(Money Magazine) — Home sales are rising. Builders are buying lots. And prices are no longer in free fall. After so much pain, there are signs of life in the housing market.

But the “recovery” is far from universal. In many cities cheaper homes are selling fast — but mid-range properties are still lingering, and high-end homes are gathering dust. “The luxury market still looks ugly,” says economist Joshua Shapiro at economics consultancy MFR. If you’re selling or buying, your strategies should depend on the value of the home you want or own.

The bottom tier (hot)

The lowdown: A big chunk of the 1.9 million post-boom foreclosures have been among the least expensive 35% of homes. Bargain prices on these foreclosures and a new tax credit of up to $8,000 for first-time buyers have lured investors and would-be homeowners back to the market, even in hard-hit areas, says Pat Lashinsky, CEO of online brokerage ZipRealty.

Sales of homes between $100,000 and $250,000 are up 9% from a year ago. Meanwhile, many banks halted foreclosures earlier this year while waiting for details on the Obama administration’s foreclosure-prevention plan. Greater demand combined with less supply is providing a strong spark to the market. “Buyers in most areas are now going up against multiple offers,” says Lashinsky.

Buyers: See homes the first day they’re listed, and if there’s one you want, submit an offer immediately, says Phoenix realtor Susan Ramsey. Don’t expect a deep discount; prices for lower-end homes are stabilizing. Put down 20% or more, if you can, to compete with cash-rich investors. Offer not accepted? Check in with the seller’s agent a few more times; many deals fall through.

If you aren’t under pressure to move, keep in mind that the supply crunch is probably temporary. The foreclosure rate is expected to stay at record highs for the rest of the year, and as prices stabilize, more sellers will jump back into the market.

Sellers: Forget trying to compete with foreclosures on price. Some buyers will pay more for a home in move-in condition, so spruce yours up and sell that fact hard in your marketing materials.

Many of the other listings are likely to be short sales in which the bank agrees to accept a price below what the owners owe on their mortgage. Since short sales can take months, offering a quick, flexible closing date will give you another advantage — and attract first-time buyers aiming to take advantage of the tax credit before it expires at the end of November.

The middle tier (cool)

The lowdown: Demand is soft. That’s because the likely buyers are trying to trade up — difficult for people who bought in the past five years, because they have so little equity. In fact, about a third of all homeowners with a mortgage owe more than the home is worth, according to First American CoreLogic.

Buyers: Unload your current home first, so you know what you can afford to spend on a new place. When you find a home you like, offer 10% less than the asking price — a realistic discount for a lukewarm market, says realtor Ramsey.

Sellers: If you have to move soon, it’s all about standing out from the pack. If your home is sitting on the market, go for one big price cut instead of slowly ratcheting down. A bold move will attract attention and prevent the listing from going stale. Offer to cover closing costs, and since many buyers will be short on cash after the purchase, throw in some necessary improvements, such as new carpeting, blinds, or painting.

If your home is in the half-million-dollar range, try to set the price at a level that doesn’t require a jumbo loan, normally $417,000 or less (up to $729,750 in pricey areas). The difference between a $400,000 conforming loan and a $420,000 jumbo loan is several hundred dollars a month. Finally, if you can hang in there, know that prices will likely start to recover within the next 12 to 18 months, says economist Shapiro.

The top tier (cold)

The lowdown: The recession and the credit crunch have almost shut down the top 10% of the market, says Joel Naroff, president of Naroff Economic Advisors. Fewer people can afford a luxury property, and since banks are hesitant to underwrite supersize loans, it’s tough to finance them.

Moreover, foreclosures are rarer at this price level, and homeowners, unlike banks, are reluctant to slash their price. Given all that, the prices on high-end homes will probably fall another 10% until the market hits bottom, says Mark Zandi, chief economist at Moody’s Economy.com.

Buyers: Get pre-approval before you shop: Jumbo mortgages are tougher to qualify for, require larger down payments (as much as 30% to 40%), and cost nearly a percentage point more than smaller loans. And ask for freebies: While sellers often balk at low-ball offers, they should be willing to negotiate, including paying closing costs and other extras. “You can set the terms,” says ZipRealty’s Lashinsky. If the seller refuses, move on.

