By JOEL LANDAU Staff Writer Press of Atlantic City

GALLOWAY TOWNSHIP — Joe and Stephanie Tucci spent a year and a half looking for the right house.

And six months after submitting a bid, they’re still waiting and waiting and waiting to find out whether it will work out.

Stephanie and Joe Tucci, of Mays Landing, stand in front of a Galloway Township home that they hope to buy in a short sale. They submitted a bid six months ago and have been waiting for bank approval.

The township home that the couple bid on is a short sale, which means the owner of the house could no longer afford to pay its mortgage and is working out a deal with the lender to sell at a price lower than what the owner owes. When a potential buyer makes a deal with the seller, the lender’s approval is required for the sale to take place.

Local real estate agents say short sales are becoming a larger part of the local market and can often translate into a lower price for a buyer willing to be patient.

“People walk away from short sales because they get tired of waiting,” said Robert Shamberg, owner of Prudential Diversified Realty in Galloway Township. “Everyone wants a deal. Everyone knows short sales are a good deal. But they may not realize it takes a lot of time.”

The home could have several lenders that all need to be satisfied, Shamberg said. The bank could take longer than expected to give an answer or make a counteroffer, he said.

Shamberg counseled Joe and Stephanie Tucci through the process and said they could get a good deal if they were willing to wait. The couple placed a bid at $200,000, which Shamberg said is about $50,000 less than a realistic market value.

But sellers and banks are often willing to accept less rather than go through the long and costly foreclosure process.

That’s the hope of the Tuccis, who fell in love with the home that was recently renovated and features an open kitchen and cathedral ceilings. The couple placed the bid in April and hope to hear within the next few weeks.

“You can get a really good deal but you have to have time,”Stephanie Tucci said.

The couple has continued renting in Mays Landing and have looked at some other homes as a potential backup plan.

“It’s just a waiting game,” Joe Tucci said. “Hopefully they’ll take our bid or they’ll lose out and have a vacant property.”

Brenda Lawn, a real estate agent for Prudential Fox & Roach in Northfield, said short sales are an “absolute roller coaster”that can take an emotional toll on the buyers.

“The first thing I do is educate them. I tell them it’s a long process and there will be a certain degree of frustration,” she said. “It’s hard to do that. The buyers are so enthusiastic. But it really is difficult because it doesn’t always have a happy ending.”

Lawn said short sales and foreclosures have taken up as much of a third of the housing market in most of the region.

She said she’s had buyers wait between three months and a year for the bank to approve a deal, but Jeff Quintin, of Prudential Fox& Roach in Ocean City, said he has had some recently that took only a few months.

Conducting a short sale “is a skill providing you know how to manage the lenders and structure the deal properly,” he said. “If you know what you’re doing and get it structured the right way, a short sale can be like a typical sale.”

Quintin said larger banks may not open the file on the property until the bid is submitted, so it’s impossible to know what the bank would accept.

“In most cases there is not a predetermined (price) for the short sale unless you have already gone through the process,” he said.

But a short sale is often worth it to the bank considering it can take more than two years to foreclose on a property owner, Quintin said.

“You never know what a bank will approve,” he said.

Short sales also benefit the seller because they avoid foreclosure and leave the seller in a better position than if they waited to get more money on the sale, Quintin said.

“Their credit may go down 100 points but they can improve it faster than the market can improve itself,” he said, adding many sellers are finding it too difficult to redo their loans.

And the program has had its results.

Quintin said he recently had a home valued at $4 million approved for a $1.425 million short sale in Ocean City. Another Ocean City property valued at $2.765 million closed at $780,000, he said.

“The buyer is always getting a property under market value,” he said. “It’s worth it many times to go through it.”

Bucket #1: Transaction signals. Distressed properties –foreclosures and short sales – make up about a third of the homes currently on the market, and these transactions have their own unique flow, timelines and challenges compared with “regular” equity sales. So, it only makes sense that listing agents have developed a set of abbreviations to brief prospective buyers on what they can expect and should be prepared for if they make an effort to buy such a home, with just a glance at the listing:

1. REO: Real estate owned by the bank/mortgage servicer, this acronym refers to homes that were foreclosed and repossessed by the former owner’s bank. It also signals that buying this property will involve doing a deal with the bank; possibly dealing with a different escrow timeline, offer process or contract forms than a non-REO sale; and almost always taking the place in as-is condition, among other things. Oh, yeah –and it might also involve one more thing: a great deal.

2. S/S, Subject to bank approval: What once stood for stainless steel is now being used to describe a short sale – a property whose seller anticipates will net them less than they owe on the home. Short sales are often described as “subject to bank approval,” which simply points out the obvious truth about these transactions, that the seller has very little control over whether the bank will allow the transaction or what price and terms the bank will approve of, and that the transaction might very well take the better part of your natural life could take 6 months or longer to close. Talk to your agent for more details about short sales, and to determine how you can tell the success-prone short sales from those that are less likely to close.

