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…

By MICHAEL MILLER Staff Writer pressofAtlanticCity.com

OCEAN CITY — Faced with increasing tax appeals in the wake of the national real estate bust, the city plans to reassess its highest-priced coastal properties this year and the entire island in 2012.

OCEAN CITY — Faced with increasing tax appeals in the wake of the national real estate bust, the city plans to reassess its highest-priced coastal properties this year and the entire island in 2012.

Cape May County lost $2.8 billion in taxable property value in 2010, the Board of Taxation’s abstract of ratables shows.

In terms of property value, that is the equivalent of having the entire city of Cape May break off from New Jersey and sink into the Atlantic Ocean. Now, Ocean City and many of Cape May County’s 15 other municipalities are planning reassessments to ensure everyone pays a fair share of taxes.

“We found it’s hard to justify assessments,” county Tax Administrator George Ray Brown III said. “Some towns reported a 30 percent loss in value since the real estate peak.”

Ocean City Business Administrator Frank Donato has warned City Council that there is $60 million less in property on the tax rolls this year. And that likely will drop if property owners prevail in appealing their assessments, as 622 people did this year.

In a typical year, the county tax board might approve 30 percent of appeals. But since the housing bust, property owners have been winning 95 percent to 99 percent of their appeals, Brown said.

“Assessors are simply unable to support the values of tax assessments on the books now,” Brown said. “There’s no justification for having an assessment above market value.”

Avalon took action last year to address its declining market. A reassessment last year determined the island’s 5,500 homes and businesses lost a staggering $1.6 billion in value since the 2005 peak in the local market, Assessor Jeffrey Hesley said.

As a result, the borough’s local-purpose tax rate increased this year nearly 25 percent from 41 cents to 50 cents per $100 of assessed value. But since this higher rate is levied against lower-valued homes, the effect on the tax bill is negligible, Hesley said.

“A reassessment is not a revenue-generating project. It’s about equity and fairness, and making sure everyone pays a fair share,”he said.

“When you deal with big numbers on a daily basis, the sticker shock isn’t that much,” he added. “When I speak with my colleagues, they may talk about properties that sell for $250,000. I have an oceanfront in Avalon that sells for $12 million. Numbers are numbers to us.”

Ocean City is addressing the difference between assessed property values and actual market values by reassessing beachfront, bayfront, and motel-style condominiums this year. Next year, the city will reassess the entire island and its 19,000 properties, city Tax Assessor Joseph Elliott said.

Elliott said the waterfront neighborhoods generated the most tax appeals this year. If the city did nothing to address the problem, he would expect to see more than 1,000 appeals filed in each of the next few years.

But some members of the Ocean City civic group Fairness in Taxes question whether everyone in Ocean City will pay a fair share in taxes if only parts of the island are re-examined in a single year.

“They’re going to be lowering the value on beachfront and bayfront communities for the coming year,” resident Jack Stover said. “That means if the budget does not go up $1, everybody else on the island will still be getting a tax increase. The poorest in the town will get an increase in taxes and be paying for the one year’s worth of reduced assessments on the wealthiest in town.”

Elliott did not dispute Stover’s analysis. But he said this partial reassessment would be fairer to the city’s taxpayers than doing nothing.

“We couldn’t do the entire municipality. It’s too big,” Elliott said. “The fairest solution was to do the neighborhoods that were assessed highest. It’s a fairer approach than not doing it. The Tax Board agreed with me. They approved the plan.”

There is a simple solution for beleaguered property owners, Stover said. He plans to file a tax appeal.

Elliott said taxpayers have until April 1 to file an appeal. He suggested they wait to file until at least Feb. 1 to see if their property is one of the approximately 3,000 that will be reassessed for 2012.

In the meantime, tax assessors said it is impossible to predict when the market might begin an upswing.

“People are waiting on the sidelines for things to become more stable. That’s when you’ll see the investment in property again,”Avalon’s Hesley said. “Trying to pinpoint that time is just as difficult as finding out when the bottom of the market is.”

Elliott said there have been promising signs this year.

“We’ve seen more teardowns this fall than I’ve seen in the past four years,” Elliott said. “The market is stabilizing, and there is more new construction being set up.”