Sellers: You’ll need to seriously undercut the competition. (Your agent can provide comparable sales figures for the past three months.) You may want to finance the deal yourself. And motivate buyer’s agents with a larger cut of the deal — a total of 4%, says Sacramento realtor Larry Henderson. It may be painful, but the price of your home is likely to fall further if you wait — and recovery for your market is a ways off.

4 local Chicago news blogs to keep an eye on… Each have built their base largely on highlighting local news for Chicagoans. Whatever neighborhood your digging unto check em out.

Gapers Block,
Chicagoist,
the Beachwood Reporter,
the Windy Citizen,

Everyblock

ChicagoNow

Huffington Post Chicago

david Roders article in the Sun Times (below) explains the ambiguity of the Old Post Office’ future. Driving under it each day on 290 it’s become a part of our psyche. Add that to the fact that one of the best Bat Man scenes was filmed there makes it a special place… And to have wushu washy developers who have failed to deliver in Liverpool in first position on the building is not a warming thought.

Here is an excerpt of the sun Times article today….
Old post office deal now in question
BY DAVID ROEDER Staff Reporter
Old post office deal now in question

Wed, 30 Sep 2009 04:00
BY DAVID ROEDER Staff Reporter

The sale of the Old Chicago Main Post Office remained a muddled …
Bill Davies, a globe-trotting investor who pledged $40 million at the Aug. 27 auction for the vacant hulk that spans the Eisenhower Expy., did not close the sale despite having the available funds, said a person representing him. ….[what options might be next]…

Those options could include opening talks with the bidder who finished second at the auction with a last offer of $39.5 million. That bidder is Investor Immigration Funds Inc., a partnership represented by Chicago immigration lawyer Nathaniel Hsieh.

Davies lists his company as International Property Developers North America Inc. and has told real estate experts in Chicago that he has access to European investors. International Property Developers released its own statement, saying it “decided to postpone its acquisition” despite having $41.2 million available in escrow.

The sum includes the purchase price and a 3 percent premium due to the property’s auctioneer.

The company said it and the postal service “were unable to reach agreement on certain key issues” concerning the redevelopment.

Hsieh said his group intends to close the sale in 15 days if given the chance. He said he expects to be the ultimate purchaser of the 2.7-million-square-foot building.

“If they can’t close today, they’re not going to close in 10 days,” he said of the Davies bid. “We can get this done. Legally and economically, it just makes sense for the seller to to come to us.”

Hsieh said his group consists of mostly Chinese and Russian investors. “This is actually our very first venture,” he said.

The post office, 433 W. Van Buren, has been the subject of many plans over the years and is listed on the National Register of Historic Places.

Davies has not explained what he wants to do with the property and has avoided interviews. He has failed at a number of attempts to redevelop parts of Liverpool, England, his former hometown.

Hsieh said his team wants to take over plans previously developed for the post office. Crafted by Walton Street Capital, the plan called for razing part of the massive building and retrofitting the rest of it for a hotel, offices and condominiums.

Finally ! The long stretch will be opened along Lake to create more vitality at the middle of the n’hood. Walk to wishbone for the Corncakes !

From the Chicago Trib: Residents, commuters and businesses in the West Loop, which has undergone a transformation from primarily a manufacturing district 15 years ago to a vibrant neighborhood with condos, town homes, arty shops and hip bars, are looking forward to a new elevated train station. Allyson Holleb, owner of a handbag shop near the proposed Chicago Transit Authority station at Lake and Morgan Streets, hopes it will bring even more people to the neighborhood. Construction could be a nightmare, she said, but it would be worth it to get a station.

$35 Billion Slated for Local Housing

By DEBORAH SOLOMON

WASHINGTON — The Obama administration is close to committing as much as $35 billion to help beleaguered state and local housing agencies continue to provide mortgages to low- and moderate-income families, according to administration officials.

The move would further cement the government’s role in propping up the housing market even as some lawmakers push to curb spending at a time of rising debt.

The effort, which could be announced as early as this week, is aimed at relieving pressure on government-operated housing finance agencies, which have been struggling to find funding amid the downturn. These agencies, or HFAs, are a small part of the housing market but are critical to many first-time and low-income home buyers, who can get lower-rate mortgages through an HFA than they could through a private-sector lender. Rates are typically 0.5 to one percentage point lower than commercial lenders.

