Island home prices double and triple rest of the country

Hawaii real estate: Keep dreaming
By: Karla Aronson: Inman News
Imagine a home buyer who's all set with a $400,000 budget to purchase a home, logs onto the multiple listing service and realizes there are only seven home listings to choose from in his price range, while hundreds more at double the price are for sale.

That's a reality today for buyers in the state of Hawaii, where median home prices readily top half a million dollars and easily run two to three times above the rest of the nation.

On the island of Kauai, for instance, home buyers looking to stay within a $400,000 budget would have just seven listings in the MLS to choose from at the beginning of May. By contrast, buyers looking to spend at least $900,000 would have 107 homes to browse on the MLS.

"The cheapest is $60,000, but they are only selling the house," said Karen Ono, executive vice president of the Kauai Board of Realtors. "You can't keep it on the land. You have to move it."

Hawaii embodies the ultimate real estate dream for most Americans. The lure of white sandy beaches, active volcanoes and relaxed island life no doubt have contributed to its skyrocketing housing costs.

The median price of a home on Kauai was $540,000 in the first quarter this year, up 27 percent from last year, putting a major squeeze on buyers who don't have a half million to spend.

The island of Maui revealed even greater extremes, with the median single-family home price setting a record of $695,950 in April. The first quarter of 2005 registered a median home price of $640,000, up 24 percent from a year ago.

Similar to Kauai, a search for single family homes on Maui for under $400,000 netted a mere seven active listings at the beginning of May. Buyers with $900,000 or more, however, could choose among 216 listings. (The full market showed another 169 active listings in the plus $400,000 to below $900,000 range.)

"Money is cheap. People can buy. Everything is high," said Terry Tolman, executive vice president of the Realtors Association of Maui. Tolman largely attributed Maui's surging prices to historically low interest rates making it possible for buyers to step in at sellers' ever-escalating asking prices. However, Tolman added, "the market will be cyclical" with rising interest rates.

Hawaii's real estate market is divided into the four major islands of the state: Kauai, Maui, Oahu and the Big Island. While Kauai and Maui represent more of a resort market, Oahu, where most of the state's 1.25 million population live in the vicinity of Honolulu, is regarded as a resident market.

Still, the low-end prices are bumping upward across Oahu, as with Kauai and Maui. At the beginning of May, home listings for Oahu revealed 127 single family residences at or below $400,000 versus 492 properties available at or above $900,000.

Oahu's median home price was $545,000 in May, up 25 percent from last year.

Harvey Shapiro, research economist for the Honolulu Board of Realtors, which represents the island of Oahu, pointed out that though the entire price structure is going up, "affordability is recently much better than it was in the early '90s."

In the early 1990s, 60 percent of residents' median income was required to purchase a median priced home on Oahu. By 2003, median housing costs had dropped to 30 percent of the median income, Shapiro said.

Not surprisingly, inventory is "exceedingly low," Shapiro said, adding that the entire inventory of single-family homes on the market could be depleted in 2.2 months, dividing inventory by sales.

In April, The Honolulu Board of Realtors recorded 814 single-family homes on the market, slightly above its record low of 784 active listings in April 2004. The median number of days a house was on the market came in at just 19 days, from the time of listing until a contract was agreed upon.

The Big Island of Hawaii is the only island where more single-family homes, 510, were listed at or below the $400,000 mark, versus 197 home listings at or above $900,000. In April, the median price of a home on the Big Island was $370,000. Comparing the first four months of 2005 to the prior year period, the median home price jumped 44 percent.

Many investors have looked upon real estate on the Big Island as the best and last buying opportunity at the low end of the market in Hawaii. Still, the overall real estate picture for the island, which is the largest of Hawaii's islands and geographically could fit all the other islands combined into its land area, belies the regional divisions, which indicate similarly stratospheric price levels as its neighboring islands.

Charles Hosley, owner-broker of Hosley Realty and a member of the Kona Board of Realtors noted, in particular, an oversupply of vacant lots in new developments with no water, no roads, and no grocery store within 50 miles. Many are located in areas with lava flow risk.

Alternatively, Hosley said, "You can't buy a home for under $400,000 in Kona." In the area where he specializes, Holualoa above Kailua-Kona, the large acreage estates regularly fetch $1 million.

"That's the biggest problem with Hawaii. People have lost track of the true intrinsic value," Hosley said. Prices have become more based on speculative values, he argued, rather than on use of the property, local infrastructure, schools and government. "People are buying warm air and views of the ocean," he said.

Hawaii's prices have been supported by many buyers who have sold homes on the mainland, have cash on hand and do not need employment. "I'd like to see what happens here in five years," Hosley said, wondering how satisfied some of those relocating will be over time.

Hosley is in the camp that anticipates some price correction as Federal Reserve Board Chairman Alan Greenspan puts the breaks on the real estate market. As well, he foresees, added fallout from the riskier lenders that will face problem loans and become more restrictive to borrowers. "Lenders are the most lenient ever," he observed, "in my 27 years in real estate."

Still, with new housing supply unlikely to meet existing demand, and increasing demand from afar likely to continue, those upward pressures on home prices in Hawaii will likely persist.
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Consumer confidence bounces back

More jobs, higher incomes on the horizon
Inman News
The Conference Board today announced its consumer confidence index, which had declined in April, rebounded in May. The index now stands at 102.2, up from 97.5 in April.

The present situation index increased to 116.7 from 113.8, and the expectations index improved to 92.5 from 86.7.

"Consumer confidence improved in May, gaining back nearly all of the ground it lost in April," said Lynn Franco, director of The Conference Board's Consumer Research Center. "The present situation index, despite fluctuations in recent months, is more than 26 points higher than a year ago. Consumers' concerns about the economy and jobs have eased. The expectations index, while slightly below year-ago levels, continues to signal economic growth in the months ahead."

Consumers' assessment of current conditions was more positive in May than in April. Those claiming business conditions are "bad" edged down to 16.8 percent from 17.6 percent. Those claiming conditions are "good" was virtually unchanged at 26.5 percent. The employment picture was mixed. Consumers saying jobs are "hard to get" increased to 24.2 percent from 22.9 percent, but those claiming jobs are "plentiful" rose to 22.6 percent from 20.4 percent.

Consumers' expectations for the next six months, which had been losing ground since January, reversed course in May. Those anticipating business conditions to improve increased to 18.6 percent from 17.7 percent, while consumers expecting business conditions to worsen slid to 9.5 percent from 9.9 percent.

The outlook for the labor market was also brighter in May. Those expecting more jobs to become available in the coming months edged up to 14.9 percent from 14 percent, while those expecting fewer jobs declined to 15.9 percent from 18.4 percent. The proportion of consumers anticipating their incomes to improve in the months ahead rose to 17.2 percent from 16.8 percent.

The Consumer Confidence Survey is based on a representative sample of 5,000 U.S. households.
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Have a safe Memorial Day!Best ways to divert water runoff, remove popcorn ceilings

Tips on proper equipment, safety
By: Paul Bianchina: Inman News
Q: I need to divert water away from my house. Can you tell me how far back from the house I need to start the diversion? –H.R., via e-mail

A: To start with, the soil surrounding the house should be a minimum of 6 inches below the level of the siding. From there, if the house sits on level ground the soil should be sloped down at least 1/4-inch per foot away from the house for a distance of at least 3 feet out in all directions.
If the house is on a hillside, then the soil on the uphill side needs to be excavated down to create a swale – a roughly v-shaped low area – behind the house. The swale should be situated a minimum of 3 feet out from the house, and is constructed so that soil from the house slopes down to the swale, as does the hill itself. The size, depth and location of the swale is dependant on the slope of the hillside as well as the soil conditions in the area, but it needs to be of sufficient size and depth so that water coming off the hillside cannot rise to such a level that it would reach the house. The swale also needs to be constructed in such a manner that is does not direct water from your lot onto a neighboring property.

Site grading for hillside lots is always difficult, both from a technical and a legal standpoint. It requires both skill and the proper equipment to determine the exact slopes and grade levels, and I would definitely suggest that you consult with an experienced, licensed excavation contractor for any grading of this type.

Q: What is the procedure for removing that cottage cheese ceiling material, back to a smooth ceiling? Gloria M., via e-mail

A: "Cottage cheese" or "popcorn" acoustic ceiling treatments are actually pretty easy to remove, but it's a slow and messy process.

First, cover all the floors and walls with plastic sheeting. Starting in one corner, use a spray bottle or a small garden sprayer filled with plain water and mist a small section of the ceiling. You want the acoustic material moist but not soaking wet. Using a drywall taping knife or other broad metal scraper, simply scrape off the damp material.

Move across the ceiling in this manner, spraying and scraping one section at a time. You'll quickly get a feel for how much water to use and how big an area to work on at one time. Take care to keep the scraper at a low angle in relation to the ceiling. The idea is to scrape the acoustic material off without gouging or otherwise damaging the drywall underneath.

What you will find under the popcorn is dependant on how much time the original drywaller took with the installation. In some cases, you will find that the drywall has been topped and finished completely, and only minor touchup is required to get it smooth. In other cases, you may find that the drywall was only rough-taped, and
one or more top coats of joint compound will be needed to even everything out. Once the ceiling is smooth, apply a primer coat and then texture and paint it as desired.

One word of caution: Up until the early 1980s – and even beyond in some areas – acoustic ceiling material contained asbestos. Before removing the material in your house, you should scrape off a small portion in an unobtrusive spot and send it in to be tested. You can find out more about asbestos testing labs in the phone book or on the Web.

Q: I have a home with high ceilings and I would like to install some crown molding. I'm looking for something fairly large, but so far we have had no success in finding anything locally. Any suggestions you might have for outlets or suppliers would be greatly appreciated. -Harry S., via e-mail.

A: Any large lumberyard should have catalogs of moldings that they can order for you. Just explain to any of the folks at the counter what you're looking for, and they can show you what's available. It will be by special order (so be sure you order a little extra), but orders typically only take a week or so.

If the crown moldings will be painted, you might want to consider using polyurethane instead of wood. Polyurethane moldings are lighter, less expensive, and paint beautifully, and they are also available in an amazing number of sizes and patterns. Two places to check out on the Web are Outwater Plastics at www.outwater.com, and Profile Mouldings at www.profilemouldingsusa.com. Both sites will give you a lot of ideas, and you can order directly from them if desired.

Remodeling and repair questions? E-mail Paul at paul2887@direcway.com.
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New Home Trends

By: Chuck Paustian: REALTOR® Magazine
Building Character
Details matter, inside and out!
New-home buyers today are seeking houses with personality. Builders are responding with designs that offer distinctive styling, luxurious finishes, and a safe haven from the stress of everyday life.

 • The Great Outdoors
  • Architectural Flair
  • Seeking Sanctuary
  • Entertaining Spaces
  • Functional Personality 

Drive by a new-home development today, and you may not see a dramatic difference from one built five years ago. But interiors—and even exteriors to some extent—reflect a changing consumer dynamic.

If there’s one overarching trend in new-home construction, it’s a shift away from large, nondescript spaces that offer size for size’s sake. Builders say demand continues for rooms that flow together—combining food preparation and entertainment, for example—but with a greater emphasis on quality, luxury, and refuge.

The movement is as much sociological as architectural, an outgrowth of the “nesting” phenomenon. The home as castle is being replaced by the home as personal retreat, says Darcy Garneau, principal with EDI Architecture Inc. in Houston.

Homebuilding and design trends, like the rooms themselves, often overlap and flow into one another. Still, some distinct categories can be discerned—a greater attention to unity of design with a melding of indoor and outdoor space, greater architectural styling, the creation of sanctuary and flexible entertaining environments, and a combination of functionality and personality.

Although specific features and upgrades might add to the price of a new home, by some estimates as much as 20 percent, observers say cost isn’t the main point. “What we’re talking about is a higher level of design. That doesn’t necessarily have to cost a fortune,” says Barry Glantz, president of Glantz & Associates Architects Inc. in St. Louis. “Buyers who are looking strictly at square footage and cost are probably not going to appreciate this higher level of design.”

The Great Outdoors

Say goodbye to rows of houses with the same safe facade. “People are tired of cookie-cutter,” says EDI’s Garneau. “They’re looking for individuality.” Today’s new homes have more dynamic exteriors, thanks to the use of bold colors and a mixture of materials, such as stone, stucco, and timber, that add a sense of texture.

The attention to a home’s exterior goes beyond mere aesthetics. The outside is being transformed into an extension of the living space, with the addition of elaborate gardens, patios and decks, balconies, and even fully furnished rooms for outdoor reading or dining.

“Every inch is so precious to us now as a society,” says Chris Barrett, president of Chris Barrett Design Inc. in Santa Monica, Calif. “Even in small gardens, people are trying to gain functionality.” The cost can range from a couple hundred dollars for a garden bench to tens of thousands of dollars for a fully furnished outdoor room.

To break down barriers between interior and exterior living spaces, owners are opting for doorways that integrate indoor and outdoor spaces and windows that offer a view of a garden or other pleasant vista. “There’s a transparency between the inside and the outside,” says Stephen Francis Jones, principal of SFJones Architects Inc. in Marina del Rey, Calif.

Architectural Flair

A one-sided approach to residential architecture, where the facade includes distinctive design elements while the sides and rear are left unadorned, has given way to what some observers are calling “architecture in the round.” Details such as balusters, brackets, shutters, balconies, and trellises continue all around the home.

And the approach doesn’t stop with the exterior. “The whole style and feel, the use of natural materials, is coming inside and being used in ceiling details, countertops, and fireplace mantels,” says Cheryl O’Brien, president of C. O’Brien Architects Inc. in Bala Cynwyd, Pa. O’Brien says she sees this approach being incorporated at all price points, not just in luxury homes.

Attention to materials in many cases makes up for size; rooms today tend to be built on a more human scale than the “big box” rooms of the 1980s, says architect Glantz. “What we’re seeing is that bigger isn’t always better.”

To retain an open feel, designers are layering, creating floor plans in which rooms flow into one another without harsh divisions or entranceways. Instead, “there’s a transitioning of spaces,” says Glantz. “We’re paying better attention to the home environment that we’re trying to create.”

Seeking Sanctuary

We’re seeing sanctuary spaces being designed into newer homes,” says Alex Anamos, studio director and project architect at KAA Design Group in Los Angeles. Those spaces are appearing throughout the interior as people seek escapes from the stress of their daily lives. In addition to master suites, Anamos says, smaller spaces such as dedicated meditation or yoga rooms are becoming more common. “The sanctuary theme is becoming part of the whole house,” agrees EDI’s Garneau.

At the 2005 International Builders’ Show in Orlando in January, Raleigh, N.C.-based Sarah Susanka, architect and author of the “Not So Big” series of best-selling books, used the term “a place of one’s own” in describing the small rooms and alcoves being designed into newer homes. Examples: a window seat for quiet reading or a small alcove or office space where people can sort mail, drop keys, and recharge cell phones. “These are rooms that America desperately needs,” Susanka says.

Entertaining Spaces

Homes today are centers of social activity, with spaces crafted for various forms of entertainment from high-tech audiovisual theaters to rooms that can accommodate large gatherings.

Often rooms will serve more than one purpose, handling both formal and informal functions with a simple change in light setting. “Spaces that overlap function and decor represent a break from traditional house layouts,” says architect Jones. “People are working with the space they have and trying to get the biggest bang for their buck.”

Even kitchens—already the hub for social activity in many homes—are getting a make over. Architects and designers are facilitating people’s natural propensity to gather in kitchens with features such as large chairs, ottomans, and fireplaces.

Overall, “there’s more of an emphasis on homes that have all the bells and whistles you could possibly want” for gracious entertaining, says designer Barrett.

Functional Personality

With all the attention being paid to designing homes with distinctive character, it’s no surprise that everyday items are taking on a creative flair.

Sheri Carmon, a broker-associate with Keller Williams Realty in Fort Collins, Colo., who has worked on design issues with builders on 20 model homes, says the little things, such as light fixtures and tiling, are taking on greater design significance. “That’s what makes a difference between a new house and a new home,” she says.

Whatever the function—storage, food preparation, or personal hygiene—no item is too common to be unworthy of design embellishments. Some of the more popular features in newer homes are freestanding bathtubs, professional-grade appliances, furniture-quality kitchen islands, and stand-alone hutches for storage.

“One of my mantras is, know where you’re spending your money, and spend it where people can see it, touch it, and feel it,” says architect O’Brien.


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Pros and cons of buying fixer-upper real estate

Cashing in not always so easy
By: Robert J. Bruss: Inman News
"All my husband and I can afford to buy is a fixer-upper house" the lady sitting next to me on a flight to Minneapolis last month shared after I revealed I write about real estate. Then I gave her my "short version" of how her purchase of a fix-up house can be a very profitable, tax-free, principal-residence investment.

Personally, I've bought many run-down houses with "profit potential." I patiently explained to my new friend that most home buyers want to purchase a brand-new or resale house in near-perfect, "model home," move-in condition. "That's how to profitably sell houses, but not the profitable way to buy them," I explained.

WHAT IS A FIXER-UPPER HOUSE WITH "PROFIT POTENTIAL?" A fixer-upper house is defined as a residence below neighborhood standards. Some of these properties need major rehab work. But most "fixers" with profit potential are not so deteriorated that the best solution is to tear down the house and start over.

The most profitable fix-up homes only need a thorough cleaning, minor repairs, and fresh coat of interior and exterior paint. New carpets, fresh landscaping, and new light fixtures are additional examples of profitable fix-up work that will bring the residence up to neighborhood standards.

These minor home defects are known as "the right things wrong." However, unprofitable fix-up houses include those needing expensive structural work, which adds little or no market value.

To illustrate, a fix-up house needing expensive foundation repairs, a new roof, updated wiring, or new plumbing is usually an unprofitable fix-up house unless it can be bought at a huge discount price from comparable nearby homes. The reason is the necessary work doesn't show so it doesn't add market value.

Slum fix-up property in a high-crime neighborhood is another example of property without "profit potential" (unless there are solid signs of neighborhood improvement). The local police department office can provide crime statistics if you are unfamiliar with the area.

TAX-FREE PROFIT IS A KEY MOTIVE FOR BUYING A FIX-UP HOME. Occasionally, buyers of fixer-upper houses purchase for the charm or location. I've also met some individual developers who purchase to help improve a neighborhood. But most fix-up home buyers purchase for the prospective profit.

Thanks to Internal Revenue Code 121, it is now possible to earn home fix-up profits tax-free when the principal residence is eventually sold. To earn up to $250,000 tax-free profits upon sale, the owner must have owned and lived in the property as their primary residence an "aggregate" 24 of the 60 months before its sale.

A married couple can qualify for up to $500,000 tax-free capital gains if both spouses meet the occupancy test, even if only one spouse's name is on the title. But they must file a joint income tax return in the year of the home sale.

However, if extensive home renovation is contemplated, it is often advisable to move out while the major remodeling takes place. Especially if there are children involved, renting an apartment or another house for a few months can save the marriage.

To illustrate, three years ago my neighbors took a two-month "grand tour" of Europe with their two children while their fix-up home was completely renovated. When they returned, their "new home" was almost completed and they didn't have to endure the unpleasant aspects of having workers in their personal residence almost every day.

HOW TO BECOME A SERIAL FIX-UP HOME RENOVATOR. I have met several couples who actually enjoy buying fix-up houses, renovating and occupying them, and then making profitable tax-free sales after at least 24 months of ownership and occupancy.

But the big, obvious drawback is living in their principal residence while it undergoes fix-up.

Because the big tax savings of Internal Revenue Code 121 can be used over and over again, but only every 24 months, these repeat, tax-free home sellers are known as "serial fix-up home sellers." It's all perfectly legal and very profitable for up to $500,000 tax-free, principal-residence sale profits every 24 months.

One "serial home seller" husband I met is a carpenter foreman by day with a major home builder and a home handyman by night and on weekends. He told me he often recruits his co-worker plumber, electrician, and other construction friends to help him and he assists them on their home fix-up projects, thus keeping costs low.

FOUR KEY REASONS HOUSES BECOME FIXER-UPPERS. Finding fixer-upper houses doesn't take much work in most communities. Just ask a savvy realty agent if she or he knows of any fix-up bargain houses for sale.

Most home buyers don't want fixer-uppers so you probably won't have much competition from other buyers. Here are the four primary reasons houses become fixer-uppers:

1. The seller either can't afford to pay for home repairs or doesn't want the inconvenience. He or she just wants to sell with minimum hassle.

These homes are often advertised for sale "as is." That term means the seller must disclose all known defects in the home but will not pay for any repairs.

2. The seller inherited a shabby property and wants a quick cash sale. These properties are often called "probates" because the sale must go through the local probate court. Heirs can be either very easy or very tough when buying their fix-up property.

3. The home is "tired." That is a term used by real estate agents to describe an out-dated residence which is basically sound but has not been kept up to current standards. But don't confuse this term with a "tired listing" which has been on the market for sale more than 60 to 90 days.

4. The home has a serious structural problem, which can be cured only at a major expense. This type of fix-up home should be avoided, especially if the upgrade won't add more market value than its cost.

SUMMARY: Fixer-upper houses with "the right things wrong," purchased at substantially below-market value, can be superb profit opportunities, especially if you own and occupy them at least 24 of the 60 months before sale.

Then you can qualify for up to $250,000 tax-free principal residence sale profits (up to $500,000 for a qualified married couple filing jointly). This tax-break can be used again every 24 months. More details are my special report, "Pros and Cons of Buying a Fixer-Upper House or Investment Property," available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet download at www.bobbruss.com.
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California: Mortgage Product for the Disciplined

By: Kathleen Pender: SF Gate
A lender in San Ramon, Calif., is offering a new financial product that combines a mortgage with a checking account as a way to lessen the pain of principal payments and help borrowers pay off a home loan faster.

