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.

Online listings give a far fuller picture of a property than print advertisements ever could. Recall the semi-focused, black and white photos in the newspaper of yesteryear? These days, an online real estate listing gives multiple views of the outside and grounds and interior of a house or apartment. As a result, real estate photographers resort to strategies to make a property appear extra attractive in order to reel in potential buyers.

Profiled in the Wall Street Journal, David Paler is one such real estate photographer. Operating in the New York City area, Paler photographed 10,000 properties over his entire career, doing approximately three per day. Because photographs can significantly help out an agent, he considers a real estate listing akin to a dating profile – honesty is the best policy, but a few improvements can draw in more interest. About photographing difficult properties, he said:

“The majority of the time, you’re going into apartments that weren’t designed to be photographed. And you have to make them look really appealing, which is a skill.”

Much like fashion photography, attractive pictures of real estate depend on light, furniture and décor, and a bit of image-editing software. Natural and artificial lights, claims Paler, are both used and a few well-placed pieces of décor and furniture alter a space’s look. The camera’s angle is also necessary, but in some cases, this can make a room appear larger than it actually is. Software, additionally, won’t totally change a space’s appearance, unlike in fashion; it helps, however, in color correction, sharpening images, and taking out blemishes, such as scuffs. He went on to explain:

“It’s a tricky business because we have to shoot what’s there. [The property] can be utterly stunning or just awful and we have to really make the best of it.”

What’s the state of the real estate market at the start of the new year? Based on figures from November 2011, the consensus is, sales and average price aren’t as bad as they could be. Sales, more specifically, rose four percent from October to November and are a second month of gains. The National Association of Realtors reported in December that only 2.58 million unsold homes are still on the market – the lowest since February 2007. Additionally, the overall sales price increased 2.1 percent from October but is 3.5 percent lower than a year ago. About the slight hint of improvement, Eric Green, a Chief Economist for TD Securities said:

“We are seeing tentative signs of life in housing in terms prices and construction. The housing market is finding its bottom, and that will translate into more growth in GDP and less of a drag on consumer confidence.

“But we still have a long, long way to go. We could see some contractions here and there. The concerns are how much of this would translate into forward momentum into 2012.”

On the other hand, the gains might actually be greater than originally thought. At the same time this news was released, the National Association of Realtors also revealed that they overstated sales from 2007 through 2010 by roughly 14 percent: Homes sales per month were, in fact, 4.42 million on average, rather than the reported 5.16 million.

On the other hand, a flood of foreclosures and short sales is imminent, by predictions for 2012. The same information was predicted for 2011 (remember more foreclosures were predicted for 2011?), so 2012 may just be another reiteration that we’ll all hear for the next few years until the economy and real estate market are both stable.

What do you think of this slightly-positive news? Could the real estate market be gradually recovering, or are the improvements just another small hill that will dip down soon enough?

Over the past month, Occupy camps, often focused at a park or plaza in a city, are being broken up, but that doesn’t mean the protestors are disappearing. Rather, they’re venturing into other locations and, in some cases, new directions. One is Occupy Our Homes, beginning with Occupy Our Homes Day on December 5.

What, specifically, has been going on? In Oakland, the Occupy Our Homes movement took over a vacant duplex and demanded that this and other deserted properties be turned into low-income housing. In other parts of the country, protestors are siding with homeowners dealing with unresponsive and irresponsible banks.

Regarding these strategies, a member of Occupy Oakland’s Home Defense Committee told the press: “We are diversifying, trying to address issues people find most problematic. We want to put more pressure on banks and show how they caused this problem.”

As Occupy Our Homes gains momentum, Daily Finance examined the tactics used by the protestors. These include:

• Reoccupying vacant properties or moving in those without homes, including former homeowners.
• Shutting down auctions and scaring off bidders to prevent foreclosures from being sold.
• Working with banks to delay the foreclosure process.
• Working with banks on loan modification.

Movements to take back foreclosed properties are happening on both coasts. Take Back The Land, operating since 2006, has been focusing on helping people kicked out of their homes move back in. Presently, 1.6 million properties in Florida are vacant, while 57,643 individuals are homeless. Focusing on communities of color in Miami, Take Back The Land has allied with Occupy Our Homes but has additional goals in mind. Aside from moving individuals back into homes, they aim to cut down on gentrification, which ends up increasing the cost of living in poorer neighborhoods.

Last week, we published a list of the 13 real estate markets hit hardest by the housing crisis, courtesy of Forbes. With the exception of Boise, Id., and Tacoma, Wash., all other markets were in Nevada, Florida, California, and Arizona. But, with 50 states in the union, why are these struggling real estate markets clustered together? Associated Press discovered that house flipping had a great influence in these areas.

House flipping, for those that don’t know, involves an investor purchasing a property (or, usually more than one), fixing it up, and putting it back on the market at a higher price. In the first half of the 2000s, down payments were low and credit easy to come by, so investors, according to a report from researchers with the Federal Reserve Bank of New York, took advantage by purchasing multiple properties and putting them back on the market at a higher price. As a result, housing prices in these states practically doubled from 2000 to ’06.

Unfortunately, those who purchased these properties ended up seeing the average price drop significantly post-2007, and if they didn’t file for foreclosure, these homeowners are now stuck with underwater mortgages. As we mentioned roughly a month ago, underwater mortgages weigh down on the economy, preventing a full recovery.

