The GSEs issued new guidelines Tuesday that fall under the Servicing Alignment Initiative rolled out last fall and aim to bring greater transparency to the short sale process and expedite decisions related to these pre-foreclosure sales.

Not only is a short sale an effective foreclosure alternative when home retention is no longer an option, but it keeps homes occupied and helps to maintain stable communities, according to the Federal Housing Finance Agency (FHFA).

Addressing real estate practitioners’ No. 1 complaint about short sales, FHFA directed Fannie Mae and Freddie Mac to establish a new uniform set of minimum response times that servicers must follow in order to facilitate more efficient short sale transactions.

The GSEs’ new short sale timelines require servicers to make a decision within 30 days of receiving either an offer on a property under the companies’ traditional short sale programs or a completed Borrower Response Package (BRP) requesting short sale consideration, whether it’s through the federal government’s Home Affordable Foreclosure Alternative (HAFA) program or a GSE program.

If more than 30 days are needed, servicers must provide the borrower with weekly status updates and come to a decision no later than 60 days from the date the BRP or offer was received.

According to the GSEs, this 30-day add-on will provide some leeway for servicers who may need more time to obtain a broker price opinion (BPO) or a private mortgage insurer’s approval for a short sale. All decisions must be made within 60 days.

In the event a servicer makes a counteroffer, the borrower is expected to respond within five business days. The servicer must then respond within 10 business days of receiving the borrower’s response.

The GSEs plan to use the new short sale timelines to evaluate servicer compliance with the Servicing Alignment Initiative.

Edward DeMarco, acting director of the FHFA, says the GSEs new borrower communication and timeline requirements for short sales “set minimum standards and provide clear expectations regarding these important foreclosure alternatives.”

GSE servicers must comply with the new minimum communication time frames for all short sale evaluations conducted on or after June 15, 2012, although servicers are encouraged to begin implementing the new requirements sooner.

“I applaud Fannie and Freddie for finally coming out with real guidance with real world timelines for their servicers,” commented Anthony Lamacchia, broker/owner of McGeough Lamacchia Realty Inc., which specializes in short sales. “There is no question that this will help short sales and the market as a whole.”

Last year Freddie Mac completed 45,623 short sales, a 140 percent increase since 2009. Fannie Mae’s short sale completions shot up by 101 percent over the same period, totaling around 79,800 in 2011.

Thinkstock

Austin is a big city in small town disguise. With a population of 790,400, the Texas capital is bigger than all of the “big cities” on the list. But it has managed to maintain the “Keep Austin Weird” credo that has made it a favorite among both retirees and young people.

The outdoors is the biggest attraction. The staggeringly beautiful, rough-hewn Hill Country, spring-fed swimming holes, a string of lakes along the Colorado River, and 10 months of warm temperatures (too warm in the summer) draw hikers and boaters and bikers outdoors. Lance Armstrong lives and trains here, and Lady Bird Johnson Lake (Town Lake to locals), which runs through the city’s center, is a favorite training spot for rowers.

And of course there’s the music. Willie Nelson and Alison Krauss music, to be consumed along with barbecued ribs and Lone Star long necks. Or, for the high-tech set, Norah Jones, to be consumed along with interactive startups, at the annual South by Southwest (SXWS) conference next month. There’s also a lyric opera, a symphony, and a ballet company. But that’s the icing. For the practical retiree, housing costs (median price: $235,000), good medical facilities, the many programs at the University of Texas, and no state income tax are the cake.

Clearwater, Fla.

Situated about midway up the Florida peninsula on the Gulf of Mexico, Clearwater is the postcard perfect coastal resort town: Sun-drenched beaches, sailboats cheek by jowl with yachts in the marinas that line Clearwater Harbor, well-traveled bike trails, and a plethora of public golf courses nearby. Now that real estate prices have plummeted throughout Florida — they’re down about 50 percent in Clearwater — this idyll is available to a wider range of retirees. A two-bedroom condo on the beach can be had for about $200,000, a sum made even more affordable when coupled with a homestead exemption of up to $50,000 for residents and no state income tax.

With a population of 107,700, Clearwater is a small town, but should you need an experience that is available only in bigger cities, St. Petersburg, with its Museum of Fine Arts, the Florida Orchestra, and major league baseball team — the Tampa Bay Devil Rays — is only 20 miles away. And, of course, there’s the annual rite of Spring Training with the Philadelphia Phillies taking up residence in Clearwater and New York Yankees descending on Tampa, 25 miles down the road.

ThinkstockFort Collins, Colo.

More than 30 miles of bike roads. And roads is exactly the right word. Ft. Collins has many miles of separate, paved roads for bikers. It’s as good a symbol as any for the way citizens of this small Rocky Mountain city (population: 144,000) see themselves. Summers are for biking, hiking, camping, golfing, and boating on 1,900-acre Horsetooth Reservoir, which sits at an elevation of 5,430 feet in the foothills. Winters are for skiing, snowshoeing, and partaking of the product of the city’s highly regarded microbreweries. Median home price is $221,400.

