There might finally be some good news this year about the nation’s dismal housing market. Or, at least, the bad news could stop.

Either way, it will be welcome relief for current homeowners as well as for potential real-estate investors. Reasons to be optimistic have been sadly lacking since the housing bubble burst in 2006.

For sure, last week we learned the widely watched S&P/Case-Shiller home-price index fell 1% in December, its fifth straight decline. The index tracks 20 major markets.

Andrew Roberts

But that figure belies real reasons to be optimistic, according to some experts. If they are right, it might make sense to jump into real estate. The trick is avoiding getting burned again, and it doesn’t necessarily mean owning a home.

First, let’s recap the economic signs a bottom is close.

Houses Are a Good Deal

Housing is the most affordable it has been in decades, according to analysts at Moody’s Analytics. They don’t just look at house prices. They also look at incomes.

Nationally, the cost of a house is the equivalent of about 19 months of total pay for an average family, the lowest level in 35 years. Prices usually average close to two years’ pay, although that varies nationally.

At the peak, midway through the last decade, a home in Los Angeles cost the equivalent of 4.5 years’ pay. The average price has since fallen to just over two years’ income now. That’s well below its pre-bubble average of 2.6 years. This means average Los Angeles homes are cheaper in "real terms" than they were typically during the period 1989 through 2003.

The opposite is true around the Washington beltway, where it will take 26 months of pay to buy a home, versus the historical norm of 22 months.

In the end, it will be affordability that will drive people to buy homes.

"Pricing is down so much in some markets that when you analyze renting versus owning it makes much more sense to own," says Michael Larson, a real-estate analyst at Weiss Research in Jupiter, Fla.

It is definitely bullish. But what about timing?

"Housing prices will probably bottom in 2011," says Scott Simon, a managing director at money-management firm Pimco in Newport Beach, Calif. He foresaw the housing crash, helping his firm dodge losses that plagued Wall Street.

Mr. Simon says prices might dip another 5%. Still, in the scheme of things, that’s small. Consider this: In some markets, home prices have fallen by half or more since 2006.

For instance, in once-hot Miami you can snap up an average house for under $166,000, according to recent data from the National Association of Realtors. That’s down from $371,000 in 2006. Another 5% drop would take it to $158,000.

Investors Stepping Up

Here’s another sign the market is nearing a bottom: Investors have started to buy up houses and condos, in some instances paying entirely in cash. That’s a far cry from the heady bubble days when borrowed money seemed the key to riches. The bubble-era speculators who got burned tended to buy at the peak and borrowed heavily to do so. When the crash came, they quickly saw their wealth erased.

Take Miami again. Last year, more than half of all transactions were made entirely in cash, according to a recent report in The Wall Street Journal. That compares with 13% of deals in the last quarter of 2006, the height of the bubble. Similarly, in Phoenix 42% of sales in 2010 went to all-cash buyers, up threefold since 2008.

It’s a sign that these investors are betting on a rebound. Investors buying at current prices are looking for deals, or so-called bottom fishing. They typically like to pay entirely in cash (or with a relatively small loan) to speed up transactions. That can be vital for an investor wishing to lock in a deal fast.

If this is a turn in the market, then it might make sense to go out and buy a home. But, warns Pimco’s Mr. Simon, "buy in areas you really know."

Plan to Stay Put

Buy and hold. While the good news is that the worst of the housing crash might be over, the bad news is that the fast gains of the glory days of 2005 and 2006 won’t be back any time soon. So to cover the costs of buying and selling, and what could be a prolonged recovery, plan to own for more than 10 years, explains Jack Ablin, chief investment officer at Chicago-based Harris Bank.

Also remember that borrowing money to buy a house can still be risky. If you pay for a $100,000 property with $20,000 cash and borrow the rest, a dip in the value of $20,000 would leave you with zero equity. On top of that, you’d have to pay to maintain and repair the property, something not necessary when renting.

Home Buying Without a House

There are other ways to benefit from a real-estate rebound than directly buying a house. Such investments include stocks, mutual funds or exchange-traded funds. Unlike homes, which typically cost tens of thousands of dollars, these financial investments can be made in smaller amounts and typically are easy to sell.