CMG Financial Services' "Home Ownership Accelerator," allows customers to deposit their entire paycheck, and any other checks they receive each month, into the mortgage account, which reduces the principal balance. At the same time, money taken from the home loan during the month for other expenses increases the loan balance.

At the end of the month, interest is assessed on the daily loan balance, and the monthly interest charge is added to principal of the loan. CMG says the new product "is ideally suited for homeowners with a stable salary, good credit, and financial discipline," not for Americans earning barely enough to cover their expenses.

The product, which carries an above average adjustable interest rate, technically is an interest-only loan for the first 10 years, with amortized principal over the next 20 years.
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Lenders Clamp Down on Inflated Appraisals

By:Ruth Simon: The Wall Street Journal
Growing concerns about mortgage fraud and speculation, and the belief that rapid price gains are here to stay, have pushed the matter of inflated appraisals to the forefront.

Appraisers say they're sometimes pressured to increase valuations, directly or indirectly, by mortgage brokers, loan officers, and real estate practitioners, who all want to see the deal completed. About 55 percent of appraisers say they have felt pressure to overstate the value or condition of a property, according to a 2003 survey by October Research Corp., a provider of news and information to the real estate services industry.

Many do so to ensure that they remain on a lender's list of preferred appraisers, or because they fear they will lose business.

Lenders are taking action by beefing up the number of in-house appraisers or being more selective about who they do business with. Others are instituting automated systems that red-flag questionable valuations, adding more appraisal audits, or requesting a second appraisal to compare to the first.

To ensuring the independence of appraisers, the Appraisal Institute also is urging lawmakers to pass legislation that would prohibit pressure by industry professionals who are compensated based on loan volume.
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Luxury real estate values break records in California

First-quarter prices grow an average $349,000 from a year ago
Inman News
The California cities of Los Angeles, San Diego and San Francisco all posted double-digit gains and record highs in luxury home values in the first quarter of 2005 compared to a year ago, according to the First Republic Prestige Home Index by First Republic Bank.

Los Angeles values jumped 3.4 percent from the fourth quarter of 2004 to the first quarter of 2005 and rose 23.1 percent from the first quarter a year ago. The average luxury home in Los Angeles is now a record $2 million, up $384,000 from a year ago.

San Diego values increased 7 percent from the fourth quarter of 2004 to the first quarter of 2005, and were up 20.4 percent from the first quarter a year ago. The average luxury home in San Diego is now a record $2 million, up $334,000 from a year ago. Luxury real estate values in San Diego were up 20 percent from last year.

San Francisco Bay Area values rose 6 percent from the fourth quarter of 2004 to the first quarter of 2005 and gained 13.9 percent from a year ago. The average luxury home in San Francisco is now a record $2.7 million, up $329,000 from the first quarter a year ago.

"In the first quarter of 2005, luxury home values set records in California due to low interest rates, limited supply, continued demand, and the traditional increase in activity this time of year," said Katherine August-deWilde, chief operating officer of First Republic Bank. "While 2005 is off to a strong start, driven in part by seasonal buying, it is unlikely values will continue appreciating as rapidly as they have over the past few years."

First Republic Bank, a NYSE-traded commercial bank and wealth management company, produces the Prestige Home Index each quarter with Fiserv CSW Inc., a provider of automated property valuation services and home-price metrics to U.S. financial institutions.
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The Weekend Guide! May 26 - May 29, 2005

The Weekend Guide for May 26 - May 29, 2005.
Full Article:
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Median U.S. real estate values gain ground

Percentage of million-dollar homes nearly doubles since 2000
Inman News
As median home values across the nation continue to rise, so has the proportion of homes valued at $1 million or more, according to a new analysis of American Community Survey (ACS) data released Tuesday by the U.S. Census Bureau. The national median home value in 2003 was about $140,000, up nearly 16 percent in the last three years, while the percentage of "million-dollar homes" nearly doubled (from 0.5 percent to 1 percent).

California led the nation with the highest median home value ($316,600), followed closely by Hawaii ($302,300), Massachusetts ($300,800) and the District of Columbia ($246,300). In contrast, some of the states with the lowest median home values were West Virginia ($78,200), North Dakota ($78,600), Mississippi ($78,700) and Arkansas ($79,902).

Since 2000, Massachusetts (50 percent), California (46 percent), the District of Columbia (44 percent), New Hampshire (41 percent) and Rhode Island (39 percent) experienced the largest increases in median housing values.

California also had the highest percentage of million-dollar homes (4.1 percent) — almost 1-in-25. High concentrations of million-dollar homes were also found in Connecticut (3.3 percent), the District of Columbia (3.3 percent), Massachusetts (2.2 percent) and New York (2.1 percent).

Of the 231 counties with populations of 250,000 or more included in the ACS, San Mateo ($644,300), San Francisco ($607,000), Santa Clara ($553,500) and Santa Cruz ($553,000) — all in California — had some of the highest median home values. Among counties with the least expensive homes were Hidalgo, Texas ($54,000); Jefferson, Ark. ($61,900); and Cameron, Texas ($62,800).

San Francisco ($607,000) had the most expensive median home values among the 69 large cities with populations of 250,000 or more in 2003. Also among the highest were three other cities in California — San Jose ($481,000); San Diego ($376,800); and Oakland ($370,000).

Other highlights:

• Among the counties with the highest median housing values, eight were in California.
• Among states with the lowest median housing values, seven were in the South: West Virginia ($78,201); Mississippi ($78,681); Arkansas ($79,902); Oklahoma ($83,525); Alabama ($87,203); Louisiana ($90,168); Kentucky ($92,599); and Texas ($94,515).
• Six Northeastern states were among those with the highest percent increase in housing values.
• Florida, one of the fastest-growing states in the nation, was also one of the states with the largest percent increases in housing values.

The American Community Survey data are based on responses from a sample of households across the nation. The estimates and rankings may vary from the actual values because of sampling or nonsampling variations. The statistical statements have undergone testing, and comparisons are significant at the 90 percent confidence level.
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Homeowners Consider Cashing Out of Hot Markets

Many homeowners in the hottest housing markets, primarily in the West and Northeast, are wondering whether they should sell and reap the benefits of rapid price gains.

Some are downsizing to devote more money to retirement, while others are finding that they can get more house for their money in lower-priced markets. Experts urge homeowners to consider the cost of living and wage potential before making the decision to move, however. Others are unsure that cashing out makes financial sense.

"Anybody who has more equity in their home than liquidity should be assessing their mortgage and equity in the context of their whole financial structure—investment strategy, tax strategy, diversification strategy—and err on the side of liquidity," says Kevin Daum of Alameda, Calif.-based Stratford Financial Services.

Those who do cash out are urged to safeguard their profits, rather than use them to pay off short-term debts and spending more.
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Florida real estate prices post hefty gains

Home sales grow modestly
Inman News
The median sales price of a Florida home climbed to $218,000 in April, up 26 percent from a year ago, while home sales continued to grow at a gradual rate, according to the Florida Association of Realtors.

Home sales and prices in the Fort Myers-Cape Coral area continued to grow steadily in April from their year-ago levels.

In 2000, the statewide median sales price was $115,900, which represents a dramatic 88.6 percent increase over the five-year period, according to FAR records. The median is a typical market price where half the homes sold for more, half sold for less.

Last month, a total of 23,537 existing single-family homes changed hands statewide for a 3 percent increase over the 22,746 homes sold the previous April, according to FAR.

Among the state's larger markets, the Fort Myers-Cape Coral metropolitan statistical area (MSA) showed higher sales last month, with a total of 1,266 homes changing hands for a 19 percent gain over the 1,064 homes sold in April 2004. The market's median home price rose 43 percent to $262,900; a year ago, it was $184,100.

Other larger Florida MSAs reporting strong resales activity last month compared to a year ago include: Tampa-Clearwater-St. Petersburg, where 5,105 homes sold for a 19 percent increase; and Jacksonville, where 1,553 homes changed hands for a 7 percent gain. The median sales price in those markets also rose over the same period: in Tampa-Clearwater-St. Petersburg, 23 percent to $183,000; and in Jacksonville, 13 percent to $174,100.

Of the state's smaller markets, the Lakeland-Winter Haven MSA reported a 13 percent boost in home sales in April, with a total of 592 homes changing hands compared to 524 homes sold last year. The area's median sales price rose 25 percent to $126,600; a year ago, it was $101,000.

Other smaller MSAs reporting strong gains in home sales last month include Gainesville, where 386 homes sold for a 27 percent increase; and Ocala, where 594 homes sold, also for a 27 percent increase. The median sales price in those markets increased as well: in Ocala, 10 percent to $131,800; and in Gainesville, 5 percent to $168,100.

The Florida Association of Realtors has more than 125,000 members in 70 boards/associations.
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Real estate remodeling on the rise

South reports strongest activity
Inman News
Remodeling activity showed strong growth in the first quarter of 2005, according to the National Association of Home Builders' Remodeling Market Index (RMI). Today's first-quarter results were two points ahead of the seasonally adjusted fourth quarter of 2004.

"The RMI showed a nice rebound from some worse-than-normal weather this past winter, particularly in the Northeast and Midwest," said Remodelors Council Chairman Don Novak, a remodeler from Cedar Rapids, Iowa.

The RMI is derived from a quarterly national survey of more than 500 remodelers and is seasonally adjusted. The current market conditions index grew two points, from 50.7 last quarter to 52.9. The future expectations index moved slightly lower from 54 to 53.6, but remained in the positive zone. Regionally, market conditions showed strong growth across the board except for the West.

The current market conditions in the Northeast grew from 46.7 in the fourth quarter of 2004 to 53.8; with a 1.3-point decline in future expectations during the same period. The Midwest grew 2.9 points from last quarter to 48.9, and also showed a slowdown in future expectations from 48.8 to 47.6. The South continues to be a strong performer, growing from 52.9 to 58.4 and a 2.2-point growth in future expectations to 60.1. The West fell 5.1 points from last quarter to 53.6, with future expectations down 3.1 points to 54.2.

"We saw solid growth in the first quarter of this year and continued positive momentum into the next quarter," said NAHB Chief Economist Dave Seiders. "Calls for bids, amounts of work committed and backlogs of remodeling jobs are all up, leading us to expect continued healthy growth over the balance of 2005."

The market saw little change in major additions and alterations ($25,000 or more), moving from 49.88 to 50.19. However, the renter-occupied market – which makes up approximately one-third of all remodeling activity – showed strong growth with a more than five-point gain from 34.45 to 39.7. Minor additions and alterations showed stronger growth, moving from 50.15 to 52.78, with the renter-occupied market again leading the charge on a seven-point increase.

The RMI "special questions" section surveyed remodelers on in-house design services and their involvement with retailers and professional design dealers, such as Lowes and Home Depot. Of the 66 percent of remodeling companies that offer design services to customers, only 6 percent work with a retailer or professional design dealer to install or provide remodeling jobs. Of those that offer in-house design services, 57 percent employed a general designer, followed by interior designer, certified kitchen designer, or architect at 17 percent, 15 percent and 15 percent, respectively.

The RMI is based on a quarterly survey of professional remodelers, whose answers to a series of questions were assigned numerical values to calculate two separate indexes. The first index gauges current market conditions and is based on remodelers' reports of major and minor additions and alterations, plus maintenance work and repairs, on both owner- and renter-occupied dwellings. The second index gauges expectations for the near future and is based on remodelers' reports of their calls for bids, amount of work committed for the next three months, job backlogs and appointments for proposals.
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California's median home price breaks $500,000

Some areas see 60% annual price appreciation
Inman News
The median price of an existing home in California in April set a record, and sales increased over the same period a year ago, the California Association of Realtors reported today.

In April, an existing, single-family detached home in California had a median price of $509,230, a 12.5 percent increase over the revised $452,680 median for April 2004, C.A.R. reported. The April 2005 median price increased 2.6 percent compared with March’s revised $496,550 median price.

“The median price of a home in California topped a half-million dollars for the first time in April, reflecting the continuing demand for housing and the ongoing supply shortage,” said C.A.R. President Jim Hamilton. “Home prices increased by double digits in nearly every region of the state, rising 37.9 percent in the more affordable High Desert region, which includes the Antelope Valley, Barstow, and Victor Valley areas.”

The median home price along Santa Barbara County's 45-mile-long South Coast gained 12 percent from a year ago to $1,285,000.

Statewide, the 10 cities and communities with the highest median home prices in California during April 2005 were: Los Altos, $1,762,500; Saratoga, $1,525,000; Laguna Beach, $1,485,000; Manhattan Beach, $1,405,000; Newport Beach, $1,297,500; Carmel, $1,294,000; La Canada-Flintridge, $1,290,000; Burlingame, $1,250,000; Calabasas, $1,225,000; Woodside, $1,100,000; and Rancho Palos Verdes, $1,100,000.

Statewide, the 10 cities and communities with the greatest median-home-price increases in April 2005 compared with the same period a year ago were: Reedley, 68.8 percent; Colton, 64.7 percent; Twentynine Palms, 63 percent; Atwater, 58.7 percent; Rohnert Park, 57.5 percent; Laguna Hills, 53.3 percent; Norco, 51.6 percent; La Canada-Flintridge, 50.9 percent; Adelanto, 49.1 percent; and Victorville, 45.8 percent.

Closed escrow sales of existing, single-family detached homes in California totaled 658,060 in April at a seasonally adjusted annualized rate, according to information collected by C.A.R. Statewide home resale activity increased 2.7 percent from the 640,710 sales pace recorded in April 2004.

The statewide sales figure represents what the total number of homes sold during 2005 would be if sales maintained the April pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

“Year-to-date sales are up 5.1 percent compared to a year ago,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “Although interest rates remain near their historical lows, consumers are clearly concerned about the impact rising rates will have on their ability to purchase a home.”

C.A.R. reported that the median number of days it took to sell a single-family home was 28 days in April 2005, compared with 23 days (revised) for the same period a year ago.
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Greenspan predicts slower real estate price growth

Fed Reserve chair acknowledges localized housing bubbles
Inman News
Alan Greenspan, chairman of the Federal Reserve, invoked the B-word Friday, acknowledging that the housing market contains "a lot of local bubbles" with "unsustainable" price gains, media reports said.

"Without calling the overall national issue a bubble, it's pretty clear that it's an unsustainable underlying pattern," Greenspan told the Economic Club of New York at the Hilton New York hotel, according to reports.

However, the Federal Reserve chair also said significant price declines are unlikely, reports said.
Greenspan pointed to a big increase in speculation in homes, particularly in second homes, and acknowledged concerns over "froth" in the market, according to reports, reports said. As a result of this, there are "a lot of local bubbles" around the country, Greenspan said, according to reports.

Even if housing prices do fall, the drop won't hit most homeowners hard because of the huge amount of equity already in their homes, Greenspan reportedly told more than 1,000 onlookers at a meeting of the New York Economic Club.

"There are a number of things which I think suggest, at minimum, that there's a little froth in this market," Greenspan reportedly said, to laughs in the audience.

Many have expressed concern over the current red-hot housing market.

For example, while saying that the housing market remains "unusually strong," David Lereah, chief economist for the National Association of Realtors, said he expects that some hyper-extended local real estate markets will sour within the next couple of years, while the overall housing market should remain robust for at least the next couple of years.

Lereah made the remarks at a presentation in mid-May at the National Association of Realtors' midyear meetings, saying loose lending and speculative buying are the greatest risks "our industry faces right now."

Analysts have found some reason to be concerned – increasing debt, fast-rising home prices in some markets, a larger share of adjustable-rate mortgages, and a higher share of home-price-to-income and home-price-to-rent ratios in some markets. Financial scandals that have plagued mortgage giants Fannie Mae and Freddie Mac could lead to some industry-shaking reforms, as the trade deficit is swelling, oil prices are increasing, and the value of the dollar is dropping.
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'Envy' fuels real estate bubble talk

Housing still a better investment than stocks
By: Lou Barnes: Inman News
Long Treasurys bottomed at 4.05 percent last week as the GM-Ford-junk-derivative-hedge mini-panic faded; they are now 4.13 percent, mortgages mostly holding 5.626 percent.

The economic data were benign: core producer prices rose .3 percent in April, but core CPI was unchanged. The nominals, up .6 percent and .5 percent were dismissed as residuals from now-fading energy costs; oil stayed under $50/bbl all week. Industrial production was on the weak side, minus .2 percent, and capacity in use fell .2 percent to 79.2 percent.

However, housing starts and new permits in April roared back from a weak March, up 11 percent and 5.3 percent, which leads to the following Housing Bubble rant.

The financial press is now on official Bubble Watch; CNBC might as well have a bubble ticker scrolling along with stock prices, and the Wall Street Journal last week ran four prominent Bubble-related stories. One had some merit, arguing The Bubble as an artifact of too easy mortgages.

The first aspect of too easy is too low, as in rates. In the last four years, fixed-mortgage rates have been on a centerline of 5.75 percent, down from 7.75 percent through the 1990s. Thirty percent of a $100,000 annual income committed to a mortgage payment ($2,500/mo., less $350 for TI = 2,150 for PI) at 7.75 percent used to borrow $300,000. Today, at 5.75 percent, it's $368,000. That 20-ish percent increase does not explain the 49 percent increase in U.S. home prices since 1999.

However, convert to interest-only, increase the TI to $400 for a more expensive house, and the $2,100 remaining for interest at 5.75 percent will borrow $438,000. That 30 percent interest-only increase, even with post-90s income growth, does not explain the 102 percent five-year run in California, or 112 percent in D.C., 99 percent in Rhode Island, and 75 percent in Florida.

How about no-proof-of-income lending as supercharger? If that were so, we would have seen a surging entrance of buyers previously shut out of the market. Not so; rates of home ownership are steady.

I have no doubt that low rates and easier underwriting (enlightened, says here) are the cause of some of the price run-up; nor doubt that interest-only loans are now facilitating higher prices. However, to be a bubble, home prices must be unsustainable; for foolish mortgage terms to be the culprit, mass default would have to be in prospect.

There is no evidence whatever that home prices are unsustainable, nor any evidence of widespread default. The bubble is in commentary coming from the financial markets, and the gas inside is envy.

After foolish lending and borrowing, the market types' critique of housing: too many investment and second-home purchases. Must be dangerous speculation. Prices are unsupported by buyer income or market rents. Tisk, tisk. The Fed should put a stop to this. Call in the regulators.

That line of argument sets a record for hypocrisy. You stock-market guys, the ones who gave us the biggest bubble in financial history, are suddenly the Bubble Cops? High prices versus lower incomes and rents? That's what you call a "healthy price-earnings ratio." Riding prices up is a crime? In your market, you call the same thing a skill, "momentum investing," and "market timing." Millions of American families are taking advantage of an epic demographic mis-match of land versus 3 million new Americans every year; you call them irresponsible Bubbleheads, while the exact same behavior among yourselves is called "value investing."

Financial-market people have a fit when clients announce they are withdrawing capital to put it in real estate: "Uh-oh. Bubble!" Say the same thing to them about their products and they will hang up on you. Stocks have staggered in their tracks since 1999; it is the soul of prudence to re-allocate some assets to a better market.

The truth hated most by stock-jockeys: invest in a home, and even if you're wrong about prices, you get to live in it. Try that with an Enron stock certificate.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.
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Investors Going into Debt to Buy Real Estate

The amount of home equity extracted by U.S. property owners surged to $705 billion in 2004 from $266 billion in 1999, with most of the money put toward buying new residences, repaying credit-card debt, and funding home-improvement projects, Economy.com reports.

And more homeowners are using the cash to purchase investment properties--2.2 million in 2004 compared to 1 million in 1994, says SRI Consulting Business Intelligence.

Experts say investors are betting that residential prices to continue their uphill climb and that demand from baby boomers and immigrants will bolster the market, but some buyers are running into difficulty unloading their properties and have posted losses in some cases.

"You should think pretty hard about whether you want to increase your exposure to real estate at a time when it is trading at historically high valuations," says Jan Hatzius, a Goldman Sachs economist.
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"Streamlined" No-Fee Mortgages are Coming to the Prime Home Purchase Market

by: Kenneth R. Harney: RealtyTimes
Home equity credit line lenders have been doing it for two years, and now the concept is migrating to the primary home purchase market: Super-streamlined loans that require applicants to pay none of the usual lender fees -- appraisals, credit reports, document preparation, tax service, underwriting or processing. Yet the mortgages carry interest rates identical to those the lender quotes on loans in the regular market that come with full fees.

Several large mortgage companies are preparing programs that radically streamline and simplify the entire mortgage process, but Bank of America appears to be the first out of the box with an actual prototype. The bank is launching what it calls its "Mortgage Rewards" loan this month. Aimed primarily at its 33 million existing customers, the program dispenses with most of the traditional lender charges paid for by home purchasers at closing. There is no application, appraisal, credit, flood zone determination, tax service or origination fee charged separately to the borrower.

The only charge the bank says it cannot waive, because of state laws and regulations, is title insurance. However, national title insurance companies participating in the program say they will be able to sharply cut their charges as a result of the bank's centralized, high-tech administration of Rewards.

Ernest Smith, head of Fidelity National Financial's title and mortgage services unit, estimated that title insurance savings to Rewards borrowers -- and competing programs expected from other large lenders -- could eventually exceed 40 percent.

Bank of America confirmed that its Rewards loans will carry the same interest rates as its regular market, non-streamlined offerings. For instance, said Eric Telljohann, program director, if the going rate for a 30-year loan at the bank is six percent plus all the standard closing and origination fees, the rate for a Rewards applicant would also be six percent -- but without the fees added on.

Bank of America estimates that on a 15-year fixed rate loan at 5.625 percent, the fee savings to the home buyer would range from about $2,000 on a $100,000 mortgage to $3,000 on a $300,000 loan, and $5,600 on a $700,000 loan. Some of the savings will be possible because the bank will be purchasing discount-priced "bundles" of services from wholesale providers such as First American Corp. and Fidelity National. Other savings will be available from sharply reduced marketing costs because the program will be targeted "in house," to existing customers with banking, checking, and mortgage accounts.

