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Market Forecast for 2015

by Karen Hickman

As indicated by the California Association of Realtors, here is an example of the last 9 years of homes sold AND a forecast of 2015! Look how much the median price was improved since 2010!

 

June 2012 Pending and Distressed Sales Report

by Karen Hickman

Tight housing inventory, slower economy constrain California pending home sales in June

 

 

LOS ANGELES (July 24) – A continued lack of housing inventory and slowing economy sent California pending home sales lower in June, but pending sales were still higher than the previous year for the fourteenth straight month, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today. 

 

Pending home sales data:

C.A.R.’s Pending Home Sales Index (PHSI)* fell 3.8 percent from a revised 126.1 in May to 121.4 in June, based on signed contracts.  Pending sales were up 4.7 percent from the 115.9 index recorded in June 2011.  June marked the fourteenth consecutive month that pending sales were higher than the previous year, although June’s year-over-year increase was the smallest since April 2011.  Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.

“Pending sales declined in June, partly due to a lack of housing supply – especially in REO properties,” said C.A.R. President LeFrancis Arnold.  “The shortage of REO inventory is also putting upward pressure on bank-owned home prices, with the median price of REO properties showing a double-digit year-over-year gain of 11 percent in June.”

Distressed housing market data:

• The share of equity sales – or non-distressed property sales – compared with total sales grew further in June.  The share of equity sales rose to 58 percent in June, up from a revised 56 percent in May.  Equity sales made up 50.5 percent of all sales in June 2011.

• The share of REO sales statewide was significantly lower from a year ago, while the share of short sales was up slightly.  The combined share of all distressed property sales fell to 42 percent in June, down from May’s 44 percent and from 49.5 percent in June 2011.

• The share of short sales edged up in June to 21.4 percent, up from 21.1 percent in May and from 20 percent a year ago. 

• Of the distressed properties, the share of REO sales continued to decline in June to 20.2 percent, down from 22.6 percent in May and 29.2 percent in June 2011.

• The available supply of REOs for sale tightened slightly in June, with the Unsold Inventory Index declining from a 1.5-month supply in May 2012 to 1.4 months in June 2012.  The June Unsold Inventory Index for equity sales stood at 3.7 months and was 5.3 months for short sales.

Multimedia and charts:

• View a video of C.A.R. Chief Economist Leslie Appleton-Young discussing highlights of the June existing home sales and price report, which was released July 17.
• View a chart of closed housing sales in June by sales type (equity, distressed).
• View a chart of pending sales compared with closed sales.
• View a chart of the historical trend in the share of equity sales compared with distressed sales.
• View a chart of housing supply for REOs, short sales, and equity sales in June.

Share of Distressed Sales to Total Sales
(Single-family)

 

Type of Sale June 2011 May
2012
June 2012
Equity Sales 50.5% 56.0% 58.0%
Total Distressed Sales 49.5% 44.0% 42.0%
     REOs 29.2% 22.6% 20.2%
     Short Sales 20.0% 21.1% 21.4%
     Other Distressed Sales (Not Specified)  0.2% 0.3% 0.4%
All Sales  100.0% 100.0% 100.0%


Single-family Distressed Home Sales by Select Counties
(Percent of total sales)

 

County June 2011 May
2012
June 2012
Amador 51% 50% 55%
Butte 34% 37% 36%
El Dorado 54% 47% 44%
Fresno 57% 57% 54%
Humboldt 29% 34% 29%
Kern 66% 48% 48%
Lake 86% 70% 63%
Los Angeles 47% 41% 41%
Madera 83% 79% 57%
Marin 26% 21% 20%
Mendocino 63% 44% 48%
Merced 64% 54% 52%
Monterey 57% 52% 50%
Napa 51% 44% 47%
Orange 35% 33% 31%
Placer 53% 47% 41%
Riverside 61% 54% 52%
Sacramento 64% 58% 53%
San Benito 74% 59% 63%
San Bernardino 69% 59% 58%
San Diego 28% 23% 22%
San Joaquin 63% 62% 61%
San Luis Obispo 42% 35% 34%
San Mateo 24% 21% 21%
Santa Clara 31% 28% 23%
Santa Cruz 36% 33% 42%
Siskiyou 42% 54% 59%
Solano 72% 70% 63%
Sonoma 51% 45% 40%
Stanislaus 70% 65% 61%
Tehama 73% 65% 45%
Yolo 51% 45% 46%
California 49% 44% 42%


**Note:  C.A.R.’s pending sales information is generated from a survey of more than 70 associations of REALTORS® and MLSs throughout the state.  Pending home sales are forward-looking indicators of future home sales activity, offering solid information on future changes in the direction of the market.  A sale is listed as pending after a seller has accepted a sales contract on a property.  The majority of pending home sales usually becomes closed sales transactions one to two months later.  The year 2008 was used as the benchmark for the Pending Homes Sales Index.  An index of 100 is equal to the average level of contract activity during 2008.

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 155,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

 

April Home Sales and Price Report

by Karen Hickman

April home sales and price report 

For release:
May 15, 2012


Spring home buying season off to strong start,
home sales and price post impressive April results, C.A.R. reports

LOS ANGELES (May 15) – California home sales and median price both jumped in April, with sales shooting up to their highest level in more than two years, and the median price rising above $300,000 for the first time in 16 months, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today. 

“A brighter economic picture, coupled with record-high housing affordability, pushed the spring home buying season off to a strong start,” said C.A.R. President LeFrancis Arnold.  “With a continuing improving economy and interest rates declining to new record lows in recent weeks, we should see a steady improvement in the housing market throughout the end of the year.”

Closed escrow sales of existing, single-family detached homes in California rose to a seasonally adjusted annualized rate of 555,300 units in April, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide.  Sales in April were 10 percent higher than March’s pace and 11 percent higher than in April 2011.  The statewide sales figure represents what would be the total number of homes sold during 2012 if sales maintained the April pace throughout the year.  It is adjusted to account for seasonal factors that typically influence home sales.

The statewide median price of an existing, single-family detached home climbed 5.7 percent in April to $308,050, up from March’s revised $291,330 median price and 4.7 percent from a revised $294,140 recorded in April 2011.  The median price rose above the $300,000 mark for the first time since December 2010.

