VF Consulting’s Real Estate Blog

Dr. Phil Buys in Beverly Hills For $29.5 Million

2010-08-11T09:47:00.000-07:00

Dr. Phil buys an estate in Beverly Hills, Calif., for $29.5 million. Plus, a Forbes family ranch in Wyoming hits the market.
By: CANDACE JACKSON: wsj.com
Phil McGraw, better known as Dr. Phil, has bought an estate in Beverly Hills, Calif., for $29.5 million. Earlier this month, he listed his Beverly Hills home for $16.5 million.

The estate he purchased, which was unlisted, is a Mediterranean-style villa on three acres that has a 14,000-square-foot main house with five bedrooms and 11 bathrooms. There's also a guesthouse and a pool. The house has sweeping views of Century City.

Mr. McGraw's current home is also a Mediterranean-style house on just under an acre. It has eight bedrooms and seven bathrooms as well as an in-home theater, gym, billiard room and an outdoor dining room. The property is walled and gated and has a two-bedroom detached guest house.

Known for his syndicated, daily advice talk show, Mr. McGraw first rose to fame when he appeared regularly on the "The Oprah Winfrey Show" in the late 1990s. He has also written several best-selling books. Through a representative, he declined to comment.

Jana Jones-Duffy and Fred Holley of Coldwell Banker Previews International represented the home Mr. McGraw purchased. Billy Dolan, a broker with Hilton & Hyland in Los Angeles, has Mr. McGraw's listing for the $16.5 million property that's currently on the market.

Forbes Wyoming Ranch Goes On the Market
A ranch owned by the family of Malcolm Forbes, the late chairman and editor in chief of Forbes magazine, has hit the market in Jackson Hole, Wyo., for $12 million.

The 85-acre ranch sits along the Snake River and borders Teton National Park. A 4,100-square-foot main lodge has a two-story great room, two kitchens, five bedrooms and four bathrooms. There are also six guest cabins and caretaker's quarters.

Malcolm and Roberta Forbes purchased a roughly 150-acre ranch in 1979. Mr. Forbes died in 1990 and Ms. Forbes in 1992. The 85 acres that are for sale are owned by Moira Mumma, their daughter. Ms. Mumma's brother Tim Forbes still owns his portion of the family's ranch, which is adjacent.

David Viehman, a co-owner of Jackson Hole Real Estate Associates, a Christie Great Estates affiliate, has the listing. He said Ms. Mumma and her husband are selling because they no longer use it enough to justify keeping it.

Real-estate investor Michele Hughes will auction off a seven-acre oceanfront estate on Kauai's Anini Beach next month. Also available is her 40-acre unlisted beachfront property in Kauai's Kilauea for $40 million.

The auction includes a property with a three-bedroom main home on 1.3 acres overlooking the ocean. It was previously listed for $9.8 million. The opening bid for the sale is $3.8 million. An adjacent 1.67-acre lot has an opening bid of $1.5 million.

Ms. Hughes's Kilauea estate, along Secret Beach, has about 40 acres of land, beachfront access and an organic farm and nursery. There is a 3,000-square-foot main house, a swimming pool and two guest houses. The property can be divided into four separate parcels.

Concierge Auctions is handling the sale, which will take place on site on Aug. 23, along with Neal Norman of Koa Properties. The Secret Beach estate is available from the Michele Hughes Company.

Home Prices Gain in 100 U.S. Cities in Second Quarter

2010-08-11T09:37:00.000-07:00

Home prices rose in 100 U.S. cities in the second quarter as a buyer tax credit boosted demand and distressed properties made up a smaller portion of sales.
By: Kathleen M. Howley: Bloomberg.com
The median price of a single-family home sold in Akron, Ohio, climbed 36 percent from a year earlier to $119,700, the biggest rise of 155 cities measured, the National Association of Realtors said in a report today. Prices in San Jose, California, gained 26 percent to $630,000 and San Francisco added 25 percent to $591,200. The median U.S. price rose 1.5 percent to $176,900.

A federal tax credit of as much as $8,000 underpinned second-quarter real estate demand, boosting sales to an annual pace of 5.61 million homes, according to the Realtors group. The effect is waning, said Richard DeKaser, chief economist at Woodley Park Research in Washington. Transactions probably will fall to a 4.55 million pace in the three months ending in September, the NAR said in a forecast posted on its website.

“Throwing a sale price on housing stimulated demand, but there is no doubt it’s been a largely temporary effect,” DeKaser said in a telephone interview. “The level of housing activity, whether one is talking about sales or construction activity, is abysmally low.”

The median price of a single-family home in the New York metropolitan area rose 3.7 percent to $393,900 in the second quarter. The Edison, New Jersey, region had a 4.3 percent gain to $345,800 and prices in the Boston metropolitan area increased 7.2 percent to $360,200.

Distressed Sales

Distressed homes, which typically sell at a discount, accounted for 32 percent of sales in the second quarter, down from 36 percent a year earlier, according to Chicago-based NAR. The category includes foreclosed homes, those where the owners have fallen behind on payments and so-called short sales, in which a lender agrees to sell a property for less than the value of its mortgage.

The worst-performing markets included Cumberland, Maryland, with a price decline of 15 percent; and Tucson, Arizona, down 14 percent. Prices in Lansing, Michigan; Ocala, Florida; Beaumont, Texas; and Boise City, Idaho, all fell 13 percent.

In a separate report today, NAR said U.S. sales rose 9.1 percent from the first quarter’s 5.14 million annual pace. North Dakota led the nation, with transactions climbing 52 percent. Sales increased 39 percent in Hawaii and 37 percent in Washington, D.C.

The average U.S. rate for a 30-year fixed mortgage tumbled to 4.49 percent this month, the lowest on record, after reaching a 2010 high of 5.21 percent in the week ended April 8, according to Freddie Mac, the McLean, Virginia-based mortgage buyer. The decline shaved about $130 off a monthly payment on a $300,000 home loan.

The federal homebuyer tax credit required people to sign contracts by the end of April. Those buyers had until June 30 to close their sales. Congress extended the deadline through September.

L.A. Home Prices Stay Flat as Sales Inch Up in July

2010-08-11T09:01:00.000-07:00

Figures seen as possible sign of strength after June decline.
By: David Haldane: labusinessjournal.com
Home prices in Los Angeles County held steady in July for the fourth consecutive month, as sales began creeping back from a dip early in the summer.

The median price of a home remained at $350,000, its high point since the market began recovering in spring 2009. Meanwhile, home sales rose 3 percent on a year-over-year basis to 4,498 units, according to data provided by HomeData of Hicksville, N.Y.

Year-over-year sales had dropped in June due largely, analysts said, to the expiration of an $8,000 federal tax credit requiring buyers to enter escrow by April 30.

The new figures suggest that the housing market, at least in the county, may be more robust than some economists believe. A survey in July of economists conducted by MacroMarkets LLC found that on average they project nationwide prices will drop more than 1 percent this year.

Christopher Thornberg, a principle of Beacon Economics, a West L.A. consulting firm specializing in real estate, warned against reading too much into the numbers.

“For a while they managed to get a bounce out of the market because of interest rates and tax credits, but that has come to an end,” he said. “As a result, things have gotten flat and I would expect them to remain soft for the rest of the year.”

Among the neighborhoods in which prices were flat was the 90049 ZIP code in Brentwood, where 16 homes sold for a median price of $1.53 million, virtually the same as last year.

But not every area shared in the flat trend, with some of the most dramatic shifts occurring at the higher end. For example, 32 homes were sold in Manhattan Beach’s 90266 ZIP code at a median price of $1.67 million, a 28 percent jump compared with last year.

Conversely, 21 homes were sold in the 90068 ZIP code in the Hollywood Hills at a median price of $698,000, a 34 percent drop from 2009.

The median price of a condo also remained flat countywide in July at $305,000 for the second month in a row. Sales volume was 1,634 units, a 1 percent increase over last year.

Geithner Defends Plan to Let Tax Cuts for Wealthy Expire

2010-08-04T12:56:00.000-07:00

US. Treasury Secretary Timothy Geithner will Wednesday continue to defend the White House plan to let tax cuts for the wealthiest Americans expire at the end of the year, arguing that extending them would imperil the fragile economic recovery.
By: VICTORIA MCGRANE: wsj.com
"Borrowing to finance tax cuts for the top 2% would be a $700 billion fiscal mistake. It's not the prescription the economy needs right now, and the country can't afford it," Mr. Geithner will say, according to an excerpt from his speech provided by Treasury. Mr. Geithner will deliver the remarks Wednesday afternoon at the left-leaning Center for American Progress.

Mr. Geithner's argument stands in direct contrast to Republicans and some congressional Democrats who argue that letting taxes increase even for the richest Americans will hurt the economy at this crucial time.

More broadly, Mr. Geithner's speech will focus on tax and fiscal policy. According to other excerpts from the speech, Mr. Geithner will say that "ultimately, fiscal policy is about getting the conditions right for economic growth, prosperity, and job creation.

Over the past two decades, Washington ran an experiment on that front. In the 1990s, the government put an end to budget deficits, and America enjoyed a period of growth led by the private sector where prosperity was widely shared and job creation was robust. Over the next decade, Washington tried a new path, running up huge debts, while incomes for most Americans stagnated and job creation was anemic. We are living today with the damage that misguided policy caused.

The speech continues: "So, as we look to a new decade, there's some empirical evidence around what works and what doesn't. Rather than recreating a false prosperity fueled by debt and passing the bills on to the next generation, we need to restore America to a pro-growth tax and fiscal policy, where the middle class once again has a chance to prosper."

After delivering his remarks, Mr. Geithner will participate in a debate with the center's president and CEO John Podesta, Douglas Holtz-Eakin, president of the right-leaning American Action Forum, and others.

Homes will sell if priced right; foreclosures have impact

2010-07-29T13:33:00.000-07:00

Emily Rennie's three-bedroom house in Oakland was a beauty in a sweet location. Walking distance to the lakeshore. Close to shops. A refurbished patio in the back. Inside, a modern kitchen with granite countertops.
By: Stephanie Armour: USA TODAY
Listed at $539,000 when she put it on the market, the Excelsior Avenue house was missing one crucial thing: The right price.
After a few weeks with no offers, she cut the price to $499,000 in May. Then she cut it to $475,000 in June. She is still hoping for an offer.

Rennie is discovering the cold reality of post-housing-bust prices: No matter what she thinks her house is worth, what matters is what buyers are willing to pay. That can be a lot less in areas where the supply of houses for sale is swollen by foreclosures and short sales, often priced 20% to 30% below the ones being sold by financially healthy owners. Nationally, such properties account for a third of all sales three years after a historic chill blew over an overheated housing market.

Foreclosures "do make it harder to sell," acknowledges Rennie, who works in marketing communications. "People can get a really good deal."

FORECLOSURES: They're booming among the most creditworthy
CHART: Drops in asking price in major cities
INTERACTIVE MAP: State-by-state look at the foreclosure problem in 2Q
HOME PRICES: Rise 1.3% in May, but don't expect it to last
HOUSING MARKET: Track the rise, fall and ... rebound?
CLOSE TO HOME: Real estate markets across the USA

Real estate professionals say Rennie is in good company. Nationally, 30% of the houses for sale were reduced in price in June, according to Zillow.com, an online real estate site. Plenty of sellers have trouble pricing their home against the foreclosed houses that lenders are trying to unload.

"It's one of the hardest things for sellers to do. They have an emotional attachment to their house," says Amy Bohutinsky, a spokeswoman for Zillow.com. "For sellers to understand how they should price, they should deeply understand their market and competition — what's on the market now, not just what's sold."

Those who do that successfully don't have a problem.

"People who price their homes to the market are selling them in a reasonable amount of time, but people who cling to 2004 or 2005 prices aren't," says Richard Smith, president and CEO of Realogy, the parent company of Century 21, ERA, Coldwell Banker and Sotheby's International Realty. "If you take into account (bank-owned property) pressures, you'll sell pretty quickly."

Competition for bargains

Oakland and nearby San Francisco are two markets where foreclosures have a strong influence

Nearly three of every 1,000 homeowners in Oakland lost their homes to foreclosure in May, according to Zillow. Foreclosure resales made up 36% of all sales in May, although that's down from a peak of 66% in March 2009.

Sellers have had to adjust. In June, 20% of the properties for sale in Oakland made price cuts, according to Zillow.com, compared with 15% in May. Drawn by falling prices, young professionals from San Francisco are coming across the bay to snap up homes in Oakland, and most of the stiffest competition for properties is in the top tier, around $808,000.

At that price, buyers in May paid 0.1% less than the asking price, according to Zillow. In all price ranges, they paid 0.3% less than asking price. Based on the median list price, that's $1,080 less than the last listing price.

But some agents are seeing bidding wars.

"We're seeing multiple offers; we're seeing above asking price," says David Kerr, a ZipRealty agent who represents buyers and sellers in Oakland. "People are buying foreclosures, fixing them up and selling them and getting offers."

Those who do take foreclosures into account and price their homes right cannot only find a buyer, but sometimes one who will pay well above what they're asking.

One such buyer was Rosa Verdin, 40, who bought a restored Victorian in north Oakland from a developer in May. The asking price was $450,000, which was well-priced, she says. She and her partner, Kelly Helms, 32, a nurse, offered $50,000 more, outbidding at least two other parties.

"We had been looking for six to eight months," says Verdin, 40, who works in graphic arts. "The location was centrally located to our work, the house was move-in ready and within our price points. Timing just seemed right, and the decision was relatively easy."

Not all offers go so smoothly. Even when owners find willing buyers, getting their price isn't a sure thing. Lenders generally require appraisals before giving a mortgage, and appraisers often take into account what foreclosed properties in the area sell for when determining how much a home is worth. If a home is being sold at too high a price, the sale can fall apart.

"Every day, sales fall apart," says Leslie Sellers, with the Appraisal Institute. "Smart sellers get appraisals done before they sell the home."

Even in markets where most sellers are getting just below asking price, some are taking a long time to find a buyer. Glen Cox put his sprawling, five-bedroom Oaklandhome with sweeping views of the bay and Golden Gate bridge up for sale at the end of 2008 for $1.8 million. He's selling it without a real estate agent. He took it off the market for a while after he got no offers. Today, he's offering it for $1.695 million.

The house features vaulted ceilings, nine rooms with French doors, travertine balconies and an oak-arbored entry corridor. "There're not many homes in the $1.5 (million) to $1.6 million range, and mine is nicer than most of them," Cox says. "If you don't have the one buyer right away, it can take awhile. It's a very tough market."

Neighborhoods buck trend

Other neighborhoods also show just how well good prices pull in successful offers.

In the heart of San Francisco, Noe Valley is home to dot-com millionaires and working professionals. The streets are lined with Edwardian and grand Victorian row houses built in the late 19th century, and the neighborhood, flanked by hills, features an eclectic array of coffee shops, sushi restaurants and lively bookshops.

The real estate market in San Francisco is struggling to regain its footing, with home prices down 0.7% from the third quarter of 2009 to the first quarter of this year. But in Noe Valley, most homes are going just above listing price. In May, homes sold for an average of 0.02% more than the last listing price, according to Zillow.com. Based on median list price, that translates into $218 more.

"It's crazy," says Brendon DeSimone, a Realtor with Paragon Real Estate in San Francisco, who represents buyers and sellers in Noe Valley. "I had one house with five offers, and it went from $1.4 million to $1.7 million. The valley has just popped. It's not uncommon for one open house to have 200 people come through."

Nationally, the average property takes eight to nine weeks to sell, down from 10 to 11 weeks a year ago, according to the National Association of Realtors. In Noe Valley in May, there were 25 listings that sold after averaging five weeks on the market.

But Paul McCickard, who put his home on the market in mid-March, is still waiting for a buyer. So far, he's had only one offer. His home, priced at $2.149 million, is a 3,400-square-foot Edwardian with four bedrooms, a two-car garage, marble fireplaces, stream showers and a view of the skyline. He says he had to price it at that amount in part because it was an investment property. He bought in 2005, demolished the home and rebuilt it; he needs to pay back the money he owes on the construction — and hopes to make a little profit.

"We've invested a lot of money into the house, so it's a matter of trying to recoup the money. Hopefully, it will sell," says McCickard, who sells heavy equipment. "There's been a lot of walk-throughs and a few interested parties, but we're still waiting."

Other homes have found buyers, and fast. Charlie Frisbie lost out on his first offer in Noe Valley, so he bid again last year on a two-bedroom Edwardian with an asking price of $998,000. There were a total of 11 offers; he got it at $1.1 million.

"You're getting the best the city has to offer — transportation, good weather, access to parks," says Frisbie, 48, an accountant. "Twice this year, homes came for sale on my block, but they didn't even go on the market — they just sold. Those that do go on the market go substantially over" asking price.

Noe Valley has taken a hit as the overall housing market has tumbled, with home values down 17% from their peak in June 2008, according to Zillow.com. In the neighborhood, about 5% of home sales in March were foreclosure resales.

But Noe Valley remains a hot neighborhood for several reasons. Other neighborhoods such as Pacific Heights and the Marina District have already been in such demand that prices are often out of reach for younger families, DeSimone says. Noe Valley remains more affordable but still has the kind of row houses desired by families.

It's also closer to Silicon Valley than other neighborhoods in northern San Francisco, which shaves off about 20 to 30 minutes of commuting time (Google and Apple both have bus stops in Noe Valley). And many buyers want historic Victorians, so demand for homes in the neighborhood is strong.

That's why, when homes are priced well, they can set off a bidding frenzy — even in an anemic real estate market.

