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Home prices rose modestly in October, mostly because of a flood of buyers seeking to take advantage of the government’s offer of a tax credit, data released Tuesday showed.

Underneath this apparent good news, however, were some disquieting signs of deterioration.

The Standard & Poor’s/Case-Shiller home price index, a widely watched measure of the housing markets in 20 metropolitan areas, rose 0.4 percent from September on a seasonally adjusted basis. It was the fifth consecutive month that prices were up.

But seasonal adjustments tend to hide any weakness in the cooler months, when fewer houses are sold. On an unadjusted basis, the index was flat in October.

“We’ve started to see the possibility of either a leveling off of prices for a few months or perhaps a double-dip,” said Maureen Maitland, the vice president for index services at S.& P.

Analysts have predicted for months that prices will resume their slump this winter, although most expect the drop to be moderate.

Housing remains under severe stress, and the government’s extensive and expensive support of the market is reaching its limit. While the tax credit has been renewed until next spring, its effects will probably diminish. And the Federal Reserve says it will gradually end its program to push down interest rates in the first quarter, in effect making houses more expensive.

Meanwhile, foreclosures are continuing to affect the market, and credit remains tight.

Dan Greenhaus, chief economic strategist for Miller Tabak and Company, wrote in a research note that “it is more than likely that prices have a bit further to fall which should help continue supply/demand rebalancing and help fix the ongoing issues in the housing market.”

The Case-Shiller index is down 7.3 percent from October a year ago and is off 29.5 percent from its peak.

Prices fell or were flat in nine of the 20 cities surveyed in October, the same as in September. But the recovery is beginning to diverge sharply by metro area, Wells Fargo’s chief economist, John Silvia, noted.

In the last three months, prices in San Francisco increased at an annual rate of 25 percent while Minneapolis was up 17 percent and Los Angeles rose 11 percent. Phoenix, long a laggard, rose 13 percent.

But New York, Portland and Boston were up less than 2 percent.

Las Vegas, the epicenter of the housing crash, shows no signs of recovery. Prices have fallen there for 38 months, and are now barely above the level at which they began the decade.

From the New York Times

The Valerie Fitzgerald Group specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of Heart and Sold: How to Survive and Build a Recession-Proof Business.

You may not be aware of the new appraisal requirements for a home purchase and how they’ve impacted the residential real estate market over the last few months. As a result of the new HVCC federal requirements, when a buyer applies for a loan to purchase a particular property, the appraiser for property must be chosen by a third-party appraisal service. In many instances, the appraiser assigned to the property is from outside the area and has no firsthand knowledge of the market being appraised.

Those of us who live and breathe residential real estate are well aware of the adverse effects this process can produce for both buyers and sellers, and how much more difficult it can make a successful close of escrow.

One of the key problems is the lack of knowledge these outside appraisers have on local residential markets. This brings into question: who really understands the true value of a home? Is it the experienced real estate agent, the buyer making the offer, or the appraiser crunching numbers based solely on statistics, who has never seen comparable properties? Does the appraiser know how to take into account the condition of the property, whether it’s been recently remodeled, the amount of flat land, the views, or the better location?

If you knew that when you bought or sold a home after May 1 of this year that your real estate agent was not allowed to speak to the appraiser, wouldn’t you be concerned? Isn’t it important for our professions to be working together and sharing important information about the market and home values? I’ve seen a number of deals fall through lately — at the last minute — because an appraiser who usually works in the Valley or Orange County turned in an appraised valuation that was far off the escrow sale price. As you can imagine, this can cause a deal to fall apart.

As professionals we were all on the same team until this change came along — make your concerns heard! CAR is supporting legislation that would put an 18-month moratorium on this new procedure, and I encourage you to contact your local legislators and ask them to do the same.

Here’s to all of our success!

Appraisal SHAKEUP

HOW TO COPE WITH THE NEW RULES FOR APPRAISALS

Challenging. Problematic. Wild. Bizarre.

These are but a few of the choice words REALTORS® have used to describe the new Home Valuation Code of Conduct (HVCC), which dictates certain practices lenders must follow with respect to appraisals related to loans they intend to sell to Fannie Mae or Freddie Mac.