“The median home price climbed for the second straight month with solid gains from both the previous month and year,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  “A sales improvement in the higher price segments of the housing market was a contributing factor to the price increase, as non-seasonally adjusted sales of homes priced higher than $500,000 increased nearly 11 percent, while sales of homes below $500,000 edged up a modest 2.1 percent.”

“Additionally, the strong sales increase of higher-priced homes resulted in a considerable decline of inventory of homes in the higher price ranges when compared with last year.  This signifies the tight supply conditions we’ve been experiencing in the lower price ranges over the past several months are now extending into the upper price ranges.”

Other key points of C.A.R.’s April 2012 resale housing report include:

• California’s housing inventory remains low, with the Unsold Inventory Index for existing, single-family detached homes remaining at 4.2 months in April, unchanged from a revised 4.2 months in March.  April’s housing inventory was down from a revised 5.6 months in April 2011.  The index indicates the number of months needed to sell the supply of homes on the market at the current sales rate.  A 7-month supply is considered normal.

• Interest rates remained extremely low in April, with 30-year fixed-mortgage interest rates averaging 3.91 percent, down from 4.84 percent in April 2011, according to Freddie Mac.  Adjustable-mortgage interest rates averaged 2.78 percent in April 2012, compared with 3.20 percent in April 2011.

• The median number of days it took to sell a single-family home fell to 49.3 days in April 2012, down from a revised 53.2 days for the same period a year ago.

• View Unsold Inventory by price range


Note:  The County MLS median price and sales data in the tables are generated from a survey of more than 90 associations of REALTORS® throughout the state, and represent statistics of existing single-family detached homes only.  County sales data are not adjusted to account for seasonal factors that can influence home sales.  Movements in sales prices should not be interpreted as changes in the cost of a standard home.  Median prices can be influenced by changes in cost, as well as changes in the characteristics and the size of homes sold.  Due to the low sales volume in some areas, median price changes in December may exhibit unusual fluctuation.

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 155,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

April 2012 County Sales and Price Activity
(Regional and condo sales data not seasonally adjusted)

 

April-12

Median Price of Existing Single-Family Homes

Sales

State/Region/County

Apr-12

Mar-12

 

Apr-11

 

MTM% Chg

YTY% Chg

MTM% Chg

YTY% Chg

CA SFH (SAAR)

$308,050

$291,330

r

$294,140

r

5.7%

4.7%

10.0%

11.0%

CA Condo/Townhomes

$240,410

$235,710

r

$237,420

r

2.0%

1.3%

-1.5%

4.0%

Los Angeles Metropolitan Area

$289,700

$276,270

 

$277,300

 

4.9%

4.5%

-4.7%

1.3%

Inland Empire

$181,770

$179,500

 

$169,460

 

1.3%

7.3%

-11.0%

-3.7%

S.F. Bay Area

$526,370

$478,330

 

$488,940

r

10.0%

7.7%

5.3%

9.2%

 

 

 

 

 

 

 

 

 

 

S.F. Bay Area

 

 

 

 

 

 

 

 

 

Alameda

$456,910

$425,000

 

$452,140

 

7.5%

1.1%

15.9%

12.5%

Contra-Costa (Central County)

$626,970

$582,070

 

$553,160

 

7.7%

13.3%

21.7%

19.7%

Marin

$783,850

$672,620

 

$726,060

 

16.5%

8.0%

21.0%

53.1%

Napa

$363,890

$351,470

 

$306,820

 

3.5%

18.6%

-5.8%

4.6%

San Francisco

$693,750

$649,390

 

$636,900

 

6.8%

8.9%

-2.1%

-4.2%

San Mateo

$745,000

$677,900

 

$700,000

r

9.9%

6.4%

-3.5%

16.0%

Santa Clara

$636,000

$575,250

 

$578,000

r

10.6%

10.0%

6.6%

-3.0%

Solano

$191,220

$194,310

 

$189,120

 

-1.6%

1.1%

-12.6%

2.8%

Sonoma

$343,750

$317,650

 

$332,650

 

8.2%

3.3%

4.9%

24.9%

Southern California

 

 

 

 

 

 

 

 

 

Los Angeles

$286,800

$272,920

 

$290,600

 

5.1%

-1.3%

-2.9%

-0.6%

Orange County

$513,950

$485,300

 

$530,140

 

5.9%

-3.1%

1.4%

19.2%

Riverside County

$213,950

$211,350

 

$199,230

 

1.2%

7.4%

-13.0%

0.0%

San Bernardino

$132,030

$131,640

 

$128,900

 

0.3%

2.4%

-7.1%

-9.9%

San Diego

$369,910

$363,710

 

$378,230

 

1.7%

-2.2%

4.5%

9.7%

Ventura

$427,320

$417,020

 

$448,440

 

2.5%

-4.7%

10.2%

4.8%

Central Coast

 

 

 

 

 

 

 

 

 

Monterey

$280,000

$314,900

 

$255,000

r

-11.1%

9.8%

-6.8%

-3.0%

San Luis Obispo

$360,670

$380,140

 

$390,180

 

-5.1%

-7.6%

0.0%

5.1%

Santa Barbara

$411,540

$405,380

 

$400,000

r

1.5%

2.9%

-14.3%

14.4%

Santa Cruz

$475,000

$482,160

 

$460,000

r

-1.5%

3.3%

-10.0%

8.5%

Central Valley

 

 

 

 

 

 

 

 

 

Fresno

$140,100

$134,690

r

$130,200

r

4.0%

7.6%

0.6%

-13.9%

Kern (Bakersfield)

$145,000

$132,480

r

$126,750

r

9.5%

14.4%

-0.2%

-8.4%

Kings County

$151,870

$141,430

 

$136,150

 

7.4%

11.5%

0.0%

5.2%

Madera

$137,500

$125,000

 

$135,380

 

10.0%

1.6%

-2.5%

-55.7%

Merced

$120,000

$115,290

 

$103,890

 

4.1%

15.5%

4.7%

-10.1%

Placer County

$276,150

$268,750

 

$270,890

 

2.8%

1.9%

-5.9%

5.9%

Sacramento

$169,930

$168,370

 

$170,270

 

0.9%

-0.2%

-3.9%

7.2%

San Benito

$287,450

$232,350

 

$261,000

 

23.7%

10.1%

14.8%

8.8%

Tulare

$128,370

$121,280

 

$111,600

 

5.8%

15.0%

-8.9%

7.2%

Other Counties in California

 

 

 

 

 

 

 

 

 

Amador

$183,330

$118,750

 

