Home shoppers who missed the April 30 deadline for a housing tax credit might have the last laugh. For a variety of reasons, they could end up saving more than the $8,000 they could have received from the tax refund.

In some neighborhoods and price ranges, sellers are dropping their prices because buyers are harder to find now that the credit has expired. Builders and real estate companies began offering promotions after the tax credit ended that, in many cases, are worth more than the credit.

Interest rates have dropped enough since the credit deadline that, over the life of a loan, a homeowner could easily save more than the value of the credit. Some folks possibly could have benefited from waiting until after the tax credit, it would depend on the price point they were buying in and the market they were looking in.

Home sales leapt in March and April during the waning weeks of the credit, especially for homes priced at less than $200,000, which appealed to first-time home buyers. Since the credit expired, home contracts and building permits have tapered off, leaving sellers with fewer buyers and, in some cases, little choice but to cut their price.

Those shopping for new homes are finding a different kind of bargain as some builders roll out incentives to keep traffic moving.

Builders are offering free appliances, trade-in programs, rebates and “sweat-equity” discounts that allow a homeowner to drop the price by painting, landscaping or otherwise helping to finish their home.

Finally, interest rates have dropped nearly half a point since the end of April, saving buyers thousands of dollars over the life of a loan. Buyers of a $180,000 home who borrowed $173,700 in mid-April at an interest rate of 5.125% would have paid $377,442 over the next 30 years—$15,000 more than they would pay if they borrowed last week at an interest rate of 4.75%.

Credit scores, which are designed to assess how likely it is that a consumer will uphold their side of a bargain, look at severity, frequency and recency of items on your credit report.

• Severity – Are we talking bankruptcy or a late payment?
• Frequency – Have you skipped a payment once, or have you missed a bunch?
• Recency – Did you miss a payment last month or last year?

With either a short sale or a bankruptcy a lender is going to take a loss of some big financial numbers. Now if you were current at the point of the short sale, as opposed to not having made a payment in six months, your credit score won’t take as big of a hit. But you will still be hit.

FICO (Fair Isaacs Corp.) and VantageScore, both credit scoring companies, have released the following information from studies they have done showing what happens to consumers’ credit scores when they have mortgage trouble.

The Vantage Score report showed that a homeowner with an otherwise clean credit record, who has a short sale will see their credit score drop between 120 and 130 points (on a scale of 501-990). If that same homeowner end up in foreclosure he will see a drop between 130 to 140 points.

Now if the homeowner is already plagued by late payments on everything else from credit cards to car loans, a short sale will hit them for between a 15-25 point drop. And a foreclosure will hit them for a 10-20 point drop. The margin is much less in these two cases because the score has already taken into account the lower-scoring customer’s risky behavior and adjusted the score down.

FICO’s report showed that short sales and foreclosures will set you back 140-160 points if your credit score is a respectable 780 (on a scale of 300-850), or 85-105 points if your credit is 680.

Dan Williams, program director for LLS financial Counseling Service, says, “If you’ve got a poor credit score and are doing a short sale to preserve your credit, it’s ridiculous.”

He even says that the widespread notion that short sales are better for credit is a big problem because it deters some people from going into foreclosure when that would be the best option for them.

Have your  real estate agent refer you to a housing counselor or an attorney for the best advice. And if anyone tells you that they will quickly restore your credit score after a foreclosure – get a second opinion. Credit scores are forgiving, but over time.

From a June 12, 2010 Dallas Morning New article entitled, Short Sale Good for Credit? Think Again, by Kara McGuire of the Minneapolis Star Tribune.

I saw this article in the Dallas Morning News today. It is the story of a man who lived near DFW that died just the other day. It’s not so much a story about a WW II veteran as it is the story of a simple man who lived his life in sight of others and in the process left a memorable legacy for all of them. It is a story of a simple man whose life tells others that real heroism is really only found in the silent, hidden parts of our character that only a small number of people will ever know. But the ones that see it – will always hold dear forever.

And so, with thanks to Bill Brown, the author, a former reporter at WFAA-TV, Channel 8 in Dallas, here is, “Remembering a Vet Who Fired Up History”.

John Hooper, then 69, wore his Army uniform at his Joshua residence 50 years after the D-Day invasion he participated in. He died in Bonham at age 85.

He slipped away at 9:15 in the morning, and he was my friend. On a chilly spring day, at the age of 85, John Hooper breathed his last in the old soldier’s home, the Sam Rayburn Memorial Veterans Center in Bonham, Texas.

