Complaint Says Zillow's Estimates Are Misleading

A national nonprofit group claims that Zillow.com's home valuations are wrong more than 67 percent of the time.
By: John Cook: REALTOR® Magazine Online
The National Community Reinvestment Coalition, a Washington, D.C.-based nonprofit that promotes equal access to credit and capital for underserved communities, is taking aim at real estate Web site Zillow.com.

In a 12-page complaint filed with the Federal Trade Commission, NCRC insists that Zillow's home-valuation tool is inaccurate and misleading. An audit by NCRC reveals that Zillow's so-called "Zestimates" are wrong over 67 percent of the time, and many home owners have expressed concerns about valuations that are too high or too low.

NCRC Executive Vice President David Berenbaum says the complaint is in no way tied to NCRC's close relationship with the Center for Responsible Appraisals & Valuations; he says the coalition is worried about low-income home owners falling prey to unscrupulous lenders that use inaccurate valuations from Zillow.

However, Don Kelly of the Appraisal Institute notes that no bank he knows of uses Zillow's Zestimates when writing mortgages.
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8 Real Estate Deals that Save Taxes

The end of 2006 is almost here, but it's not too late to cut taxes by putting money in real estate. Here are 8 tax-saving opportunities.
By: Robert Bruss: REALTOR® Magazine Online
1. Sell a principal residence before the end of the year. If it was owner occupied for at least 24 of the last 60 months before its sale, the sellers can claim up to $250,000 tax-free and $500,000 if they are a married couple filing a joint return.

2. Buy a principal residence before year-end. A typical home acquisition loan fee of 1 or 2 percent of the mortgage amount is tax-deductible as itemized interest. Mortgage interest paid in 2006 is also tax deductible.

3. Refinance a home mortgage and deduct previously nondeductible loan fees. In the year of paying off a mortgage, whether by refinancing or selling, those fees become fully tax-deductible as itemized interest.

4. Get a home equity loan, whose interest is usually fully deductible, and use the money to pay off nondeductible interest from credit card debt or a personal loan.

5. Prepay the January 2007 mortgage payment in 2006.

6. If the local tax collector will allow it, prepay 2007 property taxes and deduct them in 2006.

7. If you moved more than 50 miles and changed jobs, deduct those moving costs.

8. Deduct uninsured casualty or theft loss. Only losses that are more than 10 percent of your 2006 adjusted gross income qualify.
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Buy worst house in good neighborhood for big profits

How serial investing can become a tax-free business
By: Robert J. Bruss: Inman News
Do you have any friends who sell their homes and move approximately every two years? I know several of those very smart folks. You may wonder why they change homes so often. No, they are not in the federal witness protection program. But they have a very profitable reason.

They are "serial home sellers." There is nothing illegal or immoral about that. In fact, it is extremely smart to sell your personal residence every two years or so, especially if there is no tax to pay on your resale profit.

TAX LAW ENCOURAGES PROFITABLE TAX-FREE HOME SALES. Just in case you have no clue what this is all about, every homeowner needs to know that Internal Revenue Code 121 permits tax-free principal residence sales profits up to $250,000 (up to $500,000 for a married couple filing a joint tax return).

To qualify, the home seller(s) must own and occupy their principal residence at least 24 of the last 60 months before its sale. But IRC 121 can only be used every 24 months. If you want to maximize your tax-free sale profits, there are five easy steps:

1. Buy a sound, well-located house or condominium below market value needing cosmetic fix-up work.

2. Move in and make it your principal residence.

3. Make profitable improvements to the residence that cost less than the market value they add.

4. Profitably sell the house at a tax-free profit not exceeding $250,000 (up to $500,000 if husband and wife occupied the home 24 or more of the 60 months before sale and they file a joint tax return).

5. Repeat every 24 months to become known as a tax-free "serial home seller."

HOW TO MAKE PROFITABLE HOME IMPROVEMENTS. If creating tax-free profits, while enjoying your home is appealing, especially if you are a handyperson or in the construction field, serial home selling can be the perfect business opportunity. The only skill required is to recognize a house or condo with "the right things wrong."

Most older houses qualify, as virtually every house more than 10 years old needs paint inside and outside. Paint is the most profitable improvement homeowners can make. Spending $1,000 on painting often adds $5,000 to $10,000 in market value.

Other examples of homes with the "right things wrong" include the need for new light fixtures, fresh landscaping, new carpets and flooring, and overall cleaning and repairs. An especially profitable home improvement is adding a second bathroom to a one-bathroom house.

However, the "wrong things wrong" with a house are necessary but unprofitable work that doesn't add more market value than it costs. Unprofitable examples include a new roof, foundation repairs, new wiring, replacement of galvanized pipes with copper pipes, siding replacement, and window replacement.

Many home improvements are "nice to have," but they don't add more market value than their cost. Examples include bedroom and family-room additions, kitchen remodeling, and bathroom upgrades. Such work may make your home more desirable while you live there, but is unlikely to add more than the cost to the market value.

THE MAJOR DRAWBACK OF BEING A SERIAL HOME IMPROVER. If you think buying a run-down house, making profitable improvements while living in it, and selling it for up to $250,000 (or $500,000) tax-free profit sounds like fun, think again. It's hard work.

While you and your family are living in the house as it undergoes major renovation, that can be what TV's Dr. Phil calls "a life-changing experience." The disruption of not having a kitchen to cook in, or only one working bathroom for a large family, and the daily disruption of having strangers working in your home can't be fully described.

A few summers ago my neighbors went through such an experience. They wisely decided to take the kids to Europe so by the time they got back their remodeled home was almost finished. Yes, the marriage survived.

Because major home improvements can be traumatic, the smartest serial home sellers renovate their homes before moving in. Then they get to enjoy their fixed-up home for at least two years without the hassle and inconvenience of work in progress.

DON'T MAKE THESE COSTLY MISTAKES. Earning up to $250,000 tax-free (or $500,000 for a married couple) every two years excites most people. But there are some pitfalls to avoid:

1. Don't buy a house in excellent condition (it lacks fix-up profit potential). Instead, buy the worst house in a good neighborhood.

2. Avoid most condominiums and townhouses. The reason is no matter how nice you fix up your unit, its maximum resale market value will be held down by the recent sales prices of other units in the same complex. For example, if you fix up a condo penthouse but the other units in the building and the common areas are "ho-hum average," you won't earn much profit.

3. Stay away from "extreme makeover" houses, which need to be torn down (called a "scraper") or renovated by moving walls and rebuilding the interior. Profiting from such houses is extremely difficult.

4. No matter how much potential a fixer-upper house has, stay away if it is in a bad location, high-crime area, or the public-school quality is poor. These three criteria will hold down resale value no matter how well the house is upgraded.

WORK WITH A SAVVY BUYER'S AGENT TO FIND FIXER-UPPERS. Buyers of fixer-upper houses have a major advantage. Most other home buyers don't want these fix-up houses. They prefer to buy a house, turn the key in the door, and move in. That's the way to profitably sell your house.

A sharp buyer's agent will alert you when a fixer-upper house with "the right things wrong" comes on the market, whether it be in the local MLS (multiple listing service) or a "for sale by owner" FSBO. In the current "buyer's market" in most cities, there is little demand for these run-down houses offering profit potential.

Additional sources of profitable home purchases, which most buyer's agents don't follow, include foreclosures, probate and bankruptcy sales. Vacation or second homes can also be profitable, but they have special risks such as fickle buyer demand, which is often seasonal and volatile.

HOW TO PAY FOR THE IMPROVEMENTS. Fortunately, most "right things wrong" fix-up houses don't require costly improvements. To pay for the improvements, because the house will become your principal residence for at least 24 months, many major lenders now offer combination mortgages to pay for both the purchase and the improvements.

The lender's appraiser will evaluate both the home's current "as is" market value and the upgraded market value after the improvements are completed. The lender pays out the improvement portion of the loan as the work is completed.

Another finance method is to buy the house with mortgage financing and then obtain a home equity credit line secured by a second mortgage to pay for the improvements.

However, this method is difficult if the home buyer doesn't have much initial equity.
More details are in my special report, "How to Earn Up to $250,000 (or $500,000) Tax-Free Profits Every 24 Months Buying and Selling Houses," 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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Is buying a second home a wise tax strategy?

Homeowners aim to save big on sale of first home
By: Robert J. Bruss: Inman News
DEAR BOB: My wife and I bought a house in 1995 for $180,000. Since then, we have taken out home-improvement loans and now owe $320,000. Similar nearby houses sell for $600,000. In 2004, we bought our current home for $640,000 and rented out our former home. We have been told if we sell our first home within three years after buying our second home we won't owe any capital gains tax. Or should we try to sell it now although the local home sale market is a bit slow? -Manuel A.

DEAR MANUEL: You received incorrect tax information. Buying a replacement home is irrelevant. Also, the mortgage balance on your old home doesn't matter.

To qualify for the Internal Revenue Code 121 principal-residence-sale tax exemption up to $250,000 for a single person (up to $500,000 for a qualified married couple filing a joint tax return), you must have owned and occupied the home at least 24 of the last 60 months before its sale.

That means you have up to 36 months after moving out of your principal residence to claim your tax-free sale profits. If you rent it longer than 36 months, you lose your exemption.

However, since you rented the house after vacating, the depreciation you deducted on your tax returns will be taxed at the special 25 percent federal tax rate for recaptured depreciation. For full details, please consult your tax adviser.

WHAT IF 81-YEAR-OLD MOM STOPS PAYING DAUGHTER'S MORTGAGE?

DEAR BOB: My 81-year-old mom recently co-signed a 40-year mortgage for my "derelict" sister. The loan is in my mom's name but the house deed has both her name and my sister's name on it. My sister has really bad credit. Although she can afford it, she refuses to pay the mortgage monthly payment to my mom, so mom makes the payment. My dad, age 79, is worried about his credit rating. I say, at their ages, does it really matter? My mother also has dementia so my sister and the bank took advantage of her. What should she do? -Dee G.

DEAR DEE: If your mom stops paying the mortgage payments, the bank will foreclose on the house. Should it not sell for enough to pay off the mortgage, the bank could come after your mom for any deficiency loss (although that is highly unlikely).

Of course, if that happens, your mom's credit will be ruined. But, as you say, at age 81, who cares?

This extreme situation shows why an individual should not co-sign for credit to primarily benefit another person, especially a "derelict."

If you and your father knew this was going on, you should have stepped in to stop your mother from co-signing for your sister.

AFTER YOU QUITCLAIM TITLE, YOU CAN'T GET IT BACK

DEAR BOB: A few weeks ago you had a question from a man who wanted to add his girlfriend to the title to his house. You suggested use of a quitclaim deed to convey a half interest. My question is after quitclaiming your title, how can you get it back again? I'm asking because in two years I plan to add my boyfriend's name to the title of my home we will share as our primary residence before selling it two years later -Jeanne S.

DEAR JEANNE: When a property owner signs a quitclaim deed, he conveys whatever interest is desired, such as 50 percent or 100 percent, has his signature notarized, and the deed is recorded to complete the conveyance. After title is transferred, the grantor can't get that title back again.

Before you transfer a partial interest in your property to your boyfriend, please consult a local real estate attorney to determine the best way to hold title. Also consult your tax adviser to discuss the tax consequences.

NO WAY TO GET YOUR NAME OFF MORTGAGE AFTER A DIVORCE

DEAR BOB: As part of my divorce settlement two years ago, I signed a quitclaim deed on the house that was in both our names. The mortgage is still in both our names. He has since remarried and is still living in the house. He says he can't refinance and isn't sure when he is going to sell the house. If something were to happen to him, it is my understanding I will still be responsible for the mortgage payments. Would I get the house? Or would it go to his wife? Can I make him refinance? I really want my name off the mortgage and the house -Teresa B.

DEAR TERESA: If you had a decent divorce attorney, he or she would have resolved these issues in your divorce agreement. Because you signed that quitclaim deed, your ex-husband now owns the house in his name alone.

But your name will always remain on the mortgage obligation. The lender is 99 percent certain to never release you from liability, and you can't force your ex-husband to refinance. It's a shame this wasn't handled as part of the divorce.

If your husband dies, his living trust or will determines who receives title to his house. By signing that quitclaim deed, you are out of the picture to receive the house unless he wills it to you (very unlikely).

Sorry to be the bearer of bad news. But there is nothing you can do to force your ex-husband to refinance or sell the house to get your name off the mortgage.

WHAT IS BEST TAX STRATEGY TO RECEIVE RENTAL HOUSE?

DEAR BOB: What is the best tax strategy for my mother to give me her rental house? Initially, we bought it together, but when it was refinanced my name was taken off the title -Jan B.

DEAR JAN: The best way for you to obtain title to that rental house is to inherit it after your mother dies. Then you get a new stepped-up basis of market value on the date of her death.

If she gifts the house to you now, then you take over her presumably low depreciated adjusted cost basis for the rental property. Also, she must file a federal gift tax return. But no gift tax will be due unless she has given away over $1 million in lifetime nonexempt gifts exceeding $12,000 each. For full details, please consult your tax adviser.

SHOULD HOMEOWNER SWITCH FROM ADJUSTABLE TO FIXED MORTGAGE?

DEAR BOB: I am 64, single, and retired. I have a $125,000 mortgage with an adjustable interest rate currently at 6.3 percent (it can go up to 11 percent). My home is worth about $550,000. I am not planning to sell, but am thinking of refinancing at a 6.375 percent fixed interest rate. It would cost me $2,000 in fees ($1,000 in lender fees and $1,000 in title and escrow charges). Do I really need to spend $2,000 to avoid any future interest-rate increases? -Richard L.

DEAR RICHARD: It's up to you to decide if spending $2,000 to lock in your interest rate at 6.375 percent is worth the $2,000 expense and hassle. I can't give you a payback analysis because you won't be saving anything. But you won't have to worry about rising interest rates.

NO LIABILITY IF TREES AREN'T DAMAGING NEIGHBOR'S PROPERTY

DEAR BOB: After I moved into my home, the neighbor insisted my trees are cracking her patio foundation. The seller knew about this but didn't tell me. I then hired an arborist. According to his report, my trees are not directly affecting the neighbor's home. I do not want to remove my three trees because they make my home secluded. There is a PUD (planned-unit development) association. What are my rights as a homeowner? -Lori K.

DEAR LORI: Depending on the exact facts, it sounds like you have no liability if your trees are not damaging the neighbor's house or patio. The PUD association probably has no involvement because the homeowner's association just manages the common areas, not the individual homeowner lots. For more details, please consult a local real estate attorney.

The new Robert Bruss special report, "The 20 Essential Questions Smart Home Buyers Must Ask to Avoid Overpaying in a Buyer's Market," 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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Fed Leaves Key Rate Unchanged

Barring an increase in inflation, analysts expect the Fed to hold its key rate at 5.25 percent until the middle of next year.
By: David Leonhardt: REALTOR® Magazine Online
The Federal Reserve Board left its key short-term interest rate alone yesterday at 5.25 percent.

No rate hikes are expected soon. Federal Reserve Board Chairman Ben S. Bernanke has vowed to fight inflation, which is up 3.4 percent for the year. Barring an increase in inflation, many analysts expect the Fed to hold its key rate at 5.25 percent until the middle of next year.

The goal is to bring the economy to a 3 percent growth rate with inflation at 1 percent to 2 percent, economists say.

“'I think the Fed is feeling very good about the way the economy is developing,” says Stuart Schweitzer, a strategist at J. P. Morgan Asset and Wealth Management. “The housing slowdown is proceeding, but it’s not spiraling downward, and the rest of the economy is doing O.K.”'
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The Weekend Guide! October 26 - October 29, 2006

The Weekend Guide for October 26 - October 29, 2006.
Full Article:
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The More Things Change, the More They Remain the Same

Emerging Trends proposes that the real estate market is ever-changing. Consumers don't seem to be as certain.
By: Al Heavens: Realty Times
The Urban Land Institute sent me its Emerging Trends report for 2007 last week, and three words immediately caught my eye: "Nothing lasts forever."

The report was referring specifically to the U.S. commercial and multifamily real estate investment market, which will slow down in 2007 after reaching a 10-year peak in 2006, comfortably producing average to slightly above-average investment returns.

"Nothing lasts forever."

It's amazing how the average person is reacting to the end of the boom and the return to the normal market. Despite all of the dire predictions about bubbles and deflating prices, a recent AP-AOL News poll found at least half of all American believe their houses will increase in value in the next two years.

Real estate agents report that sellers still don't get that it is now a buyer's market in most areas of the country. They are still trying to get 10 percent more than the house down the street brought last year; its a, "And my house is much better than theirs, right down to the white shag carpets" mentality.

Listing agents are still doing big business, even though the experts suggest that if people don't have to sell right now, they shouldn't, because it just adds to inventory and - I heard this from a veteran real estate agent the other day - "buyers have so many choices they are having a harder time deciding."

The housing economists are assuring me that the residential market will be climbing back to some sort of equilibrium soon. The economists outside of housing aren't so confident, but let me say one thing: The current market isn't as dire as the one we had to endure between the late 1980s and mid-1990s, when we were truly experiencing a reaction to overbuilding - especially in the suburban condo market in non-resort areas - historically high interest rates and inflated prices of the early and mid-1980s.

Allan Domb, the "Condo King" of downtown Philadelphia and a nationally known condominium expert, says that in his market, housing prices actually declined between 1987 and 1990 and did not start to increase until 1997.

Philadelphia is one of the residential real estate bright spots in the country: The median price continues to rise - predictions of 3.5 to 5 percent in the next two years are common - because the region's housing stock was so undervalued for so long that it will take years to catch up to other older big cities, such as Boston and New York.

Anyway, from the AP-AOL poll results, from anecdotal evidence from real estate agents, and from my own observations, at least half of us don't care what the economists say and will continue to do what we want with our houses.

While I don't believe one tiny street in a town of 11,000 qualifies as a microcosm, of the 14 single-family detached houses on mine, four are for sale for prices ranging from $374,000 to $404,900.

One seller moved when his house went on the market eight months ago, and there are still no buyers, and no one coming for open houses. Another seller has bought a house closer to his job (a three-hour commute); a third seller has lost her job and is concerned that she cannot afford the taxes; and the fourth is going through a mid-life crisis and wants a change.

The "crisis" seller decided to look around the area to see what other sellers were doing to market their properties. She went to a Sunday open house in a neighboring town, where the owner had decided to remain against the listing agent's wishes and accompanied my neighbor through the house.

"It smelled of mold and dog poop," the neighbor said, but the clincher was when she asked what was behind the closed door on the second floor.

"Oh, that's the master bedroom," the owner said, and opened the door, where his wife was still asleep. "Want to see the master bathroom?" he asked.

"If I can do everything just the opposite of that guy, I may have a chance selling mine," my neighbor said.

My readers who are listing their houses look to me for reassurance that they are doing the right thing, and other than reminding them that the price has to be right, I can't offer any. Most people have their own ideas, so my counsel would go unheeded anyway.

For instance, should you bury a statue of St. Joseph upside down to sell your house?

I was dozing on the train home last evening. Behind me was a 30ish woman on her cellphone.

"I bought the statue of St. Joseph and I think you have to bury him," she said. "It came with instructions, and I think that if I follow them, the house will sell quickly."

The side of the conversation I could hear continued:

"My friend's father came over to look at the furnace, but he couldn't hear the noise," she said. "He said it probably was the motor and he'd replace it for $200. But if he didn't, I don't think the home inspector would find it so I won't say anything."

Failure to disclose. Some things do last forever.
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New reverse mortgage debuts in high-cost markets

Product lets borrowers tap more home equity
By: Tom Kelly: Inman News
Reverse Mortgage of America, a subsidiary of Seattle Mortgage and the third-largest producer and servicer of reverse mortgages in the country, plans to roll out the first new reverse product in nearly a decade when its privately funded jumbo program - The Lifestyle Plan - hits the market in the next few weeks.

The new product initially will be available in Washington, Oregon and California. It will be marketed to the remainder of the country early next year.

Designed for owners of higher-value homes, The Lifestyle Plan product is similar to Financial Freedom's Cash Account and allows for a higher percentage of available home equity to borrowers, exceeding the federal loan limit placed on reverse mortgages insured by the Federal Housing Administration.

Both the Reverse Mortgage of America (RMOA) offering and the Financial Freedom mortgage function similarly to the FHA Home Equity Conversion Mortgage (HECM) and Fannie Mae HomeKeeper reverse-mortgage programs, but are funded by a third-party lender.

