Nevada City Virtual Tour

Wednesday, February 29, 2012

2012 Housing Trend: Bulk REO Investors Buying To Rent

As we have been reporting since late last year... major lenders and Fannie Mae are readying to sell masses of REOs to investors. Investors are planning on turning these homes into rentals.

Monday, February 27, 2012

Fed Announces Low Rates Through 2014, Mortgage Affordability Remains High

Fed Announces Low Rates Through 2014, Mortgage Affordability Remains High

The Federal Reserve announced today that they will keep interest rates low until at least late 2014 in an effort to help jump-start the sluggish economy by making it less expensive to borrow money across all segments of the economy.

Friday, February 24, 2012

Worst Year Ever

Its Official: 2011 Was The Worst Year For New Home Sales…EVER!

1 out of every 5 homes sold in 2011 was a foreclosure; New home sales dropped in December; Home values were still on the decline (3-5%).

But not so bad in desirable places like Grass Valley, CA, Nevada City, CA, Olympia, WA, part of The Bay Area, a some of the Western San Fernando Valley toward Ventura. They are all doing ok. People want to live there, and can now afford it.

Tuesday, February 21, 2012

Top 3 Ways to Turn a Seller Off

Top 3 Ways to Turn a Seller Off:

1. Unjustified, extreme lowball offers: It’s no secret that buyers have the upper hand in many markets right now. (To be clear, I said ‘many’ - not ‘every’ - your agent can help you understand what the dynamics are in your market.) But let’s be realistic, here. No seller can afford to give away their home at a price far below what it’s worth on today’s market. Lowballing a seller at a price far below the recent sales prices of similar homes in the neighborhood on the ‘let’s-take-a-stab’ plan, is highly likely to turn them off. And that, in turn, will cause the seller to view your offer - and you - as disrespectful and wasteful of their time.

Not only will they turn down your offer, but they may not even bother with a counteroffer, rendering your efforts at securing that particular home dead in the water.

Buyers: Review the recent sale prices of similar homes in the neighborhood (aka “comps”) with your agent before you make your offer. Also, ask them to help you factor in other market data, like the average list price-to-sale price ratio and the average number of days neighborhood homes stay on the market. It’s all right to come in lower than asking, if the market data supports such an offer; just be sure your offer is based on reality - and not your fantastical hallucination about scoring the bargain of the millennium.

2. Buyer-side mortgage fails: Plenty of employed buyers with decent credit and cash in the bank have been turned down for a mortgage these past few years. That means buyers can’t assume (a) that they’ll be approved for the amount of loan they need to buy the house they want, or (b) that they’ll be approved for a loan at all. Your inability to get approved for a home loan can create all sorts of problems not just for you, but also for your home’s seller. The average seller’s worst case scenario is that they accept your offer only to find out a few weeks, or months, later that you can’t get the loan you need to close the deal.

Buyers: It’s not overkill to start working with a mortgage professional as far as six months or a year in advance of starting your house hunt to get pre-approved for a loan. Make sure you get a clear understanding of the amount you qualify for, then work with your real estate agent from there to determine the price range you should house hunt in. And whatever you do - don’t buy a new car, open new credit cards or even change your line of work before your escrow closes, unless you consult closely with your mortgage professional before you make that move.

Tip for Sellers: Work with your agent to vet buyers before you sign a contract. Factor in their down payment and earnest money deposit, and feel free to counteroffer these items, not just the offer price. It’s not overkill to have your agent contact the buyer’s mortgage broker to see how reliable the buyer’s pre-approval really is.

3. Bashing the seller’s home: Home bashing happens when buyers start bad-mouthing (aka “trash talking”) the place and/or the neighborhood in hopes of getting a lower asking price. Examples: pointing out all the foreclosures in the area, saying the house down the street just sold for much lower than the asking price on this house, saying you’ll need to rip out the entire kitchen before you even consider moving in - saying any of these things to a seller who happens to be at home during the showing or the inspection is probably one of the fastest ways to turn them all the way off.

Buyers: Bad-mouthing a house or neighborhood won’t work to get you a lower price. Instead, it only serves to irritate the seller and motivate them to come up with all sorts of reasons why they shouldn’t sell their home to you! Remember: homes hold incredible emotional experiences for owners. Make an offer you’re comfortable with and keep the negative comments to yourself.

If there are legitimate, factual reasons underlying your decision to make an offer at a price the seller might see as a lowball, ask your agent to respectfully communicate those facts to the seller’s agent.

