These options won’t keep you from losing your house or damaging your credit score, but they will both ease and slow the process to give you time. Short selling involves the borrower selling the house at a fair market value that is less than the amount owed on the mortgage and then having the lender forgive the remainder of the debt. The other option involves handing over the property to the lender in lieu of waiting for foreclosure with the lender assuming the remainder of the debt.

Both of these options allow homeowners to escape with little to no debt, but no money or house to speak of. In contrast, foreclosures can result in lenders pursuing the differential owed to them. The two also allow borrowers to face a shorter waiting period before they can obtain another mortgage. These two options can help homeowners get back on their feet quicker than they would be able to through a foreclosure.

A cottage industry sprung up as a result - the so-called home inspection industry. It is not uncommon for unattended homes in hard-hit areas like Florida to have their doors kicked in, trash litered all over, and infrastructure materials inside missing. As a result, banks often hire these contractors to look over homes and ensure that they are undamaged.

The surge in foreclosures - which now sits at 3% of all homes - has meant good business for those that watch over houses. Individual contractors can often bill as much as $5,000 every two weeks in order to inspect and watch over foreclosed properties. This is a big bill for banks to afford in a time when they have already been hit hard holding all of these homes on their books.

So, what exactly do these contracts do? The first thing they do is document the house when they first arrive and present problems that need attention. They also change the locks on the doors, board up broken windows, cut the grass, and record any significant damages. Banks and mortgage companies are trying to avoid these damages through cash-for-keys programs that allow homeowners to turn over the house in good condition for cash payments.

However, while business may be good, some find it disheartening to work such jobs. After all, someone lived in those houses and now they are just empty and bolted shut.

Markets that have traditionally been safe, like Seattle, are also starting to feel the heat. Many economists believes that prices may fall an additional 10% nationwide before a recovery takes hold. This means that the home-buying season this year, which we are entering now, may be much weaker than many expected.

The twin threat of a rising number of foreclosures entering the housing market and an increase in mortgage delinquencies has created a cycle that could be difficult to end without government intervention. However, only certain areas are really affected by the increase in foreclosures: such as Phoenix, Florida, and California.

Some cities have seen stable prices despite a drop in sales, which seems to contradict logic. Manhattan, for example, has seen a 23% drop in sales but no signs of prices falling. This indicates that the majority of sellers continue to believe that the property is worth more and are not holding it with borrowed funds that may prompt a sale.

In the end, the housing market is continuing to deteriorate and it could be awhile before things are fixed. However, it appears that some markets are holding value better than others…

Texas-based D.R. Horton, famous for its slogan “America’s Builder,” reported a second quarter Tuesday with almost no good news in it:

-lost a staggering $1.31 billion, or $4.14 per share, compared to a profit of $51.7 million, or 16 cents per share, a year earlier.
-closed on only 6,719 homes in the period, more than a 30% drop from a year earlier.
-new orders fell 25% to 7,528
-cancellation rate of orders increase to 33% from 32% a year earlier
-backlog sales of homes under contract is 8,947, worth about $2.1 billion, compared to 16,885 homes, worth about $4.8 billion, a year earlier.
-average selling price of homes fell 9% to $245,000 from a year earlier.

D.R. Horton’s loss was nearly seven times larger than analysts’ expected loss of about 60 cents per share. The company was also forced to cut its dividend in half to 7.5 cents per share from 15 cents. Interestingly, D.R. Horton’s shares are practically flat Tuesday, though the company has lost about one-third of its value in the last 12 months.

Homebuilders as a group, including other major players like Pulte, Lennar and Ryland, have lost significant value over the last 12 months but have counterintuitively made back some of that ground since January 1 of this year.

Pulte trades today at about $14 per share, compared to as much as $27.50 last summer and as little as $8.50 this January. Lennar trades today at about $19 per share, compared to as much as $46.50 last summer and as little as $13 this January. Ryland trades today at about $33.20 per share, compared to as much as $47 last summer and as little as $21 this January.

Despite poor developments in the housing sector, these companies’ shares surged this year on hopes that falling home prices combined with lower mortgage interest rates would increase overall demand. Also, government intervention into the foreclosure crisis was taken as relatively good news for the homebuilders.