The Lifestyle Plan could be more beneficial than the HECM for homeowners with substantial equity. For example, a HECM would provide a typical 73-year-old couple with an appraised home value of $700,000 with approximately $203,723 in available funds. Under The Lifestyle Plan this same couple could avoid closing costs and loan fees, netting $291,915 in available funds, a difference of $88,192, according to Reverse Mortgage of America.

"The Lifestyle Plan provides additional opportunities for seniors across the nation, particularly those in expensive housing markets, who are eagerly seeking alternate sources of income," said John Nixon, executive vice president of Reverse Mortgage of America. "It is important that seniors understand and fully examine their financing options. As our population ages, reverse mortgages will supplement retirement and enhance the quality of life for many more senior homeowners."

Financial Freedom first introduced a jumbo reverse mortgage in 1996 and had no competition until now. Jumbo amounts, now starting at $417,000, adjust annually and are greater than the "conforming" limits established by Fannie Mae and Freddie Mac.

The interest rate on the new RMOA program is the six-month LIBOR Index, plus 3.6 percentage points. That rate today would be 9.02 percent, compared with 5.07 percent three years ago. While the new RMOA program's "margin" is slightly higher than the Financial Freedom mortgage (3.6 compared with 3.5) the RMOA mortgage offers a more flexible no-fee option.

Most seniors prefer predictable, reliable mortgages. Many have requested a fixed-rate reverse to the unpredictable moves of an adjustable, but underwriters have been unwilling to take on the risk of a long-term product.

Tom Scaberti, who left Financial Freedom last year to head up the soon-to-be-released reverse mortgage at Countrywide Home Loans, said it has been difficult for potential mortgage investors such as Lehman to commit to gauge how long seniors will remain in the home. That information, plus other research, would bring more mortgage variety and result in lower rates and fees for consumers.

"There are actuarial tables, like the ones insurance companies use, to predict how long a senior will live," Scaberti said. "But we don't have a lot of data yet on the move-out rate. How long will they stay once they get the reverse?"

FHA's HECM is clearly the nation's most popular reverse mortgage and carries a lower interest rate than the jumbo products, but borrowers are limited in the amount they are able to borrower by FHA's loan ceilings and geographic regions. Urban areas typically have higher loan ceilings than rural areas. Borrowers have to pay HECM loan fees, typically 2 percent of the appraised value plus a 2 percent mortgage insurance premium, but these fees can be subtracted from the loan proceeds. Thus, borrowers do not have to pay "out of pocket" for most of these fees.

Reverse borrowers make no monthly payments on their mortgage during its term. The loan comes due when the borrower permanently moves out of his or her home. To qualify, consumers must be at least 62 years of age and own their own home. The home does not have to be paid off entirely, but the greater the equity, the greater the reverse loan amount.

However, seniors can "outlive" the value of their home without being forced to move. The homeowner cannot be displaced and forced to sell the home to pay off the mortgage, even if the principal balance grows to exceed the value of the property. If the value of the house exceeds what is owed at the time of the homeowner's death, the rest goes to the estate.

Tom Kelly's book "The New Reverse Mortgage Formula" (John Wiley & Sons) is now available in local bookstores and on Amazon.com. He can be reached at news@tomkelly.com.
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The Worst May Be Over, Economists Say

Consumers are growing more optimistic about the housing market, and economists concede the worst has likely passed.
By: Marc Hogan: REALTOR® Magazine Online
On Oct. 7, after mortgage applications posted their largest weekly gain since June 2005, former Federal Reserve Chairman Alan Greenspan was quoted as saying, “The worst may well be over.”

A growing number of economists and analysts are beginning to see things his way.

"The point of maximum deterioration in housing activity has probably passed," says Jan Hatzius, chief U.S. economist at Goldman Sachs (GS), in an Oct. 20 report. "The sharp downturn of the past year seems to have brought total housing starts — single-family starts, multi-family starts, and mobile-home shipments — close to the level justified by the underlying demographics."

Peter Kretzmer, a senior economist at Bank of America (BAC), points to the University of Michigan's latest consumer-sentiment report, in which the share of respondents indicating that it was a good time to buy a house jumped to its highest level in 14 months.

Even the bears are slightly more circumspect. In an Oct. 20 note, Richard Berner, chief U.S. economist at Morgan Stanley, says the housing slowdown is far from over, but may not be as bad as everyone expected. "The latest data suggest that the intensity of the housing decline may be fading somewhat, and with it some of the concurrent downward pressure on housing prices," he said. "If so, one of the biggest perceived risks to the U.S. economy may be smaller than feared."
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How to find a real estate bargain

Buyers now have luxury of choice
By: Dian Hymer: Inman News
Everybody wants a bargain. Last year, good real estate deals were few and far between. This was due to the fact that inventories of homes for sale were at record low levels. And, there was an abundance of buyers, all looking for the same thing.

Today in most areas, buyers have the luxury of choice. So, there's less of a chance you'll overpay because you have to outbid another buyer. However, even though there is a lot to choose from, this doesn't mean that it will be easier to buy a property at a bargain price.

One reason is that most sellers aren't desperate to sell. Just because the market has changed doesn't mean that sellers are slashing their prices dramatically. Many listings that have price reductions were overpriced to begin with.

Another factor is that there is usually little consistency in pricing. Some listings are well-priced, others are overpriced, and then there is the occasional listing that is actually priced below market value.

Another complicating factor is variability. Unless you're looking at listings in a single tract development, where each house is a cookie cutter of the others, you'll find disparities in age, condition, size and amenities. Each of these variables has an affect on market value.

HOUSE HUNTING TIP: In order to find a good deal, you need to be able to identify a fairly priced property when you see it. This requires intimate knowledge of home values in the area.

A good real estate agent can help you to develop this product knowledge. But, there is no substitute for doing your own due diligence-driving the area, researching the local economy, viewing listings online and visiting open houses. This gives you the confidence you need to make an educated decision about what constitutes a good deal.

Even though the pace of the home sale market has slowed, you may have to make a snap decision or risk losing out on a great buy. Many home sellers price their homes too high for the market. They usually sit for a while before the sellers realize the house can't sell without reducing their price.

But sellers who understand the market and have a pressing need to speed the process along will price their properties at or under market value. If you aren't up on current market values, you could let a good deal slip by because you didn't act quickly enough.

Part of buying at the right price is being there when the well-priced listings come on the market. Don't wait until a Sunday open house to see a new listing if your agent thinks it will sell quickly.

It's possible to create a good deal. One way is to research the listings that have been on the market a while without any offers.

Find out why they haven't sold. If there isn't anything wrong except the price, ask the listing agent why the seller is selling and whether there's any flexibility in the price. Sellers who have a real reason for selling, like a divorce, death in the family or job transfer, will soften on price in time.

Be sure to find out the amount of the outstanding loans secured against the property. If the sellers are mortgaged to the hilt, you might want to move on and negotiate with a seller who has a strong equity position in the property. Even if he sells for less than he'd hoped, he'll at least sell for a profit.

THE CLOSING: Steer clear of listings that aren't selling because they have an incurable defect, like a location on a busy street. You may be able to negotiate a bargain price, but you'll also have to discount your price when you resell the property.

Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
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Keeping Your Credit Clean

Is your credit affected each time a credit report inquiry is made? Columnist Phoebe Chongchua answers this pressing question.
By: Phoebe Chongchua: Realty Times
Many homebuyers frequently wonder, "If I am shopping for a home loan will my credit be affected each time a credit report inquiry is made?"

It's a logical and intelligent question to ask; the answer is: not significantly, if the credit checks are done in a short period of time.

When a credit check is made by a potential lender it is called a hard inquiry. When a hard inquiry occurs it does have an impact on your credit score. However, when you're shopping for a mortgage or a car loan, credit bureaus typically cluster the hard inquiries together because the credit reporting bureaus understand that the consumer is shopping for the best loan.

"So for example, if you're shopping for a new mortgage and three potential lenders pull your credit score within three weeks, that is looked at as one inquiry for that purpose," says Steven Katz a spokesperson for TransUnion's TrueCredit.com.

Keeping your credit clean is critical. Katz offers the following advice to help ensure healthy credit.

One card you should not carry: Leave your Social Security card at home. "There is basically no reason that you need to [carry] that with you," says Katz.

Most people have their Social Security card number memorized. If you're not one of those people, then only carry your card with you when you know you need the information on it. Your Social Security card number contains personal information that if it gets into the wrong hands, can cause major credit dilemmas.

Lock it up: Apartment complexes and condominiums typically have locking mailboxes, but these types of secure mailboxes aren't as common in residential, single-family neighborhoods.

"If at all possible, people should have a locking mailbox," says Katz.

Katz says mailboxes with locking devices are becoming more popular at hardware stores because identity theft is spreading. Taking precaution to protect your personal information can save you months of agony.

Shred your documents: Katz says if you don't shred your personal documents and criminals access the information, the result can be devastating to your credit. Criminals will often attempt to open new accounts using your name and information. If they're successful, they will use the new account and divert the account information to the criminals' address or post office box.

"So, you'll never even know that the account was established. They'll be receiving the bills and then just throwing them out. It's ruining your credit." explains Katz.

Keep an eye on your credit card: Katz says while it is difficult, people should not let their credit card out of their sight or else they run the risk of becoming a victim of skimming.

Skimming has become prevalent at some restaurants and gas stations where a clerk might have a small device that scans the consumer's credit card.

"It's a very small scanner that captures all the information that is on the magnetic strip, and then the card's information can be cloned," explains Katz.

Of course, keeping your credit card visible at all times is nearly impossible. Katz says, "If you're going to go to a restaurant in an area that you're a little uncertain of - that's in a fringe area or you're in a foreign country and you're not too certain about where you're dining - attempt to use cash."

Also, when using credit cards be sure that the receipt you leave with the merchant does not have your credit card number exposed. Most merchants have credit card systems that only print out the last four digits of a consumer's credit card; however, some still show the entire account number on the print out. If your full credit card account number appears on the receipt, scratch it out with a pen. Additionally, in rare cases where carbon copies are used, ask for the carbon.

Check your credit history

Consumers can check their credit history for free once a year at annualcreditreport.com. Katz says that the free reports will not contain an actual credit score, but you can get the scores for a fee.

Another good credit-checking resource is found at truecredit.com. The website offers access to tools to manage a consumer's credit health by receiving credit reports, credit scores, credit monitoring, and informational materials.
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Want your own home someday? Start by saying, 'Charge it'

About 50 million people lack the credit record necessary to buy a house.
By: Lew Sichelman: Los Angeles Times
They are mostly immigrants and minorities who, for one reason or another, pay their bills in cash. But the ranks of the "credit underserved" cut a much wider swath, including college students and those recently divorced or widowed.

You don't need perfect credit to become a homeowner, but you do need good credit. And it's never too late to start establishing a good credit record or improving the one you have.

For starters, establish a budget and stick to it. "No matter what their income, everyone must live within his means," says Sherene Costanzo, vice president of Credit Consultants Inc., a Margate, Fla., company that helps people restore their tarnished credit histories.

Your budget is not only your spending plan, it's your savings plan too. But for it to work, it must be realistic and accurate. List your monthly income, but don't overstate it by including, for example, overtime or bonuses. List your monthly expenses, including whatever you spend on entertainment.

And be sure to remember the bills that aren't due every month, such as your automobile insurance.

Now compare what you earn with what you pay out. If you have a positive balance and can put some money away in savings, you are on your way to homeownership. But if you have a negative balance, you are living over the edge and must adjust your spending habits.

Consumer Credit Counseling Services, a nonprofit, nationwide agency, operates on the 70-20-10 rule: No more than 70% of your income should go to living expenses and no more than 20% should go to your creditors. The remaining 10% should be put in savings.

If you don't already have one, the next step is to open a checking account. Without one, it's more difficult to provide creditors with a record of how you manage your money. Many checking accounts are free these days, making them less costly than paying with a money order or using a neighborhood check-cashing store to cash your paycheck.

Savings accounts are important too, because the best way to improve your overall financial health is to save money every month. Put the money in a savings account and don't touch it unless you need it for an emergency.

Pay your bills on time, making sure they arrive before their due date. This is the best way to build the good credit you'll need to qualify for the lowest possible rate on a home loan.

Paying bills late is a sure way of damaging your credit record. Not only will late fees eat up your hard-earned cash, but some creditors also report customers if they miss the due date by a single day.

Others wait until you are more than 30 days late before reporting you to the credit bureau. Either way, a late payment or two will hurt your chances of getting a low-rate mortgage.

If you are just starting out, you'll find it easiest to obtain a credit card from a department store or gasoline retailer. Even though these come with the highest interest rates, you should use them frequently so you can demonstrate you know how to handle credit, says Maxine Sweet, vice president of public education at Experian, one of the big three credit bureaus. But pay it off in full every month.

After you do that for several months, it should be easier to obtain a national bank card from Visa, MasterCard or American Express.

Other ways to start building your credit file are to buy an automobile and make payments on time, or take out a secured credit card in which you deposit an amount with your bank, say $250, and then use your card up to that amount. Activity on secured cards is reported to the three credit bureaus as conventional credit cards.

If you are married, make sure some accounts are in both your names, so you and your spouse can build a credit history.

There is no rule regarding the optimum number of credit cards you should have. Tanisha Warner, spokeswoman for Consumer Credit Counseling Services, says all you need is "one or two major credit cards."

Nick Jacobs, spokesman for the National Foundation for Credit Counseling, suggests one bank card, either debit or credit, and one department store card.

A third opinion, this one from Ginny Ferguson, an expert in credit scoring, says the numerical programs lenders use to rate borrowers for risk, make it preferable to have one or two national cards, a couple of department-store cards and even a gasoline card.

Why? Because scoring systems look for how well you handle "a nice, balanced mix" of credit, Ferguson explains.

One thing the three experts agree on is that you should pay all your debts on time.

If you find you can't meet all your obligations, call some of your creditors and see if they will reduce your payment or allow you to be late. Many are willing to work with their customers, but they can't if you don't notify them in advance that you are having problems.
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Face-Lifts on Downtown Skyline

Landmark AT&T Center is among the towers getting 're-skinned' as owners seek to cash in on the area's boom.
By: Cara Mia DiMassa: Los Angeles Times
Maybe turning 40 was a sign. The look that once was so stylish now feels a little dated. The complexion is getting a little rough.

Is a little cosmetic surgery in order?

The owners of the 35-story AT&T Center on the southern edge of downtown Los Angeles think so. So workers are beginning to remake the landmark tower, replacing the 1960s-era square metal cladding with a cutting-edge translucent metal skin that when completed will change the look of downtown's skyline.

The skyscraper — perhaps better known by its old name, the Transamerica Tower — would be come the latest L.A. building to be "re-skinned."

Giving face-lifts to buildings has become popular across Los Angeles but particularly downtown, where property owners attempt to cash in on the central city's development boom by giving their buildings a fresh look.

When complete, the AT&T building will look more like a glimmering rectangle, its distinctive penthouse restaurant somewhat obscured by the cladding.

"It was tired and outdated and a little run-down. It just didn't have a positive image in the marketplace," said Steve Briggs, a principal partner at LBA Realty.

"So many things are happening in the South Park [area of downtown]. We knew the building had great architectural bones, but it needed to be modernized and updated."

The project consists of placing new metal panels (in a neutral tone) on top of the brown terra-cotta tiles that have been a trademark. The building was designed by William K. Pereira and Associates — the firm behind many midcentury L.A. landmarks — and completed in 1965.

It turns out that in architecture, as in much else, sometimes the way to look at things anew is to put on a brand-new face.

Re-fronting a building is an inexpensive way to re-create a structure with a new look. And it's a practice that dates to the Roman Emperor Hadrian.

In modern times, the process can involve stripping out an old facade or placing something new on top of the existing design, using materials such as tile, metal, even Styrofoam. It usually involves fewer zoning hurdles than a new building.

In the case of AT&T Center, the refacing will both brighten the look and provide new insulation and waterproofing.

In Hollywood, the 6565 Sunset Building, originally constructed in 1965, was re-clad in titanium-blue reflective glass.

The Westwood Center was reworked in the late 1990s, the 1965 building's concrete skin and aggregate panels replaced by a glass curtain wall.

In downtown, a face-lift of 811 Wilshire replaced the small blue tiles that covered the mid-'60s skyscraper with more than 1,100 aluminum and stainless-steel panels. A few years ago, the Union Bank tower on Figueroa Street was significantly reworked.

But in an environment where everything old becomes new again, the issue of whether to re-clad a building is not without controversy.

"The general issue of re-cladding has become more controversial in recent years," said Ken Bernstein, manager of the office of historic resources in the city's Planning Department, "particularly as we have seen a new appreciation for the architectural value of the 'recent past.'

"In many cases," said Bernstein, the former director of preservation issues for the Los Angeles Conservancy, "architectural styles that once seemed tired or dated have won new appreciation in recent years. In some cases, that happened before the buildings have been remade, and in other cases, we have seen significant makeovers of buildings go forward."

Bernstein said he could not comment specifically on the AT&T Center project.

But architect Andy Cohen, executive director of the architectural firm Gensler, said that the building is leaking and "the sun really creates a lot of heat gain in the building. By dealing with the exterior skin, it creates energy efficiency in the building and also fixes the waterproofing and leaking problems."

Cohen said his firm was sensitive about the historic nature of the building — and the final design, he said, would maintain its architectural integrity.

"That's been a real push on our part," he said.

While the debate among many preservationists focuses on whether re-cladding is an appropriate way to save a building from possible remodeling, another movement is underway too.

As some old downtown office buildings are being converted to residential spaces, property owners are finding that it makes historical and commercial sense to bring their buildings back to the way they once were — at least in part to appeal to residents who say they value the historic nature of the structures.

Often, those restorations involve stripping away the cladding the building acquired over the years as its use — and prevailing architectural styles — changed.

Two years ago, the Los Angeles Conservancy awarded seven grants for local buildings — most of them along Broadway — to rehabilitate their facades.

One of those is the 12-story Chester Williams building at 5th and Broadway, named for one of downtown's original real estate moguls. Work is underway to expose and restore historic metal grillwork, long buried under a mishmash of signage and awnings, as well as return the building to its original milky white color.

At the Pacific Electric Lofts at 6th and Main, workers have uncovered the building's distinctive arched windows, patched up since the late 1960s or '70s.

The new owners of the Redwood Bar and Grill on 2nd Street were going for a pirate theme when they began remodeling the space months ago.

They changed the ceiling and opened up the front doorway. Working inside the building's vestibule, they discovered a piece of the now-stuccoed building's original green marble facade.

Co-owner Christian Frizzell said it was beyond the owners' purview to strip the building back entirely.

But they did expose a 3-foot piece of the facade, visible from the vestibule.

"It's really awesome," said Frizzell. "It's really like a treasure, pun intended."
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How Much is Too Much to Fix up Your House?

As with any resale product, the person trying to sell said product will usually try to make the product look as new as possible to ensure the highest profit available. In reviewing many of the homes on the market today, however, some sellers don't get that notion.
By: M. Anthony Carr: Realty Times
Don't make the mistake of the seller who, knowing full well that buyers were coming by, not only failed to do a fresh clean up, but also left his underwear on the exercise bike, a pan of crusty macaroni and cheese on the stove and debris throughout the yard.

There are some task items any seller should consider when selling a house. Even if you decide to sell "as is," a little soap and water could put a few more bucks in your pocket. With that in mind, let's look at what sellers should look at doing with any house they want to put on the market; what to do when you want to get a little more money; and how to compete with the Joneses when looking to prepare your home for sale.

Any House

    1. All homes going on the market should receive a deep cleaning. This is the
       cleaning that you do when … well, you would never do it unless you're selling
       your house (or you're just an absolute neatnik. This involves scrubbing every
       cranny of the house. Nothing goes unscrubbed. I would suggest bringing in a
       professional group to get this done and plan on spending a couple hundred
       bucks (maybe more) to get the house ready for your new buyer.

    2. Next, declutter the house. Go ahead and rent a huge storage unit and fill it
       up. Plan this with a bunch of pre-made boxes that have lids you can tape shut
       and label. Take extra kid's toys to charity. Donate all clothes that are even
       a bit too tight or out of date. Remove excess furniture (or even cover with
       matching covers).

    3. Repair and paint where needed. As with most homes that have been lived in,
       that would be all of them. Walk through a new construction home to see what
       you're up against and then go and make yours look as best you can on your
       budget.