The HVCC was worked out through an agreement between Fannie Mae, Freddie Mac, and the New York Attorney General’s Office (NYAG) in response to an investigation by the NYAG into Fannie and Freddie. The purpose of the HVCC is to insulate the appraisal process from undue influences by placing tight controls and restrictions on the ordering of the appraiser, as well as guidelines for communicating with the appraiser during the process. HVCC is a private agreement.

HVCC does NOT apply to FHA or VA loans.

The code, which became effective May 1, specifically prohibits practices that may influence or attempt to influence an appraiser’s opinion of a home’s value. For example, the code requires lenders to order appraisals themselves, rather than accept any appraisal completed by an appraiser who was chosen, hired, or paid by a mortgage broker, real estate agent, or other third party. The code allows an appraisal to be transferred from one lender to another, but only if the original lender gives written assurance that the appraisal is HVCC-compliant and the new lender accepts that assurance.

REALTORS Report HVCC Snafus

The HVCC mentions real estate brokers only parenthetically, yet REALTORS® have reported a variety of negative effects on real estate sales transactions.

Specifically, REALTORS® have noticed:

> A significant (and otherwise inexplicable) increase in the cost of appraisals.

> Valuations that have differed dramatically from perceived market values.

> An increase in alleged factual errors in appraisals.

> Delays of several days or as long as three weeks in completion of appraisals.

> Appraisers who’ve been assigned to value properties as far as 40 miles away.

New Rules Require New Practices

So how can REALTORS® cope with those challenges? Here are some suggestions:

>Allow for delays. Mary Lynn Pinto, a mortgage broker and broker/owner of Bayshore Real Estate Services in Salinas, says brokers need to write into real  estate sales contracts longer timeframes for removing appraisal contingencies. “The recommendation is to allow more time for contingency removal and contract periods,” she says. “We have a little less control than we used to in setting the contract dates.”

> Qualify the appraiser. Guy Rivera, a senior loan officer with Pacific Riviera Mortgage in Santa Barbara,

says REALTORS® should qualify the appraiser when he or she makes an appointment to inspect a home.To do so, the REALTOR® should ask about the appraiser’s experience and knowledge of the local area, Rivera suggests. A few questions REALTORS ® might want to ask are:

* How long have you appraised homes in this area?

* How many properties do you typically appraise in this area each month?

* How many properties do you typically appraise each day or on a given day?

* What are your data sources and how often are those sources updated?

If an unqualified appraiser shows up to inspect a home, the REALTOR ® should not let him into the home, Rivera suggests.

“We sent back a Ventura County appraiser who came up to do an appraisal in Santa Barbara County. We sent him away,” he says.

> Offer comparable sales data. The HVCC states: “It would be inappropriate for an appraiser to use

comparable sales data provided by the real estate broker who is handling the sale of the subject property, unless the appraiser verifies the accuracy of the data provided with another source and makes an independent investigation to determine that the comparable sales provided were the best available.”

That seems to suggest REALTORS ® can provide comps, but appraisers may choose to refuse, reject, or ignore the REALTOR ® ’s information if the appraiser can’t verify the accuracy of the information or

determines that other comps are better suited for the purposes of the appraisal.

Pinto says the REALTOR® should give the appraiser a current comparable market analysis (CMA) and explain the local market areas, even though that extra effort may be burdensome and the appraiser’s response may be disappointing.

“Don’t pull out the CMA you did to get the listing and hope that will work. You have to update it and give it to the appraiser at the time of the inspection. Don’t wait until after the inspection, and don’t do it through the lender,” she advises.

Here’s a related tip from Rivera: The REALTOR® may want to black out the sales prices on the comps that are given to the appraiser to allow him or her to accept the information and look up the details as part of his or her own investigation.

“Black out the prices, but have like properties and educate the appraiser as to the neighborhoods,” he suggests.

> Complain to Congress. REALTORS ® may have little opportunity to lodge formal complaints about the

HVCC through the mechanics of the code itself since the Independent Valuation Protection Institute (IVPI) envisioned within the code has not been implemented. The IVPI was supposed to set up and operate a telephone hotline and e-mail address to receive complaints.

