For the U.S. housing market, the roller-coaster ride continues

Many of the latest housing-industry numbers portray a still-battered market, though some of the housing news offers modest reasons to be optimistic.

Sales of existing homes climbed 10 percent in October to a seasonally adjusted rate of 6.10 million units, according to the National Association of Realtors. That volume is up 23.5 percent from the 4.94-million rate in October 2008. The bigger-than-expected bump probably results from buyers hustling to take advantage of the federal government's home-buyer tax credit, which was recently extended and expanded.

But some experts don't expect the housing rally to continue uninterrupted. "With such a sale spike [in October], a measurable decline should be anticipated in December and early next year before another surge in spring and early summer," said Lawrence Yun, chief economist of the National Association of Realtors, in a press release yesterday.

Even as sales grew, the national median price of existing homes fell in October to $173,100, a year-over-year decline of 7.1 percent. (The median price peaked at $230,100 in July 2006.) This drop has left nearly a quarter of all homeowners underwater—they owe more on their mortgages than their properties are worth—according to this report in The Wall Street Journal. Foreclosed or otherwise distressed properties, which accounted for 30 percent of sales in October, are the main drag on overall home values.

But the latest Standard & Poor's/Case-Shiller U.S. National Home Price Index, which tracks residential prices in major markets nationwide, posted its fifth consecutive monthly increase, ticking up 0.4 percent in September, the latest month covered by the index.

Unfortunately, the news for many homeowners is dismal. The combined percentage of loans in foreclosure or with at least one payment past due was at a record 14.41 percent last quarter on a nonseasonally adjusted basis, according to the Mortgage Bankers Association's National Delinquency Survey.—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

Essential information: If you're concerned about losing your home, read our advice on how to avoid foreclosure and learn why reverse mortgages are seldom the best solution.

By the Numbers: Home-buyer tax credit gets new life

2 million

Estimated number of Americans who will take advantage of the federal government's home-buyer tax credit this year, according to projections from the National Association of Realtors. The Internal Revenue Service has reported that 1.4 million families have already taken advantage of the credit, which took effect in January 2009.

The home-buyer tax credit was scheduled to expire at the end of this month but received a one-time reprieve last Friday when President Barack Obama signed the Worker, Homeownership, and Business Assistance Act of 2009.

The credit had been limited to first-time buyers and those who hadn't owned a home in the past three years. Under the updated version of the credit, first-time buyers who purchase a home or have one under contract by April 30, 2010, can qualify for a credit of up to $8,000. And a credit of up to $6,500 is available to people who have lived in a home for at least five years and buy a new home or have it under contact by April 30, 2010. (Members of the uniformed services who have been stationed overseas can qualify for a similar credit until May 2011.) The maximum price for a qualifying home is $800,000.

The updated credit now covers individuals with a modified adjusted gross income (MAGI) between $125,000 and $145,000, up from $75,000 to $95,000; for joint tax filers, the qualifying MAGI is $225,000 to $245,000, up from $150,000 to $170,000.

The new version of the credit also contains measures designed to prevent fraud, a topic we covered last month.—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

Essential information: Learn the details of buying a foreclosed home and get a thorough inspection of any property you're considering. Once you've moved in, refer to our Kitchen-Planning Guide and Home Improvement Guide interactive.

Congress proposes extension and expansion of home-buyer tax credit

Legislation to extend and expand the federal home-buyer tax credit, which is scheduled to expire on November 30, passed by a 98-0 vote in the U.S. Senate on Wednesday. The U.S. House of Representatives could vote on the measure as early as today.

Under the proposed legislation, first-time home buyers or those who haven't owned a home in the last three years would continue to receive the $8,000 tax credit that's been in place since January 2009. The tax credit has been a major boon to existing home sales, spurring five gains in the past six months, according to the National Association of Realtors.

In an effort to stimulate even wider sales, the legislation would also extend a $6,500 credit to buyers who have owned their current home for at least five years. Both credits would be phased out for individuals with annual incomes above $125,000 and for joint filers with incomes above $225,000. The credit would be available for principal (read: not vacation) homes that cost $800,000 or less, and to qualify, buyers would have to sign a purchase agreement by April 30, 2010, and close on the home by June 30, 2010.

"Tax credits like this only work by creating the sense of urgency to take advantage of them," said Senator Johnny Isakson, the Georgia Republican who's former real-estate executive. "This is the last extension of the home-buyer tax credit, and I urge all Americans, whether they're first-time buyers who've always dreamed of having a home of their own or someone who's been gridlocked in the failure of our move-up market, to take advantage of this opportunity."

