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

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.

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.

By CAITLIN DINEEN Staff Writer press of Atlantic City

Andrea Hinds, of Staten Island, N.Y., poses for a picture Friday in front of the giant Monopoly game board in front of Bally's Atlantic City on the Boardwalk in Atlantic City.

ATLANTIC CITY – When it came to deciding what pictures she wanted to shoot of the giant Monopoly game board on the Atlantic City Boardwalk, Andrea Hinds said she wanted a little bit of everything.

“Sometimes coming down here is all about the picture,” Hinds, of Staten Island, N.Y., said Friday.

Hinds was among those who captured a memory Friday afternoon by posing with the large game pieces in front of Bally’s Atlantic City.

The pieces are part of a promotional campaign with the casino. The “Pass GO! Collect $200″ Monopoly promotion began Sept. 1 and ends Dec. 2.

Don Marrandino, president of the Bally’s, Caesars, Harrah’s Resort, and Showboat casinos owned by Caesars Entertainment Corp., said the concept of bringing Hasbro’s Monopoly to Atlantic City seemed natural.

After all, the game was inspired by the city.

Monopoly was created by Charles Darrow, of Germantown, Pa., in 1933, Hasbro’s website says.

Darrow created the game when he was unemployed during the Great Depression. Executives at Parker Brothers rejected the idea in 1934, but a year later began mass production of the game, based on acquiring and collecting rent on properties named after Atlantic City streets.

“I think the history of Atlantic City needs to be celebrated,” Marrandino said Friday, adding Monopoly has not been used as a promotional tool for area casinos before.

Despite signage on the structure advising against climbing on the game pieces and the board, Marrandino recognized tourists would likely descend to the area to take pictures and interact with the game pieces.

Marrandino said the game once was a big part of pop culture.

“Go back 15 years or greater and I don’t think there were many people that didn’t know Monopoly,” he said.

A trip down memory lane was exactly what happened for those who stopped to admire the silver car or hotel pieces on the prime squares of the board.

“As a child, I played Monopoly all summer when I was in fifth grade,” said Cheryl Murphy, of Egg Harbor Township. “This is incredible.”

Murphy called the newest addition to the Boardwalk a welcome tourist attraction that could entice visitors to stay in the city longer and see what else they can stumble upon.

“It draws people in. People want to see what it is,” she said.

LOS ANGELES — Despite near-record-low mortgage rates and the cheapest housing prices in eight years, home lending has slipped this year to the lowest level since 1997.

The laggard loan market can be explained in part by the slow economy, numerous foreclosures and the proliferation of  loans that exceed the value of the properties they secure.

But other factors are compounding the problem, including so-called refi burnout — how many times, after all, can one refinance a home? — and a wave of people who have simply decided that homeownership isn’t what it was cracked up to be.

Weary of a noisy tenant on the other side of a common wall, Bruce and Deborah Dennis sold their Arcadia, Calif., duplex in April, banked a $600,000 profit and went looking for a quieter place to spend their 60s.

Bruce’s boss, a property manager, urged them to buy another home, saying they’d never again see prices and mortgage rates so low at the same time. The couple searched seriously for two months, even bidding on a home. In the end, they opted to rent a house, leery of tying up capital and taking on the headaches of ownership with the housing market so shaky.

“We thought, ‘Is buying really what we want to do?’ I have no confidence that home prices are going back up any time soon,” Bruce Dennis said.

Opt-outs like the Dennises are one reason why the mortgage business, which led the way into the recession, is taking so long to come out of it.

Another factor is the slowing of the refinance market. Mortgage costs are near historical lows. But most of the lucky homeowners who still have equity and solid finances have already refinanced once or more and have long since locked in annual rates of less than 5 percent.

In 2003, as the housing boom took hold and 30-year fixed mortgage rates fell below 6 percent, refinancings propelled home lending to four times the current volume. And as the rate tumbled toward 5 percent and then smashed that barrier in 2009 for the first time since 1956, there was twice as much mortgage lending as now.

“There is a burnout phenomenon,” said Mortgage Bankers Association economist Michael Fratantoni. In addition, many would-be refinancers have been stopped by the declines in home prices, now back at 2003 levels, which has left them owing far more than their homes are worth.

“Borrowers who couldn’t qualify for 4.5 percent mortgages last year for the most part still can’t qualify this year,” Fratantoni said.

And getting the purchase market up and running again would require “significant job growth,” he said, something that has failed to materialize in the sluggish recovery that now is threatening to fall back into recession.

