President Barack Obama has signed legislation extending the $8,000 first-time-homebuyer tax credit beyond its scheduled Nov. 30 expiration and creating a $6,500 credit for longtime homeowners who buy new homes. With thousands of dollars at stake, it’s not surprising that potential homebuyers have lots of questions. We have the answers.

How does the extension work?

It’s simple: The old credit was scheduled to expire Nov. 30, so folks who hadn’t already signed a contract faced a daunting task to get a deal closed by the deadline. Some real-estate agents were writing provisions into contracts making the purchase contingent on the deals closing in time for buyers to get the credit.

Under the new law, the credits are available to qualifying buyers who sign a binding contract by April 30, 2010, and who close by June 30, 2010. The two-month period should offer plenty of time for last-minute buyers to get to the closing table.

Are the rules the same?

No. There are a few differences that apply to deals closed after Nov. 6, the day Obama signed the bill. First, the similarities:

• You’re considered a first-time buyer if you have not owned a home for at least three years before the date you settle on your new home.
• A credit is available only for the home you live in. It’s not available for rental properties or vacation homes.
• For first-time buyers, the credit is 10% of the purchase price of the home, up to $8,000. Therefore, if your house costs $80,000 or more, you can qualify for the maximum tax credit.
• The credit does not have to be repaid, as long as you live in your house for at least three years. If you sell or move out before three years, you have to repay the money as extra tax on your tax return for the year you sell or move. (The payback can’t exceed the amount of profit you make on the sale, though.)

Now for the key differences:

• Longtime homeowners can get a credit now, too, but it tops out at $6,500.
• You don’t get a credit if the house you buy costs more than $800,000. (There was no price cap for deals closed before Nov. 7.)
• The new law increases how much buyers can earn and still claim a credit. For deals closed before Nov. 7, the right to the credit gradually disappeared as adjusted gross income rose between $75,000 and $95,000 on single returns and between $150,000 and $170,000 for married couples filing joint tax returns. (Adjusted gross income is basically your income before you subtract your personal and dependent exemptions and your standard or itemized deductions.)
• Now the phaseout zones are $125,000 to $145,000 for singles and $225,000 to $245,000 for married couples.

When we signed our contract to buy our first home in October, we were kind of bummed because our $190,000 income meant we made too much to qualify for the credit. We won’t close until mid-November. Do we get a credit now?

You’re in luck. The new, higher income limits apply to deals closed after Nov. 6. Enjoy your windfall.

How does the new $6,500 credit work?

This credit is available to qualifying buyers who sign a binding contract by April 30, 2010, and who close on a new home between Nov. 7, 2009, and June 30, 2010. To qualify, you must have continuously owned and lived in a home for at least five of the eight years leading up to the purchase of a new home.

If you have owned and lived in your current home for at least five years, for example, you can qualify. If you bought the home you’re living in now less than five years ago, however, you won’t qualify.

The credit is 10% of the purchase price, up to $6,500. As with the first-time-buyer credit, this one is available only for the purchase of a principal residence, not a vacation home or rental property. And if you sell the place or move out within three years, you have to pay back the credit on your tax return for the year you sell or move. Homes that cost more than $800,000 are ineligible for the credit.

Income-eligibility rules are the same as for the first-time-buyer credit. The right to claim the credit disappears as adjusted gross income rises between $125,000 and $145,000 on a single return and between $225,000 and $245,000 for married couples filing joint returns.

It looks as if we qualify for the move-up credit, but we signed a contract to buy our home before the president signed the new law. We’re going to close at the end of November. Do we get the money?

As long as you close after Nov. 6, you can qualify for the credit. The new credit is often referred to as a move-up credit.

We plan to sell our home and retire to a smaller place. Is the $6,500 credit available only if you buy a more expensive home?

Don’t worry. “Move-up” is a misnomer often used to distinguish this from the first-time-buyer credit. It’s OK to downsize.

There are no rules about the cost of the house you sell or the home you buy, except that the new house can’t cost more than $800,000.

How do I claim a credit?

The procedure is the same for both the first-time-buyer and longtime-resident credits. Once you close on a qualifying house, you claim a credit on your federal tax return . If you close in 2009, you can choose whether to claim the credit on the 2009 return you file next spring or on an amended 2008 return. Choosing the amended return would bring you a refund of the full credit amount. If you claim the credit on your 2009 return, it will reduce your tax bill for the year by the amount of your credit.