As we reported in "Questionable Claims for $8,000 First-Time Home-Buyer Tax Credit Spawn IRS Investigations," allegations of fraud related to the credit have arisen. (Bloomberg reported the other day that about 1.2 million home buyers have claimed $8.5 billion in tax credits in 2009 year, according to the U.S. Department of Treasury.) The new legislation includes antifraud language that would give the Internal Revenue Service greater oversight during the processing of returns.—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

Essential information: Get all the details about buying a foreclosed home and avoiding foreclosure-related scams. Be sure to get a thorough inspection of any property you're considering. If you'll be fixing up your new home, refer to our Kitchen-Planning Guide and Home Improvement Guide interactive.

By the Numbers: S&P/Case-Shiller U.S. National Home Price Index continues upward trend

146.00

Current level of the 20-City Composite Home Price Index, part of the Standard & Poor's/Case-Shiller U.S. National Home Price Index, which tracks residential prices in housing markets nationwide. The August 2009 level marks four consecutive months of improved readings and is up 1.2 percent from July, although it is still down 11.3 percent from it was a year ago. The index is calculated monthly and published with a two-month lag.

"While many of the markets remain down versus this time last year, the relative rate of decline has shown some real improvement," said David M. Blitzer, chairman of the Index Committee at Standard & Poor's, in today's press release. "California, in particular, has seen some real positive prints in recent months." The price index in San Francisco climbed 2.8 percent from July to August, behind only Minneapolis, which saw an increase of 3.2 percent. Charlotte, Cleveland, and Las Vegas were the only three markets whose price index fell from July to August.

The rise in the 20-City Composite Home Price Index comes at a time when the overall economy is expected to show 3.5 percent growth in the third quarter. But, said Blitzer, "We do want to remind people of the upcoming expiration of the federal first-time buyer's tax credit in November and anticipated higher unemployment rates through year end. Both may have a dampening effect on home prices."—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

Essential information: Learn how to buy a foreclosed home and be sure to get a thorough inspection of any property you're considering. After you've moved in, refer to our Kitchen-Planning Guide and Home Improvement Guide interactive.

Questionable claims for $8,000 first-time home-buyer tax credit spawn IRS investigations

The $8,000 federal tax credit for first-time home buyers might have been created as a way to jump-start the housing market, but it's also apparently stirred up some fraudulent activity, according to an article in today's Wall Street Journal. The Internal Revenue Service is reportedly investigating more than 100,000 suspicious claims out of the approximately 1 million tax-credit claims people have filed.

Loose oversight of the filing process is apparently to blame. The credit "has some fraud issues because it's not being done at the time of the sale," Bonnie Speedy, national director of AARP Tax-Aide, told a White House tax-advisory panel. "People are filing for the home credit who don't have a right to file for it."

The IRS's findings could dampen efforts to extend the tax credit past its current November 30 end date, to increase it to $15,000, and even to offer it to all home buyers.—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

Essential information: Learn how to buy a foreclosed home and be sure to get a thorough inspection of any property you're considering. Once you've moved in, refer to our Kitchen-Planning Guide and Home Improvement Guide interactive.

By the Numbers: Foreclosure filings rose in 3rd quarter

937,840

Number of foreclosure filings (default notices, scheduled auctions, and bank repos) reported nationwide in the third quarter of 2009, according to RealtyTrac, which has been tracking foreclosures since 2005. The filings represent a 5 percent increase over the second quarter and an almost 23 percent jump over a year earlier.

Nevada, Arizona, and California saw the greatest foreclosure activity last quarter, says RealtyTrac, with one in 23 homes in Nevada receiving a foreclosure filing; the rate in Arizona and California is one in 53 properties. Florida, Idaho, Utah, Georgia, Michigan, Colorado, and Illinois round out the foreclosure top 10.—Steven H. Saltzman | e-mail | Twitter | Forums | Facebook

Essential information: If you're considered taking out a reverse mortgage to try to fend off foreclosure, read "Reversals of Fortune" and this recent post from our Money blog to avoid the pitfalls of these loans. And check out Buzzwords: Fearclosure and Foreclobia to learn about the impact foreclosures are having on the American psyche.

Latest Consumer Reports Index shows U.S. consumers in a down mood

A year after the collapse of Lehman Brothers and the global financial crisis the firm's demise triggered, the economic outlook doesn't look any brighter, according to the latest Consumer Reports Sentiment Index, one of several indices that comprise the overall Consumer Reports Index. The Sentiment Index slipped to 38.1, its lowest level since October 2008.

U.S. consumers aren't in much of a spending mood, but they did do some shopping last month, according to the Consumer Reports Retail Index. Purchases of small appliances and personal electronics, for example, both rose slightly in August, and that uptick is expected to continue through September.