An easy 70-mile drive gets you to Denver International Airport and a wide variety of cultural venues. Not to mention the MLB Colorado Rockies, the NFL Denver Broncos, the NBA Denver Nuggets, and the NHL Colorado Avalanche.

Marquette, Mich.

If you don’t like snow, Marquette country is not for you. But the Upper Peninsula of Michigan is one of the most beautifully austere places in the U.S. If you like winter sports — and don’t like the fact that “Best Places to Retire” lists tend to be biased toward sun seekers — you’re looking at an average of 141 inches of snow for cross country skiing, snowshoeing, snow-man building, whatever your heart desires. In summer, head for the beaches along Lake Superior or out onto the water for every kind of water sport.

The city (population: 21,300) has a small airport with regular service to Milwaukee, Chicago, and Detroit, and Marquette General Health System is ranked as one of the top 50 cardiovascular hospitals by Thomson Reuters. Median home price is $130,000.

ThinkstockPittsburgh, Pa.

Pittsburgh tops the small list of rust-belt cities that have cleaned up their acts, and it now ranks as a great place to live. One big change has been a dramatic drop in population - from 680,000 in 1950 to just over 300,000 today - that has transformed a once large industrial city into a smaller financial/high tech/health-care based economy. The old industrial facilities have been converted into shopping, restaurants, galleries, and living spaces. Although the steel mills that so defined Pittsburgh are largely gone, the symphony, ballet, opera, and museums that grew when the city was thriving live on. Add the Pittsburgh Steelers, the Pittsburgh Pirates, and the Pittsburgh Penguins, and the Steel City offers a rich and diverse lifestyle that would suit almost any taste.

Best of all, it is also a remarkably affordable city to live in. The median home sale price was $112,000 in August 2011, which is unusual for a city with top-notch hospitals and more than a dozen universities, art schools, and institutes.

Portland, Ore.

Two things about Portland: It boasts more than 40 small breweries, and is threatening Seattle as the country’s coffee capital. The duality of hops and caffeine reflects the laid-back, easy going lifestyle of this small city, where craft shops and head shops and bicycle shops mingle with excellent restaurants and nightclubs that have spawned successful indie music bands (Nirvana played here).

A drop in Portland home prices offers an opportunity to grab a great deal on housing (median price: $263,300) — in a spectacular part of the country. What’s not to like about a city nestled along the Willamette River in the shadow of Mt. Hood and just 70 miles from the Pacific Coast? With a cool-summer Mediterranean climate, it’s all here: Hiking, fishing, camping, biking, boating, vineyards.

[Related: What Retirees Wish They’d Done Differently]

As Oregon’s largest city, Portland (population: 583,800) is also home to the Portland Art Museum, Oregon Ballet Theatre, Oregon Symphony, Portland Opera, a wide variety of traditional and off-beat theaters, five universities, and the NBA Portland Trailblazers.

ThinkstockSanta Fe, N.M.

The Santa Fe Opera House encapsulates all that is special about this oldest and most Western of Western capital cities. It’s central to the city’s image as a small, rustic town (population 144,170) with a giant cultural heritage. The opera season runs from June to August, and the opera house sits on a mesa, open on two sides to summer nights. The audience faces west toward awesome sunsets - and occasional thunderstorms - across the landscape captured in Georgia O’Keefe’s paintings, which are on display at the museum that bears her name. Art is really the heart of Santa Fe’s unique blend of three cultures, American, Spanish, and Anglo. And it is everywhere, in 10 art museums and literally dozens of art galleries.

Those looking for outdoor pleasures more strenuous than opera will find endless opportunity in 300 days of sunshine, on average; a mild climate summer and winter; and the nearby Sangre de Cristo Mountains for ample snow and winter sports.

All those amenities will cost you: $380,000 is the median home price.

Walnut Creek, Calif.

If you’ve long dreamt of living in California’s Bay Area, Walnut Creek is the place. Conveniently located just 20 miles east of culturally rich San Francisco, and 13 miles from the wilderness of Mt. Diablo State Park, this East Bay town (population: 64,000) has everything your heart desires within half an hour, including a couple dozen parks, bike trails, easy access to public golf courses, and theater and gallery exhibitions at Walnut Creek’s Lesher Center for the Arts.

It’s pricier than most of the cities on our list. The median home price nudges just above $430,000. But an easy 20 mile commute on a Bay Area Rapid Transit train (BART) delivers you to all the amenities of San Francisco - the Major League baseball Giants and National Football League 49ers (and just across San Francisco Bay the Oakland Athletics), world-class opera, symphony, museums, and restaurants — where median home prices top $680,000. Oh, and at the end of that BART ride is a first-rate international airport.

Getty ImagesWashington, D.C.

The nation’s capital may seem an odd choice as a place to retire. But if you think of it as a large amusement park for grown-ups, you’ll see the logic. It’s awash in museums — including the incomparable Smithsonian — historical monuments, parks, great restaurants, the National Zoo (think pandas), the John F. Kennedy Center for the Performing Arts and 39 other performing arts venues, libraries, and research centers. All of which makes it a volunteer’s paradise.