3. Pre-approved short sale: Many knowledgeable agents say no short sale is truly “pre-approved” unless and until the bank looks at a specific buyer’s offer and the seller’s financials at the same time, but some listing agents designate a short sale as “pre-approved” when a previous short sale application was approved at a given price, but fell out of contract for some other reason.

4. Motivated seller: This is a perennial term in listing parlance, but against the backdrop of the current market, translates to something like, “Have mercy on me.” I kid – this phrase often signals a seller’s flexibility in pricing and/or urgency in timing.

5. Coveted: In a word, “expensive.” No, seriously, even on today’s market, many locales have a neighborhood (or a few) which have been relatively recession-proof, have been fairly immune to the foreclosure epidemic and have seen home values continue to rise. If you see the word ‘coveted’ in a listing, chances are you’re house hunting in that sort of neighborhood, or there’s something about the individual property the home’s seller is trying to position as unique and desirable, as compared to competing listings (i.e., the view, location of the lot, or floor plan).

6. BOM, often accompanied by “No fault of the house:” Homes go in and fall out of escrows on today’s market constantly, often due to things the seller has no control over. BOM indicates a home that was in contract to be sold, but is now “Back on the Market.” “No fault of the house”may describe a situation in which the buyer lost interest in the home after a long short sale process or failed to get final loan approval, as contrasted to a situation in which the home’s inspection turned up deal-killing problems or the property failed to appraise at the purchase price.

7. Not a short sale, not a foreclosure. Sellers on “regular” equity transactions are often more negotiable on items like price and repairs, and are certainly able to close the transaction (i.e., let the buyer move in) sooner than sellers of REOs and short sale properties. Some also pride themselves on having maintained their homes in better condition than the distressed homes on the market. For buyers that seek quick certainty and closure, non-distressed homes can be especially attractive.

Bucket #2: All about the Benjamins. The government’s role in financing homes has grown exponentially over the housing recession, so the alphabet soup of government housing and home financing agencies, their guidelines and programs is now more important to understand than ever.

8. OO/NOO: Owner-Occupied and Non-Owner Occupied – You’ll see this on listings in two different ways. First, the vast majority of home loans must comply with government loan insurance guidelines, including guidelines around how much of a condo complex must be owner-occupied (i.e., 75 percent, minimum, in most cases). Also, some bank-owned property sellers will consider offers from owners who plan to occupy the property if they buy it as much as a week or 10 days before they will look at NOO or investor offers.

9. FHA: Short for the Federal Housing Administration, which backs the popular 3.5 percent down home loan program. FHA guidelines also include somewhat strict condition and homeowners’ association dictates, so if a home’s seller notes that they are not taking FHA loans, they might be saying that the property has condition or other issues which disqualify it for FHA financing.

10. Fannie, Freddie: Fannie Mae and Freddie Mac, federally controlled company/agency hybrids that now back most non-FHA (conventional) home loans, and thus provide the guidelines most Conventional loans must meet, including guidelines around seller incentives like how much closing cost credit a buyer can receive.

11. DPA/DAP: Down-Payment Assistance or Down-Payment Assistance Program

12. FTH/FTB: First-time homebuyer/First-time buyer – cities, states and large employers like universities tend to be the last bastion of these programs which offer mortgage financing or down payment assistance, usually to people who have not owned a home in the relevant city or state anytime in the preceding 3 years.

13. HUD: The federal department of Housing and Urban Development, which governs the guidelines for FHA loans, acts as a seller of homes which were foreclosed on and repossessed for non-payment of FHA-backed loans, and publishes the Good Faith Estimate and settlement statement forms every buyer and borrower will be provided at the time they shop for a loan and close their home purchase, respectively.

14. HFA: Short for Housing Finance Administration, this acronym refers to a loose body of state and regional agencies which offer an array of financing and counseling programs that varies by state, from down payment assistance for first time buyers to the Hardest Hit Funds that offer foreclosure relief assistance and principal reducing loan modifications to unemployed and underwater homeowners in the states hardest hit by the foreclosure crisis.

Liz Davidson, Contributor  Forbes.com

As a financial education company, we often see financial crises coming because employees contact us when they have financial problems or concerns they need help resolving. With the recent mortgage crisis, we began to see a major spike in calls on debt in the year leading up to the meltdown. Debt calls in 2006 increased to an all time high—representing close to half of our total calls at the time. Even worse, many callers were frantic. They weren’t looking to simply reduce their debt load; they were struggling to make ends meet. They weren’t asking about putting together a plan to pay off high interest rate debts; they were beginning to consider drastic options like foreclosure and bankruptcy.

It was rather like seeing a car crash in slow motion. You know it’s coming and you can tell the driver to slam on the brakes or swerve out of the way, but it’s too late to do much more.