    4. Landscaping. Thankfully, mulch and flowering plants don't really cost a lot
       of money for those who are just sprucing up. Before going out and paying for
       a designer-created landscaping job, start with the local garden center and
       get some free advice on how to spruce up on a budget. Fresh, flowering plants
       (even in fall and winter) can make the house look oh-so much better.

Even if you're selling as-is, the above four tips are a must. Next is where we spend a little more money.

Redecorating

    1. Renewed color. Giving your house a makeover doesn't have to cost you a second
       mortgage. The first item to consider for rehab is your color selection. While
       the traditional advice is "go vanilla," professionally selected colors (not
       too bold) can make a "nice" house into a "wow" house.

    2. Flooring is one of the best moderately priced upgrades a seller can install
       to make a huge difference. While I like the concept of "choose-your-own-
       carpet" offers in home listings, think about what else it's saying: "We're
       too cheap to fix up the house now, so we'll let you walk through our
       tattered, stained carpeting and let you get it installed the weekend after we
       leave." Like I said, make your house a "wow" by making that first great
       impression with new carpet.

    3. Replacing dated items. Sometimes replacing certain items in the house is
       really more like maintaining your home instead of upgrading it. Items like
       windows, doors, light fixtures, faucets, door hardware, etc., need upgrading
       and replacing periodically. A walk down the light aisle at your favorite
       hardware store reveals this could be done on a budget. Nevertheless, there's
       nothing more gross looking than a brass light fixture that's chipping and
       rusting.

Keeping up with the Joneses

At some point you have to look at what the neighbors are doing and keep up or you'll lose out. If everyone in the neighborhood is ripping out the old and installing the new (kitchen, bath, carpet, doors, etc.) then you may be forced to do the same thing long before you're thinking of putting your home on the market. My wife and I are facing that right now with the kitchen. It's starting to show its age, which means before we put the house on the market in a few years, if I want the best buyer (or any buyer for that matter) the kitchen cabinets need an upgrade.

Redo, Remodel, Relax

As you look around the house, making your list of things to change before putting the house on the market, remember to create some time to enjoy your new digs before selling the place. If a sale is on your horizon and you must redo the landscaping before putting the house on the market - do it early so you can drive home to the professionally designed flowerbeds and floral creations a few months or years before selling it to someone else.

While you want to repair, paint, remodel and add on to your house because it adds value to your home, every homeowner should especially do it because they want to enjoy the changes as well.
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The Weekend Guide! October 19 - October 22, 2006

The Weekend Guide for October 19 - October 22, 2006.
Full Article:
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C.A.R.'s California Housing Market Forecast for 2007:

Cooling home sales, modest price decrease next year.
California Association of REALTORS®
LOS ANGELES – The rate of home price appreciation will post a modest decline next year following several years of steep increases, while the sales pace will decrease as the market stabilizes throughout 2007, according to the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) "2007 California Housing Market Forecast" released today. The forecast will be presented this afternoon during the California REALTOR® EXPO 2006 (www.realtorexpo.org), running from Oct. 17 – 19 at the Long Beach Convention Center in Long Beach, Calif. The trade show attracts more than 12,000 attendees and is the largest state real estate trade show in the nation.

The median home price in California will decline 2 percent to $550,000 in 2007 compared with a projected median of $561,000 this year, while sales for 2007 are projected to decrease 7 percent to 447,500 units, compared with 481,200 units (projected) in 2006.

“The housing market clearly downshifted in 2006 from the record-setting sales and robust price gains of the last few years,” said C.A.R. President Vince Malta. “The residential real estate market in 2006 was characterized by a gap between buyer and seller expectations. Sellers sensed that the peak of the market was approaching, yet still hoped to obtain the highest possible prices. Buyers’ sense of urgency waned as the number of homes on the market grew and they took longer to identify and subsequently purchase a home.

“Although the 2007 sales decline is not expected to be as steep as what we experienced this year, the psychology of the market - matching the differing expectations of sellers and buyers - will continue to be a factor as REALTORS® help consumers navigate their way through a changing market.

“While we’re projecting a modest decline in the median price of a home, over the long term, residential real estate in California has been and will continue to be a solid investment. Since 1968, the long-term average price appreciation is 9.1 percent,” he said.

“While we recognized that the frenetic sales pace of the past four years could not continue indefinitely, the housing market in 2006 did not fare as well as we initially expected,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “The anticipated slowdown that began in October 2005 was heightened by dual natural disasters in the Gulf Coast, a significant drop in consumer confidence, rising energy and raw materials costs, and a series of Federal Reserve interest rate hikes that began in June 2004. Fixed-rate mortgages also hit and passed the psychological threshold of 6 percent, while adjustable rate mortgages passed 5 percent, ultimately causing a decline in affordability. Affordability concerns also will continue to constrain sales for many households in California throughout 2007, especially for first-time home buyers.

“Looking to 2007, we expect that some regions of the state, including the Central Valley, San Diego and Riverside/San Bernardino regions, will experience sales declines greater than the state as a whole,” she said. “That also holds true for several second-home markets, including the desert areas of Southern California and the Wine Country.”

Leading the way...® in California real estate for more than 100 years, the CALIFORNIA ASSOCIATION OF REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 195,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.



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Housing confidence at low point

Part 3: Effects of a national housing slump
By: Jessica Swesey: Inman News
Editor's note: Many real estate markets have slowed, and the effects are now being felt by brokers and agents who are struggling through tougher negotiations, and buyers and sellers who are aware of changing times. Among consumers, the slowdown has shaken up expectations and attitudes toward home buying, causing them to worry about future price decreases. In this three-part report, Inman News examines three areas of impact: how the slowdown is expected to influence economic growth; problems created in the property appraisal process; and consumer attitude toward home buying. (Read Part 1 and Part 2.)

In his five years working as a real estate agent in Charlottesville, Va., Jim Duncan of Century 21 Manley Associates, recently heard a prospective buyer say something he'd never heard before: "There's just too much to choose from."

Homes sales in markets nationwide have slowed considerably in the last year, causing property inventory levels to rise and price gains to slow or even decline in some areas, and national consumer confidence indexes show some of the lowest confidence levels toward housing in a decade.

The University of Michigan's monthly survey of consumers in September showed that home-buying attitudes were at the lowest level since 1990, with consumers citing concerns over potential future price decreases and increases in mortgage interest rates.

Despite the unfavorable outlook on housing, consumers' assessment of overall economic conditions was less pessimistic in September compared with past months. Overall consumer confidence, which decreased sharply in August, rebounded in September, according to The Conference Board, which reported its index increased to 104.5 from 100.2 in August, and the University of Michigan, which reported its index stood at 85.4, up from 82 in August.

Real estate brokers agree that home buyers' attitudes have changed, but said that overall, buyers they are working with still feel real estate is worth their money. The difference today from a year ago is that buyers in many markets know they have the upper hand and are letting homes sit on the market longer in hopes of finding a better deal. There's a lack of urgency in pushing buying decisions, brokers say.

"I don't see a lack of confidence (in home buying)," said Jeffrey Bastress, broker/owner of StartPoint Realty in Sterling, Mass. "I see it more as they know they have choices so they think, 'why rush into it?'" With interest rates remaining low, buyers today are more likely to wait on the sidelines until they find a good deal, he said.

Once buyers do make offers, they're being tough in what they ask for, Bastress said, referring to a recent client who at the last minute demanded another $5,000 off the home's asking price for no reason other than knowing the seller had no choice but to agree.

Bastress said the reason buyers aren't moving quickly comes down to the fact that they have no compelling motivation to do otherwise. They know they have the upper hand and though Bastress said he hates to use the phrase "sweet revenge," "that's exactly what they're doing."

Home sellers, meanwhile, see the future as the unknown and some think that next year's market may be worse so they feel they have to sell now, he said.

"The advice I give sellers is that you're going to have to put a price on your home that you won't regret selling for and also a price that if you don't sell you won't regret keeping it," Bastress said.

Richard T. Curtin, director of the University of Michigan's Survey of Consumers, said that consumer confidence in home buying measured by his university's surveys started to decline in early 2005, and current confidence levels are the lowest recorded since 1990. "One other part of the bad news for real estate is that more consumers are aware of declining housing prices - or at least the declining rate of appreciation - than we've recorded since 1993," he said.

Consumers are worried about price declines and thinking that if they buy now and prices go down then they will lose money so many are postponing their buying plans, he said.

The good news, though, is that while confidence in home-buying is at a low point, it has not significantly fallen since March of this year so it appears to be leveling, Curtin said. The data do not forecast a downward spiral, but they do indicate a prolonged slowing rather than the market turning up again, Curtin said.

Consumers in the university survey give a variety of reasons for their low confidence in housing, he said, including concerns about interest rates and home prices as well as how they view their income and employment situations, which have been favorable but not improved over the last six months.

Curtin said there's been a close correlation between steep declines in consumer's home-buying attitudes and new- and existing-home sales. Many brokers refer to the current situation as a "standoff" between buyers and sellers.

David Michonski, CEO Coldwell Banker Hunt Kennedy, a large brokerage firm in Manhattan, said that buyers in his market are uncertain, worried and have lost their courage to make a decision.

"There's a very big standoff going on … It's like a buffet table at a banquet where they keep bringing more plates from the kitchen," he said. It's as if buyers are thinking, "I like this shrimp, but maybe there's lobster coming out," he said.

Michonski said he doesn't think that confidence in real estate as a sound investment has eroded. "The confidence that's eroded is the thought that you can buy something and flip it," he said.

The slowing market in Manhattan, he said, is being driven more by an oversupply of new properties than by the resale market. Inventory is up 65 percent from last year in Manhattan and the majority of those properties are new construction, he said.

Jim Duncan, the Century 21 agent in Charlottesville, Va., said that home buyers and sellers in his market have not lost confidence in housing, but are thinking about it differently than they have over the last few years.

"I think we're returning to a more normal mindset with more normal expectations." Buyers today are thinking about their purchases more as places to live rather than properties they can flip for fast cash, he said.

"It's a long-term investment and people are taking time to consider whether they want to live in a house for two or three years," Duncan said. Also, "sellers expectations are coming more in line with reality."

Another indicator of the consumer mindset over housing is the number of consumers researching real estate online. The number of unique visitors to top real estate Web sites increased 17 percent from August 2005 to August 2006, according to analytics firm comScore Media Metrix, though that increase was not seen by all real estate sites.

The most visited site, Realtor.com, had an 11 percent year-over-year decrease in unique visitors, with about 6.6 million people visiting the national property listings site in August this year, according to comScore. The entire Move.com network of sites had only a 1 percent decline with 10.4 million unique visitors. HomeGain, a company that matches real estate agents to consumers, also saw a 2 percent decline in traffic from last year to 4.1 million in August. (Inman News publisher Bradley Inman founded HomeGain in 1999 and sold the company to Classified Ventures in July 2005.)

Despite declines at a few top real estate Web sites, plenty of sites in the top 10 posted increases in visitors during the first year of the slowing market. HouseValues sites – which include JustListed.com, HouseValues.com and HomePages.com – saw traffic increase, as well as AOL Real Estate, Yahoo! Real Estate, Rent.com, Apartments.com, and HPCInter@ctive, a division of Primedia that publishes a number of rental print guides.

National foreclosure service RealtyTrac saw very little change in traffic and comScore had no data on MSN Real Estate's traffic numbers for the previous year.
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Baby boomers drive second-home market

Survey: Generation is working longer, living longer
Inman News
About 25 percent of baby boomers own one or more types of real estate in addition to a primary residence, and boomers own 57 percent of all vacation and seasonal homes and 58 percent of rental property, according to a survey conducted by Harris Interactive for the National Association of Realtors trade group.

The baby boomers study, based on responses from about 2,000 U.S. baby boomers born from 1946-64, also found that home equity accounts for about half of the net worth for middle-income boomer homeowners, and about nine in 10 of boomers earning $100,000 or more each year are homeowners.

About 19 percent of survey respondents are renters, 37 percent say they have just enough to make ends meet, and 17 percent say they are having financial difficulty, the survey revealed.

About 13 percent of respondents own land, 8 percent own rental property, 7 percent own a vacation home or seasonally occupied property, 2 percent own commercial real estate and 3 percent some other kind of real estate.

About 40 percent of respondents intend to convert their vacation home into a primary residence in retirement, the Realtor group announced. Analysis by NAR shows baby boomers are proportionately more active in the second home market, owning about 57 percent of all vacation and seasonal homes and 58 percent of rental property.

Ten percent of boomers said they plan to buy some form of real estate within the next year, which corresponds with U.S. Census Bureau data that shows 3.5 million boomer households moved during the past year, according to the announcement. Two-thirds are considering a primary residence, but the rest are thinking about land, second homes or commercial property, the survey found.

"Most of the 78 million baby boomers are far from retirement, with diverse plans and timelines resulting in different housing requirements and significant shifts from patterns established by earlier generations," the Realtor group reported.

David Lereah, NAR's chief economist, said in a statement, "The differences from past generations -- and between baby boomers themselves -- will have a significant impact on housing needs over the next 10 to 20 years that is very different from the World War II generation, and many boomers simply don't know how they'll retire."

He added, "A significant portion of baby boomers married later in life and had children at a later age, which means many will continue to work beyond the traditional retirement age. Older boomers are thinking about retirement, but one-third expect to go back and forth between periods of work and periods of leisure and another 35 percent want to work at least part-time or start a business -- all of this will have an impact on the kind of homes they buy as well as where they buy them."

The median age at which baby boomers expect to stop working is 70, but 27 percent say they never intend to stop working, according to the survey.

"Because they will be in the workforce longer, boomers will postpone purchase of retirement property and won't be making those moves as early as assumed," Lereah said.

About 42 percent of survey respondents said they would like to retire in the South, 32 percent in the West, 15 percent in the Midwest and 12 percent in the Northeast.

Most boomers live in two-income households, with a median income in 2005 of $64,700, which is 31 percent higher than the median for all households. This generation makes up 37.5 percent of U.S. households, but receives nearly half of all aggregate household income.

Thomas M. Stevens, NAR president and senior vice president of NRT Inc., said in a statement that the survey shows most boomers want professional services when they buy real estate. "When buying a home, they want agents to represent their interests in the complex transaction process, and when selling they want help to establish the right asking price. Regardless of whether they're buying or selling, boomers want agents to explain all of the complicated contracts, forms and agreements, to manage the closing process from start to finish, and to negotiate on their behalf," Stevens said.

About 75 percent of respondents said they are not financially prepared for retirement, and many expressed anxiety about their ability to retire. Some boomers said they might withdraw retirement funds for housing or real estate expenses.

Peter Francese, an independent demographic trends analyst who served as a consultant for the survey results, said in a statement, "For the vast majority of baby boomers, retirement is somewhere off in the future," he said. "Considering that boomers are healthier than their predecessors, and are more likely to work in an office setting, many of them may work five or 10 years beyond the traditional retirement age of 65."

Half of the respondents who live in an urban area said they would like to retire in a small town or rural area. Their ideal retirement location characteristics include a lower cost of living, being near family, quality health care, better climate and being near a body of water, the survey revealed.

More than a third of all baby boomers want to retire in an urban or suburban setting, motivated by quality health care and cultural activities. Half of responding boomers said they would consider living in an age-restricted community.

Francese speculated that boomers may choose a larger home than earlier generations. "Boomers may want or need a somewhat larger dwelling that includes one or two home offices, and a low-maintenance home on a single level would have broad appeal to this group," he stated.

About one in four boomer households have a high net worth of $500,000 or more, and this ratio is expected to increase in the future as the generation ages, the Realtor group reported. Virtually all high-net-worth households are homeowners (97 percent), and 47 percent are likely to also own other real estate in addition to their primary residence, according to the survey. More than a third expect to help children or grandchildren with a down payment on a home. Wealthier boomers said they want amenities where they retire, including cultural activities such as museums and art galleries. As a result, they are more likely to retire in an urban area or city.

Although most boomers are married couples and 27 percent have children under the age of 18, nearly two out of five baby-boom households are nontraditional households, most of which are headed by women, the survey revealed.

Twenty percent of boomer households are headed by women, but because women 60 to 69 account for a quarter of homeowners in that age group, the number of women boomer homeowners is likely to increase much faster than average as they age, the Realtor association reported.

Francese said there's little doubt that the vast majority of baby boomers will delay retirement. "Some will put off retirement because they have to, but many because they want to," he said. "Many will have a larger income stream to purchase possibly two homes, which they may use to move back and forth between their retirement life and their working life."

He also noted, "Surveys of future intentions often include a dose of wishful thinking, and attitudes can be influenced by the media and other outside pressures. For example, many are probably not going to be able to, or even want to, retire in a small rural town far from their current home, even if they may dream about it currently."

The "Baby Boomers and Real Estate: Today and Tomorrow" study was conducted online between March 31 and April 6, 2006, among a nationwide cross section of 1,969 U.S. adults born from 1946-64. Figures for age, sex, race, education, region and household income were weighted to bring them into line with actual proportions in the population, the Realtor association reported. With 95 percent certainty, overall results have a sampling error of plus or minus 2.2 percentage points, with a higher sampling error for various sub-sample results.

The study is available by calling (800) 874-6500 or visiting the http://www.realtor.org/babyboomerstudy Web site. The cost is $50 for Realtors and $125 for non-Realtors.
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Some robust stats contradict the market-gone-bust reports

With all the dismal reports about the home real estate market, don't lose track of something critically important: Mortgage interest rates have been falling quietly but steadily for months and are now at their lowest level in half a year, barely a percentage point above 40-year lows.
By: Kenneth R. Harney: Los Angeles Times
New mortgage applications are up sharply, the number of pending home sales is up, the national economy continues to expand moderately, and the rate of unemployment just declined again — to 4.6%.

All of which begs the question: Just what kind of housing bust is this anyway? With gloom-and-doom purveyors forecasting imminent crashes in dozens of metropolitan areas, how could such key fundamentals as jobs, interest rates and even pending home sales simultaneously be trending in the opposite direction?

Donald L. Kohn, the Federal Reserve's vice chairman, took a stab at that seeming conundrum in a recent speech at New York University. His views are worth keeping in mind if you want to put the negative news on home prices and sales in perspective.

To begin with the fundamental point: Kohn sees no imminent bust or crash in housing. It is a "correction" that's underway — a cyclical re-balancing of a marketplace that got too hot for too long in some parts of the country and is now heading back toward more "normal" conditions, where prices are more in line with what consumers can afford.

"The reported declines in house prices in a number of areas should help to facilitate the re-balancing of supply and demand in those markets," Kohn said. Not all home sellers have fully grasped the altered realities in their own local markets — that they've got to reduce their asking prices if they truly want to sell. So the process is still unfolding. Re-priced houses, in turn, should stimulate greater numbers of potential buyers to get off the sidelines and make offers. The unexpected 4.3% increase in the latest monthly number of pending home-sales contracts heading for closing nationwide reported Oct. 2 by the National Assn. of Realtors could be a sign that Kohn's prediction is already taking shape.

Second, said Kohn, the housing correction — expressed through new-home starts — suggests we are well on our way toward bottoming out and eventually returning to positive growth in new-home starts and resales.

Now to interest rates. Today's "unusually low" long-term mortgage rate environment "stands in sharp contrast to some past downturns in the housing market that followed actions by the Federal Reserve to tighten credit conditions significantly." Translation: Affordable mortgage money should help shorten the current housing down cycle compared with credit-squeezed periods in the 1980s, when mortgage rates sometimes exceeded 16% for fixed-rate loans.

A final key factor, according to Kohn: "Continuing growth in real incomes should underpin the demand for housing and, as home prices stop rising, help erode affordability constraints."

Add it all up: Lower asking and selling prices on houses are integral parts of the correction. Lower interest rates should make those lower prices affordable to a broader number of potential buyers. That could become an even more important factor if mortgage rates dip below 6% in the coming months, as some Wall Street capital market analysts expect.

5.75% a possibility

James Glassman, a managing director at JP Morgan Chase, says 30-year fixed-rate mortgages at 5.75% are a distinct possibility if long-term rates in the global bond market continue to ease.

So, what's the source of some of the confusion about just where housing is headed? Mike Moran, chief economist of Wall Street's Daiwa Securities America, minces no words: The financial press and TV news shows are over-dramatizing what is a normal and long-predicted cyclical re-balancing, and "portraying it as a catastrophe," he said

Housing "is going through a correction that's badly needed," he said. "The key issue is whether it is orderly or disorderly" — and all signs point to a continued orderly process, not a breakout bust or panic.

