Existing home sales, excluding distressed sales, are the most encouraging stats at the moment. These, according to Trulia and the National Association of Realtors, were 80 percent back to normal in August.
Trulia’s Bubble Watch also showed that prices were 3.4 percent undervalued in the third quarter, which is a marked improvement over the 13.5 percent undervaluation at the worst of the housing bust. That means prices are three-fourths of the way back to normal.
Delinquency and foreclosure rates also were much improved. According to Trulia and Black Knight, the national delinquency and foreclosure rate was 74 percent back to normal in August, the same as one quarter ago and up from 56 percent one year ago. The decline in defaults and foreclosures has helped stabilize the financial system and hard-hit neighborhoods.
After announcing the details of the U.S. Department of Justice’s settlement with Bank of America, which includes $7 billion in relief to consumers U.S. Attorney General Eric Holder lamented Congressional inaction to extend the Mortgage Forgiveness Debt Relief Act.
For homeowners meant to be helped by the settlement funds will instead be penalized on their income taxes. Holder called on Congress to do the right thing for financially distressed American families who lost homes to foreclosure or short sales this year.
The tax relief expired on December 31 last year, and unless Congress acts to extend it, every person who has already sold or plans to sell a home in a short sale in 2014, will pay taxes on nonexistent mortgage debt, which is money many don’t have. Taxing forgiven mortgage debt as income is an unfair practice that also incentivizes defaults and foreclosures, which could torpedo the housing recovery.