$130,000

 

54.4%

41.0%

-2.1%

48.4%

Butte County

$197,620

$200,000

 

$217,040

r

-1.2%

-8.9%

8.3%

13.6%

Humboldt

$240,280

$223,330

 

$225,000

 

7.6%

6.8%

1.3%

10.0%

Lake County

$113,330

$110,000

 

$98,330

 

3.0%

15.3%

-10.3%

-10.3%

Tuolumne

$160,000

$165,000

 

$171,110

 

-3.0%

-6.5%

-29.2%

-11.5%

Mendocino

$209,090

$225,000

 

$225,000

 

-7.1%

-7.1%

20.9%

33.3%

Shasta

$164,540

$148,420

 

$153,330

 

10.9%

7.3%

-3.5%

0.5%

Siskiyou County

$103,330

$110,000

 

$120,000

r

-6.1%

-13.9%

61.1%

-19.4%

Tehama

$160,000

$108,000

 

$110,000

 

48.1%

45.5%

-13.6%

-20.8%

April 2012 County Unsold Inventory and Time on Market
(Regional and condo sales data not seasonally adjusted)

 

April-12

Unsold Inventory Index

 

 

 

 

Median Time on Market

 

 

 

 

State/Region/County

Apr-12

Mar-12

 

Apr-11

 

Apr-12

Mar-12

 

Apr-11

 

CA SFH (SAAR)

4.2

4.2

r

5.6

r

49.3

53.1

 

53.2

r

CA Condo/Townhomes

4.0

4.2

 

5.9

 

55.4

56.7

 

58.8

r

Los Angeles Metropolitan Area

4.5

4.3

 

5.8

 

54.8

57.0

 

55.5

 

Inland Empire

4.4

3.9

 

5.0

 

52.5

53.6

 

51.3

 

S.F. Bay Area

3.3

3.5

 

4.7

r

47.5

53.2

 

52.5

r

 

 

 

 

 

 

 

 

 

 

 

S.F. Bay Area

 

 

 

 

 

 

 

 

 

 

Alameda

2.8

3.3

 

4.5

 

61.4

74.6

 

69.4

 

Contra-Costa (Central County)

2.8

3.4

 

4.9

 

70.2

75.7

 

76.6

 

Marin

4.1

4.6

 

7.2

 

41.4

65.3

 

54.2

 

Napa

6.5

5.9

 

6.6

 

59.1

82.8

 

67.2

 

San Francisco

4.0

3.9

 

5.1

 

37.0

39.5

 

44.4

 

San Mateo

2.5

2.4

 

4.7

r

23.0

25.1

 

27.8

r

Santa Clara

2.3

2.5

 

3.4

r

22.6

24.3

 

26.9

r

Solano

4.4

4.0

 

5.2

 

54.1

52.6

 

54.9

 

Sonoma

4.6

4.9

 

6.2

 

68.7

91.0

 

63.8

 

Sourthern California

 

 

 

 

 

 

 

 

 

 

Los Angeles

4.4

4.3

 

5.8

 

53.0

55.6

 

53.7

 

Orange County

4.8

4.9

 

7.5

 

61.7

70.2

 

68.9

 

Riverside County

4.5

3.8

 

5.0

 

56.3

58.5

 

56.4

 

San Bernardino

4.3

4.1

 

5.0

 

45.0

44.5

 

52.6

 

San Diego

4.8

5.1

 

6.6

 

47.4

52.1

 

52.5

 

Ventura

5.1

5.8

 

5.9

 

69.3

73.4

 

64.8

 

Central Coast

 

 

 

 

 

 

 

 

 

 

Monterey

4.1

4.0

 

5.4

r

43.7

50.9

 

43.9

r

San Luis Obispo

4.7

4.7

 

6.3

 

59.7

75.0

 

70.1

 

Santa Barbara

4.9

4.6

 

7.7

r

65.8

81.7

 

69.7

r

Santa Cruz

4.5

4.0

 

6.2

r

26.5

43.4

 

50.6

r

Central Valley

 

 

 

 

 

 

 

 

 

 

Fresno

4.3

4.5

r

4.1

r

28.3

36.4

r

42.5

r

Kern (Bakersfield)

3.4

3.4

r

4.2

 

NA

NA

 

NA

 

Kings County

3.4

3.6

 

4.9

 

50.1

66.4

 

71.2

 

Madera

3.5

3.7

 

6.6

 

29.3

39.7

 

49.5

 

Merced

3.0

3.7

 

4.4

 

48.4

44.9

 

37.8

 

Placer County

NA

NA

 

NA

 

NA

NA

 

NA

 

Sacramento

3.5

3.7

 

5.3

r

29.7

34.1

 

41.4

 

San Benito

2.4

3.4

 

4.4

 

43.4

37.4

 

41.0

r

Tulare

3.9

3.9

 

5.7

 

28.3

32.3

 

48.8

 

Other Counties in California

 

 

 

 

 

 

 

 

 

 

Amador

6.4

5.8

 

10.3

 

72.6

93.1

 

101.9

 

Butte County

3.9

4.1

 

6.6

 

29.8

67.4

 

55.7

 

Humboldt

NA

6.9

 

9.0

 

67.2

53.6

 

52.4

 

Lake County

6.2

5.5

 

6.7

 

94.6

66.6

 

89.3

 

Tuolumne

9.0

5.9

 

9.5

 

87.9

64.6

 

71.9

 

Mendocino

6.9

7.6

 

9.8

 

78.4

105.5

 

64.6

 

Shasta

4.8

4.5

 

6.6

 

25.6

37.3

 

49.3

 

Siskiyou County

12.6

19.9

 

11.7

 

68.3

82.8

 

98.3

 

Tehama

6.4

5.5

 

6.2

 

61.0

56.4

 

53.8

 

 

California pending home sales up for third sraight month.

by Karen Hickman

March pending home sales index 

For release:
April 24, 2012 

From California Association of Realtors website

California pending home sales up for third straight month, highest level in nearly three years

LOS ANGELES (April 24) – California pending home sales posted higher for the third consecutive month in March, rising from both the previous month and year, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) reported today.  Additionally, the share of distressed sales dropped for the second consecutive month, as equity sales typically increase with the start of the spring home buying season.