Of course, Americans would have to buy many toasters and TV sets to boost the overall economy. Home sales might prove to the source of some positive news. The number of consumers planning to buy a home in September has climbed to 2.6 percent compared with 1.2 percent in August.—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

Essential information: Check out our Kitchen-Planning Guide for details on and ratings of appliances large and small as well as remodeling tips. And read our home-buying advice, including directions on navigating the foreclosure market.

Updated FEMA flood maps inundate many homeowners with unexpected insurance costs

My sister lives in Vermont, not a state historically known for flooding. In fact, since 1978, few states have received less money from the federal government for flood-related damage, according to statistics from the National Flood Insurance Program (NFIP).

But while buying a home recently, she was surprised to learn that properties that had been considered outside of a 100-year floodplain—and, as such, didn't require their owners to buy flood insurance, as mandated by the NFIP—now are deemed vulnerable to flooding. The reason for the change? The Federal Emergency Management Agency has issued new flood-hazard maps for the Green Mountain state.

Many homeowners in New York, New Jersey, and Connecticut are facing a similar change in the flood status of their properties, according to a recent report in The New York Times on FEMA's five-year, $1 billion effort to draw new flood-hazard maps and identify properties vulnerable to a 100-year flood. That century benchmark indicates there's a 1 percent chance of a flood occurring every year, not that a flood will occur once every 100 years and is the standard used to determine whether a house or other structure must be covered by flood insurance.

As reported in the Times' article, 4,300 properties in New Jersey that had been outside of a 100-year floodplain have been deemed flood prone, requiring owners to buy hundreds of dollars a year in flood insurance. Some homeowners are benefiting from the new maps, since homes that had been in a 100-year floodplain are no longer according to the new maps.

Some critics suggest that the federal government called for the remapping to refill FEMA's payout coffers after 2005's Hurricane Katrina. But FEMA officials insist the initiative was the result of a 1994 order from Congress to update its decades-old flood maps to reflect increased flood risk caused by development and natural changes to terrain.

To find out whether your home or one you're considering buying is affected by the new flood-hazard maps, visit FEMA's Map Service Center. Also read our report on flood insurance and watch the video (above) to be sure you buy the right type and amount of coverage.—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

Essential information: Use our Storm & Emergency Guide for advice on planning for and coping with weather emergencies.

By the Numbers: Clock is ticking on federal tax credit for first-time home buyers

$8,000

Amount of the federal tax credit you can receive as a first-time home buyer. Given that closing on a home can take four to six weeks or more, you'll need to act fast to take advantage of the $8,000 tax credit, since this program, part of the American Recovery and Reinvestment Act of 2009, is scheduled to expire on December 1, 2009.

(Note: Although the program refers to first-time buyers, you can qualify for the credit if you haven't owned a home in the past three years and you're under the income cap of $75,000 for a single buyer or $150,000 for a married couple.)

The home-buyer tax credit seems to have provided a boost to the housing market. Existing-home sales were up 7.2 percent in July 2009 from the previous month, according to the National Association of Realtors. "A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales," said NAR Chief Economist Lawrence Yun in a release.
But the NAR is concerned that the housing rebound will suffer when the home-buyer tax credit expires, and some in Washington agree. The House and Senate have each introduced a bill (H.R. 1245 and S.1230, respectively) that would extend the tax credit; increase it to $15,000; allow any buyer to qualify; and eliminate the income cap.

Senator Johnny Isakson sponsored the Senate version of the bill. In early August, the Georgian Republican tried to attach it to cash-for-clunkers legislation, but was voted down 50 to 47. The stand-alone S.1230, like its House counterpart, is currently in committee.—Daniel DiClerico | e-mail | Twitter | Forums | Facebook

Essential information: Learn how to buy a foreclosed home and be sure to you get a thorough inspection of any property you're considering. Once you've bought your new home, refer to our Kitchen-Planning Guide and Home Improvement Guide interactive for expert advice on appliances, building materials, and more.

Don't fall for mortgage scams

With foreclosures in this country reaching a record high, as we recently reported, it's not surprising that more strapped homeowners are looking for some help to avoid losing their homes.

It's also no surprise that scammers are preying on vulnerable homeowners, as evidenced by this week's arrest in Westchester County, New York, of eight people who allegedly defrauded homeowners and mortgage lenders of $1.4 million.

If you're at risk of losing your home, read this story from the September 2009 of the Consumer Reports Money Adviser to avoid foreclosure and learn how to avoid getting ripped off if you're trying to refinance or modify your mortgage.

Essential information: If you or a family member are considering a reverse mortgage, read "Reversals of Fortune" to learn the ins and outs of these loans.