Editor’s note: The results of a biannual survey, released this week by real estate search and marketing portal Trulia, found that 80 percent of homeowners plan to buy another home, and that most survey participants view homeownership, and placing money in a 401(k) or other retirement account, as the best long-term investments. Market research firm Harris Interactive conducted the survey, which drew responses from 1,392 homeowners and 758 renters, from Aug. 30, 2011, to Sept. 1, 2011.

Source: Trulia American Dream survey.

HUD will distribute $3 million among 139 local counseling agencies and more than $7 million among 23 housing counseling intermediary agencies. The funds are unused funding from 2010.

The grants will be distributed to the 100 metropolitan areas with the highest incidence of foreclosures and will assist agencies addressing foreclosure prevention by guiding homeowners through mortgage modification applications and other loss mitigation options.

In addition to foreclosure prevention, the funds are being directed to agencies addressing mortgage modification scams.

“The funding announced today is specifically earmarked to provide counseling assistance relating to mortgage modification, avoiding potential mortgage scams, and assisting victims of scams,” said HUD Secretary Shaun Donovan.

“It is crucial that we support these agencies in helping struggling families do whatever is possible to avoid foreclosure without being victimized by so called mortgage “rescue” companies.”

HUD selected the grant recipients through a competitive application process. The agencies receiving the grants are HUD-approved and are subject to performance reviews.

http://www.dsnews.com/articles/hud-awards-10m-to-housing-counseling-agencies-2011-09-02

Congress‘ supercommittee — the bipartisan, 12-member panel assigned the task of cutting $1.5 trillion from the federal deficit in the next 10 weeks — met for the first time last Thursday, appointed top staff, and took preliminary peeks at alternative combinations of spending reductions and revenue increases that could get them to their goal by Thanksgiving.

Severe cutbacks or elimination of longtime tax preferences as the mortgage interest deduction and local real estate write-offs were on some of the menus that floated into the staff.

For example, the influential, bipartisan private-sector Committee for a Responsible Federal Budget urged members to “go big” and “go long” — well beyond $1.5 trillion — and offered several options on the mortgage interest deduction, including elimination of second-home interest write-offs outright, capping the primary home mortgage interest deduction at $500,000, and turning it into a credit.

Over a 10-year period, the group estimated that by limiting mortgage interest deductions and other itemized write-offs for high earners — presumably those with household incomes above $250,000 or individual incomes above $200,000 — it could knock $250 billion off the deficit.

Curtailing all state and local tax deductions, including for property levies, would save $470 billion, according to the group.

But other, much broader themes emerged during the committee’s first week that could ultimately determine the fate of the mortgage interest deduction.

No. 1: Despite dire predictions that the committee is unlikely to produce a consensus package by its Nov. 23 deadline, the view among committee members and staff increasingly is the opposite — they are going to get it done.

There are enough spending-reduction items available on the menus being circulated that they can agree on — and convince their partisan colleagues in the House and Senate to support, albeit holding their noses — that the committee is now likely to deliver some sort of package.

No. 2: Despite calls from President Obama to shoot for a $4 trillion big splash by late November, the politically more astute approach will be to aim small to avoid rejection by one or both houses of Congress, which must approve final legislation by Dec. 23.

That strategy, say Capitol Hill tax specialists close to the committee, will involve mainly spending program cuts and only modest changes to tax preferences — no changes to the primary home MID, but possibly a phase-out or restrictions on the mortgage interest deduction for second homes.

Under this scenario, said to be favored by key members on both sides, the committee would hold back on big-ticket tax changes until after the 2012 election, and then have Congress come back in 2013 to produce comprehensive tax-reform legislation — lowering tax brackets across the board but reducing long-standing preferences such as the mortgage interest deduction, along with a slew of others.

Capitol Hill sources tell me that since Republicans — and some Democrats — in the House and Senate are not likely to approve major revenue increases item by item, there is no political logic for committee co-chairs Sen. Patty Murray, D-Wash., and Rep. Jeb Hensarling, R-Tex., to force it on them.

That would risk triggering the deep defense and Social Security provider cuts in 2013 mandated by the legislation authorizing the supercommittee in the event members cannot agree on a plan or get it past both houses of Congress.

Moreover, the sort of across-the-board reductions in tax expenditures required for a comprehensive tax-reform plan this year could not even be “scored” by the Congressional Joint Committee on Taxation between now and the deficit committee’s deadline.

