An increasing number of young families and singles are moving to the countryside. Their aim is to escape the cutthroat competition in this bad economy and seek a better lifestyle. For instance, recently, a middle-aged couple, along with their four sons moved from their suburban Atlanta home to a five-acre farm in Wisconsin. The husband, who previously worked at a parking garage has not found a new job yet. He helps his neighbors on their farms while his family learns to raise chickens, do gardening and hunting.

His generation has not seen anything like the recession before and he believes that the fear is good, because it pushes people to do things that they normally would refrain from doing.

The rural market is holding up against the economic pressure much better than urban markets partly due to people like him, who are often referred as ruralpolitans- people who consider land as safe investment with the hope that it would prove to be more secure and stable option than their current job and 401(k)s.

People who buy land in the countryside can be broadly classified into 3 categories:

• People who buy it as an investment and hope to live on it someday
• City dwellers who buy the land to escape the city
• People who buy the land to engage in farming as a hobby

A 25-year-old freelance writer, relocated from Oregon to New York in 2006- the time when the economy slipped. She was forced to live frugally in a boarding room house and buy clothes from resale shops. Finally, this August, she flew to Montana to invest her $12,000 savings into a 12 acre plot of land. Though she didn’t buy that property, she is gung-ho about looking for more rural properties. She is now looking for a rural property with a house in it.

Small-scale hobby farming is flourishing as a hobby. Mother Nature Network, an environmental News website, raked 100,000 hits when it ran a piece “40 Farmers Under 40” this year, clearly showing the rising interest level in farming among the young people.

At United Country Real Estate Inc., the residential sale price rose 7% last year as compared to 2006, before the recession hit the market. According to the firm, prices are set to rise further by 2% this year.

A United Broker says that this may be due to the trend of younger generation moving to rural areas. Another United Country agent is of the view that 20 to 30 year olds now form almost 15% of his client base as compared to only a handful earlier.

However, not everyone can adjust to the countryside life. The picture does not seem very rosy when you actually get there with problems such as weeds, vermin and dirty well water adding to the woes.

Over the years, it has been observed that economic slowdowns or other devastation such as the Sept 11 terrorist attacks caused people to seek temporary escape. Also, people nearing retirement look for distant and remote properties. As per the U.S Department of Agriculture’s Economic Research Service, if people in their 50’s (baby boomers) continue to follow the trend, the rural population age (55 to 85) will rise by 30% between the years 2010 and 2020.

Some people look at rural living as a protection against future economic uncertainties. A 36-year-old employee at Intel Corp., grabbed the opportunity to start a farm in Missouri with his parents. He knows that his coworkers envy him. In his own words, “Everyone is looking for the next opportunity of hope”.

Factors such as Internet access, renewable energy options and related tax credits mean that the home will be more self-reliable and affordable in long run. This rural relocation has both its pros and cons. Whether this trend will continue in the future or will die a natural death, only time will tell.

written by REI Circle (www.reicircle.com)

The biggest story in banking and real estate over the course of the last year has been home and commercial mortgages and what has been deemed “the lending crisis.” The recent recession we find ourselves in owes a lot to people who have become “upside down” on their mortgages – meaning that they owe more on their homes or other properties than they are worth.

How did this happen? The main culprit is a boom in real estate values which caused home and building prices to rise, coupled with easy credit given away by lenders to borrowers who were left in the lurch when real estate values dipped. The final piece of this “perfect storm” which led to a national and global financial crisis was the prevalence of ARM loans; variable rate mortgages which were given to borrowers who either didn’t understand them or purchased properties which they couldn’t afford once their low monthly mortgage payment grace period ended and their higher payment period began. Whether the government who encouraged and allowed these loans or the lenders who issued them are to blame is not as important as figuring out how to clean up the mess.

A recent policy change is aimed at alleviating some of this current crisis in mortgages, however. Federal bank regulators have recently issued guidelines to banks to keep loans on their books as “performing” even if the value of the properties associated with these loans are lower than the loan amounts. The number of these underwater real estate loans is enormous and the hope is that banks will restructure these loans rather than foreclose on them. Some critics say that this move, which is mainly directed at commercial loans, is only going to prolong the problem rather than solve it, though.

The recently released guidelines, issued by the Federal Deposit Insurance Corp.(FDIC), the Federal Reserve, and the Office of the Comptroller of the Currency, provides guidelines for financial institutions working with commercial property owners who are having difficulties with cash flow, lowered property values, or difficulties in selling or renting their properties. For these borrowers, the guidelines point out; restructuring is often in the best interest of both the lender and the borrower.