The result of all this: Despite the confluence of lower home prices and rates, new mortgages are down by a third compared with 2010. Lenders will write about $1 trillion in home loans this year, the smallest total since 1997, according to the Mortgage Bankers Association, which projects home lending will fall even lower in 2012.

Some say the combination of falling home prices, tight credit in the aftermath of the financial crisis and the flood of foreclosure sales has undermined the traditional view of homeownership as the engine of financial success.

“The previous assumptions that housing is a good investment, or that home prices can only go up, or that all Americans should be able to buy a home, are being seriously challenged,” Morgan Stanley housing analysts wrote last month in a study titled “A Rentership Society.”

In the middle of the last decade, when the term “ownership society” was coined, the homeownership rate was nearly 70 percent, the report noted. If delinquent borrowers were excluded, it said, the current rate of 66.4 percent today would instead be 59.7 percent.

For those willing to take out mortgages despite all the grim news, the prospects are improving slightly. Lenders have eased certain terms for the first time since the mortgage meltdown took hold, and some on the front lines say banks are abandoning the scrutiny bordering on suspicion with which they had come to regard potential borrowers.

“All those granular issues we were beating people up about over the last three years seem to be going away,” said Laguna Niguel, Calif., mortgage broker Jeff Lazerson. “The hassles over old credit inquiries. Having to explain every entry on a bank statement.”

Spokesmen for Wells Fargo & Co. and Bank of America Corp., the largest mortgage companies, said they recently eased standards slightly for loans backed by the Federal Housing Administration, which are attractive to first-time buyers because they require relatively small down payments.

However, among younger buyers, “there’s not much feeling that they need to buy right away,” Fratantoni said. “I expect that may change over the next couple of years, but certainly for the first-time buyer there’s less near-term demand.”

Older people can be ownership-averse as well, like the Dennises, who intend to work five more years before they retire.

“To buy another house, we were going to have to come up with a chunk of change for a down payment,” Bruce Dennis said. “Then there were property taxes, and of course maintenance — that gets expensive in a hurry.

“The glories of homeownership we no longer have to face.”

Jersey Shore Opportunities

This blog post for September 10, 2011 was to a question posed to me the other day asking is this a good time to buy a shore property? Let’s start out with some background by saying I worked with my first real estate company in Atlantic City in the spring of 1985. During that time the market at The Jersey Shore was showing signs of topping out and starting to rollover. The Atlantic City real estate market was being fueled by the massive speculation of gambling and was still on a tear because casinos and investors were still buying the dream. Also in this time period new high rise condos were being brought to market by some out of the area real estate developers that were probably late to the party but were in no position to back out at that point. With major marketing dollars and plenty of effort four residential high rise developments with approximately 1400 condominium apartments were sold and closed from January 1985 until July of 1988. The impact of these properties that entered the market was extraordinary bad. First most of these properties were sold in a vacuum meaning that the prices weren’t really the market they were the prices the developers asked for and got because of the hype. Many of the buyers were from New York or Northern New Jersey and didn’t get sticker shock like their friends from the south in Philadelphia. With the onslaught of closings about 20 to 25% of those properties were put back on the market which by then became a non market.

That short story was the Atlantic City story which had seen the amazing spikes from speculators and casino land grabbing. The casino stocks were flying and many people became multi-millionaires overnight. Let’s get back to the real world for a minute. Other parts of Atlantic County saw much growth from housing and indirect investment in the form of retail and commercial properties to keep up with the growth from the casino engine. Now sleepy Cape May County was feeling some growing pains from the exodus of some Atlantic County residents to Upper Township where the prices didn’t see the same increases and the taxes had not increased much either.

What happened to the other shore communities other than Atlantic City? Of course they went up, but not in the dramatic fashion as A.C. did.

So what happened to make one of the greatest advances in real estate prices fall? Probably to answer this question two fold, the first was greed. How fitting for the New York metro area and second is the easier answer. A market will eventually top out for what ever reason. There becomes a point in time when there is no one in the marketplace that will buy at those prices are there isn’t anyone left in the marketplace to buy. What happens next? It’s called a correction and it can last a long time or a short time depending on the increase of the advance and the longevity of the advance.

Historians have said that the end of the run up in the late 1980’s was from a few major events. First, the tax reform bill of 1986 which changed the status of rental investment properties that owners now either had passive or active income from their investment properties and then the stock market crash of 1987. These two events were the beginning of the end for the run up, on a financial front and then on a psychological front. This one-two punch put the economy and the real estate market in a correction that lasted until 1995 or 1996 depending on the regional economy.

