NEW YORK (CNNMoney.com) -- Despite signs that the real estate market might be lurching forward, prices are expected to fall further this year and next.

The average home price in the United States will fall by about 6% by September 2011, according to a joint report between Fiserv and Moody's Economy.com. And that's after plunging more than 27% in the past three years.

Most of the projected home price decline will occur during the usually slow summer months of 2010. After that, prices should begin to stabilize, according to Fiserv, and stay almost flat through fall of 2011.

 The main reason for continued decline, according to Mark Zandi, economist and co- founder of   Economy.com, is foreclosures -- the same thing that's plagued markets for  the past three years.

"Foreclosure sales will pick up this spring as mortgage servicers figure out who can qualify for a modification and who can't," said Zandi.

He figures there are at least 4.5 million mortgage loans either in foreclosure or clearly headed in that direction. When that additional inventory hits the market, it will provide numerous choices for buyers and encourage sellers to drop their listing prices.

The end of two federal programs, which have been propping up markets, will also tamp down prices.

The Federal Reserve has been purchasing mortgage-backed securities since early 2009, scooping up as much as $1.25 trillion worth. That has dampened rate increases by providing a ready market for the securities. But the Fed's program lapses on March 31, when it cedes the playing field to private investors, who will almost surely demand higher rates.

Any resulting rise in rates will cause some buyers to withdraw from the market and others to look for lower priced homes. Either way, demand for homes drops and so do prices.

A month after the Fed bows out of the mortgage-buying market, the homebuyer tax credit will start to expire. To qualify for the $8,000 credit, homebuyers must sign a contract before April 30 and close by June 30. When the first date passes, many buyers are expected to vacate the market, weakening the demand for homes.

In a broader sense, home prices are ultimately decided by employment. "If [the job market] improvement is stronger than expected, prices will get better. If it's weaker than expected, prices will be worse," Zandi said.

Worst of the worst

The worst performing market will be Miami, Fla. Moody's projects prices there to drop a heart-stopping 29.2% by Sept. 30. That follows a 47.7% decline the metro area recorded in the past three years. Grand total: 64% drop.

Other disastrous performances will be turned in by the Hanford, Calif., metro area, where prices are projected to plummet 27.2% through Sept. 30, 2010 following their 36.9% drop for the previous 36 months. Ft. Lauderdale and West Palm will also register steep drops.

There's some good price news coming out of California's Central Valley for a change; prices will begin to emerge from their free fall toward the end of this year.

In Merced, for example, which crashed and burned by 71.8% in the past three years (through last September), they'll only fall only another 6.2% in the next six months before bouncing back with a rise of 10.1% by Sept. 30, 2011.

FHA Loan Changes:

1. Increased mortgage insurance. The mortgage insurance premium (referred to as private mortgage insurance by many people) will be increased from 1.75% to 2.25%. This change will add some cost to purchasing a home, but will not overburden consumers since the mortgage insurance is paid over the life of the loan, rather than upfront at closing. This change will become effective on April 5, 2010.

2. New down payment and credit score requirements. According to the new policy, homebuyers who have a credit score of at least 580 may still be able to purchase a home with 3.5% down, but those with credit scores of less than 580 will be required to put down at least 10%. This change is designed to help the FHA balance its risk, while still providing affordable down payments for consumers with a history of good credit and responsibility.

3. Reduced seller concession. Basically, this change means that the person selling the home will now only be able to offer the homebuyer 3% to help defray closing costs, as opposed to 6% under the previous policy.

Contact Roger Evans at Fairway Mortgage for further info.

Homeowners should buck the conventional wisdom about selling in the spring.

Putting a home on the market in this grim real-estate climate might seem like lunacy considering how heavily the market favors buyers. Home prices are down 28% from their national peak in the second quarter of 2006, according to the S&P/Case-Shiller home price index, which tracks sales in 20 major housing markets. Still, listing a home during certain months can improve a seller's odds.