Doug Duncan, chief economist of the Mortgage Bankers Assn., points out that national housing sales numbers are merely rolling back to 2003 levels — "and that was a record year." Serious sellers and buyers shouldn't be misled by predictions of imminent crashes, Duncan said. Not only do the doom reports ignore the positives out there in the marketplace — mortgage rates in particular — but also "the rhetoric is just way overwrought."
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Your fall home-maintenance checklist

It's time once again to get ready for winter
By: Paul Bianchina: Inman News
Fall is already in the air, which means that another chilly winter can't be too far behind. So before the cold weather arrives and you snuggle up indoors again, here's your annual checklist of things to do to get your home ready for the change of season.

INSIDE YOUR HOME

Check smoke detectors: Please don't neglect that smoke detector any longer! Take some time right now to check the operation of detectors and to change the batteries. If you have an older house with a limited number of smoke detectors, you really need to install some additional ones. Battery-powered smoke detectors are inexpensive and very easy to install, so add one to each bedroom and make sure there is one centrally located on each level of the home as well.

Install a carbon monoxide detector:A fire is not the only danger you can face inside your home. As houses get closed up for winter, the chances of carbon monoxide poisoning from malfunctioning gas appliances increases substantially. If you have a furnace, fireplace, water heater or other appliance that is fueled by propane or natural gas, now is the ideal time to install a carbon monoxide detector. They're available inexpensively from many home centers and retailers of heating system supplies, they're an easy do-it-yourself installation, and they can truly be a lifesaver!

Clean furnace ducts: A surprising amount of dirt can accumulate inside your home's furnace ducts, which can decrease your furnace's efficiency and add unnecessary dust to the indoor air. Now is the time to have a professional duct cleaning service come out and take care of this for you.

Change your furnace filters: Now is also the time to change your furnace filter and you might consider spending a few extra dollars and install one with a higher efficiency rating then the standard inexpensive filters have. While you're changing the filter, consult the owner's manual for the furnace to see if any annual fix-ups of belts, pulleys and other components are necessary - follow all of the manufacturer safety instructions for shutting the power and fuel to the furnace before servicing.

Clean and inspect the fireplace: Last winter your hardworking fireplace was building up a layer of soot and creosote and you've no doubt forgotten all about that during the summer. Before you light the first log, clean the fireplace chimney or wood stove flue using brushes approved for the size and type of flue you have, or consider hiring a chimney sweep to take care of this task for you - most do a great job at a very reasonable price. Clean out the firebox, making sure you place the ashes in a fireproof container with a tight lid for proper disposal. If you have an airtight wood stove or fireplace insert, check the door-seal gasket, and clean the glass on the door.

OUTSIDE THE HOUSE

Check weather-stripping: When you have gaps around doors, windows or other areas that penetrate the exterior of your home, you waste expensive heated air from inside as well as allow annoying drafts to keep you from feeling comfortable. Fall is the time to check the weather-stripping around doors and windows, and replace any that are worn. Everything you need can be found at home centers and retailers who specialize in doors and windows. Now is also a good time to close up a few more air leaks by checking the condition of caulking around exterior door and window frames and other penetrations.

Check and clean gutters: Time to break out the ladder and clean your gutters of leaf and pine needle debris and check that the opening between the gutter and the downspout is unobstructed. Check the entire system for loose joints or other structural problems, and use a gutter sealant to seal any connections where leaks may be occurring. For any repairs or cleaning you don't want to undertake yourself, you can also consider the services of a professional gutter company.

Adjust exterior grade: Fall is also a great time to take a long look at the grade around your home, and make sure that everything slopes away from your foundation to avoid costly problems with ground water. Add, remove or adjust soil grades as necessary for good drainage.

Drain sprinkler systems:In colder areas, now is the time to be thinking about having your sprinkler and irrigation systems blown out. You can rent a compressor and do this yourself or contact a landscape or irrigation system installer and them handle this for you. This is also the time to shut off outdoor faucets and install freeze-proof faucet covers as needed.
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Second-home tax benefits too good to pass up

Homeowner debates whether to sell or rent to mother
By: Robert J. Bruss: Inman News
DEAR BOB: My 85-year-old mother is legally blind and hard of hearing. Recently my wife and I bought the townhouse that adjoins our home and invited her to live there so we will be readily available when she needs help. Since my mother will be selling her home of 40 years (its value is the bulk of her assets), we would appreciate your advice on the best way to protect her assets. Should the new house be put into her name instead of ours by selling it to her although we want to keep this property after she moves out? Or should the property be treated as a second residence or a rental property for tax purposes? -Terry P.

DEAR TERRY: If your mother's capital gain on the sale of her principal residence is $250,000 or less, and if she owned and occupied it at least 24 of the last 60 months before its sale, her sale profit will be tax-free thanks to Internal Revenue Code 121.

Since you already own the adjoining house, why sell it to your mother and lose your tax benefits? I don't see any advantage for you or your mother.

If she pays you rent, treat the townhouse as a rental property. Otherwise, treat it as a second residence on your tax returns. For details, please consult your tax adviser.

PITFALLS OF PAYING ALL CASH FOR A NEW HOUSE

DEAR BOB: We will soon be buying a brand-new house and paying cash. But I am concerned I will not have the protections of using a mortgage lender or a real estate agent. Do you have any information on what to watch out for when buying a new house for cash? -Larry K.

DEAR LARRY: If you read my articles regularly, I do not recommend paying all cash for any property unless you are so wealthy you won't ever need your cash again (just in case you buy a "bad house").

My best advice is don't pay all cash for your next home. Instead, pay 10 percent or 20 percent cash down payment and obtain a fixed-interest-rate mortgage. If all goes well, after a few years then you can pay off the mortgage without the worry you tied up most of your cash. Of course, be sure the mortgage doesn't have a prepayment penalty.

DEAD EX-HUSBAND'S NAME ON TITLE CAUSES PROBLEMS

DEAR BOB: My daughter and her former husband divorced. Subsequently, he died. Together they owned property in the mountains. She presumed the mortgage company took his name off the mortgage. They didn't. Even though he is now dead, his name is still on the mortgage and on the title. She has continued paying the mortgage. She wants to sell the property but cannot do so until her dead ex-husband's name is removed from the title. Why would the mortgage company not remove his name from the title? -Margery M.

DEAR MARGERY: You sound a bit mixed up. Having the dead ex-husband's name on the mortgage is irrelevant.

What matters is the title to the property. If his name is still on the title, the mortgage company cannot remove it. The only way it can be removed so your daughter can sell the property is to have his estate probated.

Somebody is entitled to receive his interest in the property and it is up to the local probate court to determine who inherited that interest.

However, if your daughter and late ex-husband held title as joint tenants with right of survivorship, then probate is not necessary. Your daughter can then clear his name from the title by recording with the county recorder a certified copy of his death certificate and her affidavit of survivorship. For details, she should consult a probate or real estate attorney in the county where the property is located.

The new Robert Bruss special report, "How to Sell Your House or Condo for Top Dollar in a Buyer's Market," 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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'Fundamentals' Will Sustain U.S. Housing Demand

A slowing housing market doesn't appear to be hampering the U.S. economy substantially, the Federal Reserve reported yesterday.
By: Martin Crutsinger: REALTOR® Magazine Online
The Fed said that the majority of its 12 regions reported lower asking prices for homes, softening in sales activity, and rising inventories of unsold homes. But Michael Moskow, president of the Chicago Federal Reserve Bank, downplays fears that the housing slump would pull the entire economy into a prolonged downturn.

"We do not see the slowing in housing markets spilling over into a more prolonged period of weakness in the overall economy," Moskow said Thursday. There are some very important fundamentals that should continue to support housing demand, especially the low level of mortgage rates, he said.

The Fed's regional economic reports will be used when central bankers meet on Oct. 24-25 to consider whether or not to raise interest rates.

While it’s expected that the Fed will leave interest rates alone for the third straight meeting, it is clear that officials remain concerned about inflation. "The risk of inflation remaining too high is greater than the risk of growth being too low," Moskow said.
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Finally, the Contractor Will Take Your Calls

For homeowners who have been putting off remodeling projects, now may be the time to get started. Sluggish home-building demand is pushing down the cost of construction materials and spurring remodelers and other professionals to take on smaller projects - and sometimes cut fees.
By: Sara Schaefer Munoz: The Wall Street Journal Online
For homeowners who have been putting off remodeling projects, now may be the time to call the contractor.

While the current housing slump isn't cheering investors, it is making remodeling a kitchen or bathroom or adding an addition easier and cheaper. During the booming real-estate market of the past several years, people wanting to remodel often found themselves waiting months for contractors to take on lower-ticket jobs - if the contractors would take them on at all. Now, sluggish home-building demand is pushing down the cost of construction materials (prices for lumber are near their lowest level in a decade) and spurring contractors to take on smaller projects - and sometimes cut fees.

Custom and speculative builders are also starting to take on renovation jobs, picking up work they may have passed over just a year ago. In Tucson, Ariz., Richard Fink, co-owner of Becklin Construction LLC, a custom home builder, used to do a few remodeling jobs as favors to former clients; now remodeling has grown to half his business. Samm Jernigan, a high-end custom home builder in Wilmington, N.C., said earlier this year he started "aggressively pursuing" remodeling projects for the first time, and John Diament, a home builder outside of Philadelphia, says two months ago he started asking architects to send big remodeling jobs his way.

"It's good news for the consumer if you've got a lot more people seeking projects," says Gopal Ahluwalia, staff vice president of research for the National Association of Home Builders.

Meanwhile, prices of framing lumber have fallen dramatically, says Shawn Church, the editor of Random Lengths, an industry newsletter based in Eugene, Ore. The composite price per thousand board feet of framing lumber was $274 this week, compared with $375 a year earlier, according to data from Random Lengths. Ken Simonson, the chief economist for the Associated General Contractors of America, a trade group in Arlington, Va., says he expects to see a roughly 10% drop in prices of gypsum and construction plastics when government price data are released later this month. Economists say the lower material costs could save homeowners an estimated 5% to 10% on additions.

The falloff is largely because of slowing new-home construction, which for several years had driven up the cost of materials. Housing starts dropped 6% in August from a month earlier to a seasonally adjusted annual rate of 1.665 million units, according to the Commerce Department. That was the slowest rate of starts since April 2003.

Growth in spending on remodeling has also slowed recently, a result of rising interest rates and homeowners who have postponed selling, along with presale renovations. According to the most recent data from Harvard University's Joint Center for Housing Studies, spending on home remodeling rose just 2.8% in the 12-month period ending in June, compared with the frenzied 20% increase in 2004. Still, spending on home remodeling, maintenance and repairs totaled $215 billion in 2005, up from $199 billion in 2004, according to the most recent annual data from the Census Bureau.

The new environment means that homeowners are more likely to find contractors willing to take on projects quickly. "Rather than saying 'call me next spring,' they'll be more likely to say 'I'll be over this week to the talk about the project,' " says Kermit Baker, a senior research fellow at the Harvard Joint Center.

That is what Kurt and Susan Askin found this summer when they sought a bid for remodeling a bathroom in their northern Virginia home. About three years earlier, the couple redid their kitchen and had to wait a couple of months to get started. But when they decided to go ahead with the bathroom project this summer, they called the same contractor and the project was under way in two weeks.

"I was certainly pleasantly surprised," says Ms. Askin, a retired accountant.

Their contractor, Don Sever, the owner of Sever Construction, in Oakton, Va., says he sees interest in remodeling starting to ease. He has trimmed prices by about 5% to attract more business. "People are much more cautious about spending that home-equity money," he says.

Economists caution that people should only invest in their home if they are planning to stay awhile and enjoy it. With home prices starting to fall, owners may not see the same, hefty return on their investment that renovations have brought in the past several years.

"It's a riskier proposition to fix it up for a buyer," says Mr. Simonson of the Associated General Contractors of America.

There are also risks in hiring a new-home builder who doesn't have remodeling experience, building experts say. On the surface, the required skills may seem the same, but staffers that work on new homes tend to have specific skills, such as roofing or framing, and managers may not be versed in the challenges and costs associated with reconfiguring an existing kitchen. Remodelers, they say, are better-suited to coordinate all the details of project, from putting up wallboard to installing faucets.

Longtime remodelers also warn that new-home builders may not be accustomed to interacting frequently with clients. While builders may be used to working on their own in an empty house, remodelers must be in a home for weeks at a time while their clients are living there.

"It takes a different kind of person," says Mr. Sever, the Oakton, Va., remodeler. "You need to put up tarps, clean up and not set tools on a customer's dresser."

Scott Sevon is a custom builder and remodeler in the Chicago area who has recently taken on more remodeling projects. He says he has made his staff aware that remodeling "is a lot more time and hand-holding and lot of good communication skills." As one way to demonstrate their responsiveness, he gave all of his staff Blackberry e-mail devices so clients can get in touch at any time.

Despite possible drawbacks, some clients say hiring custom builders for remodeling projects is a plus. When Bruce Ash wanted to do a large-scale renovation at his Tucson home, he wasn't sure if a traditional remodeler would have the attention to detail required to mimic the Arts and Crafts style he and his wife envisioned. They wanted mahogany wainscoting in a specific pattern and custom-made doors that were modeled on an old house in Wisconsin. He found Mr. Fink of Becklin Construction to take on the $700,000 project. It was one of Mr. Fink's first major remodeling projects.

"Guys who are used to commissioning million-dollar houses are going to be attuned to a whole different level of detail," says Mr. Ash, a real-estate manager. "Normally, the market has been such that we could never get custom builders to remodel homes, but now, they are interested."
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Lower Home Prices Entice Potential Buyers

"Given a positive economic backdrop and job creation, we expect sales activity to pick up early next year," says David Lereah, NAR's chief economist.
REALTOR® Magazine Online
Lower home prices are turning potential buyers into active lookers, and sellers are showing more willingness to negotiate, the NATIONAL ASSOCIATION OF REALTORS® reports. The trend is expected to inject life into slowing markets.

“Given a positive economic backdrop of lower interest rates and job creation, we expect sales activity to pick up early next year,” says David Lereah, NAR’s chief economist.

Existing-home sales are forecast to be fairly stable in the fourth quarter and sales for all of 2006 are expected to drop 8.9 percent to 6.45 million — the third strongest year after consecutive records in 2004 and 2005. New-home sales are expected to fall 17.3 percent this year to 1.06 million, the fourth highest year on record. Housing starts should be down 10.9 percent to 1.84 million in 2006.

2006 Prices to Increase Slightly

With a recent correction in the market, the national median existing-home price is likely to rise 1.6 percent to $223,000 for all of 2006; it’s anticipated prices will remain slightly below year-ago levels before gaining positive traction in the first quarter of 2007. The median new-home price is projected to decline 0.2 percent to $240,500 — largely the result of builder price cuts to move unsold inventory.

This presents a unique opportunity for buyers. “The supply of homes on the market is the highest we’ve seen in over 13 years, and mortgage interest rates are experiencing an unexpected decline,” says NAR President Thomas M. Stevens from Vienna, Va. “The 30-year fixed rate is hovering around 6.3 percent, and sellers in most of the country are now showing a willingness to negotiate.”

He says that the changing market makes it increasingly important for parties on both sides of the real estate transaction process to have professional representation.

Interest Rates to Rise Next Year

The 30-year fixed-rate mortgage will probably average 6.5 percent in the fourth quarter but will trend up modestly in 2007.

The unemployment rate should average 4.8 percent in the fourth quarter. Inflation, as measured by the Consumer Price Index, is expected to be 3.4 percent for all of 2006, while growth in the U.S. gross domestic product is forecast at 3.3 percent. Inflation-adjusted disposable personal income is likely to grow 3.4 percent for 2006.
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How to Tell Where Your Market's Headed

Is this a good time to sell my house? Is this a good time to buy? Columnist M. Anthony Carr gives some answers.
By: M. Anthony Carr: Realty Times
I've had several friends come up to me in the last few weeks and ask: "Is this a good time to sell my house?" or "Is this a good time to buy a house?" Let me preface my 700-word answer with this: If nobody panics, we'll all get out of this alive.

Many readers have accused me of being too optimistic on the real estate market. What they see as optimistic is actually an attitude steeped in the belief that you can make money in real estate in any market, you just have to know how to operate when the market's moving up, leveling off, or cooling down.

When prices are up - sell. When prices are leveling or dropping - buy (or sell). When rents are moving up, don't play Mr. Charity, raise your rents. When you enter this field of real estate as a wealth-building business investment, that's exactly how you have to treat it - like a business.

When the market shifts, that's okay if you're looking at the market as a way of making money and building wealth. So last week when I read some reports from federal agencies that appreciation had slowed, I didn't panic with many of the market prognosticators, I just shifted my business plan. Real estate investors and property owners can make money in any market, you just have to be wise on the market and be flexible on how much profit you want to make.

Consumers are definitely confused on whether they should buy a piece of property when many numbers are pointing at a housing market that is slipping in prices. Today's tip is to approach it from a non-emotional business perspective. Watch these segments of the economy in your local area to determine if you should buy in your market:

A - The local economy

What's happening? Are jobs growing? Are businesses opening? Are current businesses investing in themselves? What are the economists saying in your area? Research this data by a simple Google or Yahoo search of " economic report." Through that search, the astute investor will find out where economists are predicting growth in suburban business centers and where the jobs are coming and going.

Forget what you're hearing nationally and look for the growth on the local level - where you want to buy a house. Just like politics, real estate is local, which moves us to B.

B - The local real estate market

What's happening? Are prices booming, leveling or slipping? This has to be researched on various levels. Start on the state level, drill it down to your county and then get a granular look at the zip code and community level.

These numbers can easily be found through your local Realtor association. For a list from across the country, start at Realtor.com and click the links to local real estate associations at the bottom of the page. Most local associations (definitely state groups) keep a public area on their web pages with local statistics on the number of homes sold, sales prices and year-to-year appreciation.

Look up government information as well on job growth, economic plans and forecasts. If the state and county governments are playing their role appropriately, they're creating jobs AND allowing development of housing to house the workers who come along for those jobs.

If they haven't come up with the latter, then you might have a good investment opportunity on your hands. More jobs and fewer houses spell lower supply and high demand, meaning equity growth and high rents.

And don't forget the rental market. Is it growing? Are there a lot of vacancies? How much are the rents going up? Down? If rents are up, then you may be able to cover your monthly expenses. If they're dropping, it could be because the location is down economically or because housing is so affordable (but appreciating) that renters are getting out of the rent track and buying a house instead.

C - The financial market

This market is actually the only real estate component that is usually measured on a national basis. It's all about the cost of money and most interest rates are within a basis point or two from each other nationwide. Currently, they are still historically low (under 7 percent) which can be had for 1 or less points.

If you find that A is chugging along, B is still affordable and C is also affordable - then buy, buy, buy. A strong economy with a growing real estate market and strong rates, means you can buy a house for relatively little money down as an investor, put a renter in the house and obtain it with cheap money that the rent will pay for.

If you find you're in a positive A situation, but B is unaffordable and C is still affordable, then you may need to wait or jump in the flow before B gets even more unaffordable.

If A is great, B is leveling and C is still affordable, and A looks like it's going to keep growing - then buy while you can, because B is going to move up right after the break.

Finally, get a team together to help you analyze the data you've just researched. Are the prices trending upward? (And is that really a good thing right now?) Or are the prices dipping, meaning I should get in while I can because the jobs are coming? Work with your agent, lender and accountant to figure how the market can help you with your wealth-building goals.
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The Weekend Guide! October 12 - October 15, 2006

The Weekend Guide for October 12 - October 15, 2006.
Full Article:
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Real Estate Market Downturn Nearing End

When will the housing downturn hit bottom and start heading up again? Sooner than you might think, says consultant John Burns. How about next year? Lew Sichelman has the details.
By: Lew Sichelman: Realty Times
When will the housing market reverse gears and start moving upward again? That question is on everyone's mind, from nervous sellers to wary buyers, from anxious realty professionals to eager builders and developers.

No one knows for sure, of course. But Irvine, Calif., real estate consultant John Burns suggests the turnaround may come sooner rather than later, at least in some high-profile markets. In fact, the economist says some places could see a reversal of fortune by next year.

