Gay Real Estate News

Renters again face the impact of foreclosure mess

It's one of those stories that sounds appalling, that you might hope the media is playing up just for its shock value: responsible and conscientious tenants who suddenly find themselves evicted and out of a home — because the property they are renting is under foreclosure.

At the start of the recession, reports of renters being blindsided by foreclosure notices were not unusual. The problem prompted President Obama to sign the federal Protecting Tenants at Foreclosure Act in 2009. It requires tenants receive a 90-day notice if they are being evicted due to foreclosure — and that most existing leases for renters be honored up to the end of their term.

Foreclosures rising
Some long-time observers of the housing market believe the federal law and an improving economy have reduced the number of tenants caught up in foreclosure. "There's more bark than bite right now in what we're seeing, with ... tenants getting stuck," says Scott Lukes, president of Denver-based Echo Summit Property Management. "However, property management is a hugely fragmented industry, with a lot of smaller players. Individual landlords, people who own one, two, three properties [or] real estate investors that are trying to squeeze blood out of the turnip — those are the areas where there's a lot more risks for renters."

 
Lukes says the problem does exist, "especially when you couple foreclosure with Chapter 7 full-on bankruptcy [protection]. It gives a property owner a pretty substantial get-out-of-jail-free card, that really does impact other people's lives." But he's reassured by what he's seen from bankruptcy judges and attorneys who have been forcing defaulting home owners and investors to be more accountable with their tenants.

"The real estate investor that has two dozen properties that they're having a hard time with, and they just want to get out of Dodge and become a school teacher? That ain't happening," he says. "You are responsible for all this stuff and we're not going to let you out like this. So I think this has been a real problem but the system is really, really getting smart about it."

But smartness does not, for the moment, signal an end to the crisis. RealtyTrac released its U.S. Foreclosure Market Report earlier this month. It reported an increase of nearly 4 percent in foreclosure filings — "default notices, scheduled auctions and bank repossessions" — for the third quarter of this year.

"Lenders foreclosed on a record number of properties in September and in the third quarter, taking a bite out of the backlog of distressed properties where the foreclosure process was delayed by foreclosure prevention efforts over the past 20 months," said RealtyTrac CEO James J. Saccacio in a press release.

"We expect to see a dip in those bank repossessions — and possibly earlier stages of the foreclosure process — in the fourth quarter as several major lenders have halted foreclosure sales in some states while they review irregularities in foreclosure-processing documentation that has been called into question in recent weeks."

Renters pulled back in
At the start of the recession, Dr. Ron Throupe, assistant professor at the University of Denver's Daniels College of Business Burns School of Real Estate and Construction Management, saw the reports of renters caught up in foreclosure nightmares.

And now, he says, he has friends who are in the very same fix. One of them called Throupe last week, saying his family "got what I call a 'tack-and-send'; they tack the notice to the door. It was for his landlord, who was late on his mortgage. This guy's living there, he has aspirations to purchase the place, his lease ends in February — he's like, 'Ron, what can I do?'"

Dr. Throupe thinks this might be phase two of the mortgage mess, as homeowners who survived the first tsunami of the post-housing bubble struggle to hold on to their properties. "Two years ago I saw quite a bit of it," he says, "and now I'm seeing it again. I suspect [some] people are trying to rent the place for a while; maybe that worked, the lease got them half-way home on their debt, [but] now it's coming home to roost and they're still not making their debt."

And the renters, meanwhile, are unwilling players in the so-called "shadow market." Those are houses "that would be on the market if [their owners] felt they could sell them," says Dr. Throupe. "A lot of those are renting; [their owners] trying to buy time to get to a better market condition."

The shadow market also leaves some renters wondering if they'll ever get back their security deposits, advanced rent payments and other out-of-pocket expenses. That concern, plus the uncertainty of whether to pay the property owner or the bank, has prompted some tenants to simply withhold payments altogether.

"I've heard that to some extent and I can't blame them," say Throupe. "Technically, who owns the rent? There's still a contract in place, but it's like that movie, Catch Me If You Can."