LOWERING THE ASKING PRICE Story
How much houses in some cities listed on real estate site Trulia.com have been reduced in price since July 2009*.

City/state % of listings w/ price reductions - Average reduction

Minneapolis 40% - 9%

Milwaukee 39% - 9%

Dallas 38% - 9%

Boston 34% - 7%

Baltimore 34% - 11%

Phoenix 33% - 13%

Memphis 33% - 9%

Kansas City, Mo. 32% - 9%

Tucson 32% - 10%

Columbus, Ohio 32% - 8%

Mesa, Ariz. 32% - 12%

Jacksonville 32% - 11%

Virginia Beach 32% - 8%

Albuquerque 31% - 8%

Louisville 31% - 6%

Omaha 31% - 7%

Arlington, Texas 31% - 7%

Cleveland 30% - 12%

Chicago 30% - 8%

Atlanta 30% - 10%

Indianapolis 30% - 7%

Seattle 30% - 9%

Portland, Ore. 29% - 8%

Philadelphia 29% - 8%

Raleigh, N.C. 28% - 7%

Nashville 28% - 8%

Long Beach 27% - 9%

Fort Worth 27% - 8%

Houston 27% - 8%

Colorado Springs 27% - 7%

Tulsa 26% - 6%

Austin 26% - 7%

Washington, D.C. 25% - 10%

San Francisco 25% - 8%

Charlotte 25% - 9%

Oklahoma City 24% - 7%

San Antonio 23% - 8%

Los Angeles 23% - 11%

Honolulu 23% - 8%

Denver 22% - 8%

Miami 21% - 13%

Sacramento 20% - 9%

San Diego 20% - 8%

Fresno 19% - 11%

Detroit 19% - 26%

El Paso 18% - 7%

Oakland 18% - 10%

New York 17% - 10%

San Jose, Calif. 16% - 8%

Las Vegas 12% - 15%

* = foreclosure properties are not included; Source: Trulia.com

Doubling Down on Housing

2010-07-24T12:59:00.000-07:00

Record-Low Interest Rates and a Scary Stock Market Are Prompting Investors To Sink Even More Money Into Their Homes.
By M.P. MCQUEEN: wsj.com
The housing crash has left at least 11 million people in the unenviable position of owing more on their homes than they are worth—and many more millions with properties worth far less than they paid for them.

But some might not be as trapped as they think.

Record-low mortgage rates and a new slump in home prices are presenting unusual opportunities in the housing market these days—even for so-called underwater borrowers.

Larry and Mary Schuck paid about $29,000 to refinance into a 15-year mortgage at a rate of just 4.5%. That's like an investment return of about 10% a year over five years. They also reduced their total interest payment by more than $95,000.

Some intrepid homeowners are intentionally taking a loss on their current house—and writing a big check to retire their old mortgage—in order to buy twice the home for not much more money. Others, eschewing conventional personal-finance advice, are even opting for "cash-in" refinancings, paying thousands of dollars out of pocket to settle old loans—and then taking out new mortgages with lower payments, shorter durations or both.

Katie Everett, a real-estate broker in Denver, says none of her clients kicked in cash when selling their homes last year. This year, "about half are willing to bring money to closing, anywhere from $5,000 to $45,000," she says.

Are these people crazy to be tying up even more of their cash in their homes, in effect doubling down on what has been a losing bet thus far? After all, any number of variables, from the employment picture to the credit markets, could weigh on housing for years to come.

Yet economists say trading up to new homes or refinancing existing ones can be smart—even if it means plunking down more cash to get out of old mortgages. People living in less-desirable neighborhoods might be able to find better homes in tonier ones that offer better appreciation potential. And with mortgage rates so low, such buyers can keep their monthly payments manageable, even though the new homes are more expensive.

"If you are trading up, what better time than when interest rates are at record lows and the cost of the trade-up is much less than it used to be?" says Christopher J. Mayer, a Columbia Business School economist.

The refinancing equation is changing, too. Thanks to rock-bottom interest rates and liberal lending terms for Federal Housing Administration loans, a person who plunks down cash to retire a higher-rate mortgage might be able to reduce his monthly payments, even as he shortens his loan term to 20, 15 or 10 years.

In the past, financial planners typically recommended that homeowners devote as little cash to real estate as possible, and to invest it in the financial markets instead. But with stocks essentially where they were 11 years ago and market volatility seemingly on the rise, people are rethinking that wisdom. Devoting extra cash to repay a mortgage early is among the safest ways to produce an investment return.

"At this point," says Jay Brinkmann, chief economist of the Mortgage Bankers Association in Washington, "if they don't have anything else that is bringing a tremendous return, then they are buying themselves an annuity by paying their house off sooner than they needed to."

During the fourth quarter of 2009, 33% of refinancings were of the cash-in variety, the highest percentage since Freddie Mac began tracking the characteristics of refinance transactions in 1985. Figures for the second quarter are due next week.

"Historically high percentages of borrowers are paying down their principal when they refinance their mortgages," says Brad German, a Freddie Mac spokesman.

It helps that interest rates are lower than they have been in decades. The average rate on a 30-year fixed-rate loan was about 4.74% on July 21, according to Bankrate.com. That is down from 5.26% in January. Rates on 15-year loans averaged about 4.18%.

The Mortgage Bankers Association said Wednesday that low interest rates sent the volume of mortgage applications 7.6% higher during the week ended July 16. Purchase applications increased for just the second time since the expiration of a temporary federal tax break in May. Refinance applications grew 8.6%, to the highest level since May 2009.

The attractive terms are spurring people like Scott Ayler, 35 years old, into action. He and his wife, Jaclyn, 33, recently decided to trade up to a larger home in their native Denver, despite taking a loss on their current house. In 2004, they paid $234,000 for a three-bedroom, 2½-bath house builtthat same year in Green Valley Ranch, a subdivision that has among the highest foreclosure rates in the city and lacks upscale amenities. They are in contract to sell the home for about $204,000.

Their new home, built this year, cost about $323,000, comes with four bedrooms and three baths, and sits on a corner lot overlooking a reservoir. The house, which was initially listed at $379,000, is in Denver's desirable Cherry Creek area, known for excellent schools, plentiful amenities and few foreclosures.

With $195,000 remaining on their original 6.625%, 30-year fixed-rate loan, the Aylers estimate their total paper loss will be around $45,000. They are putting down only $11,500 on the new house. But because the new FHA loan carries a 4.5% rate, their monthly payment will rise by only $290 a month.

They say they expect better price appreciation in their new home. And with a young daughter and plans for another child, they need more space anyway.

"We don't want to wait for the market to come back," says Mr. Ayler, general counsel for an energy company. "We wanted a better quality of life now."

Of course, many homeowners in states like Arizona, Florida and Michigan are seriously underwater, having overpaid for houses now worth as little as half their value at the market's peak. Making up that yawning gap and scraping up additional cash for a new down payment is beyond their means.

Some of those people are going to extremes by engaging in "strategic defaults," a highly controversial strategy in which they stop paying their mortgages and go into foreclosure to get out of their obligations. But while cutting losses on a bad housing investment might seem liberating, it can stain a person's credit report for years.

The vast majority of homeowners remain reluctant to sell their primary residence at a loss, perhaps irrationally so. In a study of seller behavior in condominium transactions in downtown Boston from 1990 to 1997, economists David Genesove of Hebrew University in Jerusalem and Prof. Mayer of Columbia showed that sellers were so "averse to nominal losses" that it affected their behavior. Those who were selling their homes in down markets and faced the possibility of nominal losses kept their homes on the market for much longer than other sellers, in some cases to their detriment.

"Loss aversion is a very, very strong force," Prof. Mayer says. "People don't like to sell their homes for less than they paid for it."

But, he adds: "Why should it matter? If you sell a home for less than you pay for it, you would buy for less, too."

Others are coming around to that view. In Minneapolis, real-estate agent Jason Walgrave says he recently helped a couple buy a 2,800 square-foot home in nearby Plymouth, Minn., an affluent suburb, for $325,000. To get there, they sold for $175,000 a 1,500 square-foot house for which they had paid $190,000 in 2005. Their existing home is financed with a 7.5% mortgage; they will get 4.5% on the new one.

The couple is bringing $25,000 to the closing table to pay off the old loan and closing costs. "They want to take advantage of the bigger house at a lower price and the lower interest rate," Mr. Walgrave says. Now, for an extra $390 a month, they are getting almost twice as much house.

Just as old beliefs about selling houses are being upended, the conventional wisdom surrounding refinancing is changing, too. Time was when the only question about a refinance deal was how much money the homeowner could take out of the house. From the 1980s through the mid-2000s, the so-called cash-out refi became an easy way for homeowners to spend beyond their means.

Now, some homeowners are doing the opposite: writing big checks to pay off their old mortgages and taking out new ones with far lower interest rates, shorter repayment terms or both.

David Walter Banks for The Wall Street Journal

The Schucks, of Winston, Ga., recently refinanced to save money. .
Should You Invest Your Cash in a Refinance
Until recently, few homeowners were "underwater" on their mortgage, meaning they owe more on it than their house it is worth. Now millions of people are in that situation. But that doesn't mean they can't refinance—it simply means they must pay down the principal of their loan with cash.

Because that concept is relatively new, few online calculators help people run the numbers for themselves. Here, Jack Guttentag, professor emeritus of finance at the Wharton School and self-styled "Mortgage Professor," calculates the potential return on a hypothetical deal. He considers only the cash used to retire the mortgage; closing costs would affect results as well. And he assumes a five-year period because that's a typical length of time people hold a mortgage. (The returns are similar over 15 years, he says.)

In general, the rate of the return is larger when there is less cash required, or when there is a greater difference between the old and new mortgage rates.

 · Current loan balance: $809,000
(on a 30-year fixed mortgage at 6%)
 · Current monthly payment: $6,398
 · Cash paid at closing to retire current loan: $80,000
 · New loan terms: $729,000, 15-year fixed mortgage at 4.375%
 · New monthly payment: $5,530
 · Monthly payment savings: $868 per month
 · Return on the $80,000 investment: 10.4% annually for five years.*
 * Includes both the principal paid down on the new, shorter-term loan and the monthly savings in loan payments.

Source: Jack Guttentag, www.mtgprofessor.com

Anthony Hsieh, chief executive officer and founder of loan broker LoanDepot.com, says that because home values have fallen so much, many people have to bring cash to qualify for refinancing these days. "Surprisingly to us, they are willing to do it," he says.

Skeptics question why people would throw more cash at a depreciated asset. But according to Prof. Mayer, the Columbia economist, the decision centers on whether the homeowner thinks he or she can find better ways to invest the cash being sunk into housing.

During most of the 1980s and 1990s, the answer was unquestionably yes. The stock market was rising, and investing in housing seemed comparatively dull. During those years, personal-finance experts even argued against paying "points" on a mortgage to reduce the interest rate. With banks lending at 7% to 8% throughout much of the period and the stock market returning more, it was foolish to devote more cash to housing than was necessary.

But since 2000, stocks have essentially gone nowhere. Meanwhile, the recent recession gave new currency to the idea of living as close to debt-free as possible, a process economists call deleveraging. "Today, people are a lot more conservative," Mr. Hsieh says.

Larry Schuck, 60, a semiretired security consultant, is among them. Mr. Schuck is opting to pay money out of his own pocket to refinance into a shorter-term mortgage. The goal: to reduce his total interest payments over the life of the loan.

He and his wife, Mary, 56, like their Winston, Ga., community and plan to stay there. They bought their home in December 2008 for $246,000, and it appraised recently at $228,000.

Mr. Schuck this month paid $29,000 in principal and closing costs to refinance his 30-year fixed-rate mortgage, which carried a 5.87% interest rate, into a 20-year loan at 4.5%. The deal will save him more than $95,000 in interest charges over the life of the loan, he estimates, while lowering his monthly payment by $147. In investment terms, the deal produces a return of about 10% a year for five years, which about as long as most people keep a mortgage, according to Paul Habibi, professor of real estate at the UCLA Anderson School of Business.

"You are lucky if you get 1% interest in your savings account," he says. The average savings account pays interest of 0.21%, says Greg McBride of Bankrate.com.

Economist Laurence Kotlikoff, a professor at Boston University and president of Economic Security Planning, a financial-planning software company, calculates that by refinancing the mortgage to a lower rate and a shorter term, Mr. Schuck and his wife were able to increase the amount of money they can spend during retirement by about 3% each year. The short-term cost: a four-year period of belt-tightening resulting from their forgoing the ability to spend the $29,000 they paid for the new loan.

"Even though things will be a little bit tight for the next four years, on balance it was a good move," Prof. Kotlikoff says.

For scores of other homeowners, summoning the courage to take a loss now could lead to gains later on.

"People who have suffered losses and would like to refinance hesitate to do so because they have to acknowledge this loss and come up with money to get a decent rate," Prof. Kotlikoff says. "But it might still be in their interest to do it."

Housing Market Holds Its Own: Life after the Tax Credit

2010-07-20T09:01:00.000-07:00

The tax credit brought a lot of buyers out last fall and again this spring, which gave a real shot in the arm to real estate.
RISMedia.com
While that heightened volume cannot be sustained, home sales and prices still remain higher than last year due to interest rates at historically low levels and the lowest home prices seen in years. A monthly survey of 54 metropolitan areas reveals that closed transactions in June 2010 were 5.6% higher and prices 3.5% higher than during June 2009.

“There’s no question, the tax credit has had a significant impact on this market,” said RE/MAX CEO Margaret Kelly. “No one can predict the future, and we may still see a slight pull back, but for right now it appears that housing is holding its own, hopefully on the road to a sustainable recovery.”

Transactions – Year-Over-Year Change
Buyers trying to make the closing deadline for the tax credit may have pushed sales higher for June with a 7.2% rise from May in addition to the 5.6% gain over last year. Sales were especially strong in the Northeast—Boston and Hartford saw 23% more sales than last year, Providence was up 21% and Philadelphia was higher by 27%. An equal number of metro areas, 27, had increases and decreases in closed transactions year over year.

Median Sales Price – Year-Over-Year Change
Responding to demand, home prices appear to be stabilizing and slowly inching higher. In the survey’s 54 metro areas, the year-over-year change in median sales price was 3.5%, with 27 metros headed up, 25 lower and 2 unchanged. The weighted average of all median sales prices for June was $211, 530.

California experienced the most dramatic increase in prices—median prices in San Francisco rose almost 18% higher than June 2009 levels, Los Angeles prices were 10% higher and San Diego prices were 9% above the same time last year.

Days on Market – Average of 54 Metro Areas
Besides price, most home owners are concerned about how long it will take to sell their home. For the homes that sold in the survey’s 54 metro areas, the average number of days it took from listing to signed contract was 81, slightly lower than the 83 day average in May and the 89 day average in June 2009.

Months Supply of Inventory – Average of 54 Metro Areas
The inventory of homes on the market in June rose slightly from May, up only 1.2%, but down 5.8% from June 2009. In the survey’s 54 cities, the average months supply of Inventory was 8.5 months, which remains unchanged from May. This means that at the current rate of sales, the average metro would eliminate its inventory of homes for sale in eight and a half months. However, a six month supply is considered a market balanced equally between buyers and sellers.

Need to Sell Your House? Cut the Price

2010-07-15T08:45:00.000-07:00

Home sellers learned a painful lesson in June: if you want to sell right now, lower the price.
By: Nick Timiraos: wsj.com
June marked the second month with no more $8,000 tax credit for home buyers, and some 24% of all listings that were on the market as of July 1 had experienced at least one price reduction, up from 9% of all listings one month earlier.

The average price drop—at 10%—was unchanged from one month earlier. But more markets saw bigger price reductions, led by Minneapolis, where 40% of listings had been reduced in price since listing. One third of all homes in Phoenix and Tucson, Ariz., have had their prices cut.

So when does it make sense to lower the price? They offer the following five tips:

 · Multiple listing agents have recommended listing the home at a lower price.
 · Feedback from the buyers’ agents suggests the home is overpriced.
 · The home isn’t getting any showings, even though it’s marketed well.
 · The home has sat on the market far longer than other homes in the area.
 · There’s been multiple offers, but they’ve all been significantly under the list
   price.

Indonesian Agrees to Buy Bel-Air Mansion for $50 Million

2010-07-07T11:29:00.000-07:00

An Indonesian buyer is in contract to buy a 48,000-square-foot mansion in Los Angeles' Bel-Air neighborhood for around $50 million.
By: JULIET CHUNG and CANDACE JACKSON: wsj.com
If the deal closes, it would set what brokers believe to be a new record for the biggest residential real-estate sale in the U.S. to date this year. The previous record is thought to be set by Texas energy executive Kelcy Warren's $46.5 million buy in Colorado in April.

The 10-bedroom, 14-bathroom mansion, most recently listed for $72 million and originally listed for $85 million, sits on 2.2 acres. It has a ballroom seating more than 200, a music room and a 20-car motor court. There's a pond for swans, seven fountains, a Turkish hammam and a columned movie theater with a mural on the ceiling. The seller is Los Angeles developer Mohamed Hadid, who constructed Ritz-Carlton hotels in the 1980s and now builds massive homes in L.A., Mexico and elsewhere. Mr. Hadid has said he spent $59 million to build the home for his own use.

The buyer's identity could not be learned.

Financial Manager Lists Ranch
Former American Skandia chief executive Wade Dokken has listed his ranch in Montana for $29.95 million.

The property was once slated to become an ecology-minded luxury residential development with a cooking school run by Bay Area chef Alice Waters, known for pioneering the locally sourced organic food movement.

