Investors snapping up Sonoma County homes

For the first half of the year, absentee buyers purchased 30 percent of the houses and condos sold in the county, according to DataQuick, a real estate information service. That rate was up 1 percent from the same period a year earlier.

Real estate agents said absentee buyers — investors and second-home buyers — have been drawn by lower prices, historically low mortgage rates and increased confidence that prices aren’t going much lower.

Buying rentals can produce a better return than putting cash into many fixed investments, the agents said. That applies even without considering any future appreciation in home value.

“It’s a great time to be a landlord,” said Daniel Casabonne, an agent with Frank Howard Allen in Sonoma.

Similarly, some second-home buyers once thought “the Wine Country was out of their league” due to pricing, said Mike Kelly, an agent with Keller Williams in Santa Rosa.

Now those buyers are looking here, agents said, often with an eye to moving to the county permanently after retirement.

For the first half of the year, 952 of the 3,144 houses and condos sold in the county were purchased by absentee buyers, according to DataQuick, which is based in San Diego.

Among the county’s cities, Cotati had the highest portion of home sales to absentee buyers at 42 percent. Petaluma had the least, at 19 percent.

That was followed by Sebastopol, 37 percent; Healdsburg, 35 percent; Sonoma, 34 percent; Rohnert Park, 28 percent; Santa Rosa and Windsor, both 27 percent; Cloverdale, 21 percent; and Petaluma, 19 percent.

The numbers are based on sales in which the new owners receive tax bills and related correspondence at addresses other than the homes. It can be a less precise measurement in some rural communities where homeowners receive their mail at post office boxes.

Even so, experts around the country agree that waves of investors have been drawn to residential real estate.

The National Association of Realtors this spring estimated that investor home purchases in 2011 rose nearly 65 percent from a year earlier to 1.23 million homes. In contrast, owner-occupied purchases declined nearly 16 percent to 2.78 million homes.

“During the past year, investors have been swooping into the market to take advantage of bargain home prices,” Lawrence Yun, the association’s chief economist, said in the report. “Rising rental income easily beat cash sitting in banks as an added inducement.”

The California Association of Realtors reports that investment purchases in the state reached 17 percent in 2011, compared with 13 percent a year earlier.

Vacation home sales in 2011 amounted to 11 percent of all transactions nationally and 7

percent in California. Both state and national vacation home sales showed modest gains from 2010.

DataQuick has recorded a growing portion of absentee buyers in the nine-county Bay Area. Such buyers made up 23 percent of all sales in June. That compares with 20 percent a year earlier and 16 percent in June 2010.

Sonoma County’s median home price peaked in August 2005 at $619,000 before tumbling to $305,000 in February 2009. In the past two years, monthly median prices have seesawed in a narrow range and ended June at $348,000.

Ann Harris, an agent with Coldwell Banker in Sebastopol, said two of her clients recently purchased second homes in the county and hope to move to them permanently within the next five years. She has another three clients looking for such properties.

Harris said spouses are telling one another, “The prices are so good and interest rates so low. Let’s buy the retirement home for the future now.”

Among the county’s communities, Bodega Bay remains unsurpassed, with eight of every 10 homes sold to absentee buyers. Agents believe most of those homes are purchased as second homes, but some are turned into vacation rentals.

Dennis Erba, broker/owner of Coldwell Banker Coast Country in Bodega Bay, said typically a quarter of the buyers live in the county, a quarter come from the Bay Area and about half come from the Central Valley. However, that appears to have shifted after housing prices tumbled and property owners saw equity plummet.

“Sacramento did get hit pretty hard,” Erba said. “It does seem there’s more people from the Bay Area” now seeking coastal properties.

A handful of communities saw big jumps in absentee buyers from the previous year. Windsor recorded 61 such sales this year, up from 33 in 2011. Guerneville sales jumped to 42 from 21, while Cotati rose to 28 from 17 and Sonoma increased to 88 from 63.

David Rendino, an agent with RE/MAX Pros in Rohnert Park, said a number of the Cotati home purchases likely were made by investors because of the town’s proximity to Sonoma State University.

“You always have a sure thing there, because there’s always a need for rental housing,” he said.

Agents said investors and second-home buyers will continue to comprise a significant share of county home buyers.

One reason is the low cost of money. As an investor, Harris said she recently received a 30-year, fixed mortgage at 4.25 percent for one of her own rental properties.

Casabonne, who last year was the county’s top agent with $38 million in sales, said second-home buyers continue to value country settings, especially among the vineyards.

“With Sonoma,” he said, “it’s a destination location.”