Pending home sales:

C.A.R.’s Pending Home Sales Index (PHSI)* rose from a revised 126.5 in February to 143.7 in March, based on signed contracts.  The March 2012 index was the highest since April 2009, when the PHSI was 146.9.  The index also was up from the 128.9 index recorded in March 2011, marking the eleventh consecutive month that pending sales were higher than the previous year.  Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.

Distressed housing market data:

• The share of equity sales – or non-distressed property sales – compared to total sales increased in March to 55.4, up from 51.1 percent in February.  Equity sales made up 50.2 percent of all sales in March 2011.
• Meanwhile, the total share of all distressed property types sold statewide decreased in March to 44.6 percent, down from February’s 48.9 percent and from 49.8 percent in March 2011.
• The share of short sales was down again in March.  Of the distressed properties sold statewide in March, 21.1 percent were short sales, down from February’s share of 23 percent but up from last March’s share of 20.1 percent.
• The share of REO sales also declined in March to 23.1 percent, down from February’s 25.2 percent and down from the 29.4 percent recorded in March 2011.


 
Share of Distressed Sales to Total Sales
(Single-family)

 

Type of Sale

March 2011

Feb. 2012

March 2012

Equity Sales

50.2%

51.1%

55.4%

Total Distressed Sales

49.8%

48.9%

44.6%

     REOs

29.4%

25.2%

23.1%

     Short Sales

20.1%

23.0%

21.1%

     Other Distressed Sales (Not Specified)

0.3%

0.7%

0.4%

All Sales

100.0%

100.0%

100.0%

 

Single-family Distressed Home Sales by Select Counties
(Percent of total sales)

 

County

Mar-11

Feb-12

Mar-12

Amador

61%

52%

64%

Butte

35%

53%

40%

Fresno

67%

61%

60%

Humboldt

19%

40%

34%

Kern

71%

63%

53%

Lake

71%

66%

63%

Los Angeles

51%

51%

48%

Madera

59%

73%

68%

Marin

28%

39%

29%

Mendocino

68%

56%

50%

Merced

64%

63%

56%

Monterey

65%

59%

49%

Napa

53%

52%

53%

Orange

41%

43%

38%

Riverside

67%

61%

59%

Sacramento

70%

66%

59%

San Benito

71%

66%

61%

San Bernardino

72%

66%

63%

San Diego

32%

29%

26%

San Luis Obispo

47%

42%

39%

San Mateo

27%

37%

27%

Santa Clara

38%

40%

33%

Santa Cruz

51%

42%

42%

Siskiyou

63%

67%

78%

Solano

76%

74%

69%

Sonoma

57%

51%

53%

Tehama

85%

84%

59%

California

50%

49%

45%

**Note:  C.A.R.’s pending sales information is generated from a survey of more than 70 associations of REALTORS® and MLSs throughout the state.  Pending home sales are forward-looking indicators of future home sales activity, offering solid information on future changes in the direction of the market.  A sale is listed as pending after a seller has accepted a sales contract on a property.  The majority of pending home sales usually becomes closed sales transactions one to two months later.  The year 2008 was used as the benchmark for the Pending Homes Sales Index.  An index of 100 is equal to the average level of contract activity during 2008.

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 155,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles. 

Misconceptions about 2 common real estate tax breaks

by Karen Hickman

Misconceptions about 2 common real estate tax breaks

Some homeowners better off not taking home office deduction

By Tom Kelly
Inman News®

Share This

One of the biggest financial advantages of owning a home is the mortgage interest deduction, but the amount many taxpayers submit is often greater than the allowed limit.

And, while home offices have become more popular because of convenience and the downturn in the economy, many homeowners may be better off not taking the deduction because of the depreciation recapture upon sale.

Both the mortgage interest and home office topics need to be double-checked before the April 17 deadline. Why April 17 this year instead of April 15? According to the Internal Revenue Service, taxpayers will have until Tuesday, April 17, to file their 2011 tax returns and pay any tax due because April 15 falls on a Sunday.

In addition, Emancipation Day, a holiday observed in Washington, D.C., falls this year on Monday, April 16. According to federal law, Washington, D.C., holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have two extra days to file this year.

Taxpayers requesting an extension will have until Oct. 15 to file their 2012 tax returns. Remember that an extension of time to file is not an extension of time to pay. You will owe interest on any past-due tax and you may be subject to a late-payment penalty if timely payment is not made.

In a recent column, we discussed the benchmark for the mortgage interest deduction is set at acquisition debt, which is the amount of debt in place when the home is acquired. For example, if you buy a $200,000 home with a $50,000 down payment, your acquisition debt is $150,000.

Many consumers stay in their homes for years, accumulate appreciation and then refinance to put a child through school, mom into a nursing home or attend a much anticipated family reunion. The new debt on the refinance will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing.

For example, let's assume your home is now worth $300,000 and you need to take cash out for college tuition. The balance of your loan before you refinance is $135,000 and you take $100,000 "cash back" for a new loan balance of $235,000.

However, the maximum allowable mortgage interest deduction remains $135,000 -- the acquisition debt, not the bigger number from the refinance.

Another popular deduction that is often taken yet needs additional consideration is the home office deduction. It's relatively easy for taxpayers to deduct the cost of a home office. To qualify for a deduction, the space must be used exclusively and on a regular basis for either the entire business or its administrative and management activities.

If you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be "for the convenience of your employer."

A home office deduction is comprised mainly of depreciation, utilities and insurance. For example, if a home has 2,500 square feet and the detached garage now deemed "the office" is 250 square feet, then 10 percent of the utilities and insurance are deductible.

The actual office depreciation is 10 percent of what would be a depreciation deduction if the entire home were being depreciated for tax purposes. (Depreciation is not allowed on a typical principal residence, so the square footage allotted to "residence" would not qualify.) Supplies and other expenses directly related to the home office are fully deductible.

However, all these benefits do come at a price. The tax law originally stated that if you sell your home at a gain, any depreciation for a home office will have to be "recaptured." That means that any profit on the business portion is taxable as capital gain.

On Dec. 23, 2002, the IRS issued new regulations concerning gain on home sales. As long as the home office was in the same structure and not separated from the home, only the depreciation taken for the home office after May 6, 1997, is subject to tax.

Still, that depreciation recapture amount could be a lot more than you expect. It may be worthwhile to simply work from home and not deem the space a "home office."