Let’s go back and try to answer the question. When was the best time to buy shore real estate between 1987 and 1996? Let me point out the real estate market bottomed out 1992, 1993, 1994 which I call the muddy bottom. At that time buyers and sellers were trading deeds and the prices stayed generally fixed except the buyers that were buying the quality pieces made out much better in the long run. If you bought in 1991 did you not get a great price? If you bought in 1995 did you not get a great price?  All I can say in that if you bought in all five of those years you would have doubled or tripled the value of your investment.

Why did the real estate market just decide to go up then? Supply and demand is the usual factor. When the supply dips below the demand the prices will start to increase slowing because there is always addition supply waiting for the prices to increase. When do the prices really start to move? Now we go back to the opposite psychology, because when everyone is buying other people feel more comfortable to buy! Friends and family always try to keep up with the Smiths or Cohen’s.

Don’t many people say the market will never go as high as it did this time? Hell yeah. Most people have a memory problem and it starts as soon as times become comfortable. We hear the economy is better, we hear how wonderful the president is doing and we hear whatever we want to hear.

On a different concept when does the market finally go into hyper mode? This one took my much more time to figure out. Bingo! When the entire back inventory is cleared and the properties that were bought at the top of the market are either sold on the market or not returned the market is when the real estate marketplace has the opportunity to flow. Keep in mind timing, as the prices go up how much new inventory will be a drag on the markets. The quicker this happens the fewer properties will be out there since most of the buyers are holding for at least 3 to 5 years.

Now back to the story at hand. The Cape May County market from 1996 to 2000 was having a steady flow of buyers since the baby boomers were entering the resort second home market. I would say they were seeing a 5 or 6 percent increase year over year. Not bad right? The market was just plugging along until the first bump in the road and didn’t turn into a speed bump but a catalyst. The stock market had a nasty correction what was called the internet bubble. If you remember what happened, investors were back to buying stock in companies that never made money. Some people forget or it’s just a new generation of people that don’t know better. So what are people to do now? I got it! Let go back to buying bricks and sticks since they are way less volatile. Right? Well guess what happened next? Like it was yesterday, the World Trade Center came down on September 11, 2001. If you weren’t freaking out you must have been on the moon! For six months the whole country was in shock and many people had a new idea about life. Live for the day and enjoy the time you have with your family because we never know when life could be cut short. Seeing all of those young people in the twin towers and in the financial district it was so unspeakable and this brought on the next wave in my opinion.

One last flashback to 2003, I end up working as the President and general manager of The Landis Co., Realtors in Sea Isle City.  At the time I started having conversations with Jim Sofroney the Broker/ Owner of the firm who had been in the real estate business for 30 plus years. Our conversations were how to manage the risk for our clients since we managed 1000 rental properties and wanted to give the owners our best interpretation of the market twice a year. We were starting to feel a little concerned about the increase in prices already. By the end of the summer of 2003 the prices were holding and the inventory was not increasing and the economy was getting traction.

So where am I going with this story? If you aren’t familiar with the real estate market in Cape May County we have two strong buying seasons, the spring which would consist of February, March, April and May. Then our Fall season would be the end of August, September and October. When we hit the fall season of 2003 the prices were increasing at 1% to 2% per month. Everyone thought this was great, so we saw people that shouldn’t have been in the investor market or people were buying multiple properties at these scorching numbers. The prices were being driven up by the speculation from the builders and developers that were buying land and buildings to turn into townhouses and condos. The more buyers bought the more their friends and family wanted to buy. Human nature at its worst, the greed factor or the let’s keep up with the Jones’ syndrome was at work. We didn’t see this market not being able to digest the entire inventory until the fall of 2005 when things started to roll over. Prices didn’t go up or go down, so the premise was we were beginning to stabilize. That made sense since all we were doing was taking a breather from that frantic period. Right? No! Wrong the real estate markets were exhausted and the developers were still building which was putting even more pressure on the markets that the inventory was peaking out because many of the buyers were planning on flipping their property at the same time the builders were dropping their prices to meet the slowing market.

It became apparent that the real estate markets when the land costs dropped 35 to 40%. The most improved part of the market became the worst place to be. The lot costs probably came back to a reasonable price point but the actual condos and townhouses haven’t dropped that much. Over the last five to six years we watched the prices drift anywhere from 25% to 50% from the ultimate time depending on the town or property type which you might be researching.