(You can reach Staff Writer Robert Digitale at 521-5285 or robert.digitale@pressdemocrat.com)

Real estate’s returnsBy ROBERT DIGITALERealtor Daniel Casabonne has a Tuscan-style home in Sonoma listed at $1.4 million. The county’s top agent last year with $38 million in sales,…PressDemocrat.comAugust 11, 2012 2:47 PMpWith home prices still more than 40 percent off their peak, investors and second-home buyers keep snapping up significant amounts of Sonoma County real estate./ppFor the first half of the year, absentee buyers purchased 30 percent of the houses and condos sold in the county, according to DataQuick, a real estate information service. That rate was up 1 percent from the same period a year earlier./ppReal estate agents said absentee buyers — investors and second-home buyers — have been drawn by lower prices, historically low mortgage rates and increased confidence that prices aren’t going much lower./ppBuying rentals can produce a better return than putting cash into many fixed investments, the agents said. That applies even without considering any future appreciation in home value./pp“It’s a great time to be a landlord,” said Daniel Casabonne, an agent with Frank Howard Allen in Sonoma./ppSimilarly, some second-home buyers once thought “the Wine Country was out of their league” due to pricing, said Mike Kelly, an agent with Keller Williams in Santa Rosa./ppNow those buyers are looking here, agents said, often with an eye to moving to the county permanently after retirement./ppFor the first half of the year, 952 of the 3,144 houses and condos sold in the county were purchased by absentee buyers, according to DataQuick, which is based in San Diego./ppAmong the county’s cities, Cotati had the highest portion of home sales to absentee buyers at 42 percent. Petaluma had the least, at 19 percent./ppNO1That was followed by Sebastopol, 37 percent; Healdsburg, 35 percent; Sonoma, 34 percent; Rohnert Park, 28 percent; Santa Rosa and Windsor, both 27 percent; Cloverdale, 21 percent; and Petaluma, 19 percent./ppNOThe numbers are based on sales in which the new owners receive tax bills and related correspondence at addresses other than the homes. It can be a less precise measurement in some rural communities where homeowners receive their mail at post office boxes./ppEven so, experts around the country agree that waves of investors have been drawn to residential real estate./ppThe National Association of Realtors this spring estimated that investor home purchases in 2011 rose nearly 65 percent from a year earlier to 1.23 million homes. In contrast, owner-occupied purchases declined nearly 16 percent to 2.78 million homes./pp“During the past year, investors have been swooping into the market to take advantage of bargain home prices,” Lawrence Yun, the association’s chief economist, said in the report. “Rising rental income easily beat cash sitting in banks as an added inducement.”/ppThe California Association of Realtors reports that investment purchases in the state reached 17 percent in 2011, compared with 13 percent a year earlier./ppVacation home sales in 2011 amounted to 11 percent of all transactions nationally and 7THpercent in California. Both state and national vacation home sales showed modest gains from 2010./ppDataQuick has recorded a growing portion of absentee buyers in the nine-county Bay Area. Such buyers made up 23 percent of all sales in June. That compares with 20 percent a year earlier and 16 percent in June 2010./ppSonoma County’s median home price peaked in August 2005 at $619,000 before tumbling to $305,000 in February 2009. In the past two years, monthly median prices have seesawed in a narrow range and ended June at $348,000./ppAnn Harris, an agent with Coldwell Banker in Sebastopol, said two of her clients recently purchased second homes in the county and hope to move to them permanently within the next five years. She has another three clients looking for such properties./ppCW-25Harris said spouses are telling one another, “The prices are so good and interest rates so low. Let’s buy the retirement home for the future now.”/pp/CWAmong the county’s communities, Bodega Bay remains unsurpassed, with eight of every 10 homes sold to absentee buyers. Agents believe most of those homes are purchased as second homes, but some are turned into vacation rentals./ppDennis Erba, broker/owner of Coldwell Banker Coast Country in Bodega Bay, said typically a quarter of the buyers live in the county, a quarter come from the Bay Area and about half come from the Central Valley. However, that appears to have shifted after housing prices tumbled and property owners saw equity plummet./pp“Sacramento did get hit pretty hard,” Erba said. “It does seem there’s more people from the Bay Area” now seeking coastal properties./ppA handful of communities saw big jumps in absentee buyers from the previous year. Windsor recorded 61 such sales this year, up from 33 in 2011. Guerneville sales jumped to 42 from 21, while Cotati rose to 28 from 17 and Sonoma increased to 88 from 63./ppDavid Rendino, an agent with RE/MAX Pros in Rohnert Park, said a number of the Cotati home purchases likely were made by investors because of the town’s proximity to Sonoma State University./pp“You always have a sure thing there, because there’s always a need for rental housing,” he said./ppAgents said investors and second-home buyers will continue to comprise a significant share of county home buyers./ppOne reason is the low cost of money. As an investor, Harris said she recently received a 30-year, fixed mortgage at 4.25 percent for one of her own rental properties./ppCasabonne, who last year was the county’s top agent with $38 million in sales, said second-home buyers continue to value country settings, especially among the vineyards./pp“With Sonoma,” he said, “it’s a destination location.”/pp(You can reach Staff Writer Robert Digitale at 521-5285 or robert.digitale@pressdemocrat.com)/pCopyright 2012 PressDemocrat.com – All rights reserved. Restricted use only.