Move up, Move down.

Today, there’s another mortgage crisis in the works—that is, NOT having one—choosing to rent when you can afford to buy; choosing to forgo building equity in a home as a major source of retirement security—something that may be more necessary now than ever before with a soft stock market and low interest rates. This emerging crisis is not yet at the car crash stage– more at the reckless driving without a seat belt stage. There is time for Americans to resolve this one, but they must change their perspective on home ownership before it’s too late.

Why own a home when you can rent? We are hearing this question much more these days as people choose to “sit out” of the real estate market or disregard homeownership altogether after seeing many of their friends and family end up in short sales or foreclosures. Renting is the low-risk option for these callers. It’s the only way to ensure that nightmare will never happen to them.

The problem is that it will; it’s just a different nightmare. Consider this: A homeowner with a $1,500 monthly payment would still be writing the same check fifteen years later while prices everywhere increase around them. In August 2011 the Consumer Price Index included a .4% increase in rents, the biggest increase since 2008, which represents an annualized increase of 4.8%. If rents didn’t even increase that much but simply kept up with inflation at a 3.2% annual increase, a $1,500 rent payment would cost that renter nearly $900,000 over the next 30 years. The same $1,500 payment made to their mortgage would be only $540,000 (because the payments don’t increase with inflation) and of course would end with a final payment. There might even be some real equity in the property, even with a dismal 1% growth rate over 30 years, a $300,000 property would appreciate well over $100,000 giving the homeowner an additional nest egg for retirement.

The renter, by contrast has no equity in their home, so in addition to almost $900,000 in rent in the above example, the renter would also be giving up $400,000 in retirement assets (and that’s at a growth rate of just 1%– far lower than even the lowest growth rate over a 30 year time period). At a time when retirement is becoming much more challenging, an extra $400,000 (or likely more) can make a major difference, not to mention the impact of NOT having to pay a mortgage. How much less would you have to save for retirement if you didn’t pay the mortgage?

And this doesn’t even include the tax benefits. The US government essentially subsidizes your house payment by allowing a mortgage interest and property tax deduction on Schedule A of the 1040. Any points you pay when you get the loan can also be deducted. Then an amazing thing happens: the IRS allows a tax exclusion on the sale of a primary residence. Owners who live in their property two out of the past five years, who have equity and sell their primary residence, receive a maximum capital gain exclusion of $250,000 (if married $500,000.) Where else can you get a tax break on an investment and then receive the proceeds tax free? I can’t think of another investment like it.

So, deciding that “renting” is safer and there’s no need to take the risk of buying a home or even waiting in an effort to time what is an unpredictable real estate market, buying only when prices have been up for a while, can be very costly. It doesn’t bring with it the emotional trauma of a foreclosure or short sale. But it is a slow drain on your finances, that over time, could compromise your ability to retire or at the very least, to retire the way you want, when you want.

All that said, I’m by no means advocating homeownership for everyone. For many, renting is the right option, at least for now. If you can’t afford to own a home, you shouldn’t even consider buying—one of the key lessons learned from the mortgage crisis. Your mortgage should be under 25-30% of your income not including bonuses or promotions and you should have an emergency fund of 3-6 months expenses in savings before you purchase a home. Also, if you don’t qualify for a reasonable interest rate on a mortgage due to credit problems, if your income is unstable, or if you crave mobility, renting is the better choice. Renting is cheaper than buying in the short term and has other advantages. Repairs: as a renter, when you turn on the shower and freezing cold water spurts out in your face, you simply make a phone call to the landlord and they have to install a new water heater instead of you footing the bill. Mobility: If you have a job opportunity or promotion in another state, you simply give notice and move. You don’t have to go through the arduous process of selling (or not being able to sell) your home. You are free from the obligations of homeownership. Property taxes: As a homeowner, even when your mortgage is paid off you still have to pay property taxes and insurance, and those costs will continue to rise.

Just remember that freedom has its price and, in this case, it is a steep one. It costs much more in the long run to rent, which is why homeownership can be the ultimate retirement strategy. When people are making decisions on whether to buy a house or not, many aren’t factoring in thirty years from now when the home is paid off. They are wondering if the market is at the lowest point possible, if interest rates will drop even lower or if the property will appreciate. This vital element of homeownership has a long incubation period. We always hear that an employee’s peak earning years come after age 50, when you combine high earnings with the elimination of an expense that takes up a third of most people’s take home pay, people have a real chance to meet their financial goals. Homeownership is the ultimate retirement plan.

Home ownership isn’t for everyone, but for many, it is the best choice. The smartest choice, of course, is making the right decision for the right reasons based on your own circumstances. Homeownership basics apply just the same as they always have: buy only the home you can afford, lock in a fixed rate loan with the lowest interest rate possible, and refinance only to get a lower rate and only for the same loan amount and same term. What got many people in trouble during the financial crisis was going to the extreme and buying a house they could barely afford with a variable rate loan payment. When the payments reset with higher interest rates, many couldn’t make the payment. They never should have been in the house in the first place.