Burns sees a stable housing market as three-legged stool, he told his clients in a recent newsletter. One leg is demand, represented by the number of would-be buyers. Another is supply, or the number of active sellers. And the third is investment, which he defines as a mixture of affordability, consumer confidence and speculative activity.

Currently, he pointed out, the demand leg is the only one of the three that is on solid footing. Indeed, the underlying demographics "support healthy demand for many years to come," he wrote, explaining there is a real need for some two million new units alone each and every year for the next ten.

"Demand is our primary hope for avoiding a crash landing," Burns says.

While some naysayers argue that housing prices are free-falling towards a crash landing, Burns isn't in that camp. Prices may be falling, he points out, but at least most consumers aren't worried about losing their jobs. Indeed, the number of new jobs continues to rise every month, albeit at a slower pace, and the unemployment rate remains exceptionally low.

The supply leg, meanwhile, will probably take a while to correct itself, but certainly within the next 12 to 48 months, depending on the market, according to Burns.

Currently, the number of unsold homes under construction is at an all-time high, as is the number of unsold existing homes. And Burns says the situation will need time to correct itself over time - less time in submarkets close to job centers and more in outlying areas where most people commute long distances.

The increase in unsold listings was this cycle's early warning indicator, the economist points out. And a decline will be the sign that the market is rebalancing itself. "The supply problem will be resolved when the market returns to 2.5 months of supply in the resale market, and only a few standing units of inventory in a typical new home subdivision," he says.

As Burns sees it, the correction "could take years" in outlying areas. In built-out markets such as San Diego, over-supply is "likely to correct earlier" than in sprawling markets like Phoenix. But economic growth will "play a huge role as well," and help many markets recover sooner.

Burns also notes that home builders have already corrected for their share of the over-supply. During the boom years, builders overbuilt the market on a national basis by about 15 percent, he wrote. Last year's construction pace was at about 2.3 million units, but the rate has already slowed to 1.8 million, which is less than the 1.9 million to 2.1 million units a year that are needed to satisfy the demographics of the housing market.

The housing economist told his clients to worry more about the location and price of the oversupply than the overall number itself. The Nation's Capital is one example where location and price matter more. In the Washington metro area, a healthy ratio of 2.2 jobs were created for every new housing start. Unfortunately, most of the development is occurring outside the market's main employment centers.

And D.C. is not alone. In Phoenix, the largest number of resale houses on the market are on the outskirts of town, which is exactly where home builders are most active. And construction in Tampa, Orlando and Sacramento, to name just a few places, is most active far away from where the jobs are.

According to Burns, the investment leg of the stool is the wild card. Demand is strong, just not at current prices, he says. "Affordability is an issue in the major markets, but not everywhere."

On the other hand, consumer confidence is strong. In fact, it hasn't been an issue, at least not like it has been in previous down cycles, largely because most folks are secure in their jobs, the housing consultant says.

But speculators remain a bugaboo. At the height of the market, Burns says, "an unprecedented level of investors created 40 percent more sales activity" than should normally have been created. Now, we have to wait and see how they will react. Will they hold until the market turns more favorable, or will they panic and sell at any price just to be over and done with it?

As in politics, all housing markets are local. But if you are watching the national numbers, Burns concludes that 5.6 million total sales - both new and used - is indicative of a normal level of demand.

In June 2005, the annual rate reached 8.5 million. But it has already slowed to 7.3 million. Unfortunately, he believes the market will need to over-correct to below the 5.6 million benchmark because of affordability problems and the huge number of investors before it can right itself and begin heading north again.
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Winter Heating Costs May Ease On Drop in Natural-Gas Prices

This winter, consumers could see heating bills decrease by as much as 10% over last year, a consumer group says. However, homeowners shouldn't expect huge savings, experts say.
By: Stephanie I. Cohen: The Wall Street Journal Online
The recent drop seen in natural gas prices is likely to help soften consumer heating bills this winter, the American Gas Association said at a briefing.

The group said consumers may see a drop of as much as 10% compared with last year's bills, but officials also warned that consumers heating with natural gas shouldn't expect a sharp decrease in their utility bills.

Consumers have faced a steady increase in winter heating costs in the past five years. The Energy Department is slated to release its annual outlook for residential winter heating bills today.

The impact of natural-gas prices is felt by a large portion of U.S. residents - roughly 68 million American homes, or 52% of U.S. households, heat with natural gas.

Although wholesale natural-gas prices began to drop in September, the price of natural gas throughout the year, not just during the winter months, determines consumer bills, American Gas Association officials said. Utilities typically begin purchasing and stockpiling a significant portion of the natural gas they use to meet customer demand six to 18 months prior to the heating season, according to the group.

"Bills will be lower if the weather is the same as last year but weather is never the same," said Paul Wilkinson, vice president for policy analysis at the American Gas Association. "We've been on a price roller coaster for six years now," he said.

But officials for the group feel confident consumers won't see the sharp price increases of recent years thanks to natural-gas spot market prices in the first nine months of 2006 and the fact that natural gas in storage is at a record high.

During the first three months of this year spot prices were significantly higher than for the year-earlier period. But from April to June prices were about the same as the prior year and for the most recent three months prices have been significantly lower than the year-ago period, the group said.

While customers are also likely to benefit from the lack of hurricanes in the oil-producing regions of the U.S. this year, a cold snap during the winter that leads to higher demand is still the primary driver in determining winter heating bills during the heating season.

"This year, the industry has repaired much of the damage to its infrastructure and wholesale prices are lower, but the weather is a wild card," the American Gas Association said.

Natural-gas utilities don't make a penny more in profit if the price of natural gas rises but they can typically pass the increase in fuel prices along to consumers.
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Prices Coming Back to Earth, Economists Say

Nariman Behravesh, chief economist for Global Insight, an economic and financial information company, says home prices are “coming back to earth, coming down of their own weight.”
By: Camilla McLaughlin: REALTOR® Magazine Online
In a recent teleconference hosted by the National Association of Home Builders, he predicted that home prices could drop 5 percent nationally over the next year to a more regular level and that the housing slowdown's “spill over to the economy would be modest.”

That's similar to the recent outlook from David Lereah, chief economist for the NATIONAL ASSOCIATION OF REALTORS®.

“Unlike previous housing slowdowns, which have come on the heels of broader economic weakness accompanied by job losses and rising interest rates, today’s slowdown comes amid an economy that continues to chug along at a respectable pace," he said in his October 2006 column in REALTOR® Magazine. "Continuing solid spending by consumers and businesses, steady government spending, a recovering stock market, and strong corporate profits are behind the steady growth.”

Orderly Retreat in Home Sales

“The key issue is whether the correction is orderly or disorderly. What I see is orderly,” says Mike Moran, chief economist for Daiwa Securities America Inc. “The press tries to portray this as a catastrophe and I don’t think that is the case. Certainly prices are high and need to be corrected, but it isn’t a desperate situation.”

Using a historic perspective, Moran says that prices actually are in line with the rate of appreciation in that we saw in 2003, which at the time was a record year for housing. The effect of flattening prices or declines in some markets has been “to squeeze out the exuberance that was in place in 2004 and 2005,” he notes.

The rapid adjustment in prices and modifications that builders are making in production could be signs that the correction might proceed faster than expected and “things could bottom out faster than you see in the numbers,” suggests Jim Glassman, managing director for JP Morgan Chase.

Still, all three back NAHB Chief Economist David Seiders’ assessment that the correction would continue through 2007, hitting bottom in mid-year. Hardest hit will be metros in the Northeast, Florida, and California, where home prices are overvalued by an average of 30 percent to 35 percent, Behravesh says, referring to a survey of housing prices in 300 metro areas that his company and National City Bank conduct quarterly.

Safety Nets

For the economy overall, Behravesh anticipates the gross domestic product growing 3.4 percent for this year and 2.2 percent next year.

Still, strong global economies, record corporate profits, a healthy stock market, falling interest rates, and strong exports were described as “safety nets” during the period of adjustment.
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How To Get The Best Price In A Slowing Market

Can sellers be successful in a buyer's market? You bet - if they avoid five major traps. Columnist Peter G. Miller explains.
By: Peter G. Miller: Realty Times
Reports across the country suggest that real estate in most areas of the country is no longer appreciating at the rates seen in the past few years. In fact, the National Association of Realtors reports that nationwide August existing home prices were actually down 1.7 percent from a year earlier.

None of this is terrible or awful unless you bought last year and must now sell. Those who have owned for a few years are well ahead in most communities.

Consider that in 2000, according to the National Association of Realtors, the typical existing home sold for $111,800 versus $225,000 in August.

So, what's the best approach to selling in today's market? Consider these five core points.

    1. Buyers are scarce relative to home supply.

While sellers have called the shots for the past few years, that's no longer the case in most markets. No problem - adjust. Make your home the most attractive, best priced property in the neighborhood.

While pre-market prep could have been ignored in the recent past, today you have to paint, clean-up and repair before offering a home for sale. An MLS photo that shows a home with a lousy roof is evidence of a property that likely will not sell quickly or at full price.

    2. Remember that cash is still an issue.

While home prices may have slipped a touch, real estate continues to be hugely expensive for most buyers, especially first-timers who lack equity from a prior sale. Rather than reducing prices, offer to pay for buyer closing costs, thus lowering out-of-pocket purchaser cash requirements.

    3. Choose the right broker.

When comparing local brokers, look for such markers as recent success in your neighborhood, a high level of local activity and professional education.

In a slow market picking the right listing broker becomes especially important. Why? Because a broker with a strong local history is known and respected: If he or she offers a property at a given price that value is likely to be accepted as at least within the realm of reason.

As an example, last year we sold a property that was unlike virtually all nearby properties in terms of size (smaller house), lot (much bigger) and age (older than most). In other words, not an easy house to sell because there were no practical comparables. The broker - who had sold properties worth some $200 million in neighborhood real estate over the years - suggested a sale price which turned out to be exactly on target.

Alternatively, let's say we used a less experienced broker, someone who was not an authority figure. The property might have sold for less because another broker might have been less credible. In effect, one of the values of using an experienced listing broker is to readily establish believable prices and terms, an important matter in a buyer's market.

    4. Numbers Count.

Real estate sales are a by-product of exposure. If the odds of selling a home are 100 to one, if it takes 100 inquiries and visits to sell a property, then the quicker you get those inquires the better. No less important, if you can get more than 100 inquiries the odds of getting a top price and terms improve.

This means that when considering a listing broker you need to review the marketing plan with care. What, exactly is the broker going to do in terms of advertising, open houses, MLS placements, online marketing, broker relations, etc?

Remember that the marketing plan which works for one property may not work for another. Plans need to be specific to local markets, to particular homes and for current market conditions. The thinking that seemed so good last year may be inappropriate this year.

    5. It's a business deal.

With some frequency I see homes priced for reasons that won't work:

    • The property must sell for this price because I need $400,000 for the next
      home. The truth: Prices are established by the marketplace, not seller needs.



    • Similar homes in a different neighborhood command a particular price,
      therefore my house should sell at the same price. The truth: What happens
      elsewhere is irrelevant. What happens in the immediate neighborhood is what
      counts.



    • The Flombacks got $800,00 for their home so I should be getting at least that
      much. The truth: This is not about the Flombacks and should not be about
      seller ego. The real issue is about bricks and mortar. The Flombacks may have
      an objectively better house.



    • The buyer's offer requires that we leave the washer and dryer - it's an
      insult. The truth: Homes reflect our psychological identity, who we are, our
      social status, etc. But the marketplace reflects supply and demand. Leaving a
      washer and dryer may be a lot cheaper than not getting a sale for months on
      end.



    • This home would have sold for $500,000 last August and we will not accept a
      lower price. The truth: It's not last August. It's now and the marketplace
      reflects current supply and demand.

Sellers can be successful in any market so go forth and market - but do it right.
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Realogy Makes Bold Move to Counter Negative Media Spin

Says CEO Perriello: ‘Now is not the time to be quiet. Now is the time to be noisy.’
By: Maria Patterson: RISMedia
On October 5, Realogy took a strong stance against the barrage of negative press directed toward the real estate industry over the past several months. The Parsippany, New Jersey-based parent of such real estate brands as Century 21, Coldwell Banker, ERA and Sotheby’s, placed a full-page advertisement in USA Today to let consumers know that dropping mortgage rates and an increasing number of available properties make today the “perfect time” to purchase a home.

The Realogy ad ran in this past Friday’s main news section of USA Today, the section that receives the national newspaper’s highest readership.

The ad—whose headline read, “Opportunity is Knocking at Your Next Front Door”—was designed to let consumers know that rates for 30-year fixed mortgages have dropped in nine out of the last 10 weeks, potentially allowing home buyers to save more than $1,500 per year. Included in the ad were statistics from Realogy’s own home sales, including the fact that the company’s brands were involved in over 100,000 home sales in September—on average, one home sale every 30 seconds. The ad closed by encouraging consumers to contact a local real estate professional to learn more about “today’s home buying opportunities.”

Alex Perriello, president & CEO of the Realogy Franchise Group, directed an advance copy of the ad to the company’s franchise offices. In an accompanying letter, Perriello told Realogy brokers that, “Although the media has focused on the downside of the changing real estate market, there are also compelling messages about real estate that we need to reinforce to consumers,” such as the recent drop in mortgage rates.

In an exclusive interview with RISMedia Friday, Perriello explained that, “The unfortunate reality here is that good news seems to get buried in the newspapers and it's the negative headlines that get all the attention. What we're trying to do [with the ad] is motivate buyers with the facts. Mortgage interest rates have come down, there's an ample supply of inventory and homes are selling.”

“We wholeheartedly agree with the message of the Realogy ad,” says RISMedia CEO & Publisher John Featherston. “Today’s real estate market is full of opportunity for both consumers and real estate professionals, and it is our collective responsibility to disseminate the facts about the market in the face of negative media hype. We commend Realogy for taking a step that our entire industry will benefit from.”

According to Perriello, negative press surrounding the real estate industry is not a new occurrence. He recalls a “spirited debate” with Fortune magazine in 2002 whose October cover that year depicted a house on the edge of a cliff, accompanied by the headline “Are Real Estate Prices About to Fall?”

“When I look back four years later, if someone didn't buy a house in 2002, they missed out on four years of home price appreciation and what a sad commentary that is,” said Perriello. “The unfortunate reality is that bad news sells and that's what we're seeing right now.”

To combat negative press, Perriello believes that all real estate professionals need to take a very proactive position in the marketplace. “The industry needs to bridge the gap in every way possible,” he said. “Give consumers facts and figures in order to send them the message that houses are selling.”

Perriello also explained that it’s critical to infuse some historical perspective into the current marketplace. “When you look back and analyze the periods of time in the late ’70s and early ’80s, and then from 1990 to 1993 when there was a drop in housing, and you look at what precipitated all of that, the major contributing factors were high unemployment and interest rates that were 15% in the ’80s and over 10% in the early ’90s.”

Today, conversely, there is lots of good news, he says—including a dramatically growing population rate and still-low interest rates. As Perriello explained, “We just need to let buyers know.”

Perriello also emphasized the need for stepped-up communication with consumers. “You need to keep the seller informed right now,” he said. “There’s a disconnect between what a seller might think their house is worth and what the market is willing to pay. You have to give that seller continuous information. If you don’t have good news, sometimes you’re tempted not to call, but you need to keep people informed. This is the time you need to be out in front of consumers.”

“Now is not the time to be quiet,” Perriello added. “Now is the time to be noisy.”

In order to get positive information to consumers, Perriello expressed the need for brokers to become more involved as well. “Brokers need to share local market statistics with agents and make sure that the marketing and presentations agents are using are relevant in today’s market. This is the time when consumers need us the most.”

Perriello hopes that other real estate firms follow suit in Realogy’s efforts to counteract negative media coverage: “This is a multi-layered approach for us; we’re considering everything in the future from more ads to media interviews. We’re going to keep it going. And this is the one campaign that I hope all our competitors will pile on.”
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Stablizing Home Prices Fuel Hope Of Soft Landing

House prices still haven’t fallen, and that could be additional evidence to bolster the theory of a soft landing in the real estate market.
By: DANIEL MILLER: Los Angeles Business Journal Online
The expected drop in Los Angeles County home prices didn’t happen again in September, leading some observers to wonder if the housing market may experience a soft landing.

According to data released to the Business Journal, the number of existing homes sold in Los Angeles County in September dropped 30 percent – about the same as the previous month. But the median price of homes sold was $550,000 – exactly the same as the previous two months. What’s more, the price is up 4.2 percent from the same month last year.

When the number of home sales started dropping almost a year ago, many observers expected prices to head south eventually. However, the median price has been stuck at or near the $550,000 level for six straight months.

The result: the talk of price swoons and the housing “bubble” bursting has gotten quieter – at least for now.

“The indicators we are seeing are consistent with a soft landing,” said Delores Conway, director of the Casden Real Estate Economics Forecast at the USC Lusk Center for Real Estate. “The market is stabilizing to some degree. But we still need more time.”

Indeed, no one has a crystal ball, and prices may well drop, especially if predictions that lenders seeking to cash in on the real estate boom issued no doc loans – requiring minimal verification of income and assets – to overextended buyers are true.

That could lead to a rush of foreclosures as the interest rates on the loans adjust upward after their initial introductory period, when their rock bottom interest rates expire. A recession would certainly push prices well down.

However, several observers pointed out that the regionally strong economy and historically low unemployment don’t appear to set up the Los Angeles area for a steep price plunge.

In fact, so far this year the median home price in the county has risen from $519,000 in January, according to data provided to the Business Journal by HomeData Corp., a Melville, N.Y. company that tracks housing prices nationwide. Still, the soft sales and flattened prices feel like a downturn, compared to the torrid sales of recent years.

“When you come off of an extreme sellers market it looks like doom and gloom,” said Steve White, president of the Southland Regional Association of Realtors. “And the fact that the year-to-year median price has increased moderately would show you we are in a relatively strong market.”

Homes Sitting
To be sure, even though median prices have not gone down yet, sales are definitely slower.

Cory Weiss, a broker in Prudential Real Estate’s Beverly Hills office, said homes that are realistically priced are selling, albeit at a slower pace.

“Buyers are being cautious. They are taking their time. Deals are taking longer as far as negotiation,” said Weiss, who has clients in Beverly Hills, Brentwood and the Palisades area.

Weiss’ experience is in line with data released by the California Association of Realtors.
The California Association of Realtors estimates that as of August, homes in Los Angeles County were staying on the market a median 51.9 days, compared to 29.2 days a year ago. That translates into a build up of county inventory levels to 6.8 months in August, compared to 2.6 months a year earlier. That means at the current pace of sales, it would take 6.8 months to sell everything that’s on the market now.

“Where homes were moving in a week with multiple offers, it seems to be between 30 and 60 days or perhaps longer now,” said Fran Butler, president-elect of the California Escrow Association.

According to Leslie Appleton-Young, chief economist with CAR, a six-month supply of homes creates a balanced market for buyers and sellers.

Appleton-Young said that since 1988, the average unsold inventory level for homes in the county is 6.9 months.

White said that the current county home market is balanced, though it is hard to recognize that after the price gains the region experienced from 2003 to 2005.

“Last year was just complete insanity in many ways, so it was difficult to use 2005 as a benchmark or 2004 or 2003 for that matter,” White said. “Those years were so far away from normal.”

Bob Edelstein, professor of business administration at the University of California Berkeley Haas School of Business, said that while it is not clear whether the market has “found its level” he does not anticipate a regional recession, which would severely impact the housing market.

“The business sector is fairly healthy,” Conway said. “If that changes we could see more of a bumpy landing.”

Buyers Taking Time
Weiss said that in the high-end market, properties do still sometimes receive multiple offers from prospective buyers, though buyers are no longer consistently making offers at or above asking prices.

He said that homes that have sat on the market are “seeing reductions in price as buyers are being more particular.”

In the Santa Monica 90405 ZIP code, September sales dropped 32 percent to 13 homes sold, with the median price down 12 percent to $1.1 million. In the Brentwood 90049 ZIP code, September sales dropped 55 percent to 10 homes sold, with the median price down 14 percent to $1.4 million.

“I still have a ton of active buyers in the upper-end market but they are holding out and want to feel like they are getting a good value,” Weiss said.

Edelstein said that countywide slowdown is part of a typical correction before the market turns around.
“People don’t give up on their house-price dream, but the idea that there are fewer sales means that less people are getting their dreams,” said Edelstein, co-chair of the Fisher Center for Real Estate and Urban Economics at UC Berkeley.