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

S&P Indices for its S&P/Case-Shiller 1 Home Price Indices, the leading

measure of U.S. home prices, showed a fourth consecutive month of

increases for the 10- and 20-City Composites, with both up 0.9% in July
over June.Seventeen of the 20 MSAs and both Composites posted positive

monthly increases; Las Vegas and Phoenix were down over the month and

Denver was unchanged. On an annual basis, Detroit and Washington DC were
the two MSA that posted positive rates of change, up 1.2% and 0.3%,

respectively. The remaining 18 MSAs and the 10- and 20- City Composites

were down in July 2011 versus the same month last year. After three

consecutive double-digit annual declines, Minneapolis improved marginally
to a decline of 9.1%, which is still the worst of the 20 cities.

Case Shiller Report 08/30/2011 Chart

The chart above depicts the annual returns of the 10-City and the

20-City Composite Home Price Indices In July 2011, the 10- and

20-City Composites recorded annual returns of -3.7% and -4.1%,

respectively. Both Composites and 14 MSAs – Boston, Charlotte, Chicago,

Cleveland, Dallas, Denver, Detroit, Las Vegas, Miami, Minneapolis,
Phoenix, Portland, Tampa, and Washington DC – saw their annual rates
improve in July compared to June.

“With July’s data we are seeing not only anticipated monthly increases,

but some fairly broad improvement in the annual rates of change in

home prices,” says David M. Blitzer, Chairman of the Index Committee at S&P

Indices. “This is still a seasonal period of stronger demand for houses,

so monthly price increases are expected and were seen in 17 of the 20 cities.

The exceptions were Las Vegas and Phoenix where prices fell, while Denver was
flat. The better news is that 14 of 20 cities and both Composites saw their
annual rates of change improve in July.

“While we have now seen four consecutive months of generally increasing prices, we do know that we are

still far from a sustained recovery. Eighteen of the 20 cities and both Composites are showing that home

prices are still below where they were a year ago. The 10-City Composite is down 3.7% and the 20-City is

down 4.1% compared to July 2010. Continued increases in home prices through the end of the year and

better annual results must materialize before we can confirm a housing market recovery.

“As with May and June’s reports, we saw some unusually large revisions across some of the MSAs. In

particular, Detroit was most affected in July, with the revisions showing a much healthier market than

previously thought. Our sales pairs data indicate that this market reported a lot more sales in May and June,

which caused the revisions. As we have indicated before, when sales volumes are relatively low and the

ratios of distressed-to-non-distressed sales are changing rapidly, revisions are more noticeable. These

factors likely contributed to the revisions we saw not just in Detroit, but in many of the MSAs over the past

few reports.

“Other recent housing statistics show that single-family housing starts were down slightly in August, and

are about 2% below their year ago level; and these levels are at 30-year lows. Existing-home sales,

however, were up in August and are about 20% above their August 2010 level. The S&P/Experian

Consumer Credit Default indices showed a continuing decline in mortgage default rates, a two-year trend.

However, if you look at the state of the overall economy and, in particular, the recent large decline in

consumer confidence, these combined statistics continue to indicate that the housing market is still

bottoming and has not turned around.”

The chart on the previous page shows the index levels for the 10-City and 20-City Composite Indices. As

of July 2011, average home prices across the United States are back to the levels where they were in the

summer of 2003. Measured from their June/July 2006 peaks through July 2011, the peak-to-current

declines for the 10-City Composite and 20-City Composite are -31.0% and -30.9%, respectively. The

peak-to-trough declines are -33.5% and -33.4%, respectively. The 10-City Composite hit its crisis low in

April 2009, whereas the 20-City reached a more recent low in March 2011.

As of July 2011, 17 of the 20 MSAs and both Composites posted positive monthly changes. Denver was

flat. Las Vegas and Phoenix were marginally down over the month, with Las Vegas down by 0.2% and

Phoenix down 0.1%. Las Vegas was the only city that posted a new index level low in July 2011. It is

now 59.3% below its August 2006 peak.

The table below summarizes the results for July 2011. The S&P/Case-Shiller Home Price Indices are

revised for the 24 prior months, based on the receipt of additional source data. More than 24 years of

history for these data series is available, and can be accessed in full by going to

www.homeprice.standardandpoors.com

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

By KEVIN POST Press of Atlantic City Business Editor

The real estate industry was gleeful this past week, especially in oceanfront towns, after Realtors succeeded in getting the state to ease a regulation that was interfering with home sales.

“This was huge. I can’t even begin to tell you how many deals it killed,” said Nicholas Marotta, president of the Ocean City Board of Realtors.