"We know these people already," said Telljohann. Only customers with satisfactory payment and credit histories are expected to be eligible. Nor will the bank use third-party originators -- mortgage brokers -- to produce the loan flow. It will all be done in house, mainly via the bank's network of 6,000-plus retail branches.

As add-on features, the Rewards program will also offer $200 credits to home buyers as a way to offset the title fees at settlement, plus an optional one-year, free "borrower protection" plan which will pay the mortgage principal and interest for up to six months in the event of job loss, or pay off the mortgage balance in case of accidental death. Though competitors in the banking field generally declined comment about their own plans for streamlined, no-fee home mortgage programs, one offered a compliment.

"I applaud Bank of America for making this effort" to simplify the home loan process, said Garth Graham of ABN-Amro Mortgage Corp., a unit of giant international ABN-Amro Bank, which already offers a "one-fee" loan that guarantees applicants a fixed amount of bundled closing and origination charges at settlement.

For more information on the Rewards program, call 1-800-900-9000.

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Financing real estate investments

By: Pat Curry: Bankrate.com
Although the stock market has rebounded recently, many investors still are looking for solid alternatives, and few things are more solid than real estate.

That's why some are looking to buy single-family homes, duplexes or condos, either to rent out or to renovate and resell.

"The stock market bubble a few years back led to a lot of insecurity in stock investing," says Mark Hancock, executive vice president and chief credit officer at Piedmont Bank in Atlanta. "When it's insecure, people fly to quality, and real estate has been quality in this decade."

But before you head out with a real estate agent to pick out your nest egg, there are a few things you should know about the financing. Buying real estate for investment is different from getting a mortgage for your own home.

"They need to understand that the interest rates they see all over the place don't apply to them," says David Finkel, co-author of "Making Big Money Investing in Real Estate." "People ask, 'Why wouldn't I get 6.5 percent?' It's because people who have nonowner occupied properties have a higher default rate."

It's true, Hancock says. If times get tight and a person has to choose between paying his own mortgage and making the monthly payment on his investment property, he's going to keep the roof over his own head every time. Hence, lenders consider investment property a riskier loan and will charge a higher interest rate or points than in a traditional mortgage.

Depending on how much you put down and your personal credit rating, expect to pay from 1.5 percent to 2.5 percent more than the going rate for owner-occupied mortgages, says Barbara Sama, regional branch operations manager for New York-based American Mortgage Network.

You should also be prepared to make a much larger down payment than was required for your own home. As a rule, banks will be looking for at least 20 percent.

That's why Finkel considers banks his third choice for financing.

Seller-financing tops the list
"My first source of financing always will be the seller. That will always be cheaper," he says. "The seller won't charge me points, PMI or loan origination fees. They'll be thrilled if I give them 6 or 7 percent on a first mortgage. That's lower than I get from the bank. They'll let me make interest-only payments, and I can always prepay the principal."

Finkel often offers sellers a balloon note to get their full payment within 60 months. At that point, he can refinance through traditional channels.

His second choice for financing is private lenders, people with cash who are losing money in the stock market or making 1 percent to 2 percent in certificates of deposit. An investment that returns 7 percent to 8 percent with a house as collateral is an attractive alternative.

Regardless of who's providing the financing, you'll need to put together a loan package that outlines the viability of the investment. An appraisal of the property will need to include not only information on comparable sales in the neighborhood but a rent survey of the area.

Finkel includes a photograph of the property, a rent survey for a quarter-mile radius, projected income and expenses, and a projected vacancy factor (how long the property could remain unrented) based on the area's vacancy rate. All the estimates are conservative, he says, because that's how bankers make their projections.

"That done, I'm going to show the banker it will pay for itself, plus something else," he says.

That's especially important if you're going to the traditional lending market because the requirements have tightened for banks that sell their mortgages, says Robert Galbraith, an attorney in Rochester, N.Y., with more than 15 years of experience in handling residential and commercial mortgages.

The more experience you have in managing rental property, the stronger your application for a traditional loan will be, Galbraith says. Your level of experience may determine how much of the rental income they include as your income for the loan.

They also want to see sufficient reserves to cover the payments if it's not rented for an extended period, Sama says. Or they may require rental-loss insurance.

"You need the skill and experience to manage (rental property) and the financial wherewithal to pay for them," Galbraith says. "People come in, buy a duplex, run it into the ground and wind up losing it in foreclosure."

Renovation projects
While the application process for rental property is fairly similar to that of an owner-occupied mortgage, the financing for renovating and reselling houses is completely different, Hancock says. Loans for rental property will be long-term notes, usually for 30 years. Rehab projects are short-term loans, generally no longer than a year, to cover the necessary time to complete the renovations and sell the property.

"It's a whole different ballgame," he says.

The down payments will vary by the deal and will depend, in large part, on how much work needs to be done on the house.

"If you're taking off a roof, I promise you your banker will look for a bigger down payment," Hancock says. "A lot of time on rehabs, when you start construction, the value of property goes down. If you demolish the house, you have a vacant lot. We have to cover the bank's position if you don't build."

The loans on rehabs will vary based on the prime rate, with fees in the 1 percent to 1.5 percent range "depending on the financial strength of the buyer," he notes.

The buyer's experience in residential renovations also figures prominently in the deal, he says. He looks carefully at the borrower's list of suppliers and subcontractors and flatly refuses to lend money to weekend remodelers.

"They have to have experience in this particular area," he says. "The collateral I have will be good collateral. It sounds silly, but I've had pilots with major airlines walk in and I've shown them the door. Just because they're rich doesn't mean they're a home builder."

Sama recommends that buyers consider two other options. You may qualify for a Fannie Mae long-term rehab program called the HomeStyle Loan. It allows buyers to roll rehab costs into their mortgage, putting the money into an escrow account that a contractor can draw from to perform the work.

"I love this program," she says. "The rates are a touch higher (than a regular mortgage), but not much."

The second option is for a buyer to use the equity in his own home for a credit line. That gives him maximum flexibility to use the funds as he sees fit.

"It's a great way to do it," she says. "Of course, you have to be able to withstand the extra debt. This is for the borrower with pretty good credit and income."
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Home furnishings of the rich and sometimes famous

Part 3: The American Dream is on steroids
By: Janis Mara: Inman News
Editor's note: Like everything in American culture, houses have blown up to Hummer-sized proportions. Eight-figure prices and 10,000-square-foot homes are becoming the norm in the luxury housing market, which is booming. In this three-part series, we explore the changing nature of the American Dream, what people are looking for in the ideal home and our obsession with all things big. (See Part 1: Lust for status drives luxury real estate market and Part 2: Family values rank high in dream houses.)

What do boxing rings, Australian jara and navy blue gas ranges have in common? They're all highly sought-after, super-trendy components of today's luxury homes.

Though colored appliances give rise to visions of the hideous avocado and harvest gold refrigerators of the 1970s, they're back, and even now decorating – or perhaps desecrating – the homes of the very rich, according to Laurie Moore-Moore, president of the Institute for Luxury Home Marketing.

America's luxury housing is on steroids, with 10,000-square-foot homes and eight-figure prices becoming commonplace. In the luxury market, it's not about keeping up with the Joneses, building a two-story ranch and putting up a white picket fence. The stakes are higher and the fences are made of Australian jara. It's more about keeping up with the high-tech moguls next door: the Bill Gateses and the Larry Ellisons.

Along these lines, clients' demands for furnishings and amenities are ramping up as well.

Dual "his and hers" sinks in the master bath, once a staple of luxury living, have morphed into his-and-her bathrooms. Walk-in closets are now also his and hers, with climate-controlled fur storage for the lady and quality paneling for the gent, Moore-Moore said.

In many cases, yesterday's luxuries are becoming today's standards, according to Daniel Levy, president of CityRealty.com.

"Brazilian cherry wood flooring is almost a standard now," said Levy, who operates in the fang-and-claw world of Manhattan real estate. "Over the past five to eight years, the concept of luxury, at least in Manhattan, has been taken to new heights. High-end kitchens with Viking appliances are now very standard."

The one-time Holy Grail of kitchen decoration, the granite countertop, is practically mundane now, Levy said. "One new development has custom sinks made from one 700-pound marble piece," Levy said. (One can only hope the building had a sturdy elevator.)

Along with the unwashed masses, rich folks are retreating to their homes in the wake of the Sept. 11, 2001, terrorist attacks, experts say.

Pools, tennis courts, screening rooms, wine cellars, boxing rings, large exercise facilities and "things as bizarre as bowling alleys" make it possible to recreate at home, according to William Hablinski, founding partner of Hablinski + Manion Architecture, a luxury housing firm focusing mostly on the Pacific Northwest.

It goes without saying that today's luxury home has broadband access, and also qualifies as a "smart" house.

"Ten years ago, houses were wired. Now there are intelligent houses that turn on the bath, the heater, the security, the music, the lights. A lot of people go to their computer and look at the cameras in their homes, scan their homes to see if anything is awry. You can do that remotely by computer and cameras," said John Brian Losh, founder and publisher of LuxuryRealEstate.com.

Bathrooms are always hot, and clients are increasingly focused on high-tech, stress-relieving showers, said Richard Taylor of Richard Taylor Architects in Dublin, Ohio.

"The shower will be glass-enclosed, eight feet by eight feet, all tile and marble," Taylor said. Multiple-head steam or rain showers that give body massages and built-in steamers are popular, the architect said.

Exotic hardwoods can now be farmed, so now "we don't have to wreck the rain forest to trim our studies," Taylor said. For that reason, it's now possible to use exotic woods that were previously unavailable, such as Australian jara, and they're in great demand, the architect said.

Traditional architecture, as opposed to modern design, is popular these days, Hablinski said.

"Certain traditional period work, which has not been popular in this country since the 1920s and 1930s, is having a reemergence," Hablinski said. "People are going back to more traditional design work that emanates from traditional European themes, English, French, Italian."

In a cultural shift, Americans are becoming increasingly sensitive to design, according to Levy and Hablinski. This is showing up in their requests for specific types of houses.

"People are becoming sophisticated enough to ask for a Roman palazzo, a Gothic palazzo or a Tuscan farmhouse," Hablinski said, citing three forms of Italianate architecture that are currently popular. English Georgian and Regency style homes are also popular, he said.

Levy said style is gaining importance. "Before, you chose the architect as to who would maximize the square footage. Now if you can get a real name designer in there, someone with style, that's important. It's not just somewhere I'm going to live. I'll have my own style and make sure the apartment reflects it."

Sometimes, clients who spend gargantuan amounts of money on lavish features end up not even using them, according to Taylor.

"A lot of people have to have the home gym, the home theater. They try to create the movie experience at home, Dolby surround sound, they spend $100,000 on a sound system. The one thing they don't get is the experience of going out to the movies. How often can you ask your friends over to watch movies in the basement?" Taylor asked.

"We see people who spend great sums of money on a theater and it falls into disuse," the architect said.

"We started seeing this 10 or 15 years ago with master bathrooms, spas like the Paris Hotel bathroom. We get young couples – the first thing they think of is the huge big bathtub. They get a shy smile, 'We're going to have a lot of fun.' But it's a hassle to fill the tub, it's hard to clean. We go back a year later and they are using it to water the ferns," Taylor said.
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NEW HOMEOWNER'S GUIDE TO EARTHQUAKE SAFETY

Brought to you by the California Association of REALTORS®
The California Seismic Safety Commission has recently released a newly revised 52-page Homeowner's Guide to Earthquake Safety. This 2005 Edition replaces the existing 2002 Edition starting July 1, 2005. C.A.R. will release an updated Combined Hazards Book containing the new earthquake safety booklet by May 27, 2005.

The Homeowner's Guide to Earthquake Safety is a required disclosure for most sellers of residential one-to-four units built before 1960 of light frame construction. The 2005 Edition has a more consumer-friendly format than its predecessor, and has more maps, pictures, and helpful information, such as a greater emphasis on solving structural problems caused by earthquake weaknesses.

For more information, C.A.R. members may contact C.A.R.'s Member Legal Hotline at 213.739.8282, or for office managers, broker/owners, and designated REALTORS®, call 213.739.8350. Access to Member Legal Hotline is also available through C.A.R. Online at http://www.car.org/index.php?id=NTk2.
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Credit unions get flexible real estate loan programs

Inman News
Mortgage buyer Freddie Mac and the Credit Union Mortgage Alliance Network (CUMAnet) have formed a partnership to provide new home-ownership opportunities to credit union members.

Under the recently announced agreement, CUMAnet will begin marketing Freddie Mac's suite of affordable lending products, including Home Possible, a flexible credit and low-down-payment mortgage option designed to help lenders enable more first-time home ownership among credit union members.

The agreement calls for Freddie Mac and CUMAnet to work together and develop and distribute information that would help more potential borrowers understand the mortgage process. Among the initiatives the organizations will promote is material from Freddie Mac's "Homeownership: Let the Truth Move You" campaign.

"Homeownership: Let the Truth Move You" campaign is a national effort launched in 2004 by Freddie Mac that works to provide accurate information about the home-buying process. Research shows that many potential home buyers don't consider home ownership because of the "myths" about the process. For example, a number of potential home buyers believe that at least a 20 percent down payment is required to purchase a home. With Freddie Mac's suite of Home Possible mortgages, qualified borrowers may get into a home with zero down and with just $500 from their own savings for closing costs. The balance of the closing costs can be paid through a qualified grant or gift.

CUMAnet is a credit union-owned real estate service organization, providing residential mortgage and home equity loan products and related services to credit unions nationwide.
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Family values rank high in dream houses

Part 2: The American Dream is on steroids
By: Janis Mara: Inman News
Editor's note: Like everything in American culture, houses have blown up to Hummer-sized proportions. Eight-figure prices and 10,000-square-foot homes are becoming the norm in the luxury housing market, which is booming. In this three-part series, we explore the changing nature of the American Dream, what people are looking for in the ideal home and our obsession with all things big. (See Part 1: Lust for status drives luxury real estate market.)

Ask a dozen people about their dream houses, and you'll get a dozen answers – with one thing in common: most folks' dream houses have space for family activities. Most also have a taste for luxury.

"My dream house would be in the country, with log construction," said Kate Schroeder, who lives in Oakland, Calif. "I'm an artist, so I would want a studio. There has to be space for my children and grandchildren to visit."

Schroeder's dream house wasn't entirely low-key. She said she would like granite countertops, marmoleum flooring, a meditation garden and a brook. The artist also would like a kiln and woodworking shop in her dream home. Still, her demands were relatively modest compared to the luxury homes of today.

America's luxury housing is on steroids, with 10,000-square-foot homes and eight-figure prices becoming commonplace. In the luxury market, it's not about keeping up with the Joneses, building a two-story ranch and putting up a white picket fence. The stakes are higher and the fences are made of Australian jara. Now it's more about keeping up with the high-tech moguls next door: the Bill Gateses and the Larry Ellisons.

Rick Elliott, a vice president at BNY Mortgage, shared Schroeder's high priority on family. Elliott said he didn't have to use his imagination to come up with a dream house. He's living in it.

"I already have my dream house," the New Yorker said. "It's a five-bedroom Colonial with a pool, great neighbors, great schools. Our kids have wonderful friends. There's a wraparound porch, a back deck and a nice garden."

According to industry experts, many peoples' dream houses involve both materialistic and family values.

"There are so many things pulling families apart. This (the home) is a way to bring families together," said Kathryn Robyn, co-author of "The Emotional House," a how-to book about the emotional side of housing. "We don't have time any more. We want to be with our family as much as we can. We can watch a movie together at home, so we get a home theater."

Echoing the family theme, Perrin Kliot of Orinda, Calif., said he would like a view of the hills, a pool – and a flat yard for his 2-year-old son to play in.

Kliot did allow himself vaulted ceilings and "lots of room" in the house, though suggestions of a media center met with disapproval. "I have a 2-year-old. We don't need a media room," he said, perhaps meaning that his son provided enough entertainment on his own.

"When people spend money on their dream house, it's not just consumption. It's recreation," said Susan Wachter, real estate professor at the Wharton School of the University of Pennsylvania. "Housing consumption is consuming home activities."

Housing is not just physical space, she said, but access to activities in a convenient setting where families can participate in those activities together.

James Croft, who lives in Great Falls, Va., and has a second home in Midway, Utah, had a similar vision.

"I can tell you right away about my dream house in Utah," said Croft, who founded the Mortgage Asset Research Institute. "It has nine bedrooms, six baths and a bunk room that sleeps a dozen grandchildren." Snowskiing, waterskiing, golf, hiking and tennis are available in the immediate area, he said.

"We call it the kid trap," Croft said. It has every feature Croft and his wife could come up with "to trap our kids into coming to visit," he said. "We built it from the ground up about two years ago."

Croft's approach is not unusual, a luxury real estate agent said.

"People with second homes often make the second home very pleasing to fit their children's and grandchildren's interests," said Barbara Candee, vice president and Sotheby's International Realty Director at Daniel Gale Real Estate's Locust Valley, N.Y., office.

"Some of the luxury homes today more than previously are building indoor pools, personal gymnasiums. Things you can do with your family, as well as extended families, grandparents," Candee said.

Not everyone is intent on spending time with children or grandchildren, however.

"My dream house would be a dome house in the Sierras," said Robert Yates of Berkeley, Calif. "Lots of rooms so friends could come to visit, a deck, a pool and a clothing-optional environment."

Deniene Erickson-Yuen was a bit more willing to live large.

"My dream house would be on the beach in Maui, so I could take in those amazing sunsets and capture the breeze," she said.

Her dream house would have an outdoor kitchen and "one of those dark tiled pools that looks like it disappears into the horizon."

Making up for her less assuming compatriots, Amika Antoniades-Rao was more imaginative – or perhaps more honest.

Her dream house has an Olympic-sized swimming pool with Greek columns and statues, a circular foyer with a huge Swarovski crystal chandelier, a kitchen with two islands and two dishwashers, a huge bedroom with a fireplace, a movie room and a plasma TV in every room.

Features like these are not unusual in the luxury house of today, experts say.

Though she was willing to admit to some fairly lavish fantasies, Antoniades-Rao didn't forget her family.

She said she'd like a home gym with a couple of treadmills, "so my hubby and I could work out together," and one more gym – this one for her two pugs, complete with doggie treadmills so they, too, could stay in shape.
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Principle residence sale rules to live by

Title issue could jeopardize tax exemption
By: Robert J. Bruss: Inman News
Here are some additional issues that frequently arise regarding principal residence sales:

1 – Principal residence sale in the year of a spouse's death. IRC 121(b)(2) says the $500,000 principal residence sale exclusion is available for the sale of the marital home if the sale closes in the tax year of a spouse's death. Although the IRS considered extending this time limit beyond the year of a spouse's death, it found there is no authority to do so without the approval of Congress. The tax reason is that a surviving spouse can only file a joint tax return with the deceased spouse for the tax year of that spouse's death, but not in future tax years after that.

However, this is not such a "big deal," as many surviving spouses believe. If the surviving spouse inherits the deceased spouse's half of the home, the surviving spouse receives a new basis on that inherited 50 percent "stepped-up" to market value as of the date of the spouse's death. If the principal residence is in a community property state, the surviving spouse usually receives a new stepped-up basis on 100 percent of the home's entire market value on the date of death.

This stepped-up basis for the deceased spouse's interest in the home usually is far more important than the $500,000 principal residence sale tax exemption, which is available only in the year of death when a joint income tax return can still be filed.

The only time the surviving spouse is usually hurt financially occurs if title to the residence was held in the name of the surviving spouse alone so there was nothing to inherit from the deceased spouse. Then the surviving spouse does not receive a new stepped-up basis because he or she already held full title.

2 – Holding title in a living trust doesn't change eligibility for the $250,000/$500,000 exemption. When title to a principal residence is held in a trust for the benefit of the trustor, such as a living trust that avoids probate costs and delays, the method of holding title is disregarded for purposes of IRC 121 tax exemptions. "The sale by the trust will be treated for federal income tax purposes as if made by the grantor," IRS regulations explain.

3 – Sale of a partial interest in a principal residence won't increase the exemption. At the time a qualified principal residence owner sells a partial interest in the home, such as a sale to a son or daughter, that sale can qualify for the $250,000 or $500,000 exemption.

But this is not a tax loophole to allow the seller one exemption for a partial sale now and another exemption in the future when selling another partial interest. The IRS regulations clearly state that the maximum $250,000/$500,000 exemptions cannot be exceeded when selling partial interests in the seller's principal residence.

4 – Exempt principal residence sales need not be reported to the IRS. The IRS regulations state: "Reporting of an excluded gain is unnecessary and would be unduly burdensome for taxpayers."

However, if your principal residence sale is partially taxable, such as when your capital gain exceeds the $250,000 or $500,000 exemption, your home sale should be reported on Schedule D of your federal income tax returns, clearly showing the exclusion amount.

SUMMARY: The $250,000 and $500,000 principal residence sale capital gain exclusions are major tax benefits for home sellers who understand how to maximize their exemptions. More details can be found in the IRS Regulations at IR-2002-142, available on the IRS Web site at www.irs.gov/newsroom with a link to the IR regulations as published in the Federal Register.
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The Weekend Guide! May 19 - May 22, 2005

The Weekend Guide for May 19 - May 22, 2005.
Full Article:
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Bootcamp for Do It Yourself Renovators

by Al Heavens
What people new to homeownership don't know tends to be a lot. Boot camps offered to first-time buyers in the form of classes are already seen in many cities. But what about first-time renovators? Or how about those interested in restoring an older home? Perhaps there should be a boot camp for them as well.

I'm a big believer in trying to find out as much as you can about a project before you jump in feet first, and that's why a recent e-mail from the Allen Mortgage and Real Estate Group in St. Paul, Minn., caught my eye. Recognizing how overwhelming the home-buying process can be for first-timers, Allen is sponsoring a series of "first-time home buyers boot camps" around Minnesota between the end of April and mid-December of 2005.