Monday, February 20, 2012

1031 Exchanges Grass Valley Nevada City

1031 Exchange Process: Step By Step

Investors unfamiliar with 1031 Exchanges may envision the process as being intimidating and difficult. In reality, it doesn’t have to be. In order to successfully complete an exchange, investors must simply follow the following basic steps:
  1. Set up an Exchange Account with a 1031 Exchange Company - The 1031 Exchange account MUST be opened before close of escrow on the property being sold. Waiting until the last minute is not recommended, but some companies can open a ‘rush’ account if necessary.
  2. Insert the Appropriate Language into the Sales Contract - The appropriate 1031 language should be added to the Purchase & Sale contract for the property being sold. A 1031 Exchange company will provide all  language if necessary.
  3. Execute the Exchange Agreement - At the close of escrow, the 1031 Exchange company will coordinate with the escrow company to obtain all of the necessary signatures on all exchange documentation.
  4. Locate Replacement Property - The most difficult process of the exchange can often be finding the right replacement property within the required timeframe. The IRS requires that potential replacement property is identified on or before day 45 of the exchange and property must be acquired on or before day 180 of the exchange.
  5. Submit 45 Day Identification Letter - The Identification Letter MUST be submitted no later than day 45 of the exchange. All potential replacement properties must be identified in writing in an unambiguous manner.
  6. Request Funds for Deposits - Money for deposits can be disbursed from the exchange account. Clients are required to send the 1031 Exchange company the “Disbursement Form” indicating how much money needs to be distributed and to whom. Deposits can also come from the clients personal funds and then reimbursed to the client at the closing of the property.
  7. Obtain Appropriate Signatures - At the close of escrow of the replacement property, 1031 Exchange company will work with the new escrow company to obtain all appropriate signatures for all exchange documentation. Depending on the nature of the transaction, additional steps may need to take place. The 1031 Exchange company will work closely with the client to ensure a successful transaction.  

    I can help you with your 1031 Exchanges and refer you to a 1031 Exchange company. Please contact me today to get started.

Sunday, February 19, 2012

Top 3 Ways to Turn a Buyer Off

Top 3 Ways to Turn a Buyer Off:  

1. Hanging out when buyers are viewing your home: Buyers stalk properties online and off, checking obsessively for price reductions and the like.  But buyer-side home stalking is unobtrusive to sellers. On the other hand, buyers can feel personally stalked and stifled in their ability to fully explore or verbally process their impressions of a home when you, seller, hang out inside your home while it’s being shown.

As soon as a buyer sees you in the house, it instantly becomes much more difficult for them to”
(a) envision themselves living there (it’s your house, after all),
(b) be comfortable opening up drawers, closet doors, etc., and
(c) express their thoughts about how this house might be exactly what they’re looking for, if they can knock out that wall and get rid of those cukoo murals you so lovingly painted in your children’s rooms.

Sellers: If you want to sell your home, it’s best to not be around when buyers are looking. Give them some breathing space and a chance to truly walk around and consider what they like and/or dislike about your home without lurking and looming (and, let’s be real - eavesdropping) nearby.

2. Showing a messy house: Life gets hectic, and it’s easy for things like laundry, dishes and other house cleaning tasks to fall by the wayside. It’s also difficult to keep the home in which you and your 4 kids, 3 gerbils and 2 Labrador Retrievers live perfectly spotless for months at a time, while you’re waiting for an offer. But when you decide that you’re going to sell your home, it’s imperative that you make a pact and a plan with yourself and your family that the place will be in tip-top shape when buyers come knocking.

Remember: your home is competing with dozens of others, as well as with buyer’s HGTV-infused visions of what their next home should look like, so first impressions really count.

Sellers: Stuffing the closet is not the answer. (Buyers will be opening that closet door, after all.) Pack up your personals like you were moving (best case: you are), and put all but the essentials in storage, if needed. Get the carpets cleaned, do the dishes, make the beds, mow the lawn, dust, sweep and mop. Ask your agent to give you a gut check on whether your idea of clean is clean enough (better yet - ask them for the number of a house cleaner who you can engage to get the job done to showable standards).

This might all seem obvious, but agents and buyers alike are constantly amazed at the condition of some of the homes they walk into. Take my word for it; I’ll spare you the ‘ewww’-inducing stories.