This is what’s called a refundable credit , so if the credit reduces your tax bill below zero, you’ll get the difference as a tax refund. If you close on a home in 2010, you can claim the credit on either your 2009 or 2010 return. Sooner rather than later is the choice to make.

You’ll need to file a Form 5405 to claim the credit and include a copy of your settlement statement (such as the HUD 1 form) to prove that you bought the house. The settlement statement was not required for deals that closed before Nov. 7.  (…)

We bought a home Oct. 15, 2003, and sold it in August 2008. So we owned the home for slightly less than five years. We are renting an apartment now and are looking to buy a home. Do we qualify for the first-time-homebuyer tax credit as amended, assuming that we pass the necessary income tests?

Sorry, but based on the facts you present, you’re out of luck. To qualify for the first-time-buyer credit, you cannot have owned a home within the previous three years. You sold your previous home just 15 months ago. And it appears that your ownership of that home was a few months shy of five years, the minimum period of continuous ownership required for you to qualify for the longtime-resident credit.

Can I qualify for both the first-time-buyer and longtime-resident credits?

No. You can claim only one or the other. (…)

This article was edited for space restrictions; to read the full article please visit http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/homebuyer-credits-who-qualifies-now.aspx?page=1

 Published in The Independent Monitor December 2009 issue.

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Courtesy of CNN

(CNN) — Officials are looking into claims that Chinese-made drywall installed in some Florida homes is emitting smelly, corrosive gases and ruining household systems such as air conditioners, the Consumer Product Safety Commission says.

The Florida Health Department, which is investigating whether the drywall poses any health risks, said it has received more than 140 homeowner complaints. And class-action lawsuits allege defective drywall has caused problems in at least three states — Florida, Louisiana and Alabama — while some attorneys involved claim such drywall may have been used in tens of thousands of U.S. homes.

Homeowners’ lawsuits contend the drywall has caused them to suffer health problems such as headaches and sore throats and face huge repair expenses.

The drywall is alleged to have high levels of sulfur and, according to homeowners’ complaints, the sulfur-based gases smell of rotten eggs and corrode piping and wiring, causing electronics and appliances to fail.

“It’s economically devastating, and it’s emotionally devastating,” said Florida attorney Ervin A. Gonzalez, who filed one of the lawsuits. It would cost a third of an affected home’s value to fix the dwelling, Gonzalez said.

“The interior has to be gutted, the homeowners have to continue paying mortgages, and they have to pay for a [temporary] place to live,” Gonzalez said.

The CPSC has been investigating claims in Florida for more than a month, according to commission spokesman Joe Martyak. He would not confirm whether CPSC is checking other states or reveal how many cases it is probing.

The Florida complaints generally involve homes built or renovated in 2005 and 2006, when a building boom and post-hurricane reconstruction caused a U.S. drywall shortage that spurred builders to turn to imports, Martyak said.

The allegations come after a number of recent safety problems with other Chinese exports, ranging from toys to pet food.

Dick and Nancy Nelson, who say the Florida retirement home they bought new in 2006 has Chinese-manufactured drywall, contend all their appliances with copper are failing, according to CNN affiliate WFTS-TV.

“The washing machine, the dryer, the microwave, a refrigerator — these are all brand-new appliances, and they’re breaking down,” Nancy Nelson of Palmetto told the Tampa station. The Nelsons are among those who have complained to the state health department.

In a neighborhood in Homestead, Florida, owners of homes with Chinese-manufactured drywall say the dwellings smell like rotten eggs, especially on humid days, according to CNN affiliate WPLG-TV.

Electronics and appliances with copper components stopped working in short order, and copper pipes and wiring turned black, homeowners told the Miami station.

“My dream has turned into a nightmare,” one of the homeowners, Felix Martinez, told WPLG-TV. He said he closed on the home in August 2006.

Michael Foreman, head of construction consulting firm Foreman & Associates in Sarasota, Florida, said he’s been investigating drywall complaints in that state since last year and is sharing information with at least one group of lawyers preparing lawsuits on the matter. Based on shipping records, Foreman estimates the United States in 2006 and the first two months of 2007 imported enough drywall from Chinese manufacturers named in lawsuits to produce at least 50,000 homes at a size of 2,000 square feet each.

Florida ports alone took in enough of that drywall during those 14 months to build 30,000 homes of that size, he estimated, citing records he obtained from the Port Import Export Reporting Service, a company that collects information on cargoes entering and leaving U.S. ports. Foreman said he has yet to see import records from 2004 and 2005, years covering what he said was a building boom with a high demand for drywall.