If Americans don’t recover soon from their pessimism around homeownership, we predict another fallout from the financial crisis will surface many years from now when a nation of renters tries to retire. They won’t have equity in their homes. Their paychecks will be stretched to the limit, not leaving room for saving and investing for retirement and other financial goals such as college funding. Instead of their expenses reducing through retirement, they will look straight down the barrel of increased rent payments for the rest of their lives. Homeownership makes a significant difference in the long run so it is concerning to see so many walking away from the American Dream. We don’t want to see it become the American Nightmare.

Right now, is the most effective time in history to purchase a house in America.

These days, I’ll show you why… based on a few cold, challenging facts.

First, mortgage rates are lower than they’ve ever been in American history…

Most investors have only seen a couple decades of mortgages rates on a chart. But my buddies at Global Financial Data have databases – which includes real estate data – that literally go back centuries.

I had dinner with the Global Financial Data team over the weekend. And they told me about their “Winans International” real estate indexes, with housing costs back to the 1800s and mortgage rates going back over a century. I had to share it with you…

Take a look at this chart of mortgage interest rates since 1900:

In U.S. history, you can see that the current mortgage rates are the lowest.
The last time that the mortgage rates were so low was just after World War II.
And what happened, just after World War II, when mortgage rates were this low?
The greatest postwar boom in housing prices – by far.

Take a look. Mortgage rates bottomed in the mid-1950s, and house prices bottomed about the same time. Then the greatest boom in home prices in our lifetimes started.

Today we have record-low mortgage rates. And we have another thing in our favor…

Homes are more affordable than ever.

Based on the 40-year history of the Housing Affordability Index… houses are more affordable than they’ve ever been. Take a look…

“Affordability” takes three factors into account: home prices, your income, and mortgage rates.

Home prices have crashed. And mortgage rates are at record lows. But incomes (nationwide) haven’t fallen nearly as much… So homes are now more affordable than ever.

“Most people” out there will only tell you the bad news about housing… That’s the way it goes in a bear market. People drive looking in the rearview mirror.

Meanwhile, we have some darn compelling facts out there…

Home prices have fallen by a third… and mortgage rates are the lowest in history. Therefore, U.S. homes are more affordable than they’ve ever been.

You can listen to “most people.” Or you can choose to ignore them and stick to these facts.

Based on these facts alone, now may be one of the best times in American history – even the very best time – to buy a house.

By Jeff Reeves, editor for InvestorPlace.com

Now could be the best time in history to buy a home. Presuming, of course, you have the money and the credit to do so.

The average rate on a 30-year fixed mortgage hit record lows last week, down to 4.01%, according to Freddie Mac. The Federal Reserve’s recent “Operation Twist,” which was designed to do just this, appears to be doing the trick.

There are a lot of reasons to consider buying a home right now. The big savings on interest is just one of them — the difference between a 4% rate and a 5.5% rate on a $200,000 home loan is just shy of $200 in monthly payments and can save a homeowner more than $60,000 in interest payments across the life of the loan.

Another motivating factor could be the fact that rents remain sky-high in the U.S. right now, and in many markets it’s actually cheaper to buy a home than rent a two-bedroom apartment.

While housing might not be at a “true” bottom just yet, there are many signs it is nearing one in many markets. Housing prices rose from June to July in 17 of 20 cities tracked by the Standard & Poor’s/Case Shiller home price index. It marked the fourth straight month of rises in most U.S. cities.

That’s to say nothing of the case-by-case bargains to be had. Here are two personal stories that show the opportunities to be had in this housing market:

I live in the Washington, D.C., area and purchased a short-sale home in 2009. Although three months of back-and-forth with the bank drove my wife and me crazy, we finally closed on the property just hours before a foreclosure auction — after which my Realtor asked if I wanted to immediately re-list my home with him for about 30% more than we had just paid. I had purchased the property for a growing family and good schools, so I politely declined. But the message was clear: If you suffer through a painful distressed property purchase, you get a hefty discount for your trouble.

On the other side of the coin, my brother purchased a newly constructed home in Roanoke, Va., as his wife attended medical school at Virginia Tech. Seemed like a good idea at the time — but now he’s 40% upside down on his house and renting it for barely enough to cover the mortgage. Unfortunately, he now lives six hours away, so it’s no picnic to manage his rental. My brother recently decided he has enough stress in his life so he will list the house at slightly below market rate just to get rid of it — even if it’s going to cost him big-time. Very bad for him, but some lucky southwest Virginia family is going to get a nearly brand-new home for a heck of a deal.

I’m sure many of you have your own story to tell about the housing market. Share it with me (see below) or better yet, post it in our comments section so everyone can read and weigh in.