As head of American Skandia, Mr. Dokken led one of the largest sellers of variable annuities, a popular investment in recent decades. His 6,795-acre property, known as Bullis Creek Ranch, is about six miles south of Livingston and 45 minutes from an entrance to Yellowstone Park. The Yellowstone River runs next to the property.

Although construction on the development was canceled due to the economy, the property includes a fully furnished five-bedroom, three-bath Engelmann spruce log home, built in 1997, and two guest houses. Mr. Dokken paid $23 million for 11,000 acres of land in the area in 2005, including this ranch. He now runs financial-services company WealthVest.

Talent Manager's Price Cut
Talent manager Sandy Gallin, who has represented artists like Barbra Streisand and Michael Jackson, has put his Bridgehampton, N.Y. estate back on the market for $26.9 million. The home was listed for $32 million until November of last year.

Mr. Gallin, who is known for his home restoration projects, assembled the 14-acre property in 2001, by purchasing three adjacent lots. It includes a 6,500-square-foot shingled house, built in 2003, with seven bedrooms. There's a cedar plank guest cottage with a bedroom, bath and outdoor shower, and a 1.5-acre pond, home to several swans, with a heated swimming pool along one side. The home is also available as a summer rental for the months of July and August for $500,000.

In Westside Los Angeles, a Rail Line Stirs a Revival

2010-07-06T11:58:00.000-07:00

Los Angeles - Slowly, mass transit is taking hold in a city synonymous with the car. By: TERRY PRISTIN: The New York Times
Now a light-rail line is finally coming to the affluent and traffic-choked Westside after years of local resistance, and at least some urban-style development is likely to follow.

Derek Jones, chief operating officer of the Legado Company, said a mixed-use development would appeal to people who worked downtown.

When the $2.4 billion Exposition Line, currently under construction on an unused freight rail right-of-way, is completed, by 2015, its electric cars will travel all the way to Santa Monica, a few blocks from the Pacific Ocean.

The 8.6-mile first phase of the project, now about two-thirds finished, extends west from the University of Southern California, at the eastern end, to Culver City, the home of Sony Studios. Concrete columns that will support elevated train stops have sprouted near the busiest intersections along the route. (The two stops closest to the university will be underground and then will link to existing rail lines downtown.)

In addition to removing tens of thousands of cars from the road — 64,000 daily riders by 2030, according to transit authorities — the 15.6-mile Expo Line is expected to spawn a variety of mixed-use real estate projects, as some of the city’s previous rail lines have done. A project including more than 500 units of housing and a 300-room W hotel was recently completed at Hollywood Boulevard and Vine Street, and a rental and retail complex was built at Wilshire Boulevard and Vermont Avenue in 2007.

The Expo route has spurred development proposals from major companies, including Hines, an international firm based in Houston, and Casden Properties, a leading Los Angeles developer of multifamily properties. In Santa Monica, Eileen P. Fogarty, the city planning director, said there was tremendous demand for any site that was located no more than a quarter-mile from a station. “People will comfortably walk a quarter of a mile,” she said.

Since entertainment companies began migrating in large numbers to the Westside in the mid-1990s, residents have complained bitterly about the ever-worsening gridlock. Yet many fear that high-density development near transit stops will result in even more congestion and spoil the low-rise character of their communities. “Some of this is cultural,” said Mark Ridley-Thomas, a Los Angeles County supervisor whose sprawling district includes the Expo Line. “Space is important to the way Angelenos live and breathe. But you can’t do a rail line absent a certain level of density.” The projects are needed to drive ridership and make the rail line cost-effective, he said.

Much of the new line will run south of the Santa Monica Freeway, several miles from the densest population centers. But rail transit is expected eventually to have “huge economic development implications” that would bring jobs and badly needed services to people living in the Crenshaw district, a largely African-American neighborhood around the midpoint of the Expo Line, Mr. Ridley-Thomas said. Another light-rail line is planned from Exposition Boulevard south to Los Angeles International Airport along Crenshaw Boulevard.

Many proposed projects along the Expo Line, at Crenshaw and elsewhere, are still in the early stages. But farther to the west, Samitaur, a Los Angeles developer of innovative buildings, has won approval and $11 million in subsidies to build a 12-story office tower near the Expo station at La Cienega and Jefferson Boulevards, just outside Culver City, said John E. Molloy, the project manager. The building, designed by Eric Owen Moss, will offer ceiling heights up to 24 feet and an entrance that will be flush with the elevated train station. Despite its proximity to the station, the project will include a separate parking structure for 700 cars.

Samitaur, which has yet to break ground on the project because of the slow real estate market, is attracting interest from the types of entertainment-related tenants that have been flocking to Culver City in search of cheaper rents than they can find in Santa Monica, Mr. Molloy said. Another local developer, Jonathan Genton, recently transformed a group of industrial buildings along La Cienega Boulevard, about a quarter-mile north of the Expo Line (and within Los Angeles city limits), into Blackwelder, a stylish office park for media and postproduction companies.

Prospective Blackwelder tenants have made a point of asking about bicycle storage, but so far they have not paid a premium to be within walking distance of the rail station, Mr. Genton said. Mr. Molloy expressed confidence, however, that once the train is operating, “being right next to the station will be a big draw.”

The size of the Samitaur project did not prove an obstacle because it was located in an industrial neighborhood, Mr. Molloy said.

But scale is a big issue at the next station to the west, at Venice and Robertson Boulevards, which is also in an industrial neighborhood but is under the jurisdiction of Culver City, not Los Angeles. (Culver City’s newly rejuvenated pedestrian-friendly downtown is about half a mile away and not on the Expo Line.) Culver City has spent $23 million to assemble a 4.5-acre site at the station, which it intends to sell to private developers. But the city has decided to limit building heights on the site to five stories and require that the project include a park and a transit plaza. “The key would be to make this fitting for the neighborhood,” said Sol Blumenfeld, the community development director.

Roger Moliere, chief of Real Property Management and Development for the Metropolitan Transportation Authority, said Culver City’s plan was not dense enough to be practical, given the cost of the land. “They are going to find out they are not talking about something that works as a private development,” he said.

Further along in the pipeline is a mixed-use development planned by the Legado Companies of Beverly Hills, which owns land cater-corner to Culver City’s site. Legado’s project will include 115 residential units and a public plaza and will have an open look, “bringing eyes in from the street,” said Derek Jones, the chief operating officer. Mr. Jones said the development would appeal to people who worked in downtown Los Angeles but did not find it “green enough or clean enough” to live in.

For developers, it is the second phase of the Expo Line, which was approved in February but was not yet under way, that provides the juiciest opportunities. Santa Monica is reviewing a variety of proposals, including one from Hines, which owns a Papermate warehouse on Olympic Boulevard across from the 26th Street station and is seeking to build 970,000 square feet of office space and residential units on 7.5 acres. The city also owns land at Expo stations but has not yet decided what to do with it.

In Santa Monica, new development along the Expo Line will be limited to six or seven stories, Ms. Fogarty said. To compensate for the height, the city has tightened height restrictions in areas that are closer to the residential neighborhoods.

Too much bulk has also been an issue in West Los Angeles, where Casden Properties is seeking approval to replace a cement plant adjacent to the Sepulveda Boulevard station with one of the biggest developments on the Westside. The project would consist of four eight-story buildings containing 538 residential units and about 266,800 square feet of retail space, including a Target store. Despite opposition from some neighborhood residents, Alan I. Casden, the chief executive, said greater density was inevitable.

“Los Angeles is going to go vertical,” he said. “That’s the only way you can go. There’s no more land.”

California Banks Pitch `Budget-Impasse Loans' to State Workers

2010-07-06T10:57:00.000-07:00

Banks and credit unions will offer zero-interest loans and other assistance to the 200,000 California government employees who may see their pay reduced to the minimum wage as a result of the state’s budget stalemate.
By: Christopher Palmeri and Michael B. Marois: Bloomberg.com
The Golden 1 Credit Union, a lender that caters to state workers, will offer zero-interest loans to customers whose pay falls because of the stalled spending plan, according to a July 2 statement.
About 1,100 legislative aides and gubernatorial appointees whose pay was stopped on July 1 already have access to so-called budget-impasse loans, said Donna A. Bland, the company’s chief financial officer.

“We’re trying to show our support for our state-employee members,” Bland said in a telephone interview. Golden 1, based in Sacramento, the state capital, describes itself as the sixth- largest credit union in the nation with about $7 billion in assets.

Bank of America Corp., the biggest U.S. lender by assets, will waive fees and offer emergency credit-line increases and mortgage-payment help to customers whose California pay is cut, said Colleen Haggerty, a spokeswoman for the company, based in Charlotte, North Carolina.

“We could survive off our savings for a little while, but it would be a real burden on us,” said Chava Yniquez, a 49- year-old technician in the Senate printing office who has used Golden 1 budget-impasse loans in the past. “It’s a lifeline.”

California’s Republican governor, Arnold Schwarzenegger, and its Democrat-led Legislature are at odds over how to close a $19.1 billion deficit for the fiscal year that began July 1. The state has passed its budget by the start of the fiscal year only 10 times in the past 34 years.

Court Backs Governor

The Schwarzenegger administration won a Sacramento state appellate court decision on July 2 upholding an order compelling state Controller John Chiang to reduce employee pay until a budget is passed. That order affects about 200,000 state employees who work under civil-service contracts, according to the state Personnel Administration Department.

Reducing workers’ wages can’t be done until the state overhauls its payroll system, Chiang, a Democrat, said July 2 in a statement. He is running for re-election in November.

“I will move quickly to ask the courts to definitively resolve the issue of whether our current payroll system is capable of complying with the minimum-wage order,” he said.

Budget-impasse loans have been around since at least 1992, when Golden 1 first offered them. The credit union made the loans available to about 850 customers during the last budget stalemate, in 2008, Bland said.

55,000 Potential Borrowers

Golden 1 said as many as 55,000 of its customers may participate this year, if state-employee pay is cut to the federal minimum wage, currently $7.25 an hour. Flyers that tout the program are being distributed in its 84 offices, carrying a message that says “balancing the state’s budget doesn’t have to affect your own.”

Other institutions offering similar loans include San Francisco-based Wells Fargo & Co., the fourth-largest U.S. bank by deposits, and Sacramento’s Schools Financial Credit Union. The zero-interest loans are available only to current customers whose pay is deposited directly into their accounts, said Nathan Schmidt, vice president of marketing at Schools.

“It’s the philosophy of credit unions helping people,” Schmidt said in a telephone interview. “Eventually the state will pass a budget.”

Impasse lending isn’t limited to the Golden State. PSECU, a credit union based in Harrisburg, Pennsylvania, offered state workers the zero percent loans last year, according to its website. This year, the Pennsylvania Legislature passed its budget on time for the first time in eight years.

“California has a whole lot of experience in this, year in and year out,” Patrick Keefe, a spokesman for the Credit Union National Association in Washington, said in a telephone interview.

Paul Allen's Malibu

2010-07-02T11:19:00.000-07:00

Microsoft Corp. co-founder Paul Allen has bought a contemporary oceanfront home in Malibu, Calif., through a corporation, for more than $25 million.
By: JULIET CHUNG: wsj.com
The modular, white stucco-and-glass house is on Carbon Beach, the "Billionaire's Beach" where Hollywood moguls David Geffen and Jeffrey Katzenberg are owners. The roughly 5,800-square-foot home, listed for $29.5 million, has five bedrooms, a deck with a pool, a gym and a screening room, according to the listing.

Mr. Allen, who started Microsoft in 1975 with his childhood friend Bill Gates, owns the NFL's Seattle Seahawks and the NBA's Portland Trail Blazers, three yachts and significant real-estate holdings in Seattle. A spokesman for Mr. Allen said he has given away more than $1 billion and declined to comment on the house.

Kennedy Listing
Victoria Reggie Kennedy, the widow of Sen. Edward M. Kennedy, formally put their Washington home on the market last week for just under $8 million, after quietly shopping it around.

The couple paid $2.78 million for the home in 1998. "It's full of light, and there are a lot of fireplaces, which I love," Sen. Kennedy told Architectural Digest in 1999. The Massachusetts Democrat, who spent 47 years in the U.S. Senate, died in August at age 77 after battling brain cancer.

The six-bedroom, Colonial-style home is in Kalorama in the city's northwest section. The 8,900-square-foot home has a dining room that seats up to 50, a library, an office with a fireplace and an indoor exercise pool. All six bedrooms have en-suite baths and walk-in closets; the master suite also has a study and balconies looking over the home's gardens. The home has a sunroom, terraces and a wine cellar.

Bayfront, $27 Million
A bayfront mansion in Newport Beach, Calif., listed in 2008 at $38 million, has sold for $27 million, according to court records.

The 10-bedroom home is on Harbor Island, where Pimco's Bill Gross last year paid $23 million for a house, then tore it down. The seller in the recent transaction was DAKS, a limited-liability company majority-owned by apparel executive Arnold Simon, which paid $14 million in 2001 for the home. The 12,600-square-foot house has a subterranean garage for eight cars and more than 300 feet of bay frontage.

Mortgage Rates on 30-Year U.S. Loans Fall to Record

2010-07-01T11:04:00.000-07:00

Mortgage rates on 30-year U.S. loans slid to a record low for the second straight week, lowering borrowing costs for homebuyers as demand slumps.
By: Prashant Gopal: Bloomberg.com
Rates for 30-year fixed loans sank to 4.58 percent in the week ended today from 4.69 percent last week, Freddie Mac said in a statement. The average 15-year rate fell to 4.04 percent, also a new low, the McLean, Virginia-based company said.

The decline in mortgage rates, fueled by investor demand for government-supported bonds tied to housing loans, has failed to lift U.S. home sales after the April 30 end of a federal tax credit for buyers. Purchases are more dependent on consumer confidence and employment than rates, said Cameron Findlay, chief economist at Lendingtree.com in Irvine, California.

The housing market “is not a rate discussion these days,” he said. “If you have an improvement in jobs, people have more disposable income and that will improve home sales.”

Confidence among U.S. consumers fell in June more than forecast as Americans became distressed over the outlook for jobs. The Conference Board’s confidence index declined to 52.9 last month from a revised 62.7 in May, according to a June 29 report. The unemployment rate was at 9.7 percent in May, compared with a 26-year high of 10.1 percent in October.

Home Sales Drop

The number of contracts to buy previously owned homes plunged 30 percent in May from the prior month, the biggest decline in records dating to 2001, the National Association of Realtors said today. The report followed Commerce Department data last week showing a 33 percent slide in new home purchases.

The tax credit, worth as much as $8,000, helped fuel a rebound in demand last year and was extended and expanded in November. The credit required buyers to sign contracts by the end of April and close by June 30. The House of Representatives voted this week to push the deadline for closing to Sept. 30.

Mortgage rates have been declining since May as concern that a European debt crisis may spread pushed investors to the safety of Treasuries and government-supported bonds tied to home loans. Yields on Fannie Mae and Freddie Mac mortgage securities have fallen to the lowest level in more than a year.

The Mortgage Bankers Association’s index of U.S. mortgage applications jumped 8.8 percent for the week ended June 25. The Washington group’s refinancing gauge climbed 13 percent to the highest level since May 2009, and purchases declined 3.3 percent to the second-lowest level since 1997.

Foreclosed Homes Sell at 27% Discount as Supply Grows

2010-06-30T11:09:00.000-07:00

Homes in the foreclosure process sold at an average 27 percent discount in the first quarter as almost a third of all U.S. transactions involved properties in some stage of mortgage distress, according to RealtyTrac Inc.
By: Dan Levy: Bloomberg.com
A total of 232,959 homes sold in the period had received a default or auction notice or were seized by banks, RealtyTrac said in a report today. That’s down 14 percent from the fourth quarter and 33 percent from the peak a year earlier, the company said. The average price of a distressed property was $171,971, according to the Irvine, California-based data seller.

“The discount will probably stay between 25 percent and 30 percent as lenders carefully manage the number of new foreclosure actions in order to avoid flooding the market,” Rick Sharga, RealtyTrac’s senior vice president for marketing, said in an interview.

“We’re clearly creating more properties that will be sold at distressed prices than the market is absorbing,” Sharga said. There were more than 250,000 new bank seizures in the first quarter.

The discount reflects the average sales price of homes in the foreclosure process compared with the average sales price of properties not in distress. About 31 percent of all U.S. sales in the quarter were of homes in some stage of foreclosure, RealtyTrac said.

Rising Seizures

Home foreclosures set a record for the second straight month in May, with increases in every state, as lenders stepped up property seizures, RealtyTrac said earlier this month. Bank repossessions climbed 44 percent from a year earlier and will probably set a record in the second quarter, the company said.

Distressed sales totaled more than 1.2 million last year, a 25 percent increase from 2008 and a more than four-fold rise from 2007, according to RealtyTrac.

Such transactions accounted for 29 percent of all sales last year, up from 23 percent in 2008 and 6 percent in 2007. The average foreclosure discount was 25 percent in 2009, 22 percent in 2008 and 26 percent in 2007.

A “normal” market would show foreclosures accounting for less than 2 percent of sales, Sharga said.

Bank-owned properties sold for an average 34 percent discount in the first quarter, up from 32 percent both in the previous quarter and a year earlier. Such properties accounted for 19 percent of all U.S. home sales, up from almost 16 percent in the fourth quarter and down from 21 percent in the first quarter of 2009, RealtyTrac data show.

Short Sales

Properties in default or scheduled for auction sold for an average discount of almost 15 percent, up from almost 14 percent in the previous quarter and down from 16 percent a year earlier. These homes are often sold in short sales, where lenders accept less than the outstanding loan amount for the property, RealtyTrac said. Sales of properties either in default or headed for auction accounted for 12 percent of all sales.

