Can buying house for business constitute a write-off?

Find out what lenders have to say
By: Ilyce R. Glink: Inman News
Q: How should I get a loan to purchase a residential piece of property? The house is located next to my house. I wouldn't buy it to flip it and resell. Instead, I would like to purchase the house to use as my office. In essence, the whole property would be an investment.

I am hoping that I could use cash from the business I start to pay the mortgage, and use it as a write-off. Should I get a business loan? Is there another way to do this? What do you suggest?

A: There are mortgage lenders who will help you finance the property for your business. It will cost more, and you won't be able to get 100 percent financing. In fact, you may be limited to 75 percent if you choose to finance the property as investment real estate.

If you get a loan of up to 75 percent of the purchase price, you can either take out a home equity loan on your current property and use that as the down payment, or see if the seller will carry back the second note.

If you use a commercial mortgage lender, you need to know that you'll pay a higher interest rate and more in points and fees. That's why so many people try to use a residential mortgage lender to buy a second home-even if it is ultimately for investment or commercial use.

Since the property is located next door to your current residence, and since you plan to use the house as your office, it's possible to find a residential lender to give you the loan to purchase the house. The rate may be a little higher, but may be quite a bit less than with a commercial lender. Talk to several mortgage lenders to make sure that you qualify for a residential loan.

One thing to check-some communities frown on homeowners who operate businesses from residential neighborhoods. You should check to make sure that your neighborhood or community does not have such restrictions. You may also need a business license for your entrepreneurial endeavor.

Q: I live in a community that is very expensive. The rent I pay is cheap, but it costs too much to buy a home here, near where I work.

However, I have saved up enough cash for a 5 percent down payment on a property that is in another state. I would use this property as an investment and try to rent it out.

Since I don't live near where the property would be located, I am wondering if I should hire a management company to take care of everything for me.

A: While I don't know if you live in Manhattan, but many New York City dwellers (and those in other expensive metropolitan areas) are doing what you're considering-renting a primary residence and purchasing a second or investment home elsewhere.

Since this isn't going to be a vacation home for you-where you might want to take advantage of mountain, lake, or simply wide-open view-you need to spend some time working out the details of your investment property purchase.

I do wonder why you'd want to buy an investment property so far from where you live. Isn't there anything you can afford that is more easily accessible? While you can hire a management company, it's a far better idea to buy in a place where you visit frequently, so you can keep an eye on your investment.

A management company may take a sizeable portion of the rent you receive to manage and, perhaps, rent the property for you. And, you'll still have to check up on the management company to be sure that all monies are accounted for.

If you decide to go this route, please interview several companies thoroughly before handing over the keys to the house.

Here's another way to do it: If you buy an apartment building that either has a "caretaker's cottage" or "engineer's apartment" consider renting out one of the units to someone who is particularly handy and trustworthy to take care of the property and keep an eye on it for you. You can trade some or all of the rent cost for the physical management of the property.

I wouldn't have that person collect rent, but those can be sent to you or your bank directly, or you can arrange an electronic transfer into your business account.

If your plan to buy a property is in a vacation community, you may want to look for a condominium or vacation home that is in a large development.

Frequently, these large developments take care of the exterior maintenance of the buildings and offer rental property management and services. You can take advantage of the rental office, place your property with them and allow them to rent it for you. But be prepared to pay as much as half of the rent you receive for these services.

Finally, if your choice is to buy a single-family home in a different city, make sure you have friends or relatives near buy to keep an eye on the property for you.

While you'll still need to check on the property from time-to-time, this should help.
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Las Vegas real estate prices dampen merger talk

Taking a gamble on Las Vegas is getting expensive these days.
By: Paritosh Bansal: Reuters
Several casino companies are looking for ways to enter the largest U.S. gambling market, but doing so has become too costly after some pricey deals for Las Vegas properties.

"We were very interested in Las Vegas until the price got so high," Trump Entertainment Resorts Inc. Chief Executive James Perry told Reuters in a recent interview. "We don't see ... having an opportunity there in the short term."

Deals such as the buyout of Aztar Corp. by closely held Columbia Sussex Corp. for more than $1.9 billion and the acquisition of Hard Rock Hotel & Casino by Morgans Hotel Group Co. for $770 million sent shivers down the spines of other companies hoping to enter Las Vegas.

Aztar, which owns 34 acres of land on the Las Vegas Strip, saw a fierce two-month bidding war that involved as many as four suitors.

Columbia won. But it could be paying more than $30 million an acre just for the land, the highest price ever for a parcel of that size in Las Vegas, according to Deutsche Bank analyst Marc Falcone.

"The costs are getting to be prohibitive," Penn National Gaming Inc. Chief Executive Peter Carlino said in a recent interview.

"The numbers are out of control over there," Carlino said, referring to the Hard Rock deal. "They are paying way too much for that for our taste."

REAL ESTATE BOOM

A limited amount of available real estate on the Strip, coupled with the ever increasing popularity of the gambling mecca, is helping boost prices.

"Land is not available in that area," said Peter Dunay, chief investment strategist at Leeb Group. "So it is very competitive and very tough."

Things have gotten worse as private companies with deep pockets turn to the gaming industry, which offers stable cash flows and high returns.

"There's a lot of money around right now ... looking for a place to land, and gaming seems to be one of the places they want to go," Perry said.

When shareholders in companies that own casinos in Las Vegas see other deals, they too want more.

Last month, when casino operator Riviera Holdings Corp. agreed to go private in a $211.5 million buyout, one large shareholder opposed the deal, saying it undervalued the company's land on the Las Vegas Strip.

But there is a limit to how much public companies are willing to pay for a piece of the action.

Pinnacle Entertainment Inc., which started the bidding war over Aztar with an initial offer of $38 per share, bowed out of the contest when Columbia bid $54 per share. Ameristar Casinos Inc., another bidder, quit when offers started pushing $50 per share.

VEGAS BECKONS

Still, the lure of Las Vegas is too powerful for companies to completely ignore.

The city offers a stable regulatory environment and its fame as an entertainment destination is so widespread that it affects competition even in regional markets, Calyon Securities analyst Smedes Rose said.

Harrah's Entertainment Inc., the world's largest gaming operator by revenue, promotes its casinos in smaller markets through offers such as discounts at its Las Vegas properties -- a competitive edge that companies such as Pinnacle want.

Having a casino in Las Vegas also boosts the value of a company's brand, Dunay said. "It's a prestige thing to say that I own a casino on the Strip."

Pinnacle, Trump and Penn National all continue to look for ways to get into Las Vegas.

Trump's Perry said he would be open to talking with Morgans Hotel, which would like a partner to run the casino, as well as any other opportunity that may arise.

Penn's Carlino said his company would also continue to look for a point of entry, such as a joint venture.

But he added, "That's going to be tough."
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How to get the best appraisal for your house or condo

Technology improves but lacks human touch
By: Robert J. Bruss: Inman News
A few weeks ago I enjoyed lunch with one of my favorite Realtors. During our conversation, she told me about a home sale she recently closed in an upscale neighborhood for thousands of dollars above any previous sale price in that area.

As I drove home from our lunch, I couldn't help but think, "I wonder how that house appraised for a much higher sales price than any recent comparable home sales price in the vicinity?" I sure wouldn't want to be the appraiser who got that assignment.

When a home buyer makes a small or zero down payment, the appraisal is vital to obtaining a high loan-to-value ratio mortgage. However, if a home buyer makes a large down payment, then the appraised valuation to confirm the sales price is not so critical.

WHAT IS AN APPRAISAL? A state-licensed appraiser makes professional real estate appraisals. Any other evaluation, such as a real estate agent's estimate of market value, is not an appraisal, but rather an opinion of market value.

An appraisal of real estate market value is an estimate by a trained appraiser of the most likely price at which a property will change ownership, with neither the buyer nor seller being under pressure to buy or sell.

But the real world is much different. There are different types of appraisals, such as a "quick sale value," "as-is condition," "future renovated valuation," and others. The skill and experience of the licensed appraiser play a key role in the accuracy of the appraisal.

Until there is an actual property sale, an appraisal is just an estimate of probable market value. However, even when there is a sale, the buyer might have overpaid or a desperate seller might have accepted a below-market purchase offer.

IS APPRAISAL AN ART OR A SCIENCE? During the last 10 years, there have been many attempts to make real estate appraisals more accurate, especially with automated valuation models (AVMs). Mortgage lenders would be thrilled to be able to verify the exact market value of a house by pressing a few buttons on a computer. Although that day might be coming, it has not yet arrived.

The latest attempt to eliminate the need for appraisers is the free Web site www.Zillow.com, which claims to have 60 million U.S. homes profiled. For several of my properties I checked, I found the results amazingly accurate. I especially like the aerial views with the lot boundaries superimposed.

Then I checked the house where I grew up in Edina, Minn. Zillow reports a one-bedroom, one-bathroom house worth $1.2 million. That house description sounds like a shack. If the valuation is correct, I wish my parents hadn't sold that house. The reality is it is a very nice three-bedroom, two-bathroom house. Zillow isn't always correct.

However, when houses and condos are relatively similar to nearby houses, AVMs can be very valuable to help estimate market values. But appraisers will always be needed to verify valuations, especially in neighborhoods of unique one-of-a-kind homes.

Although computers have changed real estate appraisals, there is no substitute for the experience of a realty appraiser to interpret the recent sales prices of comparable nearby houses and condos, which determine the market value of a specific home. Equally important, an expert appraiser is needed to evaluate if the local home sales prices are rising, falling, or "normal." So far, computers haven't been able to replace this judgment test.

HOW TO GET AN ACCURATE APPRAISAL OF YOUR HOUSE OR CONDO. The Internet can be used to research approximate market values of houses and condos, based on recent sales prices of similar neighborhood homes within the last six months.

But that is just a starting point because each residence is unique. Market value depends on many variables. However, there are still a few basic rules to assure an accurate appraisal:

1.) GET THE HOME INTO TIP-TOP CONDITION. If you are buying a house or condo, the seller has presumably made the residence look its best. However, if you own the home and need an appraisal for mortgage refinancing or other purpose, aim to put the home into its best "model home" condition before the appraiser arrives.

Because appraisers often inspect three or more houses each day, and can't possibly remember each home's special features, it is best to hand the appraiser a list of the residence's special features, especially those that add market value. Also, if you know of recent nearby home sales prices, be sure to hand that information to the appraiser.

A Realtor friend of mine, who never has problems getting an appraisal to match the home's sales price, tells me, "I practically do the entire appraisal to be sure the house appraises for the sales price."

2.) ALWAYS ACCOMPANY THE APPRAISER. Either the real estate agent or the homeowner should always accompany the appraiser to facilitate the inspection and answer the appraiser's questions. Be sure to point out the home's special features and benefits that the appraiser might miss during the inspection.

3.) INSIST THE LENDER WILL PROMPTLY PROVIDE THE BORROWER WITH A COPY OF THE APPRAISAL. Technically, the appraisal belongs to the mortgage lender who hired the appraiser, even when the homeowner or home buyer is paying for the appraisal.

Borrowers should insist their lender agrees to promptly provide the borrower with a copy of the appraisal. If the appraisal comes in low, the home buyer, realty agent, and homeowner should have immediate access to that appraisal to correct any errors.

For example, when I refinanced my home last year with Wells Fargo Mortgage, I was very impressed when the lender sent me an overnight FedEx copy of the appraisal.

If the appraisal comes in low, and you see the appraiser made an error evaluating your house or condo, don't hesitate to promptly request a correction or a "review appraisal" by another appraiser (to be paid for by the lender).

CONCLUSION: Although appraisal is still very much an art, rather than an exact science, computers continue to help make residence value estimates more accurate. However, licensed appraisers will always be needed to verify the facts and use them to arrive at expert valuations. More details are in my new special report, "How to Get the Best Appraisal of Your House or Condo," available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com.
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Pricey Parking Is a Lot of Trouble

As L.A.’s real estate market has exploded during the last three years, the price of workplace parking has spiked 10 to 12 percent.
By: ANDY FIXMER: Los Angeles Business Journal
At STA Travel Ltd.’s corporate headquarters at 5900 Wilshire Blvd., most of the staff learned the hard way that their office building had been sold:

The parking rates increased 50 percent, from $70 to $105 a month.

“We don’t really have a choice but to pay it,” said Jarrett Klein, STA Travel’s vice president of operations. “Our landlord is undoubtedly taking advantage of the situation.”

STA, which specializes in the student travel industry, is far from alone. As L.A.’s real estate market has exploded during the last three years, so too has the price of workplace parking.

The average rate landlords charged for parking in L.A. County office buildings last July was $185 for a monthly unreserved space, according to a Colliers International survey. But since then, rates have spiked 10 to 12 percent, with most unreserved spaces now fetching more than $200 a month, parking operators in Los Angeles County say.

“The parking market and the office leasing market move in sync,” said Ross Moore, Colliers’ director of market and economic research. “We had a great year on the office leasing side, and as buildings fill up, parking garages fill up. And as parking garages fill up, you can imagine what happens to rates.”

In Los Angeles County, office vacancy rates dropped by 7 percent during the last three years – and 4 percent in the last year, according to Grubb & Ellis Co. The average L.A. County office building is now nearly 90 percent occupied.

“Once office buildings get up around 90 percent occupancy, landlords aren’t worried about losing tenants because there are three more waiting for the space,” said William Francis, a vice president at Walker Parking Consultants Inc. “In a strong market, office building owners are not bashful about raising prices.”

Moreover, during the last three years, there has also been a tremendous boost in the number of office buildings trading hands in the L.A. region. Since 2003, roughly one in every four L.A. County office buildings have switched owners. When a deal closes, new owners commonly look to parking as a quick way to raise a building’s revenue stream.

“You can’t arbitrarily raise income from office rents because those rates are set under a lease – naturally you look at parking,” acknowledged developer and landlord Wayne Ratkovich, who last year purchased 5900 Wilshire Blvd., where STA Travel is located, for close to $105 million.

Supply and demand
There are other factors at play too

Garages at L.A. County’s office buildings are filling up at an even more accelerated rate due to the region’s sizzling housing market; developers are building condo projects on top of former surface parking lots, which have historically served as a source of cheap monthly parking for commuters.
With surface lots disappearing, more and more commuters are being forced to park at their office building. “We’ve lost quite a bit of our surface lots,” Moore said. “Every time a lot is taken off the market, there’s a couple hundred cars displaced and a lot of them end up in the parking structure.”

But even with parking rates on the rise, Los Angeles commuters fare better than counterparts in New York, Boston, Washington, D.C. and San Francisco, where the cost is nearly double.

That’s mainly because L.A. grew-up in the automobile age and planned better to meet its parking needs. However, there are signs that L.A. could be heading toward a parking shortage.

For example, the city has cut in half the parking requirement for office buildings on downtown’s Bunker Hill, where developers now have to provide one space for every 1,000 square feet of office space within 1,500 feet of the building. For much of the rest of Los Angeles, developers are required to provide two parking spots per 1,000 square feet of office space within 750 feet of the building.

“In downtown, land costs are so high that you can’t afford to park every person,” said Francis, who has been studying parking issues in the L.A. region for nearly 30 years and has seen rates rise and fall dramatically at times, especially downtown.

From the late 1970s through the late ’80s, a time of heavy office construction activity, developers would include 400 spots in office properties with demand for 800 spaces, Francis said. And because the developments increased the demand for parking but limited the supply, a parking shortage occurred before the end of the decade. It wasn’t until the economic recession of the early 1990s and the opening of new parking garages that the imbalance leveled off.

“In 1989 you needed to spend $240 a month and know somebody to get a parking space,” Francis said. “Three years later you could walk into almost any garage in downtown with three friends, get a group discount and pay only $80 a month.”

‘Scarce commodity’
While today’s increasing parking rates may seem steep, Francis said it’s been bad before, even prior to the late 1980s. For example, from 1979 through 1984 parking rates increased 15 percent a year compounded annually.

“Parking is probably one of the few commodities that is a great example of the relationship between supply and demand,” Francis said. “When there’s lots of supply and not so much demand, rates get soft.”

In Los Angeles, parking rates historically soften when occupancy falls below 75 percent, he said.

For Ratkovich, 5900 Wilshire Blvd. was close to 90 percent full at the time of his purchase and included one tenant – L.A. Fitness – that has a heavy parking requirement. And unlike years past, tenants can’t rent a parking space at the Los Angeles County Museum of Art, which is across the street.
Late last year, LACMA demolished its 1,200-space garage, which typically soaked-up overflow parking from the office building, to make way for the museum’s expansion project. With the garage out of commission, demand for parking in the area spiked and Ratkovich said he was forced to raise rates.

“We have a scarce commodity. How do you allocate a scarce resource? The best way to do that is by price,” he said. “The only way to increase the supply of parking is to raise parking rates until they justify new construction.”
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NAR: FHA Reforms Would Open Doors to Homeownership for Millions of Hard-Working Families

Bill would raise FHA loan limits and extend possible terms from 30 to 40 years
RISMedia
The National Association of Realtors(R) strongly supports the passage of the Federal Housing Administration reform package approved yesterday in a mark-up vote by the House Financial Services Committee led by Congressman Bob Ney (R- Ohio) and Congresswoman Maxine Waters (D-Calif.).

H.R. 5121, the Expanding American Homeownership Act of 2006, would raise FHA loan limits, eliminate restrictive down payment requirements, provide risk based mortgage insurance premium flexibility, and extend the possible terms of FHA loans from 30 years to 40 years. All of these changes will help make homeownership more attainable.

"The Expanding American Homeownership Act will make FHA a more viable tool for first-time home buyers and lower and moderate income families and many others pursuing the dream of homeownership. It is also the most substantive FHA reform legislation undertaken by Congress in over 15 years. Not only will hundreds of thousands of additional families have the opportunity to own their own home, but this legislation will improve FHA's relevance and competitiveness in the housing market," said Congressman Ney following today's successful committee mark-up.

"On a typical loan, these changes will save many families hundreds of dollars per month -- opening the door to the American Dream for thousands," said NAR President Thomas M. Stevens. "We commend the House Financial Services Committee for taking this important step to make FHA once again competitive in the home mortgage arena. With interest rates climbing and housing prices at all time highs, it is imperative to have a modernized, effective FHA product."

NAR also announced the formation of a coalition designed to help move this legislation ahead in Congress. The Coalition for a Strong FHA, led by NAR, is made up housing industry leaders including the National Association of Home Builders, National Council of State Housing Agencies, National Alliance of Independent Mortgage Bankers/Lenders One, National Association of Hispanic Real Estate Professionals, National Association of Real Estate Brokers, National Association of Local Housing Finance Agencies, Asian Real Estate Association of America, and the Strategic Alliance for Mortgage Subsidiaries.

The coalition is expected to become an advocacy force for the housing market. The coalition's mission is to ensure FHA reform is enacted and that it becomes a competitive option. Additional information regarding the coalition is available at www.strongfha.org.

"For over 70 years, the Federal Housing Administration has made homeownership possible for millions of Americans at no cost to taxpayers. With the proposed reform legislation, FHA will continue to make homeownership available for millions," said Stevens.

NAR and its Coalition for a Strong FHA partners urge House Members to cosponsor this legislation and urge the House leadership to schedule time for House floor consideration as quickly as possible following the Memorial Day recess.

The National Association of Realtors(R), "The Voice for Real Estate," is America's largest trade association, representing 1.3 million members involved in all aspects of the residential and commercial real estate industries.

Information about NAR is available at www.realtor.org. This and other news releases are posted in the Web site's "News Media" section in the NAR Media Center.
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Don't confuse 'stepped-up basis' with property tax basis

'Stepped-up' refers to adjusted-cost basis for inherited property
By: Robert J. Bruss: Inman News
DEAR BOB: I read your recent item about property "stepped-up basis" with great interest, but I wish you had taken it further. Suppose an owner deeds you a house purchased for $100,000, which is now worth $300,000, and you live in it the rest of your life. Won't you be paying taxes on $100,000 and be way ahead of the game? -Martin A.

DEAR MARTIN: You seem to be confusing apples with oranges. "Stepped-up basis" to market value refers only to the adjusted-cost basis for inherited property. In other words, the owner died and you inherited the property. Stepped-up basis is very important when the heir decides to sell the inherited property.

For example, if your basis for a property is $100,000, but it is worth $300,000 on the date of your death, your heir's stepped-up basis is $300,000. When the heir sells that property, his taxable capital gain is only the amount exceeding $300,000.

This is a huge tax savings over a lifetime gift. Instead, if you give the same property to someone before you die, that person takes over your low $100,000 adjusted-cost basis in this example. If the donee then sells that property for $300,000, there is a $200,000 taxable capital gain.

Depending on local property tax assessment laws where the real estate is located, and the relationship of the person receiving the property, that person might be able to take over your current below-market property tax assessment. However, that has nothing to do with "stepped-up basis" for inherited property.

HOW TO TRANSFER YOUR HOME LISTING TO A BETTER AGENT

DEAR BOB: We are not happy with our listing agent, but we have a signed listing contract. How can we change agents or sell for sale by owner (FSBO)? -Leah M.

DEAR LEAH: I hope you didn't sign a long-term listing beyond 90 days.

If you are unhappy with your listing agent, your best recourse is to contact the agent's brokerage owner or manager. Explain the situation and ask that your listing be transferred to the firm's top sales agent for your area to complete the listing term.

Transferring a listing means the original listing agent will get a referral commission when your home sells, typically 10 percent of the office's gross commission. A listing transfer keeps everybody happy at that brokerage so the firm will actively promote your listing, especially your new listing agent.

In today's slowing real estate home sales market, you definitely don't want to risk become a FSBO. If you want to receive top dollar, don't even consider selling FSBO because you need all the professional help you can get.

LIVING TRUST AVOIDS PROBATE COURT COSTS AND DELAYS

DEAR BOB: I have a living trust. After I die, what does the final beneficiary have to do, such as filing court papers? I have followed your column for many years and have done very well investing in real estate. -Gloria T.

DEAR GLORIA: Congratulations on your successful real estate investments.

When your revocable living trust "matures" after you pass on, your successor trustee (such as a surviving spouse, trusted friend or relative, or bank trust department) will distribute your living trust assets according to the terms of your living trust.

No probate court action is required. It is that simple. More details are in my special report, "24 Key Questions Answered: Living Trust Secrets Reveal How to Avoid Probate Costs and Delays," available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
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Seller learns difference between appraised and market value

Stream of low offers confuses home seller
By: Ilyce R. Glink: Inman News
Q: I tried to sell a house for the appraised price and was unable to sell at that price. I understand that property will not sell when it is priced too high but the offers I received were $5,000 to $8,000 less than the appraisal.

I was under the impression that if I advertised the property for the appraised price, it would move quickly. I told one real estate agent when she made me an offer from a client that I was going to have the house appraised again and that I would provide the appraised price to the potential buyer so he could adjust his bid.

The agent didn't go for that at all. Can you give me some suggestions as to what I did wrong? When I couldn't sell the house, I finally rented it.

A: I think you made a few basic mistakes. First, the appraised value is not necessarily the same thing as the market value.

The appraised value of the home is what an appraiser thinks the home is worth based on the sales of other similar homes in the area. The market value is what someone will actually pay for the house.

In your case, either because of the condition or location of the home, the market is telling you that your home isn't worth what the appraiser thinks it should be worth-it's worth $5,000 to $8,000 less.

Getting a new appraisal doesn't change what someone will pay for the home. You'd be better off buying some cans of white paint and repainting the interior of the property. Then, you might get more money for it.

Renting the house is fine. Eventually, prices will rise in your neighborhood and you'll get your price, but not today. And only you can decide if waiting for prices to rise in order to get the extra $5,000 to $8,000 is worthwhile.

Q: My father died late last year and left a piece of property to my two sisters and me. Ownership is to be divided equally. The property is a house on Lake Michigan on the eastern shore, about due east of Chicago.

Local real estate agents have told us the property is worth $1.2 to $1.5 million. We all live too far away to use or manage the property and have decided to sell. However, one sister insists on doing nothing this year and waiting until next spring to sell. She says she heard one should wait at least a year to sell inherited property and that it "feels right" to wait.

Can you give me some reasons why we should either wait or sell immediately? My own feeling is that the taxes for this property are going to be very high once my father's "grandfathered" tax rate lapses.

A: First, I'd like to offer my condolences on the loss of your father.

Although I'm sure you and your sisters are missing your dad, I can't think of any reason why you wouldn't want to put your dad's house on the market now-when vacation homes are selling like hotcakes. The carrying costs (taxes and maintenance) on a house that expensive could be costly, especially if none of you are near enough to use it regularly and make sure that small problems don't turn into big issues.

I think the advice your sister is remembering refers to individuals who have experienced a huge trauma, like the death of a spouse or partner. In those cases, if the individual can afford to wait, it is a good idea to let a year go by while he or she adapts to the new circumstances of a new life.

In your case, you won't gain anything by waiting a year to sell this property. You have inherited the property at the current market value (which may even be able to be adjusted to whatever price you sell it for this spring). That means you would pay no capital gains tax on your inheritance when you sell.

And after the expense of selling it (broker's commission, transfer taxes, etc.), you would each pocket a significant amount of cash.

I think that you should sell now, especially since interest rates might rise significantly in the next year, which could dampen interest in an expensive vacation property. But it doesn't really matter what I think.

You and your siblings need to talk this out so everyone is comfortable with the plan. If you're having trouble agreeing, ask an estate attorney to mediate.
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Ways to Save Money This Summer By Cutting Your Energy Bills

Technology is making it easier (and cheaper) to conserve power in your home, thanks to everything from using more efficient appliances to installing solar panels on your roof.
By: Marshall Loeb: The Wall Street Journal Online
Saving energy on hot-weather days is cool. And the good news is that technology is making it easier (and cheaper) to conserve power in your home by means that range from using more efficient appliances to installing solar panels on your roof.