The process can seem simple, but "it's what first time home buyers don't know that can really hurt them," said Cindy Allen, who is a principal in the company. "There are many expensive pitfalls that may not become evident until a new homebuyer is in the middle of an unforeseen problem. Then they must learn the hard way. We don't want buying your first home to become a nightmare."

This is not a real boot camp, where prospective buyers live in tents and ford swollen streams wearing 50-pound backpacks. These "camps," held in classroom settings, present the home-buying process from start to finish, from understanding credit scores to figuring out what is the "right" mortgage.

It is a concept I think I could take to the renovation world -- a boot camp for people planning to buy older homes and fixer-uppers.

I've been thinking about this for a couple of years, ever since I spent an evening at a Home Depot project night designed for women. A number of participants who recognized me from my newspaper column photo asked me if I would ever teach a nuts-and-bolts home renovation course.

I considered it for a while, and then decided that it would be better if I found some way of presenting the good, the bad and the ugly of renovation, emphasizing the cost-effective ways of doing it.

Although I've told a lot of people lately that if I had the chance to renovate two houses again, I might have stayed in bed, that isn't completely true. I would have done things differently, for sure. For example, I would have developed a way of measuring the effectiveness of doing a project myself versus hiring someone to do
it, based on an algebraic formula along the lines of what the math genius on CBS-TV's Numbers uses to solve crimes for his brother in the FBI.

In the vast majority of cases, the numbers for most major renovation projects that homeowners take on themselves don't add up. Even some regular maintenance projects that a homeowner typically tackles might be more cost-effective if it were done by a paid professional instead.

Let's look at the annual swabbing of the deck -- a task I took on myself for the 13 years I owned a house that had one. The bi-level deck, with stairs, measured 300 square feet. Because the deck was on the north side of the house, the absence of direct sunlight for a good part of the year meant that it was very green and dirty.

A deck maintenance job typically requires washing the deck and then applying two coats of water-repellent sealer, usually in mid-spring when the temperatures are still cool and there is more cloud cover. What this means, of course, is that you have to wait for the ideal time for the job, hoping that your available time and the ideal time mesh.

Just think about actual working time. It typically took me 16 hours to maintain the deck from start to finish. Now say my regular job paid me $40 an hour, or $640 for 16 hours. Would it be more cost-effective to hire a professional, who usually takes less time than even the most-experienced do-it-yourselfer to do this job, than to do it yourself, especially if the guy or woman charges $400 from start to finish?

I'm not knocking do-it-yourself. For the last 15 years, I've been one of the chief advocates of it. What I am saying, however, is pick your battles. Cleaning a deck is a messy job, usually done after a hard week of your doing the one that brings in the bacon. It would have been smarter for me to cut off a couple of slices for the professional deck cleaner, and be able to do something else, something fun.

Now that I think about it, maybe that's what homeowner's boot camp should offer: A chance to clean an outdoor deck. Too bad I didn't think about when I owned such a deck. I could have had people paying me for the privilege.

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Lust for status drives luxury real estate market

Part 1: The American Dream is on steroids
By: Janis Mara: Inman News
Editor's note: Like everything in American culture, houses have blown up to Hummer-sized proportions. Eight-figure prices and 10,000-square-foot homes are becoming the norm in the luxury housing market, which is booming. In this three-part series, we explore the changing nature of the American Dream, what people are looking for in the ideal home and our obsession with all things big.

Amika Antoniades-Rao's dream house has an Olympic-sized swimming pool with Greek columns and statues, a circular foyer with a huge Swarovski crystal chandelier, a kitchen with two islands and two dishwashers, a movie room and a home gym.

The California resident's fantasy home may sound extravagant, but it's actually conservative compared to many existing luxury homes.

America's luxury housing is on steroids, with 10,000-square-foot homes and eight-figure prices becoming commonplace. In the luxury market, it's not about keeping up with the Joneses, building a two-story ranch and putting up a white picket fence. The stakes are higher and the fences are made of Australian jara. Now it's more about keeping up with the high-tech moguls next door: the Bill Gateses and the Larry Ellisons.

"We've experienced the overly large home phenomenon for some time," said William Hablinski, founding partner of Hablinski + Manion Architecture, a luxury housing design firm focusing mostly on the Pacific Northwest. Hablinski said 15,000- to 24,000-square-foot houses are the norm for his firm.

"I've had 60,000- to 70,000-foot houses. It's really almost obscene," the architect said.

Such projects easily can cost $35 million for the home construction alone. With the price of the land, the house could be valued at $50 to $70 million, he said.

"They're building palaces," said Yolande Citro, an agent with Triangle Properties who sells luxury homes in Miami Beach, of her clients. "Star Island and India Creek Island (in the Miami Beach area) have lots of land. They are building gigantic homes, huge master bedrooms with 'his and her' bathrooms, pools, six-car garages with private apartments on top, maid's quarters and cottages for guests."

The former Atherton, Calif., home of Larry Ellison, founder of Oracle, has seven bedrooms and 7.5 baths on 2.8 acres, with a Japanese teahouse, Japanese gardens, waterfalls, a koi pond, an in-ground spa, a pool and a tennis court. It's currently for sale at $29.5 million.

Such extravagant homes are spreading. The luxury home market is booming, with Coldwell Banker's sales volume of homes valued at $1 million or more surging to an all-time high of $35.5 billion in 2004. The company's previous record volume for luxury home sales was $23.3 billion in 2003.

In California, one of the top-selling states for luxury homes, sales of homes valued at more than $1 million jumped 73 percent, from 19,080 properties in 2003 to 33,107 in 2004, according to DataQuick Information Systems.

"We're booked up through January 2006, we're turning work away and there doesn't seem to be any letup in demand," said Hablinski.

Hablinski says similar trends are happening in Florida, Long Island, Connecticut, the San Francisco area, the greater Chicago area, Atlanta, Dallas and other metropolitan hubs.

Luxury home values jumped 48 percent in the last year in the San Francisco Bay Area, according to Katherine August-deWilde. August-deWilde is chief operating officer for First Republic Bank, which tracks luxury home prices through its Prestige Home Index. Prices for such homes are on the upswing in Los Angeles, San Diego, according to the index, and also in New York, August-deWilde said.

One commentator sees the trend toward larger, costlier homes as an upscale bunker mentality engendered by the September 2001 terrorist attacks.

"When uncertainty is strong, as it is now in the national psyche since 9/11, the tendency to hunker down is ongoing," said Kathryn Robyn, co-author of The Emotional House. "People are threatened. Where do you go when you're afraid? You go home. It's your sanctuary.

"We've seen this at other times in history," Robyn said. "Whenever there's an uncertain time, we hunker down and become fascinated by luxury." During the Cold War in the 50s when the nation was at odds with Russia, people were fascinated with luxurious homes, she said.

August-deWilde agreed that the terrorist attacks have been a big influence.

"A lot of this comes in the wake of 9/11 and the war in Iraq," August-deWilde said. "There's a bit of a homing instinct. People are spending more time in their homes." Also, lower interest rates have made the opportunity of spending money on housing low, and finally, because the stock market became more volatile in recent years, she said.

Kevin Gotham, a sociologist and associate professor at Tulane University, had a different interpretation.

"People seek out large properties because it makes them seem successful. These kinds of objects and commodities are signifiers of prestige," Gotham said.

The psychology behind the 10,000-square-foot, multimillion-dollar home is similar to that behind the Hummer, according to Gotham. They're both symbols of upward mobility.

"People believe if they have one of these, they will project status," the sociologist said. "There's nothing modest about the Hummer or those big homes. They don't express modesty or humility at all."

A person's home is a reflection of his personality, according to John Brian Losh, founder and publisher of LuxuryRealty.com. Losh agreed that "people equate big houses with big success.

"People view their homes as reflections of themselves," Losh said. "Every luxury house takes on the personality of the owner."

Hablinski agreed, saying, "It can be symbolic of personal success if you have a big house."

Daniel Levy, president of CityRealty.com, put it more succinctly.

"It used to be keeping up with the Joneses. Now it's keeping up with the Ellisons," he said.
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New book helps avoid home renovation mistakes

If it doesn't boost property value, don't do it
By: Robert J. Bruss: Inman News
If you are considering remodeling your home, but you are a little intimidated by the process, reading "What No One Ever Tells You About Renovating Your Home" by Alan J. Heavens will explain the "dos" and "don'ts" for a successful project.

This is not a "how to" book explaining specific tasks, such as installing dry wall. There are lots of other books explaining home remodeling components. Instead, this book takes an overall view of home renovation, explaining when it is wise and when it shouldn't be undertaken.

In a likeable, self-deprecating way, home remodeling expert Heavens shares many of his personal home renovation experiences, mostly to illustrate what not to do. For example, he explains his misplaced obsession with finishing his basement remodel before he completed his more visible and partially completed upstairs fix-up projects.

The book is filled with lots of real-world examples from homeowners who undertook home renovation work, mostly successful, but a few with unplanned results. The story I liked best is about Alex and Beth Cerrato from San Diego who added a 1,500-square-foot addition while continuing to live in their home with their 18-month-old son. That must have been fun. They explain how they hired a recommended remodeling contractor who actually completed the project on budget and delivered top quality work.

This guidebook to successful home renovation explains when it's best to hire contractors and when to do the work yourself. Heavens is clearly a do-it-yourself guy, perhaps because then he often writes about his personal remodeling experiences in his newspaper articles for the Philadelphia Inquirer.

But the author recommends doing lots of research before deciding to do it yourself or hire an experienced contractor. He reports the renovation business is highly fragmented, with about 880,000 businesses involved in remodeling, of which 550,000 are one-person operations.

According to the National Association of Home Builders, Heavens reports, by 2019 the remodeling business will outpace residential construction in annual volume. No wonder the home improvement stores are expanding so fast.

"Never spend money if it won't boost your property values" is the book's theme. That topic is explained in one of the 50 short mini-chapters, which break up the book into easy-to-understand components. At the end of each chapter there are dozens of short, one-sentence summary "things to remember" tips.

Heavens suggests not undertaking renovation projects shortly before selling your home. Instead, he recommends minor fix-up to prepare a home for sale to earn top dollar.

One of the most valuable of the book's many segments explains how to hire a quality contractor. Heavens advises against using the phone book yellow pages method because that's expensive advertising, which the contractor's customers pay for one way or another.

The method for hiring quality contractors the author suggests is to ask neighbors, friends and relatives for recommendations of reliable contractors. Another source, he says, is ask local building inspectors which contractors do the best work and have the fewest problems.

The book is like having a personal conversation with an impartial home renovation expert who shares his many personal experiences in an organized way. Based on his 15 years of writing his syndicated home improvement columns, interviewing hundreds of homeowners and contractors, Heavens shares his insights of what to do to have a successful home remodel.

To illustrate, I especially liked his explanations of home renovation topics from the contractor's viewpoint, such as making estimates. The author reports this is one task most contractors hate because they know many estimates will never result in firm contracts since many homeowners are just shopping and they know estimates are free.

After reading this excellent book, I have a greater understanding of the home remodeling business and what to do and what not to do for a satisfying project.

Especially revealing is the process of getting building permits and what can happen if the contractor works without a permit. For example, Heavens shares the story of a homeowner who had to tear down a $10,000 non-permitted deck that was built too close to the property line and the building inspector wouldn't grant a variance to legalize it.

Chapter topics include "Right from the Start"; "Roll Up Your Sleeves"; "Stop, Look, and Listen"; and "The Good, the Bad, and the Ugly." The Appendix includes an excellent Internet Resource Guide.

There should be a federal law requiring all homeowners to read this outstanding home renovation book before they are allowed to either undertake do-it-yourself home remodeling or hire a remodeling contractor.

Reading this book written by a home renovator who shares his many practical experiences, and who has the ability to write in a very understandable manner, will avoid costly mistakes and make the renovation process go smoothly. On my scale of one to 10, this outstanding new book rates an off-the-chart 12.

"What No One Ever Tells You About Renovating Your Home," by Alan J. Heavens (Dearborn-Kaplan Publishing, Chicago), 2005, $18.95, 208 pages; Available in stock or by special order at local bookstores, public libraries, and www.amazon.com.
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Why did home inspectors miss plumbing leak?

Buyer seeks reimbursement for re-piping work
By: Barry Stone: Inman News
Dear Barry,

Before buying our house, there were two separate home inspections, the seller's and ours. Neither inspector disclosed plumbing problems beneath the building, but two weeks after the sale, the cable TV guy found water in the crawlspace, caused by a plumbing leak. Our plumber repaired this and three other leaks that occurred in the following months, so we paid to re-pipe the entire house with copper. The plumber also installed temporary vent fans to dry out the subarea. But now we have two questions: (1) Should we install permanent vent fans to prevent water damage and dryrot? (2) Is our home inspector liable for the cost of re-piping our home? – Linda

Dear Linda,

The use of temporary vent fans to accelerate the drying process is a wise precaution. If the soil and other surfaces appear to be drying adequately, and if there is no continuing water source, there is probably no need for permanent mechanical ventilation. Just make sure that the screened vent openings in the exterior walls provide cross ventilation and that there is at least 1 square foot of vent opening for each 150 square feet of floor area.

As to the matter of inspector liability, it is too late to determine whether your home inspector was negligent, since the evidence was removed from the building when you replaced the water piping. As a general rule, home inspectors should be notified of defective conditions before making repairs. Your inspector and the seller's inspector should have been given the opportunity to review the plumbing before the house was repiped. At that time, it might have been determined whether visible evidence of plumbing deterioration was apparent during the inspections.

Although both inspectors may have been professionally negligent, it is also possible that the leaking was not occurring during the inspections, and the pipes may or may not have been visibly defective. The fact that neither inspector reported moisture below the building is a strong indication that the leakage occurred later. Unfortunately, all evidence has been removed from the scene, and without a corpus delicti, a definitive verdict is not possible.

Dear Barry,

Our home is currently for sale, and we have some concerns regarding the foundation. A contractor inspected it and said that it needs to be raised about half an inch. Our Realtor believes the house will not pass inspection if we don't have the foundation work done. Should we rely on our agent's recommendation, or are there other ways of addressing this problem? – Ron

Dear Ron,

Before proceeding with foundation repairs, you should invest in an inspection report by a licensed structural engineer. An engineer is more qualified to make that kind of evaluation and may or may not agree with the findings of the contractor. If the engineering report is positive, you can use that document to assure buyers of structural stability. If the engineer recommends upgrades or repairs, you can obtain bids from three separate contractors. At that point, you can execute the repairs or submit the bids as part of your disclosure statement. If you follow this prescription, the foundation problem should not adversely affect your ability to sell, and you can limit your disclosure liability after the sale.

To write to Barry Stone, please visit him on the Web at www.housedetective.com.
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U.S. Warns Lenders to Elevate Standards

At a time when rising interest rates threaten to push high-risk borrowers into financial turmoil, federal banking regulators have urged lenders to be cautious in approving applications for home-equity loans and credit lines and to review interest-only and no-documentation loan products or face the possibility of increased government oversight.

The guidance was issued by the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corp., the Office of Thrift Supervision, and the National Credit Union Administration in response to inadequate credit risk management policies, high demand for innovative mortgage products, and lax underwriting standards.

The agencies also warned lenders to be cautious when dealing with mortgage brokers and "correspondent" institutions, as their compensation is tied to loan volume. They further suggested that lenders frequently check consumer credit scores, determine how loans are being used, implement behavioral scoring, track neighborhood home values, and stop offering credit or raising credit limits when borrowers show signs of distress.

Douglas Duncan, chief economist for the Mortgage Bankers Association, says the tightened standards could "curtail the appetite of some lenders for taking risks and if it does, it would reduce the credit supply to some consumer groups."
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A single woman's guide to buying real estate

New book touches on high-cost-area home purchases
By: Robert J. Bruss: Inman News
If you are a single female who wants to buy a first house or condo, "Buying Solo" by Vanessa Summers provides mostly excellent advice. The theme is "You can do it."

As I enjoyed the first part of this book, I thought even men should be allowed to read this great, new, home-buying book. It offers sage advice on what steps to take and how to purchase a home even in high-cost areas.

Summers first tackles topics such as "How much house can I afford? "How can I get a mortgage?" (she recommends getting pre-approved in writing rather than just pre-qualified) and "Should I work with a real estate agent?"

Although the author is a bit mixed up on how sales commissions are split among realty agents, it's nothing of major concern to home buyers.

However, the author then swerves into unrealistic suggestions such as "Get an appraiser to give you a comparative analysis of the upside of home values in each neighborhood, present vs. future." Appraisers don't have time for that nonsense, especially without payment.

Although the book cover is unclear about what Summers does in real life to qualify her to advise first-time, single, women home buyers, she offers mostly good advice for prospective home purchasers. In an attempt to be Internet-savvy, the author lists some Web sites. However, she obviously hasn't personally used all of them recently because www.norwest.com merged with Wells Fargo Bank years ago.

In the section about different types of mortgages home buyers should consider, I found especially valuable a little chart comparing the monthly payments on a $100,000 mortgage at 5 percent, 6 percent, 7 percent and 8 percent interest. The 5 percent loan costs $417; at 6 percent the payment is $500; at 7 percent the payment jumps to $583; and at 8 percent the payment is $667. The importance of getting a lower, fixed-interest-rate mortgage is emphasized by that comparison.

Perhaps I am too critical. This new book provides valuable information for first-time home buyers, whether female, male, single, married, or otherwise. However, it should have been "previewed" by a knowledgeable real estate expert who would have corrected the obvious errors and misleading information.

Topics include "Why a Home is the Best Investment a Single Woman Can Make"; "How Much House Can I Afford?" "Is My Credit Good Enough?" "What Kind of Mortgage Should I Get?" "What If I Don't Qualify for a Regular Mortgage?" "Should I Work with a Real Estate Agent?" "Where Should I Look?" and "How Do I Negotiate the Best Deal Possible?"

The idea for this book of giving encouragement and advice to first-time female home buyers is great. Unfortunately, Vanessa Summers was not the right person to write this book because she obviously doesn't have much real estate experience and she often provides misleading information. On my scale of one to 10, this disappointing book rates only a seven.

"Buying Solo," by Vanessa Summers (Perigee-Penguin Group, New York), 2005; $14.95; 175 pages; Available in stock or by special order at local bookstores, public libraries, and www.amazon.com.
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Should I recruit a mortgage broker or lender to find a real estate loan?

Quiz will determine which path is best for you
By: Jack Guttentag: Inman News
"How do I know whether I am better off going to a mortgage broker or a lender?"

This question has no answer. The better question is whether you should shop the retail market yourself or retain a broker as your agent to shop the wholesale market for you.

If you shop the retail market, it doesn't matter whether the loan providers you shop are brokers or lenders. You are looking for the best deal, and it could come from either. The brokers you encounter when you shop the retail market are independent contractors. They receive wholesale prices from lenders, which they mark up, offering retail prices to borrowers in competition with retail lenders.

If you retain a broker as your agent to shop for you, you will pay the agent for that service, but you will receive a wholesale price. Brokers who act as agents for borrowers, called Upfront Mortgage Brokers (UMBs), negotiate a fee for their services upfront, and pass through the best wholesale prices they can find.

Some people should shop for a mortgage, while others should retain a UMB to shop for them. The case for shopping is strongest for borrowers who enjoy haggling, who understand the market or are willing to learn, and whose loan is mostly "plain vanilla."

To help you make a decision, I have developed a little quiz. Give yourself the number of points shown at the front of the first statement if that statement describes you best, 0 points if the second statement describes you best, and average the two if you are in-between.

• 6 points: I like to bargain and have no hesitancy in speaking up if I think someone is trying to take advantage of me.
or 0. I avoid confrontation at all costs.

• 2 points: When significant money is at stake, I like to control things myself.
or 0. When significant money is at stake, I like to find someone I can trust to make critical decisions for me.

• 1 point: I feel very comfortable using a computer.
or 0. I am computer-phobic.

• 2 points: I know exactly what kind of mortgage I want.
or 0. I have no idea what kind of mortgage I want.

• 1 point: I understand why I must shop loan providers on the same day if the price quotes are to be meaningful.
or 0. I don't understand that.

• 1 point: I know where to go for mortgage price quotations that shoppers can rely on, and which sources of price quotes are suspect.
or 0. I don't understand that.

• 1 point: I understand when it is and when it is not safe to rely on the APR in making comparisons between alternative deals.
or 0. I don't understand that.

• 1 point: I understand why house purchasers should lock the price of a mortgage as soon as possible, and never allow the price to float with the market.
or 0. I don't understand that.

• 1 point: I understand the features of a loan transaction that the loan provider might change even after the price is locked, and how to protect myself against that happening.
or 0. I don't understand that.

• 5 points: I have the capacity to learn as much about mortgages as I will need to know to take care of myself in the marketplace, and I am prepared to make the investment.
or 0. I feel overwhelmed by the complexity of mortgages, and I don't have the time, energy or desire to educate myself about them.

• 2 points: My credit rating is excellent.
or 0. My credit rating is poor.

• 2 points: I can fully document my income and assets.
or 0. I can't document either.

• 2 points: I can make a down payment of at least 5 percent.
or 0. I can't make a down payment or pay any settlement costs.

• 2 points: The total of my new monthly housing expense and my existing debt service payments are not likely to exceed 35 percent of my gross income.
or 0. They could exceed 45 percent.

• 1 point: My property is a single-family, detached home.
or 0. My property is multifamily, or co-op, or in a high-rise or non-warrantable condo, or in a planned unit development.

The maximum score is 30 points. If your score is 20 or higher, you are positioned to shop effectively for a mortgage. If your score is 10 or less, you should use a UMB to shop for you. If your score is in-between, think about it and then decide which way to go.