What a life he lived. What a great guy. What a treasured companion he was. John was a D-Day veteran. On the 6th of June in 1944, at 19, with his buddies in the 115th Regiment of the 29th Infantry Division, he ran out of a landing craft onto the sands of the Normandy beach that would come to be known as “bloody Omaha.”

“It was like walking into the jaws of hell,” John told me once. “I couldn’t crawl 6 feet without seeing a dead GI or one badly wounded. One poor fellow had been killed. His blood had run out all over the stones and made them slippery as I crawled over them. My God, it was awful.”

My job brought us together. I was a reporter at WFAA-TV, Channel 8, in Dallas and I was doing a story on the 50th anniversary of the D-Day invasion. John invited me out to his rustic home he built in the country outside Joshua, south of Fort Worth. John wasn’t a large man, maybe 5 feet, 7 inches. After half a century, wearing his old uniform, he looked as fit and trim as a young recruit. Quiet and a little shy, he called his Army pals “chaps,” remembering them with a fond smile.

“I’ve really never met anyone like him,” says Gen, his wife of 30 years, sitting next to a photo of the young John next to his framed medals. “I see his talent all around me, his sketches, his oil paintings, detailed models of military vehicles he built. He could do anything.”

Fighting until the end of the war, John had some close calls. Once, an artillery shell hit so close, it knocked him off his feet, leaving him dazed but unhurt. Another time, he stepped on a “Bouncing Betty” land mine that jumped into the air but failed to explode. “I was wounded in the hand once,” John said, “but that was it. I was so lucky.”

After the war, John came home and got a job at General Motors in Detroit as a technical artist. Among his many accomplishments: doing special drawings used in designing the assembly line at the GM plant in Arlington.

All his life, he had a deep love of history. He put on a Yankee soldier’s uniform and joined in Civil War reenactments. He collected old Revolutionary War muskets, swords and his pride and joy, an original 1864 Civil War cannon. Its booming blanks made a North Texas Fourth of July a rousing experience.

On long, sunny afternoons, we would talk and talk … of Pickett’s charge at Gettysburg … how Washington outfoxed the Hessians at Trenton … and Houston’s gutsy men earning freedom for Texas at San Jacinto.

John cast his own lead bullets and used black powder to fire his antique weapons. I’ll never forget going out behind his house to blast away at coffee cans with his 1862 U.S. Army Springfield rifle. The kick rocked me back on my heels, and John burst out laughing.

But, what he loved most was putting on his Civil War uniform and taking his old treasures to classrooms, where he regaled the wide-eyed kids with true tales from American history.

“Oh, he was great,” said Susan Varner, a fifth-grade teacher at the elementary school in Grandview. “He’d tell the boys and girls of his adventures, and he had fascinating stories. John inspired the students to ask their grandparents and great-grandparents about things they did for the country.”
He was always generous. Once he offered me a special gift, a union cavalry saber. When I said I couldn’t take it, John said to me, “Bill, we don’t really own the things we have. We’re just caretakers and we pass ‘em on. I want you to have it.”

In recent months, though, Alzheimer’s and other health problems took a heavy toll on the frail veteran. Reluctantly, his family placed him in the home with other aging soldiers. “He loved it there,” said Gen. “He loved the people who took care of him and they loved him.”

When the urgent call came on March 19, the family raced to Bonham, but didn’t make it in time.

As John grew weaker, nurse Renee Gunter sat with him and held his hand until the end. “I didn’t want him to be alone,” she said. “I had grown really fond of him. He was such a sweet, sweet man. He knew I was there, because he squeezed my hand. He was a sweetheart and he will always be in my heart.”

Gen is struggling with his loss. “I miss him so much, and I’m lonely without him,” she said. “He’s gone, but he left me the most special memories of him.”

Now, he lies beneath the green and rolling hills of the Dallas-Fort Worth National Cemetery. Welcome home, John.

Bill Brown is a Dallas-area freelance writer.

Becoming a well-informed home owner has just become a whole lot easier. HouseLogic.com, the National Association of Realtors® new consumer website, is becoming the go-to resource for owners. Here’s a sampling of the site’s expert advice…

Good questions to ask before hiring a contractor.

Will you itemize your bid so it’s clear what you’re charging for each aspect of the job? Is the bid an estimate or a fixed price? Who are your main suppliers?