All rights reserved. This copyrighted material may not be re-published
without permission. Links are encouraged.

▲ Return to Top


Photos
|Your Photos

  • Petaluma Little Leaguers Win Friday
  • Photos Of The Day 8.10.12
  • London Olympics 8.10.12
  • Petaluma Little Leaguers Ready For Semis
  • Napa Valley Harvest Begins
  • Miranda Cosgrove In Concert


Judge In SEC Probe: Ex-Executives Knew Fannie Mae’s Disclosures On …

* Ex-CEO Mudd accused of misleading mortgage disclosures
* Judge says SEC plausibly alleged intent to mislead
* Lawyers for defendants not immediately available
By Jonathan Stempel
Aug 10 (Reuters) – Three former senior Fannie Mae executives lost their bid to dismiss a U.S. Securities and Exchange Commission civil fraud lawsuit accusing them of misleading investors about the company’s exposure to risky mortgages.
The executives, including one-time Chief Executive Daniel Mudd, contended that Fannie Mae had explicitly and accurately disclosed its exposure to subprime and low-documentation “Alt-A” home loans before the government seized the mortgage-finance enterprise in September 2008.
But U.S. District Judge Paul Crotty in Manhattan said the SEC plausibly alleged that Mudd, former Chief Risk Officer Enrico Dallavecchia and former Executive Vice President Thomas Lund materially misled investors by not disclosing exposures to risky mortgages that totaled more than $440 billion.
“They must have known that Fannie Mae’s disclosed subprime and Alt-A exposure calculations were materially misleading,” Crotty wrote on Friday. “Defendants’ conduct in making, or aiding others that made, these misstatements constitutes and extreme departure from the standard of ordinary care.”
James Wareham, a lawyer for Mudd, said in an email: “The evidence establishing the adequacy of Fannie Mae’s disclosures (and the efforts by the many employees involved in making these disclosures to get it right) is overwhelming. Indeed, the company used the identical disclosures just this week. Discovery will reveal just how shameful this case truly is.”
Andrew Levander, a lawyer for Dallavecchia; and Michael Levy, a lawyer for Lund, did not immediately respond to requests for comment.
SEC spokesman Kevin Callahan said: “We are pleased that the judge rejected the defendants’ arguments and we look forward to proving our claims in court.”
U.S. regulators seized Fannie Mae and the smaller Freddie Mac on Sept. 7, 2008, just over a week before Lehman Brothers Holdings Inc went bankrupt, and put them into a conservatorship.
The mortgage finance companies are now overseen by the Federal Housing Finance Agency, and have since the seizures drawn down about $188 billion of taxpayer money, while repaying only about $46 billion.
Mudd had run Fannie Mae from 2005 until the seizure.

CRACKDOWN
Like other regulators, the SEC has faced criticism for not cracking down harder on individuals accused of contributing to the 2008 financial crisis and five-year housing slump through poor underwriting and misleading marketing of mortgage debt.
Mudd, Dallavecchia and Lund were sued on Dec. 16, 2011, the same day the SEC filed a similar lawsuit against three former Freddie Mac executives, including onetime chief executive Richard Syron.
The Freddie Mac are trying to dismiss that case , and oral argument is scheduled for Aug. 20 before another Manhattan federal judge, Richard Sullivan.
Mudd and Syron are among the most senior individuals charged by federal or state investigators in any case related to the financial crisis.
Angelo Mozilo, who built Countrywide Financial Corp into one of the biggest subprime lenders, settled an SEC case for $67.5 million in 2010, though Bank of America Corp, which had bought Countrywide in 2008, indemnified him for $45 million.
The SEC did in 2010 win a $550 million settlement with Goldman Sachs Group Inc over that bank’s packaging and sale of a collateralized debt obligation known as Abacus.
Goldman did not admit wrongdoing, and the SEC is still pursuing its lawsuit against the only individual charged in that case, Goldman vice president Fabrice Tourre.
On Thursday, Goldman said the SEC dropped a separate probe over its role in selling $1.3 billion of subprime mortgage debt.