Late spring and summer are usually thought of as the best times to put a home on the market because buyer demand builds steadily through spring. Sales then peak during the warmest months, when it's easiest for families to move without uprooting their children from school. But this year, experts predict that the selling boom, which normally starts in spring, will hit at a different time than it has in the past. Sellers with flexibility should market their homes earlier in the year.

In Depth: Home-Selling Tips For 2010

According to data from Zillow.com, an online real-estate database, the volume of home sales was highest in June, July or August every year since 2000. This year, however, an $8,000 credit for those buying their first home--that expires on June 30, 2010 and requires buyers to have closed on a home by April 30, 2010--will force buyers to speed up their decisions. Historically low interest rates also suggest that sellers will face a busier market as early as February.

“This year, we're anticipating sales will peak earlier,” says Nicole Hall, editor in chief of Lendingtree.com, an online mortgage comparison service. “The best time to get your house on the market will be February or early March, and maybe even earlier if you want to avoid competition.”

The Economy Upsets Seasonal Trends

House hunting may have traditionally sped up after March, but nothing about the last few years in real estate has been traditional. In 2008, sales failed to pick up with their usual gusto in late winter because the financial crisis cast a shadow of fear over buyers, and lending seized up.

Between the fall of 2008 and March of 2009, there was a long dead period in real estate,” says Ken Shuman, spokesman for the real estate Web site Trulia.com. “You don't want to buy a house if you don't have job security, and a lot of people had jobs but didn't feel too secure about them.”

2009 didn't follow typical trends, either. Fall, when sales usually plummet, saw more sales activity than usual this year because of the introduction of the government's tax credit, which was initially set to expire on Nov. 30, 2009.

Improving the Odds

Granted, some sellers have no choice but to sell at a slow time of year. Job relocation and the need to free up assets are facts of life that can deprive families of the luxury of waiting until the peonies bloom to put their homes on the market.

But Hall says that there are ways to improve your chances of a sale if you have to list your home late in the year, like playing up holiday decorations and shoveling walkways to maximize curb appeal. She adds that selling at this point in the cycle isn't always the worst fate.

“Look at how you can turn it to your advantage. Maybe because you're forced to sell at a different time, there will be less competition,” she says. “Also, be realistic about your price. If you know you're selling at a tough time, it can be a tough call, but you might have to drop that price a little.”

Shuman and Hall agree that the season shouldn't be the only factor homeowners consider when getting ready to sell. Paying attention to the vagaries of the local real-estate market, where inventory and prices can fluctuate week to week, will offer more guidance to sellers than simple seasonal trends.

“Check out your local inventory,” says Hall. “Read the housing-market blogs, follow the local market really carefully, and look at the unemployment rate. That will make a big difference.”

For smart sellers, Shuman and Hall agree, taking a chance and starting the sale process earlier will reap distinct benefits in 2010.

“The beginning of the year is going to be make-it-or-break-it,” says Shuman. “If you're a seller, get your property listed as early in the year as you can.”

By Francesca Levy, 12.24.09, 04:00 PM EST

With historically low rates, many homeowners are watching closely for the right time to refinance their mortgages. Those with good credit may well recall being showered with praise by a mortgage broker during the initial purchase for that solid credit score.

That was then. This is now.

A few years ago, a score of 620 or higher was good enough. That increased to 680 in early 2008. Then it jumped to 720 in April last year and 740 in August, says Rodney Anderson, senior managing partner of Plano, Texas-based Rodney Anderson Lending Services.

In the past, any score of 700 or higher would get a double thumbs-up from credit experts. Now, rate adjustments begin kicking in at 740, with every 20-point drop adding another adjustment.

In other words, many people who were taking pride in their credit habits either must pay significantly higher or try to make quick changes to nudge their scores upward. "What used to be great is now only good," says mortgage broker Todd Huettner, president of Denver-based Huettner Capital. Refinancing that would have worked a year ago might well not make sense, he adds.

