There are too many outside influences affecting real estate sales. Monthly numbers have less and less to do with underlying market conditions.
The deficit reduction committee’s report suggests doing away with the mortgage interest tax deduction. I don’t think it will happen, but if it did, home ownership will become more costly.The Federal Reserve recently floated a suggestion to change the rescission rights of the 1968 Truth in Lending Act which was originally passed to protect the elderly from predatory lending. Now homeowners are using the rescission clause to fight foreclosures. Apparently this has become too inconvenient for lenders.The missing, lost, or fraudulent document problem has exposed the weakness and inefficiency of our present mortgage servicing and foreclosing processes. The documentation problem is very complex and defies a simple solution. It affects millions of mortgages. It was created by the lending industry, not the borrowers, but it’s the lenders who are receiving the bailout funds.Mortgage servicing companies are being accused of stringing out foreclosures to maximize fees and "default" interest rates.Tax consequences can be a consideration when timing real estate transactions, both residential and commercial. Taxes also affect ownership costs. There are only 26 days left till the expiration of the Bush era tax cuts and nobody can say for sure what will happen. Uncertainty is another thing that affects home buying and real estate investment decisions.Fannie Mae and Freddie Mac are submitting repurchase requests to lenders for mortgages that have defaulted and were not written to fit GSE guidelines. Fitch Ratings estimates banks’ total buyback exposure to all investors may range upward to $180B. They will not acquiesce willingly. Don’t look for a quick solution to the documentation issue. A graduating high-school senior (class of 2011) will have time to pursue pre-law and law degrees plus pass the bar exam in time to catch the tail end of this saga.As the Fed pulls extra liquidity out of the money market, mortgage interest rates will rise. We have probably seen the bottom. Although record low rates did not express themselves in increased home sales, rising rates will likely show their effects by putting a damper on sales and price gains.If it turns out that faulty documentation was the basis for a foreclosure, it will be the title insurance companies who are on the hook. These companies have already started to rattle their sabers at lenders, trying to put off future exposure onto lenders. But the title company vs. lender battle will spill out into the real estate community at large. Traditionally location, location, and location have been the three most important factors of real estate value. That may change to clear title, clear title, and clear title. If so, mortgage-free homes and those with a clear title paperwork trail might sell more easily and demand premium prices.Values in many deed restricted communities, especially condominium communities, are depressed. Excessive unpaid association assessments, vacancies, and foreclosures prompted lenders to refuse purchase mortgage financing within affected communities, limiting the potential buyer pool to those with cash or private financing. The result is even lower values which, in turn, create more foreclosures, etc. This cycle will persist until a healthy buyer market appears. Opportunities abound for the savvy buyer but beware of the risks.