Home Prices Drop 18.2 Percent

The Standard & Poor's/Case-Shiller U.S. National Home Price Index fell 18.2% in the fourth quarter of 2008 from the fourth quarter of 2007, which represents the largest drop in the Index's 21-year history. Home prices are now at levels last seen during the third quarter of 2003.

The peak of the Index was the summer of 2006, and the 20-city index is now 27% below those levels.

Below are home price changes as tracked by the Standard & Poor's/Case-Shiller U.S. National Home Price Index:

	Dec. 2008	Change from Nov.	Change from Dec. 07
Atlanta	113.87	-2.30%	-12.10%
Boston	153.05	-1.30%	-7.00%
Charlotte	122.41	-2.50%	-7.20%
Chicago	137.16	-3.00%	-14.30%
Cleveland	105.21	-2.10%	-6.10%
Dallas	115.63	-2.30%	-4.30%
Denver	125.74	-1.50%	-4.00%
Detroit	80.93	-3.00%	-21.70%
Las Vegas	131.4	-4.80%	-33.00%
L.A.	171.46	-2.50%	-26.40%
Miami	165.01	-2.70%	-28.80%
Minneapolis	127	-4.60%	-18.40%
New York	183.5	-1.70%	-9.20%
Phoenix	123.93	-5.10%	-34.00%
Portland	158.5	-2.50%	-13.10%
San Diego	152.16	-2.10%	-24.80%
S.Fran	130.12	-3.80%	-31.20%
Seattle	160.19	-3.60%	-13.40%
Tampa	156.04	-3.00%	-22.00%
Washington	176.34	-2.20%	-19.20%
10 cities	162.17	-2.30%	-19.20%
20 cities	150.66	-2.50%	-18.50%
Note: index=100 in 2000 Source: S&P, Fiserv, USAToday Follow me on Twitter @ http://twitter.com/FSBO_Guy

How Barack Obama's housing plan might help you

President Obama's housing rescue plan is dominating today's headlines. Considering the size and scope of the $75 billion plan, one almost needs a map just to figure out the details. Thanks to our friends at the Chicago Tribune, we're happy to pass along this helpful Q + A on how the plan might help you:

Q. How does the refinancing program work?
A. Strapped borrowers who have existing conforming loans can apply for a refinance through their existing lender. If they meet the program requirements, including that they occupy the home and can document their income, their lender may be able to offer a lower-interest-rate loan backed by Fannie Mae and Freddie Mac.

Q. How does that help people?
A. trapped borrowers who have existing conforming loans can apply for a refinance through their existing lender. If they meet the program requirements, including that they occupy the home and can document their income, their lender may be able to offer a lower-interest-rate loan backed by Fannie Mae and Freddie Mac.

Q. How does that help people?
A. Currently, many borrowers whose homes have lost value because of the housing market collapse do not qualify to refinance into lower-rate mortgages because they do not have enough equity in their homes. Under this program, borrowers with conforming loans will be eligible to refinance through Fannie Mae and Freddie Mac even if they have little or no equity in their homes.

Q. If they're making their payments on time, why do they need help?
A. The administration wants to bring stability to the housing market without rewarding people who made greedy or irresponsible financial choices. By refinancing people who are making payments on mortgages larger than their homes are now worth, the government will reward people who play by the rules and reduce the likelihood that creditworthy borrowers will "walk away" from underwater mortgages. The administration believes that will help put the brakes on the vicious cycle by which plummeting home prices lead to more foreclosures, which further reduce home values for everyone in a community.

Q. What about people with "jumbo" mortgages?
A. Sorry. The administration plan does nothing for people with mortgages larger than the conforming loan limits set by Fannie Mae and Freddie Mac. They note that "jumbo" loans account for 2 percent of mortgages issued nationwide.

Q. What about helping borrowers with problems on second mortgages?
A. Sorry again. Any modification or refinancing would apply only to the primary mortgage.

Q. How does the loan modification program work?
A. This program is only for "at-risk" borrowers who are struggling with mortgage payments above 38 percent of their income. Under the program, if the lender agrees to lower the interest rate or reduce principal to bring the payment to 38 percent of the borrower's income, the government will pay half of the additional cost to the lender to reduce the payment to 31 percent of the borrower's income.

Q. When do the new programs take effect?
A. Details will be released March 4, but administration officials said the new programs are in effect immediately. Much of the plan does not require congressional approval.