3. Overpricing your home: Buyers already have lots to do before making the largest purchase of their lives. They have to wrangle their finances into order, jump hoops to qualify for a loan, collect the cash for down payment and closing costs, and invest sometimes hundreds of hours into market research and house hunting. With all of this already on their plates, the prospect of trying to negotiate down a high asking price is just too much work (and too outside their comfort zones) for most buyers to deal with. The average buyer won’t even bother looking at your home if the asking price is clearly high and off base compared with other similar, nearby homes for sale; they’d rather sit tight and wait .

Sellers: Price to sell from the beginning. Work with your agent to determine a price that is supported by the data on how much nearby homes have recently sold for. You’ll save yourself a lot of time and anguish and get a lot more legitimate bites from serious, qualified buyers.

Thursday, February 16, 2012

Obama Refinance Program Details - Do YOU Qualify?

Obamas Refinance Proposal Details:

* The owner is allowed to have only missed one payment in the past 6 months. That shouldn’t be too large of an obsticle for most owners to overcome……but….

* Owners who are underwater by more than 40% must get their lender to agree to forgive the negative equity. LENDERS must agree to do this. Lenders would have to get investors to agree to this forgiveness. Right...

* Mid 500s credit score.

* No Jumbos. ‘Qualifying Loans’ only. Loans must be less than $725,000 (or there abouts). Remember, the max loan amount differs depending on where the home is located.

* The negative equity is STILL ON THE LOAN with this re-fi plan. Owners would get a lower payment but, still be underwater. When these owners go to sell and if they were still underwater they would have to sell as a short sale or lose the home through the foreclosure process.

* This proposed plan is open for non-GSE backed loans. In other words, the banks would be dumping these less than stellar assets onto Fannie and Freddie..and, the tax payers. What was private debt becomes public debt.

* Congress has to sign off on this housing plan.

As long as owners are underwater there will never be a real housing recovery. Not sure who can forgive who and how much. But no politician gets our pain. UG.

Monday, February 13, 2012

Who Has The WORST Housing Market Now?

Florida makes up of 25% of ALL foreclosures in the US. It takes on average 806 DAYS to foreclosure on a home in Florida. In Florida homes have depreciated 50% from the boom.

Sunday, February 12, 2012

Renting Grass Valley homes is getting more expensive

Renting a home is getting more expensive. 
More reasons to buy a home now!

There are certain situations where renting short term probably makes sense. It may make sense if you are retiring to a different region of the country and are not yet sure where you want to set down roots for the next 15 years. It may make sense if you have a one-year employment contract that will probably require a move to another place upon termination.

However, in most other cases, renting right now makes little sense for several reasons.

• Even though prices may still soften, waiting to buy wouldn't make sense as the cost of owning a home may still increase. 

• Mortgages may soon become much more expensive than they are right now. 

• Owning a home is less expensive than renting a home in 72% of major U.S. cities. 

• Rental costs are about to explode. 

Let's take a closer look at the last reason. We have often said that the cost of anything is based on supply and demand. The number of widgets for sale and the number of widget buyers together create the price for widgets. That will also apply to rents. There is a much larger demand for rentals right now. The economy has forced many to leave their foreclosed homes and other buyers are afraid to plunge into homeownership.

At the same time, the supply of rentals is rapidly decreasing. Apartment vacancy has dropped significantly since the recession, which ultimately drives up rental rates.

When supply is rapidly decreasing and demand is quickly increasing, prices have only one place to go – and that is UP! That is exactly where rental prices are headed.

Bottom Line
Is now a good time to rent? We think not. You can buy a home today at a discounted price and get a 30-year mortgage at a historically low interest rate and with no money down. You can set your housing expense for the next thirty years. On the other hand, rental costs are poised to increase for years to come. 
If you have any questions about your personal situation, contact Gary Tippner

Friday, February 10, 2012

$26B Mortgage Settlement?

After months of wrangling, the long-awaited foreclosure settlement between the government and the banks appears to be at hand.

A $26 billion settlement was announced Thursday morning between the federal government, state attorneys general and the five biggest banks in the mortgage market: Ally Financial (the old GMAC), Bank of America, Wells Fargo, JP Morgan and Citigroup. (Editor's note: An earlier version incorrectly identified Ally Financial as being the old GE Capital.)

The settlement is being hailed as the biggest multi-state settlement since the 1998 tobacco agreement. But the settlement is too small to really help the housing market, or even do much for individual victims of fraud and abuse. The deal may, in fact, hurt housing by sending a message to people who've stayed current on their mortgages that irresponsible behavior is what gets rewarded in America. That, presumably, is not the intention of policymakers but the "moral hazard" fallout from the settlement. More Americans may "walk away" from uneconomic loans, which will put additional pressure on local housing markets.