There are plenty of other bank-owned homes or desperate sellers that folks can pursue, with deals akin to the two listed above. But the million-dollar question, of course, is whether prospective homeowners can get a loan — and if they can, whether they want one.

After the mortgage meltdown, banks have wisely tightened lending standards . That’s as it should be, but it understandably shuts many folks out of the market. Other people have good credit but don’t have the necessary savings for higher down payments some lenders now require. That’s to say nothing of folks who perhaps could sign up for a new home but are just too uncertain about their job or retirement.

Whatever the reasons, it all adds up to a decided lack of demand in the housing market. Many factors have created great deals right now, but those factors also might just be too daunting for many to overcome right now.

I remain convinced that I made the right choice in buying my home — not because it was an “investment,” but because it’s in one of the best public school systems in the country and I now have two beautiful daughters who wouldn’t fit very comfortably in an apartment. And by the way, that two-bedroom apartment rented for only about $100 less a month than my current mortgage. Buying a home was the right thing for my family, and for my finances.

And perhaps that’s the biggest lesson of all: The best reason to buy a house is because it will become your home — not a path to profits.

Timing is everything ! Everything is timing !

Reuters is out with a new report on the state of real estate in Dubai. According to the report, prices in Dubai are expected to continue to decline. Here on the Jersey Shore in Cape May County, we are expecting prices to steady. Unlike many international markets we continue to have an influx of yearly vacationers to Sea Isle City and the Jersey Shore.

Buyers have been enjoying the benefits of the lower than normal interest rates are quietly buying up most of the low hanging real estate before next spring when the sellers seem to have some footing on the prices and have the benefit of the summer rental income wind at their backs.

My peers and I used to joke about having clients cruise down during snow storms with borrowed SUV’s to get a brand new property listing under contract before the weekend when herds of potential home owners would weigh down the Islands with cash filled pockets and deposit checks already written and signed before even seeing the house.

To put this in prospective this is the fall and winter season that buyers will be rambling down for the last of the distressed inventory. More of the available properties are priced to market than anytime in the past seven years.

Contact Ian or any well trained agents of The Lazarus Team, The Landis Co., Realtors, for market data that an engineer would cry for. We can explain the information so that your four old grandchild can grasp as long as he didnt just get off the boat from . . . . .

Get the point? We do easy, easy ! As my son Rami says “Relax and let use do the heavy lifting.” The apple doesn’t fall far from the tree I see.

For all of the reader who have been lulled to sleep over the past seven years and congratulating themselves in not getting caught purchasing a shore home at the top of the market for what ever reason. Don’t get to cocky because even the smart and very smart money are moving in.

Let us know what part of the buying process we can help. We are saving our clients thousands of dollars today!

For those who are interested we do have a Jersey Shore Foreclosure & Short Sale Email List Available.

From the beautiful beaches of the Jersey Shore to Florida , I serve discerning home buyers and sellers.

Sea Isle City, NJ – Outer Banks, NC – Corolla, NC – Greenville, NC – Fort Lauderdale, FL

The good news? Two key measures now suggest it’s an excellent time to buy a house, either to live in for the long term or for investment income (but not for a quick flip). First, the nation’s ratio of house prices to yearly rents is nearly restored to its prebubble average. Second, when mortgage rates are taken into consideration, houses are the most affordable they have been in decades.

Two of the silliest mantras during the real-estate bubble were that a house is the best investment you will ever make and that a renter “throws money down the drain.” Whether buying is a better deal than renting isn’t a stagnant fact but a changing condition that depends on the relationship between prices and rents, the cost of financing and other factors.

But the math is turning in buyers’ favor. Stock-oriented folks can think of a house’s price/rent ratio as akin to a stock’s price/earnings ratio, in that it compares the cost of an asset with the money the asset is capable of generating. For investors, a lower ratio suggests more income for the price. For prospective homeowners, a lower ratio makes owning more attractive than renting, all else equal.

Nationwide, the ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble, according to Moody’s Analytics. The average from 1989 to 2003 was about 10, so valuations aren’t quite back to normal.

But for most home buyers, mortgage rates are a key determinant of their total costs. Rates are so low now that houses in many markets look like bargains, even if price/rent ratios aren’t hitting new lows. The 30-year mortgage rate rose to 4.12% this week from a record low of 3.94% last week, Freddie Mac said Thursday. (The rates assume 0.8% in prepaid interest, or “points.”) The latest rate is still less than half the average since 1971.

As a result, house payments are more affordable than they have been in decades. The National Association of Realtors Housing Affordability Index hit 183.7 in August, near its record high in data going back to 1970. The index’s historic average is roughly 120. A reading of 100 would mean that a median-income family with a 20% down payment can afford a mortgage on a median-price home. So today’s buyers can afford handsome houses—but prudent ones might opt for moderate houses with skimpy payments.