But do one or the other. If you contact only one loan provider who is not upfront, without shopping alternatives, you are likely to overpay – and especially if that one loan provider found you through a solicitation to which you responded.

The writer is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.
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FHA Aims for Buyers in Subprime Market

FHA is unveiling mortgage products that U.S. Housing and Urban Development Secretary Alphonso Jackson believes will help the agency compete with subprime lenders for first-time buyers who have below-average credit scores and limited cash for down payments.

On June 4, the FHA will introduce a low-downpayment mortgage that will allow the borrower to add another $15,000 to the loan to renovate a home to the agency's minimum property standards. Additionally, a hybrid five-year adjustable-rate mortgage carrying 2 percent annual rate-increase limits and 6 percent life-of-the-loan limits also will be available to consumers by the spring or summer. Moreover, FHA-approved lenders will offer forbearance agreements or loan modifications to help borrowers who miss payments stay in their homes and avoid foreclosure.

Jackson believes the FHA loans offer better rates, fees, and consumer protections than subprime lenders--which have seen their market share jump from single digits to 25 percent over the last 10 years, while the FHA has fallen from 11 percent in 1995 to 3.3 percent last year.
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Households Anticipate Home Price Easing

The term "housing bubble" is familiar to only a third of households, but 40 percent of all households believe a period of price declines could occur at some point during the next few years, an Experian/Gallup Personal Credit Index survey of 1,001 adults finds.

For the coming year, though, households see prices continuing to rise. Some 70 percent of households anticipate a jump in local home prices in the coming year. Gains of 10 percent or more are expected by 33 percent of those polled, while 10 percent are awaiting appreciation rates of 20 percent or more.

As for mortgage rates, 75 percent of respondents believe they will rise in the year ahead--with close to 50 percent predicting a hike of at least 1.5 percentage points.
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California real estate prices march higher

Sales slow statewide
Inman News
Home sales in Southern California slowed last month as prices hit new highs, rising at their slowest pace in more than three years, according to DataQuick Information Systems, a real estate information service.

A total of 31,431 new and resale homes were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in April. That was down 3.8 percent from 32,674 in March, and down 4.5 percent from 32,916 for April last year, DataQuick reported.

Last year's April was the strongest April in DataQuick's statistics, which go back to 1988. Last month was the second-strongest.

Home sales dropped in the San Francisco Bay Area region, too. A total of 11,158 new and resale houses and condos were sold in the nine-county region in April, which was down 1.3 percent from 11,310 for the previous month and down 10.2 percent from 12,421 for April last year.

"There are two factors that can lead to a decline in sales. The first is that potential buyers cannot or will not buy. The second is that there aren't enough homes for sale. Right now we're probably looking at a combination of the two. More homes will probably be put on the market in coming months, as potential sellers try to sell at the peak in their local markets," said Marshall Prentice, DataQuick president.

The median price paid for a Southern California home was $445,000 last month, a new record. That was up 1.4 percent from $439,000 in March, and up 15 percent from $387,000 for April 2004. Last month's year-over-year price increase was the lowest since March 2002 when the $257,000 median was up 12.7 percent from the year before. Last month's year-over-year increase varied from 9.5 percent in Ventura County to 32.8 percent in San Bernardino County.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $2,019 last month, down from $2,037 for the previous month, and up from $1,760 for April a year ago.

Adjusted for inflation, current payments are about 5 percent below what they peaked in the spring 1989.

Indicators of market distress are still largely absent.

Foreclosure activity has bottomed out, but is still low. Down payment sizes are stable, as are flipping rates and non-owner occupied buying activity, DataQuick reported.

Last year's April for the San Francisco Bay Area was the strongest April in DataQuick's statistics, which go back to 1988. Last month was the second-strongest, and last month's year-over-year sales decline was the first of this year.

"We're watching carefully for any turn in the market. Right now we just don't see anything. Appreciation is pretty even across the different categories, there are really no changes in market mix, purchase and financing profiles are stable. Mortgage rates haven't gone up as they were expected to do, and demand appears to be strong," said Marshall Prentice, DataQuick president.

The median price paid for a Bay Area home was $586,000, a new record. That was up 3.2 percent from $568,000 in March, and up 19.1 percent from $492,000 for April a year ago.

Prices are going up at their fastest pace in four years, the Bay Area appreciation rate has now passed Southern California's for the first time in four years.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,659 in April, an all-time high. A year ago it was $2,237.

Indicators of market distress are still largely absent for both the Southern California and Bay Area markets, DataQuick reported. DataQuick is a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, which monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

SOUTHERN CALIFORNIA

All Homes        #Sold     #Sold     Pct     Median     Median     Pct
                  4-Apr       5-Apr  Chng.      4-Apr      5-Apr   Chng.

Los Angeles       10,749     10,299    -4.20%   $387K      $447K    15.5%
Orange County      4,577      4,547    -0.70%   $523K      $576K    10.1%
San Diego          6,094      5,345   -12.30%   $439K      $484K    10.3%
Riverside          6,116      5,718    -6.50%   $308K      $374K    21.4%
San Bernardino     3,954      4,007     1.30%   $229K      $304K    32.8%
Ventura            1,426      1,515     6.20%   $483K      $529K     9.5%
So. California    32,916     31,431    -4.50%   $387K      $445K     15%

SAN FRANCISCO BAY AREA

All Homes         #Sold   #Sold     Pct.     Median     Median     Pct.
                 4-Apr       5-Apr  Chng.       4-Apr      5-Apr   Chng.

Alameda            2,546     2,244    -11.90%   $467K      $552K    18.20%
Contra Costa       2,419     2,119    -12.40%   $432K      $530K    22.70%
Marin                535       481    -10.10%   $666K      $779K    17.00%
Napa                 185       205     10.80%   $477K      $574K    20.30%
San Francisco        759       681    -10.30%   $625K      $751K    20.20%
San Mateo            861       850     -1.30%   $610K      $731K    19.80%
Santa Clara        3,344     2,830    -15.40%   $526K      $619K    17.70%
Solano               944     1,037      9.90%   $344K      $409K    18.90%
Sonoma               828       711    -14.10%   $415K      $534K    28.70%
Bay Area          12,421    11,158    -10.20%   $492K      $586K    19.10%

Source: DataQuick Information Systems, DQNews.com.
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Female Painters Offer New Trend

by Phoebe Chongchua
There's lead-free paint and now there is nearly testosterone-free painters. A Hillcrest, California, company is capitalizing on its mostly female staff.

"We have a female painting crew that provides the labor and also a higher level of customer service. They are fantastic communicators with clients. They have all been trained by me on tinting colors on job sites for clients. They're also trained in any kind of faux finishes or plasters," says co-owner, Jennifer Guerin.

Guerin and the lone male in the company, co-owner, Eddie Wheatley, started the business three-and-a-half years ago.

"I think when you let strangers in your house, people feel more comfortable having a girl group come in. It's just different from having a bunch of guys walking around in your house... also a lot of times women have a better sense of color," says employee Susan Suyao.

Ox and Olive Painting specializes in interior projects. Guerin says her female staff brings a warm, caring style to each job site.

The company offers a wide selection of wall finishes and painting styles including murals and Trompe l'oeil -- a style of painting that creates a three-dimensional illusion.

Another highly requested look is the Venetian Plaster.

"It's a specialty finish that is applied in thin, translucent layers to create a rich visual finish with the illusion of depth and substance. Its composition is of slaked lime and finely grounded marble dust that can serve as a luxurious accent wall, or throughout an entire home," explains Guerin.

Still another popular trend is the use of 100 percent natural clay. "American Clay plasters are the newest in finishes," says Guerin.

They're dug from the earth in Albuquerque, New Mexico. The actual clay is then tinted, and applied to walls using a trowel.

Guerin says it's growing in popularity because there are "No fumes and it can duplicate the Venetian plaster (look by using) a Porcelina finish or it can have more of a rustic and organic (look) in the Loma finish. It comes in 32 different colors."

The American clay isn't just used for its appearance. The clay helps control the temperature in your home. It regulates arid, and humid air and absorbs and releases moisture as the weather changes. The non-toxic clay can be painted, stained or plastered. It also helps to absorb sound.

When it comes to paint, Guerin says "Color washes are really popular, which is a layer of translucent color applied on top of a coat of paint. Also what's really popular... is adding accent walls and splashes of color where (an owner's home) was completely white, now it brings personality into the walls."

Color blocking is a style that uses several colors painted in various sized blocks on the wall. It creates an interesting look that can often take the place of artwork on a wall in a living room. It's best to use varying intensities of color from the same color card.

Sheen striping uses vertical stripes of the same color, but different sheens to create a subtle design. Typically this style is used in the dining rooms. In rooms with low ceilings this look can create an illusion of height.

Finally, some tips for getting started on your painting project:

    • Call ahead for an estimate; the better contractors are booked in advance
    • Before you hire a painting company or become a weekend warrior, choose
      the complete color palette before you begin; re-do jobs just to change 
      color can be a headache
    • Colors always come out two times darker than on the chip
    • After painting is complete, dispose of paints by calling your local 
      Hazardous Waste program
    • Make sure there are contracts and written payment forms
    • Never pay full price for the service before work has begun

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Bank of America real estate loan eats closing fees

Program could save home buyers thousands
By: Janis Mara: Inman News
Anyone who has been confounded with unexpected and seemingly inexplicable fees at the closing table will probably appreciate a new Bank of America mortgage loan program, Mortgage Rewards.

The program, currently available only to Bank of America customers, could save home buyers about $2,000 on a $200,000 loan, according to the bank. Higher loan amounts would yield greater savings, the bank said, varying according to location and other factors.

The program waives the loan origination fee, application fee, appraisal fee, flood determination fee, tax service fee and most other fees associated with closing. It doesn't pay for title insurance, though.

"Application volume is way up" since the program rolled out in late April, according to Steve Ozonian, national home-ownership services executive for the bank. Ozonian wouldn't give more specific numbers.

This has been an eventful year for the bank, which in April reported soaring profits, with first-quarter net income of $4.7 billion. Its quarterly profits are up from $2.68 billion, or 91 cents a share, during the same quarter a year ago.

The Mortgage Rewards program sounds a bit too good to be true. But Ozonian says the bank is able to absorb the closing fees because it speeded up and simplified its loan processing procedures, saving the bank money.

"We took a look at the entire mortgage process, application, approval and fulfillment and tightened that up using technology and better procedures," Ozonian said. "This enables us to create a more efficient mortgage process and instead of dropping it into our pockets we are passing the savings on to the consumer."

The executive said the fees will not be rolled into the loan's interest rate.

"The note rate is still the comparative street rate. We're not marking up interest rates and then bundling these services in because we're marking up rates. We encourage consumers to check our rates. They will find we have competitive rates," Ozonian said.

"What a lot of lenders will do is they will say we can take care of all these fees but you end up paying a higher interest rate, note rate, on the mortgage instrument," Ozonian acknowledged. "But we are not doing that."

The bank will pay the appraisal fee, he said. Consumers won't have to front the money when the appraiser shows up to scope out the house.

"We assign the appraiser and the appraiser knows they are working with the bank and the bank doesn't require that the existing customer who is part of the program write a check for the appraisal," the executive said.

The program doesn't include title insurance, Ozonian said. "We don't have the process internally – that's done by the title company."

As another extra, those who borrow using Mortgage Rewards get one free year of the company's borrower's protection plan. The plan pays mortgage principal and interest for up to six months if the customer loses his/her job, and pays off the whole mortgage if the mortgage holder should die.

When the free year is up, customers will be notified by a letter or phone call and given the option to continue on a paying basis.

"It won't continue by default," Ozonian said.

Currently, the program is available in 21 states and the District of Columbia and will be available in the northeast United States in the fall, according to Ozonian.
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A wood deck to weather the elements

Engineered product a sturdier, longer-lasting alternative
By: Bill & Kevin Burnett: Inman News
Q: I am replacing a rotted-out deck at home and would like to know if I should use redwood or treated wood and also whether I should stain the deck.

The structural engineer who drew the plans recommends using all redwood, including the support posts. A general contractor says the posts should be treated wood.

The engineer also recommends the redwood be stained every two years. The contractor says the treated wood needn't be stained.

Where I live, in San Francisco, it's often foggy and damp. I want a deck with less maintenance but want to be sure that the deck will last 10 to 15 years. I'm willing to pay a little extra for the right type of wood.

A: We understand your confusion. There truly are a lot of choices out there. We've built and maintained many decks over the years and have formed some strong opinions about the pros and cons of various materials and methods in deck building and maintenance.

We disagree with your structural engineer's recommendation of a deck made entirely of redwood. Redwood is very expensive and while it is rot-resistant, it is high-maintenance. If you don't clean and treat it regularly, it won't be long before it will look shabby. And, depending on the amount of sapwood – the white wood in the boards – it will eventually rot.

So, the way we see it, you want your new deck to look good, last a long time and need little maintenance. You're considering just two materials for the decking and the supporting structure – redwood and treated wood. We suggest you consider a third choice, one that is not wood at all. Give some thought to using an engineered wood product, at least for the decking.

Remember that decking, whether redwood or treated wood, should be sealed or stained every couple of years to maintain its look and help prevent rot.

Sealers are clear, while stains are colored. Stains can be transparent, semitransparent or opaque. Over the course of time as it weathers, wood loses moisture. Stains and sealers help stabilize this moisture loss and help maintain the look of the wood. In untreated wood, stains and sealers also help prevent decay.

Treated wood is usually a soft wood, such as fir or hemlock, which has been impregnated with a chemical preservative. We've seen brown and green treated lumber. So, if you are planning on staining, you should take into account the color of the treatment when choosing a stain.

We agree with your general contractor that treated lumber does not require regular sealing or staining to prevent decay, but you'll probably want to do it anyway to preserve the look of the wood.

If we were doing your job in the moist climate of San Francisco, we'd use treated lumber for the posts and joists.

You don't mention handrails, but if any part of the posts will be exposed above the deck and are part of a handrail system, specify S4S treated lumber. This means "surfaced four sides" and is smooth – no splinters. If none of the support structure is exposed, rough or smooth grades work equally well.

For the decking itself we'd use an engineered product, such as TimberTech or Trex. Because this "lumber" is made of everything from sawdust to plastic to peanut shells, it tends to be more stable and wears better than wood.

Engineered decking looks and feels like real wood and cuts and installs like regular lumber. Also, it's easier on the environment. Begin your research at www.timbertech.com or www.trex.com.

Whichever way you go, do plan on cleaning the deck at least once a year. Get out the pressure washer and give it a good bath to get rid of the dirt and debris that gets in the nooks and crannies. Pick a warm day and cool off.
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Architecture finds 'comfort' in circles

How to maximize positive space when designing a home
By: Arrol Gellner: Inman News
Positive space, negative space. They sound like some kind of flaky New Age terms. But actually, they're one of the oldest and most basic concepts in design. Nothing could be more deeply rooted in the human psyche – yet both amateurs and architects routinely ignore their implications.

Simply put, positive space represents space that we want, while negative space is what's left over. To draw a simple analogy, imagine cutting out cookies from dough. The cookies represent the positive space, and the pointy scraps left over are the negative space. In architecture as in baking, the idea is to maximize the number of cookies and minimize the leftover scraps.

As it happens, maximizing positive space is even more important in architecture than in baking, since you can't ball up the leftover scraps and roll more dough out of them. You've pretty much got to cut things out right the first time.

To stretch the analogy even further, it also happens that architectural forms that are roughly circular – like cookies – provide a much stronger sense of comforting enclosure than do those nasty angular scraps left over from cutting them out.

As basic as this principle seems, you'd be surprised how often architects violate it. Acute angles, with their jagged, knife-like shape, are inherently dramatic, and we architects are nothing if not suckers for drama.

But there's a price to pay for this kind of cheap effect. Acute angles inside buildings can't be comfortably inhabited by anything other than gnats and spiders, and it's not too much to say that they also have an unsettling effect on the human psyche. Deep in our primitive brains, converging angles still give us an uneasy sense of walls closing in, of entrapment – not exactly the ambience you want for your living room.

The Chinese design principles known as Feng Shui have long warned against acute angles – "secret daggers" – which are thought to generate malevolent forces. It's just another way of saying that sharp angles creep people out. For their part, Western psychologists might allude to the womb to explain why humans gravitate toward rounded spaces and shun angular ones. To be sure, more-or-less circular shapes are one of nature's favorite forms, appearing in practically every living thing from the cell on up.

Now, none of this implies that rooms should be literally round – a pretty impractical idea, what with all our relentlessly linear building materials. But it does suggest that rooms shouldn't contain wall or ceiling angles sharper than 90 degrees, and that they shouldn't be more than half again as long as they are wide. Nor should they have sharp angles intruding into them, or far-flung, dead corners with no through traffic. This applies to outdoor rooms as well, except that here, you can use landscaping to produce a pleasingly positive space for people to inhabit.

In short, the closer you come to approximating a circular shape – whether using architectural features, furniture arrangements, or planting – the more comfortable your rooms will be. Whether we call the result intimate, auspicious, secure, or just plain cozy – we all know positive space when we feel it.
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The Next 3 Hot Real Estate Sectors

Although some real estate sectors might “decelerate”—with price growth at slower rates than before—there are three areas of the market that have a strong potential to see home-price acceleration in double-digits over the next two years, according to Lawrence Yun, senior economist at the NATIONAL ASSOCIATION OF REALTORS®.

Yun made the prediction to members of the Research Committee on Thursday at the 2005 REALTORS® Midyear Legislative Meetings & Trade Expo, being held May 9-14 in Washington, D.C.

These next hot markets to look out for are:

• Heavy in-migration regions — Places where a high number of residents move in from other parts of the country, including Nevada and Florida.

• Future retirement destinations that are still currently affordable — Places where homebuyers plan to buy now and live once they retire, including Charleston and Myrtle Beach, S.C.; Virginia Beach, Va.; the panhandle of Florida; Alabama; and the North Carolina coast.

• Tech-sector heavy markets — Markets where the technology industry is making a comeback, including Seattle; Denver; Austin, Texas; and Raleigh-Durham-Chapel Hill, N.C.

“So, as the rest of the country takes somewhat of a breather, these markets will see acceleration of prices into double-digit levels,” Yun said.
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Local housing bubbles could burst in next couple of years

But outlook for overall real estate market stands strong
By: Glenn Roberts Jr.: Inman News
WASHINGTON, D.C. – The housing market remains unusually strong, but speculators and lenient lending practices do pose a risk for the real estate industry, said David Lereah, chief economist for the National Association of Realtors.

Lereah, during a presentation Thursday at the National Association of Realtors' midyear meetings, said he expects that some hyper-extended local real estate markets will sour within the next couple of years, while the overall housing market should remain robust for at least the next couple of years.

"Loose lending and speculative buying – that, in my opinion, is the greatest risk that our industry faces right now," Lereah said.

Wall Street analysts are definitely paying attention to the migration of investors to the real estate sector, and that has put the industry under increasing scrutiny, he also said. "They are watching us. We are under a microscope."

Analysts have found some reason to be concerned – increasing debt, fast-rising home prices in some markets, a larger share of adjustable-rate mortgages, and a higher share of home-price-to-income and home-price-to-rent ratios in some markets. Financial scandals that have plagued mortgage giants Fannie Mae and Freddie Mac could lead to some industry-shaking reforms, the trade deficit is swelling, oil prices are gushing, and the value of the dollar is dropping.

Most local "balloons" in home prices "will deflate rather than pop," though "several local markets will pop over the next couple of years," he said.

Among the indicators of a market headed for a bust: home sales falling, price growth below historical average, more than a 6.5-month supply of housing, properties taking longer to sell, job loss in the area, rising mortgage rates, negative net migration, and rising loan-to-value ratios.

The days of successful speculative buying in some real estate markets are numbered, Lereah said, citing the example of pre-construction buyers in a hot real estate region.

"People will purchase pre-construction and they'll flip it and make some money. Can they sustain it? No. At some point that won't work." While there are speculators, their activity represents only a small part of overall home buying, he said.

There is definitely a flip side to the negative indicators, though, Lereah added. Inventory is still constrained in many markets, producing the simple economics of high demand. "How many times do we have to tell Wall Street that demand is higher than supply?"

The Baby Boomer generation continues to invest heavily in real estate, and housing is still largely affordable in most parts of the country. "The stars are aligned for the housing sector. I say this is the Golden Age of real estate," Lereah said.

For the past four years, Lereah has predicted a let-up in the galloping housing market, but he said it hasn't yet paused for breath.

Unless interest rates rise above 8.5 percent, affordability should not be a problem, he also said. Modest increases in interest rates and inflation should allow a soft landing rather than a freefall for the real estate industry, he added.

Housing markets in other nations exhibit more bubble-like symptoms than the U.S. market, Lereah noted, with the United Kingdom and Spain, for example, reporting some very high price-to-rent and price-to-income ratios.

Lereah expects 6.5 million existing-home sales in 2006, compared to a projected 6.71 million this year. New-home sales should also drop slightly, from a projected 1.18 million this year to 1.05 million next year.

Rates on the 30-year fixed mortgage, meanwhile, could increase from about 6.1 percent this year to 6.7 percent by year-end 2006. And existing-home prices should slow, from 7.1 percent appreciation this year to 4.5 percent appreciation in 2006.
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FDIC IDENTIFIES 55 HOUSING BOOM MARKETS

U.S. Home Prices: Does Bust Always Follow Boom?
The number of boom markets in the U.S. increased by 72 percent to 55 metro areas in 2004, according to a recent report released by the Federal Deposit Insurance Corporation (FDIC). Using the house price index published by the Office of Federal Housing Enterprise Oversight (OFHEO), the FDIC defines a "boom market" as areas where inflation-adjusted home prices increased 30 percent or more in three years. More than 90 percent of the boom markets in 2004 were located on or near the coasts, with 21 boom markets located in California, 18 in the Northeast and New England and 11 in Florida.