Furthermore, several experts note that for all the rhetoric about punishing corporate crimes and helping victims of abuse, the banks have once again gotten away with a slap on the wrist and may end up benefiting most of all from the settlement.

According to The Wall Street Journal, the settlement will be broken down as follows:

$5 billion in cash payments, including $1.5 billion to borrowers who were wrongly or illegally foreclosed on between September 2008 and December 2011. Borrowers could receive up to $2,000, depending on the number filing claims.

$20 billion in "credits" the banks will receive for principal write-downs and other aid to homeowners at risk of default, up to $20,000 per. This tally includes $3 billion for refinancing of mortgages currently under water.

(Yes, I know 20 + 5 = 25, not 26. It's unclear what the "extra" $1 billion will be earmarked for as details are still emerging on the plan.)

A Drop in the Bucket

Now, $26 billion is a lot of money but it's a drop in the bucket compared with the trillions of dollars of household wealth that's been lost since the bursting of the credit bubble in 2008. Furthermore, $2,000 is a small price to pay to homeowners who lost their homes in illegal foreclosures. The $20,000 mortgage modification is great, except the average deficit for underwater mortgages in America is $50,000.

In addition, the $20 billion isn't coming out of the banks' pockets; it's coming from investors and, ultimately, taxpayers.

"The mortgage principal write-downs are guaranteed to come almost entirely from securitized loans, which means from investors, which in turn means taxpayers via Fannie and Freddie, pension funds, insurers, and 401 (k)s," writes Yves Smith at Naked Capitalism. "That $20 billion actually makes bank second liens sounder, so this deal is a stealth bailout that strengthens bank balance sheets at the expense of the broader public."

Meanwhile, several Fed watchers believe the central bank is gearing up for another round of quantitative easing that will focus on (wait for it) mortgage-backed securities. If QE3 is focused on MBS, it will further ease pressure on bank balance sheets and make any hit from modifications easier to digest.

Every state AG, with the exception of Oklahoma, has reportedly agreed to the settlement. One housing expert speculates key holdouts such as New York Eric Schneiderman and California's Kamala Harris agreed to the settlement in return for promises that the banks aren't being completely left off the hook.

During the State of the Union address last month, President Obama called for a new financial crimes unit to pursue mortgage-related fraud.

Not coincidentally, the SEC is now reportedly stepping up its investigations of illegal marketing and selling of mortgage-backed securities during the boom. The Journal reports Ally, Bank of America, Citigroup, Goldman Sachs and Deutsche Bank are among the firms being examined in the civil investigation.

Thursday, February 9, 2012

Nevada City News & Events

Nevada City News & Events

Mardi Gras Celebration Feb 18 & 19

President’s Day Weekend (Feb. 18-19, 2012) Community Event

20th Annual Mardi Gras Weekend Celebration in Historic Nevada City

Mardi Gras Masquerade Ball

Saturday, Feb. 18, 2012. Hours: 8-midnight

Featuring the Holcomb Brothers Band

(Traditional Cajun food available)

Miners Foundry, 325 Spring Street, Historic Downtown Nevada City

Tickets $12-$15. (Event usually sells out. Advance tickets recommended)

(530) 265-2692, -or-

Mardi Gras Parade

Sunday, Feb. 19, 2012, at 2 p.m.

(Premier Mardi Gras celebration in the Sierra Foothills)

Broad Street, Historic Downtown Nevada City

Free Event for the Whole Family. Dress in your finest Mardi Gras attire!

Mardi Gras Street Faire

Sunday, Feb.19, 2012. Hours: 11-4

North Pine & Commercial Streets, Historic Downtown Nevada City

Food, drink, craft, clothing vendors.

Carnevale ! (New)

Sunday, Feb. 19, 2012. 3-6 p.m.

Miners Foundry, 325 Spring Street, Nevada City

After Parade Event for the Whole Family Food, Drink, Family Entertainment. $5 Adults, Children Free.


Nevada City Chamber of Commerce

(530) 265-2692 • (800) 655-NJOY

Wednesday, February 8, 2012

The Truth About Appraisals

The appraisal process often confuses consumers. They may feel that their Grass Valley home or Nevada City home is worth a higher dollar amount, and so the appraised value doesn't always make sense to them. It is important to know that the appraiser is completely independent from lenders, buyers, sellers, and real estate agents, and that the guidelines to which they adhere are dictated by the Uniform Standards of Professional Appraisal Practice (USPAP) and Fannie Mae.