For example, the median home in the greater Phoenix market, including houses, condos and co-ops, costs $121,700, according to Zillow.com. With a 20% down payment and a 4.12% mortgage rate, a buyer’s monthly payment would be about $470. Rent for a comparable house would be more than $1,100 a month, according to data provided by Zillow.com.

Of course, all of this assumes mortgages are available—no given now that lending standards have tightened. But long-term data on down payments and credit scores suggest conditions are more normal than many buyers think, according to Stan Humphries, chief economist at Zillow. “If you have good credit, a job and a down payment, you can get a mortgage,” Mr. Humphries says. “There’s more paperwork and scrutiny than five years ago, but things are pretty much like they were in the ’80s and ’90s.”

Not all housing markets are bargains. Mr. Humphries says Zillow has developed a new price/rent ratio that uses estimates for each individual property rather than city medians, to better reflect the choices facing typical buyers. A fresh look at the numbers suggests Detroit and Miami are plenty cheap for buyers, with price/rent ratios of 5.6 and 7.7, respectively. New York and San Francisco are more expensive, with ratios of 17.6 and 17.2, respectively. The median ratio for 169 markets is 10.7.

For investors seeking income, one back-of-the-envelope way of seeing how these numbers stack up against yields for other assets is to divide 1 by the price/rent ratio, resulting in a rent “yield.” The median market’s rent yield is 9.3% and Detroit’s is 17.9%.

Investors would then subtract for taxes, insurance, upkeep and other expenses—costs that vary widely. But suppose total costs were 4% of the purchase price. That would still leave a 5.3% rent yield in the typical market. With the 10-year Treasury yield at 2.2% and the Standard & Poor’s 500-stock index carrying a dividend yield of 2.1%, rents for residential housing in many markets look attractive.

A few caveats are in order. First, not all transactions are average ones. Even in low-priced markets, buyers should shop carefully. Second, prices could fall further. Celia Chen, a senior director at Moody’s Analytics, expects prices to drop 3% before bottoming early next year and rising slowly thereafter. “If the economy slips back into recession, however, we could easily see a 10% drop,” Ms. Chen says.

And property “flipping” can be dangerous even when prices are rising. That is because, absent a real-estate boom, house price gains simply aren’t that exciting. Research by Yale economist Robert Shiller suggests houses more or less track the rate of inflation over long time periods.

Houses aren’t the magic wealth creators they were made out to be during the bubble. But when prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.

Houses are more affordable than they’ve been in a decade.

Jersey Shore Waterfront Home

By Pat Mertz Esswein, Associate Editor

From Kiplinger’s Personal Finance magazine, October 2011

1. Prices have nearly hit bottom.

In most areas, most of the excess has finally been wrung out of the market. But if you’re buying a first home or looking to trade up, there’s no need to rush. Although prices may fall some more — blame foreclosures still working their way through the system and tighter credit — they won’t fall by much. Fiserv Case-Shiller, which tracks home prices, forecasts that the median price nationwide will ratchet down for about six more months, then stay flat for three or four years.

In most of the cities where home values experienced a double dip after the expiration of the home buyer’s tax credit in mid 2010, median prices won’t fall below their 2009 or 2010 lows, says David Stiff, Fiserv’s chief economist. These cities include San Francisco, San Jose, San Diego and Washington, D.C. But in cities with lingering oversupply of homes for sale, Fiserv forecasts a decline of 10% or more in the median home price (for the year ending March 31, 2012). These cities include Riverside–San Bernardino, Cal.; Las Vegas; and Miami.

2. Houses are affordable again.

Homes haven’t been this affordable since 1991. Economists often define affordability as the ratio of median home price to median family income. According to Fiserv Case-Shiller, the U.S. ratio now stands at 2.6 — down from a peak of 4.1 in mid 2005 and just under the long-term average of 2.8. Of course, some areas continue to defy affordability. In California’s coastal cities and the New York metro area, the ratio is 5 or more. Average mortgage payments are another way to look at affordability. Since the housing market’s peak in 2006, the average principal-and-interest payment in the U.S. has fallen from $1,063 to $645.

Renters considering the jump to homeownership may be encouraged by the price-rent ratio, or the median home price divided by the median annual rent. In 2005, the national median home price had inflated to nearly 21 times the median annual rent, according to Marcus & Millichap, a commercial real estate brokerage company in Encino, Cal. Since the bust, the ratio has deflated to 14, less than the historical average of 15. During the same period, the difference between the median monthly mortgage payment and median monthly rent fell from $745 nationally to $102. Marcus & Millichap expects rental vacancy rates to hit pre­recession levels this year, allowing landlords to raise rents by an average of 3.5%.

3. Mortgage rates won’t go any lower.

For the past couple of years, interest rates have hovered at levels last seen when the veterans came home from the Korean War. According to HSH.com, which tracks mortgage rates, at the beginning of August the national average 30-year fixed rate was 4.5%. FHA loans, which require only a 3.5% down payment, had a 4.3% rate. Adjustable-rate mortgages are even cheaper, and even rates for jumbo mortgages have hit lows not seen since the 1980s.