Mike Gordon, president of ConsumerPowerline, a New York company that helps businesses cut their energy bills, has tips that are quick and easy - and some that are more involved - for saving money this summer.

When it comes to simple things, Gordon says, drawing your shades goes a along way.

Meanwhile, running a dehumidifier will boost your air conditioner's efficiency. The more humid the air inside, the harder your air conditioner will have to work. Lower humidity in your home means you'll be comfortable at higher temperatures, so you can turn the thermostat up a few degrees, saving even more money.

Gordon also recommends buying motion sensors that will turn your lights off once you've left the room. If you've ever been in a business meeting where the lights went out because everyone was sitting still, you're already familiar with the minor inconveniences of sensors. But the savings can be substantial.

Some homeowners can now earn money from their power company by "shedding" electrical capacity at peak times, like hot summer days. Many utilities already have such programs for condo owners and multifamily buildings.

Here's how it works: the power company will install controls that shut down your power use when you expect to be out and when the power grid needs more electricity, like at midday. In return, says Gordon, the utility pays you for the power you're not using. And the controls should come with an override so that if you unexpectedly return home you'll be able to use the dishwasher.

Another source of savings: the energy bill Congress passed last year. It includes tax credits for everything from energy-efficient windows to solar-power water heaters and other home improvements.

"If it's energy-efficient and certified as such it will likely make you eligible for credits," Gordon says. But check with your tax adviser before you go on a shopping spree.
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L.A. Home Median Hits $567,480

The median price of an existing home in Los Angeles increased 17 percent to $567,480 in April compared to a year ago, and sales decreased nearly 13 percent, the California Association of Realtors said Thursday.
Los Angeles Business Journal Online
The California median rose more than 10 percent to $562,380, with sales down 21.4 percent, said the industry group, which collects data from more than 90 local Realtor associations around the state. Closed escrow sales of existing, single-family detached homes statewide totaled 516,960 in April at a seasonally adjusted annualized rate.

“Concerns about the likelihood of future interest rate increases continue to influence the market,” said C.A.R. President Vince Malta in a statement. “While still near their historic lows, mortgage interest rates are at their highest level since June 2002 for fixed-rate mortgages, and August 2001 for adjustable-rate mortgages.”

In a separate report covering more localized statistics generated by C.A.R. and DataQuick Information Systems, 84.5 percent, or 339 out of 401 cities and communities showed an increase in their respective median home prices from a year ago.

Statewide, the 10 cities and communities with the highest median home prices in California during April were: Manhattan Beach, $1,685,000; Burlingame, $1,600,000; Los Altos, $1,557,500; Newport Beach, $1,445,000; Saratoga, $1,407,500; Santa Barbara, $1,250,000; Lafayette, $1,112,500; Mill Valley, $1,068,750; Santa Monica, $1,020,000; Danville, $1,019,500.
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On Heels of Rebound, Existing-Home Sales Ease

Pressure has come off of home prices and most owners can expect steadier gains in home values for the foreseeable future, says NAR President Thomas M. Stevens.
NAR: REALTOR® Magazine Online
Existing-home sales eased in April on the heels of a two-month rebound, according to the NATIONAL ASSOCIATION OF REALTORS®.

Total existing-home sales — including single-family, townhomes, condominiums and co-ops — slipped 2 percent to a seasonally adjusted annual rate of 6.76 million units in April from a downwardly revised level of 6.9 million in March. Sales were 5.7 percent below the 7.17 million-unit pace in April 2005.

The decline was expected, says NAR Chief Economist David Lereah. “Our leading indicator for pending home sales was trending lower, and our forecast model is showing a modest decline for the second quarter, with sales leveling out before rising in the fourth quarter,” he says. “Higher interest rates are slowing home sales, but we see this as another sign of a soft landing for the housing sector which remains at historically high levels.”

The national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.51 percent in April, up from 6.32 percent in March, according to Freddie Mac. The rate was 5.86 percent in April 2005.

The national median existing-home price for all housing types was $223,000 in April, up 4.2 percent from April 2005 when the median was $214,000. The median is a typical market price where half of the homes sold for more and half sold for less.

Price Run-Up is Over

NAR President Thomas M. Stevens from Vienna, Va., says the big run-up in home prices is over.

“After five years of booming sales, we are now experiencing normal market conditions across most of the country,” says Stevens, senior vice president of NRT Inc. “Inventories levels have come up to balanced levels between home buyers and sellers, so the pressure has come off of home prices and most owners can expect steadier gains in home values for the foreseeable future.”

Total housing inventory levels rose 5.8 percent at the end of April to 3.38 million existing homes available for sale, which represents a 6.0-month supply at the current sales pace.
Single-family home sales dipped 2.0 percent to a seasonally adjusted annual rate of 5.92 million in April from 6.04 million in March, and were 5.6 percent below the 6.27 million-unit pace in April 2005. The median existing single-family home price was $222,700 in April, up 4.3 percent from a year ago.

Condo, Co-op Sales Down 2.7%

Existing condominium and cooperative housing sales declined 2.7 percent to a seasonally adjusted annual rate of 839,000 units in April from an upwardly revised pace of 862,000 in March, and were 6.3 percent below the 895,000-unit pace in April 2005. The median existing condo price3 was $222,000 in March, down 0.2 percent from a year ago.

Regionally, existing-home sales in the Northeast slipped 0.8 percent to an annual sales rate of 1.18 million units in April, and were 2.5 percent below a year ago. The median price in the Northeast was $283,000, up 5.6 percent from April 2005.

Existing-home sales in the West declined 1.4 percent to an annual pace of 1.41 million in April, and were 13.0 percent below April 2005. The median price in the West was $348,000, up 4.8 percent from a year ago.

In the South, existing-home sales eased by 1.9 percent in April to a level of 2.61 million, and were 3.7 percent lower than a year ago. The median price in the South was $180,000, up 3.4 percent from April 2005.

Existing-home sales in the Midwest fell 3.7 percent to a pace of 1.57 million in April, and were 3.1 percent below April 2005. The median existing-home price in the Midwest was $166,000, down 1.2 percent from a year earlier.

For more housing market statistics and research reports,visit NAR's Research Department at REALTOR.org.
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The Weekend Guide! May 25 - May 29, 2006

The Weekend Guide for May 25 - May 29, 2006.
Full Article:
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Smart Tax Tips for Second-Home Owners

Taxes can be tricky for owners of second-homes and investment properties.
By: Janet Novack: REALTOR® Magazine Online
And with 6.8 million vacation homes in the United States — on top of the more than 37 million investment units — it's safe to say that there are plenty of owners looking for some smart tax advice.

Here are four tips that will help owners avoid paying too much money to Uncle Sam. For more detailed information, consult a tax expert.

    • Pay cash. You can duck the rules on passive losses by paying cash for the
      property.

    • Be mindful of mortgages. Don’t take out a mortgage out on a paid-up house and
      use the cash to buy a second home. The IRS doesn’t always allow these payments
      to be deduced as personal mortgage interest.

    • Be an involved landlord. Living in a different state and hiring someone to
      pick out tenants will cause the IRS to take a closer look. If you want to take
      deductions, you must actively participate in the management.

    • Use the property. If you stay in the house for 15 days or more, not including
      days you're really working on the properties, and for more than 10 percent of
      the total days it's in use, it becomes a mixed-use property instead of a pure
      investment property. You'll be able to claim itemized deductions for a large
      portion of the mortgage interest and taxes.

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Top 2% of Market Still Selling As Overall Sales Volume Falls

Multimillion-dollar-home purchases aren't lagging, despite an apparent real-estate slowdown. What's driving this trend? Rising prices have made seven-figure residences more common, and the rich are seemingly more insulated from market fluctuations.
By: Troy McMullen: The Wall Street Journal Online
Despite growing indications of a cooling housing market, one niche continues to sell briskly - multimillion-dollar homes.

Over the past few months in the overall U.S. real-estate market, more homes have crowded the market and sales volumes have fallen in areas from Houston to Boston and Washington, D.C. Freddie Mac, the government-sponsored provider of mortgage-loan funding, predicts total home sales this year will be down by about 7% from 2005's record levels. Yet one area of the market appears immune to all that: In many locations, homes on the ultrahigh end of the price scale - those costing $3 million and up - have been selling in increasing numbers.

In San Francisco, 18 homes in that range sold in the first quarter, up from 15 in the same period last year, according to real-estate information service DataQuick. In Jackson, Wyo., that number rose to 21 homes from 17, according to Jackson Hole Real Estate and Appraisal. Higher up the scale, 10 homes at $5 million or more in Palm Beach, Fla., sold in the first quarter, up from eight last year, says the county assessor's office.

One factor in the growth could be that median prices of all homes have risen, pushing more homes into the luxury end. Also, inventory is up across the board. But at a time when the overall number of home sales has declined in many markets, the number in the ultra-high range has continued to grow. One possible message: Just as it is often said that the rich aren't like the rest of us, the real-estate market of the rich appears to bear a decreasing resemblance to the one experienced by most Americans.

Paying in Cash

Homes at $3 million and up represent less than 2% of the overall market, estimates the National Association of Realtors. Activity at this small upper end has traditionally been a leading indicator for the broader market, says Gregory Heym, chief economist for the New York real-estate brokerages Brown Harris Stevens and Halstead Property. Now, he says, there may be less of a connection between the two segments. The stock market has created new wealth and the number of millionaires has grown, so more buyers are paying in cash. (The National Association of Realtors found that 8% of home buyers paid in cash last year, up from 6% in 2003.) That has left luxury buyers mostly insulated from economic factors such as rising short-term interest rates.

Mark Zandi, chief economist at forecasting firm Moody's Economy.com, says the segment of high-end buyers "won't be immune from the unfolding travails of the rest of the market, but it will weather those difficulties much better than it has historically."

Walter Molony, a spokesman for the National Association of Realtors, says the highly volatile high-end market serves as a poor market indicator. Activity among first-time home-buyers, he says, is more telling. "That segment provides liquidity for people to be able to trade up to larger homes," he says. "Without strong entry-level activity, the market would sink."

When Todd Michael Glaser listed his 11-bedroom Miami home in February, overall sales volume in the city was slipping - sales fell 21% for the month over a year earlier. But he wasn't concerned. He listed it for $40 million, well above Miami-Dade County's record single-family home sale of $27.5 million in 1999.

Mr. Glaser, a 41-year-old real-estate investor, figured the property would sell based on its amenities and location. The 20,000-square-foot home is one of the biggest on North Bay Road, where neighbors include Billy Joel and Matt Damon. A month after hitting the market, it went under contract for purchase. Brokers with knowledge of the deal put the price at over $30 million, though Mr. Glaser wouldn't reveal the number. "It's not a property for the everyday home buyer," he says.

In Los Angeles County, 217 homes priced over $3 million sold during the first quarter, up from 114 during the same period last year, according to Cecelia Kennelly-Waeschle of Sotheby's International Realty. That is the biggest first-quarter jump since the firm started tracking sales in 1988. For the same period, the number of all sales in the county fell 10.3%, according to DataQuick. Two homes priced above $10 million sold in Santa Barbara, Calif., during the first quarter - including a $28.5 million, 17-acre oceanfront property to actor Kevin Costner - up from one a year earlier. (The data in this and other markets do not show how long the homes spent on the market or whether they sold at their original asking price.)

The Kravis Solution

Some affluent buyers don't limit themselves to what's on the market. When Henry Kravis, managing partner of New York-based Kohlberg Kravis Roberts, went shopping for a Palm Beach house in January, he didn't like any of the available properties. His broker, Lawrence Moens, identified a property that wasn't for sale, but fit Mr. Kravis's criteria: a 15,255-square-foot home on five acres along Lake Worth. "I just knocked on the door and said, 'I've got a buyer willing to pay a lot of money for your home,' " says Mr. Moens. A few weeks later, the deal closed for $50 million, public records show. Local brokers say it is the highest price ever paid for a non-oceanfront property there. Mr. Kravis declined to comment.

Not all markets are seeing a surge in high-end sales. In Manhattan, 212 homes priced above $4 million sold in the first quarter, from 226 in the year-earlier period, according to Brown Harris Stevens. Appraisers say that apartments are staying on the market longer.

Even where sales are falling, confidence hasn't always flagged. On the Nevada side of Lake Tahoe, sales of homes priced above $1 million fell 35% in the first quarter over a year earlier, according to Chase International Realty. That didn't stop Tom Gonzales from raising the price on his home in Incline Village, Nev. After staying on the market for a year at $60 million, he raised the price on the 4.5-acre property to $65 million last month, to account for the upkeep he's paid. "I don't think there's a shortage of people looking for a property like this," says Mr. Gonzales, 61, who co-founded software company Commerce One in the 1990s.

Yet in Fairfield County, Conn., Lake Forest, Ill., and San Diego County, brokers say many sellers are trimming prices amid a glut of pricey homes. Writer Jane Green and her husband, bank executive David Burke, cut the price of their Westport, Conn., property by $1 million after it sat for eight months at $5 million. Shortly afterwards, the property sold in January for $3.9 million, public records show.

Talk of a slowdown hasn't affected Sean Wolfington, a former Philadelphia Internet entrepreneur, who just outbid two other buyers on a six-bedroom estate in Key Biscayne, Fla., formerly owned by the singer Cher. The cost: $8.8 million, in cash. "Interest rates aren't a factor for me," says Mr. Wolfington, 34, who now runs an independent film company. "Waterfront properties like these are in limited supply. I saw this as an excellent buying opportunity."
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Condo Developers Add Clubs, Restaurants to Attract Buyers

As demand for condominiums cools, some developers in places like New York, Miami and Las Vegas are signing big-name chefs and opening trendy bars on their properties.
By: Cheryl Lu-Lien Tan: The Wall Street Journal Online
When Ten Museum Park is completed next year in Miami, it will feature a high-end restaurant and an exclusive lounge designed by Michael Capponi, a nightlife impresario best known for celebrity-studded parties he throws at local hotspots like Glass and Mansion.

The building isn't a hotel or resort - it's a condominium development aimed at second-home buyers that will feature 200 units priced from $400,000 to $4 million.

As the condo market cools - year-over-year sales of existing condos and co-ops were down 2% in March - some developers are trying a new tactic to entice buyers. Taking a cue from the boom in hotel condos, where developers combine residential units with hotel rooms, they are signing on big-name restaurants and chefs, opening trendy bars and building clubs on the property.

Celebrity chef Todd English says he is negotiating with developers to open his first Miami restaurant - an upscale chophouse, he says - next year at Paramount Bay, a condo project with 346 units that cost between $600,000 to $5 million.

The success of New York City's Time Warner Center, a condo project that has drawn star chefs such as Thomas Keller, has inspired its developer, Related Cos., to plan a similar development in downtown Los Angeles. The project, named Grand Avenue, is slated to have seven restaurants and a large bar or nightclub. Ken Himmel, executive vice president of Related, says he's talked to "every major restaurateur from Los Angeles, San Francisco and Las Vegas" about opening there.

In Las Vegas, Fifield Realty is adding an upscale steakhouse to its Allure Las Vegas project and planning to offer room-service-like delivery to residents. And although Vegas 888 won't open until 2008, its developers are touting its 35th-floor nightclub, where owners and those who pay a hefty membership fee can sip cocktails while sitting in a pool and checking out sweeping views of the Strip.


Condos at Vegas 888 will come with membership in its 35th-floor private club.

"It's meant to be as exclusive as the building is," says Matt Brimhall, spokesman for Del American, which is building Vegas 888. "It'll have fire pits, outdoor rain showers - you can take guests there to have a drink and check it out."

Developers say they're turning to restaurants and nightlife to set themselves apart from competitors in an increasingly crowded high-end condo market. In Las Vegas, developers of three luxury condo projects - including one that had sold some units - recently scrapped their plans, citing concern that there wasn't enough demand. In Miami, says Daniel Kodsi, chief executive of Royal Palm Communities, which is developing Paramount Bay, "There are about 4,000 units that are built or currently under construction within a few blocks" of the project. "We wanted to offer something different."

Meanwhile hotel condos are continuing to push the envelope. The W Hotel condo project in Miami just signed up Mr. Chow, a New York City restaurant popular with celebrities, to open on its premises. And Hard Rock Hotels' condo hotel, scheduled to open next year in San Diego, will feature the city's first Nobu.

Developers say restaurants, bars and other hotel-like amenities appeal to second-home shoppers, who are increasingly picking condos over single-family houses. Rogelio Garcia, a retired property manager who lives in Laguna Hills, Calif., but regularly visits Las Vegas, says Allure Las Vegas's restaurant and high-end concierge service were "giant factors" in his decision to buy a $655,000 two-bedroom condo there. "Having all those things at your fingertips is important," he says.

Opening restaurants in condominiums hasn't always appealed to big-name chefs. Mr. Himmel, who worked for the company that built Water Tower Place in Chicago in 1976, recalls that it was hard to lure prominent restaurateurs. (California Pizza Kitchen eventually set up shop.) But the demographics of luxury condo buyers can be persuasive. Given the condo prices at Paramount Bay, says Mr. English, "the clientele would be a worldly, good clientele. And we would have that built-in business."

Putting nightclubs and restaurants in condos could have some drawbacks. Diners and clubgoers won't be able to access the residential floors, but crowds and rowdy drinkers could get in the way of a good night's sleep. At Mint, a Miami condo slated for completion in 2008, the restaurant is adjacent to the lobby. Inigo Ardid, vice president of developer Key International, says he plans to install a soundproof glass wall between the restaurant and the lobby and ban music in the restaurant after 10 p.m.

Ownership doesn't always have its privileges. Vegas 888 plans to offer residents full access to its clubs, but some properties are reserving the right to enforce a tight velvet rope. Kevin Venger, co-owner of Ten Museum Park, says he picked Mr. Capponi - whose South Beach parties draw A-listers like Jennifer Lopez - because he wanted it to attract a similar crowd. Condo owners may pay $4 million, but letting them all into the club could hurt the rep. "We have disclaimers saying there's no guarantee that you're going to be able to get in," he says.
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Sellers misled about real estate tax break

Large capital gains can't be erased with another purchase
By: Robert J. Bruss: Inman News
DEAR BOB: Due to a job promotion and transfer we must sell our house of 21 years. Our nice problem is the net profit will be about $625,000. My wife and I are aware $500,000 of that amount for a married couple will be tax-free, thanks to Internal Revenue Code 121. However, my insurance agent told me that if we buy a replacement principal residence of equal or greater cost, we could also avoid paying tax on the additional $125,000 capital gain. Is this true? -Cheryl R.

DEAR CHERYL: No. I hope your insurance agent knows more about insurance than he does about income taxes.

Since 1997, purchase of a replacement principal residence has nothing to do with avoiding capital gains tax on the sale of a former principal residence. Your insurance agent is nine years behind the times.

But the good news is the maximum federal long-term capital gains tax rate is only 15 percent, plus any applicable state tax. That is a small price to pay for enjoying your huge capital gain, which is tax-free except for $125,000. For more details, please consult your tax adviser.

HOW TO GET RID OF AN INEFFECTIVE HOME SALE LISTING AGENT

DEAR BOB: My husband and I are trying to sell our home. We stupidly chose a new Realtor who said she would list our house on a reduced sales commission. After almost two months, we have had only seven prospects inspect the house. Is there any way we can change Realtors? -Tracey P.

DEAR TRACEY: I suggest you contact the listing agent's broker or office manager to discuss the transfer of your listing to an experienced, successful agent within the same brokerage who sells homes in your vicinity.

To get more buyers' agents to show your home, you should adjust your sales commission upward to be competitive with other nearby listings.

After the listing transfer, your original listing agent will get a referral commission when the home sells and you will then have an experienced successful agent working hard to get your home sold. As the home sales market slows, primarily due to rising interest rates, you need the best available listing agent. This is no time to be cutting sales commissions or listing with an inexperienced new agent.

RECOMMENDED BOOK FOR FIXER-UPPERS

DEAR BOB: I am about to undertake my first fixer-upper house. I recall you recommended a "how to" book in the past. What is the title? – Frank C.

DEAR FRANK: A superb new book is "Find It, Fix It, Flip It," by Michael Corbett. You will love this unique book, which is not only "how to" but also explains how to upgrade a run-down house into a beautiful swan. The book is available in stock or by special order at local bookstores, public libraries, and www.Amazon.com.

CAN A 1 PERCENT CONDO OWNER BE EVICTED?

DEAR BOB: Fourteen months ago I rented a condo. The new owner resides out of town with no intent to live in the condo. We met each other and got along well. Then he learned the condo homeowner's association absolutely forbids rentals. So he deeded me a 1 percent ownership interest on the title so I can occupy as an owner. But I recently lost my job, am unable to collect unemployment, and am behind on the rent. Now the 99 percent owner has been threatening me, harassing me, and showing up to let himself into my unit without notice. He wants me out within a week. He is mean and relentless. What legal rights do I have? -Renee C.

DEAR RENEE: Your landlord must follow the unlawful detainer eviction procedures. They require giving you a Notice to Pay Rent or Quit. If you don't pay the rent, he must then serve you with a court summons and complaint, which gives you time to file an answer with the court. After that, a court hearing will be scheduled.

Only after the landlord has obtained a court judgment ordering eviction can he have you physically removed by the local sheriff. Meanwhile, the landlord has no right to enter your condo unit without at least 24 hours advance written notice (except in an emergency). If necessary, you can obtain a court restraining order against the landlord. For details, please consult a local real estate attorney.

SAVE ALL RECEIPTS FOR HOME IMPROVEMENTS AND REPAIRS

DEAR BOB: I recently bought a house where I hope to live for the next 30 to 40 years. But I have had to do costly repairs and maintenance, such as replacing aging wiring, replacing the main sewer line, installing a bathroom door, roof maintenance, interior painting, carpeting, and landscaping. Which of these expenses should be capitalized and added to my cost basis and which are non-deductible repairs? --Lauren C.

DEAR LAUREN: Save all your receipts for home improvements and repairs. Your goal is to capitalize as many expenses as possible and add the upgrade costs to your adjusted-cost basis.

For now, just save the receipts. When you eventually sell the house in 30 or 40 years, that's the time to categorize the expenses as improvements to be capitalized or repairs, which have no tax significance.

The general rule is if the expense extends the useful life of the property, or enhances its market value, it is a capital improvement. But other costs, such as painting, are repairs, which have no tax significance for your personal residence. More details are available from your tax adviser.

CHALLENGE PROPERTY TAX ASSESSMENT AS SOON AS POSSIBLE

DEAR BOB: In November 2005 I bought a brand-new house. But the county tax assessor recently sent me a letter than the assessed value will be approximately $25,000 higher than my purchase price. What should I do? -Paul C.

DEAR PAUL: You should pay a visit to the county tax assessor's office to review the appraisal for higher than your home's recent purchase price. Perhaps you got a bargain price because it was a builder's closeout or for another reason. As a property owner, you are entitled to look at your home's assessment file to determine if there was a mistake.

Unless there is a valid justification, after reviewing your file, you should consider filing an appeal with the assessor's office to get your assessed value reduced based on recent sales prices of comparable houses like yours.

DOES CONVERTING RENTAL HOUSE TO PERSONAL RESIDENCE ELIMINATE DEPRECIATION RECAPTURE?

DEAR BOB: About five years ago, I converted a rental house (that had been depreciated down to land value) to my personal residence. If I sell it today, can I take the $250,000 principal residence sale tax exemption, or will I have to recapture all the depreciation I deducted when it was a rental? - Thomas S.

DEAR THOMAS: Presuming you did not acquire the house in an Internal Revenue Code 1031 tax-deferred exchange, and you owned and occupied it at least 24 of the 60 months before its sale, as a single principal residence seller you can qualify for up to $250,000 tax-free profits. A qualified married couple filing a joint tax return in the year of home sale can qualify for up to $500,000 tax-free capital gains.

However, the depreciation you deducted while the house was a rental will be recaptured (that means "taxed" to us ordinary folks) at the special 25 percent federal tax rate. Please consult your tax adviser for full details.

SHOULD INVESTOR PAY OFF 10 PERCENT LOAN WITH 7.3 PERCENT LOAN?

DEAR BOB: I have an investor loan of $25,000 at 10 percent fixed interest with a two-year balloon payment on a rental property. Would it be beneficial to pay this loan off with my 7.3 percent variable home equity loan secured by my principal residence? -Eric P.

DEAR ERIC: Gosh, let me check my calculator. That 7.3 percent interest sounds much lower than 10 percent interest, especially since that high-interest loan has a balloon payment due in just two years. If there is no prepayment penalty, get rid of it.

EX-GIRLFRIEND NOT NEEDED TO ESTABLISH HOME'S BASIS

DEAR BOB: Fifteen years ago, my girlfriend was under a deluge of bills. She signed a quick claim deed on our house to me and disappeared. I've paid off the mortgage but can't locate her. The house has appreciated greatly in market value. I want to sell. How do I establish a cost basis? -Robert H.

DEAR ROBERT: As a general rule, your basis is the purchase price, plus closing costs that were not tax deductible at the time of home purchase, plus capital improvements added during ownership, minus any depreciation deducted for rental or business use of the property.

If your ex-girlfriend signed a quitclaim deed (not a quick claim deed) to you, and it was properly recorded, you don't need to locate her because you hold marketable title. For more details, please consult your tax adviser or a local real estate attorney.

