Much has been made recently of the government’s renewed efforts to spark the housing market from its dismal slide, however we fear there are yet more unintended consequences lurking just around the corner. The various ideas being posited for a broad REO-to-rental program is one of these steps as BofA points out in accommodating the dramatic shift from ownership to renting (with 4.2mm new renters and 1.2mm fewer homeowners since the end of 2006). Of course removing foreclosures from the for-sale market reduces competition for voluntary sellers – which should help to support prices for non-distressed homes but here is where the crux of the unintended consequence lies.

We have a squatter epidemic. There are millions of ‘homeowners’ currently living mortgage-payment-free (by choice) who will soon be forced (as the foreclosure process ramps up post-settlement) to pay rent (since they will not qualify for a mortgage). This will have the double whammy effect of reducing overall discretionary consumption spending (as rent is greater than ‘free’ – unless the cardboard box is preferable) and driving inflationary forces into rental costs (something we are already seeing). Of course these are the much larger second-order effects and we will only be told of the primary benefits of clearing foreclosure inventory, but at the margin (along with gas prices) the household will have less discretionary iPad-buying ammunition as opposed to more.

Since the end of 2006 there are 4.2 million more renters and 1.2 million fewer homeowners…

Distressed property prices continue to turn down (and re-accelerate) as the foreclosure pipeline starts to unclog…

7% Jump in US Median List Price
For-sale housing inventory drops 22%, near a 2-year low

Data courtesy Inman News.

Median list prices jumped 1 percent or more on a year-over-year basis in February for about 73 percent of the 146 markets tracked in a report released this week by Realtor.com.

On a national basis, the median list price rose about 7 percent year over year in February.

Among the top 10 markets for the highest year-over-year hike in list prices in February, seven were in Florida — Miami topped the chart with a 26.2 percent increase, according to the report.

The median list price of homes tracked by Realtor.com rose $2,500 between January and February 2012, to $188,000, which is 6.82 percent higher than the median list price was a year ago when it was at a two-year low. February 2012′s median list price is on par to what it was in February 2010.

Only two markets showed a year-over-year increase in for-sale inventory, according to the data: Philadelphia and Springfield, Ill.

The housing market shared in the summer economic slump, brought on by the downgrade of the U.S. credit rating, impotent congressional squabbling over deficit reduction and Europe’s self-inflicted debt crisis.

This single-family house on Simpson Avenue in Ocean City was among the homes in the region that sold during the third quarter for the median price, $220,000.

Home prices fell again, but by less in the southern New Jersey shore market, the latest data from the National Association of Realtors show.

Home sales, though, increased everywhere from a year ago — up 13 percent in New Jersey — helped by record low mortgage interest rates.

In the Atlantic, Cape May and Cumberland counties region, the median home price in the third quarter was down 3.8 percent from a year ago to $220,600.

That was better than the 4.7 percent decline nationwide and 6.5 percent drop in the Northeast.

Anthony D’Alicandro, president of the Atlantic City & Atlantic County Board of Realtors and broker/owner of Coldwell Banker Casa Bella Realtors in Linwood, said the price drop is a function of supply and demand, with too much inventory and too many distressed properties on the market.

Another factor is low consumer confidence, which is lower than it was in 2008, he said.

But overall, D’Alicandro said he feels good about the housing market and “the little bit of growth we’re seeing.”

A healthy market grows slowly, as it did in the early 1990s, he said, not like the housing bubble in the following decade that ended in the current oversupply.

“We will see an initial decline in prices, and then nine to 12 months from now, we’ll start to see true stabilization and a little bit of growth by the end of 2012,” D’Alicandro said.

Mortgage rates that remain about 4 percent will continue to motivate buyers as long as they last, and the shore region will remain an appealing market to home buyers, especially those looking forward to retirement, he said.

“We have an attractive place to live, near the shore, with lots of things to do, near the big cities of Philadelphia and New York, with a nice climate, and we’ve seen a tremendous increase in the quality of health care, which is important,” D’Alicandro said.