Weiss Research’s Mr. Larson says although new homes are oversupplied, home builders might benefit from a rebound as the situation rights itself.

Rather than pick individual stocks, he says, it probably makes sense for small investors to pick broader investments that hold many different stocks. In particular, he points to the SPDR S&P Homebuilders ETF (XHB), which tracks a basket of home-builder stocks.

Mr. Larson also highlights specialized mutual funds such as the Fidelity Select Construction & Housing fund (FSHOX), which tracks home builders as well as home-improvement retailers like Home Depot and Lowes that would also likely benefit from a housing recovery.

—Simon Constable is author of the forthcoming book "The WSJ Guide to the Fifty Economic Indicators That Really Matter: From Big Macs to ‘Zombie Banks,’ the Indicators Smart Investors Watch to Beat the Market." simon.constable@dowjones.com

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved

McLean, VA – Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®) which shows long- and short-term rates rising this week.

30-year fixed-rate mortgage (FRM) averaged 5.05 percent with an average 0.7 point for the week ending February 10, 2011, up from last week when it averaged 4.81 percent. Last year at this time, the 30-year FRM averaged 4.97 percent. Interest rates on a 30-year fixed-rate mortgage rose to the highest level since the last week in April 2010.

15-year FRM this week averaged 4.29 percent with an average 0.7 point, up from last week when it averaged 4.08 percent. A year ago at this time, the 15-year FRM averaged 4.34 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.92 percent this week, with an average 0.6 point, up from last week when it averaged 3.69 percent. A year ago, the 5-year ARM averaged 4.19 percent.

1-year Treasury-indexed ARM averaged 3.35 percent this week with an average 0.6 point, up from last week when it averaged 3.26 percent. At this time last year, the 1-year ARM averaged 4.33 percent.

Frank Nothaft, vice president and chief economist at Freddie Mac, reports, "Long-term bond yields jumped on positive economic data reports, which placed upward pressure on mortgage rates this week. For all of 2010, nonfarm productivity rose 3.6 percent, the most since 2002, while January’s unemployment rate unexpectedly fell from 9.4 percent to 9.0 percent. Moreover, the service industry expanded in January at the fastest pace since August 2005."

Published: February 11, 2011

by Broderick Perkins

When millions of foreclosures suddenly flooded the market at the onset of the housing crash, home owners knew little to nothing about holding onto their homes or how to recover if they got the boot.

Misinformation and fraud compounded the effects of slow regulatory action and lackadaisical response from the lending industry.

Uncharted waters were submerged in rumors, speculation, conjecture and ignorance.

Years later, foreclosure myths endure.

Freddie Mac, one of the nation’s largest home loan investors, initially charged with expanding opportunities for home ownership and now focused on the liquidity needs of the mortgage market, is also about myth busting.

To set the record straight on foreclosures, it offers "Top Foreclosure Myths" and the truth behind those false beliefs.

To wit:

Myth: You should stop paying your mortgage so you can leverage assistance with your mortgage payments.

The approach, called a "strategic default," can become a tactical trap.

It isn’t necessary to default on your mortgage payments in order to qualify for help.

If you are struggling to stay current on your mortgage, you may be eligible for a loan modification or other assistance program.

You signed a contract that binds you to making regular mortgage payments. If you don’t make your payments, you will be exposed to foreclosure, subsequent black marks on your credit report and years of financial recovery.

If you can financially afford to make your mortgage payments, even if you’ve been declined a mortgage modification , short sale or other work out, do so to maintain your credit standing.

If you need help, contact your lender, contact a U.S. Department of Housing and Urban Development (HUD)-approved counselor online or call the Homeowner’s HOPE Hotline at 888-995-HOPE (4673).

Myth: After a foreclosure, you’ll never get another mortgage.

Well, sure. You blew it. Perhaps you borrowed more than you could afford or your ability to pay for what you thought you could afford went away. You may not qualify for a home for as long as seven years, but that’s not "never."

Work to create a spending and savings plan that will rebuild your credit. Get approved counseling that will reveal your effort to recover.

Myth: Workout options are over once you get a foreclosure notice.