Prices were drifting lower at a snail pace until the bad boys of the banking community decided to do lots of bad thing. Well let us say did. Knowingly selling bond portfolios of loans that were to have little or no equity to Main St and sell them as CMO’s (Collateralize Mortgage Obligations). Boy doesn’t that sound warm and fuzzy sitting in your brokerage portfolio? Guess what the executives decided to they owned a bunch of this stuff themselves and tried to figure out a way to cover their bet with derivatives (a financial product like an option to play the other side of the bonds). Well who do you call to help with this mess since this is a new fangled problem? Let’s drag the insurance companies in since they understand derivatives and insurance programs. They will come up with a solution so they thought. The first big insurance company that took a hit was AIG. AIG was probably the biggest insurance company at the time and now running as a few smaller companies. This brought on one of the worst financial crisis ever to hit the United States. The Financial bailout of 2009 was also the biggest blunder since the following year the banks and financial firms that we bailed out had the largest profits in history.

As the prices kept falling and more and more property owners were underwater by 2009 and 2010 it seemed that a lot of the investors were throwing in the towel after getting professional advice from either lawyers or accountants.

The outcome from the professionals was three basic ideas; hold the property for as long as you can. Rent it out, use it, sell it were their choices on scenario one. Then the tough stuff the lawyers would be involved with. If you can sell the property at a price less than the amount you owe the bank we can get you out of the property with out you losing the property in foreclosure. Its easy to do because the banks don’t want to the real estate back and it will even be a longer time before they get it back and if the markets drop further, lets do the deal now and move on to the next one. Back in the early 1990’s most professionals called this a “cram down”. It was a verb since it was being crammed down the banks thought. Today the term is a Short Sale. Aw, isn’t that nice? Since the bank is letting property owners do these they aren’t the victim they are getting what they want. Less bank owned properties and much less legal fees make it a win-win for both parties. The last is the do nothing and enjoy the property and when the bank finally takes the house just get there before and get your personal items out. This process could take anywhere from six months to 18 months depending on the financial ability of the owner and the type of property.

Let’s fast forward back to today September 10, 2011 the day before the tenth anniversary of 9.11.2001. For some reason we are still not comfortable with the local real estate market. We still not have a crystal ball and we are only past history to project the next one or two years out. Why do we even care? I’m not really sure but my blog essay is to show you that history does repeat itself and that where we are today is must closer to the bottom then we are to the top.

Let’s explore these simple questions that people like you might be asking;

Is this a good time to upgrade into a larger Jersey Shore property? Yes. The first question I would ask is how much equity do you have in your current property? The difference between the realistic values of the property and any loan or debt amount attached to the property would be your equity amount. This has nothing to do with any profit or loss you might have experienced. Either way we are looking at a snapshot of today to decide our next move. Psychologically no one likes to take less on an investment but that is irrelevant in deciding to upgrade into a bigger or better property. In the long run the objective is to leverage to down market to your advantage by buying the more expensive property now. On a percentage basic if all things were equal the dollar lose would be substantially more on the larger property than the small property.

As long as you have 20% for your new down payment from funds from the old property or new funds the transition is a go. This is how people with money have been upgrading all the way to the beachfronts or bay fronts. You can’t imagine how many people have asked me “how did those people buy on the beach?” In most cases it was their second or third property at the beach. If you have additional questions about this awesome timing opportunities please email me or call to discuss.

Is this a good time to invest in a Jersey Shore home? Yes is the answer. If you are like most people who are trying to catch the bottom of this cycle well we are in it right now. I would consider being within a 10% margin of the top or the bottom as a good reference point. Why do I say that? No one has a crystal ball from what I been told. Then all we can do is our very best to identify the bottom. First of all I like to call this next two years as the muddy bottom. Properties will come up and be sold at similar prices in the period of time. This is where an experienced real estate broker will come in handy. What was the first thing you were told about real estate? The three most important components to buying real estate are location, location and location. Then I heard the experts say buy the smallest home in the best neighborhood. So my final word of advice when buying in the soft market is do not let the price be your guide. Still buy the best piece of property you can comfortably afford and jump in enjoy The Jersey Shore with your family and friends because that’s what me and my fellow Realtors are really selling. This is the greatest opportunity to enjoy the nature and the shore lifestyle for you and the most important people in your life.

So go out there and don’t get caught up in the greed of vacation property ownership and do what millions of people have done for generations. Live The Jersey Shore lifestyle. Namaste ~ Ian

Ian Lazarus

Broker Associate

Team Leader – The Lazarus Team

The Landis Co., Realtors

4201 Landis Avenue

Sea Isle City, NJ 08243

609.457.0258

ian.lazarus@mygo2realtor.com

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