But Lukes notes that, legally, the renter is obligated to pay their landlord, even through this whole, awful awful process. "We get that question a lot," he says.

By Bruce Kennedy

DailyFinance

Does Paying Cash Expedite a Deal?

Does paying cash for a home net the buyer a discount as it might for other transactions? The answer: “It depends.”

If the seller is in a big-time crunch, an all-cash deal can expedite the sale. Also, offering to pay cash gives the buyer less wriggle room, which could comfort a nervous seller.

A seller with minimal equity may be looking for a more generous deal than an all-cash buyer is likely to demand. Also, if there is a bank involved in the deal, it may not be so enthusiastic either because an all-cash transaction could undercut the reason banks are in business.

Source: The Wall Street Journal

Get a high-quality remodel for less

Ask any homeowner who has done an improvement on the cheap: You get what you pay for. Second-rate materials don't last and contractors who make low-ball bids rarely deliver fine craftsmanship.

Fortunately, there are a few effective ways to get good quality for less. One is simply to renovate during an economic slump like this one: Contractors who are eager for work tend to be more willing to cut deals. Here are five other time-tested strategies.

Think off season

Doing a project when other homeowners aren't may save you about 10%, says Robert Wilkos, who runs an HVAC and plumbing business in Panama City, Fla. In autumn, for example, put in a new patio or lawn irrigation system; in winter, finish the basement or install central air. Wait till summer, if you can, to replace your old furnace or install a gas fireplace. Get the bids during the busy season, then say, "If I'm willing to wait, will you give me a discount?"

Look for a mom-and-pop contractor

You have a choice between large outfits (where the boss or a salesman bids on the job, then sends a crew to work) and small, family-run ones (where the boss is the lead laborer). Because the latter have leaner operations and lower overhead, says Kermit Baker of Harvard's Joint Center for Housing Studies, they can charge less than the big guys. You might save 5% to 20%.

Combine small jobs

To make a minor task, such as replacing a faucet or installing a ceiling fan, worth his time, a pro typically charges extra: a four-hour minimum, for example, or a $75 service charge, says Todd Recknagel, CEO of the Mr. Handyman chain. Get more work for your money by saving up your odd jobs and hiring someone to do them all at once.

Get a tax deduction

Give your demolition castoffs -- sinks, paneling, doors, and the like -- to a building product reuse center. Call your local Habitat for Humanity ReStore (find it at habitat.org), which will send a truck to collect the stuff. Get a receipt and you can deduct the value of the items as a charitable donation.

Put in some sweat equity

Take on some simple projects yourself, such as sealing your new fencing or staining the deck. Or pay your teenager a modest amount to do it. Who knows? If the kid's good, the contractor might even give him a job next summer.

Compliments: Money Magazine

3 New Anti-Foreclosure Strategies

Here are three programs that are considered promising replacements for the government’s Home Affordable Modification Program (HAMP), which has failed to stop foreclosures.

· Fannie Mae and Freddie Mac would be encouraged to refinance loans for some 30 million borrowers with high-interest rate mortgages. The new mortgages would be folded into a new round of mortgage-backed securities issued by the government-sponsored finance firms.

· The right-to-rent plan would offer delinquent borrowers an option of renting their foreclosed homes at a market rate for five years. At that point, owners turned renters would have another chance to buy their homes at market value. It’s a compromise. Borrowers lose their homes, but lenders have to accept lower payments.

· Mortgage cramdowns give a bankruptcy judge the right to consider all of a borrower’s debts and create a solution that would force all interested parties, including holders of mortgage debt, to compromise.

Source: Reuters News

Coolest home features to consider

Fewer people are buying new homes these days, opting instead to do home renovations - you know, just to spice things up a little.

Maybe you turn your bathroom into a high-tech spa or get some smart appliances in the kitchen. Maybe you do some green upgrades or maybe you do something purely for luxury.

So, what's the new rain showerhead, the new infinity pool?

We talked to contractors, designers and developers all over the country and here are the 10 Coolest Home Upgrades.