The new Robert Bruss special report, "How to Get the Best Appraisal of Your House or Condominium," is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
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The Multimillion $ Market is Still Hot, Hot, Hot

Despite a cooling real estate market, one segment that remains red hot is the multi-million-dollar market.
By: Troy McMullen: REALTOR® Magazine Online
In San Francisco, 18 homes in that range sold in the first quarter, up from 15 in the same period last year, a DataQuick analysis shows.

In Palm Beach, Fla., 10 homes sold for $5 million or more in the first quarter, up from eight last year. And in Jackson, Wyo., 21 homes, up from 17, sold for more than $3 million, according to Jackson Hole Real Estate and Appraisal.

Mark Zandi, chief economist at forecasting firm Moody's Economy.com, says the segment of high-end buyers "won't be immune from the unfolding travails of the rest of the market, but it will weather those difficulties much better than it has historically."
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Condo Conversions Create Quandary

The L.A. City Council is beginning a series of hearings on how to protect affordable apartments before they’re converted to high-priced condominiums.
By: ANDY FIXMER: Los Angeles Business Journal
When it came to his cozy Valley Village apartment, James Norton had a rare combination in Los Angeles: a quiet, safe neighborhood to raise his two sons and affordable rent.

Now his world is being upturned.

Norton, an eight-year veteran of the Los Angeles Police Department, and his roughly 80 neighbors are being evicted to make way for a massive condo development.

Even though he got more than $8,000 for his relocation costs, Norton says he won’t be able to find another rent-controlled, two-bedroom apartment in his neighborhood – or anywhere else in L.A. – for $760 a month.

“I’m facing at least double the rent,” he said. “Everything has more than doubled.”

The situation of Norton and his neighbors is becoming more and more common in Los Angeles, where land prices have shot up and rents can’t reflect today’s values.

In response, some apartment owners are converting their buildings to condominiums or razing their property to make way for a new for-sale development.

With cases such as Norton’s mounting, the L.A. City Council is beginning a series of hearings on whether to enact a moratorium on such conversions while the city decides how to protect its remaining stock of affordable apartments before they’re converted to high-priced condominiums.

It’s no wonder why apartment building owners want to go condo.

While the average apartment rent in L.A County is close to $1,500 a month, according to Novato-based rent tracking firm RealFacts, the median priced L.A. County condo is selling for close to $415,000, according to Melville, NY-based housing market firm HomeData Corp.

Put another way: A completely occupied 25-unit apartment building with units renting at the county average could be sold for about $4.5 million while the same property could be sold for nearly $10.5 million if the units were median-priced condos.

The pace of conversions countywide has only heated up as the gap between rents and condo prices has grown larger during the past five years.

Since 2000, more than 11,000 “rent-stabilized” apartment units – those apartments built in L.A. before 1978 where landlords are limited to raising rents 4 percent annually – have been converted to condos. The majority of those, about 7,000 units, were converted within the last 18 months. (The rent stabilization law doesn’t prohibit conversions.)

“And that’s only the rent-stabilized apartments,” said Larry Gross, executive director of the Coalition for Economic Survival, a group that helped bring about rent control in Los Angeles. “That number doesn’t take into account the thousands of non-stabilized units that have been taken off the market for conversion.”
Renters priced out
Roger Temple, owner of the Valley Village apartment building where Norton lives, said he loses money on the rental property every month. “It’s totally unrealistic,” Temple said. “I have a negative cash flow on every single one of these buildings.”

Temple said he’s replacing buildings that have structural and environmental problems with new condos that meet modern housing codes.

“There’s no way to bring these buildings to modern standards and make them safe,” Temple said. “I’m trying to keep the costs down so the units will be entry level housing.”

Proponents of allowing apartment building owners to raze their property or convert their units to condos say L.A.’s codes are already unnecessarily strict. For example, the city requires 51 percent of a building’s tenants to agree to a conversion before a project can proceed.

“The City of Los Angeles already has a de facto moratorium on conversions,” said Alan Nevin, the California Building Industry Association’s chief economist. “It’s next to impossible to get approval.”

Nonetheless, landlords can evict tenants under the state’s Ellis Act, which allows property owners to get out of the apartment business. Even so, landlords can face hurdles getting approvals to convert or raze their property.

At the same time, apartment building owners and real estate agents say the conversions give first-time homebuyers a “last chance” opportunity to get into an L.A. real estate market that is increasingly becoming out of reach.

A prime example is Forest Glenn, a 204-unit Winnetka complex where the owners are converting the two- and three-bedroom townhouse-style apartments into condominiums.

The owner, Forest Glenn Development Partners LLC, bought Forest Glenn about two years ago and has sunk more than $1 million into renovating the property, where units had been rent stabilized, in preparation for conversion.

While single-family homes in the neighborhood are selling for $660,000 and nearby two-bedroom condos are trading for $350,000 – the units at Forest Glenn range from $288,000 to $390,000 and the town homes are selling quickly.

“This is the best thing to happen for first time buyers,” said Elaine Golden-Gealer, who is the listing agent at Forest Glenn and has represented numerous apartment building owners switching to condos. “There’s almost no other way to get into the market.”

Still, Golden-Gealer admits few if any of the original tenants buy their units. At Forest Glenn, she said, the developer had even given tenants a number of incentives to buy.

The developer allowed tenants to use their security deposits and relocation money – which ranged from $5,000 to $8,000 – toward the down payment. Tenants got first crack at any unit in the complex and could relocate to another unit within the complex while theirs was being remodeled.
Despite the incentives, there were few takers. “A lot of times, people who are renters can’t get that value as a condo,” Golden-Gealer said. “They always think it’s over priced.”

Nevin contends about 3 percent of tenants in converted buildings stick around to buy their unit. Of those buying the remaining units, three-quarters were formerly renters.

“It’s absolutely not a case of losing units in the inventory – the inventory size stays the same,” Nevin said. “You’re just moving renters into an ownership position.”

Elected officials are concerned, however, that apartment conversions could worsen L.A.’s affordable housing crisis by decreasing the number of rental units on the market.

Councilman Ed Reyes, who chairs the city council’s Planning and Land Use Management committee, worries that with the city’s home prices out of reach of most families, that vast numbers of residents could be displaced.

“While we understand the need to protect property rights, we simply cannot ignore the fact that more and more middle-class and working-class Angelenos are being forced out of their homes,” Reyes said. “We must consider all options and that’s what these hearings are all about.”

Few limits
Cities from San Francisco to San Diego are grappling with the same problem, but even adjusted for population L.A. now leads the state in evictions due to rental properties taken off the market.

The apartment conversion initiative is just one of a number of proposals the city is undertaking to maintain a supply of affordable housing.

Recently, the council put a moratorium on converting single room occupancy hotels, which provide cheap housing for the poor, into market rate apartments and condos.

Among other efforts, the city is stepping up its role in building subsidized rental housing for low-income families and considering an ordinance that would force developers to include some level of affordable housing at market-rate projects.

Last year, there were 586 buildings containing close to 5,000 units in L.A. County that were taken off the market under the Ellis Act.

Once emptied, those properties – some functionally sound apartment buildings – can either be converted to condos or be razed to make way for a new condo development.

While San Francisco has been trying to curb Ellis Act evictions and enact some protection for renters, Los Angeles has been slow to respond and has fewer limits on what property owners can do with their apartment buildings.
Some cities in L.A. County are already putting some restrictions in place. In Beverly Hills, for example, the city annually limits condo conversions to 0.5 percent and demolitions to 1 percent of its total apartment stock.

L.A.’s affordable housing advocates want a demolition and conversion moratorium while the council studies how the loss of rental housing is affecting the city.

Gross, at the Coalition for Economic Survival, said he’d like the city to make it harder for landlords to subdivide their rental properties for condominiums, especially in areas with already high housing costs or in buildings with elderly and disabled residents.

He also wants the city to require landlords to build replacement housing for being allowed to raze or convert their buildings. “These are all based on what other cities have done,” Gross said. “These aren’t some crazy ideas – they already work in other cities.”

But proponents of the conversions say that by not allowing for apartment conversions, building owners can’t raise money to fix-up their properties, which can lead to run-down and unsafe buildings.

“The inventory continues to rot,” Nevin said. “No one can afford to fix up their apartments so the units just continually go down hill and that’s why you get a slum.”

However, critics argue it’s a stretch that limiting conversions leads to slum-like conditions. Not addressing the issue could change the character of the city, they say.

“If we don’t stop this activity right now, and figure out a more equitable way to deal with this issue, the face of L.A. will change forever. The diversity that gives this city its strength will not exist in the future. We are going to be a city strictly of the wealthy,” Gross said.

For Norton and his two sons, that possibility has already become a reality. The family will likely have to move out of the neighborhood where Norton’s sons have grown up and where most of their friends live.

“Nobody thinks about renters’ rights,” he said. “People who have been living here for decades, we have no way or right to fight for our homes.”
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Old loan, new interest

Driven by capital-gains rules and soaring home appreciation, the appeal is growing for 'owner- carry' mortgages.
By: Jessica C. Lee: LA Times
Seller financing, once used to attract buyers forced out of the market by high interest rates on conventional loans, may be making a comeback thanks to California's handsomely appreciated market and the ceiling on tax-free home-sale profits.

"Owner-carry loans" or "take-back loans" — in which the seller holds the mortgage for an agreed-upon interest rate and period of time — gained popularity in the late 1970s and early 1980s when rates were in the double digits.

In 1981, when the average national 30-year fixed-rate mortgage reached a historical high of 18.63%, about 40% of all home sales utilized seller financing, according to the National Assn. of Realtors.

Nowadays, less than 4% of the nation's residential sales rely on the seller to finance the deal, according to the Realtors group. Low interest rates allow most buyers to qualify for institutional loans. But there is renewed appeal, brought on by soaring real estate appreciation and an Internal Revenue Service rule that limits tax-free home-sale profits to $250,000 for an individual or $500,000 per couple filing joint returns. Anything beyond that is subject to up to 15% in federal taxes.

As prices in Southern California have run up in the last few years, many people who want to sell homes — even modest ones — are discovering that if they do, they will exceed the tax-free capital-gains ceiling. One way to avoid a large capital-gains tax bill is to hold the mortgage for the person buying the house. In a seller-financed mortgage, consumers who sell a rental property or a home that is owned free and clear do not have to report their gain all in one year, says Jeffrey O. Goodfriend, a CPA at Fullerton Business Service.

With seller financing, the seller can spread out the capital-gains tax over the number of years agreed upon in the contract. By spreading it out, the seller can avoid being placed in a higher tax bracket. For sellers who don't own their homes outright or won't be able to pay off their existing loans in such a transaction, carrying a second mortgage is a less attractive option. They run the risk of losing their investment if the borrower defaults.

With seller financing, the principal that a seller receives each year is considered capital-gain income and is taxed at a lower rate, Goodfriend said. The rest is considered interest income and taxed at ordinary rates.

John Ratzlaff, of Coldwell Banker Ambassador Realty, views seller financing as an excellent way to shelter profits while putting the seller's money to smart use.

"Any time you do a carry back, you're sheltering that principal amount from taxes until the year it's paid," Ratzlaff said. "You avoid some capital-gains tax by spreading it out."

It's an option most likely to appeal to retirees or people who have paid off their mortgages and want to receive steady income. If the current mortgage rate is 6.5%, the sellers could carry back at 6% — better than what they could earn at a bank. According to Ratzlaff, if the buyer defaults, the seller can foreclose and keep the down payment if he or she is holding the first mortgage.

There are benefits to both sides. "With seller financing, a buyer doesn't have to wait for the loan. The buyer doesn't have to spend money for the appraisals, the fees and the points," said Dann Ratanjee, a private real estate investor who has been using seller financing to buy and sell property since 1979. "Escrow can close faster."

Four months ago, Ratanjee had a difficult time selling a property in Victorville. When he offered to carry the mortgage, it drew several potential buyers. After some negotiations, the buyer agreed to put down 50% of the principal while Ratanjee carried the remaining 50% at a below-market rate. "I got my full asking price and closed escrow in 15 days," he said.

Although Irvine resident and radio-show producer Benson D. Evans has qualified for a $600,000 mortgage, he wants to buy a seller-financed home. "I want to find someone who will sell their property and hold the paper for one or two years," he said. "I just want to get in. I don't want to be bothered with mortgage points, and at the appropriate time, I would refinance."
A buyer's ability to refinance does pose potential problems for the seller. All the gain that a seller plans to spread out or defer accelerates when a property is refinanced, Goodfriend says. If the seller-held loan is paid off, the seller has to pay whatever capital gains taxes are owed.

How to avoid it? "Sellers can build in pre-payment penalties in their contracts just like a bank would," Goodfriend said.

It's also wise to check a buyer's credit-worthiness. Ask the prospective buyer to complete the Uniform Residential Loan Application, also known as Form 1003, which can be obtained through a mortgage lender or broker. From this form, sellers can learn the buyer's educational and housing history, employment information, monthly income and housing expense projections, as well as the buyer's assets and liabilities. To verify the information, a seller can request the buyer provide federal returns and W-2s for the last two years, most recent statements for all outstanding loans, and award letters and copies of the most recent checks from a buyer's pension, Social Security or disability income.

In addition, experts urge sellers to obtain a buyer's credit report. Consumers can check their local yellow pages under Credit Reporting Agencies for such providers or contact larger consumer credit reporting agencies such as Experian, TransUnion and Equifax.

Experts advise sellers to ask for a minimum down payment of 20% to 30%. A large down payment can identify strong buyers, as they would be less likely to walk away.

Experts also suggest having the seller-financing contract serviced by an agency such as Circle Lending, a specialty loan administration company based in Massachusetts that aids in such transactions. Its website is at http://www.circlelending.com . For a monthly fee, a servicing agency can manage a seller's bookkeeping, tax records and late notices.

Real estate and mortgage experts urge home sellers to consult a lawyer before committing to any seller-financed transaction.
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First impressions are everything in real estate

Importance of curb appeal explained
By: Paul Bianchina: Inman News
If you're a homeowner, you've no doubt heard the term "curb appeal"-that somewhat subjective first impression that your home makes to a visitor seeing it for the first time. If you're thinking of selling your home this spring or even if you just want to spruce things up so the neighbors will love you again, here are some tips to consider:

Take an overview: You've probably stepped over that cracked walkway a hundred times, and you don't even notice the faded paint job anymore. But someone approaching your home for the first time certainly will, and it can be the difference between someone coming in for a closer look or just driving on by. So, step back and take a good look at your home through the eyes of prospective buyers. Put yourself in their shoes, and make a written list of those things that might raise some concerns for you if you were thinking of buying the house. If you don't think you can be objective enough, then ask your real estate agent or even a friend or neighbor to do it for you. And while the front of the house is the primary focal point, don't overlook the sides and rear of the house as well.

How's that roof look? A bad roof can indicate a home that has suffered from a general lack of maintenance, and may point a finger at potential structural and even mold problems resulting from leaks. Roofs are expensive to replace, but depending on your market and your desire to reap top dollar from the sale, you may want to take a hard look at the economics of re-roofing. And if you've been considering just crediting the cost of new roof to the buyer in escrow, bear in mind that you'll probably get more potential buyers and a higher sales price if you take care of the roof yourself before even putting the home on the market.

Paint is your new best friend: Few things help your home show better than a fresh coat of paint. If you're handy with a brush and an airless sprayer, you just might want to undertake the project yourself. A long weekend and a few hundred dollars in paint can make a world of difference in how well the home shows and how quickly it sells. If you don't want to paint the entire house--or if it doesn't really need it-just painting the trim, exterior doors, garage door, or window shutters can make a big difference as well.

Make necessary repairs: They may seem like little things, but making sure that everything is in proper working order can make a huge difference in how people perceive your house and the care you have taken with it as a homeowner. Fix cracked concrete walkways, and reset loose bricks. Make sure exterior knobs and locks all work properly. Replace cracked or splintered trim boards and deck boards. Make sure fences are sturdy, and gates work as they should. Repair broken window screens. Put up some bright new house numbers. And don't forget to squirt a little oil on those squeaky hinges.

A little landscaping goes a long way: You don't need a complete makeover to make a big difference in how your yard looks, and once again, landscaping and yard maintenance say a lot about how you've cared for the house over the years. If you have a lawn, fertilize and water it regularly to green it up, and run an edger along sidewalks and driveway edges. Rake up leaves and pine needles. Repair sprinkler systems. Prune back those wild shrubs, and trim overhanging tree branches. Head down to the local nursery and pick up some bright flowers to create borders and accent areas that will add both color and a feeling of hominess to the yard.

Don't forget the night view: A home that shows well at night really creates an impression. Replace any burned out light bulbs, and consider adding a timer or two to keep the lights on a little longer into the evening. Consider some low-voltage or solar lights to accent front walkways, and maybe provide up lighting to accent trees and larger shrubbery. Keep a light or two on in the front windows as well, to add to the feeling of coziness and comfort.

Clean up your act: Finally, spend some quality time with a broom, a pressure washer, and a bucket, and give every part of your home a good thorough cleaning. If you're not going to paint, wash down the siding to remove dirt and stains and get it looking fresh and clean. Wash driveways, walkways, and patios. If you have a wood deck, consider a complete cleaning to restore the wood to a fresher look. Wash all the windows, inside and out, and wash the screens as well. Polish doorknobs and light fixtures. Stow all of your garden tools and kids' toys away to remove clutter and potential tripping hazards. And take a trip-or five-to the local landfill and dump all that stuff that's accumulated in and around the yard.
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Real estate remodeling picks up

Owners interested in fixing up own homes, not rentals
Inman News
Remodeling activity grew moderately in the first quarter of 2006, according to the National Association of Home Builders' Remodeling Market Index, released today. The current market conditions index increased from 46.6 to 48.1 and future expectations moved from 47.5 to 48.9.

The seasonally adjusted RMI measures remodeler perceptions of market demand for current and future residential remodeling projects. Any number over 50 indicates that the majority of remodelers view market conditions as expanding.

The RMI for owner-occupied units grew from 48.9 in the fourth quarter of 2005 to 53.8, while renter-occupied units fell from 40.4 to 36.7 during the same period. In the futures expectation index, owner-occupied units moved from 50.4 to 53.2 and the renter-occupied component decreased from 37.8 to 30.4 for the first quarter of 2006. Remodeling accounts for 40 percent of all residential construction and improvement spending and almost 2 percent of the U.S. economy.

"The $11 trillion in homeowner equity continues feeding the remodeling market," said Remodelors Council Chairman Vince Butler. "With remodeling spending surpassing $200 billion for the first time, we see continued long-term growth in the industry."

Regionally, there was strong growth throughout the country except the West, though that area still remains well within the positive range. The Northeast's current conditions increased by nearly 10 points from 41.6 to 51.1 and the future index jumped from 41 to 47.3. Current conditions increased in the Midwest from 41.1 to 44.3 with the future expectations increasing by .4 to 46.6.

"Though the frenzy in home buying is slowing down, the remodeling spending associated with purchasing a home usually lags behind," said NAHB Chief Economist Dave Seiders. "The run-up in home sales during the past five years will fuel remodeling growth for the next several years, and the long-term growth looks to be solid as well."

The RMI "special questions" section asked about the age group of homeowners who ask for remodeling work. Baby Boomers (aged 46-64) account for the vast majority of remodeling work, with 91 percent of remodelers providing service to this age group. In addition, 26 percent of remodelers serviced "Gen. X" (36-45 years old) clients, 2 percent for "Gen. Y" (35 and under), and 13 percent for Seniors (65 and older).

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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Survey: Boomers hooked on real estate

But investments may overshadow retirement planning
Inman News
Baby boomers have a higher rate of home ownership than the national average and one out of four owns more than one property, according to a new study commissioned by the National Association of Realtors.

The study of nearly 2,000 Americans born between 1946 and 1964, conducted for NAR by Harris Interactive, also shows boomers are optimistic about the future, but many are not adequately prepared for retirement.

David Lereah, NAR's chief economist, said marketing to this generation has been and can be a challenge. "As a group, boomers are in their peak earning years and continue to wield great influence in the U.S. economy, but they are not homogeneous – there are significant variances in needs, behavior, attitudes and resources," he said. "On one hand is an almost insatiable desire for real estate, with some owning multiple properties, and on the other, many have not adequately planned for retirement. What should not be overlooked are the discretionary spending interests of this generation, and their appreciation of housing as a great investment."

Nearly eight in 10 boomers own their own homes and almost nine out of 10 have owned at some point in their lives; 96 percent believe owning a home is a good financial investment – evidenced by their actions. According to the U.S. Census Bureau, the overall rate of home ownership is 69 percent.

For the portion of baby boomers who have never owned a home, 85 percent cited financial reasons, but 38 percent simply didn't want the responsibility of home ownership.

One-quarter of respondents own one or more other kinds of real estate in addition to a primary residence: 13 percent own land, 8 percent own rental property, 7 percent a vacation home or seasonally occupied property, 2 percent commercial real estate and 3 percent some other kind of real estate.

In addition to a higher rate of home ownership, analysis by NAR shows baby boomers are proportionately more active in the second-home market, owning 57 percent of all vacation/seasonal homes and 58 percent of rental property.

For the segment of boomers who own rental investment property, 34 percent own multiple properties: 14 percent own two rentals, 5 percent own three and a small number own four properties; however, 14 percent own five or more rental units.

Of the portion who own vacation homes or seasonally occupied property, 13 percent said they own two or more vacation or seasonal homes.

Four out of 10 respondents who own a vacation home or seasonal property intend to eventually make that property a primary residence. Historically, other NAR survey data shows only one in five vacation-home buyers had such intentions when they first purchased the property.

Lereah said this has emerged as an investment strategy. "Some boomers will take advantage of generous capital gains exclusions from their taxes when they sell their primary residence, and then place themselves in the position of being able to convert a vacation home into their new primary residence, which would later become eligible for the same tax treatment," he said.

"Then, if their needs change in the future, they'll be able to take the capital gains tax break after they have lived in that home as their primary residence for two out the five previous years. It becomes a great way to build and protect a nest egg."

For the portion of respondents who own land, the median holding was 5 acres. Half of those with commercial property had an ownership interest in only one property and 29 percent have two holdings.

NAR President Thomas M. Stevens from Vienna, Va., said the survey shows one-quarter of all boomers are not satisfied with their present homes. "That means a good portion of baby boomers may be considering a move, so it's important for the industry to understand their preferences and needs," said Stevens, senior vice president of NRT Inc.

Ten percent of all boomers said they are likely to buy additional real estate in the next 12 months; two-thirds of those respondents said they were considering a primary residence but 26 percent were interested in land, 19 percent rental property, 15 percent a vacation or seasonal home and 14 commercial property.

Eight out of 10 boomers used a real estate agent the last time they sold a home. The things they value most in a real estate agent when they buy a home are representation of interests and coordinating with other parties in the process; explaining all contracts, forms and agreements; and management of the closing process from start to finish.

In selling a home, they also want agents to establish the right asking price, show the home and negotiate all offers received on their behalf.

"This tells us the Internet is great for information, but baby boomers want real estate agents to provide services, whether they're buying or selling," Stevens said.

Typical boomers have lived in their present home for a median of nine years, and plan to stay there for another five years. Two-thirds think it's important to pay off a mortgage quickly, but at the same time 58 percent are comfortable in purchasing with a small down payment.

In deciding whether to buy a primary residence in the future, nearly half of the respondents that were considering a purchase said having sufficient wealth or favorable mortgage financing were factors.

In terms of their current financial condition, 43 percent say they are financially comfortable, but 37 percent say they have just enough to make ends meet. Only 4 percent said they were well off, and 17 percent said they are having financial difficulty. "That clouds the retirement options for many baby boomers," Stevens said.

Nearly two-thirds say it costs too much today to truly retire and never work again, and four out of 10 expect they will pay for at least some college expenses for children or grandchildren; 38 percent said current financial needs mean they give little attention to financial planning for retirement.

"Many baby boomers are simply too busy to give much thought to planning for retirement, but they really need to develop strategies now," Stevens said. "Many just see themselves 'going' for as long as they can."

Only 14 percent expect to receive a sizeable inheritance that will be a critical help during retirement. Half of all boomers believe it is important to diversify savings for retirement into different types of investments.

In describing how they would like to retire, many boomers might be described as "dreamers." One in 10 said they already are retired, but only 26 percent said they would never want to work for pay again. A third see themselves as going back and forth between periods of work and leisure, 17 percent would work part time, 11 percent would start a business and 7 percent would work full time. Even so, 59 percent said it was not likely that they'd work beyond the time they become eligible for full Social Security benefits. The average respondent expects to stop working at age 65.

Three out of five say their idea of the perfect location to retire is in a rural area or small town, with only 12 percent saying an urban or city setting, and nearly half would consider living in an age-restricted community; 38 percent want to be close to family.

If money were no object, access to quality health care is important to more boomers than being on a golf course (38 percent vs. 4 percent). Ideally, they would like to live in a rural area with access to quality health care. "One question is how many areas actually offer those kinds of amenities in that kind of environment," Stevens said.

Half said they have a 401(k) or similar retirement plan, 39 percent a pension, 39 percent an IRA or Roth IRA, 11 percent a SEP (Simplified Employee Pension Plan), and 6 percent have investments in a REIT (real estate investment trust).

Most, 83 percent, do not plan to withdraw funds from an eligible retirement account starting at age 59½. For those who are very likely to withdraw, 75 percent said they'd use the funds for personal living expenses, and 51 percent said they'd travel; 39 percent would consider investment in some form of real estate.