Congress considers extension to mortgage-debt relief deadline

by Karen Hickman

April 12, 2012  

 

Congress considers extension to mortgage-debt relief deadline

Action not expected until post-election

By Ken Harney

Inman News®

 

Share This For anyone hoping that a fractious, election-bound Congress can manage to extend a law that is crucial to the housing recovery -- the Mortgage Forgiveness Debt Relief Act -- here's a little good news: Before heading home for the Easter holiday recess, key members of the House and Senate tax-writing committees introduced bills that would keep the law alive through 2014.

 

Without action by Congress, the law -- which allows homeowners whose mortgage debts have been written off by lenders in short sales, foreclosures, principal reductions and deeds-in-lieu of foreclosure to escape heavy federal taxation on the amounts forgiven -- would expire Dec. 31, 2012.

 

Real estate and mortgage trade groups believe that any expiration would be disastrous for large numbers of underwater owners trying to rid themselves of smothering debt loads.

 

It could also sharply reduce the appeal of short sales and other resolutions needed to clear out distressed inventories.

 

If homeowners thought they'd be penalized for agreeing to principal reductions and debt cancellations, they'd be far less likely to participate.

 

That, in turn, could hamper efforts like the $25 billion nationwide robo-signing mortgage settlement, which features more than $10 billion in debt forgiveness, as well as the Obama administration's efforts to spur short sales and principal reductions at Fannie Mae and Freddie Mac.

 

Until the tax code was amended in 2007, the Internal Revenue Service treated owners whose unpaid principal balances were canceled as having received actual income from the transaction and hit them with tax bills.

 

For example, in a short sale where the lender wrote off $100,000 of unpaid mortgage debt prior to 2007, the federal tax code treated the $100,000 as ordinary income to the seller and the IRS imposed tax levies at regular rates.

 

Though the prospects for quick action on the issue are virtually nonexistent, the sudden introduction of multiple bills on both sides of Capitol Hill can only be a positive sign.

 

In the Senate, Finance committee member Debbie Stabenow (D-Mich.) joined with fellow Democrats Robert Menendez (New Jersey), Sherrod Brown (Ohio) and Jeff Merkley (Oregon); and two Republicans: Dean Heller (Nevada) and Johnny Isakson (Georgia), on a proposed extension (S 2250) through Dec. 31, 2014.

 

In the House, 14 of the 15 Democrats on the Ways and Means Committee -- the point of origination for most tax legislation in Congress -- are co-sponsoring a bill (HR 4202) with the same provisions as Stabenow's.

 

One Republican on the Ways and Means Committee, U.S. Rep. Tom Reed of New York, also is introducing an extension bill, but the text and bill number were not immediately available.

 

President Obama's fiscal 2013 federal budget proposal calls for an extension through 2014, which congressional analysts estimate would cost the government $2.7 billion in tax revenues over the coming two years.

 

In a statement, Stabenow said, "It is bad enough that so many families are faced with mortgages that now exceed the value of their home.

 

"But to add insult to injury, without this bill the IRS would once again require these families to pay hundreds or thousands of dollars in additional income tax when they sell or refinance their home. That's just wrong."

 

The lack of more Republican co-sponsors on Reed's bill may point to difficulties for the debt relief extension that could materialize as early as the end of this month.

 

The Republican-controlled Ways and Means Committee says it plans to look at all "extenders" -- expired or soon-to-lapse special benefit programs ranging from corporate research and development tax credits to individual homeowner write-offs for residential energy improvements -- within the next two weeks.

 

If the Republican majority decides that mortgage debt relief is just another contributor to the federal deficit, the House version of bills could be derailed indefinitely.

 

(Remember that last December, House and Senate conferees deferred action on a long list of extenders -- including deductions for private mortgage insurance premiums -- and they all remain in legislative limbo.)

 

But tax analysts and lobbyists on Capitol Hill say the most likely scenario shapes up something like this: Though the National Association of REALTORS® and other groups will push for early consideration of the debt relief extender, it's unlikely that Congress will be able to focus on a major revenue package until after the November elections.

 

Then, the victors and lame ducks from both houses will have to do the year's tough lifting: They'll take up the entire range of budget, deficit and debt-ceiling issues during several frenetic weeks, and finally hammer out an omnibus bill that includes either a one- or two-year new lifeline for mortgage debt relief.

 

Though there's a chance the entire process will break down again as it did last year, Jim Tobin, chief lobbyist for the National Association of Home Builders, told me last week, "We remain optimistic that once we get past the election and into a robust lame duck session, Congress will do the right thing" on mortgage forgiveness.

 

"But any way you look at it," he added, "taxing (financially distressed) homeowners on phantom income is just inequitable."

 

Plus, it makes absolutely no economic or political sense for either party -- whether we have a President Romney and Republican majorities in both houses, or President Obama and the Democrats come away big winners -- to kick homeowners when they're already down.

 

Ken Harney writes an award-winning, nationally syndicated column, "The Nation's Housing," and is the author of two books on real estate and mortgage finance.

February 2012 Sales and Price Report

by Karen Hickman
February sales and price report

 Fr

For release:
March 15, 2012

California home sales post higher in February; inventory remains low

LOS ANGELES (March 15) – Recent improvements in the overall economy, combined with extremely low interest rates lifted California home sales from both the prior month and year in February, according to data from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). The median price dipped from January but is beginning to show signs of stabilization.

“While the median home price dipped in February, the year-over-year decline was the smallest recorded since December 2010,” said C.A.R. President LeFrancis Arnold. “This may be a signal of a possible stabilization in home prices, which should bode well for prospective buyers who have been on the sidelines waiting for prices to level out and may entice them to jump into the market.”

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 528,010 in February, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. February’s sales were up 2.1 percent from January’s revised pace of 517,120 and up 5.5 percent from the revised 500,480 sales pace recorded in February 2011. The statewide sales figure represents what would be the total number of homes sold during 2012 if sales maintained the February pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

“February sales posted a stronger than usual performance with sales in major metropolitan areas such as Los Angeles, Orange County, San Diego, and San Francisco all logging double-digit gains from the previous year,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Recent encouraging signs in the GDP, employment picture, and consumer confidence suggest that a growing economy is in the making. All this, combined with continued-low mortgage rates, lays out a good foundation for the housing market to continue to grow as we enter the spring home buying season.”

The statewide median price of an existing, single-family detached home dipped 0.6 percent to $266,660 in February from January’s $268,280 median price. The median price was down 1.7 percent from the revised $271,370 median price recorded in February 2011.