"I have clients all the time who literally wind up with a score of 739, 719, 699, 679 ... and it costs them money to either fix it or pay for it," Huettner says.

One of Huettner's clients, who always had a score of about 740, went to do a refinance and found her current score at 719. "The reason was, she put a new washer and dryer on a store credit card," he says. Many store cards are actually revolving credit, and your limit may well be equal or about equal to the purchase you're trying to make that day.

Take the application that Stamford, Conn.-based Luxury Mortgage Corp. got recently. Interested in lowering the rate on an existing mortgage, the borrower could verify substantial income, assets and personal credit history, says chief executive David Adamo. But the borrower's credit score had taken a hit after co-signing an auto loan for his son that had not been paid timely.

"As a result, the borrower, who otherwise met every other criterion, was unable to refinance the loan at a rate that made economic sense," Adamo says.

Another wrinkle in today's market: Even those with FICO scores of 740 or higher are penalized for buying in a geographic market on the downswing. "This adjustment affects all borrowers, regardless of score, if in a declining market," says mortgage broker Jim Heidelberg, president of Heidelberg Capital Corp. in Tampa, Fla.

In many cases, the added costs of rate adjustments are "enough to make a refinance that would otherwise make sense have no benefit to the borrower," Huettner says.

The road to new scoring

How did we get to this new reality?

The nation's two largest mortgage lenders, Fannie Mae and Freddie Mac, suffered major losses in the market last year and then redefined risk, announcing price adjustments for borrowers with FICO scores below 720, says Sean Cragg, vice president of sales for Ann Arbor, Mich.-based Gold Star Mortgage Financial Group.

And, in case you were wondering, "these fees have nothing to do with your mortgage company or its various products and cannot be negotiated away," Cragg says.

All mortgage bankers, brokers and credit unions must comply with the higher interest rates and delivery changes in all traditional mortgages, says Heidelberg. Only entities intending to hold the mortgages in their own portfolios can follow their own guidelines.

Worse news may be on the horizon. "There are many factors, including proposed legislation and regulation, that continue to change the mortgage lending landscape," says David Chung, managing director of Towson, Md.-based CreditXpert Inc., which provides credit analysis services to consumers. "In the near term, it is more likely that this benchmark will continue to rise than fall."

Surprise, surprise

Joe and Jane Homeowner have likely heard of the new credit restrictions. But the actual cost to them is often a surprise when they sit down with a broker.

"Often, lenders will quote rates that include the adjustments, without calling attention to them in order to avoid a negative reaction from their customer," says James Guthrie, a partner in New Home Finance in Suwanee, Ga.

Less surprising are other factors that go into securing financing for a new or existing mortgage. Paola Kielblock, national products manager for Sun Prairie, Wis.-based Fairway Independent Mortgage Corp., clarifies today's requirements:

• Good credit.

• Stable job, with a minimum of two years of employment.

• Reserves after closing, including a minimum of two to six months of mortgage principal, interest, taxes and insurance.

• Down payment from the borrower's own funds.

• Low debt-to-income ratio. The required ratio varies between banks but is generally less than 40 percent, according to many in the industry.

• Good loan-to-value percentage. It also varies, but it's often cited as less than 80 percent.

Having equity in your home is a major factor in getting approved for a refinance and in finding the best rate, says Cameron Findlay, chief economist for LendingTree.com. The more equity in the home, the less risk there is to the lender if the home is repossessed.

Taking action on your score

What can a homeowner who wants to refinance do with a good FICO score that's not good enough?

"Virtually everyone can raise their scores by at least 10 (points) to 20 points, sometimes significantly more in 30 days," Anderson says. Here's what to do.

1. Find out what might have gone wrong. Applicants should know their credit score, understand what it means to their loan rates and ask their loan officers to use credit analysis on their behalf, says Chung. Credit analysis tools are a simple way to identify key score influencers by scrutinizing the information contained in each of an individual's three credit reports to look for inconsistencies, errors and omissions that may artificially depress the score.