As the market continues to correct, there are fewer high-end homes selling. In September, 610 $1 million-plus homes were sold, down from 899 $1 million-plus homes sold in August.

Also, there were just 31 $1 million-plus ZIP codes in September, down from 38 such ZIP codes in August.

“I feel that a lot of people wanted things to pick up after Labor Day but when we see things close, sale prices aren’t as close to the asking or over the asking prices as they used to be,” Weiss said.

The county condo market also experienced a 30 percent decline in sales volume to 1,463 condos sold. The median condo price in the county rose 0.5 percent from a year ago to $410,000.

Conway said that seasonal factors will likely lead to a further decrease in the number of transactions during the late fall and winter months. This sort of seasonal reduction in volume is an annual occurrence for the housing market.

Conway said that in the summer months, families relocate and prepare for the school year, generally making that period a strong time for the market.

“Typically we have a decline from August to December,” Appleton-Young said. “I would expect that pattern to hold.”

Despite this expected decline, many real estate professionals said the market appears to be functioning normally. “There is nothing in the Southern California economy that will portend doom,” White said.
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Caught off balance

Home prices dropping here, rising there and sluggish appreciation. Squeamish owners fear a sudden tumble. Experts predict a long slowdown.
By: Diane Wedner: Los Angeles Times
WHETHER at the dinner table, Starbucks or just standing around the office water cooler, Question No. 1 for most property owners these days is this: Is my home's value tanking yet, and if not, when?

The short answer is that home-price appreciation has slowed to single-digit levels in most Los Angeles County neighborhoods, homes are worth less than they were last summer in a few communities and values are falling faster than most experts anticipated.

The decline is not as rapid as that of the 1990s, said Raphael Bostic, associate professor at USC's School of Policy, Planning and Development, who described what's happening as "a long, grinding slowdown, not a drop off a cliff." In the scenario of a decade and a half ago, prices sank 17% in six years.

Homes in a dozen ZIP Codes in L.A. County already are worth less now than they were a year ago, but there is no distinguishable pattern to the locations, said John Karevoll, chief analyst at La Jolla-based research firm DataQuick Information Systems, other than in some cases, prices skyrocketed too quickly.

"They overshot their mark," Karevoll said.

Those areas won't be alone for long, he predicts. Karevoll expects other communities to show a decline a month from now, and others after that. "Prices don't settle in perfect unison," he said.

The 12 areas where the median price per square foot showed the steepest decline this summer, compared with June, July and August a year ago, were led by Eagle Rock, which slipped 6.7% from $488.22 per square foot to $455.63, according to DataQuick figures for ZIP Codes with 50 or more home sales during the three-month period. Next was the 90808 Plaza section of Long Beach, which saw a 3.9% drop to $439, and Valencia's 91355 ZIP Code, which fell 3% to $336.

Prices per square foot in San Gabriel's 91775, La Crescenta and Cerritos dropped 2.5%, 2.1% and 1.8%, respectively. Declines in Pacific Palisades, Agoura Hills, Palos Verdes Peninsula's 90274, Westchester, Rowland Heights and Long Beach's 90815 Los Altos community ranged from 0.5% to 1.6%.

Not all doom and gloom

Industry watchers expect the rest of the region to follow suit, but timelines and the extent of the fall are uncertain, they say. San Diego — considered a bellwether for the rest of the region because it was one of the first U.S. real estate markets to see prices rise and subsequently fall — posted its first price decreases this summer after increasing at a single-digit rate for more than a year before that, according to DataQuick.

Not all is doom and gloom, however. While values were dropping in some areas of Los Angeles County, others continued to gain, year over year. The areas with the greatest price increases per square foot were mostly in the less-expensive neighborhoods of Los Angeles, as well as in Valley Village, considered relatively affordable for upscale homes, compared with nearby Sherman Oaks, Studio City and Toluca Lake. The median price per square foot for a home in Valley Village appreciated 20.9% from last summer to $522 this summer.

The tide is turning there too, however. Sellers have begun lowering prices, realizing that the market has shifted, said Ken Marker, a Coldwell Banker agent in Studio City. He reports that his buyers now have a multitude of houses from which to choose in their price range instead of the few available just months ago.

Jonathan Hopp bought a Valley Village home in 2004 for $610,000, hoping to reap a big return after remodeling it. The interior designer spent $590,000 expanding the home from 1,100 square feet to 2,800, adding two bedrooms and two bathrooms. The house features a high-end kitchen and other upscale amenities.

Hopp listed the home for sale in May at $1.6 million, high for the neighborhood, said Therese Hyde, his Coldwell Banker agent. The first offer was a disappointing $1.2 million. At Hyde's urging, Hopp lowered his asking price twice more and finally settled for $1.42 million in August.

"I set a wishful price, hoping someone would appreciate the quality of the home and pay more than what other houses in the neighborhood were going for," Hopp said. "But no one made those offers, because they were worried about the market and refused to go higher."

Unlike previous downturns, when the highest-priced homes were the first to flood the market, the greatest numbers of homes selling today are in the middle range, where more panic is setting in, according to DataQuick. Wealthier owners are choosing to stay put.

Expectations too dire

The fact that interest rates remain relatively low — they fell to a six-month low this week — and unemployment is stable could shorten the duration of this decline, said Michael Carney, an economist with the Real Estate Research Council at Cal Poly Pomona.

"Potential buyers simply are in a waiting mode," Carney said. Their expectations of a tanking market are worse than actual economic conditions.

In other words, the tail may be wagging the dog. Buyers hear prices are falling, so they expect them to. And they wait.

Keith Rascoe, an investment banker, and his wife, Tammy Johnson, sold their three-bedroom Lakewood home about three months ago, when price appreciation started slowing. They had paid $349,000 two years earlier, and they sold it for $554,000. Their hope was to make a lateral move, in terms of house size and amenities, but to a better neighborhood.

Prices started to drop suddenly, so the couple decided to rent — in the Los Altos area of Long Beach, which saw a dip this summer — until prices moved down even further.

"We figure we're winning right now, even if we sit on our hands," Rascoe said. "We've already made a profit, and now there's much more out there to look at."

Rascoe's right. A year ago, there were 393 homes listed for sale in Long Beach, compared with 1,216 as of mid-August, said Long Beach Re/Max agent Mark Armendariz.

"Sellers are looking at last year's prices, and buyers are looking toward 2007 prices, anticipating a fall," Armendariz said. Checkmate.

So how will it all end up? That's the $64,000 question. Most experts say that now is not the time to buy with the intent to flip the property and make a profit, because prices are expected to level off across the board year over year or decline by year's end.

But then again, most buyers and sellers — about 95% — are doing transactions for the same reasons they always have: a job change, someone has died, others have divorced or are having children. And that, they say, won't change any time soon.
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Improving Your Retirement: How Two New Tax Laws Will Affect Your Bottom Line

If you've seen any accountants jumping for joy recently, it's probably because two major laws have been passed this year that shake up the rules for all kinds of personal finance planning
RISMedia
If you've seen any accountants (or financial planners) jumping for joy recently, it's probably because two major laws have been passed this year that shake up the rules for all kinds of personal finance planning.

-The Tax Increase Prevention and Reconciliation Act of 2005

Passed in May 2006, this new law establishes a higher AMT exemption, extends the 15 percent capital gains and dividend rate (5 percent if you're in the lower tax brackets), allows anyone to convert to a Roth IRA in 2010 and beyond, and raises the age limit for "kiddie tax" to 18.

Now let's figure out what that really means.

-AMT

Alternative minimum tax (AMT) is a thorn in many people's sides. Although initially enacted to make sure the rich paid their fair share of taxes, these days AMT hits a lot of middle-class taxpayers, too.

The new law will raise the exemption amount to $62,550 for married filing jointly (up from $58,000) and $42,500 for single taxpayers (up from $40,250).
But only for 2006.

You read that right. This AMT increased exemption amount is for one year only. These increases are small and will have minimal impact on most planning. No real solutions here.

-Capital Gains and Dividends

The lower capital gains tax and tax on certain qualified dividends were scheduled to expire at the end of 2008. The new law will extend that through 2010. That means that if you're in the 10 percent or 15 percent ordinary income tax bracket, you'll pay 5 percent on capital gains from now until 2008 and 0 percent from 2008-10. For those people in ordinary income tax brackets above 15 percent, the capital gains tax rate will stay at 15 percent until 2011.

That will present some interesting planning opportunities for transferring wealth to individuals in lower tax brackets. Parents may be able to gift appreciated stocks to their children or grandchildren who will then be able to sell the securities and pay a much lower capital gains tax. This also reduces parents' or grandparents' overall estate, which may be beneficial from an estate tax standpoint.

At this point, it looks like these rates will go back to 20 percent for capital gains and as high as 39.1 percent on dividends in 2011. If you're doing future planning, you'll want to make sure you keep these higher rates in mind. If you think that taxes will increase in the future, you may want to sell securities sooner rather than later to take advantage of the fairly benign capital gains rates now. (Of course, there are bound to be more tax law changes between now and 2011.)

-Roth IRA Conversions

A number of my clients have been using Roth IRA conversions as a way to reduce their minimum distribution requirement when they turn age 70 1/2. One of the barriers we run into is that you can't convert unless your adjusted gross income (AGI) is $100,000 or less. The new tax law will eliminate that income threshold so that anyone can do a Roth conversion.

But not until 2010. At that point in time, you'll be able to recognize the conversion income either in 2010 or average it over two years.

This is big.

If ordinary income tax rates do go up in 2011 as scheduled, a lot of people will want to take advantage of converting in 2010. Even if your income is over $100,000 now, you can make nondeductible contributions to a traditional IRA and then convert the entire balance in 2010.

-Kiddie Tax

"Kiddie tax" refers to the tax that is owed on unearned income (like interest and dividends) of a minor child. Currently, if a child is under age 14, the first $850 is tax exempt, the next $850 is taxed at the child's rate, and anything above $1,700 is taxed at the parents' rate. Under the old law, once children were 14 and older, they paid income tax at their own lower rates.

The new tax law pushes up the age to 18. So net unearned income above $1,700 will stay taxable at the parents' rate until the child is 18.

This will affect a lot of you who are saving for your children's college education. (But keep in mind that it affects you only if your child's portfolio is kicking off more than $1,700 in income per year.) Typically you shift stock types of investments to fixed income the closer the child gets to starting college. You do that so your college nest egg is more secure. But fixed-income types of investments will usually generate more income that will now be taxed at a higher rate.

-The Pension Protection Act of 2006

The latest tax law was passed in August and covers 529 plans, charitable contributions, and--you might have guessed it--pensions. Actually more than just pensions; it also covers all kinds of retirement-related issues.

-529 Plans

The tax benefits of 529 plans are no longer scheduled to disappear after 2010. So if the "sunset" issue was preventing you from using a 529 plan to save for your child's or grandchild's college education, cross that off the list.

-Charitable Donations

The pension-reform bill contains a couple of interesting new provisions that affect charitable giving. First, if you don't have written documentation for any cash gift, you can't claim a deduction. So for you church-goers, gone are the days you can throw $20 in the offering plate and claim it on your taxes. You'll need to use your offering envelopes (or whatever your house of worship uses to document offerings), or you can't write it off.
And there's good news for you seniors over age 70 1/2. You can give up to $100,000 in 2006 and 2007 directly from your IRA to a qualified charity. (You can do this with your required minimum distribution.) That money will not be counted as taxable income.
There are a few caveats with this last charitable strategy:

Nobody under the age of 70 1/2 can take advantage of these new IRA giving rules.
While the law permits you to give to charity directly from your IRA, it doesn't require IRA administrators to accommodate your request. You may see some IRA providers balking at making millions of $10 and $20 gifts.

Because the gift isn't counted as income, it won't matter if you itemize deductions on your tax return.

Gifts must be from traditional or Roth IRAs--not 401(k)s, 403(b)s, or other types of defined contribution plans, and not SEP or SIMPLE plans. You can, however, roll part or all of your 401(k) plan (or other company retirement plan) into a traditional IRA and then do your gifting. (See below for new rules on transferring money directly from your 401(k) or company retirement plan directly to Roth IRAs.)

The money must come out of the IRA directly to the charity or you have to declare it as ordinary income. Don't write a check to yourself and then gift the money.

The charity must be a public charity or private foundation. This won't work with donor-advised funds.

Qualifying IRA contributions to charity will affect only pretax contributions. If you've made nondeductible contributions, your cost basis will remain intact.

-IRA Contributions from Tax Refunds

If you find yourself with a tax refund, you'll now be able to direct the IRS to deposit up to $4,000 ($5,000 if you're over age 50) directly into your IRA account.

-Rolling to an IRA

The Pension Protection Act makes two important changes to rollover rules. For the first time ever, in 2007 and beyond, a nonspouse beneficiary will be able to directly roll over a deceased benefactor's retirement plan, like a 401(k), into an inherited IRA. This inherited IRA will need to be opened in the name of the deceased and payable to the beneficiary.
This is good news for any beneficiary who inherited a retirement plan which would allow for distributions only over a five-year period. With the new law, required minimum distributions for the beneficiary can stretch over the beneficiary's lifetime-extending the tax-deferral advantage.

Just keep in mind that the direct rollover starts only in 2007. So if you are a beneficiary, try to defer taking a distribution until next year.

A second major change to the rollover rules is that effective in 2008, you will be able to roll over your company retirement plan (like a 401(k)) directly to a Roth IRA. Right now you have to roll your company retirement plan proceeds into a traditional IRA and then convert. This new law skips that middle step and allows you to go directly to a Roth.
One caveat: You still must have AGI (adjusted gross income) of less than $100,000 to convert to a Roth until the year 2010.

-Company Retirement Plans

There are several new twists and turns that apply to your company retirement plans. Let's start by separating these plans into two groups: defined-contribution and defined-benefit plans.

Defined-contribution plans include 401(k)s, 403(b)s, 457s, and other like plans. You, as the participant, make contributions into these accounts and basically you're on your own to make sure you save enough for your "golden years." Here's what changes under the new tax law:

Plans can "auto-enroll" you in the company retirement plan without your initial consent. Instead of choosing to participate, you'll choose to opt out if you don't want to participate. The company will choose a default investment that you may be automatically invested in unless you say something.

Plans can offer computerized investment advice to participants. This law makes it much easier for plan providers to give participants advice. The law also has provisions to make sure the advisors offering the investment options can't make more money selling one fund over another.

Plans have to offer more financial education to make sure plan participants know the tax ramifications of taking money from their plans.

Military and some public service people may be able to take distributions from their company retirement plans without incurring a penalty. This applies to those active military reservists from Sept. 11, 2001, to Dec. 31, 2007. The law gives them two years after the end of their active duty to repay distributions and avoid taxes and penalties. Certain retired public safety officers can withdraw retirement funds without penalty for health or long-term care premiums up to $3,000 a year.

Lots of retirement contribution amounts are now permanent and won't change after 2010. This includes 401(k)s (and similar plans), IRAs, SIMPLEs, and catch-up contributions for each type of plan.

The Roth 401(k) plan is now permanent. That means more employers may start offering them.

The other type of retirement plan, a defined-benefit plan, also changes under the new tax law. A defined-benefit plan is one in which the employer puts money into a plan to pay you a pension at retirement. Pensions are typically based on years of service and final average salary. Here are some of the relevant portions of the new tax law that affect these plans:

There will be tighter controls to make sure that pension plans fund these accounts so that less plans will declare bankruptcy and force the Pension Benefit Guaranty Corporation (PBGC) to clean up the mess.

Most companies are given the next seven years to comply with the new law, but the airline industry and defense contractors are given special breaks.

The new law requires that companies meet 100 percent of their pension funding requirements each year-up from 90 percent. There's a 10 percent excise tax for funding deficiencies.

For those plans that have met 60 percent or less of their funding requirement, all lump-sum payments and nonqualified plan payouts may be suspended.

Companies will have to pay higher premiums to the PBGC to help offset the cost of bailing out failed plans.

This is the most comprehensive pension reform we've seen in over 30 years. You can bet we'll be writing a lot more about these changes as we have a chance to think through all the financial-planning ramifications.

** Please Consult your Tax Advisor **
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Most Americans Believe Houses Continue to Gain Value

A survey by RBC Capital Markets last month shows that homeowners are expecting their houses to appreciate 5 percent a year in value.
By: Al Heavens: Realty Times
I've spent the last few Sundays visiting open houses, and have come to the conclusion - reinforced by conversations with real estate agents - that most sellers remain unconvinced that this is buyer's market now.

I saw a lot of house listed at last year's prices. While I don't believe that there is a bubble, despite one month's decline in the national median sales price of existing homes reported for August by the National Association of Realtors, I do believe that sellers need to get real about what people are willing to pay for a house that's just one of four on sale in every block or on every street in many areas.

My observation and those of real estate agents has been reinforced by a recent survey by RBC Capital Markets, which found that about half of all homeowners still expect at least 5 percent annual increases in their home values over the next few years.

The survey of 1,003 people, conduct nationwide in September and announced at meeting in Orlando, also found that 25 percent of homeowners have already paid off their mortgage - twice the number of people with risky variable and interest-only mortgages (13 percent).

"While it's true that it may be easier to pay off a mortgage in Selinsgrove, Pa., than it is in New York City, we were still very surprised that the number was so high," said Scot Ciccarelli, managing director and equity research analysts for RBC Capital Markets.

"This goes against the general belief that most Americans are leveraged to the hilt," he said.

More than 80 percent of all homeowners surveyed have at least $50,000 of equity built up in their homes and almost 60 percent believe they have at least $100,000 of equity in their homes.

Those who entered the end of the housing cycle with variable rate and interest-only mortgages are, however, clearly at risk once their mortgages renew. Nearly 40 percent of those with variable rate and interest-only mortgages are concerned with their ability to meet higher payments, while 13 percent haven't even considered the ramifications. While this is a fairly small segment of the overall survey (about 6 percent), it suggests material risk to this segment of the population.

Ciccarelli said that many of those surveyed in this category didn't seem well prepared for the higher monthly payments these mortgages will eventually bring.

"While real estate expectations are lower than they were last year, consumers still seem optimistic despite what we are seeing in the marketplace," said Ciccarelli. "Declining real estate values could eventually impact consumer spending as people don't feel as wealthy as they used to and become less likely to borrow against the equity they have built up in their homes."

Other findings:

"Getting exactly the right product" is far more important to consumers than traditional shopping attributes like brand, convenience and service.

More than half indicated that price remained their single biggest focus when they are shopping, but 35 percent indicated that "getting the right product" was most important to them.

Those with the highest incomes favored "getting the right product" over everything else, including price (47 percent versus 33 percent). In addition, those that favored "getting the right product" were also the most avid users of e-commerce. About 38 percent of this group indicated that they use the Internet more for shopping than they once did, compared with 20 percent of the price-driven consumers.

"People usually know what they want and the Internet is great for targeted purchases", said Ciccarelli. "It also seems to play less of a role in searching for the best price for something than we would have thought. These findings underscore the importance for companies to have a strong multi-channel distribution strategy."

Those making more than $100,000 were three times as likely to save money regularly as those earning less than $50,000. In addition, almost half of those in the lower income bracket indicated that they were living paycheck to paycheck or were forced to dip into savings to make ends meet.

Half indicated that they didn't expect to change their spending habits over the next year. However, for those who do expect to change, the spending for most categories is expected to decrease rather than increase, with two notable exceptions - home improvement and automobiles.

While consumers' worry list is large, geopolitical tensions and terrorism (28 percent) trumped headline topics such as gas prices (20 percent), rising medical bills (20 percent), employment concerns (13 percent) and interest rates (9 percent).
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Best ways to cash in on a buyer's market

When sellers outnumber buyers, be careful about overpaying
By: Robert J. Bruss: Inman News
October of 2006 promises to be one of the best months in many years to be a home buyer. Unlike the past few years where there were more qualified home buyers than sellers (called a "seller's market"), the current "buyer's market" is just the opposite with more homes for sale than there are qualified buyers in the market place.

If you have been considering a home purchase, there are at least five key reasons for buyers to take advantage of the current home "buyer's market" in most cities.

They include (1) a record number of brand-new and resale houses and condos on the market for sale; (2) competition among sellers is keen for the available buyers; (3) new and resale home prices have stopped escalating and are "plateauing" or even dropping slightly in most communities; (4) mortgage interest rates are still very affordable; and (5) motivated sellers are eager to negotiate on price and terms.