In essence, these important guidelines help appraisers put a fair market value on homes based on comparable sales in the same area, and the home must be bracketed in size and value.

For example, there is no set dollar figure associated with a great view, pool, spa, bathroom upgrades, etc. If a homeowner installs a custom pool that cost them $30,000, but the local marketplace supports the value of a pool at $15,000, then that item will be bracketed as [$15,000] on the appraisal.

On the other hand, the upgrading or remodeling of an older home is rarely reflected in full in the final appraisal. This is because typically 25-40% of the project involves demolition and the fixing of issues that aren't uncovered until the project has already begun, such as plumbing or wiring that may need updating or after the fact permits.

Ultimately, the value of the upgrades must be supported by comparable examples within the same marketplace. These comparisons must be drawn from current market activity within the last six months. This is a safeguard to prevent appraisers from attaching too high a value to the home in question, and opening up the appraisal for review. This guideline further states that appraisers can only base their opinion on the value of home sales that have actually closed. 
In short, a bank will only loan based on the appraisal value minus down payment, basically, in most cases.

I can refer you to a local appraiser to give you the best information and more detail. Contact me for Grass Valley and Nevada City market analysis and approximate home value.

Tuesday, February 7, 2012




“Wine is sunlight, held together by water” —Galileo

“I cook with wine and sometimes I even add it to the food” —W.C. Field

People have enjoyed vineyards and wine for thousands of years. With demand increasing, prospective vintners are buying up vacant land and planting grapes. When sold, many of these vineyards are suitable properties for a tax deferred 1031 exchange. The sale of a vineyard or winery may include several different types of property that may qualify for tax deferral in a 1031 exchange including:

The land associated with the vineyard itself;

The facilities and outbuildings that are a part of the wine making operations, including the caretaker’s house, wine tasting facility or other property used in the wine operation;

Water rights (if treated as a real property interest under local law); and

Equipment and other personal property used in the production of wine.


Many of the components of a vineyard may be depreciated over 10 years using straight line depreciation. Although this provides a nice tax advantage for the property owner during the depreciation period, the deprecation creates a considerably higher tax liability at the time of sale. When the property is sold, depreciation is recaptured and taxed at a Federal rate of 25% — a rate much higher than the current Federal capital gain tax rate of 15%. When a vineyard owner adds this depreciation recapture tax to the applicable Federal tax on the remaining gain, as well as state and local income taxes, they may end up with considerably less after-tax dollars than they expected. By contrast, through a 1031 exchange, the property owner can dispose of the vineyard and defer some or all of the capital gain and depreciation recapture taxes.

If the owners also have a residence on the wine property, the residence may qualify for exclusion of capital gain taxes under IRC Section 121. This residence portion of the property sale is normally excluded from the portion of the sales price allocated to the exchange, since IRC Section 1031 only applies to property held for investment or used in a business. For more information on the tax exclusion under IRC Section 121, click on Primary Residence Rules.


Section 1031 also permits personal property held for investment or used in a business to be exchanged for other similar personal property, provided that the replacement property is in either the same General Asset Class or the same Product Class as the relinquished property. A vineyard sale may include significant amounts of irrigation equipment and tractors, as well as the machinery used to extract juice from the grapes and to bottle the wine. Note that the IRS has established 13 General Asset Classes, while the more detailed Product Classes are specified in the North American Industry Classification System (NAICS).

Wine collectors may also exchange their collections, provided the wine is held primarily for investment. So if a wine connoisseur wants to exchange a collection of Mouton-Rothschild for a collection of Latour, they might also obtain the tax deferral benefits of a 1031 exchange.

Please Use Asset Exchange Incorporated for you 1031 Exchange Needs

Sunday, February 5, 2012

Nevada City Fine Homes Luxury Homes

Here is a link to Nevada City Fine Homes for Sale Nevada County Real Estate

Please contact Gary Tippner for anything you see or any questions you have regarding this market.

Bulk Foreclosure Sales

Bulk Foreclosure Sales Could Cause Bigger Bank Write-Downs

 As government, federal regulators and big-money private investors try to figure out a plan for bulk sales of foreclosed properties, big banks are already making deals, but they are few and far between.

The trouble is, they are looking at even bigger write-downs than forecast if they sell these distressed properties in bulk.