Administration officials are concerned that HFAs have largely stopped making new loans, exacerbating the housing market’s woes.

Details are still being finalized. The plan requires formal approval from Treasury Secretary Timothy Geithner and the White House.

The program could be in place for as long as three years, and would involve the administration essentially buying the debt that these housing agencies rely on for financing.

The Treasury Department, along with government-controlled mortgage giants Fannie Mae and Freddie Mac, is expected to buy as much as $20 billion of new housing bonds issued by the state agencies. It will also provide $15 billion in additional funding, as needed, to help the agencies continue to use a type of cheap, short-term financing.

If the housing agencies default on their debt obligations, taxpayers could lose out. The Treasury plans to charge fees to agencies that want to sell new long-term bonds to the government based on their individual risk factors, to help reduce the risk of default and protect taxpayers.

Money for the programs will come from Fannie Mae and Freddie Mac and from the Treasury, using its authority under the 2008 Housing and Economic Recovery Act.

While policymakers are beginning to unwind some of the other emergency programs extended to financial markets during the financial crisis, housing remains a weak spot that some view as too fragile to survive without significant government backing.

President Barack Obama said in February his administration would find a way to help support state housing finance agencies. Such a move has been pressed by state and local politicians and by housing advocates. House Financial Services Chairman Barney Frank, a vocal supporter of such housing initiatives, was the author of legislation earlier this year that closely mirrors the administration’s plan.

The effort could trigger criticism, particularly from Republicans, for aiming federal funds at low- and moderate-income homeowners instead of other troubled areas, such as small businesses or commercial real estate.

The move also comes as some lawmakers are advocating less spending. Already, 40 senators are pushing to allow the Treasury’s $700 billion bailout fund to expire and direct any remaining funds to pay down the nation’s ballooning debt.

Rep. Scott Garrett (R., N.J.) said while he hadn’t seen exact details of the plan, he questioned whether the government should be aiming more money at the housing market.

“I don’t know that we can continue this pattern of having the federal government being the lender of last resort,” he said. “Most people are calling on the government to lay out an exit strategy. This just gets us further into the quagmire.”

More broadly, the move is an attempt to bolster the role of government in encouraging homeownership, especially among low-income Americans. Considered well-meaning by many, the principle has been blamed by others for fueling the housing boom that led to last year’s financial meltdown.

Some state HFAs guarantee loans while others originate mortgages. The agencies also develop affordable multifamily housing or provide financing to developers of such housing.

To qualify for an HFA loan, borrowers must have certain income levels — generally a percentage of a state’s median income — good credit scores and verifiable income. The criteria differ by state.

The agencies typically fund about 100,000 mortgages a year. In 2007, state HFAs issued $17 billion in bonds that funded 126,611 mortgages and some agencies were on track to exceed that level in 2008 before credit markets froze.

In total, HFAs have funded mortgages for about 2.6 million families, according to the National Council of State Housing Agencies. That’s about 4.6% of the 56 million first-lien mortgages outstanding.

The agencies aren’t in trouble because of subprime lending or bad loans. Rather, they have found it increasingly hard to find investors willing to buy the mix of tax-exempt and taxable bonds that HFAs sell to fund mortgages.

Interest rates have surged on municipal bonds, making it harder for the agencies to offer their less-expensive mortgage rates to borrowers. As a result, most HFA lending has come to a halt. California and Texas have suspended their lending activities altogether.

Ken Giebel, marketing director for California’s state housing finance agency, CalHFA, said federal support is critical if agencies like his are to continue funding low-rate mortgages. “Our basic mission is to give moderate- to low-income people low interest rates, but that can’t happen,” when borrowing costs are so high, Mr. Giebel said.

To help these agencies continue lending, the administration will commit to purchasing up to $35 billion of new long-term bonds and shorter-term securities.

The Treasury will try to jump-start new mortgage originations by purchasing up to $20 billion of new, fixed-rate bonds issued by housing agencies. Under the program being discussed, Fannie Mae and Freddie Mac would purchase the bonds and securitize them, then sell them to the Treasury.

The effort is expected to help lower borrowing costs since the government would buy the bonds at interest rates more favorable than housing finance agencies can get in the private market.

