Real estate, both residential and commercial, has found itself in a slump, a nadir from which the industry has stayed down without any significant rise. But housing does not exist in a vacuum, and employment and the economy are tied directly to real estate’s recovery. Such issues are being addressed this week at the REALTORS® Midyear Legislative Meetings & Trade Expo, where real estate professionals will be speaking with legislatures regarding homeowners and investors.

9,000 professionals are expected to attend the event, which goes through May 19. Although speakers and meetings are planned, influencing Capitol Hill legislatures to improve access to affordable financing, make the short sale process run smoother, reforming the mortgage market, supporting liquidity, preserving tax benefits, and reauthorizing the National Flood Insurance Program are all primary objectives. Particularly for the latter of this group, a portion of Americans rely on this program, which additionally affects home sales in certain areas.

One of the more important events at the expo is the Rally to Protect the American Dream, scheduled for May 17. For this 10,000 REALTORS® are expected to gather in the Washington Monument area to demonstrate housing’s integral role in national economic recovery. About this portion, National Association of REALTORS® President Moe Veissi said in a statement:

“We need to keep housing and real estate first on the nation’s public policy agenda, because these issues affect all Americans. Realtors(R) are committed to working with members of Congress, regulators and industry leaders to ensure public policies and industry practices that promote responsible, sustainable homeownership and encourage real estate investment. We want to make sure that our country’s leaders, now and into the future, understand the vital role that real estate plays in both the long- and short-term health of this nation.”

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Populations of major and minor metropolitan areas in the North decreased during the second half of the 20th century. Diminished job opportunities, changing neighborhoods, and growing urban blight and crime are all prominent factors of this demographic shift, but are such metropolitan centers like Cleveland, Detroit, and Pittsburgh doomed to live in the shadow of their past? A recent Salon.com piece shows that Rust Belt real estate is attracting young professionals and even reversing decades-strong population trends.

As Salon.com reported, downtown Cleveland has experienced an increasing sect of 22- to 34-year-olds, while Pittsburgh, which had a declining young adult population until 2000, has seen reverse migration of the 18- to 22-year-old demographic. And Detroit, the subject of many Rust Belt real estate pieces, has turned into a draw for artists, entrepreneurs, and urban farmers.

But why the Rust Belt and why, more than 40 years after deindustrialization began, are under-30s migrating away from coastal career epicenters? Decay, or “ruin porn,” is one attraction, creating a mysterious and post-apocalyptic aesthetic not entirely offered by larger East and West Coast cities, and lower living costs is another (the average home price in Detroit in 2009 was $7,000).

At the moment, the trend is too new to be a lasting shift, and the underscoring and definitive characteristics of these areas – crime, low-performing educational systems, and corrupt, bankrupt municipal governments – have not fully been taken into account. Additionally, most of these areas have high unemployment, and those moving to or staying in these cities are either bound to find a lack of opportunities or must create their own. Or, as part of the Salon.com piece gets into, Youngstown, Ohio, is attempting to shift its industrial focus to software in order to attract workers from this age demographic.

Could these Midwestern post-industrial cities experience a resurgence of real estate and population over the next few years, or could crime, lack of jobs, and poor management deter new residents?

Related articles

• Saving Cities: Completing the Rust Belt Documentary (buffalorising.com)
• Brain Drain Revitalizing Rust Belt (sustainablecitiescollective.com)
• From Rust Belt to Green Belt (buffalorising.com)

When it comes to the internet, there’s really no such thing as too much exposure. But, on the other hand, there can be too little, resulting in less traffic and interested buyers coming to your website. Such a scenario is commonplace for e-commerce stores but, in modern times, also applies to real estate.

No longer just a brief description in the newspaper, a property for sale often automatically ends up online through an MLS listing or an agent’s social media, but only buyers with full access through a Realtor® can obtain all information. Instead, to get their properties seen and sold, independent sellers can make use of more common online properties.

A piece from MercuryNews.com explains why putting real estate online is the current strategy for getting a property seen and sold. As with all internet marketing efforts, advertising a home online is placing it where the buyers are, instead of expecting them to go to you. Aside from MLS listings or social media, more accessible options include Trulia, Craigslist (it’s not just for apartment renting), and even eBay.