Hidden, Wall-mounted TV

Photo: Electronichouse.com

It's go big or go home with televisions these days - but when you bring one of these drive-in movie-sized screens home, it can often wreck the design of the room. When a guest walks in, they won't say, "Wow, what a nice house," but rather, "Wow, what a big TV you have!"

Well now, you can have it all - a big screen and big style. Designers are increasingly choosing to hide gigantic televisions in the wall and cover them with a mirror or artwork so when they're not in use, you don't even know they're there!

When it's above the fireplace, it can be a framed mirror or piece of art. In the photo at left, this Samsung 37-inch LCD is mounted in the closet behind the mirror, hidden by a removable panel in the closet.

You probably want a pro to do this - TVs require proper ventilation.

Water Feature With Fire

Photo: MerchantCircle.com

Fountains aren't new and fire pits aren't new but put them together - maybe even add some LED lighting - and shazam! Welcome to the future.

A water feature with fire shooting out of the middle can instantly remind you of that Hawaiian vacation (maybe pump some hula music into the outdoor speakers) or just ensure that you not only keep up with the Joneses but knock their socks off when they come over for a barbeque.

They can be rectangular trough-like structures with broken glass in the middle where the fire shoots out, or circular like this one in the picture at left. They can be freestanding, attached to a pool or create a big ridge of fire in a stoned wall. Have a seat because you can control it all by remote control!

OK, who wants toasted marshmallows?

Home Golf Simulator

Photo: Truegolf.com

Golfers have been practicing their swing at home for years but not quite like this - a floor-to-ceiling golf simulator with a massive screen to let you "play" on some of the coolest courses in the world from Hawaii to England.

A golf simulator like the one from Trugolf at left is the ultimate addition to your game room next to the pool table and pinball machine.

Not only do you really feel like you're on the course but it helps you with your game, with sonic ball-tracking sensors and a program that gives you valuable feedback on your swing. They run from $20,000 to $60,000 or more.

She winds up the swing, good form and... Four!

Glass Rooms on the Patio

Photo: Cotton & Co.

Outdoor patios with full kitchens are getting even huger these days, with some nearing 10,000 square feet, said Stephann Cotton, owner of the real-estate sales and marketing firm Cotton & Co.

They've got the Rolls Royce of grills, outdoor wine fridges, fireplaces, sweeping views -- you name it. But guess what else they've got? Bugs.

Cotton said his high-end clients with penthouses in Boca Raton, Fla., are increasingly asking for these glass structures, out at the end of the patio where the best views are. They're turning them into everything from outdoor dining areas and zen gardens to man caves and music studios.

A four-sided glass structure means there aren't just northern views or southern views, Cotton says, there are north, south, east and west views!

Exotic Landscape Lighting

Photo: Robert Davie

So you've got spotlights and those little solar path lights but this is taking your backyard to the next level and doing exotic landscape lighting.

Maybe it's uplighting on the palm trees, Cotton explained, or in the waterfall that spills over into the pool.

The cool thing is, Cotton said, you can even use solar lights - so it won't cost you an arm and a leg in electricity! Take a solar light, put it in a spotlight and turn it upside down shooting up into your landscaping or water feature like a fountain or koi pond.

"Landscape lighting in the water is fairly easy to do," Cotton said. "You get that constant reflection - It's very romantic mood light. It produces a romantic and flickering light - just like a fire does."

Check out more ideas, like the one at left, from Robert Davies landscape design.

Outdoor Shower

Photo: Karmasamui.com

No, we're not talking about the kind you put next to the pool so the kids can wash off the sand, dirt or chlorine.

These are luxurious showers, usually off of the master bath, made of high-end stone and other natural materials, with lush foliage that create your own personal Eden.

You'll already find this type of outdoor shower in resorts in Bali, Fiji and the Caribbean, but now, homeowners are bringing the resort home.

"It's a very sexy thing," said Walid Wahab, president of Wahab Construction in south Florida. "It's your private shower -- you can get completely naked and take a shower outside in your private garden."

Wahab said the construction is getting very creative - things like a shower head coming out of a tree.