Of course, the smartest home buyers, even in a buyer's market, consider only sound, well-located homes in good-quality school districts to enhance the probability of future resale profits.

HOW TO BE A SAVVY HOME BUYER. Although a few home sellers are in panic mode because they see so many homes coming on the market for sale in their vicinity, the truth is the current home-sale market is merely a "normalization," or return, to a traditional buyer's market for homes.

The sellers who are most worried are the homeowners who bought in the last year or two at the peak of the market, and who have to sell now for valid reasons, such as a job transfer, unemployment, pending foreclosure, illness, death or birth in the family, and divorce. These are known as "motivated sellers" who are especially anxious to sell.

However, just because the seller is motivated doesn't mean a home buyer will be able to negotiate a "good deal." The reason is if the seller bought at the peak of the market and is not willing to sell at that price or below, the buyer probably would be overpaying.

To determine if a motivated home seller can offer a fair sales price, savvy home buyers ask their buyer's agents to find out (a) how many years ago the home was purchased, (b) what price the seller paid, and (c) what is the total of the existing mortgages and liens secured by the house.

The answers will reveal if the owner, even a motivated seller, has home equity negotiation room. If not, savvy buyers move on to the next home.

BRAND-NEW HOUSES AND CONDOS CAN BE GREAT BARGAINS. Many builders of houses and condos have unexpectedly found themselves in local buyer's markets, which rapidly changed within the last six months. The result is an oversupply of new houses and condos, which are competing with reasonably priced resale houses and condos.

To cut their inventories, many home builders are offering amazing bargains, both in prices and included features or upgrades. For example, it is not uncommon to find builders advertising no down payments, no payments for six months, landscaping upgrades, upgraded appliances and carpets, easy mortgage qualifying, no closing costs, and other sales incentives.

But smart buyers of new homes should understand that builders are very reluctant to cut their asking prices. The reason is that appraisal and mortgage finance problems arise when builders sell below what they sold the same model for a few months ago; the builder can avoid such problems by instead including more features at no additional cost.

As house subdivisions and condo complexes gradually sell out their inventories, smart buyers realize the builders and developers become more anxious. The reason is their major profit is in the sale of the last few units.

For example, if you see a builder's newspaper ad saying "85 of 100 homes already sold" that really means the builder is highly motivated to sell those last few units, which represent nearly 100 percent of the profit from that project.

HOME BUYER'S MARKETS VARY BY LOCATION AND PRICE. A little-known secret is home buyer's markets can vary by ZIP code areas and price ranges within that area. Being within the boundaries of a top school district can also determine if a house or condo is in a high-demand seller's market or a lower-demand buyer's market.

There are two criteria to determine if an area is in a buyer's or seller's market. Smart buyers and sellers understand the local situation is constantly in flux.

The first criterion is to look at the number of houses and condominiums listed for sale in the local market and their average number of days on the market before sale. The local MLS (multiple listing service) has this number for resale houses and condos listed with the MLS. However, MLS statistics usually do not include brand-new houses and condos because most builders do not list with the MLS.

As a general rule, if the average number of days on the local market is 60 days or less, that is a house and condo "seller's market." The result is home sellers feel confident their realistically priced house or condo should sell within 60 days in a seller's market.

The second criterion to tell if you are in a local buyer's or seller's market for homes is to look at the number of months' supply of residences for sale at the current sales pace. To get this number, simply divide the number of home sales closed during the last 30 days reported to the local MLS by the number of homes listed for sale.

If the result is six months or longer, that means there is a local buyer's market with an oversupply of residences listed for sale. However, if this number is three months or less, then it is a local "seller's market" where sellers can hold firm on their price and terms with reasonable confidence a fairly priced home will sell within 90 days, usually less.

A third but less scientific method is to look at the volume of local newspaper display ads by home builders and real estate brokers. In a buyer's market, these firms will greatly increase their newspaper ad volume and sizes. But in a seller's market, they don't have to advertise very much.

HOW TO AVOID OVERPAYING IN A BUYER'S MARKET. After determining if houses or condos within the location and price range where you want to buy are in a local "buyer's market," after finding a suitable residence to purchase, it's time to make a written purchase offer. However, there are several key steps to avoid overpaying:

(1) Just as smart home sellers insist their listing agents prepare CMAs (competitive market analysis) showing (a) recent sales prices of comparable nearby homes, (b) asking prices of competitive neighborhood residences now listed for sale, and (c) asking prices of recently expired similar listings (usually overpriced), smart home buyers also insist on a CMA before making a purchase offer.

(2) Home buyers, with the help of their buyer's agents, then discuss the pros and cons of the homes shown on the CMA to arrive at a fair purchase-offer price for the home under consideration. This key step is necessary to avoid overpaying.

As smart home buyers know, you can always raise your purchase offer but you can never lower it after the seller accepts. Buyers can be sure their buyer's agent will show the CMA as justification to the seller when the purchase offer is presented.

(3) Every house or condo purchase offer should contain two key contingency clauses: (a) one for the buyer obtaining a mortgage based on a satisfactory appraisal of the property confirming the sales price and (b) another for the buyer's approval of a professional inspector's report on the house or condo to be obtained at the buyer's expense within five business days.

SUMMARY: Local home sales market conditions vary widely but it's a great time to be a purchaser when a buyer's market exists in your price range and location. Savvy home buyers then take advantage of favorable conditions to purchase their home at a reasonable price and terms after first becoming well informed.
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Sellers Sitting on Large Sums of Equity Dollars

Many sellers in today's market are bemoaning the fact that prices have stabilized or are falling in their communities. While year-over-year numbers regionally and nationwide have demonstrated strong appreciation, the latest month-to-month declines in some markets have made headlines and struck fear in the hearts of homeowners everywhere.
By: M. Anthony Carr: Realty Times
Despite very robust long-term housing appreciation, many observers of the market and prognosticators write scary reports about how appreciation has slowed, prices have dipped, etc.

Stories from the field go something like this: The seller won't accept a $150,000 lower offer on his $1.2 million listing because he's already dropped it $200,000 from his original asking price. When asked how much he bought the house for 15 years earlier, he answers, "That has no bearing on my situation now."

The real answer is that the seller actually bought the house for around $400,000 15 years ago and believes the roughly $600,000 gain on the property is not enough - since last year the same type home sold for $1.4 million.

My dear sellers, sell in the market you're in, not the one you wish it could be. This particular seller's story (and stubborn attitude) could be blocking a great opportunity for him to take advantage of the current market instead of the market taking advantage of him.

The mindset goes something like this: "I've already lost $200,000, why would I give up another $150,000 to sell my house?" If we're going to talk about how much has been lost (on paper) and how much as been gained (once you sell the house), then let's look at the real cash gain on the above property. In just a moment you'll see how many homeowners are sitting on more than 1,000 percent gain in their homes - they just haven't realized it yet (nor will they) until the house is sold.

Let's use the above example. The homeowner bought the house for $400,000 and is standing in front of a $1,050,000 offer that could net him more than $600,000 if he signs the bottom line. So what's his gain?

At an initial glance, it looks like his house has grown in value by 162 percent, thus he's gained a 162 percent return on investment, right? Actually, while the asset has grown by 162 percent, his return on the investment of his actual dollars is much higher.

Here are the assumptions:

    Purchase price: $400,000
    Down payment: $40,000
    Mortgage amount: $360,000
    Sales price: $1,050,000
    Cost of sale: 8 percent (commission, closing costs, seller subsidy, etc.)
    Net gain: $606,000

With the above numbers, his $40,000 investment several years ago has resulted in a net gain of 1,515 percent. That's right - one thousand-five hundred-fifteen percent.

My question to the seller is: "How much is enough?"

According to the Office of Federal Enterprise Housing Oversight reports that the average quarter over quarter appreciation (for 2Q 2006) for housing was more than 10 percent over the same period a year ago. Of course, the report itself and the media jumped on the statement of, "The quarterly rate reflects a sharp decline of more than one percentage point from the previous quarter and is the lowest rate of appreciation since the fourth quarter of 1999."

Now, that sells newspapers and gets the "email this article" link a hefty workout. What wasn't reported everywhere is that the average appreciation nationally has been 298.85 percent since 1980. In the last five years, the nationwide average has been 56.49 percent in appreciation. Where it really comes down to a level of importance is what has happened in your state or community. For instance, in my home state of Virginia, the 26-year appreciation has been 360.29 percent; the 5-year appreciation has been 83.38 percent.

Now let's look at the latest appreciation/depreciation in my marketplace - down about 1 percent compared to the same month a year ago. Ouch. That smarts. (I will point out though, that also in my market area, sellers have been overpricing to the tune of 13 percent higher than their counterparts from last year, while they are selling at 5 percent less than asking price. It's not so much a loss in "value" as it has been an overpricing of the inventory.)

Regardless of price, the basic investment strategies still apply here - buy low, sell high. It's just all relative. If the seller thinks he's "losing" tens of thousands of dollars because 1) that's what the houses were selling for last year; and/or 2) that's how much he's had to reduce the asking price, then he has a long emotional row to hoe.

On the other hand, the seller could look at the numbers calculated above and start dancing all the way to the bank with his ROI of 1,515 percent. So, again I ask, "How much is enough?"

The biggest challenge a seller has to face in today's market isn't the market, it's actually the person he's looking at in the mirror.
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The Weekend Guide! October 5 - October 8, 2006

The Weekend Guide for October 5 - October 8, 2006.
Full Article:
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Trendsettting Baby Boomers Ready for 'Me Time' in Homes

For this generation, having a nice place to live is more important or equal to spending time with grandchildren, a new study reveals. These home buyers shun retirement communities and desire spacious dream houses with upscale amenities.
By: Amy Hoak: The Wall Street Journal Online
Every eight seconds, another baby boomer turns 60. And as the trendsetters of the generation head for retirement, they're yearning for their dream homes.

But their idea of housing utopia doesn't necessarily hinge on spending quality time with the grandkids, according to a study commissioned by publisher Hanley Wood and released this week at the company's American Housing Conference in Chicago.

More than a third said their adult children and their own parents are not a consideration in creating their dream homes. Sixty-three percent said enjoying their home after age 60 is a priority above or equal to spending time with the grandchildren, and just 35% said they'd relocate to be closer to family and loved ones.

"The generation has always been considered selfish," said Frank Anton, chief executive officer of Hanley Wood, a media and information company for the housing and construction industry. "This survey would indicate maybe they're more selfish than anyone knows."

The longing for "me" time is a theme that often appears in their real estate preferences, as identified by the Hanley Wood study. Many have a list of dream amenities: Homes that are cozy and comfortable, yet airy and spacious; homes without stairs, but with room for a Stairmaster; living spaces that are energy efficient, but deluxe. They don't want single-age communities, instead looking for opportunities to stay active.

"They're saying 'Look, I did my thing. I raised my kids, I was nice to them, I put them through college, I went to their soccer games. Now I want to do my own thing,'" Anton said.

Respondents interviewed in the study weren't just any boomers. The study included 2,000 homeowners between the ages of 50 and 60 - and with annual household incomes of $100,000 or more. The study's authors termed these individuals "Boomfluentials," the oldest, most educated and most affluent members of the generation.

This subgroup often sets the trends that the housing industry will follow, Anton said.

Unlike the boomers' parents, many of whom remained in the same homes before and during retirement, only about one in five respondents who participated in the study said they would prefer to stay in their current home as it stands today.

Thirty-five percent said they would prefer to buy a different or new home to get what they want, while 17% were ready to design or build a new home to meet their needs and desires. Fifteen percent were cost-conscious remodelers who plan on upgrading their current home; 12% said they planned to purchase a second home.

Downsize, not downscale

Although about half of those surveyed said they'd move to downsize from a larger, child-centered home with a huge lawn, they're not exactly willing to downgrade. One in three boomers surveyed believe they have more house than they want or need in the future. But they also want to furnish that smaller space with quality amenities.

"This generation wants upscale living with less complication. They want their homes to be manageable, temperate, affordable, flexible and accessible," Tom Flynn, president of Hanley Wood Market Intelligence, said in a news release.

The study also found that these "leading edge" boomers don't seem to be moving en masse toward urban areas, as some have perceived. Of those surveyed, 67% said they would rather live in the suburbs and 14% said they would rather live in a rural area.

Fifty-one percent of those surveyed are planning to move to a "better" climate, 46% percent said they are planning to move where the cost of living is lower and 38% plan to move or remodel to ensure they could live comfortably on one floor.

For the occasions that their grandchildren do visit, 58% said they want their house to be fun for kids, and 52% are interested in design features that make the home safe for children.

Why boomers matter

Hanley Wood commissioned the study because boomers have such an influence on overall housing trends, Anton said.

"Baby boomers have determined the course of the housing market for the last 30, 35 years," he said.

"In the '70s, they were kids coming out of college. They weren't ready to buy a house, they rented apartments. There was this huge building boom in the rental apartment market.

"In the late '70s and early '80s, they started to turn 30 and get married. They bought their first house, so you had a big wave of builders building relatively small, relatively inexpensive homes."

During the 1980s through about 2000, this population segment became older and more affluent, and started to buy bigger houses, termed by many as "McMansions." The trend of remodeling and buying second residences has reigned for the past 10 years, he said.

The survey was an effort to determine what boomers will do next - especially as housing markets cool and builders need to consider what models will be sellers that stand out among the increasing inventory, Anton said.

"If you're a participant in the housing industry, you ignore baby boomers at your own peril because they are your primary market still."
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Experts Say Retirement Portfolios Should Include Real Estate

In recent years, older investors have been increasingly buying second homes, land and commercial properties to shore up their nest eggs. But with mortgage rates climbing and home prices in some markets falling, is there still a chance to make money in real estate?
By: Karen Hube: The Wall Street Journal Online
It seems that many retirees have a bit of Donald Trump in them these days.

In recent years, older investors have been increasingly buying second homes, land and commercial properties to shore up their nest eggs. While stocks were going nowhere after tanking in 2000, real-estate prices logged their biggest rise on record between 2001 and 2005, with an average annual 9% gain. Some markets, such as Las Vegas, Southern California, Phoenix and Miami-Dade County saw double-digit returns of at least 20%, according to the National Association of Realtors.

But with mortgage rates climbing and home prices in some markets falling, is there still a chance to make money in real estate? Or is the retirement and pre-retirement crowd better off stashing its dollars in a traditional mix of stocks and bonds?

The answer, according to financial planners and real-estate analysts, is that most retirement portfolios should still include some real estate. That's because land and property are "loosely correlated to the stock market," says Seth Pearson, a certified financial planner in Dennis, Mass. In other words, the value of real estate tends to rise when stocks are going down.

At the same time, though, real estate should be a relatively small part of most nest eggs, no more than 20% of your overall portfolio, Mr. Pearson advises. And investors with dreams today of making a killing in residential and commercial property need to lower their expectations - sharply.

"You can't figure on returns being what they have been, or you'll be very disappointed," says Christopher Cordaro, a financial planner in Chatham, N.J.

If you're thinking about jumping into the real-estate game, or already have purchased a property or two, consider the following stories of three real-estate investors who followed differing strategies with varying degrees of success.

Buy, Fix and Flip

Flipping is the tactic that received the most attention - and notoriety - during the real-estate boom. It's when an investor buys a property with the intention of selling it quickly - usually in less than a year - betting simply that the demand for, and value of, the property will increase significantly in that brief period.

Risky as it sounds, flipping became wildly popular in some markets. In 2005, short-term investors in parts of Florida, Nevada and Southern California posted annualized returns of more than 50% on average, according to First American Real Estate Solutions, a research firm in Santa Ana, Calif. In one of the hottest markets in the Miami area last year, investors who flipped properties within three to six months scored an average annualized return of 150%.

The problem: Flipping today isn't as lucrative as it was only a year or so ago. Given that many communities are now buyers' markets, "it's a lot harder to make money," says Christopher Cagan, an analyst at First American. And the process isn't as easy as it looks, especially because buying and selling real estate carries high transaction costs.

Terry Bryan, age 53, is a flipper. A retired stockbroker in Colorado Springs, Colo., Mr. Bryan decided to try his hand at real-estate investing in 2001, after the stock market tanked. For the most part, his bets have paid off.

"I don't get excited over a 10% return for the year," Mr. Bryan says. "I put $10,000 down on a property" and walk away with $20,000. "That's a 100% return, and I do that in six months." He adds, though, that his real-estate investments are "really my full-time job." He buys two or three properties a month, typically single-family homes or apartments.

Mr. Bryan says he has learned several lessons that help him steer clear of trouble in a cooling market. First, he buys a property only if he can get it for less than market value. The way to do this, Mr. Bryan says, is "to look for motivated sellers - such as someone going through a divorce or who has to move quickly - or properties in foreclosure."

While that might sound simple, Mr. Bryan has had to build a network of close contacts, including trusted real-estate brokers, mortgage lenders, real-estate attorneys and members of local real-estate clubs. His goal: be the one they call when they hear of a great deal.

That's what happened in August, when Mr. Bryan got a call from a Realtor he knows who told him about a home in foreclosure. "The owner had passed away and left the property in a trust, but the trust couldn't keep up with the payments," Mr. Bryan says.

He bought the home for about 30% less than its value; after paying transaction costs and maintenance and doing some work on the property, he estimates he will make about 10% on the deal.

If you think you might want to try your hand at flipping, one of the most important rules is to "have an exit strategy," says William Bronchick, author of "Flipping Properties: Generate Instant Cash Profits in Real Estate." "If you can't flip the property, will you rent it? Lease with the option to buy? Know the answers before you buy."

Let Your IRA Do The Buying

Last year, James Burns, a 60-year-old lawyer in Bath, N.Y., considered buying real estate purely as an investment. But Mr. Burns faced having to sell some of his investments to free up cash to buy property. And he didn't want to get stuck with a large capital-gains tax bill.

His solution: buy a property through his individual retirement account.

And he's far from alone. IRAs have become increasingly popular vehicles for real-estate purchases in recent years. "That's where many people hold most of their assets, and they haven't wanted to miss the real-estate boom," says Jaime Raskulinecz, chief executive officer of Entrust Northeast LLC, a retirement-plan administrator in Verona, N.J.

To buy property through your IRA, you need an IRA custodian that specializes in real-estate purchases. Typical IRA custodians - banks and mutual-fund companies, for example - buy stocks and bonds, but they generally don't get into real estate because it's more labor intensive to add to a portfolio and manage.

Mr. Burns sold shares of a stock index fund in his IRA and used the cash for the real-estate purchase. This avoided an immediate tax bill because all taxes incurred in an IRA are deferred until funds are withdrawn.

And when he sells the property, "I'll be able to make money without paying taxes right away," Mr. Burns says.

Once your IRA owns a property, you may not use the property for your benefit. "It must be considered an investment only, meaning you and relatives -- parents, children, grandchildren - can't live in it or rent it," Ms. Raskulinecz says.

What's more, you must pay for maintenance, upgrades or any costs related to the property with funds from your IRA. Likewise, if you rent your property, income must go directly into your IRA.

But keep in mind that the rules governing this kind of transaction are complicated. One wrong move and you risk losing your IRA's tax-sheltered status. That would mean owing income taxes on all of your account's assets and a 10% penalty if you aren't yet 59½.

Mr. Burns figured that raw land was the perfect IRA investment, "because there's not much in the way of expense and not a lot of insurance to carry," he says. His 8.5-acre property on Lake Keuka, in New York, "is wooded, with a couple of streams running through it," Mr. Burns says. "If I had bought a building, I'd have to generate income on it because the taxes and insurance would be higher."

Look Abroad

Paul Zelnick wanted to buy a second home to use for a few months of the year in retirement. But the 64-year-old retired financial analyst from Chappaqua, N.Y., had a tall order: He wanted a charming home in a vacation hot spot that would appeal to renters and be a good long-term investment - all for no more than $400,000.

In the U.S., where properties in the hottest markets fetch closer to $1 million or more, that would be a pipe dream. But Mr. Zelnick found what he was looking for - in San Miguel de Allende, Mexico.

Like Mr. Zelnick, many retirees are looking to foreign markets for properties that are not only their dream homes, but sound investments as well. Among some of the hot spots with good deals: Panama, Honduras, Malta, Thailand and Malaysia.