“ABOUT ZERO PERCENT”
In its Fannie Mae lawsuit, the SEC contended that the company concealed exposure to more than $100 billion of subprime loans and $341 billion of Alt-A loans.
It quoted Mudd as telling the public as recently as Aug. 20, 2008, during a radio interview less than three weeks before the seizure, that Fannie Mae had “about zero percent” subprime loan exposure. He defined such a loan as “a loan to a borrower that has had a credit problem in the past,” court papers show.
In their defense, lawyers for Mudd said some of the suspect loans did not meet Fannie Mae’s definition of subprime loans.
They also said that Fannie Mae, even after going under “full government control and new management,” continued to report loan exposures “exactly as it did” previously.
The FHFA last year filed lawsuits against 17 banks over losses that Fannie Mae and Freddie Mac suffered on about $200 billion of mortgage debt.
FHFA spokeswoman Stefanie Johnson said with regard to Crotty’s decision: “We are reviewing the case.”
Mudd resigned in January as chief executive of Fortress Investment Group LLC, one of a few publicly-traded U.S. hedge fund and private equity fund managers, after having taken a leave of absence in the wake of the SEC charges.
The Fannie Mae case is SEC v. Mudd et al, U.S. District Court, Southern District of New York, No. 11-09202. The Freddie Mac case is SEC v. Syron et al in the same court, No. 11-09201.

Fannie Mae's New CEO: 'Comfortable' With Decision Not to Slash Mortgage Balances

Tim Mayopoulos


Fannie Mae is no longer bleeding cash, at least for now.

After devastating losses since 2008, the mortgage giant reported its second straight quarter of positive net income, even after making a $2.9 billion dividend payment to the U.S. Treasury. Fannie Mae has taken $117.1 billion from the Treasury since the fall of 2008.

Improving home prices and decreasing mortgage delinquencies have helped to boost the bottom line, but Fannie Mae’s CEO Tim Mayopoulos, who took the reigns of the company earlier this summer, says he’s not convinced housing is out of the woods yet.

“I think it’s too early to declare a national housing recovery,”Mayopoulos said in an interview Wednesday on CNBC. “What’s driving our results has been home price improvements. We are not expecting to see huge improvements going forward.”

Fannie Mae reported net income of $5.1 billion in the second quarter of this year, up from $2.7 billion in the first quarter. Foreclosures, however, still weigh heavily on the balance sheet, despite the far higher quality of loans in the new book of business since 2009. 59 percent of Fannie Mae’s single-family guaranty book of business as of the end of the second quarter consisted of loans it had purchased or guaranteed since the beginning of 2009.

Expectations of an improving housing market prompted Fannie Mae to reduce its future loan loss reserves to $68 billion from nearly $77 billion in the first quarter. The company notes in its report that it believes credit-related expenses will be lower in 2012 than in 2011. Mayopoulos, again, seems to hedge that somewhat.

“We are very excited about the new book of business we’ve been writing since the beginning of the crisis. We believe that we could be profitably going forward but it doesn’t mean we will necessarily make enough every quarter to be able to cover the entire dividend payment to the Treasury,” said Mayopoulos, who added that he is very comfortable with where Fannie Mae’s underwriting standards are now, despite criticism from housing industry players who claim credit is too tight.

Mayopoulos expects home prices to bounce around more before finding a solid bottom, and that will in turn keep millions of borrowers, around 11 million by several recent accounts, in a negative equity position, owing more on their mortgages than their homes are currently worth. The Obama administration has been pushing hard for Fannie Mae and Freddie Mac to participate in the government’s program that pays lenders to reduce balances on troubled loans. Last week, however, Fannie Mae and Freddie Mac’s conservator, FHFA director Edward DeMarco, said the mortgage giants would not participate in that program.

“We are comfortable with where Director Demarco came out. We believe that we have the tools here at Fannie Mae to really help homeowners in terms of doing modifications and to help people who are in distress,” Mayopoulos said.

Fannie Mae completed 35,332 loan modifications in the second quarter, down from 46,671 in the previous quarter. It also approved just over 24,000 short sales and deeds-in-lieu of foreclosure, up from just over 22,000 in the previous quarter. Refinances were far higher, with Fannie Mae acquiring 247,000 of those loans in the quarter.

Fannie Mae still has over 109,000 foreclosed properties on its books, despite selling more of them than they took in during the quarter. Its foreclosure rate is falling as are its loan delinquencies, but the legacy losses are still quite large. Fannie Mae has been experimenting with bulk sales of foreclosures as well as bad loans to investors.

As for the future of the mortgage giant, which along with Freddie Mac and FHA accounts for around 90 percent of all new mortgage originations, Mayopoulos said he would leave that to policy makers. Until then, he is somewhat hopeful that Fannie Mae will continue on its own path to recovery.

“We do think over the long term Fannie Mae can have strong profitability and can return a considerable amount of value to taxpayers, but over the next few quarters I think it’s going to really depend on housing prices and other factors.”