Given that lack of redress, REALTORS ® should call their elected representatives and make their concerns heard, Pinto suggests. California Congressman Gary Miller has introduced H.R. 3044, which would place an 18-month moratorium on the recently imposed HVCC. C.A.R. is supporting H.R. 3044, and is asking California’s Congressional Delegation to sign onto the bill as a cosponsor.

“We are working hard to get an 18-month postponement,” Pinto says. “I would encourage REALTORS® to get a hold of their Congress people.”

HVCC Help

Office of Real Estate Appraisers: Stay abreast of California HVCC developments at www.orea.ca.gov.

Two weekly reports show Christmas has arrived early for mortgage borrowers, with rates at or near record lows.

Millions of additional people may be able to take advantage of the new and improved first-time home-buyer tax credit now, and it’s not just for first-time home buyers anymore. You may qualify.

President Obama signed legislation Friday to extend unemployment benefits to American workers. The law also includes provisions that vastly expand the number of people eligible for home-buyer credits by boosting the income eligibility limits, giving buyers more time, creating a $6,500 credit for longtime homeowners and launching more-accommodating rules for members of the military. Here are the details.

The $8,000 credit

If you were locked out of the first-time home-buyer credit in the past simply because you earned too much, there’s good news.

Now you can qualify for the full $8,000 first-time home-buyer credit with a single income of up to $125,000 and married income of up to $225,000. Those who earn more will be phased out.

The credit ends completely once single income exceeds $145,000 and married income exceeds $245,000. Still, that’s a big boost from the previous law that shut off the credit for singles earning more than $95,000 and married couples who earned more than $170,000. Other eligibility rules…

* You must not have owned another home for at least the previous three years.

* You must buy a home (or have a binding contract to buy) by April 30, 2010. Under the new law, if the sale doesn’t close on time, you can still get the credit as long as you’ve got a binding contract on the ending date, said Jackie Perlman, tax analyst with the Tax Institute at H&R Block in Kansas City.

* You must be older than 18 and not claimed as a dependent by any other taxpayer.

* The property you purchase cannot have been acquired from a relative.

* You must attach a copy of your settlement statement with your tax return to claim the credit.

* Most buyers also must continue to own this new home for at least three years. If they sell in less time, the government will demand that they pay the credit back, said Clint Stretch, director of tax policy with Deloitte Tax.

Special rules for military

The government will not require repayment of the credit if you are a member of the military and had to sell or stop using the home as a residence because of extended duty, however.

In addition, those serving outside of the U.S. during any part of 2009 or early 2010 will get an additional year to claim the credit. In other words, the credit ends for most people on April 30, 2010, but it lasts until April 30, 2011, for active-duty service members working overseas.

The $6,500 credit

The new law carves out an additional credit for current homeowners.

If you have owned and lived in a home for at least five consecutive years of the last eight years, you could qualify for a $6,500 tax credit, if you buy a new home between now and April 30.

The “five-of-eight” requirement means that this credit could accommodate people who lost their homes in the last year or two to foreclosure or even sold a house and didn’t immediately replace it, said John. W. Roth, senior tax analyst with CCH Inc., a Riverwoods, Ill., publisher of tax information.

Would you have to sell your residence for it to qualify for the $6,500 credit, if you wanted to buy a new one? Not necessarily, Roth said. The home you purchase must become your principal residence, so you would have to move there. But nothing in the law says you cannot keep your existing residence as a second home or rental, he said.

If you do choose to sell your existing residence, you need to pay close attention to how much you earn on that sale, Stretch said. That’s because taxable profits from the sale of your residence will be added to your other earnings to determine whether your adjusted gross income exceeds the allowable thresholds.

This credit also phases out for singles earning more than $125,000 and married couples earning more than $225,000.

On the bright side, some profits from the sale of a personal residence don’t count. That’s because taxpayers are allowed to exclude up to $250,000 per person or $500,000 per couple in profits on the sale of their personal residence from tax, if they lived in that home for two of the last five years, Stretch said. Only profits exceeding those excluded amounts would be included in income, he noted.