But investing abroad comes with its own set of difficulties, says Tim Leffel, author of "The World's Cheapest Destinations: 21 Countries Where Your Money Is Worth a Fortune." "You have to realize that things work differently in markets outside the U.S.," he says, "and you have to play by different rules."

Mexico has attracted numerous Americans like Mr. Zelnick because of its proximity to the U.S. But near as it is, its business practices are vastly different.

"Most real-estate transactions go off without a problem, but you have to be careful or you could end up losing everything," says Raoul Rodriguez Walters, a financial planner in San Miguel de Allende. "For example, Mexico doesn't have a real-estate board to regulate brokers, so you can get caught up in unprofessional situations."

That's what happened to Mr. Zelnick. Months after paying cash for a $365,000 property, he still hadn't received the deed. Such delays are common enough in Mexico for Mr. Zelnick to be unconcerned, so he proceeded with some $50,000 of construction on his property, "knocking walls down to create bigger rooms, putting in new, bigger windows and creating two extra bedrooms upstairs," he says.

But partway through the construction, he learned that five Mexican charities had laid claim to the property, and a judge ordered all work to halt.

As it turns out, the former owner had two wills: one in the U.S. and one in Mexico. The will in Mexico cited the charities as the beneficiaries of the property. Mr. Zelnick bought the property from the owner's nieces in the U.S., who were named heirs in the U.S. will.

To make matters worse, one of the attorneys from the Mexican realty company that Mr. Zelnick worked with absconded with the cash.

"It's all a huge mess, and it's costing me," says Mr. Zelnick, who purchased the property in late 2003, and had been looking forward to renting it out for some extra income. "Now I have to work through all of this, and it could be another couple of years before it's all resolved."
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Prices, Interest Rates Make Up 20/20 Real Estate Vision

Many real estate prognosticators have been worrying about the slowing of the appreciation rates across real estate markets nationwide, scaring many buyers out of the market.
By: M. Anthony Carr: Realty Times
The Office of Federal Housing Enterprise Oversite released its 2nd quarter figures on average housing prices this month and many market watchers jumped on the "dropping prices" bandwagon.

The astute buyer, however, watches the prices and the interest rates adjustments together and then makes an offer at the optimal time to get the best house for the best price and terms.

Headlined "House Price Appreciation Slows," the OFHEO report showed that prices nationally are not dropping, rather the rate of growth has slowed. On average, the houses in the 2nd quarter were 10 percent more valuable over the same period last year. So consumers and economists have on their worry hats about the future. Understandably, none of us like to see an investment stop growing; however, for the buyers, this slow in appreciation is good news.

I've always held on to the belief that there's not a lot you can do about the future, so you have to live and make decisions based on the facts you have today. The reality about real estate, is that sometimes you have to buy when your life situation dictates it, not when the "price is right." However, for buyers who have been on the sidelines, the time may be right to hit the iron of making an offer, so to speak.

Have you been watching the interest rates lately? Bankrate.com has its average 30-year fixed rate at 6.4 percent - a drop of 3 basis points in one week and the lowest level all year. In addition, for those willing to pay more points, you could get a rate under the 6 percent threshold. Meanwhile, if the prices in your area are about to flatten before beginning their next cycle upward, and you MUST buy now, your waiting may have paid off - if you jump over the fence of indecision and get a contract written now.

Earlier this year, rates were standing at 6.8 percent. The drop of 4 basis points since then could save a shopper hundreds or thousands of dollars per year on a home mortgage, depending on the loan amount.

At 6.4 percent, the principal/interest payment on each $100,000 borrowed is $625.51 - that's about $25 less per month than when the interest rate was at 6.8 percent a couple months ago.

Thus on a $400,000 loan amount, your payment would now be $100 less per month - that's a savings of $1,200 per year (more than $6,000 over the next five years) if, and this is the big IF, you get off the fence, lock in your loan and make an offer on that house you've been waiting on.

Watching the interest rates as well as housing prices in your market is the 20/20 Vision of the real estate market. Look to the future. Buy when prices are stable with a low interest rate and then hold on for the ride. According to some forecasters, this month may be the month buyers should get off the dime.

The Financial Forecast Center, a market research group in Houston that monitors and forecasts indexes, interest rates and various other market data, predicts the average national interest rate will climb beyond the highest rate this year to 6.97 percent by January 2007.

If that's the case, that money mentioned above will then cost a buyer $663.29 per month for every $100,000 borrowed. For a $400,000 mortgage, that would then be over $1,800 per year more in monthly payments for the same amount of money (assuming your favorite house is still available and that the price hasn't gone up again).

If you're waiting for prices to hit bottom, it could happen while you wait or you could create your own "bottom" price by making an offer now before interest rates start their upward climb once again. Get the house you want for the price you want at today's interest rate.
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Pending Home Sales Index Rises 4.3%

NAR's Pending Home Sales Index shows sales should be fairly stable over the next two months, although a minor decline is possible.
REALTOR® Magazine Online
Pending home sales have increased, showing that the housing market continues to stabilize, according to the NATIONAL ASSOCIATION OF REALTORS®.

NAR’s Pending Home Sales Index, based on contracts signed in August, rose 4.3 percent to a level of 110.1 from a reading of 105.6 in July, but is 14.1 percent lower than August 2005.

David Lereah, NAR’s chief economist, says the higher index reading is a hopeful sign for the real estate market.

“Our sense is that home sales may have reached a low in August,” he says. “The Pending Home Sales Index shows home sales should be fairly stable over the next two months, although a minor decline is possible.

Prices to Rise at Slower Pace in '07

"With fewer new listings coming on the market, we should be able to draw down the inventory supply early next year to the point where home prices will rise, but at a slower pace than historic norms,” Lereah adds.

The index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed, but the sale usually is finalized within one or two months of signing.

An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined, and was the first of five consecutive record years for existing-home sales. There is a closer relationship between annual changes in the index and actual market performance than with month-to-month comparisons; analysis shows a strong parallel between changes in the index from a year ago and the actual pace of home sales in coming months.

Biggest Increase Is in the West

Regionally, the index reading for the West rose 9.2 percent in August to 112.7 but was 16.9 percent below August 2005.

The index in the South increased 4 percent to 126.8 in August but was 9.4 percent below a year ago.

In the Northeast, the index rose 3.6 percent in August to 95.4 but was 12.4 percent below August 2005.

The index in the Midwest was unchanged at 93.8 in August and was 20.4 percent lower than a year ago.
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Homeowners' Love of Remodeling Will Help Push Up Home Values

U.S. consumers will continue to put money into their homes, satisfying our cravings for two-person showers and granite countertops - despite the housing slowdown.
By: June Fletcher: The Wall Street Journal Online
Remodeling Urges Help Push
Home Prices Upward, Expert Says

Does a desire for two-person showers, travertine floors and granite countertops push home prices up? Housing economist Tom Lawler, a Vienna, Va., consultant, argues that it does - and says these cravings are partly responsible for ballooning home prices throughout much of this decade. In a subscription-only report, he notes that household spending for improvements for single-family homes increased to $1,900 last year from $1,100 in 1997, and that such spending will likely continue to rise, despite the slowdown in home sales and prices reported earlier this week by the National Association of Realtors. Although the impact of these spruce ups is hard to gauge statistically - improvements often aren't noted in public records - he estimates that overall, remodeling is responsible for 1% to 1.5% of home-price appreciation each year. So, while prices overall may continue to decline due to overbuilding, speculation and risky mortgages, remodeling will continue to add real value to many homes.

Commercial Real Estate
Outshines Housing Market

So what if housing has hit the skids? The outlook is still pretty sunny for the commercial and multifamily building industry, according to the second-quarter databook on the sector just released by the Mortgage Bankers Association. Although the report acknowledges that consumers may not be spending as freely as they did when they thought their homes were ATMs, it's cautiously optimistic about the future, noting "consumers are still hanging in there." Meanwhile, demand is still strong for rental apartments in many markets, like New York and Chicago - no doubt the result of skyscraper-high housing prices - and commercial building is picking up speed almost everywhere. During the second quarter of this year, the report shows that commercial and multifamily mortgage bankers' loan originations increased 17.3% compared to the year before and 23.3% over the first quarter.

Federal Agency Calls for Reform
Of Freddie Mae and Freddie Mac

In a speech before the National Economists Club Thursday (Sept. 28), James Lockhart III, director of the Office of Federal Housing Enterprise Oversight, called for reform of the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, "due to their history of mismanagement and massive size." He said that Congress should grant OFHEO bank regulator-like powers with independent legal authority, improved enforcement capabilities and better funding to oversee the GSEs and rein in their growth.

New York Commemorates 9/11
With Outpouring of Daffodils

DaffodilFest will take place at 11:30 am on Saturday (Sept. 30) at Union Square Park in New York, with free food and drinks, jugglers and a giant puppet parade. But the real purpose of the festival is to commemorate those who died in the 9/11 terrorist attacks. For the fifth year in a row Dutch bulb supplier Hans van Waardenburg of B&K Flowerbulbs will give out 50,000 free daffodil bulbs in the hopes that gardeners will plant them in memory of those fallen. Since the project's inception in October 2001, New Yorkers have planted more than 3 million daffodils through the city, according to the organizers, Parks and Recreation Commissioner Adrian Benepe and New Yorkers for Parks co-chairman Lynden Miller. We think that's a great gesture for gardeners to copy everywhere.

Homes Seen as a Nest Egg
By Most U.S. Homeowners

Although housing prices nationwide are falling, nearly half of all homeowners still expect the value of their homes to rise at least 5% a year, according to a recent survey of 1,003 Americans by RBC Capital Markets, a corporate banking and investment banking firm. Our homes are still our nest eggs: About 80% of homeowners surveyed estimated that they have at least $50,000 of equity in their homes, and 60% said they have at least $100,000. Surprisingly, many of those polled are immune to worries about interest-rate hikes, since they've already paid off their mortgages. But those who got risky variable-rate and interest-only mortgages are getting worried: Nearly four out of 10 such borrowers are concerned about how they'll meet higher payments.

Comparing Home Prices Within
The U.S. and Across the Globe

Coldwell Banker has released its annual Home Price Comparison Index of 382 markets - including, for the first time, 42 markets outside of North America.

The study, which compares typical 2,200-square-foot, four-bedroom homes, found that the cost of a home in Bend, Ore., is commensurate with one in Amsterdam, The Netherlands, while one in Sydney, Australia, costs as much as one in Bellevue, Wash. The most expensive market in the study? In the U.S., it's Beverly Hills, Calif., naturally, where a typical house costs a cool $1.8 million; the most affordable, Minot, N.D., where the same house (but with a much-diminished chance of a TomKat sighting) costs $132,333. Overseas, the priciest market is Milan, Italy, where the sample home costs slightly more than $1.8 million; but in Bogota, Colombia, you can find the same quality house for $56,522.

And for your parlor-game pleasure: The site also has a nifty home price comparison tool. You enter your home's estimated market price, and it shows you what that would buy you in three separate markets of your choice.

Assuming that, in this topsy-turvy market, you actually know what your home's market value is.

Trade Group Predicts Number
Of New Homes Built to Increase

The National Association of Home Builders released its long-term economic forecast Tuesday (Sept. 26), projecting to the year 2015. Although the report is subscription-only, a summary says that while production and sales will slow over the next few years, overall the numbers of new homes built over the next decade will reach historic highs - though no single year will match last year's record of 1.72 million starts, fueled as it was by a combination of speculation and low-interest-rate mortgages.

Fair enough - there's plenty of pent-up demand in the market, among both the millions of boomers on the verge of retirement and would-be first-time buyers who were priced out of the market during the recent housing mania (notice we did not say "bubble"). But the report also predicts "larger average sizes" for new homes over the coming decade. Huh? In a market that will be dominated by first-time buyers and retirees? We don't think so - or at least, we hope not.

Baltimore's Foreclosure Rate
Higher than Neighboring Cities

Baltimore homeowners face a higher rate of foreclosure than other nearby cities, according to a new report by The Reinvestment Fund, supported by the Goldseker Foundation.

The report shows that there were 30.6 foreclosures for every 1,000 owner-occupied households in the city, compared to 16.1 in Philadelphia and 12.2 in New Castle, Del. Many of those who are losing their homes are young, with little cash and poor credit. Once their homes are lost, they often aren't resold to other young families -- increasingly, they're being bought by investors.

To help families facing foreclosure keep their homes, Baltimore Mayor Martin O'Malley announced today (Sept. 27) a new initiative that includes counseling services. The initiative was spearheaded by a new coalition of government and non-profit groups called the Baltimore Homeownership Preservation Coalition.

About Half of U.S. Businesses
Are Operated From Home

So much for the stereotype that folks who stay at home sit around drinking gin and eating bon bons: The U.S. Census Bureau just-released results of its 2002 Survey of Business Owners, which shows that almost half of all the nation's businesses are operated from home. For 70% of these owners, the home business is their primary source of income; six in 10 use their own money or family assets to finance the start-up. Nearly two-thirds of those who launch a home business have some college education, and 60% are at least 45 years old.

Still a mystery: If so many people are working at home, why are the roads still so clogged at rush hour?

Real-Estate Search Engine Trulia
Expands Its Reach Across the U.S.

Trulia, a residential real-estate search engine that debuted last year in San Francisco, has gone national. It's not quite as cool or comprehensive as Zillow, which shows aerial views of houses and just recently allowed homeowners to update information on their homes so valuations are more accurate. And Trulia's "interactive heat maps," which, the press release claims, "dynamically search a city to see which neighborhoods and zip codes are hot or not!" are subjective, since they're based on consumer impressions.

But House Talk likes anything that puts essential information that used to be closely guarded by the real-estate industry into the hands of the people. So it's worth visiting this site to check out the home comparison search tool, which shows recent comparable sales, as well as the neighborhood snapshots, which show weekly changes in average and median sales prices, price per square foot and number of sales. We also liked the easy-to-use tabs linking to stats on income, crime, the age of the housing stock, commuting time and community services.

Real-Estate Telanovela Coming
To a Television Station Near You

As if steamy affairs, coma awakenings and backstabbing lovers aren't enough, a new telenovela called "Nuestro Barrio," or "Our Neighborhood," will debut this Wednesday in seven markets. But though most soap operas have underlying morals about sex, this one has a different twist: It's moralizing about money.

Specifically, into the usual storylines of romantic intrigue and jealousy, the Spanish-language soap opera weaves subplots warning of predatory lenders, out-of-control credit-card debt, redlining and other obstacles to home buying.

The program is targeted to Spanish-speaking buyers because Hispanics are the country's fastest-growing minority group. According to the U.S. Census Bureau, one out of two people added to the population in the year ending July 1, 2005 were Hispanic. Currently, the nation's 42.7 million Hispanics comprise 14% of the population; by 2050, they're expected to make up 24% of the population.

But many Hispanics are recent immigrants with misconceptions about the process of home buying and its potential pitfalls, lenders say. So rather than resorting to the usual dry brochures and public service announcements, Community Reinvestment Association of North Carolina, based in Durham, a nonprofit group, created this spoonful-of-sugar approach. A test run of the soap opera proved popular with focus groups, so on Sept. 27, it will roll out in Austin, Texas; Dallas/Fort Worth; Houston, San Antonio and Phoenix; and Oct. 1 in Miami/Fort Lauderdale.

Freddie Mac, which packages and sells loans on the secondary mortgage market, funded the first 13-episode season of the season. One reason was to encourage homeowners who get into financial trouble to call their lenders before their loans default -- a big concern these days as interest rates tick up. A foreclosure typically costs a lender almost $60,000, Freddie says.

Moving Study Looks at States
New Residents Are Choosing

About 43 million people move each year. St. Louis, Mo.-based moving company Mayflower surveyed 5,800 of them to find out why; in order, the top reasons were a new job (33.8%), new retirement location (31.8%), health or personal reasons (22.4%) or a company transfer (12%). More than half of those studied (54.5%) moved at least once within the last five years. And the most popular destinations, based on the company's 86,000 annual shipments? In order: South Carolina, Washington, D.C., North Carolina, Montana and Kentucky. The losers: North Dakota, New Jersey, Connecticut, New York, Nebraska and Michigan. We have the numbers for all 50 states.

Touring New-Home Models
Via Builders' Podcasts

Podcasting, short for 'personal on-demand broadcasting', is catching on with home builders who want to reach out and touch their customers 24/7 on their iPods or computers. Taylor Woodrow, a firm based in West Midlands, England, that also builds in the U.S., is showing podcasts on architectural trends, as well as some of its California communities, with streaming video of various models and plans. When we visited, the technology worked smoothly; it was much less herky-jerky than the typical online virtual tour. But we could have done without the distracting background sales chatter, which sounded like it was being delivered by a robot realtor with the dial set on "perky."


- June Fletcher is a staff reporter at The Wall Street Journal and the author of "House Poor" (Harper Collins, 2005). Her "House Talk" column appears most Mondays on RealEstateJournal.com. Email your questions about the residential real-estate market. Please include your name, city and state. If you don't want your name used in our column, please indicate that. Due to volume of mail received, we regret that we cannot answer every question.
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Getting into Real Estate for the Long Haul

As the market slows, eager investors are looking for properties to rehab and offer for rent.
By: Al Heavens: Realty Times
They represent the future of real estate in this time of uncertainty - 17 bright-eyed and eager students, median age 40, sitting for three hours in a classroom while I click slowly through a 50-slide Power Point presentation with embedded video and audio.

These are small investors, a mixed group of young and old, Realtors and nonRealtors, and all ethnicities - a true mix of the modern-day urban market.

They want to know what I can tell them about renovating one-to-four unit properties cost-effectively, whether or not to hire an architect, what to look for in a contractor, what will put their rentals a cut above the others without breaking their budgets.

These are not flippers. These folks are in for the long haul, agreeing with some expert who told me this week that this isn't the time to experiment with real estate but to get serious about it.

One of the experts whose video was embedded in the Power Point was Carl Dranoff, a developer who was one of the pioneers of the warehouse to loft conversion boom on the late '70s to mid-'80s in many of our older cities.

When interest rates were hovering at 18 percent and creative financing was in its infancy, Dranoff turned his attention to the rental market, and that what these former factories and warehouses became. He attracted the same kinds of renters who are buying urban condos these days - young single or recently married professionals and a few brave empty nesters willing to live on the then-mean streets of the city.

Although he focused on big projects, a lot of what Dranoff recommends can be tailored to smaller projects. On the top of his is location: Look at emerging neighborhoods that are not yet at the forefront of development. Look at smaller projects in areas where large ones are changing the equation.

Don't expect to find bargains at the intersection of major city streets.

Look for buildings with good bones: High ceilings, big windows, wide-spaced columns. For residential use, the shape of a building is important, since light can only penetrate a space up to 20 feet.

The larger the windows, the bigger the ceiling height, the more opportunity for being "sun-splashed."

Look for character-defining features, such as brick walls that can be restored.

Columns are another character-defining feature. Columns were used in lieu of beams, with the load carried by the flair-out at the top of the column.

The problem with columns is that they are often in the wrong place, so you have to adjust the spatial layout to accommodate them.

Remember: Because you are trying to accommodate architectural features with living space, "you can't make every apartment perfect," Dranoff said.

Lay out each room of an apartment with furniture; otherwise, you end up without door-swing clearance or with a piece of furniture without enough walk-by clearance.

Expect to install brand new systems: Plumbing, heating, ventilation and air conditioning. Even technology has to be introduced - high-speed Internet access or fiber-optic cable - especially for those investors whose buildings will house a younger market - especially grad students and dot.com professionals.

Dranoff is a proponent of the "gut rehab," or starting a renovation with a blank slate. That means, removing the interior down to the frame and starting over.

That way it's easy to start installing heating, cooling, ventilation, and plumbing systems.

You need to pay attention to ductwork, since it is often difficult to penetrate obstacles such as concrete walls with a duct.

That's why you need a mechanical engineer to design the system, and have that person handle obtaining the permits and the equipment suppliers needed for the work.

To the neophyte investors, Dranoff recommends starting small.

Buy a small building. Surround yourself with good people: a lawyer, architect, plumber, electrician, and more who can be depended upon for advice and to show up when needed.

Know your market: Who is the end user? If you renovate to sell, make sure you have a good real estate firm. If you renovate to rent, have a good leasing agent.

Always allow more time for your project. If you believe it will take four months, make it six, because you never know what you'll find behind the walls.

And, for the same reason, add 10 percent to your budget.

Finally, be very wary of buildings with problems. Environmental issues can make a renovation project less than cost-effective, he said.
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