Good News (No, Really)

OK, looks like Real Estate Pros have finally stopped jumping from the 8th floor windows. Across the country, there are reports of a rise in traffic at open houses. Buyers are waking up to the idea that this is it. It's like a big spring clearance sale on real estate. Prices are low, and so are mortgage rates. The Mortgage Bankers Association (MBA) reports that mortgage applications are at the highest level in months.  There is even some willingness of politicians to further juice the system to get over the next finish lines. Now if you have a secure job and the economy around is actually growing, then it's a great time to buy.

****** "Buy when there's blood in the Streets" ****** Baron Rothschild

It's still tough out there for a lot of folks. Even though foreclosures are expected to peak this year nationally, they are still looking to come in at numbers of 1 million a year through 2013. A full third of all "homeowners" now owe more than their homes are worth. Under normal conditions, the number of people with negative equity has averaged closer to 5 percent. A total of 831,574 foreclosures or bank-owned properties sold in 2010. They sold at an average discount of more than 28% compared with properties not in foreclosure. That action has helped force down home prices to their lowest level in nearly 9 years.

More and more people are forced to make a choice of walking out (strategically defaulting) on their underwater mortgages and suffering the negative impacts to their credit ratings, or continuing to throw money at a depreciating investment. In Florida alone, there were 485,286 properties subject to a foreclosure filing during 2010. That means there is a lot of housing supply (shadow inventory) sitting with the banks waiting to be placed on the market.

While the picture is certainly dire for some, the Vulture Investors are very busy. Nearly 40 percent of all sales last month were either foreclosures or short sales. The Flippers are also making hay while the sun shines. Of the 831 thousand+ distressed sales of last year, a significant percentage (7.9%) of those foreclosed homes sold again within 180 days.

As the fictional character (Gordon Gecko) from the movie "Wall Street" exclaimed, "It's a zero sum game, somebody wins, somebody loses. Money itself isn't lost or made, it's simply transferred from one perception to another."

New Trend Towards Smaller Homes

A recent study from the National Association of Home Builders (NAHB) indicates that the recent housing slump has meant buyers are looking for smaller houses. The McMansions of the boom era are quickly losing their style.

The NAHB reports that the builders they "surveyed expect homes to average 2,152 square feet in 2015, 10 percent smaller than the average size of single-family homes started in the first three quarters of 2010. To save on square footage, the living room is high on the endangered list – 52 percent of builders expect it to be merged with other spaces in the home by 2015 and 30 percent said it will vanish entirely.

Key West Fan Christian Slater has a New Series

Christian Slater with Martha Robinson in Key West

SERIES PREMIERE on FOX WED 9:30/8:30c APR 6th

BREAKING IN is an offbeat half-hour workplace comedy about a high-tech security firm that takes extreme - and often questionable - measures to sell their protection services. The series centers on a team of uniquely skilled oddball geniuses hand-picked to work for a manipulative mastermind.

Contra Security, corporate America's answer to "The A-Team," gives clients a sense of security by first ripping it away. The firm is led by OZ (Christian Slater), a larger-than-life head honcho who is a man of mystery and master of manipulation. The members of the odd squad include alluring bad girl MELANIE (Odette Annable), who is in charge of lock-picking, safe-cracking and heart-breaking; and CASH (Alphonso McAuley), a fanboy who specializes in strategy, logistics and office pranks.

Real Estate Crash catching up to U.S. Municipalities

Cities, counties and school districts had been sheltered from the full impact of the real-estate slump because of the lag between when realty prices fluctuate and values are reset by local tax assessors. That’s changing as property rolls are adjusted to the current market and residents push to have their taxes cut.

This is the first year that most local governments are seeing a decline in their property-tax revenues. Local and state property-tax revenue slid $5.3 billion, or 2.9 percent, in the fourth quarter from a year earlier to $177.1 billion. All but $3.7 billion went to municipalities. The decline may continue as values fall further, adding strains to cash- strapped localities that already fired workers, halted projects and cut spending because of the recession that began in 2007. Only 15 percent of counties raised property taxes to make up for the lost revenue, according to a survey by the National Association of Counties.