The average price was $154,740 for bank-owned properties and $199,950 for homes in default or scheduled for auction, RealtyTrac said.

“The competing forces will be bank-owned properties and short sales,” Sharga said. “The more short sales, the lower the average discount is likely to be.”

Nevada had the highest proportion of distressed sales of any U.S. state, with 64 percent of all transactions involving properties in mortgage distress.

California ranked second, with such sales accounting for 51 percent of all sales and Arizona was third at 50 percent.

Discounts on distressed homes were highest in Ohio, Kentucky and Illinois, where they sold for an average of at least 39 percent less than non-foreclosures.

RealtyTrac sells default data from more than 2,200 counties representing 90 percent of the U.S.

The End Is Near

2010-06-21T12:20:00.000-07:00

And that’s a good thing – Macerich executives wondered if they’d ever complete the remodel of Santa Monica Place.
By: By Alexa Hyland: labusinessjournal.com
Macerich Co. traveled a long, hard road to renovate Santa Monica Place. But the mall is finally set to reopen in August.

Santa Monica Place is swarming with hundreds of plywood-toting construction workers feverishly working to complete the shopping mall for its August reopening.

And executives at Macerich Co., which owns the shopping mall, can’t wait for the dust to settle. That’s because it’s been a long – a very long – road to renovating the mall.

In fact, Macerich executives said there were moments when it seemed as if the project would never get done.

“You just didn’t know if there was a light at the end of the tunnel,” said Tracey Gotsis, executive vice president of marketing and development for Macerich. “But I can say it was well worth it all.”

The company first considered mall renovation plans in 2001. It spent several years on two plans – the last of which was so big it drew community outrage. So Macerich unveiled a scaled-down third proposal, which called for opening up the enclosed mall, removing its roof, and essentially making Santa Monica Place an extension of the Third Street Promenade next door. That plan received approval in late 2007.

But when construction finally started on the $265 million renovation in April 2008, the economy soon collapsed and consumer spending declined. That slowed things down again. The projected 2009 opening was put off.

The company found itself trying to pre-lease its 550,000 square feet of retail and restaurant space during a recession that has been hard on retailers.

“Timing wasn’t on our side,” Gotsis said.

Macerich finalized lease deals about a year later than planned. But the company has signed leases or received commitments for 70 of the more than 80 spaces at the mall. Retailers include Kitson L.A., Nike, Louis Vuitton and 7 For All Mankind.

Doug Roscoe, who became property manager of Santa Monica Place in 2008, said Macerich expects the reopening to make a big splash. But the real picture will become clear when the excitement dies down.

“After it is open a full year, we can start to get comparable sales and analyze were we are and what kind of benchmarks we’ve reached,” he said.

Santa Monica Place’s first year back in business still could be bumpy. Although the economy generally has improved, national retail sales dropped in May by the largest amount in eight months, suggesting that consumers still may not be in the mood to drop big bucks.

John Fransen, president of Newport Beach retail consultancy Fransen Co. Inc., said Santa Monica Place could fare better than other shopping malls because it will draw Westside residents tired of driving to less convenient shopping destinations.

“I would be ready for some impressive results,” he said.

Executives are enthused. At a conference held by the National Association of Real Estate Investment Trusts earlier this month, Macerich Chief Executive Art Coppola said the company is expecting Santa Monica Place to generate about $1,000 per square foot in sales. He said the company’s top 50 shopping malls generate about $500 per square foot.

“We think it will be one of the great centers in the United States,” Coppola said. “And one of the most exciting centers that will open for a several-year period.”

Macerich, the nation’s third largest mall owner and operator, purchased the Frank Gehry-designed Santa Monica Place in 1999 for $130 million. At the time, the mall had fallen out of favor with shoppers, too many of whom were only passing through on their way to the popular Third Street Promenade.

Soon after the acquisition, Macerich executives began thinking up ways to bring back the mall’s luster.

In its initial concept, Macerich wanted to extend Third Street Promenade through the building of the enclosed mall, construct the parking garages underground and add 14-story towers with residential and office space. But executives nixed the proposal because they didn’t think the design would bring foot traffic to the second-floor shops.

Macerich introduced a second and even more ambitious proposal in 2004, which called for tearing down the mall and replacing it with retail space, three 21-story residential towers, an office building, three underground parking levels and park space. But the plan sparked fierce opposition from Santa Monica residents and some city officials who were outraged by the highly dense design.

Kathleen Rawson, chief executive of the Bayside District Corp., a public-private management company that oversees downtown Santa Monica, said Macerich realized the mixed-use project was too much.

“I think the community spoke to Macerich directly about the plan,” Rawson said. “They had tried to be innovative. Santa Monica wasn’t ready for that kind of approach.”

Gotsis admits that Macerich misjudged the psychology of Santa Monica residents, who’ve historically opposed large-scale projects.

“So we had to take a breather and put the site plans away,” she said.

At the same time, Macerich had to wait for Federated Department Stores, which had acquired May Department Stores Co., to determine whether it would close Robinsons-May, one of two anchor tenants. That store was shuttered, which allowed Macerich to purchase the building in May 2006 and later lease the space to Nordstrom Inc.

Through 2007, Macerich was working with community members and city officials on a third plan.

“That was a year of reconciliation with the community,” Gotsis said. “We got feedback on what we could do.”

Macerich teamed up with Jerde Partnership, a Venice architecture firm, to design a scaled-down plan. The proposal called for removing the rooftop to create an open-air dining deck and connecting the mall to the Third Street Promenade. There was to be no residential units and no substantial office space, and the retail space, at 550,000 square feet, was about 20,000 square feet less than the old mall.

Community members and city officials endorsed the plans, and the California Coastal Commission and Santa Monica’s Architectural Review Board gave the project approval in December 2007.

Macerich also had to overcome resistance from restaurant owners, who were wary about setting up shop on the third-floor dining veranda. Although the veranda has ocean views, it is away from foot traffic.

Restaurateurs also were concerned by plans for seven upscale restaurants on the deck – more competition than usual for such a mall. What’s more, there has been a decline in the restaurant industry as consumers cut back spending.

Roundtable discussions

But Macerich assured restaurateurs that the Santa Monica market could support them. It held some roundtable discussions with them and helped develop a shared marketing plan. Macerich also pledged to hold regular events on the third floor to drive traffic.

So far, Macerich has leased six of the seven restaurant spaces.

“A lot of sweat equity was put into the mix and business planning with each individual restaurateur,” Gotsis said.

Macerich is now working to secure leases for the Market, on the third floor with the restaurants, set to open in late 2010. The section is comparable to San Francisco’s Ferry Building, which includes gourmet food stores and cafes.

Finally, Macerich now has to do some marketing to let consumers know that the mall soon will be open for business again.

“That’s a big challenge for us, to get out there and say Santa Monica Place is now open and it’s new and different and a place to hang out,” she said. “It will take us a year to get that new vibe out there.”

One Palace, Never Used

2010-06-21T12:09:00.000-07:00

Now shy of glitz, owner to sell mansion.
By: By Daniel Miller: labusinessjournal.com
C. Frederick Wehba Sr. spent $65 million to build a palatial home on Sunset Boulevard. Uncomfortable with the conspicuous show of extravagance, he wants to sell before he ever moves in.

Businessman C. Frederick Wehba Sr. has spent fours years and $65 million building perhaps the most conspicuous mega mansion in Los Angeles County.

And now that it’s almost finished, he doesn’t want to live there.

Wehba, founder of Century City real estate company Bentley Forbes Group LLC, earlier this month put his Beverly Hills house on the market for $68.5 million. At that price, it would be the biggest sale in that city’s history and one of the biggest ever for a home in the Los Angeles area.

The businessman said he and his wife, Suzi, have decided to sell the 36,000-square-foot home because such a prominent display of wealth no longer made sense during the protracted economic slump. The couple also planned to use the home for charity and political fundraising events, but the recession has put a damper on that sort of entertaining.

The couple is active at Bel Air Presbyterian Church, a large evangelical church on Mulholland Drive, as well as four others. The home was built with a large music room to accommodate church events; there is a relief of a cross above the front door.

“We were never trying to flaunt, but it looks like it now,” said Wehba, 63. “We were trying to have it as a house that is open for fundraising for our church so that people can enjoy it. Maybe times will come back like that, but times are recessionary.”

The nine-bedroom mansion at 9577 Sunset Blvd. was supposed to be completed last year but is still under construction; work is expected to be finished in the next 45 days. Unlike many mansions in Beverly Hills, hidden behind hedge walls, the Wehbas’ home opens up to Sunset on two acres between Rexford and Alpine drives, so passers-by have been able to chart its progress since construction began in late 2006.

These days, a crew of 40 to 50 workers is putting the finishing touches on the mansion, which is clad in Portuguese limestone and includes French gardens, a pool pavilion and tennis court. While many parts of the house are complete, some fixtures are still being installed, including a hand-carved marble fireplace in the library, an 11-foot by 9-foot crystal chandelier in the two-story circular foyer and 24-karat, gold-plated front door knobs that weigh 15 pounds apiece.

The Wehba mansion hit the market June 7, just days before news broke that businessman Mohamed Hadid had sold his 48,000-square-foot Bel Air estate for more than $49 million. That sale is believed to be the highest price for a home in the United States in 2010.

The Wehba residence joins a handful of other high-priced mega mansions on the market, including the Holmby Hills estate of Candy Spelling, priced at $150 million. There has already been interest from buyers in Asia and the Middle East.

The pool of prospective purchasers may be smaller than it was before the recession, but she said there are still plenty of buyers who could afford the asking price.

“This certain group of people is not really impacted by that,” .

The home

The French classical design of the home was inspired by Versailles, which the Wehbas visited 20 years ago.

The home was enlarged several times during construction and ultimately became something the couple no longer wanted or needed, Wehba said.

It was designed by architect Brian Biglin of Biglin Architectural Group in Beverly Hills, who refined an American beaux-arts design of a previous architect. As the home got bigger and more ornate, the cost ballooned from about $40 million to $65 million.

“We thought it would be a smaller house and it became, ‘Well, OK, why not?’” said Wehba, chairman of Bentley Forbes, a large, privately owned commercial real estate investment firm. “We kept on adding and adding and it got kind of out of hand. It’s just so big right now. It’s more than we really wanted. The times have changed a bit.”

The Wehbas bought the land on Sunset in 2004 for about $6.7 million. The lot is the larger piece of a bisected parcel once owned by Saudi Sheik Mohammed al Fassi. The mansion drew headlines and became a tourist attraction in the late 1970s when the sheik painted its nude classical statues in flesh tones. The mansion burned in 1980 and was demolished in 1985. The smaller, 1.6-acre portion of the sheik’s former property is also the site of a new mansion. That home, at 901 N. Alpine Drive, has also been under construction for several years and remains unfinished.

Eric Johnson, senior project manager for Finton Construction, which is building the Wehba home, said the project has in some ways been more akin to a commercial development. At times, the construction crew has numbered 100 people, and scheduling is organized using computer software; commercial-level contractors have been employed for some work. “It’s a ton of fun. It’s rewarding,” he said.

Even in the competitive playing field of opulent mansions, the home’s almost Old World craftsmanship sets it apart. The exterior is made of hand-carved limestone quarried in Portugal and sent to China for finishing. (Only about a half-dozen Los Angeles homes feature exteriors of hand-cut stone, including the 52,000-square-foot Spelling mansion.) The doorknobs were fabricated at the same French workshop that has maintained Versailles. A relief above the front doorway is so detailed that toenails of the angels in the carving can be clearly seen.

Other special touches include 24-karat, gold-plated door and window hardware throughout the house; an 800-square-foot master bedroom with a ceiling slot for a 60-inch descending television; and massive his-and-her master bathrooms clad in exotic stonework.

Wehba said he and his wife still plan to decorate the home with custom-built pieces and antiques from France that they’ve already purchased, which at least will make it more attractive when shown to potential buyers.

But Wehba admitted that some of the home’s flourishes were chosen during the housing boom “back when this concept was a little bit more accepted.”

The market

Wehba’s company, which owns marquee properties such as the infamous Watergate complex and the tallest office building in Atlanta, has not been immune from the bust. He acknowledged the last two and a half years have been “trying” but strongly denied financial troubles prompted the sale of the home.

And even if financial issues are in play, the sale wouldn’t do much to resolve them. If the home sells at its asking price, the profit will be slim – about $2.5 million, Wehba said, chuckling. “And we will probably pay it to the brokers.”

Some wonder if there is a market for the home.

First there is the attention-grabbing ornate design, which a prominent real estate broker termed “Fairfax rococo” in a 2008 Business Journal story about the property. Then there’s the location – visible from busy Sunset – which could be a turn-off for the ultra-rich who often prefer the security of isolated compounds.

“The high-end people want privacy, they don’t want a statement or exposure,”

A deal at list price would be a record for Beverly Hills but not for Los Angeles County. That was set when former Global Crossing Ltd. Chairman Gary Winnick bought an eight-acre Bel Air estate for about $95 million in 2000.

“Normally in this price range you don’t get multiple offers – but it could happen,”

It isn’t even the only house the Wehbas are trying to sell. They have also listed for sale the 10,000-square-foot Beverly Hills home that they’ve lived in for more than a decade, though Wehba said they don’t plan to leave Los Angeles. Instead, if they sell one home, the plan is to live in the other – though the goal is to unload the Sunset mansion.

He said he’d feel a tinge of sadness when the home sells, though he noted that he and his wife have built about a dozen homes before. This one may not be the last.

“We will probably do it again.”

Attention to Detail

The Wehbas’ 36,000-square-foot, nine-bedroom residence includes detailing and features fit for the Palace of Versailles. Among the appointments:

• All door and window hardware is plated in 24-karat gold. The front door knobs are intricately carved and weigh 15 pounds. One shower has a gold-plated fixture that weighs 35 pounds.

• Many of the marble columns are topped with capitals gilded in gold; one room includes recessed columns with capitals gilded in gold and platinum.

• Each room features different types of exotic stonework. A bathroom suite includes a large

shower made out of green onyx, while another room features red and purple Calacatta Viola marble.

• A 12-foot-tall bronze sculpture of angels, cherubs and minstrels is the centerpiece of a fountain that fronts the mansion.

• The home’s electrical and security systems are connected by about 30 miles of wiring. The 800-square-foot master bedroom has a slot in the ceiling from which a 60-inch television will descend.

Hill and McGraw Sell Home for $9.55 Million

2010-06-18T11:44:00.000-07:00

Singers Faith Hill and Tim McGraw have sold their Beverly Hills, Calif., home for $9.55 million. The home, in Beverly Park, was originally listed in 2008 for $14.8 million, and later cut to $10.8 million.
By: CANDACE JACKSON: wsj.com
The 11,000-square-foot house, on three acres, has six bedrooms and eight baths, and expansive views of downtown Los Angeles. The Mediterranean-style home has a large master suite with his and hers bathrooms and comes with a fitness center, gardens and a pool.

Ms. Hill's hit pop and country songs include "This Kiss." Her husband has sold more than 40 million albums, and his hits include "I Like It, I Love It." Both have also appeared in films.

Dennis Miller Lists
Comedian and television-radio personality Dennis Miller has listed his Montecito, Calif., estate for $17.5 million.

The home was designed in 1895 by Stanford White, who designed the Washington Square Arch in New York. The Millers' 3.76-acre property includes a 10,000-square-foot main house with nine bedrooms and a second, smaller house on the property, built in 1917, with two more bedrooms.

The estate, a five-minute drive from the ocean, includes a pool, a tree house, a sunken trampoline and a tennis court. Mr. Miller and his wife bought the main house in 1993, according to public records. It was restored in 1994 and renovated again in 2002. Mr. Miller hosts a three-hour daily radio show and appears as a commentator on Fox News.

James Patterson Sells
Thriller writer James Patterson has sold his Palm Beach, Fla., home for $10.3 million to Robert Greenhill, Greenwich, Conn.-based founder and chairman of Greenhill & Co., an investment banking advisory firm. Mr. Patterson originally listed the property for $14.95 million in November and bought it for $5.2 million in 1999.

The nearly 11,000-square-foot colonial plantation-style house has five bedrooms and 7½ baths. The house has a heated pool and a boat dock, along with 136 feet of waterfront on the Intercoastal Waterway. The 1955 home was expanded in 1993.

Mr. Patterson's more than 60 novels have sold 200 million copies world-wide; "Private," which he wrote with Maxine Paetro, is to be released later this month. Mr. Patterson says he decided to sell because he found a new place "with massive windows on the ocean," which he bought last summer for $17.45 million.

Fed Chief Cautiously Optimistic about Economy

2010-06-14T05:24:00.000-07:00

The U.S. economy is in a moderate recovery and should continue growing through next year, but the unemployment rate is expected to remain higher than usual, and it will take “a significant amount of time” to replace the jobs that have been lost in the recession, Federal Reserve Chairman Ben Bernanke said recently.
By: Kevin G. Hall: RISMEDIA
In testimony before the House Budget Committee, Bernanke offered a mix of optimism and reality check. He pointed to numerous signs of improvement in the economy, but cautioned that improvement in the vital housing sector has been shallow and remains vulnerable.

The Fed’s release of the Beige Book, a survey of economic conditions conducted by its district banks, later confirmed Bernanke’s views. The survey found all 12 Fed districts reporting economic growth, the first time that’s happened since a deep recession began in December 2007.
Private forecasters shared Bernanke’s growing optimism.