When to make an insurance claim and when to skip it.

Generally, it makes sense to file an insurance claim for damage that exceeds your deductible. But there are exceptions: if you report significant water damage up to $10,000, some insurers will notify you they’re cancelling your policy at renewal time because of mold concerns.

Signs of energy leaks.

Check for drafts around windows, doors, electrical outlets, and range hoods by holding a lit candle or stick of incense near them. Look for stains in insulation, which may indicate a nearby leak from a duct hole or crack, in an exterior wall.

How to plant trees in the right spot.

Planting a deciduous tree on the west side of a house provides cooling shade in the summer. In winter, after it loses its leaves, the same tree lets in sunlight that cuts heating and lighting bills.

Right tools and methods for bathroom cleaning.

Unleashing a chemical onslaught isn’t necessary. A pumice stone and rubber gloves are sufficient for removing mineral deposits in bathrooms. For additional scourming poser, mix baking soda with vinegar.

How to start a neighborhood letter-writing campaign.

When you’re seeking action from local public officials about your desire for speed bumps or a new library branch in your neighborhood, contacting the right people can be very important. Avoid form letters: Personalize the letter or e-mail. Explain why you care about the issue.

In the Standard & Poor’s/Case-Shiller Home Price Index report released on Tuesday, Dallas was the best performing city out of twenty in the nation. Residential values in the Dallas area were up 1.4 percent in November from a year earlier – the first increase in the price index of pre-owned homes since September 2007. (That’s a 2.5 year period.)

The upbeat Dallas numbers support other recent reports that show residential values in the area are no longer falling.

“Obviously this is positive news and reflective of the tight inventory of both new and existing homes,” said Ted Wilson of Dallas-based home market analyst Residential Strategies Inc. “And we could see further strengthening of home demand and prices in 2010 if job growth resumes later this year, as several forecasters have predicted.

However, there are still negative elements to consider:

• Continued high home foreclosure rates in North Texas are a drag on home values
• Sales could dip again when the federal home buying tax credit runs out in April

“I expect to continue to see mixed signals in the home price indexes month to month during 2010 because demand will not measurably strengthen until job growth re-emerges,” said David Brown of Metrostudy Inc.’s Dallas housing research office.

No one doubts that the Dallas housing market is among the healthiest in the country, and the Case-Shiller numbers confirm that.

• Dallas, Denver, San Diego and San Francisco entered positive territory.
• Charlotte, N.C., Las Vegas, Seattle and Tampa, Fl. hit new low points.

Prices were down 5.3 percent for all the cities in the report from a year ago and fell 0.2 percent for the month of November.

• Dallas-area home prices were flat in November compared with October, Case-Shiller said.
• For all of 2009, median home sales prices in North Texas were unchanged from 2008 levels, according to statistics from North Texas Real Estate Information Systems Inc.
• That follows 2008’s 3 percent decline in homes sold by Realtors through the Multiple Listing Service.
• Dallas-area home values bottomed out in the Case-Shiller in March, when prices were down 5.6 percent on an annual basis.
• Prices here are still down about 5 percent from their peak in mid-2007.

Most analysts expect the Dallas housing market to begin to rebound this year. The National Association of Home Builders is predicting that the local home construction market will be back to “normal” by 2011.

Economists are cautious given the fragile state of the U.S. financial markets and sluggish consumer spending.

“I don’t think it’s time to celebrate,” said Bernard Weinstein, an economist with Southern Methodist University. “We still have a lot of cleanup to do before the local housing market reaches equilibrium.”

But Weinstein said the strong Case-Shiller number “gives more testimony to the strength of the metroplex economy and the likelihood of an ongoing recovery in the local housing market.”

This article is available in its entirety at www.DallasNews.com, entitled, Dallas-area Home Prices Turn Positive in S&P/Case-Shiller Index, by Steve Brown on Wednesday, January 27, 2010.

Ill-advised speculation on U.S. real estate helped set off the global financial crisis. But even after millions of foreclosures and their secondary effects rippled through economies around the world, U.S. homeowners might be making the same mistakes again.

This article was in the Dallas Morning News on Sunday, January 3, 2010, entitled, The Top Stories You Missed in 2009: They may have been overlooked, but these hidden headlines likely to reappear, by Joshua Keating. Joshua Keating is deputy Web editor at Foreign Policy magazine. The essay was adapted from Foreign Policy’s special year-end issue.