Lenders would prefer that you keep your mortgage and continue to make payments because they lose money when they foreclose on you. Even if foreclosure proceedings have begun, it’s not too late to be considered for a workout or other alternative.

Myth: You need to leave your home as soon as you’re notified that your property is in foreclosure.

A notice of foreclosure is the first step in the foreclosure process. There are procedural and legal guidelines and applicable state and federal laws that servicers and lenders must follow in every foreclosure. Foreclosures take months to complete.

Myth: If you’re late on your monthly payments, you’ll lose your house.

You will if you stick your head in the sand. If you have a financial hardship and fall behind, it’s possible to keep your house and get back on track if you tell someone who is able to help. Contact your lender to discuss your options that include forbearance, loan modification, reinstatement, repayment plans, even a short sale.

Myth: All the offers for help are probably all scams. Scam artists do often target homeowners who are struggling to meet their mortgage commitment or who are anxious to sell their home.

Deal with your lender first, rather than an outside party. If you do deal with an outside firm avoid those that ask for a fee in advance to work with your lender to modify, refinance, or reinstate your mortgage. Ignore guarantees from outside firms that claim they can stop a foreclosure or modify your loan.

Legitimate offers will have specific information identifying your current mortgage, including the loan number of your mortgage. Shy from offers that come from a company other than your current lender or an authorized agent of your lender.

Myth: Give up if your lender is not responding to your inquiries.

Never give up. Lenders are deluged. It make take longer than you’d like to reach your lender, which is why you should contact your lender at the first sign of trouble. The process of obtaining a loan modification or other foreclosure alternative may require diligence in the form of multiple calls and multiple submissions of documents between you and your lender. The process isn’t perfect, the procedures continue to change.

Published: January 6, 2011

by Phoebe Chongchua

As spring rolls in, many people start listing their home for sale. The weather warms up and buyers, having recovered from the holidays, begin to house hunt.

Many buyers will go it alone. They hit the Internet for their first line of attack in house hunting. They peruse magazines and open houses. But they miss an important key player in their house-hunting mission–the real estate agent.

The real estate agent is not a go-between paper shuffler. Your real estate agent is the connection to the inside world of real estate. Yes, the Internet can provide you with lots of information, but it can’t replace a knowledgeable real estate agent.

Finding the best agent who meets your needs is like finding a good friend. I’m not kidding. Having to work with an agent that doesn’t understand your needs for housing can result in endless headaches, but working with an expert in the industry takes away the worry and stress, and streamlines the process.

It can be a jungle out there. Navigating through the foreclosures, short sales, and excessive inventory can make some buyers feel overwhelmed. The result? They continue to rent!

If you have the right team of experts surrounding you and looking out for your best interest, you’re not afraid to aim high and go after exactly what you want. An agent isn’t your cheerleader but is there to help you get precisely what you want and the best deal possible.

The agent has a fiduciary duty to you–to provide trust and confidence. Up to now, we’ve talked mostly about an agent–a person licensed to sell real estate but is that the same as a REALTOR®? The answer is no. And since the terms are often confused, it’s worth taking a moment to explain how the National Association of REALTORS® (NAR) defines them.

Both are licensed to sell real estate but REALTORS® are members of the National Association of REALTORS® and are required to follow the REALTOR® Code of Ethics. According to NAR, there are 17 articles in the Code of Ethics and they are strictly enforced.

Here’s what is stated in the 2011, Code of Ethics and Standards of Practice from NAR, "The term Realtor® has come to connote competency, fairness, and high integrity resulting from adherence to a lofty ideal of moral conduct in business relations. No inducement of profit and no instruction from clients ever can justify departure from this ideal."

Whether you hire a real estate agent or a REALTOR®, the most important thing you can do is research their background, reputation in the market, and get references. This is likely the biggest financial move you’ll make, so taking the time to find information about the agent or REALTOR® you’re about to hire is a wise investment.

Visiting real estate offices and meeting with their staff is another good way to explore who will fit with your personality and match your needs. Contacting friends for referrals is a good start, but don’t just hire your friend’s agent or REALTOR® because the real estate transaction worked out for your friend. Spend a little time to effectively communicate your needs, goals, and desires, and then listen carefully to how the agent or REALTOR® responds.

