A glut of inventory and a dearth of demand can only equal one thing: falling prices, no matter how often we’re told that there will soon be unicorn under every rainbow for everyone.  Excess inventory is due to an increase in foreclosures and short sales.  Falling demand is due, in some measure, to the cyclical “slow” Winter market which normally picks up in Spring.  But jobs remain weak, the California economy has yet to be reformed and more and more people are leaving the State for greener pastures elsewhere.  No surprise then that the LA Times reports that “Home prices nearing new lows.”

The Standard & Poor’s/Case-Shiller index shows January home prices in 20 major U.S. cities continued to weaken and approach the recession lows of 2009.

Home prices in January remained barely above lows hit during the worst of the recession, according to an index that tracks prices in America’s biggest cities, and many analysts said they expected values to fall further as the housing downturn plumbs new depths.

Of course Los Angeles, if not exactly leading the way, is a solid contender.  “Los Angeles fell 1.8%” year over year, and on a month to month basis “Los Angeles fell 0.6%.”  The Time’s expert expects that they will continue to fall and actually dip below the worst of 2009′s lows by June.  I suspect he’s right.

But not everybody really believes that, particularly the government.  I just took two Fannie Mae listings.  Both of them had been overpriced and did not sell.  So I took a look at what the market was doing in each of these areas.

The first is a 924 sq.ft. condo in Montery Hills.  The poor thing has been trashed as can be plainly seen when you go HERE and 898 Temple Terrace #222, Los Angeles, CA 90042.  It plainly needs $12,000 to $15,000 just to make it habitable.  So what do the wizards at Fannie Mae do?  Why they price it 15% above similar properties in the area that have been beautifully remodeled, of course!  This poor condo has been on the market for 18 months at that same price and hasn’t sold, now it’s my turn to try to push this unfortunate wreck on some unsuspecting consumer.  Being essentially government run, I guess they think home buyers are as stupid as they think taxpayers are.

Burns me up!  I guess I have to be a government worker to appreciate the logic.

The Los Angeles Times has an excellent article about how the IRS interprets the rules of mortgage debt forgiveness enacted by Congress.  As with everything the IRS touches, it is not quite as straight forward as it seems, though it is, mercifully, fairly simple.

In its latest guidance, the IRS focuses on several key points that owners — and former owners — need to know. Tops on the list: If a lender wrote off a portion of your mortgage debt, you don’t automatically qualify for special tax treatment. To the contrary, there are essential tests you need to pass to qualify: The debt your lender canceled must have been used by you “to buy, build or substantially improve your principal residence.”

Some key points:

1. It must be your principal residence.  If you rented it even for a short time after your last payment and the last action (foreclosure, loan modification or short sale) you probably have a problem.
2. Only the money you actually spent acquiring or constructing the house or making capital improvements to it counts.  If you paid off credit cards or bought a new car, you may have a problem.
3. Mortgage cancellation relief is capped at $2 million for married taxpayers, $1 million for married owners filing separately.
4. Anyone who has had mortgage debt canceled as part of a loan modification or foreclosure should go to IRS.gov and download Form 982 and IRS Publication 4681 for additional filing details. Or they can call (800) TAX-FORM to request copies. Lenders who write off unpaid mortgage balances typically provide borrowers with a year-end IRS form 1099-C cancellation of debt statement, including the amount of the loan forgiven and the fair market value of the property.

If you have had mortgage debt canceled but haven’t received a 1099-C from your lender, request it to avoid federal tax hassles.  If you have any questions or are uncertain about how any of this applies to your situation, call a tax accountant.

One of the most irritating and frustrating things about military life is the hurry up and wait syndrome. Someone up the chain of command decides that something must be done, and so the order is given, the word is passed: “Hurry up and do it!” So everybody rushes around and throws themselves into some kind of presentable shape and races off to the ready line. Then its wait, wait, wait. Seldom is that wait only for a few minutes. No, most often its at least an hour, sometimes two or three or four hours of sitting around (or steaming around) prepared but prevented. Sometimes the entire exercise is canceled and everybody stands down. Such is military life.

But things don’t work that way in Washington DC, it seems. Bush 43 made fourteen or so efforts to rein in Fannie and Freddy and was thwarted at every turn by Barney Frank, Chris Dodd, Maxine Waters and the ACORN gang. Why, the Administration and the regulators were just a pack of racists who loved to keep America’s poor downtrodden and prevent them from experiencing the joys of home ownership. Everybody just knew that the Republicans were just a bunch of heartless, mean and nasty devils, that was the only reason these guys could think of to explain the effort to slow the gravy train down and impose some kind of fiscal sanity on the renowned government sponsored enterprises. Then for two years the Obama Administration has contemplated the train wreck and even put Frank and Dodd in charge of cleaning up the mess they made in the first place and defended throughout.

Now, suddenly, what to our wondering eyes should appear? Why, none other than Timothy Geithner instructing the “Republicans must come to grips with how to overhaul U.S. housing finance if they are serious about ending the government’s leading role in the wrecked system!”

Isn’t that marvellous? The man who, while he was tripping the derivatives fantastic at Goldman Sachs but couldn’t figure out how to pay his taxes, suddenly pops up and reads the riot act to the new Congress. I guess this gravy train is totally bust if the likes of Frank are really giving up on it.

After 10 years of “Hold on there, you racists,” suddenly it’s “Full speed ahead!” 10 years of wait, and now a sudden flurry of hurry up.