I am presenting it on DallasPerspectives in its entirety because I have been concerned that with our ongoing FHA loans and the government’s $8,000 tax credit we are continuing the same actions that led to the housing bubble meltdown of 2008.

Ill-advised speculation on U.S. real estate helped set off the global financial crisis. But even after millions of foreclosures and their secondary effects rippled through economies around the world, U.S. homeowners might be making the same mistakes again.

After suffering their largest month-to-month drop in history, U.S. home prices began to increase again in May. The S&P/Case-Shiller index, a top measure of housing prices in the U.S., rose 3.4% between May and July, with gains in 18 of the 20 cities in index measures. Prices were still 13.3% lower than last year, but that figure was less than expected. The release of this data coincided with other positive indicators, including an increase in existing home sales and home construction. “We’ve found the bottom,” one economist told The New York Times.

But economist Robert Shiller, one of the index’s creators, see the numbers as alarming. Pointing to data showing that most homeowners think their house will increase dramatically in value over the next decade, he worries that “bubble thinking” might be returning.

The government’s solution to the housing crisis might even be encouraging homebuying by people who can’t afford it. The Federal Housing Administration, which backed nearly 2 million mortgages in 2009, saw the share of its loans that are delinquent or in foreclosure rise to nearly 8% in June, and the agency is quickly burning through its reserves for loan losses. A congressional committee has been formed to investigate the losses.

On Christmas Eve the Obama administration exercised its right to increase the amount of aid it could provide to Fannie Mae and Freddie Mac without the permission of Congress by December 31, 2009. The administration vowed to back the mortgage giants for the next three years with tax payer money, no matter what the amount.

Fannie and Freddie  own or guarantee half of the nation’s $11 trillion in home mortgages. In conjunction with the Federal Housing Administration, they are responsible for backing nearly nine in 10 mortgages in the US.

“The managment of these companies involves responsibility for $2 to $3 trillion of mortgage assets. It is critical to taxpayers’ financial interests that these assets be carefully managed in a difficult environment to minimize taxpayer losses.”
Edward DeMarco, acting director of the Federal Housing Finance Agency

The Treasury Department also reversed a previous ruling enacted in 2008 requiring the companies to cut the size of their mortgage-related investments portfolios. Instead, they will not be forced to sell mortgages into an already weak market and could even buy mortgages on the market, which could help hold down interest rates.

They said the changes were made to assure financial markets it stood firmly behind the two companies and to buy more time for the two government-sponsored enterprises to reduce their mortgage-related holdings.

Fannie and Freddie have played a key role in the administration’s policies to keep mortgage interest rates low, restructure unaffordable mortgages, stop foreclosures and funnel money to housing programs around the country. And an administration official said it could take several years to resolve the future of the companies.

“It’s created a government-purchasing facility other than the Fed.”
Karen Shaw Petrou, managing partner of Federal Financial Analytics, a research firm in Washington

Ms. Petrou continued that the recent moves “make sense in a short-term way because you avoid market volitility,” but the prospect of limitless aid will make it harder to extricate Fannie and Freddie from the government.

“In a long-term way, it promotes nationalization of the US mortgage finance. We have increasingly gigantic, increasingly federal agencies eating up every mortgage out there.”

Fannie and Freddie’s core business is their role in guaranteeing payments to mortgage investors, but for years they earned additional profits and generated controversy by maintaining a large investment portfolio filled with mortgages and related securities.

“The companies are nowhere close to using the $400 billion they had before, so why do this now? It’s possible we may see some horrendous numbers for the fourth quarter and , thus 2009, and Treasury wants to calm the markets.”
Bert Ely, a banking consultant in Alexandria, Virginia

The Obama administration hopes its unlimited guarantee to back Fannie and Freddie, no matter what the cost, will bolster investor confidence and bring private sector buyers back into the market to help hold down morgage costs.

The newly relaxed portfolio limits are meant to calm investor worries that Fannie and Freddie would be forced to sell some of their mortgage holdings just as the Federal Reserve was preparing to wind down its purchases of mortgage-backed securities next spring. The Fed’s commitment to buy up to $1.25 trillion has helped to keep mortgage rates near record lows; without the support some economists have said that could rise up to 6% by the end of 2010.

The North Texas housing market was mercifully spared the severe ravages of the real estate market bubble due to the fact that our prices were not overinflated in the first place and because our economy has fared better than the rest of the country. Take a look at the figures in the Standard & Poor’s/Case-Shiller Home Price Index showing Dallas’ envious position compared to 20 other markets in the US.