Other key facts of C.A.R.’s February 2012 resale housing report include:

• California’s housing inventory declined in February, with the Unsold Inventory Index for existing, single-family detached homes decreasing to 5.3 months in February, down from a revised 5.7 months in January and down from the 7.5-month supply in February 2011. The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.
• Interest rates fell to record lows again in February. Thirty-year fixed-mortgage interest rates averaged 3.89 percent during February 2012, down from 4.95 percent in February 2011, according to Freddie Mac. Adjustable-mortgage interest rates averaged 2.78 percent in February 2012, compared with 3.35 percent in February 2011.
• The median number of days it took to sell a single-family home fell to 58.9 days in February 2012 and was down from a revised 64.7 days for the same period a year ago.
View Unsold Inventory by price range.

Note: The County MLS median price and sales data in the tables are generated from a survey of more than 90 associations of REALTORS® throughout the state, and represent statistics of existing single-family detached homes only. County sales data are not adjusted to account for seasonal factors that can influence home sales. Movements in sales prices should not be interpreted as changes in the cost of a standard home. Median prices can be influenced by changes in cost, as well as changes in the characteristics and the size of homes sold. Due to the low sales volume in some areas, median price changes in December may exhibit unusual fluctuation.

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States with 160,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.

February 2012 County Sales and Price Activity
(Regional and condo sales data not seasonally adjusted)

Feb-12 Median Price of Existing Single-Family Homes Sales
State/Region/County Feb-12 Jan-12   Feb-11   MTM% Chg YTY% Chg MTM% Chg YTY% Chg
California Single-family $266,660 $268,280   $271,370 r -0.6% -1.7% 2.1% 5.5%
CA Condo/Townhomes $216,520 $215,690   $235,790 r 0.4% -8.2% 12.5% 9.3%
Los Angeles Metropolitan Area $264,430 $256,000   $266,830   3.3% -0.9% 6.2% 7.5%
Inland Empire $172,600 $169,280   $174,040   2.0% -0.8% 5.2% 3.0%
S.F. Bay Area $438,280 $415,120   $443,880 r 5.6% -1.3% 7.7% 15.3%
                   
S.F. Bay Area                  
Alameda $402,880 $395,830   $458,060   1.8% -12.0% -5.2% 12.0%
Contra-Costa (Central County) $515,620 $476,470   $516,670   8.2% -0.2% 11.1% 1.7%
Marin $732,140 $694,440   $632,580   5.4% 15.7% -0.8% 13.1%
Napa $348,000 $344,740   $354,760   0.9% -1.9% -1.1% 20.0%
San Francisco $592,950 $561,270   $606,560   5.6% -2.2% 32.9% 33.7%
San Mateo $582,500 $578,500   $591,500 r 0.7% -1.5% 14.8% 12.0%
Santa Clara $530,000 $495,000   $520,000 r 7.1% 1.9% 13.6% 5.0%
Solano $179,020 $184,440   $191,780 r -2.9% -6.7% 1.6% 30.4%
Sonoma $324,710 $326,920   $315,340   -0.7% 3.0% 4.6% 32.4%
Southern California                  
Los Angeles $272,690 $290,890   $286,100 r -6.3% -4.7% 6.5% 12.7%
Orange County $485,380 $483,510   $496,540   0.4% -2.2% 10.8% 13.1%
Riverside County $200,730 $196,050   $203,640 r 2.4% -1.4% 7.0% 3.8%
San Bernardino $132,500 $129,920   $131,470   2.0% 0.8% 2.2% 1.7%
San Diego $362,470 $350,680   $367,770   3.4% -1.4% 13.1% 21.1%
Ventura $392,350 $386,870   $389,650   1.4% 0.7% 0.3% -8.7%
Central Coast                  
Monterey $265,000 $280,000   $231,000 r -5.4% 14.7% 2.8% -15.1%
San Luis Obispo $354,350 $363,640   $328,750   -2.6% 7.8% 22.5% 17.4%
Santa Barbara $345,000 $356,000   $380,000   -3.1% -9.2% -3.5% 30.2%
Santa Cruz $499,950 $422,500   $452,000 r 18.3% 10.6% 19.2% 27.8%
Central Valley                  
Fresno $142,300 $131,070   $141,360   8.6% 0.7% 8.5% 7.9%
Kern (Bakersfield) $119,980 $130,000   $125,000   -7.7% -4.0% -10.6% -5.3%
Kings County $144,440 $145,710   $154,000   -0.9% -6.2% 12.5% 26.3%
Madera $103,330 $113,750   $149,230   -9.2% -30.8% 32.3% -41.4%
Merced $119,280 $112,000   $117,270   6.5% 1.7% 25.0% -8.0%
Placer County $251,450 $258,210   $269,670   -2.6% -6.8% 28.5% 28.5%
Sacramento $163,870 $162,290   $168,800   1.0% -2.9% 7.9% 16.2%
San Benito $255,500 $260,000   $285,000   -1.7% -10.4% -2.0% 19.0%
Tulare $119,330 $116,670   $120,340   2.3% -0.8% -0.8% 15.3%
Other Counties in California                  
Amador $176,670 $135,000   $200,000   30.9% -11.7% 38.9% 78.6%
Butte County $177,860 $194,000   $190,000   -8.3% -6.4% 25.3% 65.0%
Humboldt $232,950 $220,000   $238,890   5.9% -2.5% 6.9% 83.3%
Lake County $103,640 $118,570   $123,330   -12.6% -16.0% 15.9% 15.9%
Tuolumne $165,000 $147,140   $192,500 r 12.1% -14.3% 48.9% 63.4%
Mendocino $190,000 $190,000   $200,000   0.0% -5.0% -16.2% -8.8%
Shasta $141,900 $151,670   $162,110   -6.4% -12.5% 10.7% 60.7%
Siskiyou County $123,330 $123,330   $140,000   0.0% -11.9% 0.0% 50.0%
Tehama $85,000 $110,000   $83,330   -22.7% 2.0% 11.8% 58.3%

February 2012 County Unsold Inventory and Time on Market
(Regional and condo sales data not seasonally adjusted)