Questions?  Comments?  And follow me on Twitter @Diana_Olick

Fannie And Freddie Pay Back 25% Of Bailout; FHA Recapitalizes

Fannie Mae, Freddie Mac Get Profitable

Since late last decade, politicians, economists and Wall Street have shown concern for Fannie Mae, Freddie Mac and the FHA, and the agencies’ respective ability to remain solvent. High default rates led to large quarterly losses, a pattern which repeated from a period of close to 5 years.

Lately, those concerns have eased, especially with Fannie Mae and Freddie Mac posting unexpected quarterly profits this week.

  • Fannie Mae : $5.1 billion second-quarter profit
  • Freddie Mac : $3.0 billion second-quarter profit

Since late-2008, the two groups received $188 billion in taxpayer funds as a “bailout”. They’ve repaid a quarter of that, to date, and with a few more profitable quarters, the loan will be repaid in full.

Not surprisingly, the improving housing market is playing a role in the agencies’ return to profitability. As home prices rise, less money is set aside to cover future losses, tipping balance sheets toward the black.

Better risk management helps, too.

Click here to get today’s mortgage rates.

FHA Rebuilds Its Reserves, Too

Fannie Mae and Freddie Mac aren’t the only mortgage groups to rebuild their reserves. The FHA has been recapitalizing, too.

Since early-2009, the FHA has raised its mortgage insurance premiums on four separate occasions. New FHA homeowners in high-cost areas such as Orange County, California; and Loudoun County, Virginia now pay as much as 1.50% annually to the FHA’s capital reserves.

Bigger premiums plus fewer FHA defaults has helped the self-funded FHA maintain a positive capital ratio, and work toward its congressionally-mandated 2% reserve ratio. The $25 billion mortgage servicer settlement helped, too, contributed $1 billion to the FHA’s bottom line. 

The FHA’s capital ratio is currently under 0.50%. 

Click here to get today’s mortgage rates.

Mortgage Delinquencies Dropping

Another big factor in Fannie Mae, Freddie Mac and the FHA’s return to profitability is that more U.S. homeowners are staying current on their respective home loans. As compared to one year ago, just 7.58% of U.S. mortgages were considered delinquent.

A delinquent mortgage is one that’s more than 30 days past due, but not in foreclosure.

On a seasonally-adjusted annual basis, Q2 2012 represents an 86 basis point improvement. Fewer defaults mean fewer losses and, with fewer losses, comes more profit. This is good for the future of the big three lenders and may decrease the chance the mortgage fees rise for future home loan applicants.

Click here to get today’s mortgage rates.

Mortgage Rates Remain Low

For U.S. homeowners, the profitability of a government-backed lender may seem unimportant, and in a lot of respects, it is. What’s more important is the mortgage rates through said institutions and, right now, mortgage rates are great.

If you’re floating a mortgage or looking to lock one in, get a mortgage rate quote today.

Click here to get today’s mortgage rates.

Fannie Mae, Freddie Mac gains show housing market may be turning corner

After reporting a profit of $5.1 billion for the second quarter Wednesday — which came on top of paying a $2.9 billion dividend to taxpayers — Fannie Mae also appeared to make a case for its continued existence.

“With our high-quality new book of business and diminishing legacy expenses, Fannie Mae has strong potential earnings power that can deliver considerable value to taxpayers over the long term,” Timothy J. Mayopoulos, president and chief executive, said in a statement.

President Obama and congressional Republicans have agreed that the firms, with nearly 9,000 local employees combined, should be eliminated.

D.C.-based Fannie and McLean-based Freddie play critical roles in the nation’s housing market and the overall economy. The firms back more than half of all mortgages made by U.S. banks. They also guarantee mortgage-related investments that have been central to the Federal Reserve’s efforts to stimulate economic growth.

Obama has floated two possible directions for what would follow Fannie and Freddie’s elimination. In one scenario, the government would create smaller governmental or private entities that would support homeownership. In the second, the government would step back completely and rely on the private sector to fill Fannie and Freddie’s roles.

A senior Obama administration official said Wednesday that the administration stands by its prior views.

Congressional Republicans have favored proposals that simply shutter Fannie and Freddie. Lawmakers who have loudly criticized the mortgage giants did not respond to requests for comment Wednesday.

Fannie and Freddie, which were seized by the government in 2008, are a source of enormous controversy in Washington. The firms have cost taxpayers just shy of $150 billion, after taking into account dividend payments. Both companies noted in their earnings reports this week that they did not need taxpayer assistance for the second quarter.

Fannie has received about $117 billion in taxpayer bailouts, and has paid back nearly $26 billion.

The firm said its earnings in the second quarter were driven by higher home prices, better sales of foreclosed properties and fewer homeowners falling behind on monthly mortgage payments. Fannie’s second-quarter results came on top of a $2.7 billion profit in the first three months of the year.