The climate is mild, if sticky in the summer, and the opportunities for outdoor activities are endless. The city is actually smaller than Austin, Texas, and its population (601,700) has the largest percentage of adults with advanced degrees in the U.S. It is home to the NFL Redskins, Major League Baseball’s Nationals, the NBA Wizards, the Women’s NBA Mystics, and the NHL Capitals. Definitely a sports fan’s Disney Land.

As for practicalities, the subway is convenient and accessible and offers reduced fares for seniors. There are excellent hospitals, 12 universities, and three major airports. The only drawback is the cost of housing: Median home price is $450,000. Still, you get a lot of bang for the buck.

Winston-Salem, N.C.

Winston-Salem (population 229,600) is part of the Piedmont Triad of cities along the northern tier of North Carolina that includes Greensboro and High Point, and in assessing one, you can include the benefits of all. For example, a unified mass transit system provides express service from all the cities to the Triad International Airport, which is located between Winston-Salem and Greensboro, and from all the cities to the Duke Medical Center in Durham and the University of North Carolina Medical Center in Chapel Hill.

As for the lifestyle, history is instructive. The city’s lineup of universities is a testament to its diversity. There’s Wake Forest, the nationally recognized private university; the historically all-black Winston-Salem State University; the oldest women’s college in America, Salem University; and one of the most prestigious art schools, the University of North Carolina School of the Arts. Its symphony, founded in 1947, is the oldest in the state, and its arts council was the first in the nation. Which is not to say the city hasn’t developed more contemporary outlets. It hosts an international film festival every spring — RiverRun International Film Festival.

Best of all, Winston-Salem is affordable: The median home price is $137,000.

Leonard Guerrero, Chairman of the Austin Board of REALTORS®, commented, “It is encouraging to see last year’s momentum continue into the New Year. January marks the eighth straight month in which the volume of home sales in Austin has outpaced the previous year and the inventory of homes has decreased.”

Austin-area homes spent an average of 85 days on the market in January 2012, eight days less than the same month of the prior year. Compared to January 2011, the Austin market also featured six percent fewer new listings, 19 percent fewer active listings and 16 percent more pending sales in January 2012.

The Austin market had 4.1 months of inventory in January 2012, or 1.4 months less than January 2011. The figure, unchanged from December 2011, marks the lowest inventory level the Austin market has seen since the organization began tracking the statistic in January 2009.

January 2012 Statistics

• 1,051 – Single-family homes sold, 10 percent more than January 2011.
• $176,550 – Median price for single-family homes, seven percent less than January 2011.
• 85 – Average number of days that single-family homes spent on the market, eight days less than January 2011.
• 2,266 – New single-family home listings on the market, six percent less than January 2011.
• 6,557 – Active single-family home listings on the market, 19 percent less than January 2011.
• 1,638 – Pending sales for single-family homes, 16 percent more than January 2011.
• 4.1 – Months of inventory* of single-family homes, 1.4 months less than January 2011.
• $236,043,039 – Total dollar volume of single-family properties sold, one percent less than January 2011.

The following sections describe trends in other sectors of the Austin real estate market.

Townhouses & Condominiums
The volume of townhouses and condominiums (condos) purchased in the Austin area in January 2012 was 121, which is 27 percent more than January 2011. In the same time period, the median price for condos was $159,500, four percent more than January 2011. When compared to the same month of the prior year, these properties spent seven percent longer on the market, or an average of 107 days, in January 2012.

Leasing
In January 2012, 1,129 properties were leased in the Austin area, which is five percent less than January 2011. During the same time period, the median price for Austin-area leases was $1,250, nine percent higher than the same month of the prior year.

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In December 2011, a total of 1,581 single-family homes were sold in Austin, which is 11 percent more than December 2010. During the same time period, the median price for Austin homes was $187,940, which is one percent less than the same month of the prior year.

Leonard Guerrero, 2012 Chairman of the Austin Board of REALTORS®, commented, “December marked the seventh straight month in which home sales volume has outpaced the prior year and the inventory of available homes decreased.”

Austin homes spent an average of 89 days on the market in December 2011, nine days less than the same month of the prior year. The Austin real estate market also featured 12 percent fewer new listings, 19 percent fewer active listings and 12 percent more pending sales than December 2010.

In December 2011, the inventory of Austin-area homes decreased to 4.1 months, which is 1.4 months less than December 2010 and the lowest figure reported since the organization began tracking the statistic in January 2009.

Chairman Guerrero continued, “With stable prices, stronger sales volume and more pending sales this month compared to December 2010, we’re encouraged to see the market showing strong demand leading into January.”

Tuesday the Fed announced that they would maintain rates at it’s exceptionally low level (near zero) through 2013 to promote on going economic recovery and control inflation.

The Fed is basing it’s decision on the fact that the labor markets have not improved since their last meeting along with seeing slow signs of growth, inflation in the energy markets and a only slow decline in the unemployment rate. As always they did leave the caveat that they would continue to monitor the market and make adjustments as necessary.