February-12 Unsold Inventory Index         Median Time on Market        
State/Region/County Feb-12 Jan-12   Feb-11   Feb-12 Jan-12   Feb-11  
California Single-family 5.3 5.7 r 7.5 r 58.9 61.9   64.7 r
CA Condo/Townhomes 5.5 6.2 r 7.8   67.1 72.5   71.8  
Los Angeles Metropolitan Area 5.9 6.3   7.5   63.2 64.2   64.0  
Inland Empire 5.3 5.7   6.3   57.1 56.5   54.8  
S.F. Bay Area 4.2 4.5   6.8 r 62.7 73.9   71.3  
                     
S.F. Bay Area                    
Alameda 5.0 4.3   6.9   87.8 98.5   96.1  
Contra-Costa (Central County) 5.0 5.2   6.5   87.5 97.0   107.5  
Marin 4.0 5.2   8.4   102.1 83.1   110.6  
Napa 6.4 6.3   9.9   85.9 87.9   92.6  
San Francisco 4.8 6.0   8.5   47.3 66.9   68.3  
San Mateo 4.0 4.5   6.1 r 36.8 40.3   36.4 r
Santa Clara 3.5 3.8   5.1 r 28.0 37.7   39.8 r
Solano 3.7 3.8   7.8   53.1 62.0   62.6  
Sonoma 4.5 4.9   8.1   93.0 101.1   80.2  
Southern California                    
Los Angeles 5.7 6.1   7.8   59.5 64.0   62.1 r
Orange County 7.1 8.0   9.6   82.0 78.4   85.9  
Riverside County 5.5 6.0   6.4   58.3 59.3   64.2  
San Bernardino 5.1 5.2   6.2   55.0 52.3   53.4  
San Diego 6.3 7.1   8.9   59.0 62.6   62.9  
Ventura 8.2 7.9   7.2   86.5 89.4   85.3  
Central Coast                    
Monterey 5.4 5.7   5.8 r 44.2 46.7   50.0 r
San Luis Obispo 5.9 7.0   8.4   69.1 85.5   80.6  
Santa Barbara 6.7 6.5   9.5   74.7 75.8   95.8 r
Santa Cruz 5.4 6.3   8.1   56.1 43.9   68.7 r
Central Valley                    
Fresno 4.0 4.6   NA   44.6 41.0   46.7  
Kern (Bakersfield) 3.1 2.4 r 6.1 r NA NA   NA  
Kings County 4.1 4.6   6.7   70.7 49.8   65.8  
Madera 3.8 5.6   7.8   58.4 35.8   50.3  
Merced 4.3 5.3   5.3   52.4 41.5   33.7  
Placer County NA NA   NA   NA NA   NA  
Sacramento 4.5 4.8 r 6.7 r 45.0 41.5   52.8  
San Benito 3.7 3.4   6.0   49.1 52.8   47.6  
Tulare 4.9 4.9   6.7   29.6 31.5   50.2  
Other Counties in California                    
Amador 5.4 7.7   10.0   76.8 91.0   129.7  
Butte County 4.5 5.9   9.8   68.7 65.8   99.3  
Humboldt 6.6 6.9   13.8   62.8 79.5   73.4  
Lake County 5.7 6.8   8.4   86.1 104.1   112.8  
Tuolumne 5.5 8.4   11.0 r 52.1 71.9   103.1  
Mendocino 9.6 7.8   11.0   78.1 75.5   91.0  
Shasta 4.6 5.0   10.5   50.3 48.3   76.8  
Siskiyou County 12.6 11.4   20.2 r 125.5 123.9   111.3 r
Tehama 6.5 7.3   12.6   56.8 78.4   49.1  

 

The Tax Benefits of Refinancing

by Karen Hickman

From SmartMoney.com , February 23, 2012

By BILL BISCHOFF

Many people refinanced their mortgages in 2011 to take advantage of super-low interest rates.

If you refinanced last year, here's how to make sure you claim all your rightful deductions on your 2011 return.

Deducting Your Mortgage Interest

Say your original mortgage was $200,000. On July 1, 2011, you took out a new 30-year, $300,000 mortgage and paid 1 1/2 points, or $4,500, for the privilege. (Each point represents 1% of your total loan amount.) You then used the extra $100,000 from the new mortgage to eliminate some high-interest credit-card bills, pay off your car loans and cover various other expenses.

Assuming your home was worth at least $300,000 when you refinanced, you have, in effect, two new mortgages as far as the Internal Revenue Service is concerned. The first $200,000 of your new loan (the balance on your old mortgage when you paid it off) is treated as "home-acquisition debt." And the interest on this qualifies as an itemized deduction on line 10 of your Schedule A.

The remaining $100,000 of your new loan is treated as home-equity debt. The interest on this should also qualify as an itemized deduction on line 10 of your Schedule A. But keep one thing in mind: The IRS only recognizes home-equity loans up to $100,000; you can't deduct the interest paid on principal above that figure.

Also, if the home-acquisition debt plus the home-equity debt exceeded the fair-market value of your home, you generally can't deduct the interest on the excess debt. Say your home was worth $240,000 when you took out that new $300,000 loan. You can deduct the interest on the $200,000 of acquisition debt. However, for the home equity debt, you can only deduct the interest on $40,000. So you can deduct 80% ($240,000/$300,000) of the total mortgage interest on line 10 of your Schedule A. (The interest on the remaining $60,000 of debt is generally considered a nondeductible personal expense, though there are a couple of exceptions, like if you used the loan proceeds to finance your small business.)

Talking Points

You can also amortize the points related to the home-acquisition-debt part of the new loan ($3,000 in our example) over the life of the loan. Say it's a 30-year loan (360 months). Your amortization deduction would be $8.33 a month ($3,000 divided by 360), for a grand total of $99.96 a year. Every little bit helps, right?

What about the points related to the home-equity debt ($1,500 in our example)? You can amortize those in the same proportion as the interest, provided that the home-equity debt is $100,000 or less, and the home's value isn't less than the home-equity debt plus the acquisition debt. Claim the amortization write-off for your home-mortgage points on line 10 or 12 of Schedule A.

This brings us to our last potential deduction. If you previously refinanced your mortgage and paid points, you probably have a good-sized unamortized (or not-yet-deducted) balance for those points. You can generally deduct that entire unamortized amount when you refinance again. For example, say the mortgage you refinanced last year was taken out in a previous refinancing deal done six years earlier, back in 2005. At that time you paid $2,000 in points for your 30-year loan. You should have $1,600 worth of unamortized points left over from the 2005 loan (80% of the original $2,000 amount). On your 2011 return, don't forget to deduct the $1,600 of unamortized points. Claim your write-off on line 12 of Schedule A.