Getting muddled? Let’s look at an example to clarify.

John and Sue Smith own a home that they bought for $100,000 in 1965. They’re now retired and want to scale back, selling that home, which is now worth $750,000, and buying a smaller home with the help of the new $6,500 credit.

Their net profit on this sale would be $650,000, but they can exclude $500,000 of that gain from tax, based on existing law. They will have to add the remaining $150,000 capital gain to their adjusted gross income to determine whether they can qualify for the new credit.

If all of their other income adds up to less than $75,000, they have no worries because the $150,000 and $75,000 add up to $225,000 — the beginning of the credit’s phase-out range for married couples. If they earn more, however, they begin to lose their ability to take the credit.

There are other arcane rules relating to profits earned on the sale of a home, so those with substantial profits may want to consult a tax professional before banking on the credit.

“It’s really confusing,” Roth allowed. “It’s as if they took the old law and threw it in a Mixmaster. Some things still apply; others don’t. The time frames are all new. This is going to keep a lot of tax accountants in business for a long time.”

From the Los Angeles Times

The Valerie Fitzgerald Group specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of Heart and Sold: How to Survive and Build a Recession-Proof Business.

U.S. home prices appear have to scraped a bottom, with a leading national index showing three consecutive months of gains this summer.

The Standard & Poor’s/Case-Shiller index of home prices in 20 metropolitan areas showed a 1% increase in the seasonally adjusted median price of homes from July to August. The index has posted month-to-month gains since June.

“I think we have reached some kind of bottom,” David Blitzer, chairman of S&P’s Index Committee, said. U.S. home prices continued to decline in August, falling 11.3% when compared to the same month a year earlier, though not as steeply as past months, according to the data released this morning.

“This one looks real at this point,” Blitzer said. “The question more to me is whether this is going to sort of flatten out or if it is going to go straight up; if you get a month that goes down [going forward], I don’t think that it is much of a concern.”

Looking at the seasonally adjusted monthly data, 17 of the metro areas tracked by the index showed improvements in August when compared to July. Meanwhile, 19 out of the 20 markets showed moderation in their year-over-year rates of decline.

As of August, home prices across the United States are at their pre-bubble levels of autumn 2003, according to the index.

Southern California cities — San Diego and, in particular, Los Angeles — have seen notable gains, separating themselves from other Sun Belt cities, including Las Vegas and Phoenix, Blitzer said.

Los Angeles area prices in August improved 1.3% over July on a seasonally adjusted basis. The median price was down 12% when compared to the same month a year earlier. Home prices in San Diego rose 1.5% on a seasonal basis from July but fell 8.9% when compared to August 2008.

San Francisco area homes gained 2.6% on a seasonally adjusted basis over the month of July, an increase second only to Minneapolis. On a year-over-year basis, San Francisco area homes declined 12.5% in August.

Only the cities of Las Vegas, Charlotte, N.C., and Cleveland reported monthly declines in August. August home prices in the Las Vegas area dropped 0.3% when compared to July. Las Vegas also had the biggest year-over-year drop, falling 29.9% in August.

Las Vegas is “reeling” from the drop in tourism, oversupply in housing, construction crash and high unemployment, Michael D. Larson, a housing analyst with Weiss Research said.

Phoenix fared better, posting a 1% median home price increase in August over July. It also saw the second largest drop in the year-over-year number, down 25.1%.

Housing market analysts cited the federal government’s $8,000 federal tax credit for first-time buyers as an important factor in the housing market’s recovery of late. The credit applies to home sales that close through Nov. 30 and is part of the $787-billion federal stimulus package enacted in February.

Larson of Weiss Research said that while the credit played an important role, the most significant factor driving the housing market was the relative affordability of homes.

“The real question is what happens now,” he said. “You are going to see some give-back, you are probably going to see a pause in the recovery. But I think the fundamental story is that housing got way too expensive and now you could argue that housing is cheap again and that is what it boils down to in 50 words or less.”

From the L.A. Times alejandro.lazo@latimes.com

The Valerie Fitzgerald Group specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of Heart and Sold: How to Survive and Build a Recession-Proof Business.