According to the FDIC report, housing availability, prices and the terms of mortgage credit are factors that may be driving the increase in boom markets. The report also notes that a housing bust, defined as a market where home prices decline by at least 15 percent over a five-year span, does not necessarily follow a housing boom. Since 1978, only nine housing busts have occurred after a housing boom.
Full Article:
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NAR EXPECTS STRONG HOUSING MARKET TO CONTINUE

U.S. home sales are anticipated to remain near record levels this year, according to NAR's recent mid-year forecast. Existing home sales in the U.S. are expected to reach 6.70 million units, a mere 1.2 percent decline from 2004. Similarly, new home sales should reach 1.17 million units, a 2.5 percent decrease from 2004, which would mark the second highest sales pace on record.

Homes sales will continue to benefit from the slow rise in mortgage interest rates, according to NAR. "The essentially sideways movement in mortgage interest rates recently has defied the consensus of earlier forecasts, with only a modest uptrend detectable over time," said NAR's Chief Economist David Lereah. "The simple effect, in an economy with an improved labor market, is a higher demand for homes."

Mortgage interest rates have been trending-up less than expected, a pattern that should continue through next year and support strong levels of home sales. The forecast was released at the start of the National Association of Realtors® Midyear Legislative Meetings & Trade Expo; a record of more than 8,500 Realtors® and guests are expected to attend the May 9-14 meetings here.

David Lereah, NAR’s chief economist, said higher oil prices are having a dampening effect on economic growth. “A side benefit is that mortgage interest rates will be rising less than expected,” he said. “The essentially sideways movement in mortgage interest rates recently has defied the consensus of earlier forecasts, with only a modest uptrend detectable over time. The simple effect, in an economy with an improved labor market, is a higher demand for homes.”

Lereah projects the 30-year fixed-rate mortgage to rise gradually to 6.4 percent in the fourth quarter, then average about 6.8 percent in 2006. “In other words, mortgage costs should remain historically low for the foreseeable future,” he said.

Sales of existing-homes, including single-family and condo, will be close to last year’s record, slipping only 1.2 percent to a total of 6.70 million in 2005. A similar pattern is expected for new-home sales – a decline of 2.5 percent to 1.17 million this year, which also would be the second highest on record. Housing starts are seen to increase 0.7 percent to 1.97 million units in 2005, the best performance since 1978.

The national median existing-home price for all housing types is forecast to rise 7.1 percent this year to $198,400. The median new-home price is expected to increase 5.1 percent in 2005 to $232,300.

The U.S. gross domestic product is projected to grow 3.3 percent in 2005, while the unemployment rate is expected to average 5.3 percent. Inflation should be tame with the Consumer Price Index rising 2.9 percent in 2005.

Inflation-adjusted disposable personal income is forecast to rise 3.5 percent this year, while the consumer confidence index is expected to rise to 101 in the fourth quarter.

More detailed information about NAR’s economic outlook, as well as other analysis of real estate industry statistics, can be found in the May issue of NAR’s Real Estate Outlook: Market Trends and Insights. The publication may be purchased by calling 800/874-6500.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1 million members involved in all aspects of the residential and commercial real estate industries.
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Double-digit home-price growth spreads across U.S.

Florida, California report strongest gains
Inman News
A growing number of metropolitan areas showed double-digit annual increases in median existing-home prices in the first quarter, with an upward trend in overall price appreciation, according to the latest survey by National Association of Realtors.

The association's first-quarter metro-area home price report, covering changes in 136 metropolitan statistical areas (see note), shows a record of 66 areas with double-digit annual increases in median existing single-family home prices and only six areas posting modest price declines. The previous record was 62 metros showing double-digit price appreciation in the fourth quarter of 2004.

The national median existing single-family home price was $188,800 in the first quarter, up 9.7 percent from the first quarter of 2004 when the median price was $172,100. The median is a typical market price where half of the homes sold for more and half sold for less. In the fourth quarter of 2004, the national annual rate of home-price appreciation was 8.8 percent.

David Lereah, NAR's chief economist, points to the tight supply of homes available for sale. "We simply don't have enough homes on the market to meet demand," he said. "Low mortgage interest rates are drawing new households into the market, but some are disappointed by their inability to find a home that meets their needs. We think the supply situation may improve next year when interest rates are expected to be higher – that should result in a lessening of demand and cooler price appreciation."

Three Florida metros led the nation in price growth. The strongest price increase was in Bradenton, where the first quarter price of $275,100 rose 45.6 percent from a year earlier. Next was Sarasota, at $326,300, up 36 percent from the first quarter of 2004. Third was the West Palm Beach-Boca Raton-Delray Beach area, with a first-quarter median price of $362,800, up 35.9 percent in the last year.

In the small number of areas with price declines, none had previously experienced rapid price growth. Generally, these are lower-cost markets experiencing one or both of the conditions necessary for price softness – local economic weakness, mainly in jobs, or a large supply of homes available in the local market; typically, these are temporary in nature.

Median first-quarter metro-area resale prices ranged from $82,400 in Youngstown-Warren, Ohio, to more than eight times that amount in the San Francisco Bay area where the median price was $689,200. The second most expensive area in the United States was Anaheim-Santa Ana (Orange County, Calif.) at $656,900, followed by San Diego at $584,100.

Other low-cost markets include Waterloo-Cedar Falls, Iowa, the second least-costly area, at $86,500, and Beaumont-Port Arthur, Texas, with a first-quarter typical resale home price of $90,000.

Regionally, the strongest increase was in the West where the median existing single-family home price was $282,900 during the first quarter, up 16.9 percent from a year ago. The strongest increase in the region was in Riverside-San Bernardino, Calif., where the median price of $343,400 rose 36.2 percent from a year earlier, followed by the Las Vegas area, at $291,000, up 29.4 percent, and Sacramento, at $352,900, up 26.9 percent from the first quarter of 2004. Fourteen other Western metro areas also experienced double-digit annual price gains, including Honolulu, Phoenix, Los Angeles, San Diego, San Francisco, Anaheim-Santa Ana and Seattle.

In the Northeast, the median resale price during the first quarter was $245,700, rising 14 percent from a year earlier. The strongest increase in the region was in the Atlantic City, N.J., area, at $217,400, up 23.2 percent from the first quarter of 2004, followed by Monmouth-Ocean, N.J., with a median price of $358,500, up 20.3 percent, and the Middlesex-Somerset-Hunterdon area of New Jersey, at $381,400, up 18.2 percent. Twelve other Northeastern metros had double-digit price gains, including Bergen-Passaic, N.J.; the New York City area; the Albany-Schenectady-Troy area of New York; Nassau-Suffolk, N.Y.; Hartford, Conn.; and Boston.

In the Midwest, the first-quarter median existing-home price of $148,800 increased 7.8 percent from the same period in 2004. The strongest increase in the Midwest was in Springfield, Mo., where the median price of $126,400 was 15.4 percent higher than the first quarter of 2004. Next came Rockford, Ill., at $129,300 in the first quarter, up 14 percent, and the Champaign-Urbana-Rantoul area of Illinois, at $120,700, up 12.9 percent in the last year. Wichita, Kansas; Aurora-Elgin, Ill.; South Bend-Mishawaka, Ind.; Springfield, Ill.; and Green Bay, Wis., also had double-digit gains.

In the South, the typical existing single-family home price rose 6.6 percent to a median of $166,600 in the first quarter from a year earlier. After the Bradenton, Fla., area, Sarasota, Fla., and the West Palm Beach-Boca Raton-Delray Beach area, the strongest increase in the South was in the Orlando area, at $194,400, up 28.7 percent from the first quarter of 2004. Next was Miami-Hialeah, at $315,700, up 28.4 percent, and Ocala, Fla., where the first-quarter median price of $122,200 was 27 percent higher than a year ago. Eighteen other Southern metro areas experienced double-digit increases in their median price including the Ft. Myers-Cape Coral-Punta Gorda area of Florida; the Washington, D.C., area; Norfolk-Virginia Beach-Newport News, Va.; Richmond-Petersburg, Va.; and Tampa-St. Petersburg-Clearwater.
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The Weekend Guide! May 12 - May 15, 2005

The Weekend Guide for May 12 - May 15, 2005.
Full Article:
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Scott Peterson's house for sale

Real estate disclosure issues come to light
By: Janis Mara: Inman News
The Modesto, Calif., home of Scott Peterson, convicted in December of murdering his pregnant wife Laci, is up for sale.

Prudential California Tuesday listed the three-bedroom, two-bath "cottage-bungalow" at 523 Covena Ave. for $379,996.

The sale opens a Pandora's Box of ethical questions about disclosure for agents engaged in the sale of what one broker described as "stigmatized properties," homes with deaths and other controversial issues connected to them.

"If an occupant died on the property, that needs to be clearly disclosed, according to Civil Code section 1710.2," said Ron Peck, a Hayward, Calif., real estate attorney with 28 years' experience. "It never has technically been determined where Mrs. Peterson passed away, but under an abundance of caution, it should be disclosed."

Peck pointed out, "I have had sales where people were murdered a block away. You can imagine that's something people would want to know when buying a property, so I recommend disclosure."

If someone were to buy the Peterson house without knowing its history, if they found out about it soon enough, the buyer could bring an action to rescind or cancel the sale and get their money back, the attorney said. Usually, though, he said, damages are established by appraisal testimony.

"If you bought the house and then discovered its history, their damages would be the difference between what it would really have been worth had there been full disclosure and what you actually paid for it," Peck said.

An event like the murder of Laci Peterson and the subsequent media attention could alter the tenor of a neighborhood for a long time to come, Peck noted. "A good example would be O.J. Simpson's home. People probably still go by there and say, 'hey this is O.J. Simpson's house,'" he commented.

Peck noted that the disclosure only has to be for the last three years. Be that as it may, sometimes it's a good idea to keep disclosing, pointed out Anne Biddell, a Hayward, Calif., Realtor with 22 years' experience.

"We have a home in Hayward where she killed him and buried him in the basement," said Biddell, referring to a wife who murdered her husband.

"That happened 35 years ago and to this day, every time the home is sold, it's disclosed," Biddell said.

Even if it's not legally mandated, Biddell said, disclosure is a good idea.

"I would disclose it because if you don't, the neighbors will. Typically we say if you have to ask the question you have to disclose it," Biddell said.

Though it is necessary to disclose if a death has happened on the premises in the last three years, it's not necessary to explain the cause of death, but Biddell recommends doing so.

"Typically a buyer gets curious and wants to know why. You don't have to tell them what they died of. It's not mandatory, but it usually helps if they were 94 and they passed away in their sleep," Biddell said.

Certain cultures are more sensitive to such things than others, according to Biddell. She also said certain religions have ways of cleansing a home in which someone has died.

"Some culture will bring a religious leader who purges the house of negative energy and bad spirits with a ceremony," Biddell said. "We have had Catholics who have had a priest come and bless the house."

A broker in Montana expressed similar sentiments.

"I would mention it because they are liable to find it out later," said Dorothea Lowe, broker at Sky Lodge Properties in Red Lodge, Mont.

"If I have knowledge of that sort, I slip it in somehow. People need to make their own decision. Some people it doesn't bother and some people would be horrified. I leave it up to the people," Lowe said.

The broker agreed that certain cultures react more strongly to such news.

"Native Americans, if someone was killed or died in the home they are not about to touch it with a 10-foot pole. I don't know if that holds true for every tribe or just certain tribes, but I know it is very important to the Navajos. I found that out when I was selling real estate in Flagstaff, Arizona," Lowe explained.

"There are some people who believe in karma and burn a lot of candles to cleanse the space and some think that's hogwash. I say, leave it up to the people where they want to live."
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Real estate purchases hit record high

Refinancings up as well
Inman News
Overall mortgage applications reached a record level last week, going up 9.4 percent on a seasonally adjusted basis from the week before, according to the Mortgage Bankers Association’s weekly survey.

The MBA seasonally adjusted purchase index increased by 9.4 percent to 526.2 from 482.5 percent the previous week. The seasonally adjusted refinance index increased by 9.8 percent to 2,263.3 from 2,061.2 one week earlier.

"Strong support for home sales has been provided by a recent decline in interest rates, a strong jobs market, and nice weather during the spring-buying season," said Douglas Duncan, the MBA's senior vice president and chief economist, in a statement. "These factors have led to a record level of purchase applications on both weekly and four-week rolling averages."

The refinance share of mortgage activity increased to 39.2 percent of total applications, from 39.1 percent the previous week. The adjustable-rate-mortgage share of activity increased to 35.3 percent of total applications, from 33.4 percent the previous week.

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.77 percent from 5.74 percent one week earlier. Points including the origination fee increased to 1.25 from 1.18 for 80 percent loan-to-value loans.

The average contract interest rate for 15-year fixed-rate mortgages increased to 5.34 percent from 5.31 percent one week earlier. Points including the origination fee increased to 1.26 from 1.22 for 80 percent loan-to-value loans.

The average contract interest rate for one-year adjustable-rate mortgages increased to 4.2 percent from 4.14 percent one week earlier. Points including the origination fee decreased to 0.93 from 0.98 for 80 percent loan-to-value loans.

Washington, D.C.-based Mortgage Bankers Association is a national association representing the real estate finance industry.
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Top towns for families with children

Schools important, but other criteria come into play
Inman News
NeighborhoodScout has issued a special report identifying America's 10 best towns for families and children.

The report combines data from the National Center for Education Statistics, the U.S. Bureau of the Census, the FBI, the U.S. Justice Department and the Office of Federal Housing Enterprise Oversight.

Dr. Andrew Schiller, a specialist in American demographics and the creator of the NeighborhoodScout search engine for home buyers, used NeighborhoodScout to analyze government data to identify the communities that have the best overall combination of attributes parents and researchers repeatedly cite as important in defining the best places for families with children.

His work has produced a list of the top choices and best value towns for families in each of America's 10 largest metropolitan areas.

Here are NeighborhoodScout's top choice and best value towns for families with children in America's 10 largest metro areas (by metro area from east to west):

Metro Region               Top Choice              Best Value for the money
Boston                     Sudbury, Mass.          Holden, Mass.
New York                   Manhasset, N.Y.         Andover, N.J.
Philadelphia               Richboro, Pa.           Downingtown, Pa.
Washington, D.C.           Potomac, Md.            Columbia, Md.
Detroit                    Bloomfield Hills, Mich. Troy, Mich.
Chicago                    Lake Forest, Ill.       Wheeling, Ill.
Dallas-Fort Worth          Highland Park, Texas    Richardson, Texas
Houston                    Sugar Land, Texas       Stafford, Texas
San Francisco              Los Altos, Calif.       Suisun City, Calif.
Los Angeles                Moorpark, Calif.        Simi Valley, Calif.

All the towns are within 40 miles of the center city.

"We were looking for those very select communities that have both top-quality public schools and an exceptionally family-friendly environment, not towns that may excel at one or two criteria but are lacking in other ways," Schiller said.

For this research, the criteria used included quality public schools, safety from crime, a high proportion of families with children in the community, many adults with college degrees or even advanced degrees, many families who own their homes, and homes that are predominantly single-family residences, regardless of the setting being urban, suburban, or rural. Median house values were also included to find the family-friendly towns that qualify as best values for the money in each metropolitan area.

"Home ownership is important because research has shown that it helps keep crime lower, and represents an investment in the location by those living there," Schiller said. High educational attainment by adults in the community is a good indicator that the populace places a high degree of importance on education, and is well equipped to make key decisions about the future of the community.

Many families with children in the town signifies that other families have selected the town as a good place to raise their children, and helps to promote a family-friendly environment with good social networks for both children and their parents. "Many parents, regardless of the type of dwelling they live in, state that they prefer a single-family home for raising their children, replete with space to play indoors and out, and so this research included the predominance of single-family homes as one of its measures," Schiller said.

Location Inc. is a Rhode Island-based company specializing in nationwide relocation software, retail site selection and real estate investment advising. Andrew Schiller is the founder of the company, a Ph.D. geographer, and a former research scientist at Oak Ridge National Laboratory and Atomic Energy Complex.
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Making a wise real estate decision

How can I make a financially prudent home purchase or sale?
By: Dian Hymer: Inman News
This could be a particularly good time to make a move if you are a homeowner whose current home no longer suits your needs. Although interest rates are rising, they still remain at multi-decade lows. And the appreciation rate in recent years has been particularly high. But, even though conditions are good, you need to have realistic expectations in order to make it all work.

Many trade-up sellers have a difficult time understanding that their current home isn't necessarily worth what they need in order to make the move. A seller's financial needs don't dictate the sale price of their home. Market value is constrained by what buyers are willing to pay.

A complicating factor is that if you're buying in a fast-paced market, you may be forced to compete in order to buy the new home. This could mean paying a higher price than you'd anticipated. You can end up in trouble if you buy first, pay a high price and your home turns out to be worth less than you thought.

HOUSE HUNTING TIP: To guard against coming up short on the sale of your home, it's best to be conservative in the estimation of the approximate selling price of your home. There's no way to know for sure how much your home will sell for until it sells and the buyers complete their inspections. Sometimes the sale price is renegotiated during the course of the transaction if the buyers discover defects during their inspections. By estimating low on the sale price of the home you're selling, you're less likely to end up in a financial bind if your home doesn't sell as high as you'd like.

Repeat home buyers who are trying to trade up in a high demand, low inventory market are faced with an intriguing dilemma. If they sell first, they know exactly how much equity they have to work with. They are in a great bargaining position, since they don't have to sell a property. They have converted their equity to cash.

However, when inventories are low, there's a risk that it might take awhile to find and buy the new home. It's not uncommon to make several offers in competition before meeting with success. Moving to an interim rental is almost a certainty for some buyers, depending on the local market conditions.

Low inventory market conditions often lead to unusually high selling prices as buyers compete with one another to be the winning bidder. In a market like this, your home could sell for significantly more than you anticipated which could improve your purchasing power in a positive way. This could give you the edge you need in a multiple offer competition.

Selling first and renting your home back from the buyers for a time is one way to try to avoid an interim move. But, this is usually only a short-term option. It can be costly if you have to pay rent equal to the buyer's per diem cost of owning your home (principal, interest, taxes and insurance). If you've owned your home for a long time, your mortgage amount could be quite low compared to the buyer's mortgage, and your property taxes and insurance premium could also be lower.

Rather than pay a high cost to rent back your home from the buyers, you may be better off moving to an interim rental. The cost to rent will probably be less, particularly if you're living in an area where the rental market is soft.

THE CLOSING: The additional benefit of moving to an interim rental is that you won't feel pressured to buy a home that doesn't suit your long-term needs.

Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
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Real estate rates stay lower than expectations

Home sales expected to remain near record levels
Inman News
Sales of existing-homes, including single-family homes and condos, will fall just shy of last year's record, slipping 1.2 percent to a total of 6.7 million in 2005, according to the latest forecast prepared by the National Association of Realtors. Meanwhile, new-home sales are expected to decline 2.5 percent to 1.17 million this year, which also would be the second highest on record. Housing starts are expected to increase 0.7 percent to 1.97 million units in 2005, the best performance since 1978.

Mortgage interest rates have been trending-up less than expected, a pattern that should continue through next year and support strong levels of home sales, according to David Lereah, chief economist for the association. The forecast was released at the start of the National Association of Realtors Midyear Legislative Meetings & Trade Expo in Washington, D.C. – a record of about 8,500 Realtors and guests are expected to attend the May 9-14 meetings.

Higher oil prices are having a dampening effect on economic growth, Lereah said, and a "side benefit is that mortgage interest rates will be rising less than expected. The essentially sideways movement in mortgage interest rates recently has defied the consensus of earlier forecasts, with only a modest uptrend detectable over time. The simple effect, in an economy with an improved labor market, is a higher demand for homes."

Lereah said he projects the 30-year fixed-rate mortgage to rise gradually to 6.4 percent in the fourth quarter, then average about 6.8 percent in 2006. "In other words, mortgage costs should remain historically low for the foreseeable future," he said.

The national median existing-home price for all housing types is forecast to rise 7.1 percent this year to $198,400. The median new-home price is expected to increase 5.1 percent in 2005 to $232,300.

The U.S. gross domestic product is projected to grow 3.3 percent in 2005, while the unemployment rate is expected to average 5.3 percent. Inflation should be tame with the Consumer Price Index rising 2.9 percent in 2005.

Inflation-adjusted disposable personal income is forecast to rise 3.5 percent this year, while the consumer confidence index is expected to rise to 101 in the fourth quarter.

More detailed information about NAR's economic outlook, as well as other analysis of real estate industry statistics, are available in the May issue of NAR's Real Estate Outlook: Market Trends and Insights.
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Happy Mother's Day!

With Warmest thoughts and special wishes!
¡Feliz Día de las Madres!
En el corazón de la felicidad familiar está el amor especial de una Madre
The Heart of a family’s happiness - a Mother’s special love!
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Stone Is the New Wood

Stone industry experts say more homeowners are turning to slate for flooring in their foyers, sunrooms, and basements as well as for exterior floors.

Popular in the 1970s, slate still has a prestige about it, says Angie Pearson, general manager of Virginia Slate in Richmond, Va., who adds that its versatility enhances its attractiveness. For example, slate installed in a bathroom can become a warm surface for the winter months when coil heating elements are used.

Homeowners will have to spend more money for slate and devote more time to upkeep for the flooring, but they are still drawn to its irregular surfaces, from fairly even to jagged, and color gradations, which are determined by its mineral and chemical composition.

Quarries carry a wide array of warm and cool shades, and homeowners are choosing either a singular look or settling on stones with a variety of hues for their floors.

Dean Marsico, co-host of DIY Network's "Rock Solid," which covers the home stone market, says the homebuilding boom is driving the overall interest in stonework in homes. An upcoming show will profile a homeowner who opted for slate in her home foyer.
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Do-it-yourself gifts just in time for Mother's Day

A look at home improvement books, classes, tools
By: Paul Bianchina: Inman News
Mother's Day is not too far away, and if you have the type of Mom that loves do-it-yourself projects around the house, here are some gift ideas she might just love.