A second effort will set aside $15 billion to target an inexpensive type of financing used by many housing agencies to lower borrowing costs. Variable-rate demand obligations, or VRDOs, are a type of debt used to fund long-term bonds and typically carry interest rates several percentage points lower than regular housing bonds. Housing agencies sell them to investors who resell them daily, weekly or monthly at low short-term rates. About 38 HFAs have $30 billion in such debt outstanding.

The likely buyers have vanished, however, in part because many of the intermediaries that used to resell the bonds have been downgraded by credit-ratings firms and so investors are unwilling to do business with them. When an investor that’s bought VRDOs thinks they can’t be resold, it can demand that agencies pay off the debt under accelerated schedules and at high interest rates.

To ease the strain, Fannie Mae and Freddie Mac will temporarily act as a buyer of last resort for this debt. The administration hopes this will encourage debt holders to hold onto the debt, forestalling the need to pay it back quickly.

“ Is there no end to what politicians will do with our money to prevent the market from correcting to affordable and sustainable prices? The market will win. ”

— John Schmitt

August Illinois Home Sales Strong at the Entry Level
Statewide Median Price at $165,000

SPRINGFIELD, Ill. — Record low mortgage interest rates, favorable prices at the entry level, and the first-time homebuyer tax credit propel home sales in August. According to the Illinois Association of REALTORS® latest report, statewide total home sales (which include single-family and condominiums) in August 2009 reached 10,595 homes sold, down 3.0 percent from August 2008 sales of 10,923. The Illinois median price in August 2009 was $165,000 down 14.8 percent from $193,750 in August 2008. The median is a typical market price where half the homes sold for more, half sold for less.

“August proved a strong month for sales, particularly in the single-family market, as we move through inventories mostly for entry-level, lower-priced homes spurred by attractive interest rates, some improvement in consumer confidence and the first-time homebuyer tax credit,” said REALTOR® Mike Onorato, GRI, president of the Illinois Association of REALTORS®. “Foreclosures and short sales continue downward pressure on prices. A full recovery in the housing market hinges on relief on the foreclosure front, more jobs and more housing stimulus.”

In the Chicagoland Primary Metropolitan Statistical Area (PMSA), year-over-year home sales were positive for the second consecutive month, up 1.3 percent to 7,009 homes sold in August 2009 compared to 6,917 homes sold in August 2008. The median home sale price for the Chicagoland PMSA was $205,000 in August 2009, down 18.7 percent from $252,000 in August 2008.

“The Internal Revenue Service recently reported the $8,000 first-time homebuyer tax credit has provided a tax benefit to more than 1.4 million people to date. REALTORS® are urging Congress to extend the tax credit beyond the fast-approaching deadline of December 1 so more people can take advantage of it,” said Onorato, broker-owner of Onorato Real Estate in Coal City. “Also just now gaining awareness is the Illinois Home Start program, which offers eligible first-time buyers a short-term no-interest loan of up to $6,000 for the down payment in anticipation of the tax credit. With more time, these programs can really help sidelined homebuyers.”

According to Dr. Geoffrey J.D. Hewings, director of the Regional Economics Applications Laboratory (REAL) of the University of Illinois: “The size of the unsold housing inventory continues to make this a buyers’ market with an approximate value of nine months for Illinois and almost 11 months for Chicago at current sales rates. Absent an uptick in sales, it is unlikely that prices will recover much before the middle of 2010.”

The monthly average commitment rate for a 30-year, fixed-rate mortgage for the North Central region was 5.27 percent in August 2009, down 0.25 from the 5.52 average rate during the previous month, according to the Federal Home Loan Mortgage Corporation. Last year in August it averaged 6.52 percent.

Illinois’ official unemployment rate in August reached 10.0 percent and was above the 9.7 percent national unemployment rate.

In the city of Chicago, August total home sales (single-family and condominiums) totaled 1,928, down 7.2 percent from 2,078 homes sold in August 2008. The city of Chicago median price in August 2009 was $229,476, down 22.9 percent from $297,500 a year ago in August 2008.

“Homebuyers continue to be active, and the absorption of distressed inventory is the reason the number of units sold in August 2009 is nearly the same as this time last year. Still, the housing market in the Chicagoland area is far from robust, as most home sellers will attest. We strongly advocate for an extension and expansion of the American Recovery and Reinvestment Act’s first-time homebuyer tax credit program, broadened to include all buyers and favoring no taxpayer over another,” said David Hanna, president of the Chicago Association of REALTORS®. “Here in Chicago the move-up buyer and those with higher incomes are facing a number of additional financial and procedural obstacles that must be addressed.”