Q + A written by Maura Reynolds of the Chicago Tribune
Syndicated with Permission

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Obama Unveils $75 Billion Foreclosure Prevention Plan

In many ways, the Phoenix metropolitan area is ground zero for the nation's housing crisis. Home prices has plummeted nearly 40% in the past couple years, and approximately 60% of homes bought in the last five years are worth less than their mortgaged amount. More than six percent of all Phoenix homes have received a foreclosure filing in the past 12 months. Unemployment has risen, making it even more difficult to find buyers in this depressed housing market.

President Obama today used the Phoenix market as a backdrop to unveil a $75 billion plan to help home borrowers affected by declining home values and an increasingly inability to keep up with monthly mortgage payments.

Dubbed the Homeowner Affordability and Stability Plan, the President's plan will offer:

1. refinancing help for four to five million homeowners who receive their mortgages through Fannie Mae or Freddie Mac
2. new incentives for lenders to modify the terms of sub-prime loans at risk of default and foreclosure
3. steps to keep mortgage rates low for millions of middle class families looking to secure new mortgages
4. additional reforms designed to help families stay in their homes

Details of the plan are still coming out. The White House is doing a good job keeping the public informed though this informative blog that contains documents to help Americans understand the plan and how it can help affected home owners.

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Tax Credit Update

Updating a previous post on a $8,000 tax credit for first-time home buyers, President Obama is expected to sign it into law today. Read this good CNN article loaded with more details about the tax credit.

Explore Neighborhoods with ForSaleByOwner.com

In any home buying search, it's not just about finding a home with a certain number of bedrooms or bathrooms, or size of property. It's finding a neighborhood that offers a lifestyle ideal for your family. Proximity to schools, shopping centers and restaurants are just some of the most commonly asked questions of home buyers.

ForSaleByOwner.com now makes it easier to learn about any community through our new "Explore the Neighborhood" feature. Look at any listing on our website and an interactive map will show you the home's proximity to key neighborhood attributes. We included 16 categories including schools, banks, airports, restaurants and health care facilities.

To give you an idea of how it works, explore this neighborhood in Red Bank, NJ.

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Home Buyer Tax Credit, Part III

I have another update on the topic of a home buyer's tax credit, which I blogged about in a January post as well as last August.

As you know, a new federal tax credit went into effect last year that provides a $7,500 tax credit for first-time home buyers. Its intention was to drum up home sales, which as you could probably guess didn't work out as planned. Many people blamed a provision of the tax credit that required the recipient to pay back that tax credit over a 15 year period. So it was argued that it wasn't even a tax credit to begin with, rather a 15 year interest-free loan.

Improving the tax credit became a major focus of the federal government's economic recovery package. The Senate voted to not only increase the tax credit to $15,000 and delete any repayment provision, but also to make it available to all primary home buyers. It's estimated that this would amount to a $35 billion tax credit for U.S. home buyers.

The House of Representatives did not go along with the Senate, and the legislation agreed to by both houses of Congress is a much lower tax credit. The bill, which President Obama is expected to sign into law on Monday, will simply delete the repayment provision and raise the tax credit to $8,000. It's still only available to first-time home buyers. It's sure to disappoint those who already set their eyes on a juicy tax credit. But we can expect that powerful housing lobbying organziation will continue to fight for a bigger tax credit to stimulate home sales.

For more about the economic stimulus package, read this Chicago Tribune article.

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Realtors Highlight the Benefits of FSBO. Yes, I'm Not Kidding!

As some who closely follow the real estate industry might know, each year the National Association of Realtors (the trade group representing real estate agents & brokers) issue a 100+ page research report entitled, “Profile of Home Buyers & Sellers.”

The report is based off a survey sent to some 133,000 consumers who purchased a home in the prior 12 month period. As the name suggests, it includes data on the habits and experiences of those who sell and buy a home.

Tucked into this 100+ page report was research that found that people who sell their homes "for sale by owner" actually sell them quicker and for closer to asking price than agent-assisted sellers! Again, this data comes from National Association of Realtors... the same organization whose marketing materials scream that people need a real estate agent to sell their home. (click on above images for the actual data)

They didn't publicize this part of their research, so we're doing it for them. We issued a press release this morning on the subject, in hopes that the media will report these interesting research findings.