Some experts feel that this announcement coupled with the stock market activity could cause the treasury to rally to have the rates fall well below 4%.

Last week rates averaged 4.39% with the treasury at 2.64% and Wednesday the treasury closed at 2.20%… This treasury rally was a direct result of the Fed’s announcement that they would keep rates low.

So what does this mean? Well, based on historical data rates fell to 4.17% last November from a decline in the fed funds. So the current 44bps decline suggests that the 30 year rate is in the process of crashing through prior lows. (the drop last November caused a 3 month refi boom and stimulated purchases, so be ready!)

Applications for U.S. home mortgages rose last week as interest rates fell to their lowest level this year,an industry group said on Wednesday.

One of the major concerns to arise from the negotiations for many is the fate of a valued tax break. The benefit, which allows taxpayers to deduct their mortgage interest payments, is used by 35 million households.

Now lawmakers have proposed limiting the deduction as part of an agreement to raise the government’s borrowing limit to avoid a default after the Tuesday deadline. But that’s not the only concern for homeowners and prospective buyers as the negotiations heat up in Washington.

Even if lawmakers strike a deal by the deadline, there’s still a chance the government’s credit rating could be downgraded. That raises the prospect of higher mortgage rates, meaning those who’ve been holding tight for home prices to fall further may feel that time is running out to take advantage of low rates.

The average rate on the 30-year fixed loan is 4.52 percent. That’s only slightly above this year’s low of 4.49 percent. But the rate could head higher if the government doesn’t hold on to its sterling AAA debt rating.

Whether you’re a homeowner or thinking of buying, here’s what you should know:

What will happen to mortgage terms if the government defaults on its debt?

Some borrowers could find it more difficult to get approved for a mortgage. This might happen if banks become more cautious and slow their lending to each other, as they did during the height of the economic collapse in 2008, notes Greg McBride, a senior analyst with Bankrate.com, a publisher of financial data.

The government’s cost of borrowing also would rise if there were an unprecedented downgrade of the country’s credit rating. Those costs would be felt by all, because the interest rates on consumer loans, such as mortgages, are tied to government bonds.

“Any increase on Uncle Sam’s borrowing would translate to higher costs for consumers,” McBride said.

However, McBride notes that any uptick in interest rates could be partially offset by a drop in home prices. That’s because the amount consumers are willing to pay for homes goes down when mortgage rates go up.

If a default is avoided is there any reason mortgage rates would still rise?

Yes. Depending on the details of an agreement, ratings agencies could still decide to downgrade the government’s debt.

Standard & Poor’s President Deven Sharma refused last week to provide specifics on how much the government would need to offset spending to maintain its top-notch credit rating. But Sharma said some of the plans being floated by Congress could be enough to avoid a downgrade.

Moody’s Investors Service has said the U.S. government would probably keep its top rating if it avoids a default.

In the case that the government cuts spending dramatically enough, mortgage interest rates could actually decline. That’s because massive spending cuts would suggest that there will be a significant decline in overall economic activity, McBride of Bankrate.com notes. That in turn would push down interest rates.

Just how much could mortgage rates spike if the government’s credit is downgraded?

A downgrade shouldn’t result in a sharp spike, because U.S. debt would still be one of the safest investments around, notes Jack Ablin, chief investment officer for Harris Private Bank.

“Investors already had the opportunity to move away from Treasurys, but the yields haven’t done much,” Ablin said. “One good thing going for us is that there’s a glut of savings and dearth of safe investments. How many AAA investment opportunities are really left?”

In the meantime, the anemic job market and struggling economy should keep low interest rates in check.

That doesn’t mean there won’t be any increase at all. Terry Belton, global head of fixed income strategy at JPMorgan Chase, estimates the government’s borrowing costs would rise between 0.6 and 0.7 of a point if its credit rating were lowered. That would mean mortgage rates could rise to more than 5.1 percent.

What about the tax break for mortgage interest payments? Wouldn’t claiming the benefit negate the impact of any increase in rates for homeowners?

Only to a point. As it stands, homeowners can deduct the interest on mortgages of up to $1 million from their taxable income.

But exactly how much a homeowner can save depends on a few factors. As an example, let’s assume you have a taxable income of $100,000 and are in the 25 percent tax bracket. That would mean you pay $25,000 in income taxes. If you deduct $10,000 in mortgage interest costs, however, your taxable income would drop to $90,000. That would lower your income tax to $22,500, meaning you’d save $2,500.

The break only benefits those whose itemized deductions add up to more than the standard deduction, notes Jina Etienne, director of tax for the American Institute of CPAs. Mortgage interest is usually the cost that puts filers over the line so they can itemize deductions.

How could the mortgage interest deduction change under the current proposal in Washington?

A proposal put forth by a bipartisan group of senators known as the Gang of Six would lower the cap on eligible mortgages to $500,000. Second homes would no longer be eligible, either. The idea is to restrict the use of tax breaks by wealthier households.