Unfortunately, these hopes have not come to fruition – according to The National Association of Realtors most recent reports on the U.S. housing market:

-the annualized sales pace is only 4.93 million homes compared to previous estimates of 4.95 million
-existing home sales plunged 19.3% in March compared to a year earlier
-new single-family home sales were down 36.6% in March compared to a year earlier
-median home price was down 7.7% in March compared to a year earlier
-home inventory rose 1% in March
-housing starts dropped 36.5% in March compared to a year earlier
-mortgage applications, as measured by an index, were down 20.4% in March compared to a year earlier

Though median home prices have fallen 7.7% in the last year and the average 30-year fixed mortgage rate is down to 6.03% from 6.16% a year ago – there has been no uptick in demand as the above data universally show.

Most troubling for Pulte, Lennar, and Ryland is the staggering 36.6% decline in new single-family home sales, their specialty, combined with increasing home inventory – which has the potential to force the companies to take massive write-downs on their housing inventory that they cannot sell.

The National Association of Realtors releases updated numbers across these measures over the next three weeks – and they probably won’t be good news, making the stocks of these homebuilders very risky bets in the short term. Taking a longer view, it is impossible to predict when the housing market will “bottom-out,” but renowned investors like Warren Buffett think it will be awhile, which means homebuilders have more painful months, if not years, ahead of them.

Michigan-based Pulte Homes just released first quarter results in late April that mirrored D.R. Holton’s results Tuesday – a much wider than expected loss due to hefty write-downs. Don’t expect anything different when the company releases second quarter results in July.

Florida-based Lennar Corporation released its disappointing first quarter results in late March with similar themes, as did Ryland Group in late April. Pulte and Ryland have the added pressure of Standard & Poor’s Rating Services having lowered their corporate credit and unsecured debt ratings to “BB” from “BB+” and to “BB+” from “BBB-” respectively on special concerns about the companies’ liquidity, making them the riskiest stocks of the group.

The take home message is with little hope for improvements in the macroeconomic picture for these homebuilders, buyer beware.

Condos offer flexibility in your living, short or long-term, along with ease of caring for the property and having to worry about rebuilding, remodeling, etc. As a condo owner or renter, it is a much more fluent act in the recent realty hits to have access to a condo. Whether you may consider buying a condo for a second home or to take part in a small realty hobby for a great investment, or if you are a student or single renter renting a condo, it only makes the most sense. Condo sellers react to market changes and act quicker than owners of single family homes, who tend to hang onto property in the face of lower prices.

Single-family house owners act like buy-and-hold value stock investors, riding out market peaks and valleys. They sell when they go through a life change such as raising a family, retiring, or moving for a new job. Condo owners act more like growth stock investors, who bet on the hottest companies and trade in and out of stocks much more often, reacting to what they perceive is happening in the market.

In looking back over the historical data of when the national housing market peaked, July 2005 topped the charts. It was the first month in four years that condo price appreciation was less than that of existing single-family houses. Condos are the more simple, more convenient, and more economically smart and fluid option in which to take a look at in the US housing market.

The typical pitch is that making refinancing a flexible tool that can reduce your bills by lowing interest rates and stretching out payments. The problem is that these low interest rates are often temporary and result in a vastly larger home mortgage to be paid off in the future. In fact, the move prompted The FTC to send warning letters to 200 lenders last year warning them that their ads were considered misleading. The other pitch is for those wishing to turn their home equity into cash. Using your home as an ATM can quickly become a problem when housing values decline which makes it very difficult in the future to sell or refinance down the road as we all know.

The U.S. government saw the rising foreclosures in 2007 and decided to implement a rate freeze program to help relieve homeowners. It negotiated with many different mortgage service companies, including Countrywide Financial, Citigroup, Washington Mutual and Wells Fargo to create a program that would prevent mortgage rates on Adjustable Rate Mortgages (ARMs) from resetting to a higher rate.