2. Correct any inaccuracies. Although consumers can improve scores on their own, Kielblock notes that credit agencies offer services to mortgage brokers to help consumers raise their credit scores if something is reported inaccurately and there is proof of a discrepancy.

3. Decrease the percentage of available credit used. This can be done by paying down balances or increasing credit limits, says Guthrie. Ideally, this means keeping balances as close to zero as possible, and definitely below 30 percent of the available credit limit, experts say.

"We've seen people increase their scores by as much as 90 points or more, simply by paying off the right cards," Anderson says.

4. Move things around. If one income can be used to qualify for the loan, transfer accounts to "park" the debt in the other party's name, Guthrie says.

5. Get a rapid rescore. It's the only way to find out fast if an attempt to improve a score was successful. It's done through your lender and a rescoring company. The process takes about a week, but it can get the loan process back on track. The downside is it costs a few hundred dollars. The credit bureau Experian has seen an increase in rapid rescoring requests, says spokeswoman Cynthia Baker. "While we haven't done a direct cause-and-effect analysis, anecdotally, the volume does appear to have increased as interest rates have dropped in March," she says.

Aside from working toward a better score, there are two additional options. One is paying points to buy down the interest rate. "This is only a good idea if the borrower will then live in the house beyond the break-even point, meaning the time where the money they've paid in points is made up for by way of less expensive monthly payments," says Findlay.

The other option: shopping around. Some lenders, such as Palo Alto, Calif.-based Addison Avenue Federal Credit Union, have loans, known as "portfolio" loans, that aren't subject to blanket rules on credit scores because the lender intends to keep them rather than sell the loans in the secondary market.

Michelle Edwards, national mortgage sales director, reports that for these loans, her company increases the cost of a mortgage only for consumers whose credit scores are below 680. One customer looking to refinance avoided a pricing adjustment because of compensating factors such as loan-to-value ratio, assets and length of employment.

In a perfect world, anyone contemplating a refinance or a new mortgage anytime within the next year or so would start working on getting the ideal credit score now.

But what if that didn't happen? Try not to let your emotions drive how you feel about your interest rate. A mortgage is a financial decision that should be driven by economics, "not the pursuit of the world's lowest rate because having it would make you feel good," Heidelberg says.

He also says some consumers wait six months for a slightly better rate when a refinance could save $500 a month means missing $3,000 in savings. As Heidelberg says,

"This is foolish."

Copyrighted, Bankrate.com. All rights reserved.

by Melissa Ezarik

Tuesday, December 29, 2009

Interest rates are likely to rise to 6% by the end of 2010, predicted Amy Crews Cutts, deputy chief economist at Freddie Mac.

The end of the Federal Reserve program that buys mortgage-backed securities will drive rates higher because private buyers will demand more return than the Fed.

"Extraordinary resources have been put into keeping the rates down and supporting the mortgage markets and it's hard to imagine that the rates can go much lower than they are," Crews Cutts said. "Anything we get at or below 5% is a gift at this point."

Source: Washington Post

U.S. Department of the Treasury Secretary Geithner just announced new details on the expansion of the Making Home Affordable program to include short sales.  Under the plan, incentives would be provided for mortgage servicers and borrowers to pursue short sales. Financial incentives include $1,000 to servicers for a successful short sale, and borrowers may receive up to $1,500 to assist with relocation expenses.  Reasonable and customary real estate commissions and selling costs will be permitted and the servicer will agree not to negotiate a lower sales commission after an offer has been received. 

Just another option for investing in today's market.  Short sales can be just as good a deal as a foreclosed property.  Call me today with any questions on buying a short sale property!

The most bearish of Wall Street economic analysts have made the same point for the past 18 months. There's no recovery or rebound in the housing market, they said, until home builders start building again.