It may not be a marriage but it’s certainly a relationship that could last a lifetime, creating a successful financial situation for all.

Published: February 11, 2011

by Carla Hill

While credit remains tight as we move forward into 2011, top economists expect that if the job market revives this year, and interest rates rise only moderately, the housing market could experience a boost.

Pending homes sales are already on the rise. The National Association of Realtors’ Pending Home Sales Index reports that pending homes sales rose in November by 3.5 percent.

Lawrence Yun, NAR chief economist, said historically high housing affordability is boosting sales activity. "In addition to exceptional affordability conditions, steady improvements in the economy are helping bring buyers into the market," he said. "But further gains are needed to reach normal levels of sales activity."

Across the nation, we see regionally diverse markets, however. The Northeast saw pending home sales rise by 1.8 percent, but this figure is still 6.2 percent below November 2009. The West also saw a stunning 18.2 percent jump. This jump leaves it within 0.4 percent of year ago levels.

Both the Midwest and South saw declines, though, in pending sales. The Midwest declined 4.2 percent and is still 7.7 percent below year ago levels. The South fell only 1.8 percent.

"As we gradually work off the excess housing inventory, supply levels will eventually come more in-line with historic averages, and could allow home prices to rise modestly in the range of 2 to 3 percent in 2012," Yun said.

For now, the 30-year fixed rate mortgage remains in the low five percent range, which is near a historical low. The extension of Bush-era tax credits, as well as renewed hopes of job growth could very easily translate into more sales on the housing market horizon.

Published: January 4, 2011

By Tara-Nicholle Nelson

Whether you are simply trying to decide whether to sell your home next year, or it’s been on the market before and you are trying to revamp your approach to get it sold next year, here are 5 things you can do to position yourself for home selling success in 2011.

1.  Reality check yourself . . . before you wreck yourself (and the sale of your home, that is). The age-old real estate advice to wanna-be sellers is to get real about pricing – and like my sweet Grandma’s advice about always rinsing the cake batter out with cold water, never hot, the caution against overpricing is advice that will stand you in good stead. (And that cold water trick works, btw – rinsing with hot starts to cook the batter to the bowl!  But I digress)  Before you even get to pricing, though, first you should get real about what your goals really are. Why do you want or need to sell?  And how badly – how important is it to you?  What would it take to make selling make sense?  If you even think you may want to sell your home next year, get clear on these items in your own head before you even talk to anyone outside of your household. Your very next step is to look at your mortgage account statement online and find out what you owe, and find out what your payoff amount would be.

Step 3? Get a reality-based idea of what your home is worth – by talking with several local real estate agents who have a strong, recent track record of succesfully selling homes in your area; these are the folks who’ll have a strong idea of what recent sales are the most comparable to yours, and what a local buyer would agree to pay for your home, as well as what it might appraise at. If 3 agents give you one range, and one gives you a bizarrely higher number, be skeptical about the outlier; there are rare bad apples out there in the agent world who will tell you whatever it takes to get the listing.  Get real and stay there – don’t fall prey to the fallacy that your home is worth more than others, for no substantive reason beyond the fact that, well, it’s yours.

Then, move toward making a decision about whether selling actually makes sense for you. Whatever you do, don’t let your mental GPS steer you anywhere near that fantasyland where all your plans for selling, moving, etc. rest on the hypothetical that you can get 25% more than your home’s actual fair market value. That sort of magical thinking costs you and your agent the time, inconvenience and money it takes to try to conjure up a sale that just ain’t gonna happen, and that doesn’t even count the opportunity costs of other things you could be doing with those resources. If your home’s current value is bizarrely less than you want or need to move on, consider a short sale and price it appropriately or consider staying put and sprucing up your home so it better suits your needs – but don’t price it at your "wishful thinking" price and set yourself and your agent up for failure.