Master Control for Energy Consumption

Photo: Control4.com

You know you can control your entire house now from a laptop, iPhone or iPad. Everything from the lights and thermostat to the stereo - and even the pool. Here's taking it to the next level - a master control for energy consumption.

"This is very, very new - people are just experimenting with it," said Ron Rimawi, who co-owns Digital Interiors in Atlanta. "It helps make you more aware and more conscious of your energy usage, so you don't waste energy."

Basically, they're small digital panels that connect with the utilities and track various appliances and systems in your home. They can tell you everything from your usage to the temperature and how much it's all costing you!

"We have long held the belief that the promise of the Smart Grid can only be realized if the consumer is front-and-center in the design of demand-response systems," said Control4, which makes the master control for energy consumption pictured at left.

Pop-up Ventilation for the Kitchen

Photo: Dacor.com

No one wants the lingering smell of smoke and cooking fumes in the kitchen - particularly with how hot the open-concept kitchen-living area is right now. But hoods, no matter what high-end materials you use, can be clunky, not to mention they get greasy and dirty.

Enter the pop-up hood vent - You can sink it into an island or other countertop (of course, with an underground vent to the outside) and then at the press of a button, it comes up, sucks all the smoke and fumes out and then press the button again and - poof! - it vanishes again.

This is not only great for kitchen design, but also to lure other members of the family into the kitchen to help.

Make it high-tech - and they will come!

Cooling Drawer

Photo: Electronichouse.com

Let's face it - kitchens are getting cool. From sleek granite to smart appliances, this isn't your grandma's kitchen.

One of the places where the most innovation is taking place is in the refrigerator. Maybe they have double French doors or are hidden by paneling that makes them blend in with the cabinets.

One of the coolest things - literally - is a cooling drawer, like the one shown left from Fisher Paykel. These are drawers with several different temperature settings, so you can store soda, wine, snacks for the kids - even ice cream.

They're individual drawers, so you can have any number of them scattered around the house.

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Tax-Friendly States for Retirees

Where's the best state for you to retire? A lot will depend on your sources of income. For retirees, while relocating to an income-tax-free state such as Florida or Texas may sound appealing, sometimes the best retirement destination is a state that imposes an income tax, but offers generous exemptions for Social Security benefits, pensions and other types of typical retirement income.

Here is our list of 10 Tax-Friendly States for Retirees. Just make sure that, before you move anywhere in retirement, you factor in local taxes, too. Municipalities can impose hefty property taxes or other assessments. Federal taxes? They'll be about the same no matter where you live.

Alaska

State Income Tax: none
State Sales Tax: none
Inheritance Tax: No

Taxes? The Last Frontier State actually gives residents money for living there, distributed from its Permanent Fund, an oil wealth savings account administered by the state. This year, every man, woman and child who has lived in Alaska for at least one year received a 2009 dividend of $1,305. There's no income tax, no state sales tax, and only 25 municipalities even levy a property tax. Some municipalities impose local sales taxes of up to 7%, however.

Wyoming

State Income Tax: none
State Sales Tax: 4% (localities can tack on an extra 1%)
Inheritance Tax: No

Retirees don't pony up much in taxes in the Cowboy State. Thanks to the abundant revenues that Wyoming collects from oil and mineral companies, residents shoulder the lowest tax burden of any state except Alaska, according to the Tax Foundation. Prescription drugs and groceries are exempt from state sales taxes. For most property, only 9.5% of market value is subject to tax, so a home worth $100,000 is taxed on $9,500 of assessed value.

Michigan

State Income Tax: 4.35%
State Sales Tax: 6%
Inheritance Tax: No

The Great Lakes State offers generous retirement-income exemptions from state income tax. It does not tax Social Security or military, federal, state- or local-government pensions. Private pensions are exempt up to $45,120 for individuals and up to $90,240 for married couples filing jointly. (However, these private-pension exemptions are reduced by any public-pension deduction that you claim.) The state's flat-rate income tax is scheduled to gradually decline to 3.9% by 2015. Food and prescription drugs are exempt from state sales taxes.