"Show us positive numbers on new home starts for a few months," they say, "and then we will we agree that the housing market has finally turned around."

Hey there bears, here are the numbers you asked for: Last week the Commerce Department reported an unexpectedly large increase in new single family home starts during May - up by seven and a half percent.

That was the THIRD consecutive monthly gain in single family starts. Total starts, including multifamily apartment starts and condos, were up by 17 and a half percent!!

Not only were starts up a lot, but so were other key indicators of future home building activity: single family permits, which surged by about 8 percent. That was the second straight monthly gain in permits - and points to at least moderately higher starts in the coming six months to a year.

On top of the good news about new construction, which has clearly been the weakest segment of the housing market since 2007, we also got some other positive reports last week:

Consumer confidence, which is extremely important for home buying, was up again for the fourth consecutive month, according to the University of Michigan's consumer sentiment survey.

Even retail sales were up slightly -- and that's an important sign that people are slowly coming out of the shell they've been in since last Fall, and are now starting to spend money again.

The latest inflation readings -- both the Consumer Price Index and the Producer Price Index -- were down slightly in May. Despite rising gas price, a dollar bought a little more in goods and services last month than the month before. That's good.

The National Association of Home Builders now projects that the current recession will end in the second half of 2009, with a one point five percent growth rate in the overall economy between July and December.

Finally, mortgage rates took a slight dip last week after several weeks of increases. Fixed thirty year rates averaged about 5.5 percent last week, according to the Mortgage Bankers Association, after climbing to 5.6 percent the previous week.

Many lenders had actually been quoting much higher rates - all the way to 6 percent - because of inflation fears in the bond market.

We've definitely got to keep our eye on mortgage rates, but otherwise the rebound appears to be underway.

HUD recently announced that qualified First-Time Home Buyers who want to take advantage of the available tax credit of up to $8,000 now have another option available to them to help them become homeowners.

It's clear that first-time home buyers have been having a major impact on the housing market this year. The National Association of Realtors announced that first-time buyers, who typically account for less than 40% of home sales each year, have been especially busy…in March, homes that were purchased by first-timers accounted for 53% of all sales, and this percentage is expected to hold true for all of 2009.

With home affordability higher than ever, available tax credits and some of the lowest interest rates ever recorded for home loans, who can blame them? Particularly as a first-time buyer, there may never be a better time to buy a home than right now.

However, the availability of a tax credit, while a great incentive, does not put the money in the hands of a buyer right away. HUD's announcement now allows for prospective and qualified home buyers to borrow the money from approved agencies and lenders.

While details of participating lenders and HUD-approved agencies are not yet available, this should turn up the heat on prospective buyers to get busy searching for their next home. As further details become available, I will get them to you.

First Time Homebuyer Tax Credit:

The new law raises the current maximum $7,500 first-time homebuyer tax credit to $8,000, and extends it at that level through November 30, 2009. It also eliminates
any required repayment to the IRS after 36 months in the home. These enhancements apply to purchases of a principal residence by a first-time homebuyer after
December 31, 2008. Purchases on or after April 9, 2008, and before January 1, 2009, continue to be governed by the original first-time homebuyer credit enacted last
year. The credit phase-outs that start for taxpayers with AGI in excess of $75,000 ($150,000 for joint filers) continues to apply to both years.

Obama's Rescue Plan for Failing Home Owners:

The rescue plan unveiled Wednesday 2/18/09 by President Barack Obama offers $75 billion in incentives for banks and investors to reduce struggling home borrowers' interest rates and make other changes to loan terms. The money will come from the second half the $700 billion federal financial bailout. The goal is to keep 4 million homeowners out of foreclosure and halt free-falling home prices.

To qualify, lenders and mortgage investors would have to agree on a lower interest rate that would be designed to reduce the borrower's mortgage payments to 38 percent of their pretax income. The government would then provide financing to bring that ratio down to 31 percent.
Another piece is designed to help borrowers who are still making their payments on time, but want to refinance into lower mortgage rates.