In March, the Department of Treasury announced the Making Homes Affordable initiative, made up of two components—the Home Affordable Refinance Program (HARP) and the Home Affordable Modification Program (HAMP).

The program was created to offer assistance to as many as 7 to 9 million homeowners making a good-faith effort to make their mortgage payments, while attempting to prevent the destructive impact of the housing crisis on families and communities. It will not provide money to speculators, and it will target support to the working homeowners who have made every possible effort to stay current on their mortgage payments.

The Treasury Department recently announced updates to its Making Home Affordable program to include a second lien program and the use of short sales and deeds-in-lieu of foreclosure.

The Home Affordable Refinance Program (HARP)

HARP provides an option for homeowners, with existing Fannie Mae loans, who have stayed current on their mortgage but are unable to refinance to a lower rate because they owe more on their mortgage than their home is currently worth. The current guidelines allow for refinances up to 125 percent of appraised value.

The expectation is that refinancing a Fannie Mae loan will put responsible borrowers in a better position by reducing their monthly principal and interest payments or moving them from a more risky loan structure (such as interest-only or short-term ARM) to a more stable product.

The Home Affordable Modification Program (HAMP)

HAMP creates a defined loan modification process to help borrowers who are delinquent in making their monthly mortgage payments, in the foreclosure process, or current on their payments but have recently experienced hardship and are about to miss a payment—have their loans modified to a more affordable monthly payment targeted at 31 percent of their monthly gross income.

All servicers must participate in the program, which expires on December 31, 2012, for all eligible Fannie Mae portfolio mortgages and MBS pool mortgages.

For detailed information see a reputable loan officer or institution, or go to these websites:

• www.makinghomeaffordable.com
• www.efanniemae.com
• www.freddiemac.com

Oct and Dec. 2009

• Sales of pre-owned homes have increased significantly from year-ago numbers
• Price declines have slowed
• The number of homes for sale in North Texas have fallen to the lowest level in more than two years

However, is this enough to cause the DFW market to rebound in 2010?

National analysts agree that Texas—which for the most part didn’t experience the last housing bubble—is poised to see home sector gains in the year ahead.

“Any sustained turn-around in sales and construction activity will definitely depend on the economy and job growth. We do see increasing signs that the local economy has bottomed out, and business contacts say they are through cutting staff.”
D’Ann Peterson, a business economist at the Federal Reserve Bank of Dallas.

New Homes

“There now is currently less than a six-month supply of homes priced under $250,000 and just over a six-month supply of homes priced between $250,000 and $500,000. If homebuilders are not able to start as many homes as they are closing because of lending constraints, then some of those buyers may be forced into the resale market and could cause new home closings to fall further next year.”
David Brown of Metrostudy, Inc.

2009
Builders starts about 13,000 homes in North Texas (the smallest production volume in amost two decades)

Ted Wilson of housing research firm, Residential Strategies, Inc., says this figure should prove to be pretty close to the bottom and is projecting 15,000 home starts in DFW for 2010.

“If job growth picks up sooner rather than later, starts could push as high as 17,000, but we are still feeling conservative about the market”.

Pre-Owned Homes

The number of properties listed for sale fell below the six-month supply point in November. This is considered a balanced sales market.

Analyst Stephan Bedikian of housing consultant, Real IQ, is expecting an uptick in the market next spring.

“By March, we’re likely to see volume increase and prices firming. That trend will continue throughout the summer, and then we will return to a market that treads water for the balance of the year. I would expect people to be surprised by the strength of housing prices between the March and August period.”

Foreclosures

Jan 2010
Almost 5,900 homes are scheduled for foreclosure next month in the DFW four-county area. This is a 45% jump in foreclosure filings from January 2009. However, it is below the record of 6,072 posting in July of 2009.

But, a big part of the filings, probably more than 40%, are not new postings, but houses that have previously been scheduled for forced sale. Lenders typically delay home foreclosures while negotiating with borrowers. That can result in the same property being scheduled for auction over and over for months.

Foreclosure Listing Service of Addison, TX, recorded a record of 61,676 DFW foreclosures. This number was up 23% from 2008. NOT counting the repeat filings, foreclosure notices fell 12% in DFW.

January 2010 Foreclosure Postings Compared to January 2009
Dallas County up 39%
Tarrant County up 38%
Collin County up 77%
Denton County up 51%