“The magnitude of the home-price improvement that we saw was greater than we would have expected from normal seasonal upticks, so that’s encouraging,” said Susan McFarland, Fannie Mae’s chief financial officer, in a statement. “But I don’t think we’re going to see this level of earnings repeat itself quarter in and quarter out.”

Mayopoulos, in his statement, said, “It is too early to declare a national housing recovery” and that a weaker economy in the second half of the year may portend worse financial results.

Freddie reported similarly strong earnings Tuesday, when it announced a $3 billion profit in its most recent quarter, also largely due to an improved housing market. The company paid a $1.8 billion dividend to taxpayers.

The firm would not say whether it thinks the improved results bolster the case for its continued existence.

“That’s ultimately a question for policymakers to decide,” said Freddie Mac spokesman Michael Cosgrove. “Of course we are pleased with our second-quarter financial results and will continue — as we have been — to do everything we can to manage the company in the best interests of the U.S. taxpayer.”

Fannie and Freddie’s rebound — which is not expected to enable the firms to ever pay back taxpayers fully — nevertheless is another signal of the housing market’s nascent recovery.

Home prices rose by 1.3 percent in June, rising for the fourth consecutive month, according to data from CoreLogic released this week. Freddie Mac’s house price index also showed an uptick, rising 4.8 percent from March to June, the largest increase in eight years.

Of course, head winds remain. More than 30 percent of people with mortgages owe more than their properties are worth, according to a report from housing Web site Zillow. And millions of Americans still face foreclosure.

Rules on Home Sales Stay—for Now

Q:
Do you expect any changes to the $250,000 and $500,000 exclusion limits on the sale of a home?


—H.S., Billings, Mont.

A: No, at least not for this year. But nobody knows what might happen to this or many other major tax laws after this year’s elections.

“Everything is up for grabs as part of tax reform,” says Linda Goold, tax counsel at the National Association of Realtors. Ms. Goold says the NAR strongly opposes any changes that would reduce or limit this capital-gains exemption. “We will fight to the finish” to preserve this and other housing-related provisions, she says.

Meanwhile, here is a refresher course on this provision—and a few words about a new tax scheduled to begin in 2013 that could affect some upper-income people who sell next year for an especially large long-term profit.

The provision you’re asking about was enacted during the Clinton Administration. In essence, it means most people who sell their primary residence for a profit have to pay little or no capital gains taxes on the transaction.

Homeowners typically can exclude as much as $500,000 of the gain on the sale of their primary residence if they’re married and filing jointly. For most singles, the maximum exclusion is $250,000. To qualify for the full exclusion, the taxpayer typically must have owned the home—and used it as the primary residence—for at least two of the five years prior to the sale.

But some people who don’t qualify for the full exclusion may be able to exclude most or all of their gain anyway. These people may qualify for a reduced maximum exclusion if the primary reason for selling is a change in place of employment, health, or certain “unforeseen circumstances,” such as your spouse’s death.

Now for the new twist:

President Obama’s health-care overhaul includes a new 3.8% tax on net investment income, starting next year. This new tax generally applies to net investment income of most joint filers with adjusted gross income of more than $250,000, or $200,000 for single filers.

There has been some confusion about this issue. As the National Association of Realtors put it: “The new tax does NOT eliminate the benefits of the $250,000/$500,000 exclusion on the sale of a principal residence. Thus, ONLY that portion of a gain above those thresholds is included in AGI and could be subject to the tax.”

For more details, go to www.realtor.org.

—Send your questions to us at askdowjones.sunday03@wsj.com and include your name, address and telephone number. Questions may be edited; we regret that we cannot answer every letter.

Big cities see rise in home prices

Prices for single-family homes climbed in most U.S. cities in the second quarter and values nationally jumped the most since 2006 as real estate markets stabilized.

The median sales price increased from a year earlier in 110 of 146 metropolitan areas measured, the National Association of Realtors reported Thursday. In the first quarter, 74 areas had gains.

U.S. housing prices are beginning to lift off the bottom after the worst housing slump since the 1930s as buyers compete for a tight supply of available properties. At the end of June, 2.39 million previously owned homes were available for sale, 24 percent fewer than a year earlier, the Realtors said.

One threat to home values is the so-called shadow inventory of delinquent properties that have yet to enter the market. U.S. foreclosure starts rose 6 percent last month from July 2011, Irvine, Calif.-based data provider RealtyTrac said Thursday.

Second Quarter Metro Area Home Prices Rise, Limited Inventory Capping Sales

WASHINGTON, DC–(Marketwire – Aug 9, 2012) – Median existing single-family home prices are rising in more metropolitan areas, but a lack of inventory — notably in lower price ranges — is limiting buyer choices in an increasing number of markets around the country, according to the latest quarterly report by the National Association of Realtors®.