Mark Zandi, the chief economist for Moody’s Analytics, recently released a report on economic conditions in the nation’s largest metropolitan areas that was encouraging.

“The economic expansion is broadening out across the country, with nearly two-thirds of the nation’s metro areas now out of recession,” Zandi told McClatchy Newspapers. “The strongest areas are mostly in the South and Midwest, as the economy is benefiting from the strong turn in manufacturing activity, a solid farm economy and more stable housing markets.”

In another positive sign, the Labor Department reported that job openings leapt in April to their highest level in 16 months, signaling that the private sector is ripe for a return to hiring.

“We’re still expecting that the job machine gets cranked up and pushes the unemployment rate a few tenths of a percentage point lower by the end of the year,” said Chris Varvares, the president of Macroeconomic Advisers LLC, the influential St. Louis forecaster. The firm expects 3.7% growth this year and unemployment, now at 9.7%, to dip to the low 8% range next year.

The Fed expects the economy to grow in the range of 3.5% this year, Bernanke said, and faster next year as stimulus spending by the government gives way to business and consumer demand for goods and services.

“This pace of growth, were it to be realized, would probably be associated with only a slow reduction in the unemployment rate over time. In this environment, inflation is likely to remain subdued,” Bernanke said. He later added, “In all likelihood, however, a significant amount of time will be required to restore the nearly 8.5 million jobs that were lost over 2008 and 2009.”

The economy has been growing steadily, and the nation has added jobs in five of the last six months. There also have been less publicized improvements. “Real consumer spending has risen at an annual rate of nearly 3½% so far this year, with particular strength in the highly cyclical category of durable goods,” Bernanke testified. “Consumer spending is likely to increase at a moderate pace going forward, supported by a gradual pickup in employment and income, greater consumer confidence and some improvement in credit conditions.” That’s all likely to increase the demand for goods and services, fueling further economic growth in what economists call a virtuous cycle, he suggested.

“Looking forward, investment in new equipment and software is expected to be supported by healthy corporate balance sheets, relatively low costs of financing of new projects, increased confidence in the durability of the recovery, and the need of many businesses to replace aging equipment and expand capacity as sales prospects brighten,” Bernanke said. “More generally, U.S. manufacturing output, which has benefited from strong export demand, rose at an annual rate of 9% over the first four months of the year.”

For all the positive signs, however, a dark cloud remains over the real estate and construction industries. The temporary boost from a home buyer tax credit is likely to fade now that the April 15 deadline for the program has passed.

The Fed chairman said that “looking through these temporary movements, underlying housing activity appears to have firmed only a little since mid-2009, with activity being weighed down, in part, by a large inventory of distressed or vacant existing houses and by the difficulties of many builders in obtaining credit.”

As if to cement that point, the Mortgage Bankers Association reported that mortgage applications fell last week to their lowest level since 1997. It was a clear sign that the expiration of tax credits reduced incentives for home sales.

Things aren’t much better in commercial real estate, Bernanke suggested, as spending on nonresidential buildings has been curtailed because of high vacancy rates, low property prices and difficulty in obtaining loans.

“Meanwhile, pressures on state and local budgets, though tempered somewhat by ongoing federal support, have led these governments to make further cuts in employment and construction spending,” he said.

Bernanke expressed confidence that the growing debt crisis in Europe won’t slow growth in the United States and pitch the economy back into recession, suggesting that events in Europe will have only a modest impact so long as the U.S. economy continues to grow.

Mounting government and private-sector debt in Europe has led to concerns of default in several European Union countries, and, given the swelling U.S. federal budget deficit, Bernanke warned lawmakers to get U.S. borrowing under control.

Once economic conditions have returned to normal, Congress and the president must address the structural problems in the nation’s health and welfare programs as baby boomers, the 75 million Americans born from 1946 to 1964, enter retirement and strain government programs, Bernanke said.

The Fed chief also took a victory lap of sorts. When House Budget Committee Chairman John Spratt, D-S.C., asked him whether he thought that unpopular government spending and bailout programs helped speed a turnaround, Bernanke said, “Yes, Mr. Chairman, I do.”

Jobs key to housing recovery

2010-06-14T05:21:00.000-07:00

The U.S. labor market will hold the key to a recovery in the hard-hit housing sector, according to a Harvard University report released on Monday.
By: Al Yoon; Editing by Leslie Adler: reuters.com
Record high foreclosures and a high jobless rate both pose significant challenges to the housing market, but some recovery in labor markets and record low mortgage rates could partly overcome other pressures, said the study from the Joint Center for Housing Studies at Harvard.

"If history is a guide, what happens with jobs will matter the most to the strength of the housing rebound," Eric Belsky, executive director of the center, said in a statement.

"Right now, economists expect the unemployment rate to stay high, but if employment growth surprises on the upside or downside, housing numbers could too."

The researchers noted that homeowners would feel poorer with real household wealth declining on a per household basis to $486,600 from $503,500 over the past 10 years, in "the lost decade." Foreclosures have reduced some mortgage debt but the level of debt relative to equity still started 2010 at a record 163 percent, the report said.

Despite falling home prices, loan modifications, and softening rents, the share of borrowers with severe housing cost burdens climbed, it said.

Wealthy homeowners seeking privacy are increasingly buying adjacent properties

2010-06-12T05:36:00.000-07:00

Compounds are the hottest commodity in L.A.'s high-end real estate market, brokers say.
By: By Lauren Beale: latimes.com
A huge retaining wall stretches along Nimes Road in Bel-Air, one of the Westside communities where wealthy homeowners seeking privacy are buying adjacent properties to create their own residential compounds.

In the Middle Ages, moats were the thing. More recently, the rich have taken refuge behind tall hedges, view-obscuring walls and guarded gates.

But today's super-wealthy, seeking even greater privacy, are increasingly buying adjacent properties as a buffer zone around their mansions. And that's made the compound the hottest commodity on L.A.'s high-end market, real estate brokers say.

On the Westside, the growing list of compound owners includes movie industry titan Terry Semel, financier and producer Tom Gores and corporate housing kingpin Howard Ruby, founder of Oakwood Worldwide.

Divorcing Dodgers owners Frank and Jamie McCourt maintain two compounds, one in Holmby Hills and another in Malibu.

"If you don't have a neighbor anymore, you create more privacy," said Kurt Rappaport, co-founder of Westside Estate Agency, with offices in Beverly Hills and Malibu.

Not that the "buffer" homes are vacant. Some house family, friends, guests or staff. But these aren't mother-in-law cottages or little guesthouses like the one Kato Kaelin holed up in at O.J. Simpson's old place in Brentwood: Think multimillion-dollar mansions — next door, behind or even a few doors down.

The adjoining properties may be used during major fundraisers or large-scale entertaining, Rappaport said, to create more parking or as a place to stage the catering during lavish events. Some buyers have been known to tear down well-known homes for more elbow room.

Property records don't fully capture the trend. Owners typically want the flexibility of selling the parcels individually, and so they usually don't apply for a lot merger to create a formal compound. Still, veteran real estate agents say high-end buyers are increasingly looking to snap up adjoining properties.

"We've never seen this much activity going on," said Drew Mandile, who works as a team with Brooke Knapp at Sotheby's International Realty, specializing in Bel-Air.

Mandile and other agents said there were perhaps two or three compounds in Bel-Air 10 years ago. Today, there are at least nine.

"A decade ago, the idea of combining properties was extremely rare," Rappaport said. "Now in the ultra high end it's the norm to strategize about amassing multiple properties."

In part, the trend reflects an economic reality: The super-rich are getting super-richer, said Elizabeth Currid, an assistant professor at USC who studies cultural shifts among the wealthy. The average net worth of the world's billionaires increased $500 million in the last year to $3.5 billion, Forbes magazine reported in March.

"In a class-conscious society, people find new ways to demonstrate their status," Currid said. "The middle class may be able to buy Louis Vuitton bags and nice holidays, but they can't buy two mansions in Bel-Air. This is a way the global elite differentiate themselves."

The trend hasn't extended to other high-end Southern California areas such as Manhattan Beach, the Palos Verdes Peninsula and coastal Orange and San Diego counties, according to agents who specialize in luxury properties.

"We don't have as much of that type of wealth down here," said Greg Noonan, a veteran Prudential California Realty agent in La Jolla.

Along with more wealth, L.A.'s Westside also tends to have smaller lots, since many of the great old estates in the area were subdivided decades ago.

But it's not just billionaires who are buying the block. Among the new generation of L.A. compound-dwellers are actors and actresses yearning to live a paparazzi-free lifestyle, including Melanie Griffith and Antonio Banderas; Brad Pitt and Angelina Jolie; and Ben Stiller.

Baseball's McCourts are embroiled in a high-profile divorce, but in happier times they were among L.A.'s most active compound builders. The Bostonians were quick to assemble nearly five acres in Holmby Hills after their arrival in 2004. They purchased a Palladian-style villa of 20,000 square feet for about $25 million as a main residence and picked up the 8,400-square-foot mini-mansion next door before the year was out for $6.5 million.

They repeated their double play in Malibu three years later with the purchase of a John Lautner-designed architectural trophy home for more than $27 million, according to the Multiple Listing Service. The 5,500-square-foot Segel residence (yes, for that price it comes with a name) has about 80 feet of beachfront. The couple gained an additional 66 feet of sand months later by buying a smaller house next door for $19 million.

Agents to the elite such as Rappaport don't rely on luck to make these purchases possible.

"I have clients whose neighbors didn't have their homes on the market, and we turned them into sellers," he said, by paying substantially more than market value. One client in Malibu paid almost double for a lot next door that was valued at $6 million. The resulting compound is worth more than the separate properties were, Rappaport said.

Internet pioneer David Bohnett combined three lots to create his four-acre-plus island of privacy in Holmby Hills after he sold the GeoCities Web-hosting service to Yahoo Inc. in a $3.9-billion stock deal more than a decade ago. (Yahoo shut down GeoCities last year.)

First, Bohnett bought the late actor Gary Cooper's longtime home, then talent manager Ken Kragen's residence and, finally, the site of singer Barbra Streisand's former mansion, which had been razed by the seller. Combined price tag: roughly $17 million. Today a lush lawn and landscaping occupy the rise of land that was the former Streisand home site, ensuring that no one is looking down on Bohnett's house. The entire compound is for sale, priced at $18.9 million.

The estate compound has become such a sought-after commodity among the wealthy that some have been known to tear down historic homes in favor of a little more lawn.

One of the largest land grabs in Holmby Hills centered on Owlwood, whose previous owners have included early 20th Century Fox Chairman Joseph Schenck, actor Tony Curtis and 1960s singing sensations Sonny and Cher.

The Tuscan-style mansion, built in 1936, is the only mansion remaining of three that were combined in 2002 for a total of 10 acres by the late billionaire Roland Arnall, founder of Ameriquest Capital Corp., and his wife, Dawn. They tore down the Pink Palace, a sparkly Sunset Boulevard landmark owned by singer Engelbert Humperdinck and, earlier, actress Jayne Mansfield. They also bulldozed the house of film star and competitive swimmer Esther Williams. A temporary gate now closes off what used to be accessible South Carolwood Drive. Arnall's widow still owns the property.

Compound building isn't new. Before his days as California's governor, Arnold Schwarzenegger bought several adjoining houses to create his Pacific Palisades compound. Its four parcels contained five homes, a pool and a tennis court on more than five acres. He eventually sold the lots — separately — in favor of a Brentwood estate.

For those less inclined to the amass-your-own approach, there are a few sizable lots and estates available for purchase on the Westside.

A graded eight-acre site above the Bel-Air Country Club, with 360-degree views of the ocean, city and mountains, is on the market for $49.5 million. Encircled by retaining walls, about half the compound-ready knoll is flat.

Before it was developed, the site consisted of three hillside parcels, said Christine Martin, who shares the listing with Tiffany Martin at Hilton & Hyland, Beverly Hills. She envisions an owner-occupant buyer and has received inquiries locally and from abroad.

In the gated community of Beverly Park, a comparatively affordable two-dwelling compound with 18 bedrooms and 28 bathrooms, including staff quarters, is listed at $21.995 million. Sited on three acres, the double-your-pleasure, double-your-fun affair has two driveways, two garages, two two-story foyers, more than 29,000 square feet of living space, a swimming pool, a sundeck and a changing cabana.

The two-family site comes with architectural drawings to combine the houses into one, said listing agent David Kramer of Hilton & Hyland. It sits in a neighborhood where several residents own more than one home.

"There are always people looking to buy nearby properties in any market," Kramer said.

"I just had one call from someone in the flats of Beverly Hills wanting to buy the house across the street," he said, for when their kids get older.

Until then? "They will just rent it out," he said.

Compound interest: L.A.'s ultra wealthy buying the houses next door

2010-06-12T05:34:00.000-07:00

latimes.com
As an added layer of privacy through increased acreage or as a way to tell the world they have arrived, L.A.'s wealthiest residents are increasingly buying up houses next door or adjacent to their homes to increase their personal space - particularly on the Westside and in Malibu.

Trading Down: Can It Still Bankroll Your Retirement? .

2010-06-12T05:06:00.000-07:00

Trading down to a smaller home is a retirement-planning staple. According to an April study by the Society of Actuaries, 20% of not-yet retirees say they plan to downsize after the last child leaves the nest.
By: M.P. MCQUEEN: wsj.com
But it is getting a lot harder to do, even for wealthier people.

A study by the Joint Center for Housing Studies at Harvard University, scheduled to be released on Monday, shows that while mobility has slowed across all age groups during the real estate bust, "mobility rates among seniors have posted the sharpest drop." Trade-downs in March comprised about 8% of total home sales, down from 12% in October 2008, the first year for which there are historical comparisons, according to the National Association of Realtors.

Why are pre-retirees staying put? The housing crash has pounded the higher end of the market, to which many 50- and 60-somethings have graduated. That has narrowed the price gaps between the upper and middle markets, meaning smaller homes aren't always much cheaper.

Making matters worse, people took an enormous amount of money out of their homes during the bubble—$358 billion in the peak year of 2005 alone, according to Goldman Sachs. So-called cash-out refinancings raised mortgage burdens sharply. That, combined with the price plunge, has wiped out trillions in home equity during the bust, making empty-nesters unable to trade down easily.

Other factors, such as job complications and dealing with adult children, are getting in the way, too.

"Unless they live in a megamansion, I haven't seen enough in savings" to justify trading down, says Steven Levey, a financial planner in Denver.

The logic of downsizing is simple. Middle-class Americans devote 20% to 50% of their budgets to housing costs, says John Henry Low, a fee-only financial planner in Pine Plains, N.Y. So people who reduce that figure significantly can improve their spending power accordingly.

Laurence Kotlikoff, an economist at Boston University and president of Economic Security Planning Inc., has developed financial-planning software to help people figure out how much they need to save for retirement. According to his calculator, which is available at www.esplanner.com/basic, a couple with a combined preretirement income of about $200,000 and living in a $900,000 paid-off home could boost their annual retirement spending from $40,314 to $47,289 just by trading down to a $450,000 home. That translates into a 17.3% higher living standard for the next 42 years, says Prof. Kotlikoff.

But Diane Saatchi, senior vice president at Saunders & Associates, a real-estate firm in Bridgehampton, N.Y., says downsizing nowadays "costs more than people have in mind." In her area, she says, total transaction costs easily exceed 10% to sell and buy simultaneously. When you add in the possibility of capital-gains taxes and moving costs, she says, "you need a big spread to make it worth the effort, and sellers often think they're going to get more than they can for the sale."

Kay Carpenter, 59 years old, and her husband Robert, 58, wanted to sell their 5,900-square-foot, seven-bedroom house in Windsor, Colo., and buy a home about half that size in Denver, where Mr. Carpenter currently commutes to his job as a hospital laboratory director.

But their current home, which they purchased for $810,000 in 2003, has received only one offer, for $575,000. "It is difficult to sell because it is a large home," Ms. Carpenter says. The couple, whose last child left the nest in 2005, are finding that they will have to spend about $450,000 for a suitable house. Throw in the transaction costs, and the financial benefit of downsizing basically disappears.

Trading down is a bit easier in some parts of the country, like the Chicago suburbs, where there is a mix of housing types and lower-tax communities co-exist with higher ones. "It's actually very typical, a classic scenario here," says Richard C. Gloor, a real-estate broker/owner in Oak Park, Ill. "More traditionally, people wait until the last kid is out of the house, five or 10 years. But now the last child is in college still and people say they don't need the space and especially don't need the taxes."

In pricey coastal cities like New York, Washington and San Francisco, desirable lower-cost housing is often hard to find in neighborhoods of upscale homes, real-estate experts say. In many affluent neighborhoods where aspiring retirees want to be, the supply of smaller homes is limited, due to zoning restrictions and high land prices. As a result, many homeowners find they would have to move a considerable distance to reduce their housing costs significantly.

Other hurdles beyond the slumping real-estate market are getting in empty-nesters' way, too. Many people of retirement age are still working, for example, and need to stay near their jobs, meaning out-of-state moves are out of the question. Some are in two-income households, complicating the decision to relocate even more.

What's more, adult children are becoming more of an issue than they used to be. In the aftermath of the Great Recession, "more and more kids are moving in with parents and grandparents," says Jim Gillespie, president and chief executive of Coldwell Banker Real Estate LLC.

Some adult children object to their parents' selling the home they grew up in because they are afraid it will cut their inheritance, says Prof. Kotlikoff. One way to address that problem: Give the children some of the sales proceeds right away.