Local officials are now facing the consequences. The strain may mean credit-rating cuts this year for local- government debt, which trades in the $2.93 trillion municipal bond market, Moody’s Investors Service said in a report this month.

Residential real estate prices in 20 U.S. cities dropped by the most in more than a year in January. The S&P/Case-Shiller index of property values fell 3.1 percent from January 2010, the biggest year-on-year decrease since December 2009. That’s prompting homeowners to seek reductions in the assessed value of their properties.

One of the symptoms of the depressed real estate market has been a proliferation of successful tax appeals. They’ve come after a municipality has already assessed a property, collected taxes and made payments to local school boards and county governments.

Municipalities have been anticipating the revenue slide and cutting costs to compensate. They are looking further at a whole series of significant cuts to balance their budgets. They may be forced to stop providing additional books and periodicals in the libraries, abolish community pre-kindergarten and lay off municipal workers along the way. So far 377,000 jobs, or 2.7 percent of payrolls, have been eliminated since employment peaked in September 2008, according to the U.S. Labor Department.

Cities are by no means out of the woods yet either. They have got another year or two of dealing with either declining revenues or pretty slow growth. In Florida, after four years of falling property values, cities are even cutting into core services like police.

Editor's Note: The decline for local governments contrasts with a recovery for U.S. states led by income and sales taxes. Their collections in the fourth quarter climbed by $13 billion to $177.8 billion, the biggest jump since 2006, according to the census data released yesterday.

First-time homebuyers getting shut out

Many first-time homebuyers are sitting on the sidelines of the U.S. housing market, hampering its ability to gain traction.

Last month, 34 percent of existing-home purchases were made by first-time buyers, according to the National Association of Realtors. In January, they were 29 percent of the market, the lowest since NAR surveys started tracking them monthly in late 2008.

In healthy markets, first-time buyers make up 40 percent to 45 percent of all purchasers. They play a critical role in buying starter homes so those owners can buy more expensive homes.

Despite low mortgage rates and falling prices in many markets, existing-home sales have been weak for months and were down 2.8 percent in February from a year ago.

What’s keeping more first-timers at bay:

Federal credits boosted home sales in 2009 and 2010 and lured some first-time buyers into the market sooner than normal. Last March, 48 percent of buyers were first-timers. The credits expired in April last year.

Tighter lending standards since the housing bust are edging out first-timers who can’t meet credit or employment history requirements in a still-weak economy.

Higher credit standards are reflected in loans bought by government-backed mortgage giants Freddie Mac and Fannie Mae. Last year, loans in Freddie Mac’s portfolio had an average credit score of 758, it says. That was up from 720 five years ago.

Many lenders are also requiring higher downpayments. The best terms kick in with 20 percent or more down. Higher down payments are driving more buyers to Federal Housing Administration loans. The FHA requires as little as 3.5 percent down for borrowers with good credit scores. In fiscal year 2010, FHA loans were 19 percent of the home purchase market vs. 14 percent a decade before.

Competition. In February, cash buyers accounted for a record 33 percent of existing-home sales, NAR says. In some areas, including Southern Nevada, cash buyers now account for more than half of existing-home sales. Sellers often prefer cash offers, over offers from first-time buyers involving loans, because they’re more likely to close.

18% of Florida Homes Are Vacant

The Census Bureau recently revealed that 18% -- or 1.6 million -- of the Sunshine State's homes are sitting vacant. That's a rise of more than 63% over the past 10 years.

The vacancy problem is more dire in Florida than in any other bubble market: In California, only 8% of units were vacant, while Nevada, the state with the nation's highest foreclosure rate, had about 14% sitting empty. Arizona had a vacancy rate of about 16%.

In Florida, the worst-hit county is Collier -- home of Naples -- with a whopping 32% of homes empty. In Sarasota County, 23% of the housing stock sits vacant, while Lee County (Cape Coral) has a 30% vacancy rate. And Miami-Dade County has a vacancy rate of about 12%.

The state's rate of population growth slowed in the second half of the last decade to just 5.7%. Still, the 2000s saw the state population grow overall by nearly 18%, the Census Bureau reported.

It could take about eight years just to put the vacancy numbers back into the single digits.