(“Scoring” means tax technicians’ best estimates of the impacts on federal revenues — plus or minus — of specific tax-code changes. If a broad tax package proposal cannot be scored, the House and Senate cannot evaluate it properly for a vote.)

That fact alone argues against any “global” tax reform effort by the committee, sources told me, and a postponement of all or most major moves on taxes until after the 2012 election.

So the preliminary good news for the real estate industry is that there appears to be little appetite on the supercommittee to limit, phase out or eliminate the mortgage interest tax deduction in the upcoming package.

The potentially more sobering news is that comprehensive tax reforms — reducing marginal rates for individuals and corporations, capping the mortgage interest deduction or turning it into a far less valuable tax credit and phasing out property tax write-offs — are very much on the agenda for 2013, no matter who wins the election.

Deficit reduction is now seen by majorities on both sides of Capitol Hill as crucial public policy. Comprehensive reforms affecting housing write-offs, Social Security, Medicare, Medicaid and employer health care exclusions will soon be front and center, just not this year.

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.

http://theresa.kweliteteam.com/viewallimages/mlsid/301/propertyid/11536363/

Amazing Santa Barbara Home. So modern and quaint.

The U.S. housing market did not benefit from any sunny summer bounce.  What makes this even more troubling is the glaring reality that mortgage rates are at all-time record lows courtesy of The Ben Bernank.  The Federal Reserve has run out of options in the Whac-A-Mole system of bailouts because you can’t print your way into prosperity or somehow magically increase home prices by snapping your fingers.  The big banks have done well and have survived this deep financial impact by simply stealing from the taxpayers.  A simple yet effective strategy.  They don’t call it stealing and would rather label it “bailout” to calm the delicate sensibility of the mainstream watching audience.  I rarely watch the morning news but when did it become necessary to have a Jersey Shore edge to it?  Everything is about 5-minute money/makeup/bathroom makeovers and trying to solve complex economic problems has become as trivial as eating carbs or not.  People get worked up about their favorite coffee chain upping prices but many seem oblivious to the trillions of dollars given to the banking sector.  And guess what?  The bailouts have done absolutely nothing in regards to improving the housing situation.  Why?  Because the economy still stinks and incomes have gone stagnant for well over a decade.  Not only has income stalled like an old car, but the cost of food, education, and energy all has gone up.  Every gimmick that is offered up is simply a banking and political ploy with little regard to the deeper problems in our economy.  The deeper problem is the government, both parties in particular, are deeply captured by the financial interests in this country and those interests don’t align with the success of the majority.

The U.S. housing market did not benefit from any sunny summer bounce.  What makes this even more troubling is the glaring reality that mortgage rates are at all-time record lows courtesy of The Ben Bernank.  The Federal Reserve has run out of options in the Whac-A-Mole system of bailouts because you can’t print your way into prosperity or somehow magically increase home prices by snapping your fingers.  The big banks have done well and have survived this deep financial impact by simply stealing from the taxpayers.  A simple yet effective strategy.  They don’t call it stealing and would rather label it “bailout” to calm the delicate sensibility of the mainstream watching audience.  I rarely watch the morning news but when did it become necessary to have a Jersey Shore edge to it?  Everything is about 5-minute money/makeup/bathroom makeovers and trying to solve complex economic problems has become as trivial as eating carbs or not.  People get worked up about their favorite coffee chain upping prices but many seem oblivious to the trillions of dollars given to the banking sector.  And guess what?  The bailouts have done absolutely nothing in regards to improving the housing situation.  Why?  Because the economy still stinks and incomes have gone stagnant for well over a decade.  Not only has income stalled like an old car, but the cost of food, education, and energy all has gone up.  Every gimmick that is offered up is simply a banking and political ploy with little regard to the deeper problems in our economy.  The deeper problem is the government, both parties in particular, are deeply captured by the financial interests in this country and those interests don’t align with the success of the majority.

If you build it, they won’t come

A good leading indicator of a future hidden demand in housing will come from new private housing starts.  These are folks that typically know the business and will build only if they expect demand to pick-up:

Don’t worry if you don’t have a Ph.D. in Economics because the above chart is dismal.  Housing starts have never been this low and we have data going back to the 1950s!  Keep in mind the population is much bigger as well but with 6,000,000+ homes lingering in the shadow inventory why would people demand new more expensive homes?  The demand is for low priced foreclosures (where there is demand).  You also may have a new kind of demand coming from younger professionals unwilling (or unable) to pay for very expensive homes in prime areas and would rather choose to live in more luxury apartments or scaled down condos closer to their urban jobs.  In this difficult economy mobility is key and the McMansion dream was built on cheap fossil fuels but also a large manufacturing base:

The U.S. is still the largest manufacturer in the world but what they don’t tell you is that this is based on output.  In other words, you may have robots doing the job of 1,000 people with 10 highly skilled engineers powering the machinery.  Good for the bottom line but doesn’t really help the person looking to have the white picket fence.