The rule, which will no longer apply to sales of single-family and duplex homes, requires businesses to give the state advance notice of unusual asset sales. That allows the state to seek any taxes owed by the business and to require an escrow account for possible payment of taxes before the sale is closed.

An inconvenience for real estate agents everywhere, the 2007 so-called bulk sales law was a serious problem along the Jersey Shore, where most properties are rented at some point during the year and therefore were business assets under the law.

This duplex home on Wesley Avenue in Ocean City, listed for $875,000, is an example of the kind of properties that sometimes ran into trouble from the state's bulk sales law but are now no longer subject to it.

Marotta said home sellers would have a deal lined up and notify the state, and then the state would tell purchasers they must set aside money in case it turned out past taxes hadn’t been paid.

“I had sellers on the bayfront with a buyer for $1 million, and it was their primary home, not a rental. They filed the form and the buyer got back a notice to escrow $100,000,” Marotta said.

That killed the deal, since the bulk-sales law makes the buyer responsible for any back taxes the state can’t collect from the seller.

“It didn’t matter that it was baseless because we knew it was a primary residence and not a business in any way,” he said. “Everything had to be filed, and we were supposed to wait until they sorted through everything.”

Buyers were often told they’d have to hold off until the back-tax issues were resolved at some point in the future, but many chose to walk away instead, he said.

As such horror stories spread, the Ocean City Realtors started working through the state Realtor organization and county government to get relief.

“God bless Ocean City because we were out in front on this thing. We were the first board to raise some flags and got the N.J. Association of Realtors involved,” Marotta said.

NJAR championed a bill through the state Legislature to exempt single- and two-family homes, including seasonal rentals, from the bulk sales notification process.

Jarrod Grasso, CEO of the state Realtors, said the exemption simply brought the 2007 law back to its original intent, clarifying an issue that had been left too broad.

Among 16 sponsors of the relief measure, which drew broad bipartisan support, were Sens. Jeff Van Drew, D-Cape May, Cumberland, Atlantic, and Jim Whelan, D-Atlantic; and Assemblymen Nelson Albano and Matthew Milam, both D-Cape May, Cumberland, Atlantic, and Vincent Polistina, R-Atlantic.

Marotta also credited Cape May County Freeholder Susan Sheppard for discussing the need for relief with the Governor’s Office.

On Sept. 14, Gov. Christie signed the bill into law “to boost New Jersey’s real estate market and cut red tape in order to ease the individual sale of homes and seasonal rentals,” said a signing statement released by his office.

“Thank God. That’s one major thing that we don’t need to consider doing in a property transaction,” said Midge Grunstra, director of sales at Goldcoast Sotheby’s International Realty in Ocean City.

She said she never lost a sale to the bulk sales process. “Everybody I dealt with had paid their taxes.”

Marotta, however, said there was a point to the original law, and the state has found that some limited liability corporations selling properties have had back taxes due.

“We weren’t able to get LLCs exempt, and that’s OK, because the state was finding some LLCs were not paying their taxes,” he said. “The state was collecting — legitimately — a good amount of money.”

The work on the issue by the Realtors in Ocean City — which he called “the rental capital of New Jersey” — isn’t quite done.

Marotta said in early October the board’s contracts committee will meet to revise the basic property sales contract used by members to reflect the bulk-sales exemption of one- and two-unit dwellings.

Existing Home Sales Aug 2011

For more information, contact:
Walter Molony 202/383-1177

Washington, DC, September 21, 2011

Existing-home sales increased in August, even with ongoing tight credit and appraisal problems, along with regional disruptions created by Hurricane Irene, according to the National Association of Realtors®. Monthly gains were seen in all regions.

Total existing-home sales¹, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 7.7 percent to a seasonally adjusted annual rate of 5.03 million in August from an upwardly revised 4.67 million in July, and are 18.6 percent higher than the 4.24 million unit level in August 2010.

Lawrence Yun, NAR chief economist, said there are some positive market fundamentals. “Some of the improvement in August may result from sales that were delayed in preceding months, but favorable affordability conditions and rising rents are underlying motivations,” he said. “Investors were more active in absorbing foreclosed properties. In additional to bargain hunting, some investors are in the market to hedge against higher inflation.”

Investors² accounted for 22 percent of purchase activity in August, up from 18 percent in July and 21 percent in August 2010. First-time buyers purchased 32 percent of homes in August, unchanged from July; they were 31 percent in August 2010.

All-cash sales accounted for 29 percent of transactions in August, unchanged from July; they were 28 percent in August 2010; investors account for the bulk of cash purchases.