2.  Figure out the lay of your local land.  National blogs and media outlets offer all sorts of useful advice about whether, how and when to sell your home, but there’s one thing that sort of advice cannot convey: what’s going on in your local market. Get active in Trulia Voices, ask questions and read blogs in your local market and start talking with the real estate brokers and agents from your area who are actively blogging, listing properties and answering questions. They can give you the hyperlocal essentials you need to knows.  Sure, it’s a buyer’s market nationwide, on average.  But if you live in Omaha, that may mean that homes sell at or near asking in 45 days or less; in Mesa, Arizona, your home could stay on the market 6 months and sell for 30% below asking.  In my neck of the woods, it’s not bizarre for homes to sell at 5 percent above asking, in two weeks – and that’s still a buyer’s market compared to the 20% above asking sales that were common in 2006.  

Every market is different, and you can neither know what to expect when you list your home for sale, nor implement smart strategies for getting your home sold without knowing what’s going on in yours. 

3.  Tour nearby Open Houses. Your job, as the seller of your home, is to present a compelling package to buyers – compelling enough to make them sign away 30 years of their lives and the vast majority of their worldly possessions in exchange for your home (kinda ups the ante, doesn’t it?). To do that, it helps to get inside the minds of your home’s target buyers.  And to do that, you need to think how they think and see what they see.

Visiting the other homes your target buyers will also see online and/or in real life will give you a sense for how your home’s price and condition will measure up to the competition.  Go view other homes that are for sale in your area, making sure you see at least a few that fall into each of these categories: (a) properties in your neighborhood or similar neighborhoods, (b) homes in your home’s general price range, all around town, and (c) homes that have similar numbers of bedrooms, bathrooms and square feet – no matter what the price. You’ll likely end up seeing homes in a wide range when it comes to price and condition; know that your home, to sell, will need to beat these on one or both measures. Also, if you try to go to at least a few open houses, rather than just asking your agent to show them to you at your convenience, you’ll also get a sense for what sort of buyer traffic you can expect from open houses, and you can even chat with those home’s listing agents about local market dynamics and what factors they believe may help or hurt that particular listing.

4.  Formulate a plan: in A-B-C order.  Collaborate with your broker or agent to put an action plan in place.  Make sure you address: list price, list date, showing arrangements and the property prep work (see #5, below) that your agent recommends you do prior to listing the place. To minimize the stress of a somewhat inevitably stressful experience (i.e., selling your home!), work with your agent on Plans B and C now, too!  What is the average number of days a home stays on the market in your area before it sells (DOM)?  (Hint:  don’t look at the ones that never sold, because you don’t want to be part of that group!)  Decide up front if your home sits on the market for X number of days with no offer, you’ll lower the price to Y.  Also cover alternative marketing plans/vehicles for your home, and even calendar when you might start to offer transactional incentives, like closing cost credits, interest rate buy-downs, throwing in personal property and even making reverse offers to buyers who have expressed an interest but can’t seem to get off the fence. At some point along the timeline, include a pause where your agent can interview buyer’s brokers who have shown your home to collect buyer feedback, so you can course correct your pricing, marketing or staging strategies accordingly.

5.  Do your prep work – fix and pre-pack.  If you are sure you’re selling in 2011, and want to put your holiday vacay time to good use, make a list of all those little repairs you’ve been wanting to do forever, call up your neighborhood handyperson and get ‘em done. Loose knobs and handles, double-hung windows that are painted shut, the frayed carpet on the steps, that broken bathroom tile – fixing those things can give your place just the patina and polish it’ll take to compete with the ample, low-priced competition you’ll have next year.

It may be tough for non-distressed home sellers to compete with foreclosures and short sales on price.  But one area where individual home sellers usually can best the competition is CONDITION! Your home can present to buyers in tip-top  condition in a way that most foreclosures and short sales cannot.  And this includes staging – most foreclosures will be shown vacant, and/or with the debris of the former owner’s lives tragically littering the premises.  Short sales are usually (but not always) a bit better, but are most often shown fully occupied, furnished and cluttered – just as the owners live in them, because of the distressed nature of the sale.  As a non-distressed home’s seller, it behooves you to ensure that your home’s curb appeal is at it’s best and that throughout the interior, the buyer is able to visualize the lovely life they can, scratch that, WILL live once they buy and move into your home. 

Depersonalizing and decluttering are essential to this staging effort; in fact, one wise Trulia Voices contributor tells her sellers to go ahead and start "pre-packing" – put most of the personal items that make your home yours in a box, like you’re getting ready to move (which you are!) and leave your place in as close to model-home move-in condition as possible.