Other strategies for living better in retirement might include paying off the mortgage, working longer or postponing taking Social Security, or increasing taxable contributions to a Roth individual retirement account, some financial planners say.

Charlie Horne, 71, a semiretired real-estate broker, and his wife, Barbara, 61, may have to use one of those strategies now that their downsizing move has turned out to be less advantageous than they had hoped. The couple recently sold their 3,000-square-foot, three-level house in Holliston, Mass., to move into a 2,200-square-foot condominium in a nearby development restricted to people 55 and older.

Their mistake: making a down payment on the new place before selling the old one. It took 11 months for the Hornes, who had owned their house for five years, to sell it, and it fetched just $540,000, far less than the $730,000 at which it was appraised the year before. The condo cost about the same with upgrades. "We thought it would be no problem [to sell]. I've been a Realtor for 52 years, and I've seen six recessions already," Mr. Horne says.

The couple's mortgage is about $380,000, or $3,900 a month. That, along with common charges of $310 per month, add up to just about as much as their old first and second mortgages and taxes. On the plus side, "the taxes were higher on the house than the condo," says Mr. Horne, who adds that he is saving money on maintenance.

Still, Mr. Horne says, if he had it to do over, he would sell the house first. "My timing was wrong," he says.

Tax Credit Extension Could Help Tax Cheaters

2010-06-11T05:13:00.000-07:00

Everett CollectionAs we reported Thursday, Congress is considering a proposal from Sen. Harry Reid (D., Nev.) to extend the closing deadline on the tax credit of up to $8,000 for home buyers.
By: James R. Hagerty: wsj.com
One risk of this proposal: It could help people who are trying to cheat Uncle Sam.

To qualify for the credit, buyers must have made a contract to buy the home by April 30. They are then supposed to complete the transaction by June 30. Because of the rush of people to close by then, mortgage companies and closing agents may have a hard time getting all the paper work done on time. So Realtors are pushing Congress for an extension. Sen. Reid has proposed to extend the deadline for closings to Sept. 30, so long as the buyers were under contract in April.

The danger is that this extension would also give more time to people who are merely pretending they were under contract in April and intend to backdate their documents.

Some real estate brokers see signs of dubious behavior. Glenn Kelman, chief executive of Redfin Corp., a Seattle-based broker that operates in nine states, says he started to wonder if tax fraud was on the agenda after hearing from some customers who were very insistent on closing by June 30 even though they went under contract after April 30.

Schahrzad Berkland, an agent for Fidelity Pacific Real Estate in San Diego, who helps produce analyses of that market, found that the number of homes listed as pending sales agreed upon in April continued to rise over the past few weeks. Normally, that number should decline as some deals fall through. Ms. Berkland thinks some buyers are backdating to April.

Beware: The Internal Revenue Service wants to see the paper trail. A spokesman for the IRS says people claiming the credit are required to “attach a copy of the pages from a signed contract to make a purchase showing all parties’ names and signatures, the property address, the purchase price, and the date of the contract.”

Backdating a contract would be both wrong and risky. “That would be fraud on the federal government,” notes Mark Fiedler of Coldwell Banker Legacy, Rio Rancho, N.M. “As a broker, I would not participate in that activity, although there may be others who might. My license enables me to earn a living, and the FBI is not someone I want to cozy up to.” Besides, Mr. Fiedler says, the FBI is “busy putting people in jail for mortgage fraud right now, so let’s not overwork them.”

Terry Smith, an agent at ReMax Integrity, Fort Worth, Texas, also thinks backdating is a bad idea. She says the IRS could demand to see fax dates on contracts, dates of emails discussing the deal and the date that the buyer put up a deposit as “earnest money.”

And is there really honor among thieves? Kevin Duffy, an analyst at ReMax Unlimited in Cincinnati, says: “First you would have to have all parties in agreement to fudge the dates, then hope no one gets mad and turns the (other) party into the IRS.”

Even without cheating, the tax credit will be expensive for Uncle Sam. The National Association of Realtors estimates that 4.4 million people will seek the credit at a cost of more than $30 billion.

Banks Face Short-Sale Fraud as Home `Flopping' Spreads

2010-06-10T04:40:00.000-07:00

Two Connecticut real estate agents found a way to profit in the U.S. housing bust: Buy low, sell fast. Their tactic was also illegal.
By: John Gittelsohn: bloomberg.com
Sergio Natera and Anna McElaney are scheduled to be sentenced in Hartford’s federal court in August after pleading guilty to fraud. Their crime involved persuading lenders to approve the sale of homes for less than the balance owed -known as a short sale - without disclosing that there were better offers. They then flipped the houses for a profit.

The Federal Bureau of Investigation, the California Department of Real Estate and mortgage finance company Freddie Mac have warned that such schemes may be spreading after a plunge in values left homeowners owing more than their properties are worth. The scams threaten to deepen losses for lenders that are increasingly agreeing to short sales as an alternative to more costly foreclosures.

“Short sales are an important tool that can help both the bank and the borrower,” said Morgan McCarty, executive vice president for mortgage servicing at Birmingham, Alabama-based Regions Bank, which lost money in the Connecticut case. “It’s just that criminals are always trying to find ways of profiting.”

Barofsky Report

An Obama administration effort to boost short sales may increase incentives for fraud, Neil Barofsky, special inspector general for the Troubled Asset Relief Program, wrote in an April 20 report to Congress. The government, through its Home Affordable Foreclosure Alternatives Program, that month began offering as much as $1,500 to servicers, $2,000 to investors and $3,000 to homeowners who close short sales.

“It appears that the program may lack necessary antifraud protections,” Barofsky wrote.

A prevalent scam involves a practice called “flopping,” Barofsky said. In that scheme, investors or home buyers hire brokers to assess a home for less than its market value and convince banks to accept a sale at that level. The buyer conceals from the lender that he has lined up a higher offer and then quickly resells the property for a profit, as in the Connecticut case.

“Flopping” occurs in more than 1 percent of short sales and may cost lenders $50 million this year, according to estimates from CoreLogic Inc., a real estate data and research company in Santa Ana, California. About 12 percent of existing home sales, or almost 622,000 houses, were short sales in the 12 months through April, data from the National Association of Realtors show.

Quick Profit

“A majority of the short-selling fraud is related to LLCs and investment companies trying to make a quick profit,” said Tim Grace, vice president of fraud analytics at CoreLogic. LLCs refer to limited liability corporations.

The Treasury has “put reasonable protections in place” to prevent short-sale fraud, requiring that the buyer and seller have no hidden relationship and banning most resales within 90 days, said Laurie Maggiano, policy director of the department’s Homeownership Preservation Office in Washington.

Suspected property-valuation fraud almost doubled from the end of 2007 through the first quarter of this year, according to a June 8 report by Interthinx Inc., an Agoura Hills, California- based company that sells mortgage fraud detection software.

In addition to banks losing money, “flopping” may hurt homeowners who complete a short sale and face higher deficiency judgments as lenders seek to recover unpaid mortgage balances, Ann Fulmer, vice president of Interthinx, said in an interview today on Bloomberg Television.

‘On the Hook’

Borrowers are “on the hook for larger deficiencies,” she said. “And there are indications that banks are increasingly turning to collection agencies and to civil lawsuits.”

Investors often use real estate broker opinions, which may rely on drive-by inspections instead of full appraisals, to persuade lenders to sell at a low price, Fulmer said in a separate interview. She suggested an Internet search of “How to influence a broker price opinion,” which yielded 74,800 results.

Near the top of the list is a video hosted by Mark Walters of CashFlowInstitute.com in Glendale, Arizona. It shows Walters feeding carrots to a pot-bellied pig while advising how to influence brokers to reduce their valuation. Among his tips: provide prices of comparable short sales to make the broker’s job easier, and be clear you want a low price.

Swaying Favor

“See if you might be able to sway what they do in your favor,” Walters says on the video.

Walters didn’t respond to e-mails, a fax and phone messages requesting comment. In the video, Walters says he learned about influencing broker price opinions from Dean Edelson, owner of Elysium Investment Group Inc. in Sedona, Arizona.

Edelson said efforts to influence broker price opinions, or BPOs, are needed to counterbalance lender pressure to inflate values. Brokers often form an opinion based on a street view of a home, unaware of hidden flaws, he said. Attempting to influence their opinion is legal as long as there is no pressure or payment to get a desired outcome, according to Edelson, who says he has completed “a few hundred” short sales since 2003.

“How is influencing a BPO fraud?” Edelson, 53, a former producer of promotional trailers for television shows including “Seinfeld” and “Frasier,” said in a telephone interview. “What’s fair market value? It’s determined by what a buyer is willing to pay for the property.”

Investors can help the real estate market by paying cash to lenders, preserving property prices by reducing vacancies and helping homeowners avoid foreclosure, Edelson said.

“Investors move inventory and help prevent market values from declining,” he said.

Taxpayer Losses

By allowing broker price opinions, the Treasury exposes taxpayers to short-sale fraud after $49 billion of government bailouts for housing, Barofsky wrote to Congress.

“As constituted now, the program permits home valuation, the key vulnerability point for a flopping scheme, without a true appraisal,” he wrote. “No program of this type and scale can be considered well designed without robust protections of taxpayer funds against the predation of criminals, particularly given the inconsistent treatment of home valuation.”

Requiring a full appraisal instead of a broker opinion doesn’t guarantee getting the accurate value, the Treasury Department’s Maggiano said.

“It’s all in the integrity of the person doing the valuation,” she said. “Clearly there are poor quality appraisers, licensed or not, and there are poor quality real estate agents, licensed or not.”

Smaller Losses

Lenders usually lose less from short sales than foreclosures, because there’s less property deterioration and repossession cost, Maggiano said. In April, the average loss in principal for prime loans that went into foreclosure was 42 percent, compared with a 33 percent loss for short sales, according to Amherst Securities Group LP, an Austin, Texas-based company that analyzes home-loan assets.

At Bank of America Corp., the largest U.S. mortgage servicer, completed short sales are on pace to more than double this year from 2009, Jumana Bauwens, a spokeswoman for the Charlotte, North Carolina-based bank, wrote in an e-mail. She declined to provide more specific data.

“We have language in our short sale approval letter that prohibits the flipping of a property and after closing we will audit transactions to identify ‘flips’ or ‘flops,’ ” Bauwens wrote. “It’s not in the best interest of our investors or communities at large to encourage or allow flipping.”

Regions Bank, a unit of Regions Financial Corp., completed 498 short sales with $175 million in unpaid principal balances in 2009, double the value of its 2008 transactions, McCarty said. The lender completed 303 short sales worth $93 million this year through May.

Short Sale Requirements

The company requires a full appraisal before a resale, McCarty said. It also demands short-sale buyers sign statements affirming the transactions are arms length, with no hidden buyer-seller relationships, and that there are no agreements to resell the property.

In the Connecticut case, Regions Bank in April 2008 agreed to a short sale of a Bridgeport house for $102,375, unaware that Natera and McElaney had a bidder willing to pay $132,500, according to the plea agreements. Eight weeks after the bank sold for a loss, the pair resold the house for a $30,125 gain.

Natera’s phone has been disconnected and he couldn’t be reached for comment. Arnold Kriss, his defense attorney in New York, declined to discuss the case before sentencing.

McElaney declined to comment when reached by phone. Her New York-based attorney, Mark Bederow, said he couldn’t discuss specifics of the case.

“The mere act of a buyer in a short sale selling again quickly isn’t per se fraudulent,” he said. “That’s business.”

Pending home sales race to 6-month high

2010-06-02T08:39:00.000-07:00

Pending sales of previously owned homes rose more than expected in April, scaling a six-month high as prospective home owners took advantage of a popular homebuyer tax credit, a survey showed on Wednesday.
By: Lucia Mutikani, Editing by Chizu Nomiyama: Reuters.com
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in April, increased 6.0 percent to 110.9, the highest since October.

It was the third straight month of gains in the index, which leads existing home sales by a month or two. Pending home sales rose by a revised 7.1 percent in March, a figure previously reported as a 5.3 percent increase.

Analysts polled by Reuters had forecast pending home sales rising 5.0 percent in April.

Compared to April 2009, the index was 22.4 percent higher.

Pending home sales were boosted by a government tax credit for home buyers. Prospective buyers had to sign contracts by the end of April and close by the end of June to be eligible for a federal tax credit.

Pending home sales are measured at the time of contract signing. Existing home sales, which are counted at contract closing, are likely to increase until next month.

Given that the tax credit has pulled forward some sales, activity is expected temporarily slacken, but the strengthening economy and job market are seen supporting the housing market in the absence of additional government aid.

"The housing market has to get back on its own feet and now appears to be in a good position to return to sustainable levels even without government stimulus, provided the economy continues to add jobs," said Lawrence Yun, chief economist with the NAR.

Wealthy Investors Bet on Property, Stocks as Caution Reigns, Barclays Says

2010-06-02T04:37:00.000-07:00

Wealthy investors globally are avoiding derivatives and hedge funds and turning to property and stocks following the global financial crisis and economic downturn, Barclays Wealth said, citing a survey.
By: Sophie Leung: bloomberg.com
More than half of the investors surveyed said they are more cautious than they were before the crisis, Barclays said in a statement in Hong Kong today.
About 2,000 wealthy investors who have more than 1 million pounds ($1.47 million) in investments from 20 countries participated in the survey in February and March, it said.

“The uncertainty around the prospects and timing of the global economic recovery is causing investors to favor” equities and real estate, Joanna Chu, managing director and head of North Asia at Barclays, said in the statement.

Almost 90 percent of the surveyed investors in Singapore said the property market is likely to perform well in the next 12 months, while 68 percent of the Australian respondents said they are positive on equities, according to the survey.

Fed Officials Upbeat On U.S. Recovery

2010-05-31T09:24:00.000-07:00

Two senior Federal Reserve officials were upbeat Monday about the U.S. economic recovery despite the worsening debt crisis in Europe, but gave no indication the Fed is anywhere near raising interest rates.
By: In-Soo Nam and William Mallard: wsj.com
“Right now, the prospects for continued growth in the U.S. remain relatively solid,” Charles Plosser, the president of the Federal Reserve Bank of Philadelphia, told a news conference during a Bank of Korea seminar in Seoul.
“I hope, I anticipate at this point that the U.S. won’t have a double-dip recession.” He added that the European crisis “raises some clouds on the horizon” and that the Fed would have to “be cautious” in response.

Charles Evans, president of the Chicago Fed, said the U.S. recovery is “well under way” but still-low inflation means the central bank should keep rates very low “for an extended period,” in line with its official policy statement.

“Inflation is severely under-running price stability, so it’s still appropriate to keep an accommodative policy,” Mr. Evans told a separate news conference at the Seoul event. “But if the situation turns rapidly, policy will need to respond more quickly.”

A few weeks ago, many analysts expected the Fed to begin raising interest rates by the end of 2010. As the situation in Europe worsened in May, those expectations have been put off and now many analysts don’t expect the Fed to move until 2011.

Mr. Evans said the European crisis would likely damp U.S. exports to a small degree but that for now it wasn’t likely to have a big impact or change the outlook for Fed policy.

Fed Chairman Ben Bernanke, addressing the Seoul conference by video, said the world’s central banks will exit their economic-stimulus policies at different times, weighing local factors as they seek to be neither hasty nor tardy in tightening, U.S. Federal Reserve Chairman Ben Bernanke said.

“Because economic conditions vary, the appropriate timing of the exit is likely to differ across countries,” Bernanke said. “To guide these important decisions, each central bank will have to carefully monitor economic developments in its own jurisdiction.”

Mr. Plosser and Mr. Evans both cited recent improvement in the U.S. labor market as promising signs for the broader recovery and predicted the improvements will continue. Mr. Plosser said many people may be surprised by how fast employment bounces back, while Mr. Evans said that if inflation expectations should surge, the Fed would need to respond quickly–shifting its current emphasis on promoting growth.

Mr. Evans, asked about the outlook for the Fed to sell back some of the massive amount of mortgage-backed securities it has bought in a bid to provide liquidity to the financial system, said he expects this would come after the Fed unwinds other emergency measures.

Bernanke Says Central Banks May Differ on Timing of Monetary Tightening

2010-05-30T09:11:00.000-07:00

Federal Reserve Chairman Ben S. Bernanke said central banks around the world will probably unwind monetary expansion at different times because of differences among their economies.
By: Scott Lanman: bloomberg.com
“In the medium term, like the Federal Reserve and many other central banks, the Bank of Korea will have to manage its exit from accommodative policies,” Bernanke said in pre- recorded remarks to a conference hosted by South Korea’s central bank in Seoul today. The Bank of Korea “will have to weigh the risks of a premature exit against those of leaving expansionary policies in place for too long,” Bernanke said.

The Fed chief didn’t elaborate on the outlook for the U.S. economy or monetary policy. Bernanke praised South Korea’s response to the global financial crisis over the last few years, including its decisions to reduce its policy interest rate by 3.25 percentage points and to set up a fund to keep its banking system stable.

“This suite of policy responses helped stabilize Korean financial markets and promote a swift recovery of economic activity,” Bernanke told the Bank of Korea event, according to a text distributed by the Fed in Washington.

South Korea’s stock market has erased much of its losses since late 2008, and gross domestic product has “rebounded decisively” since contracting at a 17 percent pace in the fourth quarter of 2008, he said.

Asset Purchases

In the U.S., the Fed cut its benchmark interest rate to near zero in December 2008 and purchased $1.7 trillion in Treasuries and housing debt to revive growth. Officials are debating when and how fast to raise rates and sell mortgage assets. “Because economic conditions vary, the appropriate timing of the exit is likely to differ across countries,” Bernanke said.