Freddie Mac forecasts a 30-year fixed rate of 5% by year-end and 6% by late 2012. Standard & Poor’s downgrade of the U.S. credit rating won’t have an immediate effect on rates because of the weak economy. But credit is tighter, and you’ll need a credit score of 740 or more and a down payment of at least 25% to nab the lowest rates. If you fall short of that, you’ll pay interest-rate risk premiums if the bank plans to sell your loan to Fannie Mae or Freddie Mac. For example, lenders must charge an extra 0.25 point if a borrower has a 740 credit score but puts down less than 25% (but at least 20%).

4. It’s a buyer’s market.

Demand is low; supply is high. In early summer, the National Association of Realtors reported that sales of existing homes (single-family houses and condos) fell by 9% from the year before. NAR also reported 9.5 months’ supply of homes. That’s how long it would take to sell all the homes on the market at the current pace of sales, and it strongly favors buyers. (Four to six months’ supply is considered balanced between buyer and seller.)

With so much selection, you’ll find more properties in good school districts or near your job, or homes that offer added value, such as a mother-in-law suite, says Thomas Popik, research director with the Campbell surveys of real estate professionals. You’ll spend less time shopping and competing against other bidders. And you don’t have to waste time with sellers who set unrealistic prices (although they’re still out there).

One caveat: If you’re searching among entry-level homes, which had more extreme price declines than upper-end houses did over the past year, you may face stiff competition from investors. They typically pay cash, which makes them attractive to sellers who want to close the deal fast. However, says Popik, you may find opportunities in homes that were bought and fixed up by investors, who intended to flip them but have had difficulty making a sale.

5. You may find a distressed property.

Bank-owned foreclosures (or REOs, for “real estate owned” properties) sell for an average discount of 35% off the per-square-foot price of conventional homes for sale, according to RealtyTrac. In the first half of 2011, lenders owned about 870,000 REOs but listed only about one-fifth of them for sale, concentrated in such high-foreclosure states as Arizona, California, Florida, Michigan, Nevada and Ohio; even with the slowdown in the foreclosure pipeline due to legal-processing issues and new supply exceeds sales. Find more on buying foreclosures.

Short sales, or homes sold with lenders’ permission for less than their owners owe on their mortgages, have also grown in number. Lenders have become more amenable to them as they seek to avoid the often huge losses associated with foreclosures, says Rick Sharga, of RealtyTrac. Short sales offer buyers less of a bargain than REOs, but the homes tend to be in better condition. Banks may still take two to six months to sign off on a short sale, so patience is imperative.

6. Homeownership is still attractive.

A home is the biggest purchase most people ever make. But deciding whether and what to buy isn’t purely a financial decision, says Chris Herbert, research director at Harvard’s Joint Center for Housing Studies. When you own a home, you can control your living environment and security, upgrade and change your home as you see fit, and create a sense of rootedness in your community.

You can offset some of the cost of homeownership by deducting mortgage interest. But don’t mistake a home for an investment, at least not in the short run. “If your goal is to jump in and get a return of 6% annually, that’s a bad idea,” says Fiserv’s Stiff, given the forecast for weak price appreciation. Instead, you need to commit to owning the home for at least five to seven years to ride out any further price declines and recoup your down payment and transaction costs. If you think that you might need a bigger home before that time to accommodate a growing family or that you might have to move to another area for your job, don’t buy unless you’re willing to become a long-distance landlord.

Shop carefully, and be patient. Exclusive buyer’s agent Michael Crowley of Spokane, Wash., tells buyers it may take three to four months to find the right house. “We can be in a hurry, or we can be particular, but we can’t be both,” he says.

Florida Real Estate Agents:
Florida Enhanced Short Sale Relocation Assistance
Florida homeowners may receive $5,000 to $20,000
in relocation assistance.

Bank of America encourages distressed homeowners to explore a short sale as a viable option for avoiding foreclosure. To that end, for a limited time we are offering enhance relocation assistance to help motivate homeowners to engage with us on a pre-offer short sale. An additional benefit for these pre-offer programs – such as the Home Affordable Foreclosure Alternatives (HAFA) and Bank of America’s proprietary program – is that deficiency may be waived for the homeowner.

Eligibility:

• Homeowners with property in Florida
• Short sales initiated without an offer between September 26 and November 30
• The customer will have to be eligible for one of the without offer programs such as the HAFA program or our proprietary program (specific investor participation and eligibility criteria do apply to these programs)
• Successful closing of the eligible short sale by August 31, 2012
• Minimum relocation assistance is $5,000 and maximum is $20,000, with the specific amount calculated based on the unpaid principal balance

Exclusions:

• Ginnie Mae, FHA, VA and USDA loans are ineligible for participation
• Lot loans are ineligible for participation
• Properties outside the state of Florida are ineligible for participation
• Short sales initiated with an offer are not currently eligible for the enhanced relocation assistance

Frequently Asked Questions:

Q: How can I find out if my client/homeowner qualifies for this relocation assistance?