By Tara-Nicholle Nelson

There are lots of purchases that are highly prone to impulse buying: shoes on sale, puppies at the pound, and carrot cupcakes with cream cheese buttercream frosting come instantly to mind. (But that’s just me.)

But houses?  Not so much. Savvy, regret-free homebuying can take weeks or months of financial and lifestyle research and planning.  If you want 2011 to be the year you become a homeowner, here are 5 things you should be doing, as we speak.

1.  Minimize your holiday spending and save your cash. Instead of using the holiday sales to acquire a new winter wardrobe of cashmere sweaters, hold the discretionary spending down so you can give yourself the gift of homeownership!  If you are serious about buying a home next year, don’t run up additional credit card debt on gifts this year. Instead, make homemade cards or write holiday letters this year for everyone except the kiddos.  And even for the kids, consider scaling back on the stuff, spending more of your time with them than your money, and getting started now saving toward your home purchase. (I don’t think too many folks would argue that a less materialistic holiday season would hurt anyone, at any age.) 

Kickstart your 2011 homebuying resolution by starting a "Home" savings account at an high-interest, online bank (the discipline-boosting goal is a bank that isn’t super easy to transfer funds out of when you run low on cash), and set up an automatic deposit into it every payday. To get specific about your savings goal, if you’re cash-flush, obviously a 20% down payment will get you top notch interest rates and provide you with the maximum ability to manage your monthly payments. If you’re going to be more of a bootstrapping buyer, an FHA loan might be right up your alley – they offer a down payment of 3.5% of the purchase price. 

All buyers should plan to have at least 3 percent of the purchase price saved up for closing costs, even if you want the seller to chip in.  The lower-priced the home you want to buy, the more percentage points you should be willing to chip in for closing costs.  It’s easy for closing costs on an $150,000 FHA loan to run as high as $4,000 or more, considering transfer taxes, inspections, appraisals and mortgage insurance fees. So, even the scrappiest buyer should have a savings target somewhere around 6.5% of their target home’s price.  To buy a $200,000 home, for example, that would mean a savings target of $13,000.

Local real estate and mortgage pros can help you clarify realistic "cash to close" expectations and savings targets for your area – ask them, on Trulia Voices.

2.  Research financing, areas homes, prices, agents and online. Smart homebuying takes a lot of research and knowledge-gathering.  Since most buyers find it much harder to qualify for a mortgage than it is to find a home you’d love to live in, start with studying up on home financing and what it will take for you to get a home loan (note: FHA loans are preferred by the average homebuyer on today’s market who has less than a 10% down payment, so start your research there). 

If you’re considering relocating next year, now’s the time to start narrowing down states, cities and even neighborhoods that may or may not work for you. Take into account the job market, housing and other costs of living, and income and property tax rates, as well as the critical lifestyle inputs that vary from state-to-state, like weather and whether the place is a personality fit for you and the life you want to live, be it urban sophisticate or outdoors adventurer. 

Also, start to develop a feel for home prices in a what-you-get-for-your-money type way, and start narrowing down the home styles and even neighborhoods that might fit your aesthetic preferences and lifestyle.  If you’re one of those rare buyers-to-be who is not already obsessively house hunting, hop on Trulia and start regularly checking out homes and neighborhoods, making sure to take advantage of the neighborhood ratings and reviews feature, which empowers you to surface what other folks think and say about an area. 

3.  Rehab your credit, if you need to.  Go to AnnualCreditReport.com and check out your credit reports – from all 3 bureaus – for free. (Note – these will not give you your credit score for free – that costs extra, but it will give you the actual detailed credit reports.)  Audit them for errors and do the work of disputing inaccuracies to have them corrected. Pay particular attention to: accounts that are not yours/you never opened, derogatory information that should have "aged off" your report by now (i.e., 7 years for late payments, 10 for bankruptcies) and balances or credit limits that are inaccurate (i.e., your credit card balance is listed at $2500, but you actually only owe $250.)  These are the errors most likely to foul up your financing, so follow the instructions each bureau provides to correct them, stat. While you’re at it, don’t close any accounts, even if you are able to pay some down or off – actually, check out these tips for getting the bank to give you the best possible home loan, without unintentionally making your score worse!