Countries must cooperate to improve financial regulation and ensure that firms are “well capitalized, liquid and transparent,” Bernanke said. The leadership of the Group of 20 countries is “essential” for producing effective and consistent changes, Bernanke said.

In addition, central banks “must continue to place great weight on the factors that have been shown to enhance the credibility and effectiveness of monetary policy: central bank independence, accountability and transparency, and effective communication,” the Fed chief said.

Homeowner Confidence Rises Nationally, But Western Homeowners Remain Pessimistic

2010-05-28T17:55:00.000-07:00

As some parts of the U.S. housing market work their way out of the housing recession, while the majority of markets continue to decline, homeowners across the country had mixed opinions of the state of their...
RISMEDIA
own homes’ values, according to the Zillow Q1 Homeowner Confidence Survey. Nationally, homeowners were overconfident, with half (50%) believing their own home’s value declined in the past year. In reality, 65% of U.S. homes declined in value, according to Zillow’s Q1 Real Estate Market Reports.

Meanwhile, 7% of homeowners, which translates to 5.3 million homes, said they would be “very likely” to put their home on the market in the next 12 months if they see signs of the housing market improving. By comparison, 5.2 million existing homes were sold during 2009. An additional 8% said they would be “likely” to put their home on the market, and another 14% said they would be “somewhat likely.” These homeowners represent “sidelined sellers,” a component of shadow inventory that if materialized, could significantly delay timing of a market recovery.

The most pessimistic homeowners reside in the West, even as home values in many California and Colorado metros have stabilized over the past year, according to the Zillow Q1 Real Estate Market Reports. Eighteen percent of Western homeowners believe that their home gained value over the past year when in reality 31% of Western homes gained value. That resulted in a Misperception Index of -12 (a Misperception Index of zero would indicate that homeowner perception is in line with reality, and a negative Misperception Index indicates that homeowners are overly cynical about their own homes’ values).

On the other end of the spectrum were Southern homeowners, who were overly optimistic, even as many Southern markets continue to see significant decreases in home values. Thirty-four percent of Southern homeowners said that their home gained value over the past year when in reality 27% of homes gained value. That resulted in a Misperception Index of 14.

Homeowners in the Northeast and Midwest recorded Misperception Indexes of -2 and 4, respectively.

“It is clear that there is a lag between market realities and public perceptions of home values. For quite a while after the market peak, Western homeowners continued to believe their own homes’ values were doing better than they were in reality,” said Zillow Chief Economist Dr. Stan Humphries. “Conversely, after years of press coverage about declining home values, homeowner perceptions are now in line with market conditions from early last year, although the Western market has improved since then.

“We see the opposite phenomena in the South where home values in most markets – with the exception of Florida – took some time to begin falling. Many markets there have recently joined the housing recession in earnest, with five of the nine Southern states tracked by Zillow hitting their home value peak after 2007, but homeowners there are likely to believe the downturn has not affected them. This could also be a result of the fact that most attention has been on the hardest-hit areas of California, Florida, Nevada, Arizona and Michigan, and homeowners outside of these markets may have less information about what has happened in their local markets.

“However, when homeowners across the country do start to believe that their home’s value has stopped declining, we can expect to see a lot of new inventory entering the market via sidelined sellers. This added inventory, combined with current elevated inventory levels and continued high rates of foreclosure in many areas, will likely serve to keep home values treading near the bottom for several years. Inventory must come down for home values to go up.”

Homeowner Perception of Future Home Values
Looking forward, homeowners are fairly positive about their own home’s value over the next six months, but like Misperception Index, the degree of optimism varies wildly among regions. In the Northeast, more than half (51%) of homeowners believe their home’s value will increase over the next six months while in the Midwest less than one-third (29%) of homeowners believe their home’s value will increase. Nationally, 39% of homeowners believe their own home’s value will increase during the next six months.

Bernanke `Extended Period' Resolve May Be Eroded as Delinquencies Decline

2010-05-28T08:00:00.000-07:00

Consumer delinquency rates are dropping at U.S. retailers and banks such as American Express Co. and Bank of America Corp., signaling an incipient lending thaw that may spur economic growth.
By Bob Willis and Anthony Feld: Bloomberg.com
Past-due loans at Bank of America, the second-largest card lender, fell for a fifth month in April and by the most in four years, while AmEx’s delinquencies were down 34 percent from a year earlier. Target Corp., the second-largest U.S. discount retailer, last week reported its lowest delinquency rate in the latest quarter since the second quarter of 2008.

With fewer tardy borrowers to worry about, banks are more likely to extend fresh credit to American consumers, whose spending makes up 70 percent of the economy. That may weaken Federal Reserve Chairman Ben S. Bernanke’s commitment to an “extended period” of low interest rates - once policy makers determine the European debt crisis no longer poses a risk to the recovery, said economist Stephen Stanley.

“Then we get back to the scenario where the U.S. banking system is gradually healing, credit quality is gradually improving and creditworthiness of borrowers is improving,” said Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “Some evidence of stability in the banking sector is an additional precondition to normalizing monetary policy.”

U.S. central bankers on April 28 kept the benchmark federal funds rate in a range of zero to 0.25 percent, where it has been since December 2008, and said “subdued” inflation and high unemployment are likely to keep rates “exceptionally low.” They repeated their assessment that consumer spending was likely to be restrained by “tight credit.”

‘Reasons for Optimism’

Bernanke, in a May 6 speech in Chicago, said bankers’ attitudes on lending “may be shifting,” citing as “reasons for optimism” the economic recovery and expectations among senior loan officers for a “modest reduction” in troubled loans. The comments were overshadowed by that day’s 9.2 percent intraday plunge in the Dow Jones Industrial Average, which was sparked in part by concerns about euro-zone defaults.

“The Fed chairman is getting closer to saying the economy has reached a turning point, and the confidence he expressed was overlooked due to the market’s extreme volatility,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “When we look back some months from now, his remarks may be seen as prescient in forecasting a sustainable economic recovery.”

Loan Officer Survey

The Fed’s latest survey of senior loan officers, released May 3, showed the smallest proportion of banks in two years restricted lending standards in the first quarter. Other Fed data released May 7 showed consumer borrowing unexpectedly rose in March for the second time in three months, signaling Americans are becoming more optimistic about the recovery.

“One of the factors the Fed watches when deciding when it’s appropriate to begin normalizing rates is when banks stop tightening lending standards,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “This is starting to happen.”

Economists surveyed by Bloomberg between April 29 and May 10 cut their forecasts for Fed rate increases to a quarter point rise in the fourth quarter from the half point gain forecast in the month-earlier survey.

“If lending standards start to stabilize, that’ll be another reason to remove the emergency measures, including the zero rate,” said Jay Bryson, a senior global economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who formerly worked at the Fed in Washington.

Target Profits

Minneapolis-based Target reported May 19 that credit-card loans more than 60 days overdue declined to 5.3 percent of the total in the first quarter, from 6.3 percent in the previous period, helping it post profits that beat analysts’ projections.

Citibank’s new U.S. card account originations fell 17 percent in March from a year earlier, about half the 35 percent drop posted in January. Originations climbed 3 percent in February, which was the first annual gain since the data started being reported in Oct. 2008, according to the Treasury’s monthly lending report.

“The fundamentals here in the U.S. are suggesting the Fed should already be on a path towards tightening,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, which manages about $30 billion in client accounts. “They should already be taking some action to be preparing to raise rates; however, the drama overseas is likely to encourage policy makers to pursue a cautious path.”

Addicted to Real Estate

2010-05-27T11:50:00.000-07:00

By now, everyone knows the financial reasons for the housing bubble, from lax lenders to greed.
By: JUNE FLETCHER: wsj.com
But there's another, emotional side: In our rootless and confusing culture, our domiciles have become more than mere shelters, investments, havens or even status symbols. Rather, they have become extensions of our narcissistic personalities, glorified by entire industries of shelter magazines, websites and cable networks.

It's no wonder, writes Meghan Daum in her new book "Life Would Be Perfect If I Lived In That House," (Alfred A. Knopf), that by the middle of the decade, scads of Americans were "buying real estate and melting it down to liquid form and then injecting it into their veins."

It was an addiction shared by Ms. Daum, an essayist, novelist and columnist for the Los Angeles Times. And it almost ruined her life, she writes.

Fully aware of how neurotic such an obsession is, Ms. Daum examines it neurotically, almost as if she were a recovering abode-aholic. She reveals personal details that—even in this blogging age—sometimes made me a bit squeamish (do I really need to know about the dog poop on the patio of one of her many temporary abodes)?

Nevertheless, her candor also reveals the roots of her restlessness: Her jingle-writing father, who settled the family in New Jersey, really longed to live in Manhattan, while her creative and frustrated mother channeled her suburban ennui into constant redecorating and endless trips to open houses.

Ms. Daum doesn't make the connection overtly, but the reader feels how much she internalized this sense of familial dislocation and discontent (her parents eventually separated). Her longing for a safe place where she'd belong is revealed in one bittersweet childhood anecdote: Instead of fantasizing about a grand wedding, like most little girls, she re-enacted cozy scenes from Little House on the Prairie.

By the time she was a Vassar student, Ms. Daum simply assumed that your habitat defined you. And yet, no place ever quite felt right. She blew through a succession of dorm rooms, and then overpriced Manhattan apartments. But, as she wrote more than a decade ago in a widely-read New Yorker essay, she could never afford the sort of glamorous place she salivated over in decorating magazines, and wound up buried in about $80,000 of debt. Worse, her materialistic aspirations also impoverished her spirit: At one point, her aesthetic snobbery caused her to evict a roommate simply for the sin of owning a baby-blue carpet and orange chair.

“ By the middle of the decade, scads of Americans were "buying real estate and melting it down to liquid form and then injecting it into their veins." ”

Fortunately, she tired of this shallow identity and tried on a new one, inspired by her Prairie fantasies. Unfortunately, her restlessness remained. In friendlier and more affordable Lincoln, Neb., she donned and discarded a series of farmhouses, as well as a boyfriend. By now, her obsession is full-blown: The houses are described in loving detail; the boyfriend is simply called "an aging slacker." Inevitably, the nameless boyfriend soon becomes known as the Ex. She also acquires a dog during this phase, named Rex.

During her Nebraska days, she wrote a novel, "The Quality of Life Report," which attracts the attention of Hollywood. So she packs up again and moves to Los Angeles, Rex in tow, to re-frame her life in a series of unsatisfying rentals that she deems too tacky to show to potential dates—so she stops going on them. She becomes ever lonelier, but doesn't yet connect the dots of her disconnection. She describes the problem as "being alone with awful furniture."

The solution, she decides, was to commit—not to a person, but a house. Unfortunately, she starts searching at the height of the bubble, and so has to settle for a tiny stucco box with dirty white carpet and a dilapidated garage. (She's now about $100,000 underwater on her mortgage, she writes.) Still, ripping up the carpet, installing stainless-steel ceiling fans and buying a purple futon seem to settle her—so much so, that she soon begins spending far too much time alone in her pajamas in her newly remodeled kitchen, eating Stovetop stuffing.

At this point, a reader may want to scream: "It's time to break up with the house!" But Ms. Daum doesn't realize this obvious fact until a promising new boyfriend tries to move his bikes and books in, and their arguments (including whether or not to saw his beloved sofa in half) threaten to derail the relationship.

I don't want to spoil the ending, so I'll just mention the opening scene in the book, set in the present day, when a chunk of stucco siding falls off in Ms. Daum's hand and–instead of running to a repairman–she simply throws it away.

Mortgage rates sink to lowest this year

2010-05-27T11:14:00.000-07:00

Mortgage rates have fallen to the lowest level of the year as investors poured money into the safe haven of U.S. government securities.
By: ALAN ZIBEL: AP Associated Press
The average rate on a 30-year fixed rate mortgage dipped to 4.78 percent this week from 4.84 percent a week earlier, mortgage company Freddie Mac said Thursday. It was the lowest level since early December, when rates fell to a record low of 4.71 percent.

The average rate on a 15-year fixed-rate mortgage fell this week to 4.21 percent_ the lowest level in nearly two decades.

Concerns over the European debt crisis have sent yields for 10-year and 30-year Treasury bonds to their lowest levels of 2010. Rates on 30-year home loans often rise and fall in line with the 10-year note.

Analysts say the opportunity may not last. If Europe's woes subside and the U.S. economic recovery stays on track, rates are likely to move higher. That's because traders will move their money back into riskier investments.

"Strike now," said Greg McBride, senior financial analyst at Bankrate.com. "If they move quickly against you, it just takes money right out of your pocket."

Homeowners appear to be taking notice. Applications to refinance surged this week to the highest level since October 2009, the Mortgage Bankers Association said Wednesday.

But mortgage applications to purchase homes fell to the lowest level since April 1997. A major reason for that drop: tax credits expired on April 30.

A campaign by the Federal Reserve to reduce borrowing costs for consumers pushed rates down to extraordinarily low levels last year. Rates were expected to rise after the program ended this spring. Instead, they have dipped. Fears that Greece's government would default on its debt shook world markets and boosted demand for U.S. Treasurys.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

Rates on five-year, adjustable-rate mortgages averaged 3.97 percent, up from 3.91 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 3.95 percent from 4 percent. That was the lowest average since May 2004.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.

The nationwide fee for loans in Freddie Mac's survey averaged 0.7 a point for 30-year, 15-year and 5-year loans. The average fee for 1-year loans was 0.6 of a point.

Sales of previously owned homes up 7.6% in April

2010-05-25T17:40:00.000-07:00

Completed purchases rose in every region but the West, where they fell 6.2% as California buyers delayed closing deals to take advantage of a tax credit.
By: Alejandro Lazo: latimes.com
The National Assn. of Realtors attributed the increase in sales of previously owned homes in April to cheap prices, low interest rates and federal tax incentives that expired April 30. Above, a house for sale in Maryland. (Jonathan Ernst, Reuters / May 23, 2010)

Fueled by federal incentives for home shoppers, the U.S. housing market gained ground in April with sales of previously owned dwellings jumping 7.6% from March, the National Assn. of Realtors said Monday.

Buyers were motivated last month by cheap prices, low interest rates and federal tax incentives that expired April 30, the Washington real estate group said. Sales jumped in every region but the West, where they fell 6.2% as shoppers appeared to time purchases to take advantage of a tax credit in California.

To qualify for the federal credit of up to $8,000 for first-time buyers and up to $6,500 for certain current homeowners, contracts had to be signed by the end of April and those deals must close by June 30. The California tax credit of up to $10,000 for some purchases requires deals to close May 1 or after.

The national median home price — including single-family homes, town homes and condominiums — was $173,100 in April, up 1.4% from March and 4% from April 2009.

Economists are predicting sales will fall later this year after the tax-credit surge ends. The weak recovery in housing will probably continue if the job market improves, although the possibility of more foreclosures hitting the market remains a concern, economists said.

"In the grand scheme of things, housing is affordable again. Lenders aren't really tightening standards anymore. And the employment situation has stabilized. That's the good news," said Michael D. Larson, a housing and interest rate analyst with Weiss Research.

"The bad? The backlog of distressed homes remains extremely high. Uncle Sam is just about the only guy making or backing home loans. And we're certainly not seeing a rip-roaring rebound in the job market," Larson said.

The National Assn. of Realtors' data are based on its proprietary multiple-listing service and are reported as a monthly estimate that is adjusted for seasonal variations. Homes sold at a seasonally adjusted annual rate of 5.77 million units in April from an upwardly revised 5.36 million in March, the group said. Sales were up 22.8% from the 4.7-million-unit pace in April 2009.

Housing inventory jumped 11.5% at the end of April to 4.04 million previously owned homes available for sale, representing an 8.4-month supply at the current sales pace. That was an increase from an 8.1-month supply in March.

Regionally, resales of all types of homes surged 21.1% from March in the Northeast, 9.9% in the Midwest and 8.6% in the South. Sales fell 6.2% in the West but rose 5.2% from April 2009.

In California, April sales of single-family homes totaled 483,830, down 6.4% from March and off 8.1% from April 2009, according to the California Assn. of Realtors. The median price of a previously owned single-family detached home in the state was $306,230 in April, edging up 1.5% from March and jumping 21% from April 2009.

"It's likely that the state tax credit that went into effect May 1 created an incentive for many buyers to postpone closing escrow so they could take advantage of both the state and federal tax credits that were available," said Steve Goddard, president of the California real estate group. "We should see the pace of closed sales edge up in May and June as these tax-incentivized transactions close."

A report last week by San Diego real estate research firm MDA DataQuick showed that sales of new and previously owned homes in California declined 1.3% in April from the same month last year. April sales in Southern California fell year-over-year for the first time in 22 months.

Analysts attributed that decline to fewer foreclosures on the market as well as some buyers possibly timing their purchases to take advantage of the California tax credit.

Consumer Confidential: Home sales soar, Ford goes electric, cable TV saved

2010-05-24T10:07:00.000-07:00

Here's your heavens-to-Murgatroyd Monday roundup of consumers news from around the Web:
--Uncle Sam wanted people to buy homes last month, and he got what he wanted.
By: David Lazarus: latimes.com
A last-minute rush to take advantage of an expiring tax credit caused sales of existing home to soar almost 23% from a year earlier. The National Assn. of Realtors said the increase topped expectations and suggested the housing market was regaining some health. "For people who were on the sidelines, there's been a return of buyer confidence with stabilizing home prices, an improving economy and mortgage interest rates that remain historically low," says Lawrence Yun, an economist with the organization. Now let's see how we do without the tax credit.

