Existing home sales reached 6.03 million in the fourth quarter of 2009, which was an increase of 13.9% from third quarter sales. Even with a decline in sales figures in December 2009, the fourth quarter still concluded up.  

NAR chief economist Lawrence Yun believes the increase in home sales was sparked by buyers taking advantage of the first time home buyers tax credit. Yun went on to say that NAR believes the home inventory levels should balance out by spring of this year and that some areas of the country may even enjoy higher home sale prices.

In the fourth quarter of 2009, the national median sales price for existing single-family homes was $172,900. For the same period, the median sales price for existing condos was $177,399.

Certain areas of the country saw median prices that rose (11 metro areas), while the remaining areas (53 metro areas) had declining median sales prices. The northeast region of the country had an 11.1% increase in median home sales, the Midwest region had a 14.5% increase, the south had a 13.8% increase and the west had a 16.2% increase in median home sales.

The economic crisis and tumultuous real estate market includes an ever increasing unemployment rate and drops in home prices. The financial environment has also caused the number of homes being sold using short sales to increase. With short sale transactions limiting the loss to the lender, many lenders and borrowers are averting foreclosure and opting for short sales instead.  

Then in May of 2009, the government first stepped in with its Foreclosure Alternatives Program, which offers a lot of assistance to make the short sales process seamless for all parties involved.

Four Benefits of the Program

1.     The Foreclosure Alternatives Program provides incentives for mortgage establishments such and servicers, seller and lien holders to allow and complete short sale transactions. This has encouraged more lenders to opt for short sales rather than rely on foreclosures

2.     Allows the home seller, as part of the short sales, 90 days to sell their home without the threat of foreclosure

3.     Requires that the short sale agreement states the commission amounts and costs deducted from the sales price, that the commission rates are reasonable and unchanged after the sale

4.     Provides standardized documents for the short sale process so that it’s consistent and streamlined for all parties involved in the transaction

While  a short sale may not be the ideal situation to sell a home, it is a more positive alternative to foreclosure. The benefits are even recognized by the federal government, which has stepped in to make short sales a more viable action and to protect the parties involved in a short sale. Painting short sales in such a beneficial light has created an increase in the number of short sales, but has also helped to contribute to slowing down the number of foreclosures around the country.

The expansion of the original tax credit now allows homebuyers to claim up to a $6,500 tax credit for move-up buyers that owned and resided in a home for a minimum of five consecutive years of the eight years leading up to the purchase. This change could mean that there is greater demand for the construction of new homes. Greater demand could mean a positive outlook for builders and lenders, creating a need for more staff to accommodate the greater demand for the construction and sales volume the extended and expanded tax credit may mean for the housing industry.

According to a report released by John Burns Real Estate Consulting, provisions of the new tax credit bill allow certain types of businesses to obtain a tax refund for real estate losses and to claim back taxes as far back as 2003. While this tax credit can be applicable to any industry, it’s probably most applicable and most beneficial to homebuilders.

There is one catch. All deals must close by the end of the fiscal year for the business, which is typically the end of the calendar year. This has homebuilders scrambling to sell their projects at a loss in order to offset taxes paid in previous years.

When you’re assembling your dynamite real estate team, you have to decide whether or not to include a lawyer. Depending on your locale, lawyers can handle everything from closings to negotiating a deal – or getting you out of a bad deal. Some buyers may never need a lawyer, but there are times when a lawyer is indispensable.  

Lawyers can help you negotiate deals.

Many people use lawyers to help get the best deal when buying real estate. A good real estate lawyer has experience negotiating everything from simple to complex deals, and can help keep a seller’s lawyer from running roughshod over you when negotiating a purchase and sale agreement.

Lawyers do things like making sure the purchase and sale agreement gives you enough time to procure funding, conduct inspections and manage your transaction. They can also help you avoid language that binds you to a bad deal, and can protect your interests if an inspection turns up something that changes your deal.

Lawyers can get you out of bad deals.

Sometimes, a deal seems simple and straightforward and you don’t think you need a lawyer at all. Then something comes up, and you find that the deal isn’t the great deal you thought, but actually a bad deal in disguise. Maybe something comes up in the inspection that means the house is going to require a lot of work, but the language of the purchase and sale agreement doesn’t let you back out of the deal once you’ve signed.

The right lawyer can help you find loopholes and get out of a deal with a minimum of fuss, or at least mitigate your damages in breaking a deal. Think about it: would you rather pay a few hundred for a lawyer to help you break a deal, or be stuck with a home that could cost you tens of thousands of dollars in repairs, or wind up being nothing but a liability for the next 30 years or so?

When the housing market hits its bottom, the only place it can really go is up, right? The problem is that when the housing market hits its bottom (or if it already has), most people wouldn’t recognize the signs anyway. Here are some signs that the market has reached its lowest point, so you can watch for and recognize it when it happens.  

1.     Inventory drops. It’s the old supply and demand rule and less houses on the market indicates that the housing market may be heading in the right direction—up.