4.  Run your numbers. In the past, some overextended homeowners complained that they felt pushed into a mortgage they couldn’t afford. Pundits blamed that on the real estate and mortgage industry, but I have witnessed firsthand many a homebuyer push themselves or their spouses into buying too expensive of a home. Eliminate this issue entirely by doing this – run your own numbers, before you ever even talk to a salesperson or start looking at homes beyond your means. (I assure you, once you see the million dollar home you think you can afford, the $250,000 home you can actually afford will be underwhelming.)

Get your monthly finances in order, and get a clear read on how much your monthly bills are – outside of housing. Decide how much you can afford to spend every month for housing, when you buy your home.  Get clear on exactly how much cash you plan to have at hand to put into your transaction up front.  When, in the next step, you begin working with a mortgage broker, you’ll want to share these numbers with them, early on in your conversation, to empower them to tell you what home price you can afford – not based on their rubrics, but based on what you say you want to spend every month and what you want to put down.

5.  Talk to a real estate and mortgage broker (1 of each). Trulia is a great place to find an engaged, communicative, tech-savvy real estate broker or agent in your area.  You can use our Find a Pro directory or simply start participating in the Trulia Voices Community, asking your questions and tagging them for the town where you plan to buy a home, and paying attention to the agents who give timely, thorough responses to your questions, and communicate in a language you understand. 

Drop one (or a few) an email, letting them know you’d like to work on putting an action plan together for buying a home next year, and would like to talk with them about what action steps need to go on the list. Ask them to brief you on the timeline of a transaction in your local market, and to point out for you things like when along the process you’ll need to bring money in, when you’ll need to miss work and come into their office or the closing office, whether they offer conveniences like digital document signing, and generally the local standard practices about which buyers you’ll need to know.  Depending on your target home purchase timeline, they might even want you to take a spin with them and look at a few properties to reality-check your expectations or narrow down a broad wish list. 

In addition to chatting with them about timing your purchase vis-à-vis your other life events and plans for the year, make sure to ask for referrals to a local, trustworthy mortgage broker or two – preferably one that has worked with them and closed a number of transactions with their clients.  (In fact, many busy real estate pros will want you to talk with their trusty mortgage partner before they get too involved in your planning process.  You may think you only need a month to get ready to buy, but once the mortgage folks weigh in, it might turn out that you actually need a few.)  When you do get in touch with the mortgage maven, if you’re serious about buying, you will want them to actually pull your credit report, check the actual FICO scores that come up on their system and give you their professional recommendations for what final tweaks you can do to your debts to get your credit score where it needs to be.

by Carla Hill

For months now, experts have been debating the fate of the home mortgage interest deduction (MID). So why exactly are politicians targeting the MID? With a federal deficit of around $13 trillion, officials are hard-pressed to find ways to curb the growing the debt.

The deduction, a pillar of the housing industry since 1913, could be on the chopping block. The Obama administration’s deficit committee is currently reviewing it, along with other items, in order to scope out new ways to help reduce our budget shortfall.

The co-chairmen of the White House’s bipartisan deficit-reduction commission said Tuesday they would propose a significant paring of popular middle-class tax breaks, including the mortgage-interest deduction, and push for an increase in the Social Security retirement age.

Some say there are better options available than keeping the MID, following suit of many European nations who have in recent years nixed the deductions themselves, but the National Association of REALTORS® (NAR) disagrees. They feel that this deduction is a strong incentive for homeownership. For nearly 100 years homeowners have been allowed to deduct the interest paid on mortgages for their primary residences, second homes and most home equity lines of credit.

"The tax deductibility of interest paid on mortgages is a powerful incentive for home ownership and has been one of the simplest provisions in the federal tax code for more than 80 years. In a new survey commissioned by NAR and conducted online in October 2010 by Harris Interactive of nearly 3,000 homeowners and renters, nearly three-fourths of homeowners and two-thirds of renters said the mortgage interest deduction was extremely or very important to them."