Jarrod Grasso, the chief executive officer of the New Jersey Association of Realtors, expressed a similar sentiment about the statewide market in explaining the strength of New Jersey home sales.

“The resiliency of Garden State infrastructure and industry, plus our location between the New York City and Philadelphia markets, places us in a strong position for employment and stability,” Grasso said in a statement.

Thanks to low mortgage rates and fallen housing prices, home affordability continues at record-high levels.

NAR’s Housing Affordability Index was 183.8 in the third quarter, the highest ever except for the record level in the first quarter this year. The index gauges how readily those with a median income could afford a mortgage for a median-priced home. The median is where half are higher and half lower.

A third of home purchases in the third quarter were for cash, and two-thirds of those cash buyers were investors, the Realtors said.

D’Alicandro said that with rents for homes soaring, housing makes sense as an investment again. “We’re seeing rates of return in the 9 percent to 11 percent range.

Distressed properties — either short sales or foreclosures — made up 30 percent of home sales in the quarter, down from 33 percent in the second quarter, the Realtor survey said. Those houses typically sold at a discount of about 20 percent.

D’Alicandro said that while there is a large backlog of distressed properties from the legal system’s slowdown of foreclosure processing, he doesn’t expect those to undercut demand much for normal homes.

“If you think about a 28-year-old who is exceptionally good at writing HTML code, I don’t know that he wants to buy the house that’s been sitting vacant for three years,” he said.

The 3.8 percent decline in the regional home price follows a 5.8 percent increase in area home prices in the second quarter.

The current median price in Atlantic, Cape May and Cumberland counties is about the same as it was in 2009, and 13 percent lower than it was in 2008.

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.

By KEVIN POST Business Editor Press of Atlantic City

Joel Naroff, of Margate and Holland, Pa., is president of Naroff Economic Advisors and this year’s most accurate U.S. forecaster, as determined by the National Association for Business Economics.

His clients include the Susquehanna and Metro banks, grocery giant Ahold USA, Cumberland Advisors, eMoney Advisors and Prudential Fox & Roach. Naroff discusses the economic recovery, government interventions, lasting effects of the downturn, and the future of the regional economy.

Joel Naroff, economist and president of Naroff Economic Advisors, discusses the economy, Tuesday Oct. 18, in Pleasantville.

Q: Is the popular perception of the economy accurate? Should we be worried more or less about the strength of the recovery?

A: For about a year and a half I’ve been asking people if they think the recession is over, and if I get 5 percent of the group saying yes, that’s a lot.

Yet the recession ended in June 2009. That perception is being driven by job numbers.

We seemed to be coming out of it in the first part of the year. There were several months where we had job growth in the 200,000 range. That was signaling that the economy was on the verge of changing gears.

Unfortunately, before the job growth could get strong enough and be self-sustaining, we had $4 a gallon gasoline. And that really cut the legs out of what was always going to be a tenuous recovery.

You could never get a really strong recovery with housing not going to rebound the way it did in the past. Housing used to lead the recovery, but we built almost twice as many homes as we needed in the last decade, so housing’s going to be weak.

But if you look at the details of the economy, the manufacturing sector is really good, the service sector has been expanding, exports are really doing very well. The details are better than the headline popular number, which is jobs, and I think that’s why people are depressed, and with very good reason.

If you can’t find a job or are worried about losing your job, that’s job insecurity, and that’s what a lot of people have right now.

Q: What are the strengths and weaknesses of the Jersey Shore’s economy?

A: Clearly the attractive forces in terms of the shore communities and the summertime are not going to go away and are only going to grow. But I think the key factor over the next 10 to 20 years is the slow but steady retirement, or whatever they call it, of the baby boomers.

Baby boomers are not retiring all at once, but that process has begun and over the next 10 to 20 years it will ramp up. Baby boomers are looking for different things than their parents’ generation looked for. They’re looking for what I call high-density amenity locations. Places where they can get to and do lots of different things easily.