According to the IAR report, total home sales (single-family and condominiums) comparing August 2009 to the same month in 2008 were up in 32 of 99 Illinois counties reporting including Adams, up 5.8 percent; Boone, up 6.2 percent; Cook, up 0.7 percent; DeKalb, up 33.6 percent; DuPage, up 5.7 percent; Kendall, up 12.5 percent; Logan, up 30.8 percent; Rock Island, up 24.8 percent; and Sangamon, up 17.3 percent.

Sales and price information is generated from a survey of Multiple Listing Service sales reported by 37 participating Illinois REALTOR® local boards and associations. The Chicagoland PMSA, as defined by the U.S. Census Bureau, includes the counties of Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry and Will.

The Illinois Association of REALTORS® is a voluntary trade association whose 50,000 members are engaged in all facets of the real estate industry. In addition to serving the professional needs of its members, the Illinois Association of REALTORS® works to protect the rights of private property owners in the state by recommending and promoting legislation that safeguards and advances the interest of real property ownership.

Find Illinois market stats data at www.illinoisrealtor.org, click on Market Stats.

Crains mentions that the 2016 team is hunting fed cash…see below…

Chicago 2016 hunts fed cash

By: Paul Merrion September 28, 2009

Chicago and the Obama administration are exploring ways the federal government can bolster the city’s bid for the 2016 Olympic Games with financial support for the $1-billion Olympic Village.

Crain’s has learned that senior presidential adviser Valerie Jarrett and Lori Healey, president of the Chicago 2016 committee, met this month with top officials of the Department of Housing and Urban Development to discuss financing options for the village, the single biggest project — and question mark — in the city’s bid.

The main hurdle facing Chicago is coming up with a long-range plan for an Olympic Village that is commercially viable while meeting objectives of existing HUD programs that could be tapped for funds, such as low-income housing tax credits and grants or loan guarantees for community development, affordable housing or housing for seniors.

“I think it’s premature to talk about what the funding might be,” says Ms. Jarrett, a former co-chair of Chicago 2016 and city planning commissioner who now heads White House efforts to help Chicago’s bid. “A proposal has not been made to the federal government, but the administration is not closing the door” on anything, she adds. The administation “obviously (is) willing to meet and listen.”

While the Olympics in Atlanta and Salt Lake City received a few million dollars in federal housing funds, the U.S. government spent hundreds of millions on security, transportation and other infrastructure needs besides housing. In other countries, however, host governments have picked up or guaranteed most or all of the tab to house athletes.

With credit scarce and the housing market bleak for developers, merely a promise of federal help for the village could be an important talking point if questions about the city’s plan for housing athletes are raised during the International Olympic Committee meeting this week in Copenhagen. On Friday, the IOC will announce which city will host the 2016 games; Chicago is competing against Rio de Janeiro, Madrid and Tokyo.

“Given that uncertainty of financing for (Chicago’s) village was one issue raised by the IOC, clarification of that would be good for the bid,” says Ed Hula, editor of AroundtheRings.com, an Olympics news Web site.

The city proposes that the village be built on the former site of Michael Reese Hospital, just south of McCormick Place, by one or more private developers that would later convert the property into several thousand marketable condos and apartments. While the city has received non-binding letters of intent from several developers and their financiers, no agreements have been reached.

“We’re very bullish on this project,” says Ron Shipka Sr., principal at Enterprise Cos., a Chicago real estate investor that has lined up financing and expressed interest in developing the Olympic Village. While he’s confident the project can be financed, federal housing support “is obviously a help because it’s a source of money. It would be a great idea to have that.”

Experts say a concerted effort to tap federal housing and community development funds for the Olympics would be complex but achievable. “There are myriad programs,” says Steven Preston, who was HUD secretary during the last Bush administration. “You have to connect dots between what you’re trying to achieve and what funding is available.”

Originally, the plan was to convert 90% of the village into pricey lakefront condominiums. Chicago 2016 organizers now have committed to convert 20% to 30% of the village into affordable housing, and the Chicago Housing Authority has expressed interest in 15% of the project for public housing.