NAR President Ron Phipps, states, "Recent progress has been made in bringing stability to the housing market and any changes to the MID now or in the future could critically erode home prices and the value of homes by as much as 15 percent, according to our research. This would negatively impact home ownership for millions of Americans, including those who own their homes outright and have no mortgage."

He continued, saying, "Any further downward pressure on home prices will hamper the economic recovery, raise foreclosures and hurt banks’ abilities to lend and likely tip the economy into another recession resulting in further job losses for the country. It will effectively close the door on the American dream."

Will Washington continue to allow taxpayers who own their homes to reduce their taxable income by the interest paid on the loan? Time will tell. It is dependent on finding alternative ways to curb growing anxiety over our growing debt.

Published: December 2, 2010

by Carla Hill

Housing affordability is bringing buyers to the market, say industry leaders. And the proof is in the numbers. Pending home sales rose in October, up 10.4 percent from September.

Lawrence Yun, chief economist for the National Association of Realtors (NAR), reports, "It is welcoming to see a solid double-digit percentage gain, but activity needs to improve further to reach healthy, sustainable levels. The housing market clearly is in a recovery phase and will be uneven at times, but the improving job market and consequential boost to household formation will help the recovery process going into 2011."

Regionally, all areas saw double digits gains, except for the West, which still struggled — at a 0.4 percent decrease from the month prior. The largest increase was seen in the Midwest, which surged ahead 27.3 percent.

If one looks to the NAR’s Housing Affordability Index, the appeal of today’s market becomes evident. From 2007 to today, the median house price in the U.S. has fallen from $217,900 to just $171,100. Interest rates have dropped from 6.52 percent to 4.62 percent, while median incomes have risen slightly. This means a buyer can find themselves with the same house as 3 years prior, but for smaller monthly payments. And although buyers must have cash for downpayment, as well as good credit, there may have never been a better time to buy if you are in the position to do so.

Will homes sales continue to climb? This could depend very much on the state of the job market, which for now continues to struggle.

The Labor Department reports that "this past November, nonfarm payroll employment increased by 39,000 jobs, and the unemployment rate increased to 9.8 percent." They note that while 1.2 million private sector jobs have been created, this is nowhere near enough to make up for the 15 million unemployed, and the new unemployed that continue to enter the ranks.

Yun notes, that, "more importantly, a return to more normal loan underwriting standards and removal of unnecessary underwriting fees for very low risk borrowers is needed and could quickly help in the housing and economic recovery."

Published: December 7, 2010

McLean, VA – Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®), which found that once again, both fixed- and short-term mortgage rates rose this week. This was the fourth week in a row where fixed-rate mortgage rates were up.

30-year fixed-rate mortgage (FRM) averaged 4.61 percent with an average 0.7 point for the week ending December 9, 2010, up from last week when it averaged 4.46 percent. Last year at this time, the 30-year FRM averaged 4.81 percent. 

15-year FRM this week averaged 3.96 percent with an average 0.7 point, up from last week when it averaged 3.81 percent. A year ago at this time, the 15-year FRM averaged 4.32 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.60 percent this week, with an average 0.6 point, up from last week when it averaged 3.49 percent. A year ago, the 5-year ARM averaged 4.26 percent.

1-year Treasury-indexed ARM averaged 3.27 percent this week with an average 0.6 point, up from last week when it averaged 3.25 percent. At this time last year, the 1-year ARM averaged 4.24 percent.

Frank Nothaft, vice president and chief economist of Freddie Mac, reports, "After Europe made strides in its debt situation, investors left the security of U.S. Treasury debt causing bond yields to rise and mortgage rates along with them. Interest rates for 30-year fixed mortgages are now almost a half percentage point higher than the record low set in mid-November, which for a $200,000 conventional loan amounts to $50 more in monthly payments."

"Housing demand appears to be picking up recently. Existing pending sales jumped 10.4 percent in October to the strongest pace since April, according to the National Association of Realtors®. More recently, mortgage applications for home purchases rose for the three consecutive weeks ending on December 3rd, representing a 17.7 percent increase and the strongest pace since the week of May 7th, based on figures released by the Mortgage Bankers Association ."

Published: December 10, 2010