California home sales rise in December, posting 11-month sales high

by Karen Hickman

January 17, 2012

California home sales rise in December, posting 11-month sales high, C.A.R. reports 

LOS ANGELES (Jan. 17) – California home sales rose for the third consecutive month in December, marking the highest level since January 2011, according to data from the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.).  Sales also were up from a year ago, marking the sixth consecutive annual increase.

“With the economy slowly improving, home buyers – investors and first-time buyers alike – took advantage of affordable  interest rates and made a push to close escrow by the end of year,” said C.A.R. President LeFrancis Arnold.  “Robust sales over the past few months signal the housing market is treading above water on its own in the first full year without the government stimulus that has helped housing in the last couple of years.”

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 520,940 in December, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide.  December’s sales were up 3.3 percent from November’s revised pace of 504,420 and were up 0.1 percent from the revised 558,840 sales pace recorded in December 2010.  The statewide sales figure represents what would be the total number of homes sold during 2011 if sales maintained the December pace throughout the year.  It is adjusted to account for seasonal factors that typically influence home sales.

The statewide median price of an existing, single-family detached home posted its second consecutive monthly gain, increasing 1.8 percent to $285,920 in December, up from a revised $280,960 in November.  However, the median price was down 6.2 percent from the revised $304,770 median price recorded in December 2010.

“Fourth quarter sales were stronger than we expected, thanks to recent improving consumer confidence and an economy that’s slowly showing signs of growth.  As a result, sales came in slightly above our fall projection,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  “For 2011 as a whole, sales reached a preliminary 497,860 homes sold statewide, up 1.1 percent from the 492,290 homes sold in 2010.  However, the statewide median price declined 6.3 percent for the year, to reach a preliminary $285,950, down from the revised $305,010 recorded in 2010.

“Home prices are stabilizing for the distressed market, where we see robust demand, but we continue to see downward pressure on home prices in some higher end markets,” said Appleton-Young.

Other key facts of C.A.R.’s December 2011 resale housing report include:

Housing inventory remains tight throughout California, with the Unsold Inventory Index for existing, single-family detached homes declining to 4.2 months in December, down from 5.0 months in November and down from a 5.0-month supply in December 2010.  The index indicates the number of months needed to deplete the supply of homes on the market at the current sales rate.

Thirty-year fixed-mortgage interest rates averaged 3.96 percent during December 2011, down from 4.71 percent in December 2010, according to Freddie Mac.  Adjustable-mortgage interest rates averaged 2.79 percent in December 2011, compared with 3.31 percent in December 2010.

The median number of days it took to sell a single-family home edged up to 58.7 days in December 2011, compared with a revised 58.0 days for the same period a year ago.

Note:  The County MLS median price and sales data in the tables are generated from a survey of more than 90 associations of REALTORS® throughout the state, and represent statistics of existing single-family detached homes only.  County sales data are not adjusted to account for seasonal factors that can influence home sales.  Movements in sales prices should not be interpreted as changes in the cost of a standard home.  Median prices can be influenced by changes in cost, as well as changes in the characteristics and the size of homes sold.  Due to the low sales volume in some areas, median price changes in December may exhibit unusual fluctuation.

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 155,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles

Foreclosures fall to lowest level since 2007

by Karen Hickman

Foreclosures fall to lowest level since 2007 

By Les Christie @CNNMoney January 12, 2012

Total filings, including default notices and bank repossessions were down 33% for the year to 2.7 million, according to RealtyTrac, the online marketer of foreclosed properties.

One in every 69 homes had at least one foreclosure filing during the year, while 804,000 homes were repossessed. That's a significant improvement from the peaks reached in 2010 -- when 1.05 million homes were repossessed -- and the lowest levels seen since 2007.

More than 4 million homes have been lost to foreclosure over the past five years.

While the declines seem like good news for the housing market, where a flood of foreclosed homes has depressed home prices, much of it is due to processing delays caused by fall-out from the "robo-signing" scandal that broke in late 2010

During the year, banks spent more time making sure paperwork was legal and proper, creating a backlog in the foreclosure pipeline. As a result, the average time it took to process a foreclosure climbed to 348 days during the fourth quarter, up from 305 days a year earlier.

"Foreclosures were in full delay mode in 2011, resulting in a dramatic drop in foreclosure activity for the year," said Brandon Moore, chief executive officer of RealtyTrac.

However, Moore said there were "strong signs" during the second half of the year that lenders are working through foreclosure backlogs in certain markets. He expects foreclosure activity to rise above 2011's level but remain below the peak hit in 2010.

Low rates offer some help for homeowners

Early in 2011, many forecasters were predicting a wave of foreclosures due to resetting adjustable-rate mortgages, but low mortgage rates helped many borrowers refinance into more affordable loans, said Moore.

The government helped as well, through efforts like the Home Affordable Refinance Program (HARP), which made refinancing easier for borrowers who owe more on their mortgage than their homes are worth.

Turning foreclosures into rentals

Government foreclosure prevention programs, including HARP and the Home Affordable Modification Program (HAMP), have started about 5.5 million mortgage modifications since April 2009, according to the U.S. Department of Housing and Urban Development.

"Programs like HAMP and HARP have definitely made a dent in the foreclosure problem," said Moore "However, they are certainly not living up to their billing of preventing several million foreclosures. In addition, many [HAMP] homeowners fall back into foreclosure later on."

Of course, there were still plenty of factors working against homeowners in 2011, including the continued erosion in home prices. Falling prices rob homeowners of home equity, which they can tap if they need emergency cash.

Foreclosure hot spots

Hot spots for foreclosures remain mostly in "bubble states," where speculative investors helped drive up home prices beyond their fundamental values during the mid-2000s housing boom.

Nevada, where one out of every 16 households received some kind of default notice during the year, was the worst hit of all, a distinction it has held for the fifth consecutive year.

Foreclosure free ride: 3 years, no payments

Arizona had the second highest foreclosure rate and California came in third. Florida, which had been running neck-and-neck with the other "Sand States" in past years, fell to seventh, behind Georgia, Utah and Michigan.

Among metro areas, Las Vegas suffered from the highest foreclosure rate in 2011. California put seven cities in the top 10, led by Stockton in the second slot. Other cities in the top 10 included Phoenix, which finished sixth, and Reno, Nev. was eighth. 

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Karen Hickman
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