventory of homes for sale in Las Vegas shrank to 20,613, a decrease of 11.9 percent from a year ago.  Condo listings are down 2.2 percent to 5,416. 

“I think it’s significant that we sold a record number of homes last month,” Realtors association president Sue Naumann said. “We’ve been closing in on this mark for a few months now.” 

Median prices held steady at $140,000 for singlefamily homes, unchanged from the previous month and down 37.8 percent from a year ago. The median price for an existing home was $242,000 in June 2004. Condo prices meanwhile inched up 1.5 percent from May to $66,000. It was the second consecutive month of condo price increases. 

“We’ve been looking at prices declining for so long now, it’s refreshing to see them stabilize and some go back up,” Naumann said. “Inventory is down, so that’s a good thing. ”

The numbers for June are quite impressive, broker David Brownell of Keller Williams Realty in Las Vegas said. Closings are up 82.5 percent from a year ago, pending sales are up 82 percent and inventory — taking out pending sales — is down 40 percent. 

His numbers are for the greater Las Vegas area, not including Pahrump, Mesquite, Boulder City and other outlying areas covered by GLVAR. 

He said sales numbers would have been higher if banks had not placed a voluntary moratorium on foreclosures last year. The market should welcome the backlog of bank-owned homes that are expected to be coming soon, Brownell said.

“The reason I say that is in 90 percent of scenarios, we’re in multiple offer situations,” he said. “I had a client on Monday looking to buy a home and found one she wanted. It was on the market for less than 24 hours and we would have been the 19th offer.”

Brownell said there were six cash offers on the bank-owned home and just as many conventional loans. The bank will consider those offers before his client’s FHA financing, he said. 

“When the market price is $230,000 and you have 19 offers and six are cash, I’m going to say the market is undersupplied,” he said. 

Brownell showed 3,460 closings of real estateowned, or bank-owned, homes in June, more that double the number from the same month a year.  Meanwhile, REO inventory has dropped 42 percent to 2,771, leaving less than one month’s supply.  Another 5,340 REO closings are pending. 

Naumann said she’s seeing strong demand from both investors and first-time buyers taking advantage of the $8,000 tax credit.

“They’re hearing rumors of interest rate increases and they could very well be priced out of a home if they don’t act now,” she said. “Plus, we’re seeing where parents want to help their children with gifts for down payments to get them out of apartments.”

Housing analyst Dennis Smith of Las Vegas-based Home Builders Research said the upward trend in home resales will continue for two to three years because of the affordability factor and also because new home builders can’t compete on prices.

“That’s the problem. As long as prices continue to go down, we can’t say the market is at the bottom,” Smith said. “We can say it’s getting closer.”

In the Realtor.com survey, to be released today, nearly 53 percent of consumers who said they were planning to buy a home in the future cautioned they’re not ready to take such a large financial step right now.

Nearly a third of potential homebuyers surveyed cited concern about their jobs as the main reason they would shy away from the housing market. Worries about selling their current home are stopping 16 percent of the prospective buyers surveyed, while just under 8 percent said they fear home prices will keep falling.

Americans recognize there are great deals to be had in the housing market, but many are in too much of a financial pinch at the moment to even think about buying.

Among those consumers who are interested in buying, the survey found, some believe that prices aren’t going to fall further and others are looking to take advantage of government incentives designed to kick-start sales.

Nearly one in five potential buyers said they were interested in a deeply discounted foreclosed home, while nearly 15 percent said they want to receive a new $8,000 tax credit for first-time buyers or other state incentives. More than 15 percent said they don’t expect prices to drop lower, but many are still taking their time.

GLVAR statistics are based on data collected from the Multiple Listing Service and does not necessarily account for new homes sold by builders, sales by owner and other transactions not involving a Realtor.