The 2006 National Association of Realtors study, "Baby Boomers And Real Estate: Today and Tomorrow," was conducted online by Harris Interactive between March 31 and April 6, 2006, among a nationwide cross section of 1,969 U.S. adults born between 1946 and 1964. Figures for age, sex, race, education, region and household income were weighted where necessary to bring them into line with their actual proportions in the population. Propensity score weighting was also used to adjust for respondents' inclination to be online. With 95 percent certainty, overall results have a sampling error of plus or minus 2.2 percentage points; the sampling error for various sub-sample results is higher and varies.

The study, expected to be ready for publication in late June, can be ordered in advance by calling 800/874-6500. The cost is $50 for NAR members and $125 for non-members.
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Cost-Saving Tips for Fixing Up Your House to Attract Buyers

A slower U.S. housing market means sellers can no longer bank on having their pick of offers. Suggestions on ways to dress up properties for more curb appeal and to speed up a sale.
By: Rachel Koning Beals: The Wall Street Journal Online
A slower U.S. housing market means sellers can no longer bank on having their pick of offers for properties showing their age and the wear and tear of everyday living. Dressing up, or staging, a home with a thorough cleaning and decorator touches may be vital to luring increasingly fussy buyers.

Sellers work within a range of budgets as they prepare a property for sale, often from a few hundred to a few thousand dollars. Yet many critical fixes don't cost a dime.

"Walk through the house and remove all the clutter," says Rhonda Duffy, an agent for Rainmaker Realty in Atlanta. She reports four houses on the market for every one buyer in her area, plus slower activity in her firm's northern California, Washington D.C., and Florida offices.

"A living room should have a couch and chairs, a table, some plants and maybe a TV, not a 30-year life history," she says. "Clean out the closets and don't forget the garage."

Since similar houses that had routinely sold in weeks over the past few years may now be sitting on the market for several months, sellers are challenged over a longer time to keep their home free of the remnants of hectic family life.

At the least, agents recommend, stage the house for a series of high-quality photos to run on an Internet listing sight - first impressions take on even greater importance these days. Then, keep copies of the photos accessible to would-be buyers as they walk through the house, says Duffy. Toys, piled-up mail and crowded countertops are likely to be forgiven if a buyer can see the home's full potential. Staging for photos can include moving a sofa away from a feature window and editing items on a fireplace mantel.

Personal items that will soon have to make the move to a new place anyway should be boxed up and stored ahead of opening the house to potential buyers. Sellers must try to distance themselves emotionally from the house as soon as the decision is made to list, says Fran Bailey, an agent with Baird & Warner in suburban Chicago. "Yes, the purpose of a home is to support a lifestyle. Now, it has another purpose and that is to sell itself," Bailey says.

Don't rid the home of its lamps, however. Plenty of light, including a small lamp on a kitchen counter, can go a long way to warm the place up. Made beds and emptied garbage cans should become second nature since sellers never know when they may have to show the place on little notice.

The few hundred dollars budgeted for the house sale might be best spent on storage rental or professional clutter removal - out-of-commission appliances for instance - in order to optimize square footage. For smaller homes, space is often a trick of the eye, says Lindsay Peroff, with 1800gotjunk.com, a junk-removal service operating in larger cities.

When to call the pros

Once personal items and extra furniture are out of the way, sellers may want to spend enough to hire professional cleaners, including someone to wash windows inside and out and to shampoo carpets. Pets shouldn't be around for showings and neither should their smell.

"This may seem simple, but you'd be surprised how many people don't do it," says David Henry, an agent with Coldwell Banker in Aptos, Calif., in Santa Cruz County. "Air the place out several hours a day, for several days."

Have pest, septic and mold inspections prior to investing in any upgrade projects, he says. Then, sellers can better prioritize upgrade ideas and budget accordingly.

Sellers hoping to keep their staging expenses lean and their family routine intact might focus on the exterior. Web-based listings may be key to generating early interest, but curb appeal is what's likely to get buyers to the front door.

Get rid of clutter and dead vegetation and add color with some new plantings. When possible, try to pick flowers that will bloom in time for showings, says Duffy. Remove broken and dated lawn features and fences - and, says Duffy, tear out chain-link fences in any condition.

Inside, modest budgets stretch the most if spent on fresh paint, particularly for the entry and main rooms of the house. Cracked windowpanes, leaky faucets and other modest repairs deserve attention.

Agents and decorating professionals said budgets of several thousand dollars might be best used toward exterior panting, new landscaping and kitchen face-lifts.

Value rooms

It's no surprise that kitchens and bathrooms sell a home, so spiffing up these spaces, even for a few dollars, can go a long way toward boosting the asking price and generating interest.

Many people underestimate the low cost and high impact of swapping out cabinet hardware and faucets for updated styles, says Daryl Coley, who co-owns the Tulsa, Okla.-based franchise of national remodeling chain Kitchen Solvers.

He suggests that larger budgets go to countertop upgrades; solid surface materials such as granite, quartz and marble give a high-end feel. Even less-expensive choices, such as a laminate with a beveled front that runs $1,000 to $2,000 depending on footage, can give the overall room a fresher look. Floors should be considered next, he says. Those watching the bottom line might consider long-wearing laminate flooring as an alternative to hardwood or tile.

Gut kitchen renovations or even a few choice updates - refaced cabinets, new floors and countertops -- can typically add $5,000 to $10,000 to the asking price depending on size and quality, says Coley. But sellers must keep in mind that new owners may have different taste; a few staging updates might prove more enticing to buyers than being stuck with an expensive renovation they don't like.

Dressing up

It's likely that a designer free of emotional investment in the property can better dress a home for the widest range of potential buyers. If the budget allows, a professional stager - a growing field of certified and noncertified participants - might ease seller anxiety; many agents, but not all, also consider staging a specialty.

Think twice before assuming you can stage on your own. Chicago designer Philip Popwici was called in to help sell a midrise Chicago apartment, on the market for nearly three months with little interest, that along with several similar two-bedroom, two-bath units in building, was about to have its Lake Michigan views compromised by new construction. Staging introduced to potential buyers the appeal of the apartment exclusive of its view. It sold long before any of the comparable properties, some of which had to be pulled off the market.

Popwici, owner of Rooms Redux, a staging company catering to a clientele of condo and town home owners, helped carve out a dining space in an open floor plan with furniture positioning, essentially adding a room within existing square footage. He recommends hanging a mirror to mimic a window in rooms lacking natural light. He says bathrooms and master bedrooms are a good place to use limited resources. A few touches, like rich window treatments and candles, can make these rooms feel like a retreat for potential buyers.

He too emphasizes a good edit of life's possessions.

Yet, while decluttered homes stand a better chance of selling, that doesn't mean homes should be shown completely empty, the experts say.

Those working under a larger budget might consider trendy and appropriately proportioned rental furniture to fill the main rooms, says Baird & Warner's Bailey.

At the least, says Rainmaker's Duffy, stage small vignettes of tables, lamps and artificial plants to soften corners and add interest. Make sure to provide a chair or two, even inexpensive covered folding chairs and a simple covered table, for any buyer who might need to sit down and weigh her options - like making an offer.
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Price Your Home Right To Help Speed a Sale

With sales slumping and inventories on the rise, experts say getting your property sold depends on pricing it correctly.
By: Marshall Loeb: The Wall Street Journal Online
One tool sellers can fall back on when the market is shifting is a home appraisal.

You can have an appraisal done before you contact a broker or if you're just curious what your home would be worth. They cost, on average, from $250 to $400 for a single-family home, slightly more for multiple-family dwellings.

An appraiser will physically inspect your house for shoddy workmanship or needed repairs, measure its dimensions and takes notes on the floor plan, utilities and other factors that affect pricing.

He or she should also look at three or four "comps" - comparable homes in your neighborhood that have sold within the past six months - and analyze how homes currently on the market are faring, says William J. Doka, owner and president of Erickson Appraisal Company in Fair Lawn, NJ.

That's a more comprehensive assessment of market conditions than the free comparative market analysis, or CMA, that a broker will give you, says Doka.

He cautions that brokers want to earn your listing and can be tempted to paint an overly rosy picture of how your home will sell while appraisers, although sometimes subject to similar pressure from mortgage brokers, strive to be objective.

The results of the appraisal will be presented to you in a report that can run from five pages, for a simple summary that suits most lenders and homeowners, to 50 pages or more for a "narrative" that banks might demand before financing the purchase of a multimillion-dollar home.

Homes are typically listed for sale at a price several percent above the appraised value.

Predictably, most of Doka's business comes from lenders, who typically require an outside appraisal before making a loan. But homeowners are also hiring him before contacting a broker. He charges from $350 to $400 to appraise a single-family home.

Some things to remember when looking for an appraiser:

    • Make sure the appraiser is licensed by your state.
    • Ask how long the business has been around, what professional education the
      appraiser has had and what organizations - like the Appraisal Institute or the
      American Society of Appraisers - the appraiser belongs to.

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The Weekend Guide! May 18 - May 21, 2006

The Weekend Guide for May 18 - May 21, 2006.
Full Article:
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Survey Shows How Sellers Spend Their Money

A new study by the Home Improvement Research Institute shows how money is being spent to get a house ready for sale.
By: Al Heavens: Realty Times
We've got a couple of weeks left in National Remodeling Month, so it seems appropriate and timely that we check into this year's home improvement trends.

For that, we turn to a study funded by the National Hardware Show and conducted in March by the Home Improvement Research Institute of Tampa, Fla.

The study, which involved 1,200 new and existing homebuyers, and was released last week at the Hardware Show in Las Vegas, found that almost 50 percent of those selling houses work on projects to get them ready for sale.

This jibes with findings of a study conducted by the institute two years ago, according to its managing director, Fred Miller.

The vast majority of work - 61 percent of it - is being done before the property goes on the market, and an increasing amount of it in the 30 days before it is listed.

Still, 12 percent of the work is being done after an offer has been made, twice that of the 2004 survey and probably reflecting the slowing market and the accommodations real estate agents suggest sellers should make to buyers.

Almost 25 percent of this work involves replacing flooring, although Miller said the data don't suggest the reasoning - whether more upscale hardwoods or ceramic or quarry tile are replacing vinyl.

Painting accounts for 22 percent of the work done to get the house ready for market. Most real estate agents suggest painting as a relatively inexpensive way to freshen up rooms.

Electrical work and landscaping are each at 9 percent, and exterior structural changes - windows and siding - accounted for 12 percent.

"Most people who responded to the survey said these projects improve the value of their houses," Miller said.

Why spend the money at the last minute?

Almost one-third of those responding to the survey replied, "To make a good impression." Curb appeal sells almost 50 percent of houses generally, according to survey after survey by the National Association of Realtors, but in a slowing market, your house has to look better than the five others for sale on your street to get someone out of the car and up to your front door.

The renewed importance of curb appeal likely accounts for the increase in landscaping work (5 percent in 2004), since, together with painting, it's a relatively inexpensive way to spruce up a home's exterior.

Most suggestions for change came from real estate agents (78 percent), although Miller emphasized that data for this category came from "a small base." Almost 15 percent of the sample said that the work was recommended in the home inspection report.

Fewer sellers in 2006 than 2004 made the changes "to make the houses look more modern," perhaps an indication that a lot of existing-home buyers either like original touches or prefer making changes themselves.

About the same percentage (22 in 2006 versus 24 in 2004) spent money to repair unsightly areas, while 17 percent did it to "fix something not working," 8 percent to pass inspection and 7 percent to neutralize decor.

In a slowing market in which people are concerned about selling quickly with a chance of selling for more, fixing things and passing inspection are becoming more important considerations.

While the male head of the household leads in initiating projects for getting the house ready for sale, Miller said that there has been an increase in joint decisions on these projects since 2004.

Miller said there had been a slight shift from sellers doing the work themselves to using a professional between 2004 and 2006.

He said the possible reason for the shift has less to do with the unwillingness of homeowners to do their own work and more with getting it done quickly so the house can get on the market faster and ahead of the competition.

Only 53 percent of sellers were doing the work themselves in 2006, compared with 59 percent in 2004, according to the study.

Use of professionals increased to 43 percent in 2006 from 37 percent in 2004. A small percentage (3 percent in 2006, 4 percent in 2004) did these projects jointly.

The 2006 study was conducted between Feb. 28 and April 2, and the sample was doubled from the one in 2004, with 597 respondents buying new houses and 600 buying existing ones, Miller said.

All interviews were conducted by telephone, and all of those interviewed had purchased a house within the last year, Miller said.
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Growth of Median Home Prices Slowing

Southern California homeowners, say goodbye to your good friend: Double-digit price appreciation.
By: Annette Haddad: LA Times
For the first time in 4½ years, the region's median home price rose less than 10% year over year, data released today showed. It was the most dramatic sign yet that the Southland's housing market is coming to the end of its long-running boom.

In April, the median price for the six-county region was $485,000, a 9% gain over April 2005, but virtually flat from March's median of $486,000.

What's more, sales in April declined 21.3% from a year ago and were down 16% from the previous month, according to DataQuick Information Systems, a La Jolla-based research firm.

It was the fifth straight month of declines, but at 24,748 transactions closed, the number was still above the average for the past two-decades.

The housing market "is moving in the direction we thought it would," said John Karevoll, DataQuick's chief analyst. "It's all part of a normal end game of the cycle."

But identifying what the next phase may bring could be tricky. These days, Southern California's housing market is defined by three undisputable facts: Slowing sales, flattening prices and a sharp increase in the number of homes for sale.

What's more, about a third of homes on the market have had their asking prices reduced at least once, listing data provided by ZipRealty showed.

The experts call it a market in transition. It's not the same red-hot sellers' market of the last three years, but it's also not a buffet of bargains for buyers either.

"No one's in a panic mode," said Patrick Lashinsky, senior vice president of ZipRealty, an Emeryville-based brokerage with offices in Southern California.

"It's kind of like a pendulum swinging," he said. "Sometimes it swings back a little too much, but right now it's swinging away from sellers and more toward buyers."

Median prices reached new records in three counties: Los Angeles, up 13.6% year over year to $508,000; Orange, up 9% to $628,000; and San Diego, up 4.3% to $505,000, DataQuick said.

The median in Riverside County rose 9.4% to $409,000. It gained 18.4%, to $360,000, in San Bernardino, and rose 10.4% to $584,000 in Ventura County.
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Vegas Buyers Sue Developers After Condo Projects Cancelled

In this hot housing market, buyers claim they were kept out of condominium deals by companies behind two developments that were halted after deposits were accepted from potential homeowners.
By: Dan Ackman: The Wall Street Journal Online
With housing price growth slowing, home sales declining and interest rates and inventories of unsold homes rising, one might think buyers would be itching to exit condominium contracts any way possible. But in Las Vegas, a hot spot of the housing boom that has only recently started to show signs of cooling, some buyers are suing to stay in.

In one lawsuit, would-be condo buyers are suing the developers of the Vegas Icon condominium project - affiliates of the New York-based Related Companies - which announced plans to build and then cancelled the project. In another, filed by the same group of lawyers and settled last week, the plaintiffs had entered into reservation agreements, which involved putting some money down, to buy units in a project called Vegas Grand, just off the Las Vegas Strip, at specified prices. But the developers, Del American, based in Altamonte Springs, Fla., cancelled the reservations.

The plaintiffs allege the Vegas Grand developers needed pre-sales to obtain financing for the 880-unit project. In late 2003, they sold so-called reservations and then sent the buyers letters congratulating them on their new home purchases and urging them to tell their friends to buy as well. In April 2004, say lawyers for the plaintiffs, the developers issued a press release announcing they had "sold" 740 units and that sales were continuing at a brisk pace.

But in May 2005, the developers said they were canceling the reservations in order to get out of ballooning construction costs. David Oliver, lead lawyer for Del American, says condo reservations are generally cancelable by either party. But because Nevada has no intermediate appellate court, the issue has not been settled there as it has been elsewhere. Because there's no intermediate appeals court, "there is very little law on just about anything," he says. "It's the Wild, Wild West and it's not a good place to be a condo developer."

A settlement in the lawsuit was finalized on Friday, according to Thomas Foley, one of the plaintiffs' lawyers. The developers have agreed to pay the plaintiffs 2.5% of the sale price on each of the 880 units.

In the Related case, the condo buyers were geared up to buy units in the Icon Towers on the Las Vegas strip. These plaintiffs say they signed contracts to buy actual units (as opposed to reservations). But in January, the developer informed them that it was canceling the project and offered to refund their deposits. The plaintiffs allege that the land on which the towers would have been built, along with the related zoning variances, could be transferred to other developers, and that Related is seeking a buyer to do just that. The plaintiffs' implication: that Related could make more money by selling the land to other developers than it could by adhering to its contracts.

Lawyers for the Vegas Icon buyers say that their contracts are binding even if the project is not built. They say any substitute developer would be well-served dealing with their clients who remain eager to close a deal.

"If the new developer buys the property, builds it out, the class members should get to buy the units," Mr. Foley says, adding that his clients should also be able to collect damages from Related. Related and their lawyers declined to comment for this article.

The Legal Players:

The plaintiffs in both cases are represented by Craig Anderson of the Las Vegas firm Marquis & Aurbach; George West III of Las Vegas; Donahoo & Associates of Santa Ana, Calif.; and Foley Bezek Behle & Curtis, a class action firm from Santa Barbara, Calif.

Related is represented by Hilarie Bass, the national chair of the litigation department at Greenberg Traurig. Del American is represented by David Oliver, a partner in Greenberg Traurig's Orlando office.

The Vegas Grand case was assigned to U.S. District Judge James Mahan and then reassigned to newly appointed U.S. District Judge Brian Sandoval. The Vegas Icon case has been assigned to Judge Mahan.

State v. Federal:

Cases like these historically were litigated in state court. But because of the Class Action Fairness Act of 2005, putative class actions alleging damages of more than $5 million can either be filed in federal court or may be removed from state court to federal court by the defendants.

The Vegas Grand case was originally filed in a Nevada state court but was later removed. There remain a group of 35 individual actions in state court that have not been settled, Mr. Oliver says. The Icon Towers case was filed initially in federal court in Nevada.

Possible Resolution:

The Vegas Icon suit seems as though it, too, could be settled along the lines of the Vegas Grand case. The plaintiffs could buy if the project gets built, or seek damages from Related, or some combination of the two. But whether the plaintiffs will still want to buy luxury condos in Las Vegas six months or two years down the road remains, well, anyone's bet.
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NAR: First Quarter State Existing-Home Sales Ease

Existing-home sales, including single-family and condo, remained historically high in the first quarter but have experienced a downtrend since hitting a record in the third quarter of last year.
NAR: REALTOR® Magazine Online
Even so, 26 states showed increases in sales activity from a year ago, according to the National Association of Realtors®.

The latest report on total existing-home sales shows that the seasonally adjusted annual rate* was 6.80 million units in the first quarter, down 2.1 percent from the 6.94 million-unit level in the first quarter of 2005.

The biggest increase was in New Mexico, where existing-home sales rose 26.2 percent from the first quarter of 2005. Louisiana’s first-quarter resale pace rose 22.9 percent from a year earlier, while Montana experienced the third strongest gain, up 17.5 percent. Six other states recorded double-digit sales increases from a year ago. Twenty-one states and the District of Columbia experienced declines. Complete data for three states was not available.

David Lereah, NAR’s chief economist, said rising interest rates have dampened sales. “A steady rise in mortgage interest rates has slowed home sales in higher cost areas, yet job growth in some moderately priced markets is boosting sales in other areas,” he said. “The net effect is a modest decline in home sales for the nation as a whole, but sales remain historically strong and are providing a solid underlying base for the overall economy.”

View Quarterly Data

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was 6.24 percent in the first quarter, up from 6.22 percent in the fourth quarter; it was 5.76 percent in the first quarter of 2005.

NAR President Thomas M. Stevens from Vienna, Va., said the sales pattern is expected to level out. “We project home sales may soften a little further before picking up in the fourth quarter, but we’re not looking for any significant changes in the market moving forward,” said Stevens, senior vice president of NRT Inc. “This should provide stability in the market so that buyers and sellers will be on a fairly level playing field in most of the country.”

Regionally, the strongest performance was in the South, which reported an increase of 2.3 percent to an existing-home sales pace of 2.71 million units in the first quarter in comparison with a year ago. After Louisiana, the strongest increase in the South was in Mississippi, up 17.3 percent from the first quarter of 2005; resales in North Carolina rose 17.0 percent; Arkansas and Tennessee also posted double-digit sales increases.

In the Midwest, existing-home sales rose 1.1 percent to a 1.56 million-unit annual sales level from the first quarter of 2005. Indiana led the region, up 10.4 percent from a year earlier, followed by Iowa, up 9.0 percent, and Ohio, with an increase of 6.2 percent.

The Northeast recorded an existing-home sales pace of 1.12 million units in the first quarter, down 2.9 percent from a year earlier. Sales activity in Maine rose 4.6 percent from the first quarter of 2005, Rhode Island increased 2.0 percent and New York sales declined 2.2 percent.

In the West, the existing-home sales level of 1.41 million units was 12.4 percent below the first quarter of 2005. After New Mexico and Montana, the best performance the region was in Utah where existing-home sales rose 12.7 percent from a year earlier; Hawaii sales increased 6.3 percent while Alaska rose 5.9 percent.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.
# # #
* The seasonally adjusted annual rate for a particular quarter represents what the total number of actual sales for a year would be if the relative sales pace for that quarter was maintained for four consecutive quarters. Total home sales include single family, townhomes, condominiums and co-operative housing. NAR began tracking the state sales series in 1981.

Minor revisions have been made to quarterly seasonally adjusted annual sales rates for 1999 through 2005. Each May, NAR Research incorporates a review of seasonal activity factors and fine-tunes historic data based on the most recent findings. Normally, revisions are for the past three years, but these revisions include some adjustments back to the benchmark year of 1999.

Seasonally adjusted rates are used in reporting quarterly data to factor out seasonal variations in resale activity. For example, sales volume normally is higher in the summer and relatively light in winter, primarily because of differences in the weather and household buying patterns.

Tables of state resale rates, percent changes and some historic data are available at the site below under Research – click on Existing-Home Sales, then State Existing-Home Sales.
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Home Prices Cool But Appreciation Remains Strong

Metro Home Prices Begin to Cool but Appreciation Remains Strong
NAR: REALTOR® Magazine Online
The growth in single-family home prices continued to cool in the first quarter, but many metropolitan areas are still showing double-digit annual gains, according to the latest survey by National Association of Realtors®. At the same time, metro area condo price appreciation has generally cooled to normal levels.

The association’s first-quarter metro area single-family home price report, covering changes in 149 metropolitan statistical areas,* shows 60 areas with double-digit annual increases and 16 metros experiencing price declines.

The national median existing single-family home price was $217,900 in the first quarter, up 10.3 percent from a year earlier when the median price was $197,600. 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 2005, the annual rate of home-price appreciation was 13.6 percent.

David Lereah, NAR’s chief economist, said the market is responding to the improvements in inventory. “With the supply of homes picking up very nicely in many areas of the country, pressure is coming off of home prices,” he said. “By the time we report second quarter data, I expect most areas will be returning to normal rates of price growth in the single-digit range. Consumers generally can expect normal price appreciation for the foreseeable future, providing solid returns over time.”

Metro area condominium and cooperative prices, covering changes in 56 markets, show the national median existing condo price was $224,100 in the first quarter, up 5.2 percent from a year earlier. Twenty-seven metros showed double-digit annual gains in the median condo price, and five areas had declines.

NAR President Thomas M. Stevens said inventories have picked up more strongly in the condo sector. “Although we continue to have areas of hot growth, we’re finding more broadly balanced conditions across the country in the condo market,” said Stevens, senior vice president of NRT Inc.

“Condos have good fundamentals given the demographics of buyers, with baby boomers focused on the high end and their kids on more affordable units. However, in a handful of areas where there may be an oversupply, prices may level-out, so the longer your time horizon the better your investment,” Stevens said.

The national condo price is higher than the median single-family home price because there is a high concentration of condos in the most expensive metropolitan areas. Within a given area, the typical single-family home costs more than the median condo price.

The largest single-family home price increase was in the Phoenix-Mesa-Scottsdale area of Arizona, where the first quarter price of $268,300 rose 38.4 percent from a year ago. Next was Orlando, Fla., at $260,500, up 34.0 percent from the first quarter of 2005. Gainesville, Fla., with a first quarter median price of $210,100, increased 31.9 percent in the last year.

Median first-quarter metro area single-family prices ranged from $52,500 in Danville, Ill., to 14 times that amount in the San Jose-Sunnyvale-Santa Clara area of California, where the median price was $746,800. The second most expensive area was the San Francisco-Oakland-Fremont area at $720,400, followed by the Anaheim-Santa Ana-Irvine area (Orange Co., Calif.), at $712,600.

Other low-cost markets include, Decatur, Ill., the second least-costly metro, at $80,000, and the Youngstown-Warren-Boardman area of Ohio and Pennsylvania, with a first-quarter typical resale home price of $81,100.

In the condo sector, the strongest gains were in the Phoenix-Mesa-Scottsdale area, where the first quarter price of $179,600 rose 38.0 percent from a year ago. In the Honolulu area, the median condo price of $309,000 rose 34.9 percent from the first quarter of 2005, while Miami-Fort Lauderdale-Miami Beach, at $221,500, increased 31.4 percent. The condo price series will be expanded in the future as more data becomes available.

Metro area median existing condo prices ranged from $97,400 in Bismark, N.D., to $615,300 in San Francisco-Oakland-Fremont. The second most expensive reported condo market was Los Angeles-Long Beach-Santa Ana, at $404,600, followed by the San Diego-Carlsbad-San Marcos area of California at $382,200.