Two Florida attorneys involved in separate class-action lawsuits, Gonzalez and Jordan Chaikin, said they, too, believe shipping records indicate tens of thousands of residences in the United States, with a good chunk of them in Florida, may have drywall from the manufacturers.

“The breadth of this thing is a lot bigger than people think,” said Chaikin of the Parker Waichman Alonso law firm in Bonita Springs. Chaikin said the problem is perhaps more easily recognizable in Florida because humidity exacerbates it.

An Alabama-based homebuilder alleges that Chinese-manufactured drywall in 40 houses it built in 2005 and 2006 — 32 in Alabama and eight in Florida — caused corrosion or odor problems. The builder, Mitchell Co., has filed a class-action lawsuit in Florida against certain manufacturers, attorney Steve Nicholas said.

“We filed on behalf of builders because we believe … they’re going to be the ones with the initial loss” to fix the problems, said Nicholas, of Alabama law firm Cunningham Bounds.

In Miami, Gonzalez filed his class-action lawsuit for homeowners this month. The suit names as defendants three China-based drywall manufacturers that the plaintiffs say are affiliates of Germany-based manufacturer Knauf Gips KG. Knauf Gips KG was also named, along with three Florida developers and two distributors.

The Miami suit seeks compensation and medical monitoring of the homeowners.

Joerg Schanow, a member of Knauf Gips’ board, said in a telephone interview with CNN that the Chinese manufacturers named in the suit are part of Knauf Group, but not controlled by Knauf Gips KG.

“We here in Germany do not manufacture Chinese drywall. [Knauf Gips KG has] never asked companies to manufacture Chinese drywall for us or on our behalf. And there is no relationship at all,” Schanow said. “I’m confident we will rebut this.”

On its Web site, the company says the Knauf Group operates 150 factories worldwide, including the three Chinese production facilities named in the lawsuit.

One of the Chinese manufacturers named in the suit, Knauf Plasterboard Tianjin (KPT), said in a statement released through U.S. representatives that tests by an expert toxicologist it retained found “no associated health risks with the KPT product.” KPT is still investigating whether its product has caused any corrosion, spokeswoman Yeleny Suarez said.

In a separate statement released through KPT’s U.S. representatives, lawyers said there is no basis for the other two China-based manufacturers, Knauf Plasterboard Wuhu and Knauf Plasterboard Dongguan, to be part of the lawsuit and the manufacturers “will defend themselves vigorously.”

At least two other class-action lawsuits — one in Florida, the other in Louisiana — name as defendants Knauf Gips, KPT and a Chinese drywall manufacturer not connected to Knauf, Taishan Gypsum Co. In a telephone interview with CNN, a Taishan Gypsum representative said “it’s impossible that our products are found to emit poisonous gas in America,” adding that the company didn’t export to the United States.

Martyak declined to say which Chinese manufacturers the CPSC is investigating.

And Foreman cautions that not all Chinese drywall manufacturers who exported to the U.S. are accused of supplying a defective product.

The Louisiana suit, filed by the Becnel Law Firm of Reserve, Louisiana, claims defective Chinese drywall was installed in a home in Pearl River.

The Louisiana Department of Health and Hospitals has received one complaint related to the drywall issue by phone, J.T. Lane, the department’s deputy chief of staff, said Wednesday.

The department is in touch with the Centers for Disease Control and Prevention and the Florida Health Department, and is “trying to determine what might be the public health impact for Louisiana and what the most appropriate response to this is,” Lane said.

 Published in The Independent Monitor November 2009 issue.

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August 26, 2009

WASHINGTON-Sales of new homes surged 9.6 percent in July, another sign the housing market is climbing back from the historic bottom it reached early this year. Driven by falling prices, the fourth-straight monthly increase was greater than expected.

The Commerce Department said Wednesday that sales rose to a seasonally adjusted annual rate of 433,000 from an upwardly revised June rate of 395,000. Sales are now up more than 30 percent from the bottom in January, but are still off nearly 70 percent from the frenzied peak four years ago.

The median sales price of $210,100, however, was down slightly from $210,400 in June and was off 11.5 percent from year-ago levels. Prices are still up from March’s low of $205,100.

Last month’s sales pace was the strongest since September and exceeded the forecasts of economists surveyed by Thomson Reuters, who expected a pace of 390,000 units.

In a kind of Cash for Clunkers effect, homebuyers are rushing to take advantage of a federal tax credit that covers 10 percent of the home price, or up to $8,000, for first-time owners. Home sales must be completed by the end of November for buyers to qualify.