But, as MercuryNews.com points out, how a property is advertised online is particularly crucial. As with all real estate listings, an online description must be accurate, to the point, and accompanied by quality photographs. Additionally, those looking for greater exposure should consider working with a broker; however, a quality broker does more than put a link to a profile up on Craigslist, so, if you plan to take this route, ask about his or her approach to advertising. A good broker, as well, is similar to an agent: aware of the area’s real estate and able to connect you with the right buyers.

If you are considering advertising your home without an agent, understand that a significantly greater amount of work is involved. Even if you hit all the right visibility targets online, be aware that you’ll be responsible for showing all potential buyers your property.

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Ever since the real estate crash in 2007, banks’ discriminatory and illegal practices have been exposed, from targeting minority customers with sub-prime, adjustable rate mortgages to robo-signing foreclosure paperwork. The latest is distinct discrimination regarding foreclosed properties in African-American and Latino neighborhoods.

Once a bank assumes a foreclosed property, the financial institution has a responsibility to keep it properly maintained and advertised. However, a report from the National Fair Housing Alliance (NFHA) reveals six of the nation’s largest banks in nine urban areas were ignoring these two aspects of Real Estate Owned (REO) properties in African-American and Latino neighborhoods.

The report shows that, when REO foreclosures in these communities were compared to those in white neighborhoods, the latter generally received preferential treatment. As the Huffington Post mentions, the report found a large percentage of REO properties in African-American and Latino neighborhoods had more than 10 marketing or maintenance problems, from no “For Sale” sign out front to neglected upkeep. The latter of these two particularly ends up downgrading the cost of the foreclosure and takes the rest of the neighborhood’s prices with it.

As the Huffington Post points out, all of these practices are illegal under the Fair Housing Act (FHA), and in response, NFHA and the U.S. Department of Housing and Urban Development is filing a complaint against these banks.

With pervasive practices like this, along with robo-signing and pushing larger-than-necessary subprime loans on minorities, should banks be absolved of all related responsibilities, such as Bank of America’s extended settlement with the U.S. government to reduce its $850 million in penalties? Is assisting homeowners in need sufficient, or should such giant national institutions be properly punished for discrimination, disorganization, and poor management that essentially caused, worsened, and extended the housing crisis?

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• Banks More Likely To Let Foreclosed Homes Fall Apart In Black, Latino Neighborhoods (thinkprogress.org)
• Really? Banks neglect minority-area foreclosures (lansner.ocregister.com)
• Banks More Likely To Let Homes Get Run Down In Minority Neighborhoods (aboriginalpress.wordpress.com)

Less than a month ago, a settlement between five big banks and the U.S. government was drawn up, but since then, Bank of America extended its share of the deal. Reported by the Wall Street Journal, the bank with the greatest liability in the foreclosure crisis has traded in larger cuts to buyers for reducing its $850 million in penalties.

The deal, so far, has not been extended to other banks, which are required to reduce mortgage balances by no more than 120 percent. Through Bank of America, 200,000 households will have their rates lessened by more than $100,000 percent on average. Also unlike other banks, some of Bank of America’s mortgages originated from Countrywide Financial, which the large chain bought out in 2008. Countrywide, as you may be aware, turned its loans into securities, and the balance reductions may affect investors in return.

While the settlement is officially getting filed on Monday, states are already thinking about spending their share of the settlement, as not all is being divided amongst the five big banks. On the other hand, much like the repercussions of earlier mortgage relief efforts, scams are popping up, particularly as homeowners with loans through Freddie Mac and Fannie Mae are not being compensated in any form, at least as of yet.

Consumer Reports warns of home loan modification scams and offers suggestions for determining which efforts are legitimate. In general, they recommend, a loan modification service never charges you for help and must not ask you to sign papers immediately. If they do, it’s certainly a scam operation, and the consumer protection magazine states that free assistance for loan modification is available through the government. Additionally, a homeowner’s payments must always go toward the mortgage company – never an outside source.