Other low cost condo markets include Greensboro-High Point, N.C., at $108,000, and Dallas-Fort Worth-Arlington, at $112,800.
Regionally, the strongest increase in the median existing single-family home price was in the West, where the price rose 12.0 percent to $344,000 during the first quarter. After Phoenix-Mesa-Scottsdale, the strongest increase in the West was in Spokane, Wash., at $172,100, up 26.3 percent, followed by Eugene-Springfield, Ore., at $223,600, up 25.3 percent from the first quarter of 2005, and the Tucson area, at $248,600, up 24.9 percent.

In the Midwest, the first-quarter median existing single-family home price of $158,800 rose 6.7 percent from a year earlier. The strongest metro increase in the Midwest was in Waterloo-Cedar Falls, Iowa, where the median price of $109,700 was 26.8 percent higher than the first quarter of 2005. Next was Decatur, Ill., up 14.3 percent, and Cedar Rapids, Iowa, at $134,600, up 13.4 percent in the last year.

In the Northeast, the median resale single-family home price during the first quarter was $285,200, up 6.6 percent from a year ago. The strongest increase in the region was in Elmira, N.Y., at $88,500, up 18.8 percent from the first quarter of 2005, followed by Trenton-Ewing, N.J., with a median price of $264,900, up 17.5 percent, and Atlantic City, N.J., at $251,700, up 15.8 percent.

In the South, the median existing single-family home price was $179,700 in the first quarter, up 6.6 percent from a year earlier. After the Orlando and Gainesville areas of Florida, the strongest increase in the South was in Ocala, Fla., at $159,800, up 30.8 percent from the first quarter of 2005. Next was the Virginia Beach-Norfolk-Newport News area of Virginia and North Carolina, where the first quarter median price of $221,100 was 27.1 percent higher than a year ago, and Deltona-Daytona Beach-Ormond Beach area of Florida, at $212,600, up 25.4 percent.

View Charts.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.
# # #
*Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. A list of counties included in MSA definitions is available at: http://www.census.gov/population/estimates/metro-city/0312msa.txt

National and regional quarterly prices have been revised back through 1989; the only revision to the metro price series is the normal annual revision for 2005 with revised fourth quarter data. The fixed reporting sample of representative multiple listing services for national and regional data has been updated to reflect geographic changes over time. In addition, regional weights have been updated and aligned to the 2000 Census, but changes in price patterns are consistent with previously reported data.

Regional median home prices include rural areas and samples of many smaller metros that are not included in this report; the regional percentage changes do not necessarily parallel changes in the larger metro areas. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Quarter-to-quarter comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.

NAR began publication of metropolitan area median single-family home prices in 1982; the metro area condo price series was launched earlier this year when fourth quarter 2005 data was reported.

Because there is a concentration of condos in high-cost metro areas, the national median condo price is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes. As the reporting sample expands in the future, additional area will be included in the condo price report.

Tables of metropolitan area median prices, percent changes and some historic data are available at the site below – under Research, click on Existing Home Sales, then Metropolitan Area Prices.
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Pricey homes and lots of 'em

Fewer sales mean more houses to choose from. Buyers have gained breathing room, if not a lot of great deals.
By: Darrell Satzman: LA Times
Guy and Karen Vidal are experiencing something new as they try to sell the small Craftsman house they own on Apex Avenue in Silver Lake.

Since listing it at $699,000 two months ago, they've reduced the price twice — first to $679,000 and then to $659,000 a couple of weeks later.

After buying, restoring and selling 20 distressed homes over the last five years in Silver Lake and Echo Park — and making at least a small profit on each one — the former entertainment industry workers feel the real estate market shifting beneath their feet.

"We specialize in restoring places to their original glory: old Craftsman, bungalows and Spanish houses," Karen Vidal said. "When you walk in the door, we make it look like it's 1925."

The problem for the Vidals is that after several years of frenzied bidding, buyers are also determined to turn back the clock.

Although most neighborhoods in Southern California saw home prices increase by double-digit percentages in the first quarter of this year compared to the first quarter of last year, some experts point to another key indicator — fewer sales — as evidence that the sellers' market of the last five years is coming to a close.

"This is a time when buyers have time to shop and compare and can make a thoughtful purchase," said Roni Telmosse, branch manager of Coldwell Banker Carlsbad in San Diego County. "It's not like a year ago, when buyers were walking around with a check in their pocket and writing offers on the hood of their car."

All told, there were 69,499 single-family homes sold in the first three months of the year in Los Angeles, Orange, Riverside, San Bernardino, Ventura and San Diego counties, according to DataQuick Information Systems — a decline of more than 8% from the same period a year earlier.

Riverside was the only county to show an uptick in sales activity — 6.6% — in the first quarter, while San Diego had 17% fewer sales; Ventura, 16%; Orange, 15%; Los Angeles, 10%; and San Bernardino, 3%, according to DataQuick.

Call it a correction, a flattening or a return to common sense, but as inventory creeps up and the number of sales diminishes, many believe the end of soaring prices in Southern California is nigh.

"Buyers don't have that panicked feeling: 'If I don't buy before the post goes up, I'll get into multiple offers and lose out,' " said Ron Tornell, manager of the Thousand Oaks office of Prudential California Real Estate.

In his area, Tornell said, there were roughly 900 houses and condominiums on the market at the beginning of May — up about 25% from last year but still well below the 20-year average of about 1,500 homes. During the depressed market in the mid- 1990s, there were about 2,500 homes for sale in the area, Tornell said.

"What we're seeing is a more balanced market," he added, "one that doesn't favor the seller or the buyer."

San Diego County had the lowest increase on a price-per-square-foot basis — 7.2% — of any of the six Southern California counties at the end of the first quarter of 2006, compared with the same quarter of 2005.

Although most buyers are focused on specific neighborhoods and follow median sales prices more closely than the price-per-square-foot measurement, real estate agents and industry analysts say the latter number offers the most reliable snapshot of how a market is performing over a wide area. By this same measure, San Bernardino County home prices were up the most, at 27.7%. Los Angeles County was up 23.1%.

Homes are also clearly lingering longer on the market. According to the California Assn. of Realtors, Southern California had a six-month supply of homes for sale in January, more than twice the number in January 2005. In February, the supply increased to more than seven months, again twice as much as a year earlier.

Even if interest rates stay relatively low, Southern California is entering a period of slower sales and flat prices that could last five years or more, believes Christopher Thornberg, senior economist for the UCLA Anderson Forecast. The forecast has been predicting a leveling off of prices for several years now; so far, it has not come to pass. But to Thornberg, the fact that fewer people can afford homes is an indication that prices will flatten. In Los Angeles County at the end of 2005, according to the California Assn. of Realtors, the percentage of households able to afford a median-priced home was just 12%, down from 17% at the end of 2004.

The sort of turnaround in the market predicted by Thornberg would make it easier for the Vidals to compete for the distressed properties they make their living restoring — but it leaves them in a bind with the Apex house, which they purchased in January for $525,000.

The people they bought it from acquired the house in October for $400,000 — turning a quick profit of $125,000 before agents' fees and taxes.

Guy Vidal says they spent more than $60,000 to restore the Craftsman to near its original 1911 condition, with such enhancements as copper plumbing and updated electrical wiring.

Even though the house is just a bit over 1,000 feet, the Vidals' agent, Lyn Bradford of Prudential California Jon Aaroe Division, believes it would have sold quickly a year ago.

"People are taking their time; there's a lot of fence-sitting going on," Bradford said. "There's no doubt the market feels flat."

"As soon as we bought it," Guy Vidal said, "the market changed."

Another recent buyer who has seen the market change is Matthew Zevin, an attorney who lives with his wife, Kimberly, and their two children in San Diego's Carmel Valley neighborhood.

The Zevins began looking for a larger house with a bigger yard and a pool in the same neighborhood last spring. At the time, prices were soaring and most listings in the area were being snapped up in a few weeks.

Sometime last fall, however, Zevin noticed a pronounced slowing. "It was drastic," he said. "There was suddenly a lot more inventory, and with more inventory, prices started dropping."

The Zevins paid $1.5 million in November for a 3,800-square-foot house. Coincidentally, they had bid $100,000 more for this same house in July. The sellers had rejected that offer, which was contingent on the sale of the Zevins' home.

"If we were buying it today," Zevin said, "we'd pay even less."

Some San Diego County communities actually registered a decline in prices in the first quarter of 2006, compared with the same period in 2005, a rarity in Southern California, where the six-county median was up nearly 18%. Among communities with 50 or more sales in the quarter, prices for East San Diego, ZIP Code 92105, were down 6.8% on a price-per-square-foot basis; El Cajon 92020 was down 4.6%; and Rancho Bernardo 92127 was down 2.7%.

By comparison, the lowest-performing ZIP Code in Los Angeles County was 91390 in Santa Clarita, which was still up 7.7% for the same period, according to DataQuick.

Among the best-performing neighborhoods in all of Southern California during the first quarter were Twentynine Palms 92277 in San Bernardino County, up 55.7%; August F. Haw 90061 in Los Angeles County, up 48.6%; and Coachella 92236 in Riverside County, up 40.3%.

Realtor Bob Deville is co-owner of Windemere Coachella Valley, which has a dozen real estate offices in Riverside County. His area, which includes Palm Springs and Rancho Mirage and is dominated by retirement and resort communities, is picking up after a slow stretch late last year and early this year, he said.

"Prices won't keep going up at the clip they had," Deville said, "but we still feel like we're going to have a good year."

Hector Castañeda, branch manager for Century 21 Real Estate in San Bernardino, said he thinks many parts of that city may be hitting their price ceiling. But, he added, a changing market is not necessarily bad.

"We're used to breaking records every year," Castañeda said. "So when you talk about a slowdown, it's all relative."


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Darrell Satzman is a Los Angeles-based freelance writer. Reach him at satzman@ earthlink.net.

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Leaders of the pack

Here are the places where home prices have risen the most, percentage-wise, in six Southern California counties, for the first quarter of 2006, compared with the first quarter of 2005.

Place and              ZIP Code Price change

Los Angeles County
LA/August F. Haw 90061       48.6%
LA/Watts             90002       43.6
LA/August F. Haw 90059       41.5
LA                      90011       40.4
El Monte              91732       40.0

Orange County
Anaheim Hills       92807        25.5
Anaheim              92805        25.0
Fullerton              92833        24.8
San Clemente       92672        24.0
Fullerton              92831        23.8

Riverside County
Coachella             92236        40.3
Hemet                 92344        29.9
Wildomar             92395        28.8
Norco                  92860        28.7
Riverside             92501        27.9

San Bernardino County
Twentynine Palms 92277        55.7
Barstow               92311        48.8
Joshua Tree         92252         43.6
San Bernardino     92411         38.9
San Bernardino     92410         37.3

San Diego County
Paradise Hills       92139         16.5
National City        91950         12.3
Fallbrook             92028         10.4
Escondido            92026         10.3
La Mesa              91941         10.3

Ventura County
Oxnard               93035          31.1
Ventura              93001          26.7
Camarillo            93010          19.4
Oxnard               93030          18.4
Simi Valley         93063          17.4

Note: Based on the median price per square foot for ZIP Codes with 50 or more sales for the quarter.

Source: DataQuick Information Systems
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Benefits, Risks of the Half-Century Mortgage Loan

Some buyers who can't afford a standard 30-year mortgage, and aren't comfortable with a 40-year mortgage either, are finding a 50-year loan to be an attractive option. But there are risks.
By: Noelle Knox and Mindy Fetterman: REALTOR® Magazine Online
While many banks offer the 40-year product — which accounts for 5 percent of loans — 50-year mortgages are harder to find, according to LoanPerformance, a real estate data firm. So far, only a few small lenders have rolled out the five-decades-long mortgages.

Statewide Bancorp in Rancho Cucamonga, Calif., has had about 220 applications since March when it began offering the 50-year term. The loans are luring cash-strapped buyers who are having a hard time coping with soaring home prices. Although 50-year mortgages come with lower monthly payments, but borrowers build equity very slowly and risk owing more than the home is worth.

Also, because rates on the loans are adjustable, monthly payments could rise over time. Still, observers say, the 50-year mortgages are less risky than interest-only or option mortgages.
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Top 10 mistakes of DIYers

From skimping on supplies to using the wrong paint, here are the top home-remodeling gaffes - and how to avoid them.
By: Pat Curry: Bankrate.com
The standard rule with do-it-yourself projects is that the projects will take twice as much time and three times as much money as you thought they would - or maybe it's three times as long and twice as much money.

Either way, the reason for that is the same. DIYers make mistakes. Lots of them. The good news is that you can learn a lot from mistakes. For example, whatever it was that my husband did to make all the outlets in the kitchen blow at the same time - don't do that again. The bad news is that mistakes always wind up making your home-improvement project more expensive and more time-consuming than you want it to be.

With that as a given, Bankrate.com asked home-improvement experts for their lists of the top DIY goofs, with advice on how to avoid repeating the errors in the future.

The experts are:

    • Ed Del Grande, host of the DIY Network's "Warehouse Warriors" show, as well as
      other shows and building specials on the network. A master plumber, pipe
      fitter and fire-sprinkler fitter, Del Grande has more than 20 years of
      construction experience.

    • Lou Manfredini, the official Ace Hardware "Helpful Hardware Man." (You didn't
      think it was John Madden, did you?) The home-improvement expert for
      NBC's "Today" show, the Chicago-based contractor also answers questions from
      DIYers on the Ace Hardware Web site.

    • C.J. Iannuzzi, owner of 3SQFT, a design-build company in Miami Beach, Fla.,
      and home-improvement contractor to the stars, including Madonna, Rosie
      O'Donnell, Gloria Estefan and Ricky Martin.

    • Barbara Kavovit, owner of Barbara K Enterprises. A New York City-based veteran
      of the construction industry, she now makes and markets DIY tools especially
      designed for women.

1. Not taking out the required permits. This is a big issue with both Del Grande and Manfredini. Considered a bother at best by many DIYers, permits actually serve a greater purpose than just raising money for the government. "People in permitting offices aren't evil," says Manfredini. "They're there to make sure the job is done right and you don't hurt yourself." Plus, for some jobs, such as putting in a wood stove, you need proof of the permit or your insurance carrier won't cover it. Not sure if your job requires a permit? Del Grande says that the rule of thumb is that you need one for anything larger than painting and wallpapering. It doesn't hurt to call the building department and ask.

2. Starting a job without the necessary tools and supplies. Nothing slows down a job more than not having all the materials you need. Manfredini says that the reason the pros can do what they do is that they buy quality tools. "There's always a bargain bin," he says. "It's not a wise investment. You lose time and money."

3. Inadequate preparation of the job site. If you do a small addition, suppliers will be delivering materials. You don't want them out of order or exposed to the weather while you are working, Del Grande says. Beware: They could be stolen if they're not properly stored. (If you have a septic tank, make sure you know where it is. If a supplier delivering materials in a heavy truck drives over it, you could be looking at a cracked tank. Yuck.)

4. Skimping on materials. Kavovit says she often sees DIYers use 1/4-inch drywall for building walls. You need to use at least 5/8-inch; 3/4-inch works well for a good sound barrier. The same rule applies to plywood for subfloors. Go with 3/4-inch. It creates a much stronger floor, especially if you're installing wood floors over them.

5. Using the wrong paint. One of the biggest DIY projects around, painting can make a place look great. Manfredini says flat paint should only be used for ceilings. Interior paints should have at least an eggshell or satin finish so you can scrub it. On outdoor decks, "sun and rain tear the heck out of the wood," he says. Clear sealers don't block the UV rays, and they peel. Use a linseed-oil-based stain; it drives the pigment into the wood and preserves it.

6. Improper preparation of walls for painting. A good, quality paint job is 90% preparation, Manfredini says. Clean the walls, sand them and patch any holes before you paint. Iannuzzi recommends a coat of primer or stain blocker if you're trying to cover over oil-based paint, stains or peeling paint, or if you're painting a lighter color over a darker color.

7. Unsafe job conditions. Nothing diminishes your return on investment like a trip to the emergency room. Wear safety goggles when using power tools or working with drywall or wood, wear hard hats when you're working under other people on scaffolding, and open some windows when you're painting or staining, or stripping old finishes off of floors or walls, Del Grande says. Iannuzzi cautions against wearing loose, hanging clothing, especially when using power tools. Wear gloves when carrying wood, metal and rock, or when hammering, and wear a nail or tool pouch to prevent damage to your floors and more important, the feet of people and pets.

8. Inaccuracy. Iannuzzi lives by the rule: Measure twice, cut once. It's so important for things like building walls, hanging drywall or cutting baseboards, counter tops or pipe. If you're going to err, err on the side of too long. You can always make something shorter; you can't make it longer. Spackle can cover up to a 1/8-inch seam, Iannuzzi says; if it's a 1/4 of an inch, the seam will pop the spackle and show.

9. Working beyond your limits. Everybody has them. Del Grande won't work on a roof; yours might be plumbing or electrical work. Don't stand on the top steps of ladders, and don't try to work beyond your reach. Ladder accidents send more than 164,000 people to the emergency room every year, according to the U.S. Consumer Product Safety Commission.

10. Failure to get a clue. You don't want to start to learn how to do a project on your own house. If you have a friend who is a contractor or an experienced DIYer, offer your assistance on one of his projects so you can learn. No one will turn away free labor. If you need to remove a supporting wall, have an engineer look at it to see what kind of beam you need to replace it. "If you have a saw in your hand and have a question about what you're doing," Del Grande says, "stop. Follow that little voice in your head."
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First-time Buyers: Is Now the Time to Buy?

As rates - and prices - continue to rise, is now the time to buy? For many first times homebuyers this is the ultimate financial question.
By: Carla L. Davis: Realty Times
Should you buy a house? As a first time homebuyer this can be one of the biggest decisions you've ever faced.

Many of the stories in the news media would have you believe that buying a home right now would be too much of a gamble. They use scary figures about rapidly rising mortgage rates. And still others make most of us feel as though homeownership is something far out of our affordability.

The truth is - all of these issues are partial truths. The economy could go belly up and thousands could lose equity in their homes or be stuck with a home that won't sell. Mortgage rates are going to rise -- a simple lesson in economic history proves that. And yes, you probably can't afford some of the homes on the market right now, with the average home price above $200,000 in most of the country, especially if have large amounts of student or personal loans.

But homeownership is a feasible option.

There are simply several questions you need to start asking yourself.

How much debt do you have? Before you can take on a huge financial responsibility that a home is - you need to pay down, or off, debts you have. Consider consolidating loans and getting rid of credit cards. Perhaps most importantly, you need to make sure that as you reduce debt, you increase your credit score. For more information, please contact a credit consultant.

Where will you be living in two to five years? If you are planning on being in an area for a short amount of time (less than 2 years), then renting may be a more financially feasible option for you. Buying (and selling) a home comes with fees and costs associated with closing the deal. Your house may not build enough equity in just 2 years for you to justify paying those fees twice. And if your home does appreciate in value quickly, if you live in the residence for under two years, you will probably not be eligible for a capital gains tax exemption.

What is the market like in your area? Are prices in your area rising quickly? Has the market gone into a slump? An economically sound region can expect prices to continue to rise, while prices may stall in an area experiencing hardship. For information on your area, contact a local professional and check out Realty Times' Market Conditions reports.

After these issues, most people are faced with two options. They can rent or they can buy.

Ginne Mae, who works closely with the Federal Housing Administration (FHA), another great source for information, - offers an online calculator that gives a decent idea as to how buying and renting compare costwise.

For demonstration purposes – let's say your rent is $940 a month – the national average at this time.

Buying a home that costs $150,000, with 5 percent down ($7,500) could end up saving you $16,618 over the course of 5 years.

And because of appreciation, which one can predict to be at least 6 percent per year, that means over the next five years you'll have a home that's worth around 30 percent more than when you bought it. You'll have the extra money to pay off student loans and other expenses - and build yourself some wonderful credit at the same time.

Now that's a win win.

The idea behind buying is getting a head start on building up your financial future. If you are planning on being in a location for any extended amount of time - two or more years - then you should strongly consider the option of buying. Not only will your home be growing in value, but you'll be saving yourself money on a month to month basis. In the example above -- the mortgage payment would come out to $700 a month. That's over $200 less a month than the average renter pays.

Becoming involved in the real estate market becomes less scary when you educate yourself. There some wonderful benefits to being a homeowner, such as having a more stable lifestyle, enjoying tax benefits, and watching your investment appreciate in value. And while some locations are more high risk, the majority of the U.S. sees fairly predictable prices and rates. Since 1968, according to NAR, homes on a national scale have never lost value and consistently beaten inflation. This is why real estate has always been a more secure investment than stocks. Unfortunately there is not sure way to gauge if it is the time to buy - rather, one must make that decision based on personal factors and finances.

But you don't have to go this alone. The government and many financial institutions know how hard it is for first time buyers to get into a home. That is why there are numerous programs to help out.

For those interested in Rural living, please visit the Rural Development Housing & Community Facilities Programs page.

For minorities wanting to find out more about their options, call toll-free 1-866-7TRUTHS (1-877-ATREVE1 in Spanish), for information from Freddie Mac.

Also take a look at HUD's website, which offers programs for low income, minority, and many other homebuyers.
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Bankrate: 50-Year Mortgage Debuts in California

The Methuselah of mortgages has arrived: the 50-year home loan.
RISMedia
Think of it as a mortgage that has been supersized. Like that other supersizer, McDonald's, the massive mortgage was born in Southern California's San Bernardino County. Statewide Bancorp of Rancho Cucamonga began offering the loan in late March, to California residents.

Advertisements have yielded a lot of phone calls and "quite a few applications," says Alex Diaz Jr., vice president of Statewide.

Half of first-time home buyers are 32 or older, according to the National Association of Realtors. If those buyers get 50-year mortgages and never refinance or make extra payments, they won't pay off their loans until they're well into their 80s.

Would they be crazy to get loans that amortize or pay off the balance over 50 years instead of the standard 30 years? Not at all, Diaz says.

Getting a 50-year loan is a perfectly rational way to avoid an interest-only or payment-option adjustable-rate mortgage, he says.

With an interest-only mortgage, the minimum monthly payment doesn't put any money toward principal. A payment-option ARM goes a step beyond that: In some circumstances, the minimum monthly payment doesn't even cover the interest accrued that month. You make a minimum payment at the beginning of the month, and four weeks later, you owe more than you owed before the payment. This condition is called negative amortization, or "going negative."

Forgive borrowers for thinking that it makes better sense to amortize a loan over 50 years than to get an option ARM or interest-only mortgage.
"Payment-option ARMs and interest-onlies have been so popular, we wanted to come out with a longer-term, fully amortizing loan for people who don't want to go negative," Diaz says.

Regulators and consumers worry that foreclosures will surge in coming years, especially among homeowners who got interest-only and payment-option ARMs. The 50-year loan is a lifeline for them, Diaz says.

"There are two markets for this," he says. "One is if they're looking to purchase a home, because of how expensive housing is, they'll consider this loan. And the other is payment-option ARMs -- borrowers are making minimum payments and they're starting to panic a little bit and look for vehicles to get out of these loans."
About a quarter of new mortgages in California are 40-year loans. This is the next logical step, Diaz believes.

Statewide's 50-year loan is a 5/1 hybrid, meaning that the introductory interest rate lasts five years and then the rate is adjusted annually, moving up and down with the London Interbank Offered Rate, or LIBOR.

Bystanders are dubious of the half-century loan's benefits.

"If you run the amortization out, it basically is an interest-only loan, in all practical terms," says Jason Flurry, a certified financial planner and president of Legacy Partners Financial Group in Woodstock, Ga. "If a person is considering something like that, they're probably trying to squeeze into too much house to begin with."

But just about everyone in California is trying to buy too much house. Of the houses sold in the state in February, half cost more than $535,470. Is a 50-year mortgage really an alternative to an interest-only loan? Yes, but it's not necessarily the best option.

"You're not talking about a significant savings in any event," says Jim Sahnger, mortgage consultant for Palm Beach Financial Network in Sewall's Point, Fla.

A 50-year loan has lower monthly payments, but the total cost is astronomically higher than that of a 30-year mortgage because you're stretching out the payments for two decades longer. It's impossible to guess how much higher because the rate moves up and down annually for the last 45 years of the loan.

But just for grins, let's compare a 30-year fixed-rate loan with a mythical 50-year fixed. For a 30-year loan of $300,000 at 6.5 percent, principal and interest cost $1,896.20 per month. A 50-year loan for the same amount and at the same rate costs $1,691.15 per month in principal and interest.

The 50-year loan costs $205 less per month, but the payments stretch out for 20 years longer and will cost a total of $332,058 more.

An interest-only loan at 6.5 percent would cost $1,625 per month for the first 10 or 15 years, and then the payment would jump.

Sahnger points out that few people live in one house for 30 years and hardly anyone for 50 years. A lot of home buyers move into a house knowing that they will move out within five years. Most of those people are well-suited for lower-rate hybrid adjustable mortgages, Sahnger says.

As for the 50-year mortgage, it's a good attention-getter, Sahnger says: "People are trying to differentiate themselves in the marketplace."
RISMedia welcomes your questions and comments.
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L.A. Reluctant to Give Its Bums the Rush

The Los Angeles City Council this week banned demolition of about 240 flophouses in the city's downtown for at least one year.
By: Andrew Glazer: REALTOR® Magazine Online
The moratorium gives officials time to figure out how to simultaneously encourage gentrification and preserve affordable housing.

The city recently commissioned a study that examined the problem of dwindling housing for skid row denizens, including drug users and prostitutes. The study recommended that the city and county spend $15 billion on preserving single-room accommodations and preventative services.