Builders and real estate agents are pressing Congress for that credit to be extended. If it isn’t, sales could reverse their upward trend.

Some builders are already seeing sales dip.

At A.F. Sterling Homes in Tucson, Ariz., sales dipped in July because the builder said it couldn’t guarantee the homes could be finished in time to qualify, said Randy Agron the company’s vice president,

“The real estate market is really a fragile thing,” he said. “It’s not the right time to take (the tax credit) away.”

But still, the economy is healthier now, so sales are unlikely to fall back to the lows of last winter, even if the credit is discontinued, said Wells Fargo economist Adam York,

“People don’t have the sense of panic and dread,” about their futures, he said.

As sales rise, that’s likely to make builders more confident about getting going on new projects, and that’s likely to eventually lead to more jobs in the construction industry, which has been hurt badly by the recession.

“These are crucial elements of a sustainable recovery,” David Resler, chief economist at Nomura Securities, wrote in a research note.

Each new home built creates, on average, the equivalent of three jobs lasting one year and generates about $90,000 in taxes paid to local and federal authorities, according to the National Association of Home Builders.

There were 271,000 new homes for sale at the end of July, down more than 3 percent from May. At the current sales pace, that represents 7.5 months of supply-the lowest since April 2007. The decline means builders have scaled back construction to the point where supply and demand are coming into balance.

AP Real Estate Writer Alex Veiga contributed to this report from Los Angeles.

Published in The Independent Monitor September 2009 issue.

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August 18, 2009

The Federal Reserve and the Treasury Department said Monday that they will extend a key lending program aimed at freeing up credit including loans to build offices, apartment buildings and other types of commercial real estate.

The extension comes as the Term Asset-Backed Loan Facility, or TALF, has so far made little headway in reviving the ailing commercial real estate market, industry officials and analysts said.

According to analysts, the TALF is simply too small to stimulate the lending needed to boost the sector. For now, Obama administration officials have no plans to pour additional federal resources into the effort, said government sources familiar with their thinking.

Though the recession has shown signs of letting up and the housing slump appears to be nearing a bottom, the commercial real estate market remains mired in problems. Rising vacancies and falling rents have left commercial property owners unable to make mortgage payments, and the credit crunch has hampered their ability to roll over their debts, driving some into bankruptcy and forcing others to a sale.

Some analysts worry that a new wave of defaults is looming, which could add grief to the banking sector and cause regional and community banks to fail. Between this year and 2011, $814 billion in commercial real estate loans are expected to mature, according to the research firm Foresight Analytics.

As a result, the Fed and Treasury said they would extend the TALF, which lends money to investors buying highly rated securities backed by consumer, business and commercial real estate loans. When investors buy those securities, lenders can use the proceeds to make additional loans. As of Aug. 12, the program had $29.6 billion in outstanding loans.

The TALF, created last November, was set to wind down by the end of the year. It will now last through March 2010 for newly issued securities backed by consumer and business loans and for existing securities — created months or years ago — backed by commercial real estate loans. For newly issued securities backed by commercial real estate loans, the program will run through June 2010.

“Conditions in financial markets have improved considerably in recent months. Nonetheless, the markets for asset-backed securities backed by consumer and business loans and for commercial mortgage-backed securities are still impaired and seem likely to remain so for some time,” said a Fed release announcing the extension.

The Fed and Treasury also said they had no plans to open the program up to other types of collateral.

Many lenders have sharply curtailed new commercial mortgages, leaving many developers and construction companies in a bind. The results of a July survey of senior loan officers issued Monday by the Fed showed that 45 percent of banks tightened lending standards for commercial real estate loans, compared with 65 percent in April. However, the percentage of banks reporting weak demand for such loans fell only slightly, to 65 percent.

Over the next few years, developers and construction firms will need to refinance an estimated $3 trillion in commercial real estate debt. Many of these loans were issued during the construction boom earlier in the decade under the mistaken assumption that they would be refinanced on the same generous terms.

Since the credit crisis struck last year, few developers have been able to refinance their debt, endangering distressed and healthy properties alike. For instance, General Growth Properties, which owns Tysons Galleria mall in Northern Virginia, one of the most profitable shopping centers in the nation, filed for bankruptcy in April after it could not roll over its loans.