The median existing single-family home price rose in 110 out of 147 metropolitan statistical areas1 (MSAs) based on closings in the second quarter in comparison with same quarter in 2011; three areas were unchanged and 34 had price declines. In the first quarter of 2012 there were 74 areas showing price gains from a year earlier, while in the second quarter of 2011 only 41 metros were up.

A separate breakout of income requirements to buy a home on a metro basis shows a wide range of conditions, but most buyers had ample income in the second quarter assuming they could meet mortgage credit standards.

Lawrence Yun, NAR chief economist, said home prices are set to rise in even more markets during upcoming quarters. “It’s most encouraging to see a growing number of metro areas with rising median prices, which is improving the equity position of existing homeowners. Inventory has been trending down and home builders are still under-producing in relation to growing demand,” he said. “Some of the improvement in prices is due to a smaller share of sales in low price ranges where inventory is tight.”

The national median existing single-family home price was $181,500 in the second quarter, up 7.3 percent from $169,100 in the second quarter of 2011. This is the strongest year-over-year increase since the first quarter of 2006 when the median price rose 9.4 percent, but even with the gain the current price is 20.1 percent below the record set in 2006.

The median price is where half sold for more and half sold for less; medians are more typical than average prices, which are skewed higher by a relatively small share of upper-end transactions.

Distressed homes2 — foreclosures and short sales which sold at deep discounts — accounted for 26 percent of second quarter sales, down from 33 percent a year ago.

Total existing-home sales,3 including single-family and condo, slipped 0.7 percent to a seasonally adjusted annual rate of 4.54 million in the second quarter from 4.57 million in the first quarter, but were 8.6 percent above the 4.18 million pace during the second quarter of 2011.

At the end of the second quarter there were 2.39 million existing homes available for sale, which is 24.4 percent below the close of the second quarter of 2011 when there were 3.16 million homes on the market. There has been a steady downtrend since inventories set a record of 4.04 million in the summer of 2007.

According to Freddie Mac, the national commitment rate on a 30-year conventional fixed-rate mortgage averaged a record low 3.80 percent in the second quarter, down from 3.92 percent in the first quarter and 4.66 percent in the second quarter of 2011.

NAR President Moe Veissi, broker-owner of Veissi Associates Inc., in Miami, said buying power is historically high. “Home buyers today can stay well within their means. Record low mortgage interest rates and an over-correction in home prices have opened the door to many potential buyers,” he said.

“What we need now is additional inventory in the lower price ranges, so we hope banks will be releasing more foreclosure inventory into the market. With gains apparent in all of the price measures, banks also should have more confidence in expanding mortgage credit to home buyers using safe but sensible standards,” Veissi said.

A breakout of incomes needed to purchase a median-priced existing single-family home by metro area shows the typical buyer has ample income. Required income amounts are determined using several downpayment percentages, assuming a mortgage interest rate of 4 percent and 25 percent of gross income devoted to mortgage principal and interest.

The national median family income4 was $61,000 in the second quarter. However, to purchase a home at the national median price, a buyer making a 5 percent downpayment would only need an income of $39,900. With a 10 percent downpayment the required income is $37,800, while with 20 percent down the necessary income is $33,600.

“Because the income required to buy to a typical home is very manageable by historical standards, any further decline in mortgage interest rates will have little effect. Changes in underwriting guidelines would have a far greater impact,” Yun said.

In the condo sector, metro area condominium and cooperative prices — covering changes in 53 metro areas — showed the national median existing-condo price was $178,000 in the second quarter, up 7.5 percent from the second quarter of 2011. Twenty-nine metros showed increases in their median condo price from a year ago and 24 areas had declines.

First-time buyers purchased 34 percent of all homes in the second quarter, compared with 33 percent in the first quarter and 35 percent in the second quarter of 2011. Historically they are close to 40 percent of the market.

The share of all-cash home purchases was 29 percent in the second quarter, down from 32 percent in the first quarter; it was 30 percent in the second quarter of 2011. Investors, who make up the bulk of cash purchasers and compete with first-time buyers, accounted for 19 percent of all transactions in the second quarter, down from 22 percent in the first quarter; they were 19 percent a year ago.

Regionally, existing-home sales in the Northeast slipped 0.6 percent in the second quarter but are 10.6 percent above the second quarter of 2011. The median existing single-family home price in the Northeast declined 1.6 percent to $241,300 in the second quarter from a year ago.

In the Midwest, existing-home sales rose 1.3 percent in the second quarter and are 16.2 percent higher than a year ago. The median existing single-family home price in the Midwest rose 7.5 percent to $149,400 in the second quarter from the same quarter in 2011.