The big issue is.......not everyone sees this as fair?

Do you?

Here are a few Housing-Related Provisions:

1. Landmark Energy Savings
*Provides $5 Billion for energy efficient improvements for more than one million medium-income homes through weatherization. According to some estimates, this can help modest-income families save an average of $350 a year on heating and air conditioning bills.

2. Tax Incentives designed to Spur Energy Savings & Green Jobs
* Designed to help promote energy-efficient improvements in homes by extending and expanding tax credits through 2010

3. Make Repairs to Public Housing and Make Key Energy Efficiency Retrofits To HUD-Assisted Housing
*Provides a total of $6.3 Billion to increase energy efficiency in federally supported housing programs. It establishes a new program to upgrade HUD-sponsored low-income housing (for elderly, disabled, and Section 8) by increasing energy efficiency, including new insulation, windows, and frames.

4. Expand Housing Assistance
*Increases support for several critical housing programs. This provision includes $2 Billion for the Neighborhood Stabilization Program that helps communities purchase and rehabilitate foreclosed & vacant properties.

RELIEF FOR HOME OWNERS:

The Obama administration is releasing details about its new programs aimed at helping millions of borrowers stay in their homes. Below are some answers to basic questions about a rescue plan.

Which Americans can qualify for housing help?

Q: Why is the Obama administration coming out with the housing affordability plan?
A: As many as 6 million families are expected to face foreclosure in coming years. The Obama administration in February unveiled a rescue plan designed to help up to 9 million Americans stay in their homes by refinancing loans or modifying them to more affordable terms. The price tag is estimated at $75 billion. Details about the plan were released Wednesday.

Q: How do I know if I qualify for refinancing under the plan?
A: The program is designed to help homeowners who might not otherwise be able to refinance. Under current rules, most families who owe more than 80% of the value of their homes have a difficult time refinancing. (For example, if a borrower's home was worth $200,000, he/she would have limited refinancing options if owing more than $160,000.)

If you have a loan owned or guaranteed by Freddie Mac or Fannie Mae, the plan will let those who qualify refinance through the two institutions. Eligible loans will include those where the first mortgage will not exceed 105% of the current market value of the property.

Q: How would that lower my payments?
A: Refinancing could reduce mortgage payments by thousands of dollars per year. For example, consider a family that took a 30-year fixed-rate mortgage of $207,000 with an interest rate of 6.50% on a house worth $260,000 at the time. Today, that family has $200,000 remaining on its mortgage, but the value of that home has fallen 15% to $221,000 - making them ineligible for today's low interest rates. Under the plan, that family could refinance to a rate near 5.16%. That would reduce their annual payments by over $2,300.

Q: My mortgage payments are too high. Can I get help now from my lender?
A: As long as you meet eligibility requirements. But the program is especially geared toward those who are facing financial hardship or who are at risk, such as homeowners who owe more than their homes are worth and those who could fall behind on payments. Eligibility for the program will sunset at the end of three years.

One key element is that delinquency will not be a requirement for a modification. But all borrowers must document income, which includes providing information such as two most recent pay stubs and an affidavit of financial hardship, to avoid fraud and demonstrate need.

Q: What if I have a lot of other debt?
A: You can still qualify. Specifically, homeowners with total debt payments (which include car loans and credit card debt) equal to 55% or more of their income will be required to agree to enter a federally certified counseling program as a condition for a modification.

Q: Who isn't eligible for a modification?
A: Only owner-occupied homes qualify; no home mortgages larger than the conforming limit of $729,750 are eligible.

Q: Where can I get more information?
A: Go to financialstability.gov. There is no fee to apply. Borrowers are encouraged to contact lenders directly. Federal officials say borrowers should also contact their lenders to find out if their loans are held or guaranteed by Freddie or Fannie. The guidelines released Wednesday are detailed on the Treasury website.