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The idea that things are going to get back to "normal" Real Estate - wise seems to have bitten the big one today with a report issued by my favorite group of fiction writers, The National Association of Realtors.

After thoroughly blowing smoke up everyones collective ass for the last several years, they finally might be getting a handle on reality.
The National Association of Realtors' revised monthly prediction calls for U.S. existing home sales of 5.9 million in 2007, down from 6.5 million last year. The forecast was below last month's prediction of a 6.8 percent drop.

This year's sales would be the lowest since 2002, when sales hit 5.6 million. Home sale prices this year are forecast to drop 1.7 percent to a median of $218,200.

Seems that those suicide loans to risky borrowers have finally come home to roost, that and jumbo loans, that is anything over 400k or so are almost impossible to get. Now given that most houses in these inflated times have been going for prices way above anything that would be considered a Jumbo Loan it doesn't seem that sales are going to go up again any time in the near future unless prices fall substantially.

Next year, the trade group expects existing home sales to climb to 6.3 million. It forecasts new home sales will fall 24 percent to 801,000 this year and 741,000 next year.

The forecast comes as delinquencies among borrowers with weak, or subprime, credit have risen dramatically over the past year, and other loans are showing weakness as well

Seems that the suckers who've been gobbling up this bad paper faster than a bag of lead laced snack foods from China have finally gotten smart and closed the checkbooks. This, just as the fit has hit the shan, as my gramma used to say. Actually she used to say the shit has hit the fan, but I was trying to be polite.

Last week, the NAR said pending sales of existing homes fell in July to the lowest level in nearly six years as borrowers struggled to finalize home purchases, particularly in expensive areas.

Investors around the world have been spooked by the U.S. mortgage market's problems, amid uncertainty about how much they will grow. The Federal Deposit Insurance Corp. estimates that 2.5 million mortgages given to borrowers with weak credit will reset at higher rates and sometimes dramatically higher monthly payments by the end of next year.

Which brings us to the issue of all those mortages that were given away out there during the boom. Seems that one can't put an ad for a "Miracle Product" on TV or Radio anymore that claims it will grow hair, bring world peace, cure cancer, etc. unless it's for real and can deliver on it's promises. The days of the snake -oil salesman have gone, unless that guy on the back of the buckboard is offering you a sub-prime mortgage.

Now that the barn door is swinging wide open and the horse is eating the neighbors petunias are they starting to realize that "Hey! All those sleazy mortgage ads??? Well, they might be like...illegal????!"

What? Really? No shit.

The U.S. Federal Trade Commission said Tuesday that some advertisements for home mortgages might be deceptive and even violate the law.

The FTC said it had warned mortgage brokers and lenders, as well as media outlets carrying the advertisements, that the claims appearing on Web sites and in newspapers, magazines, direct mail, e-mail and faxes might be unlawful.

Warning letters were sent to more than 200 advertisers and media outlets, the FTC said in a statement.

Wow. That's big of them. Just in time too, or like who knows what might have happened? I mean people could really get in trouble with these wonky financial instruments, ya' know??? We wouldn't want that to happen. I mean that could lead to a bailout or something where we'd all have to pay for their mistakes and.......never mind.

The warnings stem from a nationwide review this summer of ads that failed to adequately disclose other important terms of home loans, the FTC said.

Questions of whether lenders inappropriately pushed home mortgages onto subprime borrowers -- those with poor credit histories -- are at the heart of the turmoil in that market.

Lawmakers and regulators are debating whether the federal government should oversee independent mortgage brokers and lenders.

Gee. Do ya' think???

So what're the Powers That Be planning on doing about all this? According to the Detroit Free Press, nothing.

The last thing somebody who couldn't pay the mortgage would expect is a tax document in the mail that proclaims they magically got an extra $20,000 in income they never touched.

But that's exactly the tortured tax picture that faces many troubled homeowners in Michigan and elsewhere.

Thousands of families could face an unexpected tax hit if they went through foreclosure, worked out some unusual deals with the bank to refinance or sold homes for less than the outstanding debt.
"This really adds insult to injury where someone is in a situation where they get hit with a tax bill on top of having to lose their house or refinance at a lower value," said U.S. Sen. Debbie Stabenow.

So they're just figuring this out now?

So Senator Stabenow wants to cut these guys some slack, and change this tax rule temporarily...that is untill the next bubble

It's one of those tax rules that not many people know about because home values have typically gone up, not down. Yet, it's a tax issue that now could have great impact on families throughout the country.

Yes, houses have always gone up ...that is when they haven't gone down.

This post first appeared on Sonoma Housing Bubble, please read the originial post: here

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