Pennsylvania

State Income Tax: 3.07%
State Sales Tax: 6% (localities can tack on an extra 2%)
Inheritance Tax: Yes

True to its Quaker roots, the Keystone State extends a friendly hand to retirees. It is one of the most generous states when it comes to offering income-tax exclusions on a wide variety of retirement income. Pennsylvania does not tax Social Security benefits or any type of public or private pensions. Nor does it nick distributions from 401(k)s, IRAs, deferred-compensation plans or other retirement accounts. Food, clothing and medicine are exempt from state sales taxes. But Pennsylvania is one of the few states that has both an inheritance tax and an estate tax.

Colorado

State Income Tax: 4.63%
State Sales Tax: 2.9% (localities can add their own)
Inheritance Tax: No

If the sheer beauty of the Rocky Mountains isn't enough to draw you to the Centennial State, its low, flat income-tax rate of 4.63% might. Taxpayers 55 to 64 years old can exclude a total of $20,000 of Social Security and qualified retirement income from state income taxes; those 65 and older can exclude up to $24,000. The state sales-tax rate is 2.9%, but local taxes can boost the combined rate to an average of about 7%. Food and prescription drugs are exempt from sales taxes.

5 Steps to Remodeling Done Right

Here are five steps to developing a great relationship with a remodeling contractor.

1. Let the contractor know if you are ready to remodel or just kicking the tires. Gary Palmer, a Charlotte, N.C.-based general contractor, says seeking multiple bids is fine, but don’t waste his or her time by letting the bidding process drag on for weeks.

2. Do your homework. Before seeking bids, develop two files. One should include information, including photos, of what you like. The other should include a list of what you don’t like.

3. Listen to the experts. A good contractor can tell you whether the project is feasible and what the pay off will be.

4. Communicate your budget. Let the contractor know up front how much money you intend to spend.

5. Be realistic and patient. Every remodeling project is messy and all of them are going to be frustrating somewhere along the way.

Source: Charlotte Observer

Credit Scores: How 720 Became the New 680

Until recently, a credit score of 680 was something to be proud of. It meant you paid most of your bills on time, got dinged when you went shopping for a refi, but in general, had a solid enough record to get a loan at the best rates.

Not anymore. That 680 is firmly second-tier these days. Now, borrowers need at least 720 to get the biggest loans or the best terms, including a credit card with the longest 0% APR promotion or a jumbo mortgage. For millions of once-desirable consumers with scores between 680 and 720, that 40-point jump could cost thousands of dollars over the life of a typical loan.

Once that line has been drawn, there's no wiggle room, either. Lenders place borrowers into brackets, which means someone with a score of 719 is lumped into a bracket that starts as low as 690. That one measly point could cost more than $600 over the life of an average 36-month car loan, or $2,500 over the life of a 15-year home equity loan, according to Informa Research Services. And that is "ludicrous on its face," says Ed Mierzwinski of the U.S. Public Interest Research Group. "Credit scores are a blunt tool being abused by creditors as if they were a sharp instrument."

For their part, lenders say the credit scores aren't arbitrary and that a score of 720 predicts the borrowers who are most likely to repay their debts and least likely to default. At the same time, they're more profitable than people with a perfect score of 850, because they're also likely to carry a balance or incur fees -- and therefore, to generate profit for the lender.

As for 680, it's become a casualty of the market crash. When Fannie Mae and Freddie Mac were backing mortgages after the crash, they settled on the 720 threshold for the best pricing, says Keith Gumbinger, a vice president at HSH Associates, a mortgage-data tracking firm. At the time, most borrowers were afraid of lending to anyone, so 720 seemed plenty low. Because most mortgages are backed by Fannie or Freddie, the major lenders kept the same threshold, and as banks have started to put loans on their books again, it's stuck.

Of course, while earning a 680 wasn't all that difficult before the recession, the new good-credit bar of 720 is harder to reach. With more people out of work and unable to pay their bills, even consumers with previously envious credit scores might not reach 720. To get there, a consumer would need low balances on credit cards and a 15-year credit history -- but might have missed a couple payments over the last two years. Someone who regularly pays on time could drop from the mid-700s if he applied for several new credit cards recently. Other 720-scorers: Those who haven't missed a payment but carry balances that are more than 30% of their credit line; or those who have a short credit history but pay on time.