As the proposal stands, the change would apply to new and existing mortgages, according to Jackie Perlman, a senior analyst for the Tax Institute at H&R Block.

It’s not clear exactly how many homeowners would no longer be able to claim the tax break. But in June, only 2 percent of homes sold for $1 million or more and 10.5 percent sold for $500,000 or more, according to the National Association of Realtors.

Still, Perlman notes that there could be other changes to offset the impact for those who would lose the benefit.

“The idea of tax reform, regardless of party, is to try to make everything more simple and fair,” she said. “So some people may lose benefits. But there’s usually something in it for everyone, whether it’s a lower tax rate or simpler form.”

Everything seems so up in the air. What are the chances this tax change could be adopted?

The budget proposals being pushed by both parties envision bipartisan committees that would be charged with cutting spending. Such a committee also would have the option to include changes to the tax code. But that doesn’t mean committee members would adopt the proposals put forth by the Gang of Six.

The Gang of Six proposal “was intended to form a model for an agreement,” said Mel Schwarz, director of tax legislation at Grant Thornton, an accounting firm. “It would be going too far to say it forms a blueprint.” Schwarz also said lawmakers also would be careful of adopting changes that could impede the housing market’s tenuous recovery.

Why? For starters, 30-year fixed-rate mortgages can be had for less than 5 percent. Recently, the 30-year rate hit 4.6 percent. If you want a 15-year mortgage, you can (for now) still get it for less than 4 percent. These are astounding rates. As Robert Fogel, a Nobel prize-winning economist from the University of Chicago, recently told me, it’s like borrowing for free. That’s how it feels to me, too: When my husband and I bought our first home in 1989, our interest rate was 11.75 percent.

At this point, it seems everyone wants the real estate market to get better:

• Realtors are selling a fraction of the homes they once were, taking a huge hit in income.

• Builders (at least, those that are still in business) are selling about one-eighth as many homes as they were selling in 2005.

• Appraisers continue to take some of the blame for the housing crisis, for over-appraising property in the boom years and under-appraising it now. Realtors say that more than 75 percent of the homes sales that fall apart do so because the appraisal comes in so far below the contract price that a deal can’t be worked out.

• And homeowners are desperate for the housing market to rebound — especially the more than 25 percent who are underwater with their homes — so they can refinance or sell their homes and move on with their lives.

[Click here to check home equity rates in your area.]

There’s no reason you shouldn’t buy a home now and take advantage of super-low prices, historically low mortgage interest rates, and a significant supply of homes on the market. But to be successful in today’s real estate market, you need to understand that the game has changed.

Here’s my list of the biggest shifts:

1. R.I.P., Big Housing Price Jumps

If you want to buy a house, you have to have enough income to support the mortgage. Now, take it the next step: If everyone in a particular neighborhood earns around the same money, then all the houses in the neighborhood will be priced about the same and home values will only rise 3 percent per year.

That’s about the typical raise most Americans used to get, but the decidedly old-fashioned expectation went out in the 2000s because banks told borrowers that exotic mortgages (like the infamous pay-option adjustable-rate mortgage, or ARM) would allow them to “leverage up” to a much more expensive house payment. It was a payment most clearly couldn’t afford; the bulk of those loans started going delinquent within three months of closing. Now that every borrower has to have a job and some sort of down payment, and the only basic loan types available are 30-year and 15-year fixed-rate mortgages, you won’t be able to leverage up with your mortgage, and housing prices will remain far more steady.

In short — buy now, but don’t expect a huge pop in home prices. It ain’t going to happen.

2. Mortgage Lenders: Just Not That into You

Most home buyers don’t have enough cash in their pocket to purchase a home without a mortgage. But, lenders are extremely risk-averse at the moment — so they don’t want to approve a mortgage application unless you have an extremely good FICO score (preferably 700 or higher, and at least 760 to get the best rates); you have plenty of cash in the bank (for your down payment, closing costs and a healthy cash reserve); you don’t have anything weird or amiss in your financial data. And it helps if you have another loan application approved from a competing institution. Which is to say: They only want you if you don’t really need them.

You’ll also need to make sure the property appraises at or above the contracted price and the neighborhood is steady (without too many foreclosures).

3. The Best Deals Are in New Places

Sure, there are amazing short sales and foreclosures out there. To find them, you’ll have to hire a great agent who really knows what he or she is doing, has connections with the foreclosure-sale (also known as real estate owned, or REO) departments of big lenders, and can help you navigate a tricky and frustrating negotiation cycle.

For example, if you want to buy a HUD home (an FHA foreclosure), you’ll need a HUD-certified real estate agent who can help you make an offer at HUDHomeStore.com. But the agent may not tell you that short sales and foreclosures are often damaged properties that will require tens of thousands of dollars (or more) in deferred maintenance, rebuilding or renovating.

Instead, look for a property where the seller has plenty of equity and has to sell, but is confronted with a neighborhood full of foreclosures. The seller will have to price the home to compete with foreclosures, and you’ll scoop up a property that is in much better shape and will, in all likelihood, require a lot less maintenance, renovation and upkeep.

