The Real Story wishes you a happy holiday season and stellar 2012. We’ll be back in January with more insights and conversations. In the meantime, be sure to like us on Facebook to get our podcasts delivered directly to your news feed.The entire 2011 lineup of The Real Story is available on iTunes.

Warmest wishes to all!

If you’re considering renting a home while you restore your credit rating, consider this: the home you rent may be a foreclosed property, and the person you are paying first and last month’s rent plus security deposit is part of a real estate scam.

This very sophisticated—and sometimes, very expensive—scam has become so prevalent that the Department of Real Estate (DRE) has now posted a consumer alert about bogus rental properties on its web site: www.dre.ca.gov/cons_alerts.html.

This is a very slick operation, starting with ads listed in the classifieds or Craigslist that attract people looking for a rental home. Drawn in by the location or price of the property, potential renters make contact with “rental agents” who make appointments to meet at the properties, tour them through the homes, provide business card for contact information and present contracts or rental agreements. In some cases, not only does the fraudulent leasing company take the renter’s deposits, but it collects monthly rents—until the real property owner or its agent visits the home to prepare it for appraisal and sale.

The Department of Real estate offers this advice: carefully review the proof of ownership paperwork, ask for photo ID and then go to the DRE website to see if the person representing himself or herself as an agent of the owner is licensed. The DRE has a detailed consumer alert on its site, and a listing of phone numbers for consumers all over the state.

The Deficit Reduction Commission report, released last month by a bipartisan commission, suggested trimming the mortgage interest deduction (MID).

Currently, mortgage interest is deductible for itemizers with the mortgage capped at $1 million for principal and second residences plus an additional $100,000 for home equity loans.

The report proposes a 12 percent non-refundable tax credit available to all taxpayers (rather than a deduction), with eligible mortgages capped at $500,000 and no credit for interest from a second residence or equity loan.

The National Association of Realtors immediately sprang into action to “warn Congress of the potentially devastating effects of such a change on American Families and the economy,” according to their web site. Part of this effort is an ad in several prominent Capitol Hill publications that reads:

The Facts:
Repealing the mortgage interest deduction (MID) is a form of tax increase. Families with children would bear more than half of the total increase.

IRS data show that taxpayers in the 35 - 45 age group take the largest MID on average compared to any other age group of taxpayers.

First time home buyers would be hurt the most if the MID is curtailed.

Current data from the IRS show that 65% of the taxpayers who have claimed the MID made less than $100,000.

The housing market has not emerged from the crisis that began in 2007.

Congress: The Facts Speak for Themselves
The 1.1 million members of the National Association of REALTORS^® strongly oppose proposals to reduce the mortgage interest deduction (MID). Hard-working American families’ budgets are already stressed. Reducing or eliminating the mortgage interest deduction would pull even more money directly out of their wallets. If this crucial deduction is eliminated or reduced, home values will further erode. That’s something America simply can’t afford in this unstable housing market.

According to an analysis in the Christian Science Monitor, the current deduction is the second most expensive tax subsidy, expected to cost the US Treasury $104 billion in 2011. Many economists and budget watchers have long viewed it as a form of wealth transfer to the rich, since they benefit the most.

Will the MID remain on the table?  It will certainly not remain there quietly.  We’ll keep this topic on our radar, so log in for updates.

For the last four weeks running, mortgage rates have been inching up. According to Freddie Mac (the Federal Home Loan Mortgage Corporation), a government-sponsored enterprise, both fixed and short-term rates are up to 4.61 percent, up from 4.46 percent last week.

It doesn’t sound like much, but according to Frank Nothaft, vice president and chief economist of Freddie Mac, “Interest rates for 30-year fixed mortgages are now almost half a percentage point higher than the record low set in mid-November, which for a $200,000 conventional loan amounts to $50 more in housing payments.”

Is that $50-a-month jump keeping people away from the real estate market? According to the NAR (National Association of Realtors), existing pending sales were up by 10.4 percent in October, making it the strongest month since April, 2010. The Mortgage Bankers Association tells us that mortgage applications are up as well, with three weeks in a row of increases that represent a 17.7 percent increase in activity. Looks like Old Saint Nick might be driving a moving van this holiday season.

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When we sat down with economist John Burns of John Burns Real Estate Consulting, we learned of a few major changes on the horizon. John provided his economic viewpoint on the ecological and generational shifts we’re beginning to see take hold.

Ecologically, California’s greenhouse gas reduction initiatives encourage development near transit, which is not always financially feasible. John suggests a better approach might be to move jobs inland to where the cheap housing already exists, and to energize those economies so more people could work locally.

Generationally, 25 to 34 year olds will be ready to buy homes as the recovery gets stronger—a younger group with far different priorities than previous generations. Sometimes characterized as not very interested in home ownership, will this group take the plunge? John says yes, but time is very important to them and they’re not so willing to take on a long commute as previous generations.

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John Burns stopped by last week to talk to The Real Story about some of the issues that just don’t seem to go away in this prolonged recession…from consumer debt to FICO scores to foreclosures in the pipeline to the pleasure of purchasing a new home.

Where to start? John jumped right in on the subject of consumer debt, which he has charted as being as high as 50 to 60 percent of some consumers’ gross salaries, as a result, he says of Americans applying “the right to buy whatever the heck we want”. Consumers aren’t alone in their profligate spending, he reminds us—they have the government and business leaders to model themselves after.

He shared a shocking statistic—that currently approximately 5 million Americans are living in homes that they have not made a payment on in the last 90 days. Whether that number is an indicator of how slowly the foreclosure process is moving, how many people are playing the system, or how frustrated folks are at not being able to hear back from their lender, it is a whopping number of mortgage delinquencies that are yet to be dealt with.

John also defends Fannie Mae and Freddie Mac’s performance. He points out that since Fannie Mae was created in the 1930’s to create mortgage liquidity during THAT economic crisis, it is actually doing what is was supposed to do. He opines that had Fannie Mae had not been lending so aggressively, home prices could have fallen even further.

More from John today and every day this week, available on iTunes.