That changes where they’re going to locate. Center cities become not really great places. Areas around colleges become really nice places. The shore becomes a wonderful area. If you think of Atlantic City in terms of all the cultural amenities that is has to offer — the music, the shows — it’s a really desirable place not just for the summertime, but for the baby boomers it becomes a desirable place to retire to.

I think we’re beginning to see that. A lot of the rentals over time will be replaced by retired baby boomers living there full time. That will change the face of shore communities because the services that go along with more and more full-time and reasonably well-off residents will have to be developed.

Atlantic City is obviously the linchpin, but Atlantic City is also the risk in that, for the longest period, it had relatively little competition. Now that’s not the case. There are casinos everywhere, and Atlantic City needs to define itself in a different way.

Outside of Atlantic City, clearly what’s happening in the airport and (William J. Hughes) Tech Center area is potentially a huge plus over the next 10 to 20 years because that’s so much of where the world economy is going.

Q: Will the region’s housing market benefit going forward from its substantial second-home and retirement-home segments?

A: If my thinking about the Jersey Shore being a retirement community and not just a tourism attraction is correct, that’s very good for the stability and growth of the housing market.

That demand will continue and grow to a major force as more baby boomers retire. To the extent it requires a more diverse and stable base to support the residents, that’s going to bring more workers, more incomes, and more demand for housing throughout the area, including offshore.

Again this is going to take a long time, 10 to 20 years, but it does have a really good implication for housing market outlook.

Q: What is the potential for Atlantic City to set itself apart from the convenience gambling competitors around it?

A: Atlantic City faces a major challenge right now to identify itself in a different manner.

It can’t be the same Atlantic City that it was 20 or 30 years ago, and it isn’t. It has been trying to wean itself off of the day-trip model and become more of a destination. That’s critical.

The challenge is figuring out precisely what that image is. It’s got to be something else that really sets it apart.

It’s got a large enough mass now, with the Revel hotel coming in, that even if it loses some of its casinos, it’s a different place than anything that exists on the East Coast. It has to make that clear and sell that. I’m not a marketing expert, but I think there’s an understanding that it’s a tourism place, it’s got the summers, but getting people down here in the fall and spring is really important as well.

Q: Is there anything that government can do to reduce unemployment and strengthen the weak recovery?

A: With this really, really disappointing recovery, I think everybody’s turned toward the magic bullet. Can’t the government do something? We’ve spent all this money, bailed out the banks, had stimulus plan after stimulus plan. Why isn’t the recovery stronger?

With fiscal policy being restrictive and state and local governments cutting back on their budgets and their work forces, and with housing and finance not adding in the way they used to, it’s very difficult to get things going.

That said, could the government be doing more? Well, the problem with fiscal policy is that it takes a long time. Even the so-called shovel-ready projects we started are still being worked on. We have construction just beginning or not yet finished and it’s nearly three years ago we started that.

The government can’t simply say, gee, we’ll cut taxes. Businesses have $2 trillion in cash on hand. That’s not what’s stopping them from hiring more people and investing more. It’s uncertainty about the economy.

Q: Are there things government shouldn’t do during this period of prolonged economic weakness?

A: There’s a lot of debate about that. You don’t want the government to put up hurdles to business. At the same time we’re in a special situation.

We had been letting the financial sector handle things on their own, and while there were plenty of regulations to deal with the excesses that occurred, the regulators didn’t enforce those regulations nearly to the extremes that they might have to prevent things from happening.

I’m not saying the regulators were at fault, but now the question we’re having is what’s the right amount of regulation and what’s too much or too little regulation. We’ve gone through a period of too little regulation and we may be going through a period of too much regulation, but we know there are costs involved with that. We need to make sure there’s not too much regulation.

We need to make sure there’s confidence coming out of Washington, coming out of the statehouses across the country, coming out of local governments, that people are dealing with the issues rather than fighting.

In a period where psychology matters, the chaos that’s going on in Washington is not particularly helpful.

So what government can’t do is send the wrong messages and create major hurdles that will prevent households and businesses from doing the things they need to do.

Q: What is the soonest and the latest the economy might return to what we’d consider normal?