“You can see the emerging players coming together to make it work,” says Kevin Johnson, executive director of Chicago Rehab Network, a housing advocacy group that pushed for the 30% affordable housing component. “I can’t think of any reason why HUD money couldn’t support the village.”

Obama administration officials have said they plan to take an interagency approach to urban problems, so coordinated federal housing and transportation support for the Olympic Village could help address long-term needs of the South Side.

“The Olympics are a great opportunity for the Obama administration to show what it wants to do,” says MarySue Barrett, president of Chicago’s Metropolitan Planning Council, which has a task force developing long-term infrastructure goals for the Olympics. “We’re a laboratory.”

Greg Hinz contributed.

©2009 by Crain Communications Inc.

Here is an explanation and a list of the proper forms.

How to Get the First-Time Home Buyer Tax Credit (from the Illinois Assoc. Of Realtors)

You’ve decided to purchase a home and take advantage of the 2009 First-Time Home Buyer Tax Credit. Here’s what you have to do to get your benefit:

1. Close on your home purchase by November 30, 2009,
2. Ensure that you are a qualified first-time buyer under IRS guidelines,
3. Decide which year to file under, 2008 or 2009,
4. File an amended 2008 return or choose to apply the credit to your 2009 tax return.

Breaking News: Tax Credit Can Be Used on Closing Costs (REALTOR® Magazine).

Deciding When to Apply the Credit

If you want the benefits of your credit as soon as possible:

You might choose to file under your 2008 tax year. Since April 15 has already passed, you would have to file an amendment to your return. However, if you’ve already filed for an extension of your 2008 return, then you can simply claim the credit when you submit your return.

If you anticipate a drop in income next year:

You can wait to claim the credit as part of your 2009 filing. In some cases the value of the credit might be higher, particularly if in 2008 you qualify for only a partial credit because your income is over $75,000 (single) or $150,000 (joint).

Your Next Steps

Once you have determined which year to apply the tax credit, you will need to do two things to claim the credit:

1. Fill out Form 5405 to determine the amount of your available credit, and
2. File an amended return for your 2008 taxes, or wait and apply to credit when you file your 2009 tax return.

http://www.realtor.org/home_buyers_and_sellers/2009_first_time_home_buyer_tax_credit_how_to

Determining Your Home Buyer Tax Credit Amount: Form 5405

Applying the Home Buyer Tax Credit to Your 2008 Tax Return

Applying the Home Buyer Tax Credit to Your 2009 Tax Return

Bridge Loans: Using the Home Buyer Tax Credit Up-Front

Housing starts are up 3.3% from June to July.  Is this another signal that we may have reached the bottom of the housing slump?  It’s hard to say, but housing starts have decreased by over 70% since the peak of the housing boom.  In fact housing starts are even down some 50%+  from 1995 levels!  It’s safe to assume that housing starts should start gaining month over month (with some possible small declines in the winter months), but it will most likely be at a very slow pace.  Ultimately the unemployment rate needs to decrease to start seeing significant changes in the housing starts statistic in my opinion.  Builders are going to be hesitant to start major projecst, but there may be some builders that are trying to time the upswing, get land now and make a larger profit if there is an uptick in prices next spring.  We’ll see, only time will tell.  It’s probably a safe bet though that housing starts aren’t going to drop significantly more over the next 6 months to 12 months.  I’m more of the glass half full guy – 90% of people still have their jobs and still need a place to live!  Check out this article from the Wall Street Journal and their take on the housing starts stat and what it means.

After facilitating the economy’s downfall, the housing sector will soon start helping its recovery, though probably not by much.

Census Bureau data on August housing starts are due Thursday morning. Economists think starts rose 3.3% from June to an annualized rate of 600,000 units, the fastest pace since November 2008.

A tentative recovery in home construction might be enough to boost annualized gross-domestic-product growth by as much as 0.5 percentage point, according to some estimates, perhaps as soon as this quarter.

That would be an impressive turn of events. Collapsing residential construction slashed nearly one percentage point, on average, from GDP growth for the past 3½ years in a row.

That starts are gaining ground might seem quizzical, as there is still an oversupply of housing on the market, including a large “shadow” inventory of homes that will eventually enter foreclosure or that are being held off the market while their owners wait for prices to recover.