LEARN SOMETHING NEW.
If you have a Mom that is always interested in picking up a new skill or enjoys exploring new hobbies, why not get her enrolled in a local class. If you have a community college in your area, chances are that they offer any number of fun, non-credit classes in everything from beginning woodworking to backyard water feature construction. Classes are usually taught by local instructors who know and love their subject matter and bring many years of practical knowledge into the classroom with them. To learn about what classes might be available, contact your local community college for schedules and descriptions.

Even if you don't have a community college, there still are probably any number of classes available in your area. Your best source of information would be to talk with the folks at your local library, or you can also check in with local retail stores that carry things Mom is interested in.

Home Depot has recently begun offering evening seminars and classes at many of their locations, with how-to subject matter directed specifically at women. You might want to check out the offerings at your local store, and arrange a "learning night" for Mom where you do everything from signing her up for the class to chauffeuring her to the store.
If Mom has a deep interest in a specific subject, there are hundreds of classes and workshops available that range from a one- or two-day introduction to in-depth apprenticeships lasting several weeks or even months. A Web search under the general topic area - boat-building classes, for example - should get you any number of possibilities, or you can check with reference librarian at your local library.

BOOKS, BOOKS, BOOKS.

Books are always a great source of information and inspiration for any do-it-yourselfer. If Mom has a passion for a particular home improvement topic, visit your local bookstore or on-line retailer for some great reading. A couple of potential books might include:

• "Decorative Paint Effects: A Practical Guide" (Annie Sloan, Reader's Digest Books, suggested retail $18.95): This is a wonderful little book, packed with color photos and how-to instructions for creating a number of decorative paint effects. The author covers the materials and tools needed and the individual steps to take for everything from color sponging a wall to creating an incredibly realistic oak grain on an inexpensive piece of furniture.

• "Dare to Repair: A Do-It-Herself Guide to Fixing (Almost) Anything in the Home" (Julie Sussman, Stephanie Glakas-Tenet, Harper Resource, suggested retail $14.95): This is a very well-written book that is aimed primarily at any woman who would like to learn the basics of doing her own home repair work. It covers areas such as clearing a plumbing drain, fixing a faucet, replacing a doorknob, and a variety of other repair and maintenance issues.

COOL TOOLS.

There is a growing trend toward offering tools aimed specifically at women, which typically have lighter weight, smaller hand-grips, or are otherwise designed for use by women. Some gift ideas include:

• Skil iXO Power Screwdriver: Here's a power screwdriver that is small and lightweight but still offers plenty of power for many do-it-yourself tasks around the house or apartment. The Skil iXO has a lithium ion battery, which holds its charge even after 18 months of non-use. Under $50, with a 34-piece bit set.

• Barbara K. tools (www.barbarak.com): Barbara K offers, among other things, a 30-piece toolkit that contains many of the most common tools needed around the house, along with an 84-page how-to booklet. There is also the Power-Lite cordless drill, which has a hip-mounted battery pack that allows the user to remove the battery from the drill itself for lighter weight and better control. Both retail for $49.99 each.

• Tomboy Tools (www.tomboytools.com): Tomboy Tools offers a variety of tools through their online store, as well as through home parties. There are also areas with do-it-yourself tips and a question and answer forum.

Remodeling and repair questions? E-mail Paul at paul2887@direcway.com.
Copyright 2005 Inman News Distributed by Inman News

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Should I fix up my home or just sell it?

Consider price appreciation, adding on to house
By: Paul Bianchina: Inman News
Making the decision to sell your home is always a tough one. There are financial and emotional decisions to make, and any number of factors that can tip the balance one way or the other. The emotional decisions are ones that only you can answer, but as to the financial side of things, there are some common sense questions that may make the decision a little easier.

What Is Your Home's Condition?

If you are faced with large home improvement repairs such as a new roof, dryrot repairs, or major plumbing or electrical system overhauls, you need to weigh that carefully. If your home has substantially appreciated in value over the years and the needed repairs would create a financial burden for you, it may be wise to consider selling - you'll have to ask a little less than you would if those repairs weren't necessary, but you may still make a sizeable profit on the sale.

On the other hand, perhaps the housing market is down, or you haven't had the house that long and your equity is not substantial. It may be wise to refinance or secure other funding, and make the repairs now before the situation worsens.

Can You Expand?

Quite often, the reason people want to move is because the house is simply too small to meet their current needs. If that's the case, and if you like the neighborhood and like the house in general, you might want to consider adding on.

Room additions can make a huge difference in the size, layout and livability of any home, provided they are done correctly. Take a good look at your needs, and what you have to do to meet them.

Do you have the room to add onto the side or rear of the house? Can you add a second story? Are their city, county or homeowner's association restrictions that will limit your ability to expend sufficiently?

Remember that as much as you love a house and a neighborhood, and as much as you would like to stay in it, remodeling is not always the answer. No matter how good your contractor is, remodeling will not increase the size of a small lot, it won't add a wood shop in a neighborhood that doesn't allow them, and it probably won't be able to alleviate major flaws in room layout.

Beware Of Overbuilding.

Suppose you are considering adding 500 square feet to your 1,000-square-foot home. If your entire neighborhood consists of 1,000-square-foot homes, you may be overbuilding for that neighborhood. For some people, overbuilding is a serious consideration, since part of the reason for the improvement is to make the house more valuable, and to hopefully see a return on your home improvement investment. For others who are primarily interested in creating a home that meets their needs and that have no plans to sell the house in the foreseeable future, overbuilding may be very much a secondary consideration.

Overbuilding is not limited to additions - it can apply to everything from upgraded roofing materials to kitchen remodels to extensive landscaping. You need to take the neighborhood into consideration, the general housing market, your future plans, and even your relationship with your neighbors.

Get That Homework Done.

If the time seems to be drawing near for making the decision to move or improve, do your homework first. Look at what your neighborhood is doing, and what housing prices are. Talk with a trusted real estate agent, and consider an independent market appraisal of your home. Consider paying a general contractor a consultation fee to discuss your home's general condition, and the cost of potential improvements. And be sure you don't ignore municipal and homeowner's association requirements and restrictions as part of your fact-finding.

Remodeling and repair questions? E-mail Paul at paul2887@direcway.com.
Copyright 2005 Inman News Distributed by Inman News
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Limits of limited-service real estate

Guest perspective: Deals harder to close with discount brokers
Inman News
Editor's note: RELO, a network of independent residential real estate firms, in this guest perspective offers its view of some of the limitations of limited-service real estate brokerage and points to differences between full-service and limited-service brokerage. The article was written by RELO members.

RELO member NP Dodge, one of the largest real estate firms in Omaha, Neb., made waves in Nebraska when it told limited-service firms that it would pay them less when they bring in buyers on properties listed by NP Dodge.

The company offers limited-service firms 1 percent instead of the usual 2.4 percent or 2.8 percent co-op commission.

According to Mike Riedmann of NP Dodge, the move was intended to compensate his agents for the extra work they do when working with agents at limited-service firms whom he contends often are inexperienced, untrained, or unwilling to handle their duties related to the transaction. "It is dramatically more difficult and time-consuming to close deals with discount brokers," Riedmann said.

NP Dodge agents say they have been involved in deals where discount brokers haven't followed up, stalled the loan process, or written a contract that was inappropriate for the client. The agents also say they've seen discount brokers try to negotiate a higher commission for themselves after they have sold their client on the fact that they accept a lesser commission.

While all real estate commissions are negotiable, there are real costs to marketing a home, said RELO CEO Pam O'Connor. If real estate professionals are not compensated accordingly, shortcuts will be taken that can affect the home's exposure to potential buyers, she added, and ultimately, its marketability and/or the price it commands. When home sellers focus on saving commission dollars by working with a limited-service broker, that discount may in fact cost them much more in the overall transaction.

Full-service firms offer extensive marketing muscle, and some limited-service firms try to take advantage of this, according to RELO. For example, one discount broker told sellers that if they listed with them they would still have their listings marketed through full-service firms that typically display MLS listings on their Web sites. Upon hearing this, one full-service firm deleted the discount broker's listings from its Web site.

NP Dodge conducted an analysis of limited-service firms and discovered that 30 percent of the contracts discount brokers have with sellers expire before they sell the property. Of those that expired, the sellers re-listed with full-service firms. NP Dodge also noted that limited-service firms only close 50 percent of their listings.

In one example, a seller asked a full-service and a limited-service firm to each recommend a selling price for the home. The limited-service agent said $250,000 and the full-service agents said $325,000. The listing went to the full-service agent who sold the home for $325,000 in less than one week. The difference was $75,000 to the seller.

First Weber in Madison and Milwaukee, Wisc., a 1,300-agent firm and also a RELO member, trains brokers and agents on how to explain the difference between full service and limited service to clients. One agent who left First Weber to work for a discount firm wanted to come back because she found it hard to cover her expenses at a limited-service firm where she was receiving lower commissions.

Another RELO member, Weidel Realtors, with 20 offices and 340 agents in the Princeton, N.J., area, stressed the importance of understanding that "you get what you pay for" in real estate. Broker Ric Weidel said, "If we can ultimately produce more net return to the seller at the closing table because a full-service commission has enabled us to deploy all of our resources to sell the home at the best price possible, isn't that a better result than if a seller receives lower net proceeds even though a lower commission was paid? It's all about value."

The other issue that Weidel discovered was that his company's success rate in selling homes increased significantly when they guaranteed a certain level of co-payment to other traditional brokers. By so doing, brokers wanted to show their listings to their potential buyers, and sales increased.

RELO is a network of independent residential real estate firms, with 660 members representing 4,700 offices and 110,000 associates across the U.S. and in 20 countries.
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Designing a small house to 'live large'

Experts share ideas about kitchens, hallways, room sizes
By: Katherine Salant: Inman News
Any home builder or developer with his or her ear to the ground knows there are more than a few homeowners out there who are ready to downsize. Empty nesters with grown children, professional couples with no kids, single parents, and those who are urbanists at heart have had it with yard maintenance, long commutes and owning so many rooms that are only used for special occasions.

This group is ready to walk the walk and talk the talk. They want a much smaller house and are eager for specifics. What would a 1,200-square-foot house – about half the size or less of the one they own now – look like? In downsizing, what should be eliminated? And, cutting to the chase, can you move from a big house to a much smaller one without undue compromise and without feeling like you're perennially on a domicile diet?

Boston architect Jeremiah Eck said yes. While acknowledging that a segue from the excesses of the 1990s to the essentials of the aughts is quite a leap, Eck said that when a house is thoughtfully designed, the owners will feel comfortable in it, regardless of the size. Eck also stressed that such a downsizing is not merely a matter of lopping off rooms, though he agreed that some of those McMansion mainstays, such as the music room, the home theater, the sunroom and the six and seventh bedroom and bath, could be excised with little debate.

The best way to determine what downsizing is right for you, Eck said, is to catalogue where each household activity occurs, even the prosaic ones like where you read a newspaper – at the breakfast table, on the sofa or online in your home office.

Most households that carry out this exercise find that they spend most of their time in an eat-in kitchen/family-room type of space, Eck said. The differences lie in "all the other activities they have dragged in there" that need to be accommodated. Because this main living area will be much smaller in a 1,200-square-foot house, some households might decide to move some activities to a separate room nearby. Examples of relocated activities might include television watching, piano playing, and tasks that require concentration such as homework. The smaller room could also serve as an adult-decompression chamber after a long workday or as an office for someone who works at home. With a full bath, the "other" room could also be a bedroom. The second floor could include two reasonably sized bedrooms and a single bath.

The perfect archetype for such a house, Eck said, is the simple English-style cottage that was common throughout New England in the 17th and 18th centuries. That house was two rooms deep with two large back-to-back fireplaces sharing a single central chimney. The household spent most of its time in the larger "keeping room" where food was prepared. The smaller, formal "parlor" often doubled as a master bedroom. Two small bedrooms, up a very steep set of stairs, were tucked under the roof on the second floor. The 2005 version would certainly be bigger, but schematically this house type lends itself to the long and narrow lots found in most new subdivisions now.

Another source of inspiration when designing small houses is boats, Eck said. In those constricted spaces, every nook and cranny is utilized. Adapting this approach to a house could mean running cabinets up to the ceiling and around a corner or, when there's no basement stair, tucking a powder room under the stairs.

Sarah Susanka, author of the best selling "The Not So Big House" and a number of other books, said the archetype she would draw upon in designing a small, 1,200-square-foot house is the bungalow, which was built all over the United States about 100 years ago. One or two stories high, with one or two-bedrooms, the bungalow was typically longer than it was wide with a front porch that usually ran the full width of the house. Geared to a modest, informal lifestyle, the front door usually opened directly into the living room. In adapting the bungalow for the aughts, Susanka said the most obvious modification would be removing the walls that separated the small kitchen, dining and living rooms.

Santa Barbara, Calif., architect Barry Berkus looks to another American Classic, the country kitchen, when designing small houses. He favors a "one-wall kitchen" with all the appliances and food prep area along one wall and a large dining table that can be used for food prep as necessary. Agreeing that the eat-in kitchen family room is the heart of most households now, he would use the table to demarcate the eating and sitting areas.

Though some might balk at his kitchen layout proposal, Berkus said that you can be very comfortable with a well-designed, one-wall kitchen despite what homeowners who have always had bigger kitchens might believe, and "you pick up 6 feet of floor space." Another space-saving economy that Berkus recommends – eliminating the hallways that typify older houses and having bedrooms open directly off the main living area. When a budget allows, Berkus would enhance the living area with features such as a generously sized window seat that has storage below and bookshelves at each end. It can be a cozy spot for reading and a great sleeping arrangement for visiting grandchildren.

While excising hallways would seem to be an easy way to pare down, Susanka cautioned that you still need to leave room for getting from one area to another, preferably about a 3-foot-wide swath behind a furniture grouping. She observed that when you routinely walk through the middle of a sitting area, it often divides the space into two awkward halves. Another issue when downsizing to a smaller house is furniture size – many people discover that theirs is too big. The overstuffed couches and arm chairs that look great in a big room with high ceilings can overwhelm a smaller space; even worse, the bigger pieces often won't fit. Susanka said that Scandinavian furniture, including Ikea's, which is designed for the smaller living spaces that typify European housing, works well in smaller houses.

Susanka also offered a word of caution about room sizes. While you expect them to be smaller in a small house, they can only go down so far before the occupants will feel uncomfortable. For example, a bedroom that's less than 10 by 10 feet will feel cramped unless you build in some of the furniture like a loft bed with a desk below. She said that the differences between too small and just right can also be subtle. Many people balk at the idea of a master bedroom that's only 12 feet wide, but she's found it works well if you can incorporate a window seat into one end of the room.

A community of small houses

How do you design a small house so that it "lives large"? When your living areas have big windows and you overlook a sweeping vista without another house is sight – the solution offered in any number of books on small houses – your rooms will definitely feel spacious. The books show that it also helps if you have a Zen-like lifestyle and live simply, or live in your small house only on weekends. But for real people in real-life suburbia or real cities, these aren't very realistic solutions.

A community of 50 cottages in Poulsbo, Wash., near Seattle, provides some interesting possibilities, however. Designed by the Mithun architectural firm in Seattle for the Dwelling Company and completed in 2002, the cottages were built on a tight urban site with a project density of 15 units per acre. Though the houses are only 8 feet apart, each one has a vista by virtue of clever land planning – almost every house overlooks a sizeable communal area in the middle of each block.

The units feature 2 bedrooms (one floor and 870 square feet) or 3 bedrooms (two floors and 1,270 square feet), and each one has both a front porch close to the sidewalk and a back porch and small yard that overlook the commons.

Bob Trahan, an architect with the Mithun firm and a current Poulsbo Place resident, said the community layout promotes knowing your neighbors, though he actually lives in one of the few houses that does not overlook the greens. He shares a cul de sac with five other households; during the warmer months they frequently socialize outside.

Most of the residents are empty nesters like Trahan and his wife or first-time buyers without children. The Trahans moved there from a 2,500-square-foot townhouse on three floors because they didn't want to maintain space they never used and they wanted an informal living area that was all on one floor. Though the main living area is relatively modest, Trahan said the back wall is "all windows," which makes the space feel larger.

Paring down their possessions to what would fit in their much smaller house that is only half as big was an arduous process that included four garage sales, Trahan said. They brought only what would fit, but some families have rented a storage unit for the things they couldn't bear to part with.

After they moved in, the Trahans discovered an upside to small-house living that the books on small houses never mention – keeping it tidy is a lot less work.

Questions? Katherine Salant can be contacted at http://www.katherinesalant.com/.
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Adjustable real estate loan activity soars

Borrowers combat affordability issues
Inman News
Adjustable-rate mortgages, known as ARMs, and interest-only products accounted for a full 63 percent of U.S. mortgage originations in the second half of 2004, according to the Mortgage Bankers Association's Single-Family Mortgage Activity Survey released Wednesday.

The survey covers mortgage activity during the third and fourth quarters of 2004. It represents about half of the mortgages originated last year.

The dollar volume of first-mortgage originations declined 9 percent from the first half to the second half of 2004, the study said. While the dollar volume of refinances fell in the second half, the dollar volume of purchase originations rose, resulting in the purchase share of originations increasing from 41 percent in the first half to 51 percent in the second half of 2004.

"Consumers shift to ARMs when long-term rates rise and when the spread between long- and short-term rates widens. This happens at the end of every refinance boom, so it's not a surprise that ARM share has risen over the last year," said Doug Duncan, MBA's chief economist and senior vice president.

Duncan said this interest cycle is unusual because the increase in ARMs has occurred with a much smaller increase in rates than in past cycles. He said one reason for this is that appreciation in house prices leading up to this ARM cycle was much stronger than in previous ones. This created affordability constraints that led a number of buyers to seek lower payments with ARMs.

The survey also found that non-prime loans increased their market share, capturing nearly one-third of the mortgage market in the third and fourth quarters of 2004.

The survey included more than 90 companies, including the top 12 loan originators and 25 of the top 30 loan originators. Based on internal market estimates, sample coverage included more than 50 percent of total market originations of first and second mortgages. This survey collected detailed information on origination of first and second mortgages – including for the first time data on hybrid ARMs, alt-A mortgages, FICO scores, LTV distributions, and piggyback and stand-alone second-home loans.

Whenever possible, comparisons were made to highlight the trends from the first half to the second half. All trends were based on data from repeater companies - companies that reported data for both the first and second halves of 2004. Survey results from the MBA study are only available to participants.
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Real estate living trust a safer bet than joint tenancy

Incapacitated titleholder could impede home sale
By: Robert J. Bruss: Inman News
DEAR BOB: My husband and I hold title to our home in joint tenancy with right of survivorship. But lately he is showing signs of dementia. I am very concerned if he declines into Alzheimer's disease. A close friend had that situation with her spouse and, when she could no longer take care of him at home, had to move him to a convalescent home. Although he receives excellent care, the monthly cost is more than $4,000. After reading several of your articles, I am concerned what would happen if my husband declines. Would I be able to sell our home to pay for his care (which is not covered by Medicare)? – Betty Y.

DEAR BETTY: You ask a great question. The answer is the signatures of all joint tenants (or tenants by the entireties in states allowing such title method) are required to sell a joint-tenancy property.

If your husband becomes severely incapacitated so he is unable to understand and sign his name to the deed to your home, you cannot sell it alone without his signature.

The legal solution is to then have an independent conservator appointed to look out for his best interests. In most states, a spouse cannot be appointed the conservator.

While your husband is still competent, I suggest you consult a local attorney about
placing the title to your home and other major assets into a living trust. Then, if your husband continues to decline, and if it becomes necessary to sell your home to pay for his care, you will be able to sign the deed without his signature as the successor trustee of your living trust.

NO WAY TO GET RID OF A DEADBEAT SPOUSE ON YOUR CREDIT REPORT

DEAR BOB: My wife and I divorced in 2001. She got the house and the obligation to pay its mortgage. At the time, she earned more income than I did. However, she lost her great job in a "corporate downsizing" and is struggling to keep up the mortgage payments on her house. But my name is still on the mortgage. She is often more than 30 days late, so her late payments ruin my credit reports and FICO (Fair, Isaac and Co.) rating. I asked the mortgage lender not to report her late payments on my credit reports, but they say there is nothing they can do. Is this true? – Roth R.

DEAR ROTH: Unfortunately, the information you received from the mortgage lender is correct. You both signed your names to that mortgage obligation. Although you no longer hold title to the house, your name is still on its mortgage.

If your wife should lose the house in foreclosure for nonpayment, in some circumstances the mortgage lender might come after you for a deficiency loss. But that is highly unlikely.

I wish I could tell you about a secret technique to get your name off that mortgage. But I am not aware of any such method. Unless your ex-wife sells or refinances the home, you are stuck with her late mortgage payments showing up on your credit report.

UNDEDUCTED RENTAL PROPERTY LOSS CAN BE CARRIED FORWARD

DEAR BOB: In 2004 I had deductible tax losses from my rental property, which I deducted against my ordinary income for $25,000. But my paper tax loss exceeded that amount. Can I claim that undeducted loss exceeding $25,000 in future tax years? If so, what IRS tax form should I use? – Charlotte P.

DEAR CHARLOTTE: Yes, you can claim undeducted tax losses from your rental property in future tax years, or upon sale of the rental property. These losses are called "suspended losses."
For example, over the years, because I didn't need to use all my rental property tax losses against my ordinary taxable income, I had substantial suspended losses, which I eventually used when selling my rental properties. But I am not aware of any IRS tax form on which to record your unused suspended tax losses. Just keep a careful record for future use. For full details, please consult your tax adviser.