One of the things that might be holding these bulk sales back is that the assets might not have been fully written down by the banks. The problem for the banks is that in that scenario, when they sell off these assets in bulk, they have to recognize pretty significant losses all at once, rather than spread those losses out over a longer period of time.

No details on the deal until it closes, but those deals are still rare, despite investor appetite, because the banks would have to take bigger write-downs on the value of those properties than originally thought.

Bank officials will tell you that the write-downs are taken when the properties are taken back as REO (real estate owned), that is, when they are officially repossessed by the lender. That value is based on the current market value of those properties. In some markets, the bank will be able to sell REOs at pretty close to the market value. But if they sell the properties in bulk to investors, they will have to offer deep bulk discounts, and that means additional write-downs.

The same could be true of any bulk program with the government, involving current and future REOs at Fannie Mae, Freddie Mac and the FHA.

Sources say there was a big meeting this week in Washington, DC about just that.

The players included Treasury and HUD officials, representatives of Fannie and Freddie and their conservator, the FHFA, along with private equity investors and housing non-profits.

Friday, February 3, 2012



There were 2.38 million unsold homes on the market last month, the fewest since March 2005. That represented a 6.2 months' supply at December's sales pace, the lowest since April 2006 and down from a 7.2 months' supply in November.

However, the inventory of unsold homes tends to decline in winter.  (what? is it because more homes list in summer than winter?)

A supply of 6 months is generally considered ideal and anything higher suggests prices will decline further.

The NATIONWIDE median sales price fell 2.5 percent to $164,500 in December from a year ago. For 2011 as a whole, prices dropped 3.9 percent to an average of $166,100, the lowest since 2002.

Further pressure could come in the months ahead as banks finish working out kinks in the foreclosure process and push more homes onto the market.

"That so-called 'shadow' inventory has to come to the market eventually and will keep downward pressure on home prices long after a pickup in building and sales activity"

Wednesday, February 1, 2012

Home sales hit an 11-month high

WASHINGTON (Reuters) - Home sales hit an 11-month high in December and the number of properties on the market was the fewest in nearly seven years, pointing to a nascent recovery in the housing sector.

The National Association of Realtors said on Friday existing home sales increased 5 percent to an annual rate of 4.61 million units, with all four of the nation's regions recording gains.

Sales of both multifamily and single-family homes rose.

"It seems that the housing sector may be slowly picking itself up off of the mat," said Omair Sharif, an economist at RBS in Stamford, Connecticut.

The fairly upbeat data and reports that debt-stricken Greece was close to a deal with its private-sector creditors pushed U.S. Treasury debt prices lower. Stocks on Wall Street were mixed, while the dollar was little changed against a basket of currencies.

While the home sales pace was a touch below economists' expectations, December marked the third straight month of gains, adding to hopes that a tentative recovery was taking shape.

But a glut of unsold properties that is weighing down on prices and stringent lending practices by banks is likely to make progress painfully slow.


The Federal Reserve has suggested a number of ways other policymakers could step in to help the beaten-up market, including giving government-controlled mortgage finance firms Fannie Mae and Freddie Mac a bigger role in refinancing loans.

Some officials at the Fed say the central bank should consider further purchase of mortgage-backed securities as a way to help spur a stronger recovery, but no action is expected at a policy meeting next Tuesday and Wednesday.

The data on previously owned homes was just the latest in a number of signals on housing to show improvement, gains economists pinned to an improving labor market.

Data earlier this week showed single-family home starts rose for a third straight month in December and optimism among builders this month was the highest in four-and-a-half years.

"It is very encouraging that the current phase of the recovery is being driven by economic fundamentals as opposed to being fostered by temporary stimulus," said Millan Mulraine, a senior macro strategist at TD Securities in New York.

Existing home sales in December were up 3.6 percent from a year earlier. A total of 4.26 million homes were sold last year, up 1.7 percent from 2010.

But the road to recovery will be bumpy. Distressed properties, foreclosures and short sales, which typically occur at deep discounts, accounted for 32 percent of overall sales last month, little changed from November.

A third of pending existing home sales contracts were canceled, the NAR said.

"There is every reason to believe that banks are not going to reduce credit standards back to pre-recession days, when all that was required was the ability to fog a mirror - and only a faint fog was necessary," said Steven Blitz, a senior economist at ITG Investment Research in New York.

"This, plus the slow pace of the upturn, will keep the housing market from a dynamic turn. It is, however, increasingly safe to say the market has finally turned positive."

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