But many unsold homes might be too large for the first-time buyers that have boosted the market in recent months, spurred by government tax credits, suggests Ian Shepherdson, chief U.S. economist at High Frequency Economics. Home builders can make smaller houses to meet that demand.

Still, there are limits to how much activity is likely to be seen. Builders remain cautious. Though their sentiment has improved, it is still near record lows, according to the latest survey by the National Association of Home Builders.

August’s expected gain would still leave starts down 29% from a year ago and down 74% from the 2.27 million-unit record pace set in January 2006, at the height of the bubble.

Goldman Sachs economists, weighing population growth, inventory and still-high home-vacancy rates, estimate there might be just 850,000 housing starts in 2010 — roughly the pace before the Lehman Brothers collapse a year ago.

That suggests there mightn’t be much more juice in home-builder stocks. The Dow Jones U.S. Home Construction Total Stock Market Index has more than doubled from its November bottom and is near pre-Lehman levels.

It also suggests housing’s contribution to GDP will be minimal.

Still, it’s a start.

Write to Mark Gongloff at mark.gongloff@wsj.com

CITY OF CHICAGO DEPARTMENT OF COMMUNITY DEVELOPMENT
TAXSMART MORTGAGE CREDIT CERTIFICATE PROGRAMSERIES 2008

Is your income less than $72,384? Is your household income less than $105,560? If your answer is yes, you may be missing out on a little known program offered by the City of Chicago’s Department of Community Development.
I recently met with a client who has an income of $55,000 per year. The client is single and is looking to purchase for the first time in the City of Chicago. During our application I pointed out that there is a program offered by the City of Chicago’s Department of Community Development. The City of Chicago’s TaxSmart Program is a Mortgage Credit Certificate program. The Program has been put into place to give tax savings to a first time buyer (defined as someone who has not owned a home in the past 3 years) or to a buyer of a home in a targeted area. If purchasing in a targeted area is does not matter if you are a first time buyer or if you are a recent homeowner. The Homebuyer can apply for the mortgage credit certificate (an “MCC”) in conjunction with a TaxSmart mortgage loan from a participating lender (A&N Mortgage Services, Inc is a participating Lender).
The benefit of this program is an additional tax credit of 20% of the mortgage interest that can be taken annually. This credit can be taken annually as long as the home remains the primary residence of the buyer.
In a very basic example below here is the standard tax benefit of owning a home*:
SINGLE PERSON – DOES NOT OWN A HOME:

For a Single Person making $55,000 income it is assumed they would pay taxes in the amount of 20% (effective tax rate/bracket). So this would be $11,000 Federal Taxes Paid.

For a Single Person who PURCHASES A HOME:

For a Single Person making $55,000 income BY OWNING A HOME MORTGAGE INTEREST IS A DEDUCTION ALONG WITH REAL ESTATE TAXES. For this example we are going to assume mortgage interest write off is $10,800 and real estate taxes $3,000.
$55,000 (income) – $10,800 (mortgage interest) – $3,000 (real estate taxes) = $41,200 taxable income.
$41,200 is the taxable income at 20% (effective tax rate/bracket). So this would be $8,240 Federal Taxes Paid.

If you did not own a home you would have paid $11,000 in Federal Taxes, now when you own a home your Federal Taxes are $8,240 which is a $2,760 tax advantage. For this client, she typically would get a tax refund of $800.00 per year when she was not a homeowner, now she will receive $800 plus the $2,760 for being a homeowner.

IN ADDITION TO THIS STANDARD TAX BENEFIT of $2,760, MY CLIENT ALSO WILL GET BACK $1,719 ON HER TAX REFUND/1040’s BECAUSE HER INCOME FALLS UNDER THE LIMIT FOR THIS PROGRAM. THE 20% ADDITIONAL TAX BREAK CAN BE TAKEN EACH YEAR THAT THE HOMEBUYER HOLDS THE MORTGAGE LOAN AND USES THE HOME AS THEIR PRIMARY RESIDENCE.

Income Limits Non-Target Area Target Area
One Person Household $60,320 $72,384
Two Person Household $75,400 $90,480
Three or More Person Household $86,710 $105,560

Consult your mortgage professional for more details and specific information regarding this program.

*Consult your tax professional, Certified Public Accountant or Tax Preparer