A: Call a Bank of America short sale specialist at 1-877-xxx-xxxx.
Monday – Friday 8 a.m. – 10 p.m.; Saturday 9 a.m. – 5:30 p.m. Eastern

Q: Do I have to do anything differently when initiating or completing the short sale?

A: No. As long as the homeowner’s short sale is initiated between September 26 and November 30, 2011, and the property closes by August 31, 2012, they will be eligible.

Q: Will the relocation assistance funds be reported on the HUD-1?

A: Yes, they will be documented on the HUD-1, and a 1099-MISC will be issued.

Q: Can the relocation assistance funds be used to pay off existing liens?

A: Yes, if the investor approves it.

Q: Is the relocation assistance added to any other incentives, such as the HAFA or Bank of America proprietary program incentives?

A: No. A homeowner will receive the $5,000 to $20,000 in place of the typical incentive paid out by these programs. The relocation assistance is essentially an enhancement to the standard payout offered on these programs.

Q: Is the enhanced relocation assistance available for other programs?

A: Currently, the enhanced relocation assistance is only available to short sale programs initiated without an offer. However, as we gauge the success we may extend this incentive to other programs.

Questions?

Homeowners and may call Ian Lazarus, Abraham and Associates, Davie, Florida. 609-457-0258 ian.lazarus@mygo2realtor.com

Washington, DC, September 20, 2011

Increased lending to creditworthy home buyers and more loan modifications and short sales are necessary to reduce the rising inventory of foreclosed homes and help stabilize and revitalize the housing industry and economy, according to the National Association of Realtors®.

That was the message delivered today by Allan Dechert, 2011 president of the New Jersey Association of Realtors®, who testified on NAR’s behalf before the Senate Banking, Housing and Urban Affairs Subcommittee on Housing, Transportation, and Community Development regarding new ideas to address foreclosures.

“As the leading advocate for homeownership, NAR knows that foreclosures don’t just affect the families that lose their homes – communities, the housing market and the economy all suffer,” said Dechert, broker-owner of Ferguson Dechert Real Estate in Avalon, N.J. “Ensuring credit availability to qualified buyers and helping more distressed homeowners with loan modifications and short sales will help reduce the growing inventory of foreclosed homes and ensure that housing leads the way out of today’s economic struggles.”

Dechert said that creditworthy consumers continue to have difficulties securing fair and affordable loans despite their proven ability to afford the monthly payment. He said that NAR supports responsible lending standards; however, unnecessarily tight credit restrictions are putting downward pressure on home values, increasing the number of homeowners whose mortgage exceeds the value of their home, and adding to the number of foreclosures.

“Increased fees, higher down payments and reduced loan limits are making it harder for borrowers to obtain safe and sound mortgage financing products. Greater access to financing for qualified borrowers and investors could help absorb the excess inventory of foreclosed properties,” said Dechert.

In testimony, NAR also urged the lending industry to take greater action to keep struggling families in their homes through loan modifications that reduce the probability of default and prevent further increases to the large inventory of foreclosed properties. Helping more families remain current on their mortgage by significantly reducing their monthly mortgage payment will allow them remain in the home that they worked so hard to obtain and reduce the impact of foreclosures on local home prices.

Dechert said that continued short sale delays are also contributing to foreclosures and urged lenders and servicers to quickly approve reasonable short sale offers that would allow home owners to avoid foreclosure. The current short sale process can be time-consuming and inefficient, and many would-be buyers end up walking away from a sale that could have saved a home owner from foreclosure.

“Loan modifications – and short sales for those unable to meet their mortgage obligations – help stabilize home values and neighborhoods, and limit the losses incurred by lenders, the federal government and taxpayers,” said Dechert. “More must be done to streamline short sale transactions, since many potential home buyers are simply choosing to walk away from transactions due to the length of time it takes for lenders to approve and complete these sales.”

Dechert also testified about the pooling and disposition of foreclosure inventories held by the Federal Housing Administration and Fannie Mae and Freddie Mac. NAR is concerned that, although bulk sales may quickly alleviate the large inventory of homes held by the agencies, those sales would likely result in larger losses than necessary. Realtors® strongly believe that every effort should be made to incentivize individual versus bulk sales because individual sales maximize asset recovery and minimize the impact on housing values.

Regarding another proposed option to combine foreclosure disposition with affordable rentals through lease-to-own programs, Dechert testified that the focus should be on keeping families in their homes whenever possible. He recommended that any lease-to-own programs be privately administered by local entities that understand the needs and challenges of their local communities.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.