The problems of the commercial real estate market could also hit lenders, many of them small community banks and regional firms. Thousands of these firms wrote hundreds of billions of dollars worth of mortgages for new dentist offices, shopping malls and grocery stores. During the boom, these loans produced tremendous profits for the lenders, but they also required them to take on big risks because of the size of some of the commercial projects.

Now, a growing number of defaults on those properties is eating away at the capital held by these banks, forcing some to close. Some bank analysts say losses from commercial real estate loans are now the single largest cause of bank failures.

TALF has had some success reviving the market for commercial mortgage-backed securities, with some real estate investment trusts saying they plan to issue new securities later this year. But the larger problem is defaults, said Matthew Anderson, a partner at Foresight Analytics.

“For that end of it — the end of the market that is experiencing payment problems — I don’t see that TALF is going to have an impact,” he said.

Published in The Independent Monitor September 2009 issue.

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NEW YORK – Actor Stephen Baldwin’s foreclosed home in the suburbs north of New York City will be publicly auctioned.

Baldwin paid $515,000 for the 1.4-acre home in Rockland County in 1997. In 2006, he tried unsuccessfully to sell it.

County filings show Baldwin and his wife Kennya defaulted on more than $824,000 in payments to mortgage holder Bankers Trust Co.

The auction is set for June 24.

A representative for Baldwin couldn’t be reached for comment.

The actor has starred in movies such as “Bio-Dome” and “The Usual Suspects.” Recently, he’s appeared on reality television shows “The Celebrity Apprentice” and “I’m a Celebrity…Get Me Out of Here!”

Published in The Independent Monitor July 2009 issue.

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Courtesy of Forbes.com

May 28, 2009

There’s a long and treacherous road ahead for the U.S. real estate market and financials.

On Wednesday, the National Associ-ation of Realtors reported sales of existing homes rose 2.9% in April, to an annual rate of 4.7 million, compared with a downwardly revised pace of 4.6 million in March.

The report comes a day after the S&P Case-Shiller 20-city Home Price Index fell 18.7% in March over the last 12 months, slightly wider than the 18.4% decline economists expected and larger than the 18.6% drop in the year ended February. The 10-city HPI was down 18.6% over the last year.

Continuing declines in the first three months of 2009 led to a 19.1% decline in the first quarter compared with last year’s corresponding period, which is the largest quarterly decline in the 21-year history of the series. Average home prices in March 2009 are the same as they were in fourth quarter of 2002, and prices are down 32.2% from their peak in second quarter of 2006.

“Declines in residential real estate continued at a steady pace into March,” said S&P Index Committee Chairman David Blitzer. “All 20 metro areas are still showing negative annual rates of change in average home prices with nine of the metro areas having record annual declines.”

Though there have been some friendly signs from the housing sector, banks still have plenty to be concerned about.

David Pedowitz, a managing director and senior portfolio manager in the Private Asset Management Group at Neuberger Berman, is worried about the real estate market; the situation already seems serious in the commercial sector. “National office and retail vacancies are high and expected to rise, all the while rents are down,” Pedowitz said. “What you do as an analyst is identify the businesses with those kind of categories and make sure you stay away.”

There are lots of red flags in the residential housing market. Aside from prices remaining unsettled, Pedowitz pointed out that the effect option adjustable rate mortgages–sort of sleeper subprime mortgages–is still waiting to be felt.

“A lot of these were written from 2005 through the beginning of 2008, and what it could mean for foreclosures is scary,” Pedowitz said.

This could be a very rocky and drawn-out process for banks and other financial institutions such as Citigroup, JPMorgan Chase, Bank of America and Wells Fargo, along with regional shops like Regions Financial, SunTrust Banks and Fifth Third Bancorp..

Homebuilders KB Home, D.R. Horton and Centex won’t have it easy either, as depressed prices on existing homes undercuts demand.

Published in The Independent Monitor July 2009 issue.

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Courtesy of SmartMoney.com

Home buyers looking for a bottom in the real estate market may have been encouraged by housing data released earlier this week. Sales of existing homes rose 2.4% in May, according to the National Association of Realtors. The increase was a little less than most analysts had expected, but it represented the second straight month of improvement. Meanwhile, sales of new homes dipped 0.6% in May, continuing a trend of fairly flat months so far this year, according to data released by the Commerce Department.

Don’t get too excited – it’s still too early to say the housing market bottomed out, analysts and economists say. Distressed properties still account for about a third of all sales, and 29% of sales were to first-time home buyers, who are currently benefiting from an $8,000 tax credit.