A: This is one of those questions that if I knew the answer I’d write it down. I’d like to say it’s probably going to be at 2:30 in the afternoon of March 14, 2012. The reality is that we really haven’t had to go through a recovery where we were dealing with two of the most critical components of the economy, housing and finance, that were so badly damaged that it was taking a long time for them to recover and get things going.

These are conditions we really hadn’t seen in previous recoveries in the post-World War II era, really in the last 60 to 70 years. That makes it a very odd situation.

The economy is going through what I call a slow but steady grinding recovery. It’s going to take a while. By the time we get to next spring or summer, we will clearly see that things are back. Are they going to be normal? Maybe not fully normal but getting there. If you think back to last spring, when job growth was coming around, we hadn’t flipped a switch, we hadn’t shifted gears, we were getting to that point such that, if gasoline prices hadn’t shut the recovery down, by now we’d be in pretty good shape.

We’ve essentially pushed that recovery back a year, so by the spring we’ll probably be in the process of shifting gears and by summer we’ll see things getting appreciably better.

Q: Will the severe downturn have lasting effects and, if so, what might the new normal look like?

A: Whether it has as deep an impact as the Depression did on that generation that lived through that, which became extraordinarily cautious for a long time, is unclear.

But the longer this goes with this kind of slow growth, this kind of uncertainty, with this kind of job insecurity, the more that perceptions and attitudes are going to change.

It’s going to be a long time before we have another go-go housing market. People are going to look at jobs in different ways. Job security had been defined by a lot of people as simply the ability to get another job. If I don’t like this one, I’ll just go find another one. Well, they’re going to be looking at trying to keep their jobs.

In addition, a lot of people are being scarred by changes in income and spending, and so their spending habits are going to change. Shop ’til you drop will return, but it’s going to take a long time. Maybe it will be shop ’til you’re tired.

Then there’s the idea of what’s a normal economic expansion. We think of the last 20 years as having really strong growth, but what drove the ’90s? It was a tech bubble. That created a huge amount of wealth and that wealth drove strong growth.

Similarly, what happened in the last decade? A lot of people saw their housing prices go up, they spent as if their $250,000 home was really worth $2.5 million, and that extra wealth on paper drove the strong growth.

Unless we have another bubble that creates huge wealth, we’re not going to have that strong growth.

So the new normal, which is an old normal, a non-bubble-driven normal, is significantly slower growth than we had in the bubble periods.

Q: How will the jobs of the future be different, and how should workers prepare themselves for them?

A: The job of the future is just a continuation of the changes that we’ve seen the last 20 years. The days of being able to get a basic high school education, go into a factory and make a decent living are pretty much behind us. Factory jobs are much more skilled right now, and you hear stories every day about manufacturers who even in current circumstances are having trouble finding the right people with the right skills.

That’s in part a result of our perception that manufacturing is disappearing so we don’t have to train for it. It’s not necessarily that the education system went wrong, just that we told everybody they should be in software, rather than getting the kinds of technical skills that every firm requires right now.

It shouldn’t be that we have so many manufacturers looking for skilled workers and they aren’t out there at a time when we have unemployment above 9 percent in the state and nation. That’s a lack of understanding where the skills were going and setting up the training to match that.

Q: What are your business clients most concerned about this year?

A: In the beginning of this year, the question I was asked the most was: When are we going to get out of this and how strong will the recovery be?

Then as we moved through the summer and the chaos of Washington with the debt ceiling, budget cuts and the downgrade, the question became: Are we going to go into a double dip?

Businesses are uncertain and they’re not hiring because of that. They want to have some confidence that if they make an investment and hire some people, the economy’s not going to fall apart three months from now. And while no one can give them certainties, my forecast is that’s not likely to happen, at least not unless there’s another shock to the economy.

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

By JOHN FROONJIAN Statehouse Bureau Chief Press of Atlantic City

Homeowners in most towns in Atlantic and Cape May counties, with spending caps in place and housing values declining, experienced low or moderate property-tax increases this year, an analysis of tax data by The Press of Atlantic City shows.