[How to Get a Perfect Credit Score]

For someone on the cusp, the differences could be as small as one extra credit inquiry -- like when a lender looks up your credit score before approving you for a loan, or if a prospective employer pulls your credit report without telling the credit bureaus it's strictly for employment reasons. The same thing could happen if you're suddenly using more of your available credit because you made a big purchase, says John Ulzheimer, president of consumer education at Credit.com.

What's a 680 to do? Sadly, not much beyond the regular steps to credit score maintenance, experts say. That means paying bills on time and keeping debts to a reasonable level. And be patient, says Ulzheimer: As lending picks up, lenders will be forced to relax their standards once again. Within as early as six months to a year, 680 could be back on top.

Top 6 Mortgage Mistakes

During the 2007-2009 financial crisis, the United States economy crumbled because of a problem with mortgage foreclosures. Borrowers all over the nation had trouble paying their mortgages. At the time, eight out of 10 borrowers were trying to refinance their mortgages. Even high end homeowners were having trouble with foreclosures. Why were so many citizens having trouble with their mortgages? 

Let's take a look at the biggest mortgage mistakes that homeowners make.

1. Adjustable Rate Mortgages
Adjustable rate mortgages seem like a homeowners dream. An adjustable rate mortgage starts you off with a low interest rate for the first two to five years. They allow you to buy a larger house than you can normally qualify for and have lower payments that you can afford. After two to five years the interest rate resets to a higher market rate. That's no problem because borrowers can just take the equity out of their homes and refinance to a lower rate once it resets.

Well, it doesn't always work out that way. When housing prices drop, borrowers tend to find that they are unable to refinance their existing loans. This leaves many borrowers facing high mortgage payments that are two to three times their original payments. The dream of home ownership quickly becomes a nightmare.

2. No Down Payment
During the subprime crisis, many companies were offering borrowers no down payment loans to borrowers. The purpose of a down payment is twofold. First, it increases the amount of equity that you have in your home and reduces the amount of money that you owe on a home. Second, a down payment makes sure that you have some skin in the game. Borrowers that place down a large down payment are much more likely to try everything possible to make their mortgage payments since they do not want to lose their investment. Many borrowers who put little to nothing down on their homes find themselves upside down on their mortgage and end up just walking away. They owe more money than the home is worth. The more a borrower owes, the more likely they are to walk away.

3. Liar Loans
The phrase "liar loans" leaves a bad taste in your mouth. Liar loans were incredibly popular during the real estate boom prior to the subprime meltdown that began in 2007. Mortgage lenders were quick to hand them out and borrowers were quick to accept them. A liar loan is a loan that requires little to no documentation. Liar loans do not require verification. The loan is based on the borrower's stated income, stated assets and stated expenses.

They are called liar loans because borrowers have a tendency to lie and inflate their income so that they can buy a larger house. Some individuals that received a liar loan did not even have a job! The trouble starts once the buyer gets in the home. Since the mortgage payments have to be paid with actual income and not stated income, the borrower is unable to consistently make their mortgage payments. They fall behind on the payments and find themselves facing bankruptcy and foreclosure.

4. Reverse Mortgages
If you watch television, you have probably seen a reverse mortgage advertised as the solution to all of your income problems. Are reverse mortgages the godsend that people claim that they are? A reverse mortgage is a loan available to senior citizens age 62 and up that uses the equity out of your home to provide you with an income stream. The available equity is paid out to you in a steady stream of payments or in a lump sum like an annuity.

There are many drawbacks to getting a reverse mortgage. There are high upfront costs. Origination fees, mortgage insurance, title insurance, appraisal fees, attorney fees and miscellaneous fees can quickly eat up your equity. The borrower loses full ownership of their home. Since all of the equity will be gone from your home, the bank now owns the home. The family is only entitled to any equity that is left after all of the cash from the deceased's estate has been used to pay off the mortgage, fees, and interest. The family will have to try to work out an agreement with the bank and make mortgage payments to keep the family home.