In today’s troubled housing market, people need to be armed with all relevant housing data so they can make an informed decision of how to effectively sell their home. So, if you want to sell your house quickly and for close to asking price, you might want to listen to Realtors and choose to list your home with a FSBO company like ForSaleByOwner.com.

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The Latest on Mortgage Rates

Bankrate.com is reporting that the average 30 year fixed mortgage rate increased to 5.70% for the week ending February 4, compared to 5.48% the week before. That's the highest it's been in six weeks, and the increase probably has a lot to do with the uncertainty with the Federal economic stimulus package.

Any 30 year rate below 6 percent should be very attractive to any buyer, as well as home owners whose interest rate is well north of the six percent level. Less than four months ago the average interest rate on a 30 year loan was 6.75%. Back in 2000 it was above 8%. If we go back to 1990 figures we see that it stood above 10% for most of the year. (thanks to Bankrate.com for providing these historical figures).

We've been hearing of buyers who have been trying to time the market to get the lowest rate possible. A rate difference of just half a percent can add up to tens of thousands of dollars over the life of a 30 year mortgage (see below), but these folks risk getting a rate higher than they could have gotten in the first place. My advice is to shop around for the lowest rate possible with a broker or direct lender who agrees to let you "float" down your mortgage to a lower rate during the lock in period, should a lower rate become available. Most reputable brokers & lenders will allow you to do this. Remember that one of the keys to a low interest rate is having the all important credit score.

To help give you a quick idea of the affect different interest rates have on a mortgage, I used ForSaleByOwner.com's mortgage calculator to come up with these scenarios on a $250,000 30-year mortgage:



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U.S. Homes Lost $3.3 Trillion In Value

Real estate website Zillow reported today that U.S. home values fell 11.6% in 2008, or $3.3 trillion. The last quarter of 2008 proved to be the worst, as homeowners lost $1.4 trillion during this time -- more than the $1.3 trillion lost during all of 2007. Since the housing market's peak in 2006, homes across the country have lost $6.1 trillion in value.

Foreclosures made up 19.9 percent of all sales during 2008, while short sales accounted for 10.9 percent of all sales. Such distressed sales are sold at a deeply discounted price and have a huge negative affect on the values of all surrounding homes and, hence, the $1.4 trillion in lost value. Finally, Zillow found that approximately 18 percent of all American homeowners are underwater and owe more on their mortgages than what their home is worth.

These statistics provide us with more evidence of the "natural vs. unnatural" real estate market where conventional home sellers are competing against the discounted home prices offered by foreclosures & short sales. Home sellers should be mindful of any such distressed properties within their local community, because today's buyers are going to be looking for the best bargain possible.

Here's some tips to compete against distressed sales:

- Skip the Agent: Your home has probably already lost considerable value in the past year, and hiring a real estate agent will cost you another 6% of your home's sales price. Sell the home yourself and you'll keep that money in your pocket.

- Price it Right: We're in 2009, not 2006. Homes have lost $6.1 trillion since housing hit its peak in 2006, and it's better to forget about the sky-high price that your former neighbor got when selling their home back then. Buyers are looking for the best deal possible so make sure you price your home right to reflect today's market conditions.

- Keep Your Home in Mint Condition: All too often, foreclosed homes are in disrepair and are in need of some renovation due to being left vacant. It can easily cost a new owner thousands of dollars and months of work to get the home back in shape. By keeping your home in mint condition and making necessary repairs, you'll be reminding buyers that your home is in "move in" condition.

Qualify Interested Buyers: There's nothing worse than spending weeks with a prospective buyer and then learning that they are unable to obtain a mortgage. To avoid such situations, make sure that your buyer is pre-approved for the loan amount necessary to buy your home.

- Be Ready for a Quick Closing: With so many properties on the market, you need your home to stand apart from the rest in not just price and condition. Being able to offer a 30 day closing will give you a huge competitive edge to attract buyers who want to move quick. Foreclosed property sales and, especially, short sales, can take months to complete and it's essential that you have the ability to be flexible to arrange a quick closing date.

- Work with an Attorney: For a couple hundred bucks, a local real estate attorney will craft & review all contracts between you and the seller, and ensure that you are adhering to all state & local disclosure requirements. Remind buyers that a real estate agent isn't needed to sell or buy real estate, and that they should get an attorney to represent their interests as well.

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