Property taxes actually decreased in Avalon this year. Dale Gerhard

Property-tax increases from 2010 to 2011 were held to 3 percent or less in 25 of 39 municipalities, or 64 percent of towns in those counties.

A typical homeowner’s property-tax bill actually decreased in four towns — Corbin City, Estell Manor, Avalon, and Wildwood — and stayed flat in Sea Isle City and Woodbine, Press analysis shows.

Tax bills increased by 10 percent in Egg Harbor City — the region’s highest increase — and by 7 percent in Upper Township, where a new municipal purpose tax was instituted. They rose by only 1 percent in Mullica, Dennis, and Lower townships and West Cape May.

The Press used state Treasury property-tax data to calculate the median assessed values of homes in each municipality, then multiplied those values by the overall local tax rates to arrive at a typical homeowner tax bill. Data are not yet available for Cumberland and Ocean counties.

Property-tax bills overall in Atlantic County rose by 3 percent, and rose by 1 percent in Cape May County.

Officials said local governments have responded to the tight economy by cutting costs.

“I think they have all battened down the hatches,” said George R. Brown, Cape May County Tax Board administrator.

A state-mandated cap on municipal, school, and county spending was in place for this year’s budgets. The cap, enacted in July 2010, prohibits spending and the tax levy to increase more than 2 percent unless approved by local voters.

Certain costs, however, are exempt from the cap, including pension and health benefit costs, debt payments, and emergency spending.

Effects of the reeling housing market are evident in the property-tax data, as the median assessed home value declined from 2010 to 2011 in 11 towns in Atlantic County and nine towns in Cape May County. In some places, including Avalon — where tax bills dropped by 9 percent — all property values were reassessed or revalued. In others, lower home sale prices led to property-tax appeals that reduced values for some homeowners.

In Wildwood, the median home value declined from $250,700 to $222,400. Mayor Ernie Troiano said the city lost $220 million in assessed value because of tax appeals.

Troiano said the city has reduced spending and staff, and put off construction work on roads and other infrastructure. But he said a tourist town cannot afford to ignore maintenance needs for long.

“That can bite you a few years down the road,” the mayor said.“You need to fix your streets. Most of our infrastructure is 80 to 100 years old.”

But he said he understood that taxpayers are hurting, so it made sense for the city to put off such costs for now. The tax bill for a typical residential property in Wildwood declined from $4,598 to $4,214, an 8 percent drop.

Galloway Township Manager Steven Bonanni said officials have cut staff, including reducing the police force from 73 to 56 officers, and have pursued shared services agreements to reduce spending.

In past years, the township’s residential base grew at a consistently fast pace. But spending cuts are now being made as home building has stopped and values are deflating. The 2011 median home assessment of $218,700 is $200 less than what it was last year.

A typical homeowner’s tax bill in the township went from $4,310 in 2010 to $4,416 this year, an increase of 2 percent.

Bonanni said local officials are trying to attract more businesses to the area to help spread the tax obligation.

“We’re holding spending down,” he said.

In Egg Harbor Township, the typical property-tax bill increased from $5,266 to $5,405, up 3 percent. Township Administrator Peter Miller said a 20 percent reduction in staff since 2008 was just one of many strategies being employed to keep costs down.

“We’re doing a multitude of things. There’s no one magic bullet,” Miller said.

One example, he said, is that the township refinanced debt from 2002 within the past month, saving about $45,000 a year.

The township has conducted cost-benefit analyses to explore increased efficiency, he said. It considered whether to privatize trash collection but concluded it would be more expensive in the long run. Miller said the township was able to eliminate 11 positions by using an automated trash collection system with a truck that lifts 96-gallon trash barrels provided to residents.

In Cape May County, Brown said property values have declined for various reasons. Selling prices have fallen below assessed value in many towns, especially along the ocean. With home construction stalled in the poor economy, pricey new housing is not expanding the tax base.

And some towns have reassessed or revalued all properties, as did North Wildwood and West Cape May. Tax bills increased by only 1 percent in West Cape May and by 2 percent in North Wildwood.

