Home prices and sales volume drop further

While mortgage rates rise, home prices continue to drop – a trend that may soon change direction, according to several experts. In October, prices dropped (nationally) by a whopping 6.7 percent from the preceding month. That was the 10th consecutive monthly drop and the largest since early 1991.

“Sales of homes will likely start to rebound this year with price appreciation to follow,” said Patrick Newport, a noted economist with Global Insight, a consulting firm. The sluggish market has impacted the sales of newly constructed homes most severely. New home sales dipped to the lowest level in more than 12 years, dropping 9 percent in November from the previous month, according to a report from the U.S. Commerce Dept.

Major FHA changes coming

FHA home loans may soon experience a major revival as a favored type of home financing. Pending legislation would reduce the minimum down payment required (possibly to zero percent) and will increase the maximum amount that can be borrowed.

The FHA Modernization Act has finally been approved by Congress. After a bit of fine-tuning by a conference committee, it will be ready for the President's signature. When signed, it will be the biggest overhaul of loans insured by the Federal Housing Administration in many years, and will serve the needs of home buyers and owners who want to refinance their mortgage much more effectively.

“The bill itself is really very simple, the proposal straightforward,” said Brian Montgomery, with the Dept. of Housing and Urban Development. “It does just what its name suggests. It modernizes the 72-year-old Federal Housing Administration and restores the agency to its intended place in the mortgage market -- nothing more, nothing less. Yet, the impact of this bill may be tremendous.”

One segment of home buyers most benefited from the changes is persons and families living in particularly high priced areas. The new law would either raise the FHA loan limit to $417,000, the current limit for conforming home loans, or the maximum could be tied to the median home price in local regions. Either way, it would make the loans viable for many more buyers and owners, particularly in coastal California and Northeast communities where prices are highest. The required minimum down payment, now 3 percent, would be reduced to zero percent (House version) or 1.5 percent (Senate version). In the House version, the FHA would be able to vary the insurance premiums by applicant risk levels. The more high-risk applicants could pay higher premiums. The Senate version includes a one-year moratorium on a risk-based pricing system. These items will be worked out in a conference committee.

Property buyers look at Mexico

A growing number of U.S. citizens are looking across their nation's southern border, searching for a home or investment property in Mexico . “There are now about 1.5 million Americans living in Mexico , and that number is increasing,” said Adrian Arriaga, a Texas-based broker and consultant specializing in properties located in Mexico . “ Mexico is the number one destination choice for U.S. buyers of property in foreign countries.”

Compared with prices of U.S. real estate, properties in Mexico are real bargains, and there are other incentives for buying a property in Mexico . Cities are rapidly developing. Infrastructures have improved dramatically during the past couple of years, and such developments are continuing. Many growth areas offer outstanding opportunities for real estate investors. One of the first concerns expressed by prospective buyers relates to legal structuring of Mexican property purchase transactions.

“Generally, the laws of Mexico regarding the purchase of real property are similar to those of the U.S. ,” said attorney John Vernon. “For example, Mexican law recognizes real estate mortgages and various types of security interests in personal property. Also, in most real estate transactions, Mexican banks can act as escrow agents or trustees. However, there are some differences. When Americans participate in their first real estate purchase in Mexico , they are often surprised to learn that title insurance is not widely available. Foreign purchasers should take steps to ensure they have full title insurance. And there is no widespread use of purchase and sale agreements as such documents are understood in the U.S. ”

It's always a good idea to work with a Realtor and/or attorney in structuring a real property purchase. “The good news for investors is you can own property in Mexico free and clear, easily and forever,” said Dave Ash, author of “The Boom in Mexico Real Estate.” “Having lived here for six years, I am amazed at the changes and modern times that seem to have flooded into this area. Small fishing villages have evolved into modern cities with American-style life and mega shopping centers.”

“Green” in housing becoming popular

People are becoming more environment conscious and want to surround themselves with eco-friendly possessions. That includes their home. Housing experts see this trend as having a major impact the design, construction and decorating of homes in 2008. As energy prices remain high, homeowners are adjusting by adopting green principles to save money. They are creating an eco-chic home that will save money and enhance its value.

Even mortgages are affected by the trend. Major banks are offering “energy-efficient” mortgage loans for homeowners planning green renovations. Home design companies are becoming more environmentally friendly as well, introducing an array of options that allow consumers to go green without sacrificing style or busting their budget.

Many homeowners are taking their passion for interior decorating outside, turning their backyards into exotic environments. Basic pools will turn into tropical oases and outdoor kitchens will rival their indoor counterparts. Gardens will grow into jungles. More people are discovering the benefits of growing their own food. Home-grown produce saves money and is considered more nutritious than store-bought products, and they're consistent with eco-friendly living. Selected furniture will be more likely to reflect advancing technology. From nightstands to coffee tables, new designs include innovations such as dedicated storage areas to hide cables and power strips. The world is changing, inside and outside of the home.

Preparation pays off when selling a home

Preparing a home to be most appealing to prospective buyers is a key element in today's market when sales are generally sluggish. Buyers are out there seeking the best possible home that satisfies their needs and tastes, and sellers need to market their properties. Both parties are most likely to achieve their objective if the house is ready to create a positive impression with prospects inspecting it.

One rather simple but vitally important action is to declutter the house. Nearly all successful Realtors agree with this recommendation. Remove toys, furniture and decorative items that don't enhance the appeal of the residence. Prospects need to see space where they can envision their own belongings. There are an increasing number of professional “decluttering consultants” who can help in this process, but many homeowners can handle the task themselves. Look at your home from the perspective of a buyer.

When planning a remodeling project, keep in mind the baby boomer generation as they move toward old age. Modify your home in a way that will be appealing to this major segment of home buyers. This might include renovations ranging from the simple things like installing levered handle doorknobs (friendly to arthritic hands) to more complex additions, such as installing stair lifts.