Not everyone is enamored with the study or the city’s actions. "Preserving units built in the early 1900s to house migrant railroad workers that have no bathrooms or kitchens does not strike us as the best low-income housing policy for the city," says Carol E. Schatz, president and CEO of the Central City Association.
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Survey: Boomers Dominate Second-Home Market

Middle-aged, middle-income households are the driving factor in the second-home market, according to a new NAR report. Most respondents see their purchase as a better investment than stocks.
NAR: REALTOR® Magazine Online
A new survey of second-home owners by NATIONAL ASSOCIATION OF REALTORS® shows that baby boomers continue to dominate the market, and a growing number of second homes — more than one-in-ten — are owned by minorities. A surprising majority of respondents own multiple properties in addition to their primary residence.

David Lereah, NAR’s chief economist, says the market continues to be dominated by the baby boom generation.

“Middle-aged, middle-income households are the driving factor in the second-home market, with favorable demographics providing a solid fundamental demand in this sector for the next decade,” Lereah says. “Boomers believe in diversifying their assets, and most second-home owners see their purchase as being a better investment than stocks. A surprising majority of survey respondents hold multiple properties, and they are interested in purchasing additional homes.”

About six in ten respondents own two or more homes in addition to their primary residence.

Minorities have become more active in the market, accounting for 11 percent of vacation home purchases between 2003 and 2005 in contrast with 6 percent of purchases in 2002 or earlier. In the investment property segment, minorities accounted for 17 percent of transactions between 2003 and 2005 compared with 11 percent in 2002 or earlier.
An unexpectedly high number of vacation-home owners, 21 percent, own two or more vacation homes. In addition, 34 percent of vacation-home owners report they own two or more investment properties.

More than half of investment property owners, 53 percent, own two or more investment homes and 12 percent own two or more vacation homes.

Analysis of U.S. Census Bureau data shows there are 6.8 million vacation homes in the United States and 37.4 million investment units in addition to 74.6 million owner-occupied units.

'Second Home' a Misnomer

NAR President Thomas M. Stevens from Vienna, Va., says the term “second home” appears to be something of a misnomer. “The fact that so many owners of vacation homes and investment property have additional properties is a bit of a revelation,” says Stevens, senior vice president of NRT Inc.

“We’ve always known that a certain segment has invested heavily in the rental market, and some people earn their living simply by holding and managing investment property," he says. What we see now is a crossover between largely vacation- and investment-home owners, with people recognizing the value of those investments and pouring more assets into real estate.”

The typical vacation-home owner is 59 years old, earned $120,600 last year, and purchased a property that is 220 miles from their primary residence, but 34 percent were less than 100 miles and another 34 percent were 500 miles or more. Eight out ten drive to their property, and half of vacation homes are located within the same state as the owner’s primary residence. Eighty-three percent of owners are married couples.

Three-fourths of vacation-home owners purchased for personal use, although one-third also wanted to diversify investments, and 18 percent intended that the home would become a primary residence in retirement. Only 13 percent of vacation owners listed rental income as a reason to buy. The typical owner spends 39 nights per year at their property, and three-quarters do not rent out. Of those who do rent their vacation home, the median number is 12 nights per year.

Investment Properties Close to Home

The median age of an investment owner is 55, with an income of $98,600 in 2005; 75 percent of owners are married couples. Their investment property is located close by, within a median distance of 10 miles.

Two-thirds of investment-home owners purchased their property to generate rental income, and half viewed the property as a way to diversify investments. Eight out of ten spend no time in their property. Not surprisingly, 80 percent rent it out, with 73 percent renting for at least six months per year.

For all second home owners, their most recent property was purchased a median of six years ago. However, most have held additional properties for longer periods.

As for attributes desired in a vacation home, two-thirds want to be close to an ocean, river or lake; 39 percent close to recreational or sporting activities; 38 percent close to vacation or resort areas; and 31 percent close to mountains or other natural attractions.

Leisure activities of interest to vacation-home owners include beach, lake or water sports, 57 percent; boating, 38 percent; hunting or fishing, 32 percent; golf, 21 percent; biking, hiking or horseback riding, 20 percent; ski or winter recreation, 17 percent; and tennis, 9 percent.

Half of vacation homes are located in resort or recreational areas, 18 percent in small towns and 16 percent in rural areas. Four out of ten are detached single-family homes, 22 percent are cabins or cottages, 21 percent condos in buildings with five or more units, 7 percent a townhouse or row house, 5 percent a mobile or manufactured home, and 3 percent are located in two-to-four unit structures; 1 percent were other. Six percent said their vacation home was a timeshare unit.

The median size of a vacation home is 1,480 square feet, 29 percent were new when purchased, and owners estimated the current value to be a median of $300,000 — 68 percent said the value of that property was lower than their primary residence. Sixty-five percent of owners said their vacation property was a better investment than stocks.

Six out of ten investment properties are located within metropolitan areas. Half are single-family homes, 21 percent are a duplex or apartment in a two-to-four unit structure, 13 percent condos in a building with five or more units, 8 percent a townhouse or row house, 3 percent a mobile or manufactured home, and 2 percent a cabin or cottage; 4 percent were other.

The median size of an investment property is 1,520 square feet, 15 percent were new when purchased, and owners estimated the current value to be $200,000. Three-fourths said the value of their investment property was lower than their primary residence, and 70 percent said their property was a better investment than stocks.

Four percent of vacation-home owners and 8 percent of investment owners said they intended for their child to occupy that property while in school.

Majority of Buyers Use a Practitioner

Among buyers of second homes in recent years (since 2003), two-thirds purchased through a real estate practitioner. Eighteen percent of vacation homes and 17 percent of investment properties were purchased directly from owners, while 14 percent of vacation homes and 7 percent of investment properties were purchased directly from builders.

Thirty-two percent of all vacation-home owners and 24 percent of investment owners paid cash for their property. Combined with mortgages that have been paid-off, 82 percent of vacation homes and 75 percent of investment properties are owned free and clear.

Of owners who purchased with a mortgage, the median down payment on a vacation home was 27 percent and the median down payment for an investment home was 23 percent.

When asked about the source of down payment funds for more recent vacation-home owners with loans, who purchased since 2003, half said savings, 23 percent from the sale of other real estate, and 19 percent identified equity or sales proceeds from their primary residence. For more recent investment owners who purchased with mortgages, half said down payment funds came from savings, 28 percent from equity or sales proceeds of their primary residence, and 18 percent from the sale of other real estate.

“With older baby boomers just now reaching 60 years of age, and younger boomers in their early 40s, the lifestyle preference of boomers will figure prominently into future demand for vacation homes,” Lereah says.

Owners Plan to Buy More

Eleven percent of vacation-home owners said they were planning to buy another home within two years, and 10 percent said they planned to sell. On the other hand, ownership of investment property hinges on financial gains that can be expected from rental income and appreciation.

“Mortgage interest rates, local economic conditions and the local rental market are more important factors in investment decisions," Lereah says. "Cooling appreciation rates and greater loan oversight are expected to discourage the speculative element in the investment market, although that is likely to be a relatively small portion of the overall market.”

Even so, 35 percent of all investment-home owners said they were planning to buy another home within two years. For those who currently own four or more investment units, 64 percent said they planned to buy another property within two years, and 17 percent said they planned to purchase five or more additional properties.

Twenty-eight percent of investment owners plan to sell a property within two years.

The 2006 NAR Profile of Second-Home Owners is based on an eight-page questionnaire mailed in January to a nationwide sample of 45,000 households who owned more than one residential property. It generated 416 usable responses from vacation-home owners and 619 from investment owners.
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The Weekend Guide! May 11 - May 14, 2006

The Weekend Guide for May 11 - May 14, 2006.
Full Article:
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Survey: Younger Generations Spend More on Housing

A recent survey shows that Generation X and Generation Y home buyers spend more on their first home than baby boomers and use a more business-like approach to finding and buying a property.
By: Camilla McLaughlin: REALTOR® Magazine Online
A recent survey of home buyers in three generations — Gen Y (those born between 1979 and 1994), Gen X (born between 1978 and 1965), and baby boomers (born between 1946 and 1965) — show that the two younger generations are outspending boomers in their first home purchase.

Both of the younger generations also devote a larger portion of their salaries to housing costs, according to the survey, conducted by Century 21 Real Estate. The goal of the survey was to understand and compare the experiences of the first-home purchase among members of three different generations.

Unlike boomers who purchased their first homes in response to life events such as a marriage or birth, financial incentives motivate both Gen X and Gen Y buyers with investment value cited as the “key driver” by the Century 21 survey with 42 percent of Gen X respondents and 39 percent of Gen Y respondents citing a “safe investment” as the reason for purchase.

A similar business-like approach is applied to the home search and purchase. “These guys don’t get caught up in the process. They’re very bottom-line oriented and results oriented,” says John Tuccillo, former NAR chief economist and principal of John Tuccillo Associates, an economics and business consulting firm in Virginia.

“Don’t expect them to fall in love with the property,” he cautions. “What matters is whether the house works for them and whether it’s a good deal.”

“Real estate professionals shouldn’t only get to know this group, they should also begin to look at their own materials, particularly Web sites, from the perspective of this demographic,” Tuccillo says.

A higher proportion of younger buyers use the Internet. For Gen Y it ranked as the primary source of home shopping information according to the survey. Experts such as Tuccillo and Melody Bohrer, vice president for education for ERA Real Estate say that being able to remain anonymous while they gather information is a top criterion for younger buyers.

Less relationship oriented than boomers, younger buyers are also more likely than boomers to say “next” if a salesperson doesn’t meet their expectations. However, Bohrer says, “They will be loyal if you work the way they want.”
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Housing Takes Breather, But Strong Year Still Expected

NAR: REALTOR® Magazine Online
The housing market is settling but should experience its third-best year in 2006, with job creation and a growing economy offsetting some of the effects of rising interest rates, according to the NATIONAL ASSOCIATION OF REALTORS®.

David Lereah, NAR’s chief economist, says the market is adjusting to higher mortgage interest rates. “Coming off a prolonged period of record sales, housing is taking something of a breather this year,” he says. “Even so, interest rates remain historically low, we’ve added about 2 million jobs over the last 12 months and the economy continues to grow – that will sustain healthy levels of home sales in 2006, but they’ll stay below the peaks experienced during the last two years.”

Lereah forecasts the 30-year fixed-rate mortgage to rise to 7.0 percent this summer and hold at that level during the second half of the year. The unemployment rate is expected to average 4.7 percent, compared with 5.1 percent in 2005, while growth in the U.S. gross domestic product is seen at 3.5 percent in 2006, the same as last year.

Existing-home sales are likely to fall 6.4 percent to 6.62 million in 2006 from a record 7.08 million last year. New-home sales are projected to drop 11.6 percent to 1.13 million from last year’s record of 1.28 million. Housing starts should decline 3.7 percent to 1.99 million this year compared with 2.07 million in 2005.

NAR President Thomas M. Stevens from Vienna, Va., says home prices are returning to normal patterns.

“Since the supply of homes on the market has improved to roughly balanced levels, overall home price appreciation has cooled to single-digit rates,” says Stevens, senior vice president of NRT Inc. “Most of the country is now entering a period of equilibrium in the housing market, which is good for the long-term health of the sector. Owners in most areas can now expect steadier and more normal rates of return on their housing investment.”

The national median existing-home price for all housing types is expected to rise 5.7 percent this year to $232,200, while the median new-home price is forecast to increase 2.2 percent to $242,500.

Inflation as measured by the Consumer Price Index is projected at 3.4 percent in 2006. Inflation-adjusted disposable personal income is likely to grow 3.4 percent this year.
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Real estate sales down, prices up in '06

Forecast calls for third-highest annual sales total
Inman News
Existing-home sales are expected to drop 6.4 percent this year to 6.62 million, down from a record 7.08 million in 2005, according to the latest annual forecast by the National Association of Realtors trade group.

The projected sales total would be the third highest on record. The forecast also calls for new-home sales to drop 11.6 percent to 1.13 million from a record 1.28 million in 2005. Housing starts are expected to fall 5.4 percent to 1.99 million compared to the 2005 total.

The national median existing-home price for all housing types is expected to rise 5.7 percent this year to $232,200, while the median new-home price is forecast to increase 2.2 percent to $242,500, the group announced.

The Realtor association's sales expectations for the real estate market have lowered since the start of the year. In January the group predicted that existing-home sales would be 4.4 percent lower this year than in 2005, with new-home sales declining 6 percent. The group expected housing starts to drop 6.6 percent this year.

The group's forecast in January called for the median existing-home price to rise to $219,700 this year and the median new-home price to reach $245,200.

David Lereah, NAR's chief economist, said in the association's announcement today, "Coming off a prolonged period of record sales, housing is taking something of a breather this year. Even so, interest rates remain historically low, we've added about 2 million jobs over the last 12 months and the economy continues to grow – that will sustain healthy levels of home sales in 2006, but they'll stay below the peaks experienced during the last two years."

Lereah said he expects the 30-year fixed-rate mortgage to rise to 7 percent this summer and hold at that level during the second half of the year. In January, the group's forecast called for the 30-year fixed-rate mortgage to reach 6.7 percent.

The unemployment rate is expected to average 4.7 percent this year, compared with 5.1 percent in 2005, while growth in the U.S. gross domestic product is seen at 3.5 percent in 2006, the same as last year.

Thomas M. Stevens, NAR president and senior vice president of NRT Inc., said in a statement, "Since the supply of homes on the market has improved to roughly balanced levels, overall home-price appreciation has cooled to single-digit rates. Most of the country is now entering a period of equilibrium in the housing market, which is good for the long-term health of the sector. Owners in most areas can now expect steadier and more normal rates of return on their housing investment."

Inflation as measured by the Consumer Price Index is projected at 3.4 percent in 2006. Inflation-adjusted disposable personal income is likely to grow 3.4 percent this year, the association announced.

The National Association of Realtors, "The Voice for Real Estate," is America's largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.
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Pitfalls of agentless real estate sale

Homeowners face legal paperwork, disclosures
By: Robert J. Bruss: Inman News
DEAR BOB: Twelve years ago we successfully sold our home "for sale by owner" and saved the real estate sales commission. Now we are trying to sell our townhouse without an agent and are encountering nothing but problems. The additional legal paperwork and required disclosures are amazing. More important, we discovered that even paying a local Realtor to put our listing into the local multiple listing service (MLS) for a $795 fee hasn't brought results. The local agents aren't showing our home although it is reasonably priced and we offer a 2 percent broker co-op commission. We had one very serious buyer who came back three times. But she wanted us to reduce our sales price by 6 percent to compensate since we wouldn't have to pay a sales commission. Any suggestions how we can sell our home and save the sales commission? -Norman V.

DEAR NORMAN: No. As longtime readers know, I do not recommend attempting to sell your home alone without a professional real estate agent. Although I am a real estate broker, unless I sell a rental house to my tenant, I always list it with a local Realtor. There are many reasons.

Full-time, professional real estate agents know local market values, whether they are rising or falling. By attempting to sell alone, you could be vastly underpricing your home. Or maybe it is overpriced so prospective buyers will stay away.

Most prospective home buyers shy away from "for sale by owner" newspaper classified ads. They fear the seller is "strange" for not listing with a realty agent. There is a good reason more than 80 percent of home sales are handled by real estate agents.

As a do-it-yourself home seller, although you paid $795 to put your listing in the local MLS, that doesn't mean it will be actively marketed. The MLS is a very powerful marketing tool, but your home also needs exposure on the Internet, such as www.Realtor.com, and other Web sites, which only a pro-active listing agent can provide.

Offering a mere 2 percent sales commission to a buyer's agent is an insulting joke. Get realistic. In today's competitive home sales market, you should list with a successful, aggressive real estate agent to get your home sold and to comply with today's disclosure requirements to prevent future legal problems.

NO EASY WAY TO GET A LIFE TENANT OUT

DEAR BOB: My father died in 1986. He left his house to me, his only child, subject to a life estate for his second wife. My stepmother is now 93 and still living in the house, which is in a horrible state of disrepair. About five years ago, after reading your item about terminating a life estate for "waste," on my behalf a local real estate attorney brought a lawsuit against her because she let the house deteriorate. However, the sympathetic judge ruled there was not sufficient waste to terminate her life estate. The house (worth around $300,000) is "declining" but in a decent neighborhood, and the life tenant isn't spending a penny to maintain it. Is there anything I can do? -Ryan R.

DEAR RYAN: Of course you could bring another lawsuit for waste. But there is no guarantee of success.

Another alternative is to offer your stepmother cash to terminate her life estate. Perhaps she would like to move to an assisted-living center where she can receive care and cooked meals in a nice facility. Waving $50,000 or $100,000 cash (theoretically) in front of her might convince her it's time to move out and terminate her life estate. For more details, please consult a local real estate attorney.

WHY IT IS BETTER TO INHERIT PROPERTY THAN RECEIVE IT AS A GIFT

DEAR BOB: After reading your recent article, I got the impression it is economically better to inherit property than to receive it as a lifetime gift. But both situations are subject to tax. Please expand on this topic. -Al R.

DEAR AL: There are many reasons why it is far better to receive real estate as an inheritance than as a pre-death gift. From the heir's viewpoint, inheritance is more beneficial than a lifetime gift because the heir receives a new "stepped-up basis" of market value on the date of the decedent's death. This is a huge tax benefit, especially if the property had been owned many years with a low basis.

When a property is gifted before death, the donee takes over the donor's often very low adjusted-cost basis. Also, if the net value exceeds $12,000, the donor must file a federal gift tax return. But no federal gift tax will be due if the donor has given away less than $1 million in lifetime non-exempt gifts.

However, if the decedent's net estate exceeds $2 million, then federal estate tax must be paid by the estate before the heir receives inherited title. Also, in a very few states, there might be an inheritance tax if the heir is not a close relative. For full details, please consult your tax adviser.

PROS AND CONS OF TENANCY-IN-COMMON APARTMENT BUILDINGS

DEAR BOB: I own a four-unit apartment building. I want to sell a 75 percent interest and retain 25 percent. If I sell 25 percent to each of three investors, can they force a sale of the entire building by a partition lawsuit? Or can any of the four co-owners sell their share without the approval of the other investors? Is it possible to allow the investors to occupy a specific apartment in the building? -John E.

DEAR JOHN: The situation you describe is known as a tenancy-in-common (TIC). TICs are widely used to get around local rent control and condominium conversion ordinances.

But the major drawback is there is one mortgage on the entire property. Each TIC co-owner cannot obtain an individual mortgage, as can a condominium buyer. Another problem occurs if a TIC fails to pay their share of the mortgage each month. Then the other owners must pay the deficit or risk losing the property by foreclosure.

Although I don't recommend TICs for owner-occupied apartment buildings, because of the many potential problems that can arise, they have been successfully used for investment properties where the investors are not owner-occupants.

Yes, it is usually possible to provide in the TIC documents for the tenants-in-common to waive their right to force a partition sale of the property. The TIC documentation can specify a TIC can occupy a specific apartment in the building. For full details, please consult a local real estate attorney who is experienced with TICs.

CAN HOMEOWNER BE FORCED TO JOIN HOMEOWNER'S ASSOCIATION?

DEAR BOB: In 1997 I bought my home. There was no homeowner's association. A developer bought the vacant lots in the subdivision and formed a homeowner's association. Now the developer is applying pressure for everyone to join. There is a private road that has been apparently turned over to the association. Is this legal? We are in the process of selling our home and want the new owner to make the decision to join or not? -Zuella P.

DEAR ZUELLA: I have never heard of such a situation where the private road is transferred to the homeowner's association, unless there was a vote of the affected owners or unless the developer controls a majority of the affected vacant lots.

The best you can do is to disclose the situation to yourbuyer and let him decide if he wants to join the homeowner's association. Perhaps a local real estate attorney can provide further details.

BE EXTREMELY CAREFUL WHEN BUYING LEASEHOLD CONDO

DEAR BOB: My son was recently transferred to Hawaii. He is considering purchase of a condominium in Honolulu. It is on leasehold land. The inventory of available units seems very limited. We have benefited from your recommendations about IRC 1031 tax-deferred exchanges, living trusts, and tax-free cash from home sales, but have never before encountered leasehold land. Your recommendations? -Bev P.

DEAR BEV: Your smart son is wise to question the purchase of a condo that is on leasehold land. He should carefully investigate the terms of that land lease.

For example, when I was at a Realtor's convention in Honolulu years ago, we went to inspect a beautiful new high-rise condo building. As an inquiring reporter, I asked about the land lease, its terms, and if there was a renewal option. I learned it was a 40-year land lease with no renewal option. Buying a condo in that building was clearly a very bad deal because as it gets close to the 40th year, the condo loses all its value since the building title then reverts to the land leaseholder.

Several years later, when I visited Honolulu, I inquired about the fate of that building. I discovered the condos did not sell and it is now an apartment rental building. When buying any improvement on leased land, you can't be too careful.

The new Robert Bruss special report, "Pros and Cons of Fast and Slow House Flipping for Big Profits," by Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
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House Prices Rise as Volume Slows

The median price of a home in Los Angeles County rose for the fourth straight month in April, countering perceptions of a cooling market, according to data provided to the Business Journal.
By: DAVID GEFFNER: Los Angeles Business Journal
Home prices in Los Angeles County rose for the fourth straight month in April, countering perceptions – at least some perceptions – of a cooling market.

The median price of existing homes sold in April was $545,000, up nearly 15 percent from the same period last year. It was also up $9,000 from the previous month, according to numbers provided by HomeData Corp., a New York state firm that tracks residential sales nationwide.

However, volume – the number of homes sold – was down more than 16 percent from the same month last year.

On a month-to-month basis, volume looks a bit better. After dropping to a three-year low of 5,309 homes sold in February, down even by traditionally slow post-holiday standards, volume bounced back to 7,159 in April. While that was well off the blistering pace of last August, when more than 12,000 homes traded hands, it still represented an increase of 295 homes over March.

Data from Hanley Wood Market Intelligence, a Costa Mesa-based housing data and consulting firm, indicated strong job growth was helping prop up the region’s housing market.

“We’re not dependent on one or two industries, i.e. aerospace and entertainment, as we were in the ’90s,” said Patrick Duffy, managing director of consulting for Hanley Wood “And we haven’t had to deal with things like riots and earthquakes that hurt the economy back then. Most all of our sectors are strong.”

Some 35,300 jobs were added in L.A. and Ventura counties last year, with an expected 30 percent increase in 2006, or an additional 44,200 jobs.

In addition, interest rates remain at reasonable levels. Financial Forecast Center LLC, a Houston, Texas, firm that tracks economic trends, said the 30-year fixed mortgage rate in April was 6.43 percent and would not reach 6.5 percent before September.

However, the uptick in price did not sway some economists from their belief that a general cooling is ahead.

Christopher Thornberg, a senior economist at the UCLA Anderson Forecast and a prominent bear about the local housing market, noted the big drop in the number of home sales from last April to this one.

“Every slow-down in the real estate industry has been led with (less) activity followed by a drop in price growth,” said Thornberg. “People are making this (price upturn) into a big deal, but prices always lag activity.”

Thornberg said he expected price growth to disappear by the third quarter of the year.

“At some point, people had to realize that paying $700,000 for a 600-square-foot converted apartment in Santa Monica, with a view of someone’s rainspout, was completely insane,” he said.

Strength, weakness
The best buys in the region were in the Antelope Valley, where brokers said a strong job base has driven sales. A three-bedroom home in Palmdale’s 93550 ZIP code cost 50 percent less than nearby Valencia, where the average price jumped to $647,000 in April.

High-desert bargains sparked sales: three Lancaster ZIP codes – 93534 through 93536 – accounted for 5 percent of all L.A. County volume in April, topping the region on a percentage-basis.

Steve Burton, with Keller Williams Realty in the Antelope Valley, said Ana Verde, a new 5,200-home planned community in West Palmdale, has been the area’s hottest neighborhood.

“We’re projecting a 16 percent rise in property values this year,” said Burton. “As long as home prices are double in Santa Clarita, the Antelope Valley will stay hot.”

Given soaring construction costs for concrete and steel, wood-frame residential development still penciled best for area builders. New single-family detached units in Los Angeles County were up 116 percent, compared to March 2005.

According to Hanley Wood, which tracks new homes and condos, there was a 212 percent rise in new condominium closings through April 2006, compared to the same period 2005.

Sales of existing condos, according to HomeData, were strong as well, rising to 1,961 units, versus 1,779 in March.

“Traffic and the cost of gas have become issues in home-buying,” Duffy said. “Urban neighborhoods along transit lines, or close to employment centers, offer a trade-off to a single family home with a back yard. People are less willing to spend their lives on the freeway.”

Condos weren’t the only urban sales. Neighborhoods along the Harbor (110) Freeway, south and west of downtown’s core infill boom, also experienced a rise in activity this past month.

Exposition Park’s 90037 ZIP code had a 22 percent rise in volume compared to April of 2005, and a median home price of $490,000. That’s more than a 28 percent jump from a year ago.

Sales even crested at the very highest end of the market. Santa Monica’s 90402 was the most expensive ZIP code in Los Angeles with a median price of $2,175,000. The Westside neighborhood – south of San Vincente Boulevard and north of Montana Avenue – saw a 25 percent jump versus April 2005.

“Land values in 90402 have remained strong,” said Kate Bransfield, estates director with Prudential-California in Santa Monica. “I have a listing for $1,890,000 that’s an original 1951 structure that the buyer will most likely tear down.”

Westside brokers said the bubble may have “gently popped”, but prices remain high. They noted appreciation rates that have tumbled from 30 percent, typical with 2005 closings, to 10 percent, have made the market more “sustainable” over the long haul.