4. Investing? Focus on Income

Somewhere along the way, ordinary civilians got the idea that there were massive profits to be made in real estate, if only they could flip the properties fast enough. The problem with that strategy became apparent when the real estate market crashed, and investors (who were leveraged to the hilt) couldn’t get out of their properties in time. When you’re paying thousands of dollars for a mortgage but don’t have any income — nor hopes of a sale — it’s a fast track to bankruptcy.

But now is an amazing time to buy investment property. Purchase a foreclosure or two (or up to 10, if you can find the financing), and focus on how much income you can get each month. If you buy a foreclosure in the Atlanta area for $75,000 and can get $800 to $1,000 per month in rent, that’s a terrific return on investment.

5. Time to Think Medium Term … at Minimum

I’m not sure where home buyers got the idea that they could buy and flip houses every 24 months and collect a king’s ransom’s worth of tax-free profits. But those days are over. Whether you’re buying as an investor or plan to live in the property, you’ll need a 7- to 10-year plan in order to make sure you won’t lose money after factoring in the costs of sale.

Even those investors who are buying bottom-feeder foreclosures and fixing them up might not be able to resell them so quickly. And if they do, they might find that lenders won’t finance their buyers. So come up with a long-term plan that will let you rake in money … while the rest of the real estate market catches up.

___

In the 20-odd years that I have been writing about real estate, I don’t believe there has ever been a better time to buy a home.

Why? For starters, 30-year fixed-rate mortgages can be had for less than 5 percent. Recently, the 30-year rate hit 4.6 percent. If you want a 15-year mortgage, you can (for now) still get it for less than 4 percent. These are astounding rates. As Robert Fogel, a Nobel prize-winning economist from the University of Chicago, recently told me, it’s like borrowing for free. That’s how it feels to me, too: When my husband and I bought our first home in 1989, our interest rate was 11.75 percent.

At this point, it seems everyone wants the real estate market to get better:

• Realtors are selling a fraction of the homes they once were, taking a huge hit in income.

• Builders (at least, those that are still in business) are selling about one-eighth as many homes as they were selling in 2005.

• Appraisers continue to take some of the blame for the housing crisis, for over-appraising property in the boom years and under-appraising it now. Realtors say that more than 75 percent of the homes sales that fall apart do so because the appraisal comes in so far below the contract price that a deal can’t be worked out.

• And homeowners are desperate for the housing market to rebound — especially the more than 25 percent who are underwater with their homes — so they can refinance or sell their homes and move on with their lives.

[Click here to check home equity rates in your area.]

There’s no reason you shouldn’t buy a home now and take advantage of super-low prices, historically low mortgage interest rates, and a significant supply of homes on the market. But to be successful in today’s real estate market, you need to understand that the game has changed.

Here’s my list of the biggest shifts:

1. R.I.P., Big Housing Price Jumps

If you want to buy a house, you have to have enough income to support the mortgage. Now, take it the next step: If everyone in a particular neighborhood earns around the same money, then all the houses in the neighborhood will be priced about the same and home values will only rise 3 percent per year.

That’s about the typical raise most Americans used to get, but the decidedly old-fashioned expectation went out in the 2000s because banks told borrowers that exotic mortgages (like the infamous pay-option adjustable-rate mortgage, or ARM) would allow them to “leverage up” to a much more expensive house payment. It was a payment most clearly couldn’t afford; the bulk of those loans started going delinquent within three months of closing. Now that every borrower has to have a job and some sort of down payment, and the only basic loan types available are 30-year and 15-year fixed-rate mortgages, you won’t be able to leverage up with your mortgage, and housing prices will remain far more steady.

In short — buy now, but don’t expect a huge pop in home prices. It ain’t going to happen.

2. Mortgage Lenders: Just Not That into You

Most home buyers don’t have enough cash in their pocket to purchase a home without a mortgage. But, lenders are extremely risk-averse at the moment — so they don’t want to approve a mortgage application unless you have an extremely good FICO score (preferably 700 or higher, and at least 760 to get the best rates); you have plenty of cash in the bank (for your down payment, closing costs and a healthy cash reserve); you don’t have anything weird or amiss in your financial data. And it helps if you have another loan application approved from a competing institution. Which is to say: They only want you if you don’t really need them.

You’ll also need to make sure the property appraises at or above the contracted price and the neighborhood is steady (without too many foreclosures).

3. The Best Deals Are in New Places

Sure, there are amazing short sales and foreclosures out there. To find them, you’ll have to hire a great agent who really knows what he or she is doing, has connections with the foreclosure-sale (also known as real estate owned, or REO) departments of big lenders, and can help you navigate a tricky and frustrating negotiation cycle.

For example, if you want to buy a HUD home (an FHA foreclosure), you’ll need a HUD-certified real estate agent who can help you make an offer at HUDHomeStore.com. But the agent may not tell you that short sales and foreclosures are often damaged properties that will require tens of thousands of dollars (or more) in deferred maintenance, rebuilding or renovating.