Brown said local governments and school districts have had to deal with the pressure of rising costs while their tax base is declining.

“I think officials have done their best,” Brown said. “Towns like North Wildwood should be credited for holding the budget line in a year of down assessments.”

September 20, 2011

A rental property can generate “taxable losses” that can be used to reduce your normal salary income, hence the federal income taxes you pay. It’s difficult for most people to understand how taxes work, and even more confusing once we get into the realm of rental properties and taxes. Below are some of the basics to understanding rental properties and federal income taxes. (Note: Understanding how taxes impact personal residences are a completely different topic, as those are governed by totally separate tax codes and go elsewhere on your 1040 form.)

Often I hear people saying that they want to buy some real estate to save money on income taxes. However, depending on your tax situation, owning real estate might not save you a dime on taxes. It wholly depends on your specific tax picture and the IRS rules about Passive Activity Loss Limitations.

First and foremost you should never make real estate investment decisions based solely on tax considerations. The first order of business is do your due diligence and determine if an investment makes sense based on cash flows, cash on cash returns, renovation costs, rental income, financing, and the risk of any particular property. Once you believe it makes sense in every other sense, then you can contemplate the tax effects.

(Important note: Always have a CPA, attorney or licensed tax professional guide you through your individual tax picture – this article is an illustration of one scenario but your scenario can be very different based on your financial picture.)

To better understand, let’s first quickly discuss the IRS 1040 form (http://www.irs.gov/pub/irs-pdf/f1040.pdf).

Your 1040 form you fill out each year – the form that most people start about midnight in April 14 – does two things:

1. Calculates the amount of federal income taxes you owe for the year based on how much you earned in salary, income, wages, profits, distributions, etc. LESS all the deductions (tax “shields”/subtractions) to those totals in the form of losses, deductions, exemptions, etc., to get to your Taxable income on Line 43. Then, look at the IRS Tax Tables and determine how much you owe in taxes based on your tax filing status (Single, Married Filing Jointly, etc.) and your Taxable Income.
2. Second, it reconciles the amount you owe from #1 above against the amount you have already paid during the year. This is commonly called “withholdings” from your salary, or if you are self-employed, you probably paid quarterly estimated income tax amounts to the IRS during the year.

• If you paid more in #2 than you owe in #1, you get a tax refund!
• If you paid less in #2 than you owe in #1, you write the IRS an additional check!

Tax Considerations of Rental Properties

Rental properties generally show taxable losses for the first many years. That taxable loss is essentially another “deduction” that lowers your taxable income – noted in #1 above – and hence lowers your income taxes.

This chart below shows an example of how a loss would be calculated. For example, this property might show a ($7,500) loss. That loss would filter through your IRS 1040 form, reducing your taxable income, and hence reducing your taxes.

This is how you might save money on taxes by owning rental properties – using losses on your rental real estate to reduce your taxable income, which allows you to pay less in federal income taxes.

How much it reduces your taxes depends on your income and filing status. It is a little complicated and can get very complicated depending on your situation.

There are also limits on how much of a loss on rental property any particular taxpayer can use to “shield” their income. These limits are called Passive Activity Loss Limitations. If your losses are over $25,000 and/or your Adjusted Gross Income is over $100,000, you may not be able to use all of the losses. You may have losses, but you are not allowed to reduce your income with them based on the IRS rules. Consult a professional.

Because of the manner in which the law was written, the sale of single family homes from individual sellers was made subject to the requirements, resulting in home purchasers having to file paperwork and provide ten days notice to the Division of Taxation for every real estate transaction, or else risk being held liable by the State for the seller’s delinquent taxes. Under A-2748, the sale by individual sellers of any dwelling unit, primarily one- and two- family homes, will no longer be subject to the bulk sales notification requirements.

BILL SIGNED:

A-2748/S-2313 (Diegnan, Schaer, Lampitt, Conners/Van Drew, T. Kean) – Exempts sales of certain homes and seasonal rentals from the bulk sale notification requirements