Related articles

• Bank of America to reduce loans for homeowners (seattletimes.nwsource.com)
• Bank of America outlines mortgage relief aimed at 200,000 homeowners (oregonlive.com)
• BofA to slash mortgage balances by $100,000 or more (money.cnn.com)

Last week, we discussed the $26 billion settlement between the government and large, big-bank mortgage lenders. While a large portion of this amount is going directly to homeowners hit by the foreclosure crisis, $2.7 billion has been directed to 49 state governments, but no provisions for allotment, distribution, or usage are in place. As a result, the Huffington Post points out, states are putting their amounts toward closing budget gaps.

Do you think is a flagrant misuse of funds? Not all states think so. In fact, several see the foreclosure crisis as a widespread and painful hit to the local economy, and in response, putting the settlement’s funds toward the state budget makes sense. Missouri is one such state, and the foreclosure settlement funds are being set aside for colleges and universities. Gov. Jay Nixon told the press:

“Clearly the economy was affected all across the country by foreclosure challenges, and I think it is apt and appropriate to use those dollars to help restore some of the challenging cuts that I was forced to make.”

On the other hand, citizens think such usage is illogical and, perhaps even, harmful. In response to Missouri’s allocation use, a St. Louis homebuilder stated to the press:

“It’s like taking tax money that was supposed to go to road improvements, and then suddenly the bridges are falling down and you don’t know what to do about it. That money should go to something that can directly improve the situation with the housing program.”

Who do you agree with? States intending to devote the funds toward foreclosure-related needs are putting them toward mortgage assistance hotlines, mediation between borrowers and lenders, children and the homeless affected by foreclosure, financial counseling, and legal aid.

Homeowners who borrowed from Freddie Mac or Fannie Mae are already being shortchanged by the settlement. Inappropriate use of funds on the state level may additionally continue to hurt those directly affected by the foreclosure crisis.

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• Ohio To Use Foreclosure Settlement Funds Meant To Aid Homeowners To Demolish Homes (thinkprogress.org)
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Last week, a mortgage settlement between the government and big banks was put into place. The agreement, which allots 20 billion to 1 million U.S. homeowners for lowering debts on their homes or for refinancing with lower interest rates, is considered by the President to be the largest federal-state settlement in history, and he said to the press:

“No compensation, no amount of money, no measure of justice is enough to make it right for a family who’s had their piece of the American dream wrongly taken from them. And no action, no matter how meaningful, is going to by itself entirely heal the housing market. But this settlement is a start.”

But, is this notion accurate? Although the settlement offers relief to some, nearly half of all homeowners (specifically, those with home loans through government housing finance agencies Freddie Mac and Fannie Mae) are left in the cold. So, what, exactly, will the settlement achieve? To break it down:

• Aside from the $20 billion, another $1.5 billion goes to approximately 750,000 homeowners who lost properties to foreclosure between 2008 and ’11. This amounts to $1,500 to $2,000 per individual.
• Banks have three years to distribute the aid.
• The amount banks give out is tied to their market shares. Bank of America will distribute $11.8 billion, Wells Fargo $5.4 billion, JPMorgan Chase $5.3 billion, Citigroup $2.2 billion, and Ally $310 million.
• The banks are being partially held accountable for their past practices, such as robo-signing.

Although all points are a small step toward resolving the financial crisis, a few negative points clearly stand out. First, why no aid to those with Fannie Mae/Freddie Mac mortgages? Although the government proposed incentives to the two entities, no plan or resolution has been reached. Second, economists think that the settlement will give no boost to the economy, as the amount is drawn out over three years. Third, $2,000 or less to each homeowner who lost property to foreclosure is really only a drop in the bucket.

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• $26B Mortgage Settlement a ‘Modest’ Help: Experts (newser.com)
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What happens to foreclosures once seized by the government? The properties, essentially, sit, empty and waiting for a buyer once they go up for auction. According to the Lancaster Eagle Gazette, the government is planning to sell about 83,000 foreclosures nationally in the near future, with the hardest hit areas being some of the first to be relieved of this burden. The foreclosures, once sold to investors, will become rentals.

The Federal Housing Finance Agency, the federal conservator of Fannie Mae and Freddie Mac, is overseeing this undertaking. Some state-level officials are uncertain of the investors’ intentions, as evidenced by the Gazette piece, but the Federal Housing Finance Agency isn’t taking just anyone. Experience and knowledge of real estate investment assets and risk management are the determining factors. Additionally, all investors will be pre-qualified for a given number of years.