Instead, look for a property where the seller has plenty of equity and has to sell, but is confronted with a neighborhood full of foreclosures. The seller will have to price the home to compete with foreclosures, and you’ll scoop up a property that is in much better shape and will, in all likelihood, require a lot less maintenance, renovation and upkeep.

4. Investing? Focus on Income

Somewhere along the way, ordinary civilians got the idea that there were massive profits to be made in real estate, if only they could flip the properties fast enough. The problem with that strategy became apparent when the real estate market crashed, and investors (who were leveraged to the hilt) couldn’t get out of their properties in time. When you’re paying thousands of dollars for a mortgage but don’t have any income — nor hopes of a sale — it’s a fast track to bankruptcy.

But now is an amazing time to buy investment property. Purchase a foreclosure or two (or up to 10, if you can find the financing), and focus on how much income you can get each month. If you buy a foreclosure in the Atlanta area for $75,000 and can get $800 to $1,000 per month in rent, that’s a terrific return on investment.

5. Time to Think Medium Term … at Minimum

I’m not sure where home buyers got the idea that they could buy and flip houses every 24 months and collect a king’s ransom’s worth of tax-free profits. But those days are over. Whether you’re buying as an investor or plan to live in the property, you’ll need a 7- to 10-year plan in order to make sure you won’t lose money after factoring in the costs of sale.

Even those investors who are buying bottom-feeder foreclosures and fixing them up might not be able to resell them so quickly. And if they do, they might find that lenders won’t finance their buyers. So come up with a long-term plan that will let you rake in money … while the rest of the real estate sits

To determine the next boom towns in the U.S., Forbes, with the help of Mark Schill at the Praxis Strategy Group, took the 52 largest metro areas in the country (those with populations exceeding 1 million) and ranked them based on various data indicating past, present and future vitality.

We started with job growth, not only looking at performance over the past decade but also focusing on growth in the past two years, to account for the possible long-term effects of the Great Recession. That accounted for roughly one-third of the score. The other two-thirds were made up of a a broad range of demographic factors, all weighted equally. These included rates of family formation (percentage growth in children 5-17), growth in educated migration, population growth and, finally, a broad measurement of attractiveness to immigrants — as places to settle, make money and start businesses.

We focused on these demographic factors because college-educated migrants (who also tend to be under 30), new families and immigrants will be critical in shaping the future. Areas that are rapidly losing young families and low rates of migration among educated migrants are the American equivalents of rapidly aging countries like Japan; those with more sprightly demographics are akin to up and coming countries such as Vietnam.

Many of our top performers are not surprising. No. 1 Austin, Texas, and No. 2 Raleigh, N.C., have it all demographically: high rates of immigration and migration of educated workers and healthy increases in population and number of children. They are also economic superstars, with job-creation records among the best in the nation.

Perhaps less expected is the No. 3 ranking for Nashville, Tenn. The country music capital, with its low housing prices and pro-business environment, has experienced rapid growth in educated migrants, where it ranks an impressive fourth in terms of percentage growth. New ethnic groups, such as Latinos and Asians, have doubled in size over the past decade.

Two advantages Nashville and other rising Southern cities like No. 8 Charlotte, N.C., possess are a mild climate and smaller scale. Even with population growth, they do not suffer the persistent transportation bottlenecks that strangle the older growth hubs. At the same time, these cities are building the infrastructure — roads, cultural institutions and airports — critical to future growth. Charlotte’s bustling airport may never be as big as Atlanta’s Hartsfield, but it serves both major national and international routes.

Of course, Texas metropolitan areas feature prominently on our list of future boom towns, including No. 4 San Antonio, No. 5 Houston and No. 7 Dallas, which over the past years boasted the biggest jump in new jobs, over 83,000. Aided by relatively low housing prices and buoyant economies, these Lone Star cities have become major hubs for jobs and families.

And there’s more growth to come. With its strategically located airport, Dallas is emerging as the ideal place for corporate relocations. And Houston, with its burgeoning port and dominance of the world energy business, seems destined to become ever more influential in the coming decade. Both cities have emerged as major immigrant hubs, attracting on newcomers at a rate far higher than old immigrant hubs like Chicago, Boston and Seattle.

The three other regions in our top 10 represent radically different kinds of places. The Washington, D.C., area (No. 6) sprawls from the District of Columbia through parts of Virginia, Maryland and West Virginia. Its great competitive advantage lies in proximity to the federal government, which has helped it enjoy an almost shockingly “good recession,” with continuing job growth, including in high-wage science- and technology-related fields, and an improving real estate market.

Our other two top ten, No. 9 Phoenix, Ariz., and No. 10 Orlando, Fla., have not done well in the recession, but both still have more jobs now than in 2000. Their demographics remain surprisingly robust. Despite some anti-immigrant agitation by local politicians, immigrants still seem to be flocking to both of these states. Known better as retirement havens, their ranks of children and families have surged over the past decade. Warm weather, pro-business environments and, most critically, a large supply of affordable housing should allow these regions to grow, if not in the overheated fashion of the past, at rates both steadier and more sustainable.