Why was the proliferation of house-flipping discovered now and not four years ago? According to the Associated Press piece, this aspect of real estate went undocumented. To prevent such a crash in the future, however, the Federal Reserve Bank of New York report states that regulators must limit speculative buying.

House-flipping itself, on the other hand, hasn’t died out as the result of the real estate crash. Instead, investors are purchasing fewer properties, and those that are bought are likely foreclosures. As a result, the process an investor makes in the present from flipping houses is likely less than what would have been made pre-2007.

Which housing markets have seen the greatest drops in prices? Forbes compiled a list of 13 metropolitan areas in which housing prices fell eight to 15 percent over the past year. The figures were compiled by Local Market Monitor, which examined price drops from October 2010 to September 2011 and projected figures for the next year.

The 13 metropolitan areas and their rates of decrease are:

1. Las Vegas, Nevada – -15.2%
2. Boise, Idaho – -13.4%
3. Phoenix, Arizona – -13%
4. Tucson – -11.9%
5. Fresno, California – -11%
6. Orlando, Florida – -10.9%
7. Sacramento, California – -9.3%
8. Jacksonville, Florida – -8.9%
9. Tacoma, Washington – -8.8%
10. West Palm Beach, Florida – -8.5%
11. Atlanta, Georgia – -8.5%
12. Bakersfield, California – -8.5%
13. Stockton, California – -8.2%

Various factors went into these significant price drops. All markets have a large percentage of foreclosures. When a foreclosure is sold, the price is contributed to the average for the area, and with enough foreclosed properties in a city, the overall property value goes down. In Las Vegas, as we saw, as well as in other cities, nearly half of all properties are foreclosures, and prices have dropped 50 percent on some homes over the past decade.

The subprime housing crisis contributed toward many of these drops, but this isn’t always the case. In Boise, unemployment caused many to stop paying mortgages. About the price drop in her area, Cristina Pescaru, a Realtor with Gold Key Real Estate, told the press:

“Prices in Boise Proper specifically haven’t come down quite as much as people expect, but in other areas around the city, prices have come down as much as 50% from where they were a few years ago. I think we absolutely haven’t seen the bottom of the market here.”

Overall, nationally, prices only dropped 4.5 percent over the same time period. Since the start of the housing crisis in 2007, however, the overall national price is 35-percent lower.

When it comes to assessing the value of your home on the real estate market, what’s better, an agent or an estimation program? While the latter is definitely quicker, speed can make accuracy fall to the wayside. In some instances, being slightly off is insignificant; in real estate, however, gross inaccuracies are devaluing Connecticut real estate.

According to a piece in the Hartford Courant, Zillow.com, a popular tool for sellers in assessing the worth of their properties, uses an algorithm to assess a home’s worth, taking into account publicly available data like sale price, square feet, number of beds and baths, and recent home sales in the area. The site claims to not factor in foreclosure sales. Yet, while the site claims to have a 7.9-percent error rate nationally and 6.8-percent rate in Connecticut, a fair amount of sellers in Connecticut find that Zillow’s estimates are greatly above or below the actual value.

The Courant cites an instance in Glastonbury in which two home sales lowered average neighborhood prices, and about this, Enza Dandeneau, of Prudential Connecticut Realty in Glastonbury, told the newspaper:

“Zillow deals with absolutes and that is not always valid. You could have two houses, exactly the same style, one with updated features like granite countertops, central air and hardwood floors, and the other without. That makes a huge difference.”

On a similar note, Evan Berman, of ERA Broder Group in West Hartford, explained that a website can’t offer the same accuracy as a professional:

“The simple fact is they have never been on the street or the town, let alone stepped inside the house to see the condition and enhancements. If your house is above or below average, the Zestimate [Zillow’s estimate] is inaccurate.”

Essentially, consulting a website can be a reference point in selling a home and gathering information, but the value should not become the be-all-end-all in obtaining a price. While a website like Zillow takes into account only data, a local real estate agent is more familiar with each neighborhood’s and town’s market conditions and can produce a closer estimate.

Spending power, often resulting from wider-spread employment, and the ability to purchase homes go hand-in-hand. Once demand for new homes increases, prices go up and new construction, with corresponding jobs, is possible. Yet, for all the recent talk about unemployment holding back the housing market, real estate has itself to blame, somewhat.

According to a recent piece in The Week, underwater mortgages are a drain on both the housing market and the economy. Resulting from homes purchased during the housing bubble, underwater mortgages have resulted in borrowers owing $700 billion. Presently, 29 percent of homeowners, or 14.7 million people, are paying off an underwater mortgage – one that, in fact, may be two or three times the property’s current worth.

But what about refinancing or loan modification? Think about the disparity in prices between 2007 and the present. As The Week explains, the amounts owed by homeowners are still too much for refinancing or loan modification, and to keep credit in good standing, homeowners continue to pay off these outrageous debts.

The Week proposed the following solution to getting rid of underwater mortgages and, essentially, stimulating both the real estate market and economy: forgiving these debts. Sam Khater, an economist at real estate data firm CoreLogic told the press: “Until that negative equity recedes, the housing market is not going to recover. It’s a giant anchor that’s holding back the economy.”

What do you think the best solution would be? Housing prices may not reach 2007 highs for the next few decades, and until then, homeowners with underwater mortgages won’t put their properties up for sale or, worse, will file for foreclosure, which ends up lowering the average price per home. Yet, $700 billion is a large amount still owed. The Week hypothesizes that prices could continue falling until 2013, preventing recovery of the housing market.