Although this action would remove a significant number of foreclosures from the market (83,000 out of 200,000 government-owned), communities, such as the Columbus metropolitan area, are concerned, particularly about rentals being permanent and lowering the overall neighborhood price. At the same time, demands for renting are increasing, and more housing in this regard would better fulfill needs. Additionally, getting foreclosures off the markets – which, in areas like Las Vegas, significantly contributed to lowered prices and underwater mortgages – might bring some stability to communities hit hard by the housing crisis.

On a government level, turning foreclosures into rental properties lessens the Federal Housing Administration’s, Fannie Mae’s, and Freddie Mac’s burdens. As the latter two organizations were bailed out, rental properties end up lessening taxpayers’ losses.

Although foreclosures bought as single-family homes is the most ideal situation, it’s simply a pipe dream in today’s real estate market, marked by greater lending restrictions and undermined by widespread unemployment. Because foreclosures contribute to lower average prices and underwater mortgages, getting them off the market somewhat halts the plummeting prices.

Home sales, overall, picked up in November, but resuming the undulating, sine wave-like motion of the past four years, the real estate market took another related dip in December 2011. Sales of new homes took a particularly significant dive – the first in four months. As explained by Business Week, figures went down 2.2 percent for single-family properties.

2011 was reportedly the worst year for builders since 1963, but economists seem to think that demand will increase in 2012. On one hand, the average price per home is still plummeting; even with low mortgage rates, the market for existing and new properties is not appealing to buyers. Why, when no bottom is in sight, purchase a home, only to end up with an underwater mortgage a year later? The instability of the economy additionally contributes to the general apprehension surrounding home-buying.

Anika Khan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, quoted in the Business Week piece, explains the conditions more clearly:

“Builders continue to contend with a number of existing homes that are deeply discounted. We’re expecting a bit of a pickup in 2012, but we won’t see a meaningful increase as long as new homes are competing with those existing homes.”

So, with an apparent lack of demand, why should builders expect the market to go up, especially when a deluge of foreclosures is predicted for later in the year? Because fewer existing homes are for sale on the market, the demand for new properties may grow.

The constant flip-flopping of residential real estate does not indicate a clear path for 2012. While prices and sales of new homes continue to drop, figures for home sales overall increased in November 2011. Yet, more foreclosures are expected to come at any moment, and areas with particularly great price decreases over a 10-year period, such as Las Vegas, don’t seem to be improving. With some facets up and others down, where do you think real estate will go in 2012?

How many of you would purchase a former foreclosure fixed up by a 1990s hip-hop star? Dubious-quality songs, however, don’t become questionable real estate practices. Vanilla Ice, the rapper born Rob van Winkle, has transformed himself from a washed-up performer, one that appeared just a few years ago on Hit Me, Baby, One More Time, into a successful house-flipper with a reality television show on the DIY Network. A renovation show in the same vein as Extreme Makeover: Home Edition, The Vanilla Ice Project features Van Winkle and his team transforming a poor-quality foreclosure into a luxury home and then flipping it for a profit.

As one example of his show’s approach, Van Winkle described the new features added to a foreclosure in a Vulture interview:

“I built a lazy river in the backyard and put this tiki hut in the middle of it like an island. On the inside, I put in a pneumatic elevator; a panoramic, 200-inch 3-D gaming system room with vibrating chairs; and a cinema that looked like an auditorium out of a castle. Flush-mount iPads throughout the entire house in every room, because the house is a smart house, which means that with your smartphone anywhere in the world […].”

Like any reputable real estate professional, Van Winkle offers an investing course, albeit one that’s online. House-flipping, however, adjusts with the market conditions, and those taking his course – or any course on it, for that matter – must have reasonable expectations. A property likely cannot be fixed up to the level of a Vanilla Ice Project foreclosure, and it won’t reap in as large of profits as pre-crash flipped homes did. In fact, excessive house-flipping influenced the crash in some markets.

Rather, sales from house-flipping for the ordinary individual – and not a former rap star in his second career stage – may take months, and while a profit is earned, the amount isn’t a huge payday.