Sadly, several of the nation’s premier economic regions sit toward the bottom of the list, notably former boom town Los Angeles (No. 47). Los Angeles’ once huge and vibrant industrial sector has shrunk rapidly, in large part the consequence of ever-tightening regulatory burdens. Its once magnetic appeal to educated migrants faded and families are fleeing from persistently high housing prices, poor educational choices and weak employment opportunities. Los Angeles lost over 180,000 children 5 to 17, the largest such drop in the nation.

Many of L.A.’s traditional rivals — such as Chicago (with which is tied at No. 47), New York City (No. 35) and San Francisco (No. 42) — also did poorly on our prospective list. To be sure, they will continue to reap the benefits of existing resources — financial institutions, universities and the presence of leading companies — but their future prospects will be limited by their generally sluggish job creation and aging demographics.

Of course, even the most exhaustive research cannot fully predict the future. A significant downsizing of the federal government, for example, would slow the D.C. region’s growth. A big fall in energy prices, or tough restrictions of carbon emissions, could hit the Texas cities, particularly Houston, hard. If housing prices stabilize in the Northeast or West Coast, less people will flock to places like Phoenix, Orlando or even Indianapolis (No. 11), Salt Lake City (No. 12) and Columbus (No. 13). One or more of our now lower ranked locales, like Los Angeles, San Francisco and New York, might also decide to reform in order to become more attractive to small businesses and middle class families.

What is clear is that well-established patterns of job creation and vital demographics will drive future regional growth, not only in the next year, but over the coming decade. People create economies and they tend to vote with their feet when they choose to locate their families as well as their businesses. This will prove more decisive in shaping future growth than the hip imagery and big city-oriented PR flackery that dominate media coverage of America’s changing regions.

The Next Big Boom Towns in the U.S.

©Forbes Images

No. 1: Austin, Texas

This is no surprise. Austin consistently sits atop Forbes’ annual list of the best cities for jobs and scores highly in other demographics rankings. It is the third-fastest-growing city in the nation, attracting large numbers of college grads, immigrants and families with young children.

©Forbes Images

No. 2: Raleigh, N.C.

Raleigh has experienced the second-highest overall population increase and the third-highest job growth over the past two decades in the U.S. It also ranked among those regions seeing the biggest jump in new immigrants and is the No. 1 city for families with young children. The area is a magnet for technology companies fleeing the more expensive, congested and highly regulated northeast corridor. Affordable housing and short commute times are no doubt highly attractive to recent college graduates and millennials looking to start families.

©Forbes Images

No. 3: Nashville, Tenn.

The country music capital, with its low housing prices and pro-business environment, has experienced rapid growth in educated migrants, where it ranks an impressive fourth in terms of percentage growth. New ethnic groups, such as Latinos and Asians, have doubled in size over the past decade. A high quality of life, a vibrant cultural and music scene and a diverse population also make Nashville a desirable place to live.

©Forbes Images

No. 4: San Antonio, Texas

Like its other Texas neighbors, San Antonio boasts soaring population rates as well as a good job market and booming industry. One key factor in San Antonio’s favor: stable house prices — even by Texas standards. PMI Mortgage Insurance’s most recent risk index, which is a two-year measure, lists San Antonio as having the lowest risk from falling prices among large Texas cities.

©Forbes Images

No. 5: Houston, Texas

Low housing prices, a stable job market and a vibrant immigrant community has helped Houston emerge as future boomtown. And with its burgeoning port and dominance of the world energy business, the area seems destined to become even more influential in the coming decade.

Click here to see the entire list of the Next Big Boom Towns in the U.S.

Center for American Progress associate director David Min expects the White House will deem FHA a “non-essential” agency and stop all loan approvals by the federal mortgage insurance agency.

“This would cause a devastating new shock to our extremely fragile housing markets,” Min said in an article published by the Washington think tank.

Treasury secretary Timothy Geithner has warned that the U.S Treasury will have to cease all borrowing on August 2 unless the debt ceiling is raised.

Many Republican lawmakers are skeptical of Geithner’s deadline and his warnings of a financial catastrophe if Congress misses the Aug. 2 deadline.

The CAP associate director for financial markets policy noted that the government will have to slash 40% of its budget once the debt limit is reached.

“When you take out Social Security checks, Medicare checks and payments to our troops, there is going to be very little money left.  Almost all administrative activities are going to be shut down,” Min said in an interview.

It appears Fannie Mae and Freddie Mac may not be affected by the disruptions to the federal government.  However, lenders seeking to verify Social Security numbers or check a borrower’s tax return with the Internal Revenue Service will be out of luck.

“An extended federal debt ceiling impasse would shut down these critical activities, removing many potential homebuyers from the market and causing significant delays in mortgage approvals for everyone else,” Min said.

Before joining CAP, he served on the staff of the Joint Economic Committee and worked at the Securities and Exchange Commission.

POLICY | WASHINGTON RESEARCH GROUP