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Q&A: What you need to know about real estate now

(MoneyWatch) After weeks of mixed housing news, many Main Street Americans are wondering just what's going on with the housing market. The federal government has stepped in on a number of occasions, but despite all the financial help, the housing recovery has been slow and painful. It leaves many people wondering where we are so many years after the housing bubble burst.

There's no definitive answer - after all, real estate is all about what's happening locally, not nationally. But I want to address some of the most common questions.

Q. What's going on with home prices?

A. As with everything in real estate, home prices are highly dependent on location, location, location. Select markets have seen home values improve, but the overwhelming national trend is a decline in prices. According to the latest S&P/Case-Shiller home price index, prices fell 4 percent year-over-year in the fourth quarter of 2011. (In Atlanta, home prices fell nearly 13 percent last year.)

Prices will probably continue to fall through 2012, due to big banks clearing out their foreclosure inventories. But as the year wears on and the number of REO homes dwindles, I believe prices will begin to rise - modestly - again.

Don't expect anything to happen quickly, though. It took us years to get into this mess and will take us just as long to get out.

Buying or selling your home? Local real estate markets

Q. Are foreclosures still happening at a rapid rate?

A. Foreclosure activity recently increased due to the big settlement between banks and states, but it's still down from one year ago. According to RealtyTrac's last foreclosure report, foreclosure filings were reported on 210,941 U.S. properties in January. That's a 3 percent increase from the previous month, but still down 19 percent from January 2011.

So, while banks are still foreclosing on homeowners, the velocity has slowed. Foreclosures are not happening at the rapid pace they were a few years ago. We should expect to see foreclosure activity increase a little in the coming months, which is not good news. But it needs to happen. Foreclosures keep home prices down and buyers from jumping into the market. Until we get through them, we can't begin a true housing recovery.

Q. What is the government doing today to help the housing market?

A. The government is actually doing a number of things in hopes of further stimulating the housing market. Many haven't worked (like the original loan modification programs), and others - like the Independent Foreclosure Review - have been poorly publicized. Those which have been touted as the cure for what ails the housing market have mostly failed. The programs I've received the most questions on are:

HAMP/HARP programs

The Home Affordable Modification Program (HAMP) is geared toward helping homeowners who have fallen on hard times. Borrowers must meet certain criteria and complete a trial loan modification of about three months. Ultimately, it's up to the lender whether or not you receive any help; as you might imagine, many borrowers receive nothing.

The Home Affordable Refinance Program (HARP) is designed to help underwater homeowners who are not in financial trouble. In other words, the value of their home has gone down but they can still make payments on time. The loan must be owned or guaranteed by Fannie Mae or Freddie Mac to be eligible for the HARP program.

By most accounts, these programs have been unsuccessful in doing what they set out to do: Keep people in their homes.

Independent Foreclosure Review

The Independent Foreclosure Review has been poorly publicized, and many consumers don't realize it's an option. The review is conducted by an independent agency and gives homeowners the opportunity to request a review of how their lender conducted the foreclosure of their primary residence.

The Office of the Comptroller of the Currency (OCC) recently extended the deadline for submissions until July 31, 2012. More information, including eligibility criteria, is available in my Independent Foreclosure Review post.

Foreclosure Settlement

The nation's largest lenders recently agreed to pay out billions to the states and drastically overhaul their industry after deceptive foreclosure practices and robo-signing caused many homeowners to lose their homes. But what does the foreclosure settlement mean for consumers?

Unfortunately, not much. Only 750,000 Americans, or roughly half of those eligible to receive assistance under the deal, will receive $1,800 checks. That's not enough when you've lost years' worth of mortgage payments.

It's hard to be optimistic about the terms of the settlement. It doesn't offer much to those who have already lost everything, and it's not clear if lenders will actually make significant changes to their practices. And, it's probable the cost of the banks' payouts to the government will somehow be passed onto the consumer.

Q. Is there an end in sight?

A. The housing market will rebound at some point, but it's unlikely we'll see the prices we saw during the housing bubble in the near future. In fact, some would argue we may never see them again.

It's possible there's been a fundamental shift in the way we view housing. James Bullard, president and CEO of the Federal Reserve Bank of St. Louis, makes the argument that current would-be homebuyers see homeownership as not worth the risk.

At a speech in New York, Bloomberg reports, Bullard said:

"My sense is that the housing debacle of the past five years may have scared off a generation of potential homeowners. New home buyers likely see homeownership as a fundamentally riskier proposition than earlier cohorts and therefore may be far more likely to rent rather than own."

With recent reports showing drops in home values and acceleration in foreclosures, it's unlikely we'll see "the end" any time soon. But I want to know what's happening with you. Email me with your questions or concerns about today's real estate market.

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