I also hear an argument that somehow immigrants are going to sop up the excess demand in the housing market.  This is absolutely not the case.  Although the population will grow it certainly won’t come at a level to purchase the entire overpriced inventory sitting out there.  A commenter “greg” addressed this issue:

“Ron, that’s not true. In 2009 (the last year of data), 1,130,818 people obtained legal resident status in the U.S. The average number of legal residents admitted over the last 10 years of data is 1,029,943, or about 47% less than your 1.5 million figure. In fact, the only years in which 1.5 million or more people legally immigrated into the U.S. were 1990 and 1991. (Source: 2009 Yearbook of Immigration Statistics). Even invading two countries and creating two huge populations of refugees over the past decade couldn’t pump up that number.

And, not all the immigrants are single. So you can’t assume 1 million immigrants are going to buy houses. The average family size in the U.S. is 3.19, so you’d better likely divide the pool of homeowners by about 3. So now you’re down to about 350,000 potential homebuyers. Also, over time, only about 1/2 of legal immigrant heads of households are college educated, so divide again: or 175,000. Considering that the average homeownership rate in the US is say, 65%, make it about 113,750 homebuying households. That group would be able to absorb the 6,000,000 vacant homes in about 52 years.

Oh, and your statement that “that 30,000,000 people that we will add in the next decade have to live somewhere” is substantially true, but they could just be living on the streets or in a van by the river.”

I think the last point is probably the most key.  If you have a large increase in immigrants the demand is likely to be heavy on the lower more affordable end of housing (aka apartments, multi-units, etc) and a very small sliver of that will be for higher end homes.  The people that make these pipe dream assertions usually have very little data to back up their pedantic and dogmatic beliefs but again, the evidence is rather clear and the trend is obvious.  We have anecdotal evidence of foreigners buying high priced real estate but this argument occurred as well when Japan was booming in the 1980s.

With that said, let us talk about legislation like Prop 13 here in California.  So many people have this backward and a commenter “Edvard” brought up some key points here:

On Prop 13

“Prop 13 wasn’t passed to save lil’ old ladies from losing their homes. At least that’s what it was touted as, but the truth is that it was more for corporate real estate and the windfall benefit they would get from passing such a law.

The reason I dislike the law is because it was passed in an unintelligent way. It was passed universally- meaning EVERYONE was placed under its umbrella. Why was this wrong? As mentioned before, this law has been repeatedly touted as the law that saved old people from losing their homes. In almost all other states residents of a certain age get their taxes lowered or frozen on their properties- the idea of course being that retired people have limited incomes. This works in the approximately 48 other states that do so. But in California the law was passed for ALL residents. Instead it should have been passed only for those that it was touted as being for- elderly residents.

This in turn basically created a single generation of homeowners whom enjoyed windfall appreciation and had to pay no more in taxes as a result. This in turn meant hardly any pressure for them to sell or downsize. But this also mean out-of-control appreciation and less and less ability for later generations to purchase.

But let’s look at another state for comparison. TX has some fairly high property taxes. But that said, prices are still within reason. Why? Because there is a penalty for appreciation and this in turn tends to put a tamper on rampant, out of control appreciation. This means prices stay more inline with real incomes because the tax bill will always be due and the more those prices go up, the more the owner has to pay. This works out nicely as a sort of check and balance system. This sort of situation doesn’t exist in California. Instead there are zero consequences to the owner if their values go up. But buyers on the other hand have to stomach that additional cost in the form of ridiculous home prices.”

This is absolutely right.  As usual, the real crime is hidden behind some marketing PR piece.  If you wanted to protect “little old ladies” and retirees from eating dog chow in old age, we could have written the legislation much more intelligently and capped rates at a certain point.  Instead, you have this lottery given to those who bought way in the past and effectively gives a giant subsidy to buy.  The only problem is you have younger professionals either choosing to move or over paying for some basic home.