“Inventory is averaging about 55 days, as opposed to the 55 minutes it took a year ago,” Bransfield said. “But that’s mostly because sellers are still pricing their homes for last year’s appreciation, which doesn’t work anymore.”
Steve White, president of the Southland Regional Association of Realtors, noted in a February press release that slower price appreciation would keep the door open to first-time buyers while preserving investment advantages for sellers.

“The bubble is a myth, because there’s nothing to portend any kind of economic disaster within the Southern Californian region. Bubbles bursting happen with something catastrophic. All the economic indicators in Southern California are sound. It’s more like welcome to a balanced market, where any sort of spike or slow-down looks out-of-place, relative to the insanity we’ve had,” White said.

“In February there was 5.3 months of inventory. To have a neutral market, not weighted toward buyer or seller, you need six months of inventory. We’ve clearly left the seller’s market we were in, but we have a long way to go to reach a buyer’s market.”

Not all areas partook in this most recent spring bump. Sales in Malibu, where the median home price has risen nearly 300 percent in the last year, dropped 78 percent. That slow-down was second only to the 91502 ZIP code in Burbank, where prices have ditched down nearly $400,000 in the last year to $720,000.

But even in areas of the San Fernando Valley where sales slowed in April, prices still tracked upward, giving weight to the notion that the alleged bubble just hasn’t popped.

Activity this past month was down in all four Van Nuys ZIP codes by nearly 40 percent compared to 2005, even as median home prices surpassed $700,000.

Ditto for West Hills, with data including parts of Bell Canyon and Canoga Park. The 91307 ZIP code saw a 31 percent drop in sales in April, compared to the same period last year, while average home prices climbed 22 percent to $650,000.
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Home Improvement Web sites Can Educate and Inspire

RISMedia
With the weather ideal for spring home maintenance tasks, homeowners nationwide are relying heavily on the Web to get them the how-to information they need, and fast. With the click of a mouse, a plethora of Web sites will detail everything from caulking to landscaping, to hiring a pest professional for an annual inspection. Before embarking on any project, the key is to be judicious in selecting a few reliable Web sites to serve as guides, according to James and Morris Carey, nationally recognized experts on home building and renovation, and hosts of the syndicated radio show, On the House.

"The Internet can be both a help and a hindrance," warns James. "It can be downright time-consuming to comb through the dizzying number of sites that are out there. So, it's absolutely critical to rely on the quality of information a site has to offer, in addition to educated recommendations from reliable home improvement experts."

For a productive and fruitful spring - with more time spent outside or around the house than at the computer - the Carey Bros. advise to keep the following websites a click away:

- TheFamilyHandyman.com: For the DIY-minded consumer, this Web site hosts a large assortment of great tips and quick fixes. Easy to maneuver, it includes step-by step-pictures for each tip, a resource that's quite helpful for first time projects.

- HGTV.com: Ideal for decorating, remodeling, gardening, and crafts, this Web site has educational and engaging video tutorials and inspirational content to challenge ambitious homeowners.

- OnTheHouse.com: The official Web site of the Carey Bros., this Web site is host to over 20 years of seasoned home improvement expertise, updated daily with fresh content. Says James, "We're fortunate enough to share the tried and true and the latest and greatest home improvement tips and trends with our audience."

- TermiteInstitute.com: There are some projects that even seasoned homeowners should leave to the pros, and termite defense is one of them. Recently featured in the New York Times as a premier termite consumer education resource, TermiteInstitute.com provides a complete, simple tutorial on termites - how to rid your home of them, as well as prevent them. For consumers looking to learn more about America's $5 billion wood feasters, there's no better resource on the Web," notes Morris.
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"Normal" Housing Market Doesn't Affect Spending

It is taking longer to sell a house, but consumers are still spending lots of money to furnish it.
By: Al Heavens: Realty Times
There is now little doubt that residential real estate market has slowed - or "normalized," as Realtors and economists like to say to compare it with the frenzy of the past few years.

Douglas Duncan, chief economist of the Mortgage Bankers Association of America, citing mortgage origination data for the last three years, recently said that 2006 would be more like 2003, which, in its time, was a record year.

So far, this "normalization" has increased the time houses in many areas are spending on the market, has begun reducing annual increases in home values to single digits from double ones, has new-home builders worrying about oversupply while culling investors from the condo market, and has lower-end buyers who bought with adjustable "exotic" loans scrambling to refinance before their monthly payments double as the Fed continues to increase short-term rates.

That's a mouthful, but that's the worst of what is happening generally around the country.

What it doesn't seem to be doing, or so my recent sojourns in Chicago and High Point, N.C., seem to bear out, is have much, if any, effect on the people who furnish these houses.

On the contrary, Dacor's chief operating officer, Michael Joseph, who has spent 34 years bringing his kitchen appliance company from one product to a highly competitive line of products, told me at the Kitchen and Bath Show in Chicago April 21 that sales were up 25 percent in the first quarter of 2006 over the same period of 2005.

Jim Baake, president of SubZero Wolfe, said that his Pittsburgh-based firm's first quarter was 25 percent to 30 percent better than January to March of 2005.

Studies by a number of data trackers repeatedly show that people who buy houses - new or existing - tend to spend an average of $6,000 the first year turning those houses into reflections of their personal lifestyles and tastes.

In addition, while long-term rates are now following short-terms to higher levels, upper-end buyers and a lot of those in the middle still find it relatively easy to buy higher priced appliances for their new houses, since financing those purchases over 30 years reduces the pain to monthly twinges.

The home furnishings market also has some immunity to the normalizing market, as my day at High Point last week with the National Association of Real Estate Editors indicated.

If the resource guide for the six-day show we were given is any gauge, 657 pages is a lot of furniture. Lighting takes up storefront after storefront on just one floor of the 11-story Showplace.

This is not Ikea. This is Hooker and Hamilton, and Bradington and Alexander Julien, who, in a luncheon speech to our group, referred to rugs as "sweaters for the floor." I let my wife look at the guide for a few minutes the morning after I flew home from Charlotte, and in just those few minutes, she found the new bed for my younger son's room.

There are stresses and strains in the furniture industry, just as in the housing industry and the appliance industry.

"The furniture industry is twice as large as the music industry, and is rapidly changing because of globalization," said Robert Maricich, president of Century Furniture Industries in Hickory, N.C.

"Because of globalization, furniture has never been a better value, but globalization has made furniture a commodity," he said. "The outgrowth of this trend toward commodity has been overcapacity," and that is something the industry will have to change to survive.

How will change come? According to Maricich, the three elements of change are innovation, creating an exceptional experience and speed.

In product development, the key driver is creativity, "which is driven by talented people with the courage to be different," he said.

The luxury market is driven by lifestyle. Suburbanites now want an urban experience, "and that requires us to edit furniture down to a smaller scale," he said. The suburban houses they are leaving "are not McMansions, but mansions, with a scale of furniture that is enormous."

The goal in both the appliance and furniture industries is to achieve an integrated look. The kitchen is not just a place to cook but a gathering space with many functions. Furniture has to be able to fit into every room, no matter that room's function, Maricich said.

"People want a wonderful home," he said. "A key element of luxury is aspirational. It is incumbent in us to put together that kind of environment."

The last two years have been fantastic for luxury markets, he said.

"Carmakers and others understand that what they are selling is not a product but an experience," according to Maricich. Instant gratification is a part of that experience, but "we in the furniture industry are continually frustrated because our work is filtered through a retailer or a designer."

"How many Lexises do you think would be sold if you had to wait eight or 10 months for them?" Maricich asked.
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With Energy Prices up, Saving At Home Is Now Paramount

Fuel costs are growing. So is the square footages of our residences, the number of appliances we use and the level of comfort we expect. Of course, being comfortable comes at an expense. Some tips on how a few minor changes around the house can cut heating and cooling bills.
By: Marshall Loeb: The Wall Street Journal Online
Fuel costs are up. So is the average house size, the number of appliances we use and the level of comfort we expect year-round in our home. Of course, being comfortable - or lazy - has a price, and you want to cut your energy bills.

Heating and cooling, including water, account for 56% of home energy costs, reports the U.S. Department of Energy. You already know the obvious: don't set your air conditioning so low, use an automatic thermostat to regulate your home's temperature and buy appliances that bear the government's Energy Star seal, indicating efficiency. But, according to our national laboratories, there's plenty more we can do.

For example, an air-conditioner in the shade uses as much as 10% less power than one in the sun, so consider planting around a central unit or placing a window unit on the north side of your home. Likewise, make sure your thermostat doesn't sit next to a hot lamp or appliance.

You may not have a green thumb, but the Department of Energy believes that just three properly located trees can save an average household $100 to $250 a year in energy costs. An energy-efficient ceiling fan is also a great way to circulate cool air through your house.

Reducing the temperature of your hot water by 10 degrees will save you 3% to 5% on energy costs. Many manufacturers set water-heater thermostats at 140 degrees while most of us can make do with 120 or even 115 degrees.

That trick works even better if your dishwasher has a built-in booster heater: the feature will pay for itself in about a year. Shorter wash cycles are also a money-saving feature.

If you plan to be out of town for more than a few days, you can turn your water heater thermostat down to its lowest setting, or turn off the heater completely.

When it comes to washing machines, front-loaders use less water and new, energy-efficient models can cost a third as much to operate as older washers.

You can also give your home an "energy audit" online for free at http://hes.lbl.gov or by hiring a professional who will take measure such things as heat loss and make recommendations. See the energy audit site.
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Spring is best time for vital home repairs

Checklist to help your home recover from winter
By: Paul Bianchina: Inman News
It's all starting to come out of hibernation-plants, flowers, lawns, and even your home. Winter plays havoc on houses, and spring should be a time to toss on some shorts and take a walk around your house to get that spring chore list in order. Here are few additional areas to pay attention to:

ROOF VENTILATION

Remember that ice dam on the roof last winter? Remember how hot your attic was when you went up there to check the antenna wire last summer? Proper attic ventilation can help with both those problems, and spring-while it's not too hot or too cold-is an ideal time to take care of any necessary work.

Attic ventilation should equal approximately 1 square foot of vent area for every 300 square feet of attic, so first figure out roughly how many square feet your attic is, and then divide by 300. The total vent area should be roughly split between high and low vents, so now divide that number by two.

Take some measurements to see if you have an adequate amount of vent area in both the eaves and high on the roof, and add more as needed. Also, check the condition of existing vents to see that the screen is intact, flashings are secure and well sealed, and there are no other problems that need correcting.

SPRINKLERS

Permanent, in-ground sprinklers are great, as long as they're properly adjusted. Run each set of sprinklers through a cycle, and watch how and where the water is hitting. Adjust or replace any sprinklers that are hitting your siding, washing out loose soil areas, spraying over foundation vents, or in any other way wetting areas on and around your house that shouldn't be getting wet.

GRADE

Soil is also susceptible to being washed away or redistributed by heavy winter rains and melting snow. Now is the time to check and see if the grade around the outside of your home has been moved around by winter's fury, which can result in runoff getting into your basement or crawlspace, or running into neighbor's yards where it shouldn't go.

Look for areas where soil seems too high or too low in relation to your home, as well as for marks on your siding, foundation, walkways, and other areas that might indicate if soil or water is in a place it shouldn't be. A 4-foot builder's level placed on a long, straight board can help you check grade and slope-redistribute soil so that for every foot horizontally you have at least 1/4 inch of fall away from the house.

CHECK YOUR HOUSE NUMBERS

Can someone find your house easily, especially in the dark? Spring is a great time to check that your house numbers are clearly visible from the street, that they are painted a contrasting color from whatever surface they are mounted on, that they are somehow hit by exterior lighting at night, and that they are not obscured by overgrown foliage.

FENCES AND GATES

Fence posts are especially susceptible to ground water saturation, and will loosen up and tilt if the soil around them gets soaked too deeply. Check fence posts in various areas by wiggling them to see how solidly embedded they are. If any are loose, wait until the surrounding soil has dried out from winter's rains, then excavate around the bottom of the posts and pour additional concrete to stabilize them.

SMOKE DETECTORS

As always when it's time to change the clocks, you want to check your smoke detectors. Replace the batteries, clean the covers, and test the detector's operation before it's too late. If you have gas-fired appliances in the house, including a water heater, now is also a great time to consider adding a carbon monoxide detector, which are inexpensive and easy to install, and are available at most home centers and other retailers of electrical parts and supplies.
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The Weekend Guide! May 4 - May 7, 2006

The Weekend Guide for May 4 - May 7, 2006.
Full Article:
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School, auto loans affect future real estate purchase

How a borrower's debt-to-income ratio comes into play
By: Ilyce R. Glink: Inman News
Q: I have a friend who is getting ready to go into real estate. He wants to know if he takes out a small personal loan, what impact will it have on his ability to take out future loans on property he wishes to buy?

A: Any time you take out a loan, whether it is personal, credit card, school, auto or a mortgage, it lowers the total amount you can borrow to buy real estate in the future.

Mortgage lenders take a look at your monthly debt service-that is, how much you spend each month to keep all of your loans afloat-and subtract that number from the total amount you have available to pay your total debt service.

So if you're spending $500 per month on your debt service, and your income will allow you to spend $1,500 on your total debt (including a mortgage, real estate taxes and insurance), you'll only be able to spend $1,000 on a conventional loan. If you want to increase that amount, you'll either have to look at some riskier loan programs (like interest-only or option adjustable-rate mortgage (ARM) loans) or consider going with a high loan-to-value ratio Federal Housing Administration (FHA) mortgage.

Q: We are in contract to sell our home. We have a question concerning the term, "built-in appliances." Does that term include the refrigerator, washer, or dryer? The contract says that the house is, "together with all improvements and attached items, including fixtures, built-in furnishings, built-in appliances, ceiling fans, light fixtures, attached wall-to-wall carpeting, rods, draperies and other window coverings." There is a line about other items being included in the purchase, but it was left blank.

We have a normal 25-cubic-foot side-by-side refrigerator that stands alone. It is not built into the kitchen cabinetry. We purchased it ourselves. It did not come from the builder when we bought the house. In fact, we bought all of our own appliances, including the washer and dryer.

Are we obligated to leave our refrigerator, washer, or dryer for the new owner or should they make an offer to us if they are interested in any of these items?

Thank you so much. We really appreciate any advice you can give us.

A: In my neck of the woods, appliances are left in the house. Home buyers typically expect a house to come with appliances-even though your builder did not put them in.

But, depending on where you live, sometimes appliances do not go automatically with the home. Sometimes people take refrigerators, washers and dryers with them. Did the listing for your home include the refrigerator, washer and dryer? If it did, your buyer may be expecting them. If the prevalent practice in your area is that those appliances stay with the home, you may have to leave them behind.

To be safe, if you want to take your appliances with you, you should specifically exclude them in writing in the contract. That way, the buyers won't be surprised when they walk into the house after the closing. However, you might want to talk to your real estate attorney to find out if the refrigerator, washer and dryer are considered appliances that stay with the home.

I called an attorney in Illinois and he indicated that in Illinois, those appliances would not be built-in and could be taken by the sellers. If the buyers had wanted them included in the sale, they should have specifically listed them in the contract. He also said that if the buyers made a mistake and forgot to insert them into the contract, they could argue that the purchase price included these items as they were included in all the marketing materials for the home.

He suggested you tread carefully on this issue: Make sure no one promised the buyers these appliances and the listing sheet did not include them.

Q: I bought a house in August 2004 for $225,000. The mortgage is a seven-year adjustable-rate mortgage (ARM), fixed until 2011 at 5.375 percent. My mortgage balance is $175,188.

I've been noticing that long-term interest rates are going up. I probably won't move in the next five years. When should I refinance and how high will interest rates climb?

A: I'd wait as long as possible to refinance. You have a great rate that's about one percentage point below the current market interest rate. Why pay more now? I'd keep paying at 5.375 percent and start paying down as much of the loan as possible. That way, when you do refinance, and rates adjust, the monthly increase (if any) will be nominal.

I'm following my own advice, by the way. I have a 5/1 ARM at 4.185 percent. And I plan to keep that loan until the last possible minute.

When the loan does adjust, it'll only adjust by two points at the most in a given year. So in year six, the interest rate will rise to a maximum of 6.185 percent. The year after, if interest rates keep rising, it'll be 8.185 percent--still not too bad. In the meantime, I am pouring my interest rate savings into paying down this loan.

I have another two-and-a-half years until my loan adjusts, and with the additional year tacked on, I have three-and-a-half years to see where the economy is heading before refinancing.

In five years when your rate adjusts, or some point in between, interest rates may have fallen again for a variety of reasons. So, take a wait-and-see attitude and enjoy your savings in the meantime.
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Real estate purchases bounce back

Interest rates resume climb
Inman News
Overall mortgage applications jumped 8.8 percent last week on a seasonally adjusted basis from the week before, ending a three-week slide, the Mortgage Bankers Association reported today.

The seasonally adjusted purchase index increased by 11.3 percent to 433.3 from 389.4 the previous week, and the refinance index increased by 5.1 percent to 1,565.6 from 1,489.4 one week earlier.

The refinance share of mortgage activity decreased to 35.2 percent of total applications from 36.7 percent the previous week, which is the lowest share since June 25, 2004. The adjustable-rate-mortgage share of activity increased to 28.3 percent of total applications from 28.2 percent the previous week.

The average contract interest rate for 30-year fixed-rate mortgages increased to 6.57 percent from 6.53 percent. Points including the origination fee increased to 1.18 from 1.1 for 80 percent loan-to-value ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages increased to 6.19 percent from 6.18 percent, with points including the origination fee increasing to 1.18 from 1.11 for 80 percent loan-to-value ratio loans.

The average contract interest rate for one-year adjustable-rate mortgages increased to 6.08 percent from 5.96 percent. Points including the origination fee increased to 0.85 from 0.82 80 percent loan-to-value ratio loans.

Washington, D.C.-based Mortgage Bankers Association is a national association representing the real estate finance industry. The survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.
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Lenders Push Home-Equity Deals In a Move to Attract Borrowers

With rates on these lines of credit at a five-year high, demand is slowing, leading banks to offer new promotions to keep customers borrowing.
By: Ruth Simon: The Wall Street Journal Online
Home-equity borrowing has been a boon to consumers in recent years, essentially allowing them to turn their houses into cash machines. But with rates on home-equity lines of credit at a five-year high, demand is slowing, spurring lenders to keep their business growing with new promotions, rate cuts and other offers.

Wells Fargo & Co. launched a new program last month that cuts the rate on home-equity loans and lines of credit by between 0.375 and 0.5 percentage point for customers who also have a Wells Fargo checking account. Bank of America Corp. is sending out "customer reward" certificates that give borrowers up to half a percentage point off their rate if they take out a home-equity line of credit. PNC Financial Services Group Inc. is offering $25 PNC Bank Visa gift cards - and, in some cases, two free airline tickets - to borrowers who take out a new home-equity loan or line of credit.

As rising short-term interest rates push up the cost of credit lines, many lenders are also pushing fixed-rate home-equity options. Last week, Regions Financial Corp. introduced a fixed-rate home-equity loan with a term of up to 15 years. Before that, the Birmingham, Ala., bank's fixed-rate loans required borrowers to make a balloon payment at the end of five years.

Home-equity borrowing surged in recent years as millions of Americans took advantage of low interest rates and rising home values to pay off high-cost credit-card debt and fund everything from vacations to home improvements. The growth has been fueled in particular by the rising use of home-equity lines of credit, which carry a variable interest rate and give homeowners the right to borrow up to a certain amount, either all at once or as needed over a number of years.

Yet if housing values fall, some home-equity borrowers could wind up owing more than their house is worth. And homeowners with credit lines are vulnerable to rising interest rates, which can make their monthly payments higher.

Already, higher rates are fueling an increased interest in a different type of home-equity borrowing: loans, which offer a lump sum and a fixed rate, instead of credit lines. SunTrust Banks Inc. says that about a quarter of its borrowers are now opting for a fixed-rate home-equity loan, up from 10% a year ago. At Wachovia Corp., 40% of customers are choosing fixed-rate home-equity loans, compared with 30% last year.

Meanwhile, lenders such as J.P. Morgan Chase & Co. and Bank of America are touting newly popular features that let borrowers lock in a fixed rate on some or all of their line of credit. This fixed-rate option "is the largest weapon in our arsenal" when it comes to retaining customers, says Brad Conner, president of Chase Home Equity, which has boosted its home-equity marketing budget by 15% this year.

The cost of tapping your home's equity has climbed dramatically as the Federal Reserve Board has boosted short-term interest rates 15 times over the past two years. Rates on home-equity lines of credit currently average 8.33%, according to HSH Associates in Pompton Plains, N.J., up from as low as 4.64% two years ago, and are at their highest levels since 2001. Rates on home-equity loans have also increased, to 7.96% from 6.75% over the same period.

Yet even at their current levels, home-equity products remain attractive compared to many other kinds of borrowing. Rates on variable-rate credit cards, for instance, currently average 14.14%, according to Bankrate.com in North Palm Beach, Fla.

Home-equity borrowing has become increasingly important to lenders. Balances on home-equity lines of credit have climbed 71% to $543.2 billion over the last two years, according to an analysis by Equifax Inc. and Moody's Economy.com. Home-equity loans and lines of credit accounted for 10% of loans at commercial banks in the fourth quarter of 2005, up from 6.5% in 2001, and are the second-fastest-growing asset class, says Morgan Stanley analyst Betsy Graseck.

Yet growth is slowing. Total home-equity debt outstanding increased 9% in the first quarter compared with the same period a year earlier, according to Equifax and Moody's Economy.com. That's down from the first quarter of 2005, when the year-over-year growth rate was 25%.

"You have consumers that are being reminded every other month that their rate is going up," says John Gellhausen, an executive vice president at National City Corp. Demand for home-equity products could slow further if home-price gains slow and borrowers build up equity at a slower pace.

In a bid to keep business strong, some lenders are introducing customer-rewards programs. U.S. Bancorp this month rolled out its "EquiLine Rate Reward" program, which gives borrowers a lower rate the longer they hold on to their credit line. Under the program, which the bank tested last year, the interest rate on a borrower's credit line drops by one-quarter of a percentage point every six months until it reaches prime minus 1%. National City last month began giving rewards points to customers when they take out a home-equity line or loan and when they access their home-equity line with a credit card. The points can be redeemed for gift cards, consumer electronics and airfare.

In an effort to boost "retention" rates, a growing number of lenders are using computer-modeling tools to identify customers who are likely to pay off their credit lines. Citigroup Inc. offers larger credit lines to eligible borrowers who've almost fully utilized their credit line. Borrowers who've maxed out their credit lines are more likely to pay them off, explains Alan Dakay, president of Citi Home Equity.

SunTrust has boosted its retention staff by 10%; the Atlanta-based lender calls borrowers who are likely to pay off their credit line and sends out "checks" that let borrowers with lines of credit lock in a fixed, promotional interest rate. Forty-seven percent of banks now employ "home-equity customer retention specialists," according to a recent survey by the Consumer Bankers Association, up from 12% in 2005.

Still, rising rates are beginning to pinch some homeowners. More than 13% of borrowers with home-equity lines have balances greater than $95,000, according to Experian Corp.; more than 23% of borrowers owe more than $65,000.

Some borrowers have decided they've had enough. Stephanie McElhaney, a nuclear physicist in Colorado, recently consolidated her adjustable-rate mortgage and her $76,000 line of credit into a new 6.5% fixed-rate mortgage. The line of credit carried a rate of roughly 8.5%, Ms. McElhaney says. "I wanted to lock [a rate in] before it really got outrageous."

Yet this strategy - known as "cash-out refinancing" - doesn't make sense for everyone. Borrowers considering it should look not only at the rate and size of their credit line, but also at their overall mortgage picture. Refinancing may well be a wise move for someone with a large line of credit and an adjustable-rate mortgage that will soon reset. But it's less likely to make sense for a borrower with a low-cost fixed-rate mortgage, particularly if they have a relatively small line of credit, because their overall borrowing cost is likely to rise.

There are other downsides. With a cash-out refinancing, borrowers typically spread the loan payments out over 30 years, says Greg McBride, a senior financial analyst with Bankrate.com. "If you've got a smaller home-equity balance, you can knock it out in 10 years," lowering your total interest costs, he notes. Another factor to consider: Home-equity rates could decrease if slowing economic growth leads the Federal Reserve to begin lowering rates down the road.

Another possibility: Borrowers who took out a home-equity line a few years ago may be able to get a new one with a lower rate. Nearly 10% of lenders now offer lines of credit that are priced below the prime rate, according to HSH Associates, up from 8.9% a year ago. Almost 31% now offer lines priced at the prime rate, versus 28.3% last year.

Another option is to lock in a fixed rate on a portion of your credit line and then unlock it if rates move lower. Some lenders, such as Bank of America, let borrowers lock or unlock their credit line at no cost. At J.P. Morgan Chase, locking in a fixed-rate is free, but borrowers who want to unlock a credit line pay 1% of the loan balance or $250, whichever is smaller.

Homeowners who opt to lock in a rate could still see their monthly payments increase, however. That's because borrowers with home-equity lines often make interest-only payments. Lenders typically require borrowers who lock in a fixed-rate on their credit line to make both principal and interest payments.
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Fed Chief: Only 1 More Rate Hike

Associated Press: REALTOR® Magazine Online
Federal Reserve Chairman Ben Bernanke raised hopes yesterday that the quarter-point rise in interest rates he expects to put in place at the Fed’s next meeting May 10 will be the last for a while.

The Fed, which has raised rates 15 times at policy meetings in the past two years, "may decide to take no action at one or more meetings" in the future while waiting for economic information, Bernanke told Congress' Joint Economic Committee. "Of course, a decision to take no action at a particular meeting does not preclude actions at subsequent meetings," he added.