2.     Less stringent financing guidelines. While it probably won’t go back to the looseness that many believe put the lending market in a crisis, lenders may loosen their stringent guidelines to make it easier to obtain financing.

3.     Sales increase. As the sales volume of homes and buildings increase, the inventory drops, so #1 and #3 work in conjunction with each other. Both are signs of a recovering market.

4.     Prices stabilize. While housing prices may not increase, a housing market that has hit the bottom also stops seeing a decline in housing prices. In other words, housing prices stabilize.

5.     Federal Reserve backs off. When the Fed stops getting involved in monetary policy when it comes to interest rates, it’s typically a sign that things are starting to stabilize.

Timing the real estate market is similar to trying to time the stock market—it’s not possible. There are, however, ways to evaluate when the housing market has reached the bottom. Look for these five signs and you’ll be able to get a general idea when the housing market has reached the bottom (or if it already has).

Most believe the tax credit not only has contributed to the stimulation of the housing market, but has also stimulated the economy and created new jobs across the country. The extension and expansion of the tax credit permits additional individuals and families to become homeowners.

The extension allows first time homebuyers to take advantage of up to an $8,000 tax credit through April 30, 2010. The expansion part of the bill allows current homeowners to take advantage of up to a $6,500 tax credit through April 30. Current homeowners must have lived in the home being sold or have sold their primary residence within five consecutive years of the past eight years. Any homeowners with a pending contract have until July 1 to close the transaction.

The income limits were also increased. Singles income limitations increased to $125,000 and couples income limitations increased to $225,000. The maximum purchase price of the home allowed under the tax credit is $800,000.

The Pending Home Sales Index calculates the number of pending home purchase contracts in effect. The number of contracts signed in September increased by 6.1% over the August numbers and is 21.2% higher than September of 2008. Many real estate professionals, such as the National Association of Realtors (NAR) economist Lawrence Yun, associate this increase with the record number of first time homebuyers that are taking advantage of the first time homebuyers’ credit that is close to expiring.  

Certain areas of the country saw a decline in the regional Pending Home Sales Index. In the northeast the index decreased by about 2% from August to September, but is still higher than the index numbers from September of 2008. The south (up 4.9%), Midwest (up 8.1%) and west (up 10.2%) all saw increases in the regional index, which contributed to the overall increase of the index for the entire county.

While the increase in this index has a positive outlook for what the future may hold there are some things to be aware of that may have less of a positive effect. There is still an excess amount of homes on the market compared to the demand and even though home prices are starting to stabilize, there are still a record number of foreclosures clouding the picture.

The Numbers

The existing home sales numbers include single-family homes, townhomes, condominiums and co-ops. September numbers show a 9.4 percent increase over August numbers. This is the highest sales level of existing home sales since 5.73 million homes sold in July 2007.

The chief economist for NAR, Lawrence Yun, believes the tax credit is fueling the fire of favorable market conditions (affordable home prices and low interest rates). The continuous rebound is fertilizer for the NAR’s call for Congress to extend and expand the tax credit. While the housing market is still underperforming overall, a recent study conducted by NAR (the formal results are expected on November 13, 2009) show that 45 percent of the homes sold in the last year were sold to first-time buyers.

Evidence seems to be stacking up in support of the tax credit helping the housing market to recover. The October numbers are due out on November 23, which will reveal if increasing home sales hit a six-month increase streak.

All good things must (and usually do) end, and it’s no secret that the First Time Homebuyer’s Credit expiration date is looming. The National Association of Realtors, along with countless real estate agents and lending institutions are waving the last lap flag in the race to buying a first home. The American Recovery and Reinvestment Act of 2009 allows for up to $8000 tax credit to a first time home buyer that closes a loan on the purchase of a primary residence on or before November 30, 2009. 

Many prospective homebuyers question whether there is still time to find a home and close on in before the deadline. While there may be some exceptions to the rule, with less than two months left before the opportunity disappears, it probably is too late. Generally, once you find a home, it takes anywhere from 30 days or more to get through the home buying and mortgage financing process in order to cross the finish line.

This means that unless the government decides to extend and expand the first time homebuyer program, if you’re not already close to closing on the purchase, then you probably don’t have enough time remaining to take advantage of the incentive.

Even though home sales numbers and prices seem to be going in the right direction, the indication for homebuilders doesn’t seem to be heading in the same direction. Moody’s Investor Service, in fact, recently reported that it expects homebuilder companies’ numbers to decrease by approximately 8% in the upcoming year. 

Moody’s expects the overall housing market to find itself in a better situation, but combined with the hits the homebuilding industry has taken in the past few years, the service predicts that homebuilders will still suffer an overall loss in 2010. Moody’s further predicts that these losses may linger into the first half of 2011 as well–even as the market works toward recovery.

And as is often seen when it comes to adverse market conditions, things may get worse before they get better. With an increase in unemployment rates and lingering foreclosures, further housing price decreases may be just around the corner—and for a period that is longer than what was originally expected by analysts.

Moody’s and other services do expect the overall housing market to take a positive turn, but there are some obstacles the housing market still has to overcome. These obstacles may make the recovery more of a long-term than a short-term process.