This new year might be the one in which the housing market starts to strengthen, according to the 2012 predictions of several housing industry observers and experts.

Jed Kolko, chief economist at Trulia.com, a real estate search and research website, says he sees rising rents, a humble recovery in housing prices and even some unexpected "hot" spots where he thinks price increases will exceed the average this year.

"Smart cities are hot," he said in his annual forecast, highlighting Austin, Houston, San Jose, Boston and Rochester, New York, as cities where home prices can be expected to see modest to healthy increases.

Rochester might seem a surprising addition, since the city lost many jobs when the photography colossus Kodak thinned its ranks. Seems things are rebounding; "In Rochester, a center of high-skill manufacturing industries, education levels are well above the national average," Kolko wrote. "As the recovery proceeds, smart cities are leading the way."

Kolko told Reuters his predictions are based on 14 months of U.S. job gains and the assumption that "there's no big crisis in 2012."

He also sees shrinking mortgage delinquencies in 2012, though foreclosures will rise as old delinquencies exit the paperwork pipeline.

Increasing demand for rental properties should mean higher rents, he added, but should also spark new construction to keep up with demand.

Mortgage rates should rise a bit, too, said Kolko; calling that a sign of economic strengthening. "Higher rates for a reason we can cheer," he said.

"I would double-down on (Kolko's) statement" on rentals, said Rich Arzaga, founder and CEO of Cornerstone Wealth Management in San Ramon, California and an adjunct professor in personal finance at the University of California at Berkeley. "This was going to happen even without foreclosures. If you look at the statistics on homeownership, it shows that people are buying homes later in life, and that the echo boomers will drive rentals for a longer period of time."

Jeffrey Rogers, president of Integra Realty Resources, a New York-based real estate valuation and consulting firm, also agreed with Kolko's assessment of the rental market: Multifamily units - that is, building with five or more units - "are one of the property types that still received funding for new projects throughout the downturn."

That's because builders are responding to the pressures created by the continual shortage of rental properties.

When it comes to "smart cities," real estate expert Dolores Conway, a professor of real estate economics and statistics at the University of Rochester, picked many of the same areas as Kolko.

In the case of Rochester, she said growth within that city's healthcare sector has helped stabilize its housing market, and her enthusiasm for Texas cities echoes his. ("The bloom's not off the yellow rose of Texas," Kolko wrote in his Trulia blog dated December 21.)

The optimism of housing pros for 2012 follows a fairly grim 2011. The Case-Schiller Index released at year end showed home prices for October dropped again in 19 out of 20 cities covered by the index. (The 20-city composite is down 3.4 percent compared to October 2010.)

Source: Reuters

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Three days before the end of 2011, in an effort to continue stabilizing home values and improve conditions in communities experiencing high foreclosure activity, Acting FHA Commissioner Carol Galante announced a temporary waiver of FHA's anti-flipping regulations through 2012.

"This extension is intended to accelerate the resale of foreclosed properties in neighborhoods struggling to overcome the possible effects of abandonment and blight," said Galante. "FHA remains a critical source of mortgage financing and stability and we must make every effort to promote recovery in every responsible way we can."

With certain exceptions, FHA rules prohibit insuring a mortgage on a home owned by the seller for less than 90 days. In 2010, however, FHA temporarily waived this regulation through January 31, 2011, and later extended that waiver through the remainder of 2011. The new extension will permit buyers to continue to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. It will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.

The extension announced at the end of 2011 is effective through December 31, 2012, unless otherwise extended or withdrawn by FHA. All other terms of the existing Waiver will remain the same. The Waiver contains strict conditions and guidelines to prevent the predatory practice of property flipping, in which properties are quickly resold at inflated prices to unsuspecting borrowers. The Waiver continues to be limited to sales meeting the following conditions:
• All transactions must be arms-length, with no identity of interest between the buyer and seller or other parties participating in the sales transaction;
• In cases in which the sales price of the property is 20 percent or more above the seller’s acquisition cost, the Waiver will apply only if the lender meets specific conditions, and documents the justification for the increase in value; and
• The Waiver is limited to forward mortgages, and does not apply to the Home Equity Conversion Mortgage (HECM) for purchase program.

Since the original waiver went into effect on February 1, 2010, FHA has insured nearly 42,000 mortgages worth more than $7 billion on properties resold within 90 days of acquisition.

FHA research finds that in today's market, acquiring, rehabilitating and reselling these properties to prospective homeowners often takes less than 90 days. Prohibiting the use of FHA mortgage insurance for a subsequent resale within 90 days of acquisition adversely impacts the willingness of sellers to allow contracts from potential FHA buyers because they must consider holding costs and the risk of vandalism associated with allowing a property to sit vacant over a 90-day period of time.

Source: Federal Housing Authority

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