This is not a change in the current rules, but instead is described as a more explicit explanation of current ones. This clarification is being issued in response to a barrage of questions directed at federal agencies in recent months involving the skyrocketing number of problem loans. Regulators have shown concern, however, that increasing issues with commercial real estate might work against economic recovery if left unchecked and allowed to continue to rack up record amounts of losses under these new rule “clarifications.” Other experts, such as FDIC Chairman Sheila Bair, feel that reworking the terms of commercial loans could actually help banks to avoid further losses.

Whether you side with the detractors or the supporters of these new rules, a few grim facts are certain:

• About $770 billion of the $1.4 trillion commercial mortgages that will mature in the next five years are currently underwater.

• More than 106 banks have failed this year – the most since 1992.

Something had to be done to slow the downslide in the mortgage industry, and this recent change in policy could prove to be a wise move over the long term. If successful, these new guidelines should help all of the banks who are carrying the hundreds of billions of dollars worth of loans which are coming due but cannot be refinanced because the value of those properties have fallen below the loan amount. Many of these properties are still generating enough income to service their loans and therefore should stay on the books.

Despite this philosophical change, however, some still say that this practice of continuing commercial mortgages which are undervalued may make things worse in the long run by prolonging the problem, rather than confronting these problem loans as soon as possible before they grow worse. Only time will tell which approach is more prudent.

written by REI Circle (www.reicircle.com)

This Could be an Opportunity for Some People to Buy

With the real estate market in shambles and homes entering foreclosure at record levels, this may not seem like a good time to enter the market as a home buyer. However, investors and individuals looking for a bargain are taking advantage of short sales, foreclosed properties, and lowered home valuations to get some good deals. In fact, recent months have actually seen an increase in home buying activity in the U.S., and there are a lot of reasons you may want to consider cashing in on this trend.

Motivated Sellers

Sellers are very motivated in this market and are willing to negotiate on a number of sales points including price reductions, property improvements and payment of closings costs to get a sale. If you qualify to buy a home in this tight credit market and plan on living in the home you buy for at least five years, this just may well be the right time to buy.

According to the National Association of Realtors’ housing affordability index (which measures the relationship between home prices, mortgage interest rates and family income) homes were more affordable in December of this past year (2008) than at any other point since the group started the index back in 1970. What does this all mean? Prices are at their lowest point in years. For example, listings for homes in the Las Vegas market have dropped by more than 50 percent.

Low Prices

Vegas isn’t the only U.S. city that is seeing this trend, either. A recent report from Moody’s Economy.com predicted that house prices will stabilize by the end of 2009, even though the Case-Shiller house price index will fall another 11 percent from the fourth quarter of 2008. By the end of this current real-estate downturn, prices are predicted to fall by double digits in almost 62 percent of the nation’s 381 metro areas. In 10 percent of the areas discussed in the report, declines will be more than 30 percent. Not every market will see these types of declines, however, so be careful to investigate the real estate valuations in the market where you plan to buy.

Plenty of Homes to Choose From

Because it is taking so long to sell homes in many markets, there is a lot of inventory to choose from out there. The variety of homes makes it a seller’s market, from short sales and foreclosures to new homes. There was a 9.6 month supply of unsold existing homes in January of 2009 in the U.S. according to the National Association of Realtors. For new homes, the inventory hit a 13.3-month supply at the end of January, according to the Commerce Department. Because there is such a vast supply of homes to choose from currently, prices are driven down even further, helping potential buyers out even more.

It’s difficult to say whether we’ve hit the bottom of the trough and are moving upwards or not, so buyers who are trying to time the market for when it reaches its lowest point before buying may have already missed their opportunity. The longer they wait, the smaller the inventory will be as well, leading many experts to believe that the time to buy is now.

Mortgage Rates and Tax Credits

Another big reason to buy now is the historically low rates currently being offered on home mortgages. Earlier in 2009, rates on the popular 30-year fixed-rate mortgage hit a level unseen in decades, and rates have stayed relatively near that low figure to date. You’ll still need to have good credit and a substantial down payment to buy, so keep that in mind.

Another big incentive to buy is the federal credit of up to $8,000 for home buyers who haven’t owned a home in at least three years. Unlike the previous credit, this is money that doesn’t have to be paid back, either. The credit was originally set to expire at the end of October 2009 but was extended for another six months and expanded to include more potential buyers than before.

To further entice buyers, the income limit on the credit has been raised from $95,000 to $145,000 for an individual taxpayer and from $170,000 to $245,000 for joint filers. Also, the credit is no longer restricted to just first-time buyers. Previous homeowners can also qualify for a credit of up to $6,500, provided they’ve been in their home for five consecutive years and will make this new home their primary residence. The combination of price, value, inventory, and this extended and expanded tax credit make this the best time to buy a new home in decades.

written by REI Circle (www.reicircle.com)