Boosting the rate to 5 percent at the Fed’s next meeting is a necessary step, Bernanke said, because, "Our assessment currently is that the risks to inflation are perhaps the more significant at the moment, and we need to address that."
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A history of paradise

By: Thomas Curwen, Times Staff Writer: LA Times
We are obsessed with real estate and always have been. For more than 125 years, Southern Californians have bought it, sold it, graded it, changed it, planted it, built on it, dreamed on it, torn it down and started all over again. We have pushed ourselves beyond our city centers. We have filled every space in between.

At first such devotion seemed natural. We knew paradise when we saw it, and we knew how to make it our own. Drawn to this flood plain by the climate and open space, we came, tens of thousands of us, decade after decade, transforming the region and making us accomplices for better and worse in our own fate.

Paradise is still here, but the terms have changed significantly. Today we see Los Angeles and this region as if we were on an endless approach to LAX. It may be easy to say that, amid the sprawl, we have lost the past — and the reasons for our abiding connection to this land — but scattered throughout this sea of rooftops, this tangle of freeways, are places that ignite the same thrill that new arrivals must have felt 100 years ago or that contain a more contemporary charge.

To identify these touchstones, we approached historians, urban planners, friends and users of this metropolis. We looked for the most singular locales that would put a human face on this sweep of development and, when isolated, would capture the speed, the exhilaration, the hope and heartbreak of our undaunted passion. Together these places form a picture of our belief in the possibilities of this land.

*

Pacific Electric Building

Downtown Los Angeles

As if someone had flipped a switch, the Pacific Electric Building, once famous for moving Angelenos out of downtown, is pulling them back.

When it was incorporated in 1901, the Pacific Electric Railway Co.'s Red Cars of California did everything it could to encourage downtown residents to "Go see what a beautiful country is opened up." And go they did, catching the Red Car at this terminus and riding it out to Monrovia or Newport Beach, expanding the city's limits.

Now the Pacific Electric Building is riding a rush of newfound enthusiasm for urban living. At the corner of 6th and Main streets, the building, renamed Pacific Electric Lofts, is something of a postmodern fortress in a postmodern part of town. The last train ran in 1961, and the station was partially gutted and transformed into a parking structure. Today it offers apartment living, high-speed Internet, a rooftop pool — and residents who blog about carpooling to the Coachella Valley Music Festival.

*

Bungalow Heaven

Pasadena

"One of the most hard-worked words in California of recent years is bungalow," wrote lovestruck enthusiast Charles Francis Saunders in 1913, and nowhere was that word worked harder than in Pasadena, where more than 1,000 of these low-pitched homes were built nearly a century ago on some 13 streets between Washington and Orange Grove boulevards and Lake and Hill avenues.

At the time, this accidental proliferation was about as radical a statement as you could make with redwood, pine and cedar.

More than a house, the California bungalow was a template for a new kind of life. Extolled for its indoor-outdoor arrangements, bungalows were cheap to build, cheap to heat and dispensed with the need for servants.

"The properly appointed bungalow inside stands for comfort, leisureliness and cheerfulness, comporting with a climate which makes for the same qualities," Saunders continued. "Bungalow life is informal but not necessarily bohemian, and at its best is simple, without being sloppy."

Tell that to the relatives back East.

*

The Lummis Home

Highland Park

When it was nearly completed in 1910, the Lummis Home attempted with its bohemian irreverence to connect Southern California to its Southwestern roots. Meanwhile, just across town, Henry Huntington was putting the finishing touches on his mansion and would have nothing of it. Between Lummis and Huntington, a sparing match was waged in Los Angeles over its future as a Western or a metropolitan city.

Charles Lummis celebrated a Mission-style aesthetic with river rock, vigas and corbels set beneath the sycamores of the Arroyo Seco; Huntington, a Beaux Art neoclassicism with columns, pilasters and balustrades on a ranch that would become San Marino. One vision was born from the experience of walking from Cincinnati to L.A. in 1884; the other from taking the train. One was cowboy boots and a wide-brimmed hat, the other starched and laundered. A hundred years later, they're still duking it out.

*

The fence

Pacoima

Some are made of pickets. Others of chicken wire or cement, wood or cactus, and for Mexicans who came to this city in the wake of the 1910 revolution — families who could own no land back home — nothing was more meaningful than the fence.

"My father had a thing about fences," writes Mary Helen Ponce in "Hoyt Street," her memoir about growing up in Pacoima in the 1940s. "I often thought that … it was important for him to fence, to secure the right of ownership."

Sixty years later, Hoyt Street — south of Van Nuys Boulevard and east of the train tracks — still has a thing about fences. They march right out to the sidewalks and announce themselves like guard dogs in front of these modest stucco and wood-sided homes with their icicle lights, geraniums and ficus trees, plastic toys and tables out in front. There is the slump stone variety, the cinder block and the cyclone. There is an iron fence with wood slats. There is one that is painted yellow, blue and green in an Aztecan pattern. One has fleur-de-lis points with a medallion center. One has lions, and one is made of yellow caution tape. And each in its own way has set down roots for the world to see.

*

Hollywoodland Gates

Hollywood

Sandstone, Gothic and so yesteryear, the Hollywoodland Gates at the corner of Beachwood and Westshire drives were put up in 1923 and marked the entrance of the great Hollywoodland development, one of the first housing tracts in Southern California. And in the years since, nothing has topped this promotion. It began with the sign: Thrown up as four syllables in 1924, truncated to three in 1949, it remains today a landmark to our faith that places define who we are.

Cruise Beachwood Drive as it lifts above the flatlands and you'll understand why. Sea breezes funnel into the canyon. Bird song drifts among the ridges, and between aged pines and greening sycamores rises a phantasm of Spanish Colonial, English Tudor and French provincial facades. The eastern gate looks like a sentinel's post. An archer's window is poised toward the city below. Step inside this domain, and two real estate agents smile at you from an ad posted on the bench at the Dash shuttle turnaround.

*

Venice

Step into a hand-painted postcard from Venice beach, circa 1910, and you'll be wandering inside California's first theme park. The idea that someone would dig canals and raise arched bridges so that you could wave over a gondolier proves that the dreamers of Southern California went a little too far — and were proud of it.

Mailed to some Eastern city, on a winter day, not long before the sinking of the Titanic, you can hear the postcard landing in an empty mail slot. Outside, snow is falling. Elm trees cast skeletal shadows against distant brownstones, and in your hands is something unbelievable. The image is small, and the lighting reminds you of the Mediterranean. You saw it once on a trip to Italy, where there never seem to be shadows, even in the brightest sunlight. Here is a gondola, crowded with well-dressed men and women, being sculled on a canal that looks like nothing in Venice — or at least the Venice that you know. Alongside are two young boys, modern-day Tom Sawyers, in a wooden canoe, and in the distance, there's a high, arching bridge and a few homes painted red on a green spit of land set against this powder blue sky.

You rub your eyes. Imagine living there, you think. "Boating on the Canal, Venice, California," the caption reads. Abbot Kinney, the mastermind of the dream, would have wanted it this way.

*

The Spadena house

Beverly Hills

This witch's lair of fairy-tale proportions, concocted in 1921 from a brew straight out of the Brothers Grimm, may be a cliché by now, yet it still dares to say what is often kept quiet.

With its raked plaster and river rock, aversion to straight lines, a shingle roof with ski-slope severity, mullioned windows and off-kilter shutters, it is the "Rocky Horror" of domestic architecture, "Gods and Monsters" come home to roost. Designed by Harry Oliver in 1921 as movie set, it became an office, and then a home, and it's what real estate is all about — fantasy.

But taking exaggerated leaps is a dying art. Our homes are either quiet and respectable or self-important and self-conscious. Few try to have it both ways and succeed.

*

Office of the Assessor

Downtown Los Angeles

Located in the Hall of Administration, in a remote basement once affectionately known as the Swamp, the 12,000 ledger books of the assessor's office contain in their pages nearly every real estate transaction in L.A. County over the last 100 years. Their bindings are torn and duct-taped, their stenciled catalog numbers faded with age. Closed, they measure 2 1/2 feet long by 20 inches tall. Opened, they document the cellular division of the region over 4,084 square miles in delicate handwritten lettering on lines as straight as the horizon itself.

The language is often hieroglyphic, and most of the information is inconsequential (computers upstairs keep recent records), but the slightly Midwestern cadence of the names — Clifton Taylor, Vernon Wooten, Martha B. Earle — sing out, and you realize that nothing is more simple or complicated than a plot of ground and a place to call home.

*

San Bernardino Peak

Here is where it began. In 1852 on this wind-scratched summit more than 10,000 feet above the flatlands of San Bernardino County, Col. Henry Washington and a crew of 13 built a tower 24-feet tall and began to survey all the land south of the Tehachapis. To this day, every parcel in Southern California has an invisible line that connects it to this point.

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Rancho Los Alamitos

Long Beach

Set on a small knoll in east Long Beach, this whitewashed adobe is the oldest home still standing in Southern California. Built in 1806 and remodeled through the succeeding decades, it is a reflection of our mestizo heritage. Beneath floral wallpaper laid on plaster is dried mud and straw.

Rancho Los Alamitos was an Indian village and then the center of a 300,000-acre land grant, whose rolling hills and isolated barrancas spreading across southeast Los Angeles were so dense with wild mustard that cattle got lost in its tangles. Bankruptcy and marriage whittled down the property, so that by the time its last owner, Fred Bixby, took charge in 1906, it was merely 3,700 acres.

No wonder he looks so pleased. With the flash of a match, he lights his cigar for the camera to catch. Dressed in shirt and tie, fedora and eyes curiously closed, he is entirely the gentleman rancher. They say he was once badly in debt. They say that the discovery of oil on Signal Hill in 1921 bailed him out, but it was the land itself that ensured his wealth.

Bixby died in '52 and his wife nine years later. By then, the natural spring that fed the hill had gone dry, and Bixby's home, reduced to a mere 7 1/2 acres and owned by the city of Long Beach, would soon be surrounded by a gated community that would block his priceless view.

*

The Cascades

Sylmar

The history of L.A. is writ in water and dust, and no single location contains that history better than where water from the Owens River pours into Los Angeles.

Close to the middle of nowhere, pushed up against a dry and rocky hillside, some 10,000 people once gathered at this spot. They stood beside a long concrete runway that emerged from the ridge above. It was a brilliant November day in 1913. A band played "America," and on a bunting-draped grandstand, dignitaries dressed like European royalty began the speechmaking.

The courageous feat "ranks higher than the bloody accomplishments of all the Caesars," intoned a former governor.

"I Love You, California," the band picked up, and eventually, in a moment of silence, an old and solitary man began addressing the crowd.

"This rude platform is an altar," William Mulholland said, "and on it we are consecrating this water supply and dedicating this aqueduct to you and your children and your children's children — for all time." Then he stopped.

"That's all," he said, and returned to his seat.

A flag was unfurled. A trickle of water darkened the runway, then a stream, then a torrent. "There it is," the old man spoke again. "Take it."

*

The Tehachapi Mountains

For years, the Tehachapis have marked the wild limit to the sprawl of Southern California. Too far from Los Angeles and too close to Bakersfield, they are at best a scenic blur taken in from Interstate 5.

Jedediah Smith, John Fremont and Joaquin Murieta traipsed through these lonely valleys. A grizzly mauled a trapper named Peter Lebec not far from where most people fill up their tanks.

Until the construction of the Ridge Route in 1914, most travelers would turn west at the Santa Clarita Valley to avoid the ordeal of summit. (The stretch we now called the Grapevine, the 6 1/2 -mile segment from Fort Tejon to the Central Valley, is the steepest grade allowed on a federal highway.)

Only now, the Tejon Ranch Co., owner of the largest chunk of change up here, plans to build more than 25,000 homes and a 23,000-acre resort in a saddle of these mostly empty mountains, and a region once known for its bears, bandits and wayward travelers will be transformed into our newest bedroom community.

*

The oldest orange grove

Northridge

There may be more hidden in a few pockets of private land, but at the corner of Lindley Avenue and Nordhoff Street on the campus of Cal State Northridge stands the oldest, most contiguous remnant of the Valley's agricultural past.

Wander among these trees, stretching over 6 acres, and you fall back to a time before there was a Northridge, before there was a north Los Angeles. The town was Zelzah, the "watering place in the desert," and in the summer of '23, a Norwegian family visiting from Oklahoma purchased a 10-acre parcel and got to work.

Farmers here mostly grew lima beans; the Halversons tried alfalfa as well. A standpipe in the field provided water, which had to be ordered from the Department of Water and Power.

In 1929, Ole decided to swap out most of his lima beans for Valencias. They were brought in from the Cascade Ranch — 3 feet tall with stems almost an inch thick, roots wrapped in burlap. Today the oranges grow out of reach. The trunks are more than 60 inches round, and in the midday sun, you are quickly lost in their fragrance.

*

Tarzana

Here on a small hill in Tarzana stood Gen. Harrison Gray Otis' hacienda and ranch, Mil Flores. In 1919 it was sold for $125,000 to Tarzan's creator Edgar Rice Burroughs, who at first resisted, then embraced the development of Tarzana, "Gateway to the Sea." It was one of the first subdivisions in the Valley and is still being divided today. Welcome to Monteverde, a tract of 30 homes designed in the Spanish Revival style by the architect who transformed Pickfair into a Venetian palazzo. The homes have up to 6,600 square feet and are priced from $2.8 million — a 2,240% return on Burroughs' investment.

*

Zillow.com

Either the zenith or the nadir of our obsession, Zillow.com took a moment of our lives by storm when it debuted earlier this year. It was all about the Joneses. And with satellite photos, click-on descriptions and latest selling prices, we came closer than ever before to addressing the great taboo of our age — how much did it cost? — without having to say a word.

*

Heritage Square

Highland Park

Five homes, a Red Line Station, a carriage house, church, boxcar and a transplanted coral tree — this motley collection, once part of the city scene and now moved and preserved at Heritage Square, is the sum of our Bunker Hills, our street corners and city blocks lost to redevelopment and eminent domain. Italianate, Queen Anne-Eastlake, even idiosyncratic (the wonderful Octagon House), these 100-year-old designs remind us of a time when Los Angeles aspired to be no different than anywhere else. Scrape away the paint, and layers of history fall free.

Before the Perry Residence was restored to its white, skeletal splendor, it was a pink-stucco apartment on Pleasant Ave. in East L.A., and before the Ford residence arrived, it housed four families (on the living-room floor, you can see the shadowy line of a wall that supported back-to-back Murphy beds). In a city of forgetting, utility trumps aesthetics — but not this time.

*

The Valley windbreaks

Shadow Ranch, West Hills

Four stories tall, snarled with dead limbs and peeling bark, the eucalyptus trees at Shadow Ranch soar above the ranch homes that line Vanowen Street. These elegies, these few blue gums, trace back to the stock that Alfred Workman imported from Australia in the 1870s. Workman, a tenant farmer employed by wheat barons Isaac Lankershim and Isaac Newton Van Nuys, planted them at a time when the Valley was treeless and raked by summer breezes and winter gales. Windrows offered the only protection.

An insect called the longhorned borer felled many of the trees. Most are stumps now, 5 feet in diameter, and when the wind blows, whining down Topanga toward the Santa Susanna Pass, no one seems to complain.

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Howard Jarvis' house

Los Angeles

It's 1941. Howard Jarvis, a former newspaper publisher, press aide and campaign organizer from Magna, Utah, pays $8,000 for a three-bedroom storybook home at 515 N. Crescent Heights Blvd. Almost 25 years later, Jarvis watches a middle-aged woman drop dead at the Los Angeles County Hall of Administration while complaining about her taxes. It gets him thinking.

It's 1978. Proposition 13, Jarvis' landmark tax reform bill, passes by a 65% margin. Personal and corporate property taxes roll back 57%; it triggers a tax revolt almost as famous as the Boston Tea Party. At the time Jarvis disdained fame, glory, reward — or "a goddamn thing," as he once told a reporter. "My reward is going home at night," he says.

The home is quiet, the current tax bill, $999.81.

Before her recent death, his widow, Estelle, sat in an easy chair remembering the fires in the fireplace in the addition out back. There were the cocktails and the cigars — how Howard loved to his cigars. And how she loved to dance with him on the hardwood floor of the living room.

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First navel orange tree

Riverside

It's still there, growing at the corner of Magnolia and Arlington avenues in Riverside, the mother of all navel oranges. But forget the miracle of the tree, planted in the 1870s. Think instead about the land rush it started. On postcards and orange crates, its Edenic and well-watered simplicity sold and transformed the Southern California landscape.

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$2.9 million

As of March 6, 2006, the median price for a single-family home in Beverly Hills, 90210, was $2,995,000, the highest in Los Angeles County. Need we say more?

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Judson Studios

Highland Park

The unassuming two-story Craftsman, clad in gray shakes just off Avenue 64, which once housed USC's School of Fine Arts, is now Judson Studios. And today, it is our closest connection to the Arts and Crafts Movement.

To gaze through its windows is to make a connection to a mantra of the Arroyo Guild: "simple living, high thinking, pure democracy, genuine art, honest craftsmanship, natural inspiration and exalted aspiration." These words, coined nearly 100 years ago by William Lees Judson, almost seemed possible.

Judson himself had arrived in Los Angeles from Chicago in 1893 in broken health and penniless, and in less than 10 years, he found himself prospering in a studio along the banks of the Arroyo Seco.

Offering designs to the new homeowners, Judson and this collective of artists and craftsmen committed to the work of Gustave Stickley and William Morris, focused with ideological purity on domestic life and the home and, for a brief period, gave Angelenos a stab at their own aesthetic.

But the dream faded as quickly as it had formed. Perhaps it was too rarefied. Perhaps the world rushed ahead too fast. Today only the stained-glass studios remain. Most of their commissions are ecclesiastical, an apotheosis of Judson's uncompromising hope.

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Jackie Robinson's boyhood home

Pasadena

The house at 121 Pepper St. was torn down in the early 1970s. But It was here that Jackie Robinson learned to stand up to bigotry and prejudice.

He was 16 months old when his mother, abandoned by her husband and with five children in tow, boarded a train one summer night in Cairo, Ga., and never looked back. It was 1920. The South was an ugly place.

"If you want to get closer to heaven, visit California," Mallie Robinson's brother had promised, so she set her sights on Los Angeles, and when the train pulled into the Pasadena railroad station, heaven seemed within reach. Only she didn't know that this town was as prejudiced as any in the South.

The Robinsons were the first blacks to live on Pepper Street. Their neighbors tried to buy them out. Someone burned a cross on their front lawn. An elderly couple crossed the street whenever they saw them coming, and the police were eager to respond to noise complaints. "Nigger! Nigger! Nigger!" a neighbor girl screamed at Jackie when he was 8.

Nothing was easy, but it was in the Castle, as the family called it, this Victorian-style home with a mansard roof and a front porch, that Jackie listened to his grandmother, born a slave, tell stories by the light of an oil lamp. "She told me once that when the slaves were freed they wanted no part of freedom. They were afraid of it."

Today only a brass plaque on the sidewalk commemorates the site.

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The Brady Bunch house

Studio City

Before Wisteria Lane, there was 11222 Dilling Street, the platonic ideal of the American dream. Retailed to the world for only a few seconds — in the opening sequence or after an ad — it is a vision of life everlasting.

Where else but behind the walls of this split-level with its shake roof, clerestory windows and Palos Verdes stone will you find Marcia struggling with new braces, Alice fretting about her future with Sam the butcher, Peter sick with the measles, Bobby drumming and the phone always busy?

No wonder the new owners put up a brick wall and wrought-iron fence. Syndication is a very long time.

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Home Depot

Huntington Beach

On July 25, 1985, the Atlanta-based Home Depot opened its first stores in Southern California, one in Fullerton and one in Huntington Beach, and sweat equity never had it so good. What once was the mom-and-pop hardware store, devoted to the arcana of shiplap, ballcock shank washers and locksets, now became super-sized for shoppers who gave no second thought to sharing space with forklifts or gazing at merchandise stacked three stories high.

From the outside, the Depot's bright orange signage is like the pediment of the Parthenon, and once inside, you realize that given enough time and money, you could build, refurbish and landscape your own private temple.

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California pools

Covina

Nothing defined middle-class ambition in Southern California during the '50s and '60s better than the swimming pool, and no one took it more to heart than Wayne Steimle, a high school physics teacher living in San Gabriel who one day in 1952 found himself mesmerized by the goings-on in his neighbor's backyard.

"They're not doing anything I can't do," he told his wife, who got ready to say goodbye to her fruit trees and a boysenberry patch.

They told the kids on Christmas Day and got down to work. First, a rectangle was laid out with garden hoses, then the skip loader started digging, and Steimle began stacking cinder blocks. Photographs show him, dressed in a plaid shirt and flashing a toothy smile, as if these were the happiest days of his life.

Within four months, the Steimle family stayed up all night with their garden hoses running. The next morning, Steimle's daughter took the first plunge. The water was 57 degrees. Within two years, Steimle would quit teaching and get into the pool business full time. Today his company is one of the oldest pool companies in Southern California, and is managed by Steimle's four grandsons.

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The model home complex

Tustin

Scarier than the Spadena House, the model home complex — found in every new-home development in Southern California — is fantasy kitsch. Stuck in a time warp, they bring to mind the dreams and sad longings of American life without a hint of irony.In this world, the ideal life is serious business, and it exists well beyond the Jeffersonian grid with its right-angled streets and side-by-side city blocks. It exists in a place where curlicues and cul-de-sacs, new homes and community pools reign.

At the Villages of Columbus in Tustin, one of Orange County's newest master-planned communities, utopianism abounds. No longer is it enough to sell bedrooms and baths. Today you sell a lifestyle, and here it's the "socially interactive infrastructure" and the promise of more time, less stress and happier families.

The homes are just off a street called Sweet Shade and feature a mix of Georgian, Victorian, Tudor and Craftsman styles. Inside, there are robes in the closets, bath oils on the counters, soft music playing in the background.

Walk these recently paved streets, tour the models and you can't help but feel a little guilty: In their promise of perfection lies a judgment about the world you've left behind.

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Sources: Jessica Maria Alicea, manager, Heritage Square; Brian Sheridan, director of development, Heritage Square; Rick Auerbach, assessor, Los Angeles County; Ken Bernstein, director of preservation issues, Los Angeles Conservancy; William Deverell, professor of history, USC; Robert Gohstand, professor of geography emeritus, Cal State Northridge; Joel Fox, former president of Howard Jarvis Taxpayers Assn.; Trevor Grimm, general counsel of the Howard Jarvis Taxpayers Assn.; Joel Kotkin, Irvine Senior Fellow, New America Foundation; Robert Knowles, special assistant, assessor, Los Angeles County; Robert D. Montoya, Historical Society of Southern California; Becky M. Nicolaides, associate professor of History and Urban Studies and Planning, UC San Diego; Merry Ovnick, associate professor of history, Cal State Northridge; Leonard Pitt, professor of history, emeritus, Cal State Northridge; Kevin Roderick, editor and author; Kevin Starr, professor of history, USC; D.J. Waldie, public information officer, city of Lakewood.

BIBLIOGRAPHY
Among the books reviewed in preparing this story were:

Jackie Robinson: A Life Remembered by Maury Allen
El Alisal: Where History Lingers by Jane Apostol
Painting with Light: A Centennial History of the Judson Studios by Jane Apostol
Los Angeles: The Architecture of Four Ecologies by Reyner Banham
Los Angeles: Epic of a City by Lynn Bowman
Los Angeles: Biography of a City, edited by John and LaRee Caughey
Ride the Big Red Cars: How Trolleys Helped Build Southern California by Spencer Crump
Whitewashed Adobe: The Rise of Los Angeles and the Remaking of its Mexcian Past by William Deverell
Bound for Freedom: Black Los Angeles in Jim Crow America by Douglas Flamming
A Guide to Architecture in Los Angeles and Southern California by David Gebhard and Robert Winter
Magnetic Los Angeles: Planning the Twentieth-Century Metropolis by Greg Hise
Arroyo Craftsman, a 1999 reprint by The Judson Studios
The City: A Global History by Joel Kotkin
Landscapes of Desire: Anglo Mythologies of Los Angeles by William Alexander McClung
William Mulholland and the Rise of Los Angeles by Catherine Mulholland
My Blue Heaven: Life and Politics in the Working-Class Suburbs of Los Angeles, 1920-1965 by Becky M. Nicolaides
Los Angeles: The End of the Rainbow by Merry Ovnick
Los Angeles: A to Z by Leonard Pitt
Hoyt Street: an Autobiography by Mary Helen Ponce
Jackie Robinson: A Biography by Arnold Rampersad
I Never Had it Made: The Autobiography of Jackie Robinson by Jackie Robinson
The San Fernando Valley: America's Suburb by Kevin Roderick
Wilshire Boulevard: Grand Concourse of Los Angeles by Kevin Roderick and J. Eric Lynxwiler
The Seduction of Place: The History and Future of the City by Joseph Rykwert
Under the Sky in California by Charles Francis Saunders
La Reina: Los Angeles in Three Centuries, a 1929 publication of Security Trust and Savings Bank
Excerpts from Southern California's Architectural Heritage by Terry Silo
Americans and the California Dream: 1850-1915 by Kevin Starr
Inventing the Dream: California Through the Progressive Era by Kevin Starr
Material Dreams: Southern California through the 1920s by Kevin Starr
American Character: The Curious Life of Charles Fletcher Lummis and the Rediscovery of the Southwest by Mark Thompson
Henry Edwards Huntington: A Biography by James Thorpe
L.A. El Pueblo Grande by John D. Weaver
Places of their Own: African American Suburbanization in the Twentieth Century by Andrew Wiese
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