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Constance Sharpe


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NEW YORK (CNNMoney) Home prices in 20 major U.S. cities were up

by Constance Sharpe



Home prices in 20 major U.S. cities were up 5.5% in November compared to a year earlier, their biggest jump in more than six years.

The latest reading of the closely watched S&P Case-Shiller index is another sign of the growing recovery in the long-battered housing market.


The last time prices jumped this much was in August 2006, when the housing bubble was still inflating. Soon after that, prices went into a steep decline that led to a flood of foreclosures. That sparked the most serious economic downturn since the Great Depression.

"Housing is clearly recovering," said David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices. "Prices are rising as are both new and existing home sales. These figures confirm that housing is contributing to economic growth."

Housing prices have been helped by a number of factors in recent months, including increased sales of both new homes and previously-owned houses, a drop in foreclosures, and near record low mortgage rates. A drop in the nation's unemployment rate also is helping.

The rise in home prices is good news for more than just people hoping to sell their home. The higher prices rise, the fewer homeowners that will be underwater on their mortgage, meaning they owe more on their homes than they are worth. That can help many homeowners refinance and save money, which would pump more cash into the economy.

"The ongoing price appreciation is significant, because we expect housing wealth effects to be an important factor driving economic growth in 2013, possibly matching the direct impact on economic output from the rebound in homebuilding," said Joseph LaVorgna, chief U.S. economist for Deutsche Bank.

Related: Housing to drive economic growth (finally!)

Michael Gapen, senior U.S. economist for Barclays, said the fundamentals for the housing market are now strong enough that his firm is forecasting another 6% to 7% rise in prices in 2013, and a 5% to 6% rise again next year. He said the tight supply of homes for sale on the market should support continued price increases, and that the decline in foreclosed homes for sale is reducing the drag that those distressed properties had on overall prices.

"I'm not worried about these increases being overdone," he said. "Home prices overcorrected a bit on the downside, and what we're seeing now is a recovery from that."

Related: Home building surges 12%

The S&P Case-Shiller index tracks home prices in 20 major markets. The latest reading showed 19 of them posting a gain in prices, with only New York posting a modest decline from a year earlier. Phoenix, one of the markets hit hardest by the housing crisis, posted the biggest increase, with home prices there climbing 22.8%.

San Francisco and Las Vegas, markets that were also hit by the housing boom and bust, also posted double-digit increases, while Miami, another bubble market, posted a 9.9% rise. Detroit, a city where economic problems led to a high rate of foreclosures, enjoyed an 11.9% price increase.

But even with November's strong gains, the overall index stands 29% below the home price peak reached in the summer of 2006. To top of page


Great News in Real Estate

by Constance Sharpe

Housing Continues to Improve!
CoreLogic reported yesterday that home prices rose by 7.4% in November 2012 from the year before and have been positive for nine straight months.  The figure includes the sales of distressed properties.  The 7.4% was the largest year-over-year increase since 2006.  In addition, mortgage applications jumped by 15.2% in the latest week with a 13% gain in purchases.

Hardship letter coutesy of the NYTimes

by Constance Sharpe


Writing the “hardship letter”
Homeowners having trouble paying their mortgage are often required to write a hardship letter
when applying for a loan modification. Such a letter is a requirement for modification
applications under the government’s Making Home Affordable program.
Making sense of the story
 A hardship letter is not the basis for modification approval – that depends on the
borrower’s financials and the intricacies of the various government and in-house lender
programs. The purpose of the hardship letter is to explain upfront why borrowers missed
payments, and what they propose as a solution.
 Some housing experts recommend that homeowners write short letters, using the
philosophy that “less is more.” The lenders’ loss mitigators, faced with mountains of
modification requests, are unlikely to spend time reading more than the first few lines of
each letter. Also, there is the risk that borrowers who go on at length could unknowingly
trip themselves up with unnecessary details that raise red flags for a mitigator.
 The hardship letter should open with a succinct explanation of why the borrower stopped
paying the mortgage. The letter should cite a specific hardship, like a lost job, illness, or
reduced income.
 Next, the letter should briefly cite any steps the borrower took to avoid defaulting on their
loan, like cutting household expenses or tapping in to savings.
 If the borrower’s financial situation has since improved, or is likely to, borrowers should
mention that as evidence that their hardship was temporary and won’t hamper their
ability to make payments on a modified loan.
 Finally, the letter should state exactly what borrowers are applying for. Is the proposed
solution a lower interest rate, for example, or a principal reduction?
 Borrowers who are underwater – those who owe more on their mortgage than their
property is worth – may ask their lender to consider a short sale, in which the house is
sold to another buyer for less than the amount owed.
Read the full story

What to Watch for in 2013

by Constance Sharpe


-A A +A

4 Housing Issues to Watch in 2013

What does 2013 have in store for the housing market? With marked gains this year, housing experts expect the housing market to continue to gain momentum in the new year. 

The Wall Street Journal recently offered up some chief housing issues likely to be important in the New Year. These include: 

  • Inventories rise: To meet the increased demand, home builders are increasing production and more sellers may be more willing to test the market as housing prices increase. 
  • Home prices spur demand: More buyers have urgency with home purchases as rents rise, housing values gain momentum, and mortgage rates remain low. 
  • Credit remains tight: “While rising prices could serve as a tailwind, new regulations may lock in some of the defensive underwriting posture while impeding capital rules may lead banks to pare their lending footprint,” The Wall Street Journal predicts.
  • Broader economy dictates how far recovery goes: If unemployment decreases and the economy improves, many of the biggest challenges facing the housing market would likely fade, such as tight credit, the large number of underwater home owners, and a high rate of foreclosures. 

“Any renewed weakness in job growth could put housing back into the stall that it found itself in between 2010 and 2011,” The Wall Street Journal reports. “The housing market is still fragile. ... If lawmakers can’t agree on a series of spending cuts and tax hikes to avert the ‘fiscal cliff,’ that could crimp demand or damage confidence.”

Source: “Recap: Five Housing Issues to Watch in 2013,” The Wall Street Journal (Dec. 21, 2012)


Good news for Challenging Times

by Constance Sharpe

Courtesy of Don Faught, President of California Association of Realtors


Late last night, Congress reached a settlement in the “fiscal cliff” negotiations.  As a result, the Mortgage Forgiveness Debt Relief Act has been extended for another year.  The measure will continue to exempt from taxation mortgage debt that is forgiven when homeowners and their mortgage lenders negotiate a short sale, loan modification (including any principal reduction) or foreclosure.  REALTORS® should tell their clients to keep their short sales on the market and encourage them to consult with their own tax advisers about their tax situation.

I want to thank the 26,296 California REALTORS® who sent messages to their members of Congress and made 1,862 calls in response to our Call-for-Action.


Should I Buy a Home Now?

by Constance Sharpe

I'm often asked if this is a good time to buy a home. Some clients are concerned that home prices may fall further than they have already. They are assuming that the best course of action is to wait for the bottom in the market and then buy. The problem with this approach is that you don't know where the bottom is until you see it in the rear view mirror, meaning until you've missed it!

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability. Even though interest rates have gone up in the last six months, they are still near historic lows. Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life. It's important to live in a home that reflects your taste and values, yet is within your financial "comfort zone." To that end, it may be more important to lock in today's relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

Please give me a call if I can be of any assistance in determining how much home you can afford in today's market.

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