“We had some disruptions from Hurricane Irene in the closing weekend of August, when many sales normally are finalized, along the Eastern seaboard and in New England,” Yun said. “As a result, the Northeast saw the smallest sales gain in August, and some general impact is expected in September with widespread flooding from Tropical Storm Lee. Aberrations in housing data are possible over the next couple months as markets recover from disrupted closings and storm damage.”

Yun said an extremely important issue currently is the renewal and availability of the National Flood Insurance Program, scheduled to expire at the end of this month. “About one out of 10 homes in this country need flood insurance to get a mortgage, and we would see significant negative market impacts without it,” he said.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage fell to 4.27 percent in August, down from 4.55 percent in July; the rate was 4.43 percent in August 2010. Last week, Freddie Mac reported the 30-year fixed rate fell to a record low 4.09 percent.

NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I., said the market is remarkably affordable for people with secure jobs, good credit and long-term plans. “All year, the relationship between home prices, mortgage interest rates and family income has been hovering at historic highs, meaning the best housing affordability conditions in a generation,” he said.

“The biggest factors keeping home sales from a healthy recovery are mortgages being denied to creditworthy buyers, and appraised valuations below the negotiated price. Buyers may be able to find more favorable credit terms with community and small regional banks, and Realtors® can often give buyers advice to help them overcome some of the financing obstacles,” Phipps said.

Contract failures – cancellations caused largely by declined mortgage applications or failures in loan underwriting from appraised values coming in below the negotiated price – were reported by 18 percent of NAR members in August, up from 16 percent July and 9 percent in August 2010.

The national median existing-home price³ for all housing types was $168,300 in August, which is 5.1 percent below August 2010. Distressed homes – foreclosures and short sales typically sold at deep discounts – accounted for 31 percent of sales in August, compared with 29 percent in July and 34 percent in August 2010.

Total housing inventory at the end of August fell 3.0 percent to 3.58 million existing homes available for sale, which represents an 8.5-month supply⁴ at the current sales pace, down from a 9.5-month supply in July.

Single-family home sales rose 8.5 percent to a seasonally adjusted annual rate of 4.47 million in August from 4.12 million in July, and are 20.2 percent above the 3.72 million pace in August 2010. The median existing single-family home price was $168,400 in August, which is 5.4 percent below a year ago.

Existing condominium and co-op sales increased 1.8 percent a seasonally adjusted annual rate of 560,000 in August from 550,000 in July, and are 8.3 percent higher than the 517,000-unit level one year ago. The median existing condo price⁵ was $167,500 in August, down 3.3 percent from August 2010.

Regionally, existing-home sales in the Northeast increased 2.7 percent to an annual pace of 770,000 in August and are 10.0 percent above a year ago. The median price in the Northeast was $244,100, which is 5.1 percent below August 2010.

Existing-home sales in the Midwest rose 3.8 percent in August to a level of 1.09 million and are 26.7 percent above August 2010. The median price in the Midwest was $141,700, down 3.5 percent from a year ago.

In the South, existing-home sales increased 5.4 percent to an annual pace of 1.94 million in August and are 16.9 percent higher than a year ago. The median price in the South was $151,000, which is 0.8 percent below August 2010.

Existing-home sales in the West jumped 18.3 percent to an annual pace of 1.23 million in August and are 20.6 percent higher than August 2010. The median price in the West was $189,400, down 13.0 percent from a year ago.

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.

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NOTE: Existing-home sales, which include single-family, townhomes, condominiums and co-ops, are based on transaction closings. This differs from the U.S. Census Bureau’s series on new single-family home sales, which are based on contracts or the acceptance of a deposit. Because of these differences, it is not uncommon for each series to move in different directions in the same month. In addition, existing-home sales, which generally account for 85 to 90 percent of total home sales, are based on a much larger sample – more than 40 percent of multiple listing service data each month – and typically are not subject to large prior-month revisions.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity. For example, home sales volume is normally higher in the summer than in the winter, primarily because of differences in the weather and family buying patterns. However, seasonal factors cannot compensate for abnormal weather patterns.

Single-family data collection began monthly in 1968, while condo data collection began quarterly in 1981; the series were combined in 1999 when monthly collection of condo data began. Prior to this period, single-family homes accounted for more than nine out of 10 purchases. Historic comparisons for total home sales prior to 1999 are based on monthly single-family sales, combined with the corresponding quarterly sales rate for condos.