Not only is subsidizing housing retroactively an issue, but it largely protects commercial real estate that has little to do with residential housing.  Is it any wonder why California has such historical run-ups and busts?  The unfortunate situation is you have brainwashed people voting for causes that actually hurt their bottom line because they are wedded to the “team” concept of politics.  Think about it, does it really make sense for someone that bought in 1970 to somehow get a subsidy to own while new buyers in the same exact area have to pay full market rate taxes to compensate?  This is why in California you have an odd phenomenon where you have really old homeowners living with a mix of young professionals in places likeCulver City or Pasadena.  Many would never be able to purchase in their neighborhood again and the new households are stretched to the hill with debt.  What a toxic imbalance and the more troubling aspect is how commercial real estate can be offloaded to other family members, corporations, or connected entities and the tax rate goes with it.

I find it amazing that those who usually champion this also enjoy the amenities of California yet don’t want to pay for it and obviously those that bought in the past enjoy this subsidy.  Make no mistake, someone is paying here.  Clearly younger professionals looking to buy don’t understand this but this is another item that has inflated home prices in the state.  But guess what?  The budget is so bad that the third rail is now being discussed:

“(Bloomberg) It’s time to address the unfairness inherent in a system that allows Wall Street hedge-fund managers to devise complex real-estate investment trusts that give the super-rich a free pass on taxes every ordinary homeowner in California has to pay,” Villaraigosa said in a speech at the Sacramento Press Club. “Let’s apply, as an idea, Proposition 13’s protections to homeowners and homeowners alone.”

I’m sure they can figure out a way to fix 1978 legislation to protect old retirees while not subsidizing others through these loopholes.  You’ll find out that this issue is more than protecting gramdma and more of an old political mantra.

New family home sales and mortgage rates

This is an amazing chart because mortgage rates are at historical lows yet new home sales are also at historic lows.  Again, the demand is for lower priced homes and we have enough inventory in the shadow inventory to last us years.  Incomes are stagnant and households are confronting a darker future when it comes to prosperity.  Lost decades like those experienced in Japan are very likely.  Instead of confronting these issues head on we have ideas being thrown around about carpet refinancing for people and turning over homes into rental properties from the current administration.  Why not let the market dictate those prices and save yourself those trillions of dollars to truly revamp the corrupt financial system?  We have seen in areas like Arizona to Florida that if prices get low enough, investors and buyers will jump in.  Yet the goal is to protect the banks at the expense of the public.  From the banks to the government why is there no trillion dollar focus on jobs?  Look, if you are funneling money into the QE inferno don’t you think it would be better spent at least on building bridges, schools, and roads?  At least you’ll put some of these construction workers back to work:

Then again, the government/banking system is only looking to unload the toxic waste to taxpayers so don’t interrupt their failing momentum.

http://www.doctorhousingbubble.com/

HUD has announced it will sell almost 90 REO properties to public housing authorities in central Alabama and Joplin, Missouri — areas suffering the impact of this spring’s tornadoes.

In a pilot program, HUD will sell “move-in ready” properties to public housing authorities at a discount, and the housing authorities will lease or sell the homes to families impacted by the storms.

The houses will be ready for sale or lease within two months of the purchase from HUD.

The available properties are located in several Alabama counties: Autauga, Calhoun, Elmore, Jefferson, Limestone, Madison, Marion, Marshall, and Tallapoosa.

HUD has also selected homes within a 20-mile radius of Joplin, Missouri, including homes in Cherokee County, Kansas; Jasper and Newton Counties, Missouri, and Ottawa County, Oklahoma.

This pilot program may serve as a model for future programs aimed at providing aid to disaster victims.

“After witnessing first-hand the size and scope of the devastation in Alabama, I knew we must do more,” HUDSecretary Shaun Donovan said.

“For the first-time, HUD has designed a pilot program that will bring families affected by a significant disaster closer to stability by quickly providing them with an opportunity to purchase or lease a home,” Donovan said, announcing the program this week.

“We hope to be able to use this draft purchase agreement as a model to assist other families displaced after a disaster,” Donovan concluded.

In addition to the discount home sales, HUD has already provided $350,000 to Birmingham and Tuscaloosa, Alabama, and Joplin, Missouri.

This aid was provided through HUD’s Community Development Block Grant Sanctions Fund. The fund’s goal is to help communities recover after disasters.

Those interested in reviewing the homes available through the program can contact local housing authorities, a list of which is available on HUD’s website.