5. Longer Amortization
You may have thought that 30 years was the longest time frame that you could get on a mortgage. Are you aware that some mortgage companies are offering loans that run 40 years now? Thirty five and forty year mortgages are slowly rising in popularity. They allow individuals to buy a larger house for much lower payments. A 40-year mortgage may make sense for a young 20-year-old who plans to stay in their home for the next 20 years but it doesn't make sense for a lot of people. The interest rate on a 40-year mortgage will be slightly higher than a 30 year. This amounts to a whole lot more interest over a 40-year time period, because banks aren't going to give borrowers 10 extra years to pay off their mortgage without making it up on the back end.

Borrowers will also have less equity in their homes. The bulk of payments for the first 10 to 20 years will primarily pay down interest making it nearly impossible for the borrower to move. Besides, do you really want to be making mortgage payments in your 70's?

6. Exotic Mortgage Products
Some homeowners simply did not understand what they were getting themselves into. Lenders came up with all sorts of exotic products that made the dream of home ownership a reality. Products like interest only loans which can lower payments 20-30%. These loans let borrowers live in a home for a few years and only make interest payments. Name your payment loans let borrowers decide exactly how much they want to pay on their mortgage each month.

The catch is that a big balloon principal payment would come due after a certain time period. All of these products are known as negative amortization products. Instead of building up equity, borrowers are building negative equity. They are increasing the amount that they owe every month until their debt comes crashing down on them like a pile of bricks. Exotic mortgage products have led to many borrowers being underwater on their loans.

The Bottom Line
As you can clearly see, the road to home ownership is riddled with many traps. If you can avoid the traps that many borrowers fell into then you can keep yourself from financial ruin.

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The Best States For Business and Careers

Utah tops our fifth annual ranking, knocking longtime leader Virginia from the top spot.

When voters in 37 states select their governors next month, the overriding issue will be, of course, the economy.

A recent CBS News poll found that 54% of adults think the economy and jobs are the most important problem the U.S. is facing today. Health care ranked a distant second, with 7% of the tally. Almost every state experienced decreased output, a loss of jobs and budget shortfalls during the economic downturn. Nationwide employment has declined by 7 million jobs over the past two years while gross domestic product growth has been sluggish this year after a 2.6% drop in 2009. No state has emerged unscathed.

But some areas are doing better than others, and for many of them, it isn't an accident. Who's doing the best job when it comes to fostering growth? Utah, according to our fifth annual look at the Best States for Business. The Beehive State captured the top spot in our rankings for the first time, after a four-year run by Virginia at the head of the list.

Utah's economy has expanded 3.5% annually over the past five years, faster than any other state except North Dakota. This is three-and-a-half times faster than the U.S. as a whole. Total employment in the U.S. has shrunk over the past five years, but in Utah it increased 1.5% annually, fourth-best in the nation. Household incomes have surged 5% annually, which is tops in the country and twice as fast as the national average.

"We have a fiscally conservative government where we are trying to keep government off your backs and out of your wallet. We want the free market do what it does best," says Utah Gov. Gary Herbert, a Republican running for a full term this year after taking over the job in August 2009, when then Gov. Jon Huntsman was appointed U.S. ambassador to China.

Utah lowered its corporate tax rate from 7% to 5% in 2008, to the delight of businesses. The rate is now one of the lowest in the country. The regulatory climate is also pro-business, with the Pacific Research Institute rating Utah second-best in the regulatory component of its U.S. Economic Freedom Index. "We want to make sure we don't have any nonsensical regulations that inhibit the private sector from expanding and having a profitable bottom line," says Hebert.

Other factors the state have going for it include energy costs 35% below the national average; an educated labor force, with 90% of residents holding a high school diploma (and 29% a college degree); a great quality of life with low poverty rates; a healthy populous; and ample recreational opportunities. Utah boasts a triple-A debt rating from Moody's (NYSE: MCO - News), S&P and Fitch. Earlier this year Forbes crowned Utah the country's most fiscally fit state government.