The program was designed to not only benefit a targeted group of homeowners but also the economy as a whole by reducing foreclosures. After all, it is a deadly cycle that has been put into motion. The rapid number of foreclosures has caused a huge surplus in cheap housing; this led to a decline in housing prices; and this led to less equity for homeowners which resulted in even more foreclosures.

The program itself will involve having these banks set aside as many as 1.2 million loans and not reset the interest rates for at least five years to keep costs manageable for homeowners. There are a few rules, however, to keep people from gaming the system. First, the plan would only be available to owner-occupied properties, which leaves investors out to dry. Secondly, borrowesr must be in relatively good standing with their current loan.

The problem with the system is that mortgage investors are being left out of the loop - and these are some very important people. The government went straight to mortgage companies to eliminate the rise in interest rates, which wouldn’t affect them at all. Instead, those investors holding the mortgage-backed securities will suffer substantial losses. Obviously, a lower interest rate for five years longer than expected is a problem when they were expecting to get much higher interest rates.

Many believe that the plan could end up hurting the mortgage industry by raising costs in the future. After all, investors that are now being hurt by the government have no insurance that they won’t do the same thing again in the future. So, their only choice is to raise the “risk premium” on the securities and charge future borrowers even more money. Moreover, the appetite for these types of loans in general could be significantly diminished.

Whether or not this was the right move by the government remains to be seen, but it is definitely a controversial program.

Residential construction spending continues to be the sore spot with a 0.8% decline compared to January and a 4.2% increase compared to the same month last year. The data reflects a continued rise in foreclosures amid falling home prices along with tightening consumer credit. The number was less than expected, however, after federal intervention has helped save some homeowners from foreclosure and encouraged banks to lend more money.

Commercial spending saw the largest increase with a 5.5% increase over last month despite a 13.1% decline compared to the same time last year. The market for commercial buildings was hit hard over the past year as companies cut capital spending and chose not to build new factories. However, the office market saw an 11.9% increase since last year despite this cut in spending, which suggests that companies are still keeping the offices open.

In the end, the Construction Spending report isn’t considered to be especially significant, but the rapid deterioration of the real estate market has put it into focus. These latest numbers suggest that the non-residential market may be on the rebound, but residential buyers may need some time before they start building again. Next week, investors will be able to get a better read on the market with consumer credit and pending home sales data.

The usual suspects, Miami and Las Vegas, topped the list of losses. Both cities posted declines of 19.3% compared to last year and were followed by similar declines in Pheonix, Washington and Minneapolis. Meanwhile, Carlotte was the only city on the list to avoid a year-over-year decline by posting a 1.8% gain in housing prices. However, even that city saw its numbers down from last month.

Yesterday, the housing market got some relief as one side of the supply-demand equation received a boost. New home buyers turned out in numbers to snap up cheap properties for the first time in seven months, but even that didn’t help curb the decline of housing prices. Meanwhile, the slew of houses in foreclosure will likely keep supply significantly ahead of demand for the next few years, pushing prices down even further.

In the end, the housing market appears to be far away from recovery despite a small improvement on the demand side in February. Many economists and experts are predicting that housing prices will not begin a recovery until 2009 and won’t see normality until as late as 2010 unless there is some significant government intervention to reduce the number of foreclosures being forced into the market by banks looking to get some money back.

The key to a successful storefront, as with most real estate projects, is location, location, location. In particular, storefronts with a large window in commercial districts in large cities make for the best opportunities. One of the best way to find these locations is to seek out residential areas that are being rezoned for commercial and purchasing property or options ahead of the curve.

The first thing to remember when pursuing one of these opportunities is to make sure you comply with all local ordinances. Specifically, regulations regarding advertising, lighting and signs as well as more complicated matters like parking and driveways. Often times, regulations like these are overlooked and can end up breaking a deal as requesting any special permissions from the city can take months to get approved.

The second thing to remember is to have tenants lined up, ideally before purchasing the property. If this isn’t possible, it may be a good idea to either put an option on the property until you can find tenants or make the tenant search a condition of the offer to purchase (this option is free!). In the end, these leasing a storefront can be a great way to earn an income while building value in commercial real estate - the land appreciates very quickly while the tenants have very little turnover.