The new Robert Bruss special report, "How to Get Started Investing in Real Estate for Big Profits," is now available for $4 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF download at www.bobbruss.com. Questions for this column are welcome at either address.
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The Weekend Guide! May 5 - May 8, 2005

The Weekend Guide for May 5 - May 8,2005.
Full Article:
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Real estate foreclosures drop

Defaults remain highest in Texas
Inman News
The number of new foreclosed residential properties dropped 3 percent from March to April, according to online foreclosure listing service Foreclosure.com. A total of 27,417 new foreclosed residential properties were listed for sale across the country in April, and the total number of U.S. residential foreclosure properties available for sale in April was 76,786, a decrease of 5 percent from March, Foreclosure.com also reported.

"The slight decrease in foreclosure inventory represents a stabilization in the housing market over the last month. The continued high inventory reflects the current interest rates and the leveling off of home values," said Brad Geisen, president and CEO for Foreclosure.com.

"Foreclosures remain prevalent in areas of the country where home values continue not to rise, such as Georgia, Indiana, Ohio, Texas and Michigan. However, if interest rates continue to climb and home values stay the course, we expect foreclosure inventory to increase in other areas of the country," Geisen also said.

Among the states with the highest number of properties in foreclosure in April:

• Texas: 9,266 total foreclosure properties available for sale; 3,481 new foreclosures.
• Ohio: 7,233 total foreclosure properties available for sale; new foreclosures.
• Michigan: 6,205 total foreclosure properties available for sale; 1,978 new foreclosures.
• Georgia: 6,125 total foreclosure properties available for sale; 2,082 new foreclosures.
• Indiana: 4,661 total foreclosure properties available for sale; 1,719 new foreclosures.
• North Carolina: 3,945 total foreclosure properties available for sale; 1,234 new foreclosures.

Among the states with the lowest number of properties in foreclosure in April:
• Rhode Island: Seven total foreclosure properties available for sale; two new foreclosures.
• Washington, D.C.: 15 total foreclosure properties available for sale; six new foreclosures.
• Hawaii: 20 total foreclosure properties available for sale; 12 new foreclosures.
• Vermont: 28 total foreclosure properties available for sale; 11 new foreclosures.
• New Hampshire: 38 total foreclosure properties available for sale; six new foreclosures.
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FDIC: Slim Odds on Housing Crash

New research by the Federal Deposit Insurance Corp. reveals that home prices usually stagnate, rather than crash, following housing booms—which are characterized by growth of 30 percent or more over a period of three years.

Although the housing market is not likely to collapse, the FDIC notes that the increased use of home-equity credit lines and subprime and high loan-to-value mortgages, as well as other market changes, will make it more difficult to gauge home prices down the road.

Housing collapses typically do not occur on the national level, according to the study, as they are sparked by local economic declines.
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Loans Linked to Builders May Cost More

An undercover investigation by the National Association of Mortgage Brokers found that new-home buyers often are forced to use their builder's affiliated lender and settlement-service provider in order to close the deal.

Posing as a buyer at five sales offices in Florida, NAMB's Marc Savitt confirmed that all of the builders violated federal real estate settlement and anti-trust rules. According to Savitt, the builders refused to provide incentives or OK the sale if the buyer opted to use an unaffiliated lender.

Savitt added that builders often offer free patios, landscaping, or a similar bonus to buyers who use their preferred lenders; however, they include the cost of the incentives in the home price.

"What they're doing here is discouraging buyers from shopping in the open market," Savitt says.

Ivy Jackson, who heads the U.S. Department of Housing and Urban Development's settlement rules office, says incentives are permitted as long as they translate into actual savings for the buyer.

Experts urge buyers to avoid builders who act illegally by mandating the use of their partner firms and to compare the offerings of affiliated lenders against those not part of the venture to determine whether the advertised savings are real.
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Lease-Purchase Option: Now Worth a Look

Fannie Mae, Freddie Mac, and housing agencies and nonprofits across the country have teamed up to establish lease-purchase programs to help low- to moderate-income households achieve homeownership.

Under a traditional lease-purchase arrangement, the home buyer pays a monthly rent that includes funds to be put toward the down payment. In a matter of one to five years, they are given a mortgage and become the owners of the property.

Under Fannie and Freddie's programs, however, the real estate is purchased by a housing authority or nonprofit that holds title to the property until the buyer secures the mortgage. Traditional lease-purchase agreements are formulated by the landlord and the buyer, and most must be ironed out by the courts because they fail to include necessary details and contingencies.

The government-sponsored enterprises hope to avoid that by explaining all of the terms in detail; and the borrower often receives an education as well as a cleaner credit record. Once the renter becomes the homeowner, the interest they pay each month is tax deductible.
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Sharing the Dream: Latinos See Home Gains

The number of home buyers with Spanish surnames in Southern California surged to 34.3 percent in 2004 from 17.6 percent a decade earlier, DataQuick Information Systems reports.

Latino home buyers are moving beyond the traditional magnets of Anaheim, Santa Ana, Pico Rivera, Compton, and Lynwood to Fontana, Riverside, Ontario, and the northern portions of Los Angeles and San Diego counties. While the statewide median home price came in at $425,000 in February, DataQuick says the median paid by Latino buyers was $383,500.

Despite their distrust of banks and lack of traditional credit histories, Latinos are achieving homeownership due to Spanish-speaking marketing campaigns; mortgages for buyers with non-traditional credit; homeownership courses that help Latinos establish checking accounts; and lenders that allow several families to hold title to one property.

Still, Latinos accounted for less than a quarter of home buyers in the state since 2003, compared to 59 percent of non-Latino whites. American CityVista's Henry Cisneros urges builders who target Latinos to include extra bedrooms, outdoor space, and garage space as well as focus on neighborhoods in close proximity to churches, schools, and public transit.
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Up on Roofs? Gardens Help in Several Ways

Green roofs are gaining popularity among owners of residential and commercial properties. Also known as eco-roofs, garden roofs, living roofs, or vegetated roofs, they use plants to absorb pollutants and storm-water. Other benefits of green roofs include cooler interior temperatures during the summer months and warmer interior temperatures in the winter, which effectively reduces heating and cooling costs.

"Extensive" garden roofs employ drought-tolerant plans and require little or no maintenance; but some homeowners are opting for "intensive" versions that need watering, fertilizing, and mowing. Once built only on flat roofs, green roofs can now be installed on slopes of up to 26.5 degrees. They involve several layers, built on top of the roof deck, rigid foam insulation, a waterproof membrane, a drainage layer, and the necessary soil and compost.

Home and business owners in Oregon, Washington, Illinois, New York, California, and Maryland have access to incentive programs that offset the upfront costs, which range from $10 to $20 per square foot.
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New report examines green policies for affordable housing

At least a dozen states promote more healthy, sustainable homes
Inman News
A report released today by The Enterprise Foundation shows that state housing agencies are encouraging affordable-home builders to implement a wide range of "green building" practices to make homes healthier, more efficient and more sustainable.

The report, "A Greener Plan for Affordable Housing," summarizes elements in state plans for allocating federal Low Income Housing Tax Credits (Housing Credits) in the areas of smart site locations, energy and resource efficiency, and healthy living environments. The Enterprise Foundation provides financing for affordable-housing projects.

"'A Greener Plan for Affordable Housing' shows states are serious about ensuring that the affordable homes they help provide conserve energy and natural resources, promote healthier living, and support state and local strategies to connect affordable homes to transportation and job opportunities," said Bart Harvey, chairman and chief executive officer of The Enterprise Foundation.

The report finds that many states encourage developers to meet some standard of energy and/or water efficiency, utilize sustainable, durable materials, and ensure proximity to services and amenities. A smaller number of states are taking a more holistic approach that emphasizes strong conservation, healthy homes and smart site location approaches.

Among states that the report finds particularly progressive in certain areas are:

- Georgia, Michigan and Oregon: Emphasize walkable communities.
- Illinois and Minnesota: Stress transit access in connection with affordable housing.
- California, Illinois and Massachusetts: Award points in their scoring systems for developments that utilize alternative energy sources such as solar panels or geothermal heating.

- Connecticut: Rewards developments that meet asthma-safe criteria.
- Arizona and New Mexico: Prioritize indoor air quality.
- Virginia: Awards points to developments in which a U.S. Green Building Council- certified professional participates.

The report was based on an analysis of every state's 2005 Housing Credit allocation plan (as of April 2005) and additional relevant policy guidance that affects the Housing Credit program in certain states. The author is James Tassos, a housing industry consultant based in Santa Barbara, Calif., who worked for nine years on the Housing Credit program at the National Council of State Housing Agencies. The report is available at http://www.greencommunitiesonline.org/.

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California housing starts climb in March

Largest gains seen in Southern California
Inman News
Home builders shook off the effects of record rainfall earlier in the year to post sharp month-over-month increases in housing starts in March, the California Building Industry Association reported.

New housing units as measured by permits issued in March totaled 19,157, up a resounding 33.3 percent from a rain-soaked February and down a slight 2.4 percent from March 2004. Of that total, 14,136 were single-family units (up 35.2 percent from February) and 5,021 were multifamily dwellings (up 28.1 percent).

During the first quarter of 2005, 16 of the state's 28 metropolitan areas posted gains in single-family housing starts, while 15 have posted gains in multifamily units. The San Jose-Sunnyvale-Santa Clara Metro Area, which posted the largest decline in starts in 2004, has rebounded nicely, posting the largest increase in the first three months of 2005. One area showing a significant decline so far has been the Sacramento region, which local building officials attributed to both the weather and delays in processing two large master-planned communities.

Despite the fact that California's housing production is rebounding and is expected to exceed 200,000 new homes and apartments for the second year in a row, home builders still aren't keeping up with continued high demand from the state's growing population, said CBIA President Steve Doyle, a San Diego home builder.

"With interest rates still near their historic lows and demand remaining high due to continued population growth, we expect this year's production to come in right around last year's level." Doyle said. "But even the 210,000 new homes and apartments built last year – the most produced since 1989 – is still not enough.

"The State Legislature needs to take action this year to ensure that land is available for new homes and apartments and that home builders aren't handcuffed by unnecessary and redundant regulations that prevent us from keeping up with demand. Because the bottom line is that housing affordability begins with housing availability, and it's the lack of availability that has contributed to sky-high prices and the diminishing opportunity for Californians to realize the dream of home ownership."

The California Building Industry Association is a statewide trade association representing more than 6,200 businesses involved in home construction.
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Freddie Mac: More cash-out refis this year

Home improvement spending grows
Inman News
Cash-out refinancings that resulted in higher mortgages jumped in the first quarter of 2005, mortgage giant Freddie Mac said today.

Freddie Mac said 64 percent of its loans that were refinanced in 2005's first quarter resulted in new mortgages with loan amounts at least 5 percent higher than the original mortgage balances.

In comparison, in the fourth quarter of 2005, 56 percent of refinanced loans had higher new loan amounts. That quarter was the highest since the fourth quarter of 2000.

"The first quarter had record home sales and single-family housing starts and a lot of refinancing activity," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

The share of borrowers who decided to cash out some home equity as part of their refinancing increased as well, Nothaft said. This helped prop up consumer spending on home improvements, even though total consumer expenditures grew more slowly, according to Nothaft.

Freddie Mac expects the U.S. Gross Domestic Product to grow at a slower rate in 2005 than the 3.9 percent growth experienced in 2004. Core inflation (excluding food and energy costs) should continue to be low, but high energy prices are starting to filter into the prices of goods and services and have already depressed consumer spending, the company said.

"The disappointing economic news over the past few weeks is not likely to cause the Fed to deviate from its measured pace of quarter-point increases in the federal funds rate when it meets today, but it could cause the members of the Federal Open Market Committee to change their stance on future rate increases," noted Nothaft.
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Why Won't It Sell? Slow Homes in Fast Market

Even in housing booms, some homes sit unsold. Maybe they're not priced appropriately in comparison to similar homes in the neighborhood or maybe the sellers are restricting the times when buyers can view the property.

Other factors can be to blame. Homes with the right asking price and unlimited viewing times might not be in good condition. Buyers will be turned off by peeling paint, messy lawns, interior clutter, or odors. Buyers commonly associate musty smells with mold, so sellers would be wise to install a dehumidifier. If odors are not easily eliminated, they should opt for a professional cleaning.

Some homes languish on the market due to unattractive features or floor plans. Buyers tend to avoid homes with below-grade kitchens, narrow staircases, lack of natural light, or bedrooms with a walk-through that leads to other rooms.
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Faltering economy not hurting real estate

Fed likely to continue hiking cost of money
By: Lou Barnes: Inman News
All long-term rates fell again late last week. The benchmark 10-year T-note has broken below 4.2 percent, and an "origination fee" will buy a 5.5 percent 30-year fixed-rate mortgage.

Bond traders are placing recession bets. Not (yet) in expectation of a classic recession in which GDP growth would decline, but a "growth recession" in which GDP growth might slip to 1 percent or 2 percent annual, and the unemployment rate begins to increase. The rationale for a recession bet is this win-win equation: either high energy prices and a tightening Fed have already tipped over the economy, or a worsening inflation problem will force a tighter Fed and tip-over at a later date.

Evidence. Last week's breakthrough bond rally started with news of a steep drop in March orders for durable goods, and gained steam on Thursday's news that first-quarter GDP had grown only 3.1 percent. That's fabulous by European or Japanese standards, but not enough to support U.S. job growth. Internal aspects of the report were worse: "final demand" (purchases by business, government, and individuals) rose only 1.9 percent. The excess of 3.1 percent production over 1.9 percent demand is sitting on shelves and floors as unsold inventory, a disincentive to production in this quarter.

Second, the personal consumption expenditure deflator ("PCE"), used to convert nominal GDP to after-inflation, jumped to an annual 2.2 percent gain. The PCE is Federal Reserve Chairman Alan Greenspan's favorite, and the acceptable band for its movement is 1.5 percent-2 percent; if PCE is in a jailbreak, the Fed is coming no matter what collateral damage its inflation-fighting may (will) do to the rest of the economy.

In the 1970s, the Fed tried stagflation (accidentally, maybe): keep the economy going at the price of tolerating some inflation. The reward: steadily increasing inflation and deferral of ultimately greater economic sacrifice to remove it. Not this time. Donald Kohn (Fed governor, longtime Fed staffer and key advisor to Greenspan, in the running for the Chairman's job) concluded a speech two weeks ago this way: "We should not hesitate to raise interest rates to contain inflation pressures just because it might set off a retrenchment in housing prices,...nor should we hesitate to raise rates because higher rates mean higher debt-servicing burdens for the current account, the fiscal authority, or households."

Ow. If he won't hesitate for housing, or for the increased cost of our foreign or national debt, or for Mom and Pop, presumably he won't hesitate for the stock market, either.

The bond market's win-win, economic-slowdown equation is correct. However, neither traders nor the Fed know which win will win; i.e., how tough the Fed will have to get. Some think the Fed will signal "tough-enough soon" after its meeting on Tuesday, and stop tightening at 3.5 percent, only three .25 percent moves away. I hope so, but I think there is surprising strength in the economy just under the radar.

The obvious sign of strength: the housing market is as healthy as ever. There are some signs of slowing in price-appreciation in overheated markets, but a truly weakening economy would have showed up in housing stats by now. Recession bets have cancelled any effect of a year of Fed tightening on fixed-rate mortgages; tightening has removed silly prices for ARMs, but the interest-only innovation has more than replaced the ARM loss.

Sneaky strength: tax withholdings from paychecks are running 2.5 percent to 6 percent above official wage growth, and the wage stats are supported by the employment cost index. If wages are growing slowly, if at all, and withholdings are way up, then there are a hell of a lot more people at work than payroll stats show.

Given latent strength, and a mortgage market impervious to Fed hikes in short-term rates, the hunch here is that the Fed will have to go past 3.5 percent but the win-win bet will keep fixed rates under control.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.
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Time to cash out or dive further into real estate?

By: Julie Brosterman: Inman News
The dialog debating the housing boom versus the housing bust continues. Articles in major publications every other week speculate on the meaning of flattening prices and small declines in the percentage of sales. In spite of these stats, sales of homes in the Westside of Los Angeles are rocking. We're back to that multiple-offer, irrational overbidding and all-cash-offer situation that fueled the market last year in March and April.

Is this irrational exuberance or do these buyers know something that I don't know?

Several of my friends who have been trying to buy for a while and haven't found what they're looking for have been outbid on every home that they've looked at in the past three weeks. And if you're looking for a fixer or a flipper, so is everyone else here in L.A.

A listing in need of some major TLC and located around the corner from me came on the market last week. The listing price was $1.3 million. Our friends were interested in seeing if it qualified as a fix and flip so my husband and I went along to give them moral support through the exercise of pricing out the improvements to see if they could get their desired profit after a few months of hard work. It looked like a "go" so they made a solid offer of about $60K over asking price only to be told by the selling agent that there were 27 offers and that they were only going to be responding to the first 12 with bids over $1.5 million.

I'm thinking this must be an L.A. phenomenon. That long, cold winter back East usually works well on kicking up prices this time of year.

So I called our good friend who is an established developer of luxury homes in South Florida to see if the same fever was going on down there. I've been seeing several articles in the past few weeks about how Miami, Ft. Lauderdale and Palm Beach have been experiencing price run-ups similar to those in Southern California.

"Time to get out," I told my friend, the developer. "Take the money and run. Go live on that desert island and drink drinks with pink umbrellas sticking out of them. Done."

"Are you kidding?" my friend asked. "I just bought four more properties that are old hotels that I'm going to be tearing down and turning into million-dollar townhomes. This is no time to be cashing out. You can't believe what's going on down here."

My husband has less emotional thoughts on the subject. "Real estate is the perfect capital market scenario," he said when I posed the "what's going on here" question to him. "Information is readily available via the MLS for not only current listings but past listings and pending sales. Houses are priced accordingly. Houses that are 'tear downs' or in need of major TLC are now being priced with the finished profit in mind – in other words, they incorporate the ability for upside in their pricing – so there's no unknown. The only unknown is whether there will be a terrorist event or an earthquake sometime in the future that will rock the basic foundation of people's faith in the economy as a whole, not real estate in particular."

"This is the time for pioneers," he continued. "To branch out into areas that are rapidly becoming re-gentrified before everyone else wakes up and drives the prices up there too. There are still a few bargains out there but they are few and far between…and your neighbors might still have bars on their windows."

While concluding this story, I did my own personal test of whether to go further in or pull out of the market. I took a look at my stock portfolio's valuation as another rocky week ended. It certainly has looked better. Maybe it just needs a new coat of paint? Somehow, the idea of investing in real estate seems a whole lot saner.

Julie Brosterman is a consultant to the real estate technology, mortgage and servicing industries. She lives in Los Angeles and can be contacted at juliebrosterman@hotmail.com.
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Residential real estate construction spending grows 12%

Annual spending rate remains above $1 trillion
Inman News
Construction spending during March 2005 was estimated at a seasonally adjusted annual rate of $1.05 trillion, or about 0.5 percent above the revised February estimate, the U.S. Census Bureau of the Department of Commerce announced today.
The March figure is about 8 percent above the March 2004 estimate of $973.9 billion. The seasonally adjusted annual rate projects a monthly total over a 12-month period.

During the first 3 months of this year, total construction spending amounted to $222.4 billion, or about 9.3 percent above the $203.5 billion for the same period in 2004.

Spending on private construction was at a seasonally adjusted annual rate of $815.5 billion, about 0.5 percent above the revised February estimate of $811.3 billion. Residential construction was at a seasonally adjusted annual rate of $585.3 billion in March, about 0.3 percent above the revised February estimate of $583.6 billion and up about 12.1 percent from March 2004. Nonresidential construction was at a seasonally adjusted annual rate of $230.3 billion in March, about 1.1 percent above the revised February estimate of $227.7 billion and up about 6.3 percent from March 2004.

Month-to-month changes in seasonally adjusted statistics often show movement that may be irregular, the Census Bureau reported. It may take two months to establish an underlying trend for total construction and as long as eight months for specific categories of construction. The statistics are estimated from several sources and surveys and are subject to sampling variability as well as non-sampling error including bias and variance from response, non-reporting, and under-coverage.

Statistics for the current month are preliminary estimates subject to revision in following months as additional data become available. The average absolute percent changes from preliminary estimate to first revision for the major seasonally adjusted components are as follows: total construction, 0.8 percent; private construction, 0.7 percent; and public construction, 1.4 percent.
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California: Number of Latino Homeowners Increases

Latinos accounted for 31 percent of Southern California households in 2003, according to research by the Richard S. Ziman Center for Real Estate at the University of California at Los Angeles. They also made up one-quarter of the region's homeowners.

Additionally, 50 percent of Latino homeowners bought their residences during the past five years. The survey reveals that first-time Latino buyers selected neighborhoods that had the most affordable dwellings, while repeat buyers chose better neighborhoods with larger homes.

More than 60 percent of Latino renters voiced their support for mixed-use housing within a two-block radius of their current residences, compared to only 47 percent of Latino homeowners. Nearby retail centers, meanwhile, are favored by 80 percent of renters but fewer than 40 percent of homeowners.
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Fed Sees Inflation as Bigger Threat Than a Slowdown

The Federal Reserve appears to be more concerned about the first quarter's jump in inflation to 2.2 percent than about the U.S. Commerce Department's recent report that the economy expanded at a rate of only 3.1 percent—its lowest level since 2003—during the same period.

The central bank is poised to hike the federal-funds rate next week for the eighth time since last year, boosting it to 3 percent from 2.75 percent, with the biggest debate centering on the post-meeting statements it issues.

There are concerns that continuing to state that the Federal Reserve will drive up the short-term rate at a "measured" pace indicates that it is abiding by an already-established policy, prompting investors to sink their money into riskier investments.

Meanwhile, there are worries that removing the language would lead investors to act on the belief that the central bank is shifting its policy to half-percentage-point hikes from quarter-point increases.
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