Companies across the country are taking notice. Goldman Sachs (NYSE: GS - News) keeps expanding its operations in Utah, and its Salt Lake City office is now the company's second-largest in North America. Adobe (Nasdaq: ADBE - News) announced plans in August to build a new campus in Utah that will create 1,000 new jobs there, building on its $1.8 billion purchase of Orem-based Web analytic firm Omniture (Nasdaq: OMTR - News) last year. Oracle (Nasdaq: ORCL - News) and eBay (Nasdaq: EBAY - News) are both building massive data centers outside Salt Lake City.

Our Best States ranking measures six vital categories for businesses: costs, labor supply, regulatory environment, current economic climate, growth prospects and quality of life. We factor in 33 points of data to determine the ranks in the six main areas. Business costs, which include labor, energy and taxes, are weighted the most heavily. We relied on 10 data sources, with research firm Moody's Economy.com as the most-utilized resource.

Our former No. 1-ranked state, Virginia, falls to No. 2 this year. Virginia still boasts a very favorable business climate, with an educated labor supply and solid economic growth. But Virginia's business costs (namely labor and energy) have crept up, which allowed Utah to leapfrog it. Rounding out the top five are No. 3 North Carolina, No. 4 Colorado and fifth-ranked Washington.

The Northeast isn't dead yet, judging by our rankings, despite high business costs and crippling budget deficits. New York, New Jersey and Massachusetts all rank among the priciest states when it comes to labor, taxes and energy costs. Yet each state moved up the rankings this year, thanks to improving current economic climates and growth prospects relative to the rest of the country, compared with last year.

Massachusetts made the biggest move of any state this year, climbing from No. 34 to No. 16. Business costs in the Bay State are highest in the country: 22% above the national average. But venture capital continues to pour into the state, looking to take advantage of the bright minds at elite universities in and around Boston and Cambridge. VCs invested $2.9 billion in Massachusetts companies last year, second only to California. The state enjoys the highest college attainment rate in the country, with 38% of adults possessing a degree.

Bringing up the rear this year is Maine, which replaced No. 49 Rhode Island at the bottom of our rankings. Growth prospects in Maine have deteriorated relative to the rest of the country. Job growth is expected to increase 1.3% annually over the next five years--one of the worst forecasts in the country. The state has endured a rash of business closings the past three years as well.

Mainers head to the polls next month to choose a new governor. The state's current chief, democrat John Baldacci, is off the hook though; thanks to term limits, Baldacci cannot seek reelection.

 

©George Frey/AP

 

No. 1 Utah

2009 Rank: 3
Business Costs Rank: 8
Labor Supply Rank: 5
Regulatory Environment: 6
Economic Climate: 1
Growth Prospects: 20
Quality of Life: 18

 

©Steve Helber/AP

 

No. 2 Virginia

2009 Rank: 1
Business Costs Rank: 24
Labor Supply Rank: 3
Regulatory Environment: 2
Economic Climate: 4
Growth Prospects: 14
Quality of Life: 6

 

©Chuck Burton/AP

 

No. 3 North Carolina

2009 Rank: 5
Business Costs Rank: 3
Labor Supply Rank: 15
Regulatory Environment: 3
Economic Climate: 18
Growth Prospects: 9
Quality of Life: 32

 

©Jack Dempsey/AP

 

No. 4 Colorado

2009 Rank: 4
Business Costs Rank: 33
Labor Supply Rank: 1
Regulatory Environment: 15
Economic Climate: 6
Growth Prospects: 6
Quality of Life: 9

 

No. 5 Washington

2009 Rank: 2
Business Costs Rank: 28
Labor Supply Rank: 2
Regulatory Environment: 5
Economic Climate: 11
Growth Prospects: 4
Quality of Life: 29

Sources: Moody's Economy.com; Pollina Corporate Real Estate; Pacific Research Institute; Tax Foundation; Sperling's Best Places; Better Government Association; Census Bureau; SBA; FBI; Dept. of Education; Forbes.