The sales trends are telling. “You’re not really seeing a lot of move-up buying,” says Richard F. Moody, chief economist and director of research at Forward Capital, LLC. “There are so many vacant homes and so many foreclosures that [there's] not the normal trade-up pattern that you would have traditionally seen,” Moody says.

Housing prices fell nationwide during the first quarter, according to Standard & Poor’s Case-Shiller Index. The decline appears to be slowing: in February and March, the annual rate of decline did not set a new record, but home owners should take little solace in those numbers. “Based on the March data… we see no evidence that that a recovery in home prices has begun,” David M. Blitzer, chairman of the Index Committee at Standard & Poor’s, said in a statement.

All of this less-than-terrible news has left analysts cautiously optimistic that much of the country will start to see housing prices rise sometime in the next year or two. Looking at the nation as a whole, today through the spring of 2011 may be the window for those looking to buy a house at the bottom of the market, says Gary Hager, president and founder of Integrated Wealth Management, a New Jersey-based financial planning company.

A few markets where the housing crisis started earliest have already shown signs of bottoming out. Early-suffering cities like Denver and Boston are now seeing slower declines in home prices, which could indicate they’re already poised for a comeback.

And in some areas, buyers have seized on rapidly falling prices. Existing-home sales rose 9% in the Midwest in May, according to the National Association of Realtors.

“There will be regional differences in the turnaround,” says Maureen Maitland, vice president of index services at Standard & Poor’s. “Most economists I talk to are expecting the beginning of the turnaround to be sometime next year,” she says. However, she added, “the last market may not turn around for two or three years.”

For those hoping to buy at the best possible price, we’ve got a list of five cities where home prices may still have farther to fall. But keep in mind, getting a house at a discount is still not necessarily a house you can afford.

“In light of the housing market boom and bust, consumers should feel very comfortable financially” before deciding to buy, says Lawrence Yun, chief economist for the National Association of Realtors. “They should not try to overstretch their budget to get their dream home.”

1) Detroit

Housing prices fell 4.9% in Detroit in March, according to the latest reading of the Case-Shiller Index. That marked the city’s largest monthly decline since January 1991, when S&P’s backlogged data begin. Houses in Detroit are currently selling at 1995 prices – and with prices still falling so fast, it’s hard to say when the city will rejoin the 21st century.

“Detroit is Detroit because of the auto industry,” says Maitland. The whole Midwest is hurting from car companies’ woes, but Detroit is hurting the most.

2) New York City

Anyone who was hoping to see Wall Street suffer from the financial crisis can relax. New York may have avoided the nationwide implosion in home prices early on, but the city saw its largest-ever monthly decline in March, at 2.5%.

“New York may not be out of the woods,” Maitland says. “Because of what’s going on with the financial markets and the layoffs on Wall Street, New York may be one of the last places to turn around.”

3) Phoenix

Home prices in Phoenix have fallen 53% from their peak in June 2006, and the 2009 data suggest they’ve got farther to go. In March, prices in Phoenix fell 4.5%.

The Southwest has been one of the hardest-hit regions in the mortgage crisis. The region still faces a glut of recently-built homes.

“In Phoenix, you had some of the worst excesses,” in terms of overbuilding, Moody says. “The surplus of houses is so great that it could take two or three years” for prices to turn around. However, a steady influx of new residents into the region suggests the long-term prospects for the market are sound, he says.

4) Portland, Ore.

In the Northwest, median home prices are down but they remain above the national average. Portland’s prices fell 2.1% in March. Home prices in Seattle were down 2.0% for the month.

“Portland’s still going down,” says Dave McCarthy, president and chief executive of Integrated Asset Services, a real estate valuation and asset disposition and management company that collects data on the housing market.

The city “has remained pretty strong but they’re starting to feel some of the effects,” he adds.

The local labor market may be playing a role, Moody says. Portland’s unemployment rate was 11.6% in April, according to the Department of Labor. That’s well above the national average for the month (8.9%).

The Pacific Northwest bubble was among the last to burst, which could mean the market will be among the last to recover.

5) Minneapolis

Housing prices in Minneapolis fell 6.1% in March, the largest monthly decline of any metro area since data tracking began in 1987.

More than half of all March home sales in Minneapolis were due to foreclosure or short-sale activity, according to the Federal Reserve Board’s Beige Book, which gathers information on regional economic conditions. Foreclosed homes tend to drive prices down because “the bank’s best interest is to get the asset off their books” as quickly as possible, Maitland says.

Published in The Independent Monitor August 2009 issue.

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