Existing-home sales in the South increased 1.3 percent in the second quarter and are 7.7 percent above the second quarter of 2011. The regional median existing single-family home price increased 7.4 percent to $163,200 in the second quarter from a year earlier.

With tight inventory, existing-home sales in the West fell 5.3 percent in the second quarter but are 3.0 percent higher than a year ago. The median existing single-family home price in the West jumped 13.4 percent to $234,000 in the second quarter from the second quarter of 2011. “Inventory is pretty tight in all prices ranges in most of the West except for the upper end, which accounts for the sharp price gain,” Yun noted.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

NOTE: NAR releases quarterly median single-family price data for approximately 150 Metropolitan Statistical Areas (MSAs). In some cases the estimated MSA prices may not coincide with data released by state and local Realtor® associations. Any discrepancy may be due to differences in geographic coverage, product mix, and timing. In the event of discrepancies, Realtors® are advised that for business purposes, local data from their association may be more relevant.

Data tables for MSA home prices (single family and condo) are posted at http://www.realtor.org/topics/metropolitan-median-area-prices-and-affordability. If insufficient data is reported for a MSA in particular quarter, it is listed as N/A. For areas not covered in the tables, please contact the local association of Realtors®.

1Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. A list of counties included in MSA definitions is available at: www.census.gov/population/estimates/metro-city/0312msa.txt.

Regional median home prices include rural areas and samples of many smaller metros that are not included in this report; the regional percentage changes do not necessarily parallel changes in the larger metro areas. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Quarter-to-quarter comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.

Median price measurement reflects the types of homes that are selling during the quarter and can be skewed at times by changes in the sales mix. For example, changes in the level of distressed sales, which are heavily discounted, can vary notably in given markets and may affect percentage comparisons. Annual price measures generally smooth out any quarterly swings.

NAR began tracking of metropolitan area median single-family home prices in 1979; the metro area condo price series dates back to 1989.

Because there is a concentration of condos in high-cost metro areas, the national median condo price often is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes. As the reporting sample expands in the future, additional areas will be included in the condo price report.

2Distressed sales, first-time buyers, investors and all-cash transactions are from a survey for the Realtors® Confidence Index.

3The seasonally adjusted annual rate for a particular quarter represents what the total number of actual sales for a year would be if the relative sales pace for that quarter was maintained for four consecutive quarters. Total home sales include single family, townhomes, condominiums and co-operative housing.

Seasonally adjusted rates are used in reporting quarterly data to factor out seasonal variations in resale activity. For example, sales volume normally is higher in the summer and relatively light in winter, primarily because of differences in the weather and household buying patterns.

4Income figures are rounded to the nearest hundred.

Third quarter metro area home prices and quarterly existing-home sales will be released November 7 at 10:00 a.m. EST.

Information about NAR is available at www.realtor.org. News releases are posted in the website’s “News and Commentary” tab. Statistical data in this release, as well as other tables and surveys, are posted in the “Research and Statistics” tab of www.realtor.org.

Home values: 5 worst markets for Q2 2012

<!–

–>

Home Values » 5 Worst Markets

PreviousPreviousNextNext5 worst marketsBridgeport-Stamford-Norwalk, Conn.Edison, N.J.Gulfport-Biloxi, Miss.Elmira, N.Y.Atlantic City, N.J. squaresquaresquaresquare

Home values were up nationally for the second quarter of 2012, compared to the same period of 2011, according to data from the National Association of Realtors. See five cold markets where prices fell fastest.

Administration searches for new ways to help Fannie and Freddie borrowers

Edward DeMarco, acting head of the FHFA

In the wake of the Federal Housing Finance Administration’s firm stance that it will not allow principal reductions for Fannie Mae and Freddie Mac borrowers, the Obama administration is now looking for new ways to encourage the use of unspent federal housing funds to ease borrowers’ financial pains, Bloomberg News reported.

Some states are using money from the Hardest Hit Fund, a $7.6 billion national aid program which has so far only spent $351 million of its funds, Bloomberg News said, to give debt relief to Fannie and Freddie borrowers. The difference with the money provided by Hardest Hit is that it is provided at no cost to the government sponsored entities, according to Bloomberg.

The FHFA, which had barred principal reductions at the behest of controversial acting head Edward DeMarco, has approved the plan to use Hardest Hit funds.

“Treasury has money that is meant to help homeowners, and the money has not gotten out the door,” Julia Gordon, director of housing finance and policy at the Center for American Progress, said in a recent report cited by Bloomberg. “DeMarco has not seen fit to agree to do it one way, but that money should be spent to help homeowners, and if it means offering the money in a different amount or a different format, that should be done.” [Bloomberg News]