-- Our friends at Ford Motor Co. say they want up to a quarter of their vehicles to run on electricity. To achieve that lofty goal, the company says it will invest $135 million and add 220 jobs at three Michigan facilities. The short-term aim is to get at least five electric vehicles on the market by 2012. As many as 25% of Fords will be battery-powered within a decade, the company says. An ambitious plan. I'll believe it when I see it.

-- Whew, that was close! Remember the wayward satellite that was supposed to disrupt cable programming throughout the United States? Well, the owner of the cable satellite, SES World Skies, now says that off-course bird kept its distance, and thus box watchers nationwide were able to enjoy their hundreds of cable channels without interruption (not counting commercials, of course). Imagine if "Lost" had gone off the air during the big finale. There would have been rioting in the streets. Or at least a whole lot of griping.

The Weekend Guide for May 20 - May 23, 2010

2010-05-20T04:18:00.000-07:00

What to Do This Weekend!
The Weekend Guide for May 20 - May 23, 2010.

Full Article:

Mortgage Rates on 30-Year U.S. Loans Fall to 4.93%

2010-05-13T04:53:00.000-07:00

U.S. mortgage rates fell for the third straight week as investors filled a void left by the end of a Federal Reserve program to purchase bonds backed by home loans.
By: Prashant Gopal: Bloomberg
Rates for 30-year fixed loans dropped to 4.93 percent in the week ended today from 5 percent last week, Freddie Mac said in a statement. The average 15-year rate was 4.3 percent, the McLean, Virginia-based mortgage finance company said.

Low home loan rates may help support a housing recovery as a government tax credit for homebuyers expires. The central bank has pledged to keep rates low for an extended period as the economy recovers. Home prices rose in 91 U.S. metropolitan areas in the first quarter compared with a year earlier, the National Association of Realtors said May 11.

Falling rates will help people “save a couple bucks on mortgage payments” when they refinance a home loan, said Keith Gumbinger, vice president at HSH Associates, a mortgage-data company in Pompton Plains, New Jersey. Declining borrowing costs also provide a boost to buyers who missed the government’s April 30 deadline for a tax credit of as much as $8,000, he said.

This week’s rates, the lowest since Feb. 18, might have been influenced by investors flocking to less risky securities such as Treasuries as the Greek debt crisis unfolded and the Dow Jones Industrial Average took an unexpected plunge, Gumbinger said.

Sales Gain

Home sales in the U.S. gained in March as buyers took advantage of a tax credit of as much as $8,000 that required recipients to sign contracts by April 30. New home sales surged 27 percent in March, the biggest gain since recordkeeping began in 1963, according to the Commerce Department. An index of signed purchase agreements for previously owned homes rose 5.3 percent in March, the Realtors group said May 4.

The Mortgage Bankers Association’s index of mortgage applications rose 3.9 percent in the week ended May 7. The portion of refinancings climbed 15 percent. Applications to purchase fell 9.5 percent.

Pending Home Sales on an Upswing

2010-05-05T09:04:00.000-07:00

Pending home sales increased again in March 2010, affirming that a surge of home sales is unfolding for the spring home buying season, according to the National Association of Realtors®.
RISMEDIA
The Pending Home Sales Index (PHSI) forward-looking indicator based on contracts signed in March, rose 5.3% to 102.9 from 97.7 in February, and is 21.1% above March 2009 when it was 85.0; this follows an 8.3% increase in February. The data reflects contracts and not closings, which usually occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said favorable affordability conditions have been working with the tax credit. “Clearly the home buyer tax credit has helped stabilize the market. In the months immediately following the expiration of the tax credit, we expect measurably lower sales,” he said. “Later in the second half of the year, and into 2011, home sales will likely become self-sustaining if the economy can add jobs at a respectable pace, and from a return of buyer demand as they see home values stabilizing.”

The PHSI in the Northeast declined 3.3% to 75.1 in March but remains 27.2% higher than March 2009. In the Midwest the index increased 1.2% to 98.9 and is 18.5% above a year ago. Pending home sales in the South jumped 12.7% to an index of 121.2, which is 28.3% higher than March 2009. In the West the index rose 1.9% to 99.9 and is 8.8% above a year ago.

“Another encouraging sign is the improvement in the availability for jumbo and second-home mortgages,” Yun said. “As bank balance sheets strengthen, it is just a matter of time before lending of non-government-backed mortgages steadily opens up.”

The National Association of Realtors, “The Voice for Real Estate,” is one of America’s largest trade associations, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

The Pending Home Sales 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 but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.

An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.

Pending Home Sales on an Upswing

2010-05-04T08:58:00.000-07:00

In March, the Pending Homes Sales Index rose 5.3 percent and is well above 2009 levels.
NAR: REALTOR®Magazine
Pending home sales increased again in March, affirming that a surge of home sales is unfolding for the spring home buying season, according to the National Association of REALTORS®.

The Pending Home Sales Index, a forward-looking indicator based on contracts signed in March, rose 5.3 percent to 102.9 from 97.7 in February, and is 21.1 percent above March 2009 when it was 85.0; this follows an 8.3 percent increase in February. The data reflects contracts and not closings, which usually occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said favorable affordability conditions have been working with the tax credit. “Clearly the home buyer tax credit has helped stabilize the market. In the months immediately following the expiration of the tax credit, we expect measurably lower sales,” he said. “Later in the second half of the year, and into 2011, home sales will likely become self-sustaining if the economy can add jobs at a respectable pace, and from a return of buyer demand as they see home values stabilizing.”

Regional Numbers
The PHSI in the Northeast declined 3.3 percent to 75.1 in March, but remains 27.2 percent higher than March 2009.
In the Midwest the index increased 1.2 percent to 98.9 and is 18.5 percent above a year ago.
Pending home sales in the South jumped 12.7 percent to an index of 121.2, which is 28.3 percent higher than March 2009.
In the West the index rose 1.9 percent to 99.9 and is 8.8 percent above a year ago.

“Another encouraging sign is the improvement in the availability for jumbo and second-home mortgages,” Yun said. “As bank balance sheets strengthen, it is just a matter of time before lending of non-government-backed mortgages steadily opens up.”

Sales, but No Frenzy, From Home-Buying Tax Credit

2010-04-30T08:54:00.000-07:00

The looming expiration of a tax credit for home buyers has spurred some consumers to hurry to ink deals, but the last-minute activity has been more muted than some brokers and builders anticipated.
By: DAWN WOTAPKA And ROBBIE WHELAN: wsj.com
Many people who wanted to act on the tax credit already have done so, said Eric Lipar, chief executive of Texas-based LGI Homes. "We're not seeing an increase in traffic," he said. "It's business as usual."

To qualify for the credits of up to $8,000, home buyers must sign purchase contracts by midnight Friday, and those purchases must be completed by June 30. Some sellers were preparing for a possible 11th-hour rush: Home builder Lennar Corp. is keeping some of its sales offices open until midnight Friday, while rival KB Home extended hours both Thursday and Friday.

And some brokers say their business has surged as the deadline neared.

"It's gone nuts," said Lew Reich, an agent at the brokerage of Keller Williams Realty in Plano, Texas. "We're seeing a very strong rush, strong sales, a lot of people are being energized by the end of the credit."

David Lee, who does maintenance work for the Mandalay Bay casino in Las Vegas, submitted a $150,000 offer on Tuesday for a three-bedroom house in Las Vegas. He hopes to get an $8,000 tax credit, but the home is a bank-owned foreclosure, and Mr. Lee is still waiting to hear from the bank about whether his offer has been accepted. "I'm kind of going crazy because it's a lot of money for me," Mr. Lee said.

If Mr. Lee doesn't get a home now, however, he figures he might be able to get one cheaper in a few months—if prices fall further.

It isn't clear how effective the credit has been. Sales of new single-family homes surged 27% in March from the prior month on a seasonally adjusted basis, the Census Bureau reported, but that estimate is based on a small sample and is frequently subject to large revisions. So far, the credit has been most effective with first-time buyers not stuck with an existing home to sell.

The end of the credit has stirred fears that the housing market, which has showed signs of stabilizing in much of the country over the past year, might face further steep price declines. Economists note that the buying incentives pulled demand forward, so buyer traffic could fall come Saturday.

Meanwhile, many of the same headwinds remain: Unemployment is high, and the foreclosure crisis continues to dump more distressed properties on the market.

Congress initially passed a $7,500 tax credit for first-time buyers two years ago, which had to be repaid over 15 years. Then, last spring, Congress extended the credit, expanded it to $8,000 and waived the repayment requirement. When that was set to expire Nov. 30, Congress extended it again and added a $6,500 tax credit for some repeat buyers.

Many buyers had rushed to meet the expected November deadline, leaving less demand in the market as the new cutoff approached. "There is no doubt the first round of the credit had a much bigger impact," said John Burns, an Irvine, Calif., home-building industry consultant.

The credit won't be extended—for now, at least. The National Association of Home Builders has said it currently isn't lobbying for another round. Some consider that a good thing because a more normal market will result.

Some forecasters expect foreclosure activity to put further pressure on prices and inflate inventories in troubled markets, but Lawrence Yun, chief economist with the NAR, said he is not worried about distressed homes.

"We know that foreclosures will remain high" he said. "We've had this shadow inventory coming on, and it is being absorbed."

The key test, he added, is whether home sales numbers for the coming fall and winter seasons will match those from last year. He predicted that job growth and the creation of new households would compensate for the expiration of the tax credit in stimulating the market.

Sellers unloaded homes at an annual rate of 5.3 million units in the third quarter of last year, up more than 11% from the previous quarter, according to the NAR.

"If this year's [autumn and winter] sales can match up with last year, when there was the credit, then we can say that the housing market is back on its feet," Mr. Yun said.

Home prices rise in three California cities

2010-04-28T08:47:00.000-07:00

A trio of California cities bucked a nationwide home price decline in February while most of the other metro areas posted losses or...
By: Alejandro Lazo: latimes.com
The Standard & Poor's/Case-Shiller index of 20 metropolitan areas falls 0.1% overall for February. But San Diego, San Francisco and Los Angeles post gains.

A trio of California cities bucked a nationwide home price decline in February while most of the other metro areas posted losses or flattened out, underscoring the resurgence of the Golden State's coastal markets, data released Tuesday showed.

The Standard & Poor's/Case-Shiller index of 20 metropolitan areas was down 0.1% from January on a seasonally adjusted basis, marking the closely watched measure's first decline since home prices began to recover last June.

But in a positive sign for housing, the index posted a 0.6% increase from February 2009, its first year-over-year increase in more than three years.

The mixed readings come as the expiration of a federal tax credit for buyers looms at the end of this week. Many analysts expect home prices to decline once the incentive runs out — but not nearly as steeply as when values entered a nearly three-year free-fall in the summer of 2006 that helped drag the U.S. into one of the most brutal recessions since the Great Depression.

"Generally, I don't see an upbeat picture, I see the trend as faltering," said David Blitzer, chairman of Standard & Poor's Index Committee. "One of the few spots that seems surprisingly strong is California."

California cities saw home prices in February gain 0.8% in San Diego, 0.4% in San Francisco and 0.2% in Los Angeles.

Mark Zandi, chief economist with Moody's Economy.com, said the strong showing in California reflected the reduction in foreclosures on the market over the last year. Foreclosures made up 44.3% of the resale market in February, down from an all-time high of 58.8% in February 2009, according to San Diego research firm MDA DataQuick.

"California is perhaps the most efficient state in respect to resolving its foreclosure issue and so a lot of properties were pushed through the process," Zandi said. "There are now fewer in the pipeline."

Although foreclosures may increase in California in coming months, leading to a period of flat prices and perhaps even some declines, the state was "much further along in getting its house in order than most parts of the country," he said.

Not reflected in the Case-Shiller numbers are regions in the state farther from the coast where overbuilding was more prevalent and the unemployment rate remains above average, said Richard Green, director of USC's Lusk Center for Real Estate.

"We are doing a little better than the rest of the country, and that is not particularly surprising because California, in general, didn't overbuild the way Arizona and Las Vegas and Florida did," Green said. "In the places we did, prices collapsed so much it's hard for them to fall much further."

In the next two months, some California shoppers have a shot at as much as $18,000 worth of tax credits if they get their timing right.

The federal tax-credit program, set to expire Friday, provides up to $8,000 for first-time purchasers and as much as $6,500 for some current homeowners. To qualify for that credit a buyer must sign a contract on a home by April 30 and close the deal by June 30.

Adding to that incentive is a statewide credit, which was approved by lawmakers last month and kicks in May 1, for as much as $10,000 for first-time buyers and those purchasing newly built homes.

The Case-Shiller index covers three months of data beginning in December, when sales began a three-month slump after what was to have been the federal tax credit's Nov. 30 expiration; Congress in November extended the credit. February's sales data capture that plunge and the traditionally slow winter months. Home sales picked up again in March, and many expect that trend to continue at least through April.

Along with the California cities, Las Vegas eked out a 0.1% gain. Fourteen cities posted declines in February over January, with the biggest losses in Portland, down 1.9%; Dallas, falling 1.4%, and Chicago, down 1%. Two cities were flat for the month.

Home Prices Probably Increased First Time in 3 Years

2010-04-27T07:25:00.000-07:00

The trend in U.S. home prices probably turned up in February for the first time in more than three years, and consumers became less pessimistic this month as the jobs picture brightened, economists projected reports today will show.
By: Shobhana Chadra: Bloomberg.com
The S&P/Case-Shiller index of property values in 20 cities climbed 1.3 percent from February 2009, the first year-over-year gain since December 2006, according to the median forecast of 22 economists surveyed by Bloomberg News.
A report from the Conference Board may show sentiment improved for a second month.

Home prices in January were 30 percent below the peak reached in July 2006, indicating the industry that helped trigger the worst recession since the 1930s will take years to recover lost ground. A pickup in employment is needed to help stem the damage from mounting foreclosures and to sustain recent gains in household spending.

“The bottom has been reached in home prices and we’re now seeing gradual improvement,” said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania. “Prices will move upward but we’re not going to get spectacular gains any time soon because of all the troubled houses out there.”

The S&P/Case-Shiller figures, due at 9 a.m., would follow a 0.7 percent year-over-year drop in January. Bloomberg survey forecasts ranged from a decline of 0.8 percent to an increase of 1.6 percent. Year-over-year records began in 2001.

Year-Over-Year

While the data also include month-to-month changes in prices adjusted for seasonal variations, it’s best to focus on the year-over-year trends, the group charged with issuing the report said on April 20. The panel includes Karl Case and Robert Shiller, the economists who created the gauges.

The seasonally adjusted and unadjusted series “have given conflicting signals” recently, with the former rising while the latter fell, the group said in a statement. The turmoil in housing in the past few years has influenced the models used in adjusting the data, “resulting in larger seasonal adjustments and misleading results,” according to the group.

The New York-based Conference Board’s sentiment index is due at 10 a.m. The gauge probably rose to 53.5 from 52.5 in March, according to the survey median. Estimates ranged from 48 to 57, and the measure averaged 98 during the economic expansion that ended in December 2007.

“Once people feel there’s more job security, consumer confidence will come back up faster,” Naroff said. “We need faster employment growth.”

Payroll Gains

Employers in the world’s largest economy added workers to payrolls in March for the third time in the past five months, according to figures from the Labor Department.

Reflecting the stabilization in housing, the Standard & Poor’s Supercomposite Homebuilder index, which includes Pulte Group Inc. and Lennar Corp., has gained 26 percent this year compared with a 8.7 percent rise in the broader S&P 500 Index.

Prices may improve in coming months as homebuyers rush to take advantage of a government tax credit worth as much as $8,000 before it expires. Purchase contracts must be signed by the end of this week and transactions need to close by the end of June in order for buyers to be eligible.

Growing demand may help offset the pressure on prices from mounting foreclosures. Filings jumped 16 percent in the first quarter from a year earlier, and bank seizures reached a record, according to Irvine, California-based RealtyTrac Inc. Foreclosures push up the number of homes on the market, forcing builders and sellers to make concessions to get deals done.

Some businesses see better prospects. M.D.C. Holdings Inc., the Denver-based builder of Richmond American Homes, said its loss narrowed in the first quarter from a year earlier as orders jumped 38 percent.

“While this trend is encouraging, we remain cautious due to the impending expiration of the federal homebuyer tax credit and depressed overall economic conditions,” Chief Executive Officer Larry Mizel said in an April 23 statement.

The New Rules of Remodeling

2010-04-24T07:37:00.000-07:00

After years of economic recession and housing-market malaise, people are starting to fix up their homes again—but the forces driving today's action couldn't be more different from those during the boom.
By: M.P. MCQUEEN: wsj.com
You may have noticed the lines at home-improvement stores getting longer or heard the whirring of buzz saws in your neighborhood. After years of economic recession and housing-market malaise, people are starting to fix up their homes again.

According to an April 15 report from the Joint Center for Housing Studies at Harvard University, annual spending on remodeling is expected to accelerate this year, with nearly 5% growth over 2009. "This year could produce the first annual spending increase for the industry since 2006," the peak of the housing boom, says center director Nicolas P. Retsinas.

But the forces driving today's action couldn't be more different from those during the boom. Back then, people wanted to renovate their places so that they could trade up to bigger homes, or because their home equity was soaring and they wanted to reinvest some of the spoils.

Now, the opposite is happening: Many people who bought during the boom years are accepting the reality that they won't soon be swapping up for a sybaritic spread. Their mortgages may remain above water, but after years of falling home prices, their equity is so low that the transaction costs of buying a new house would leave little for a down payment.

In short, they are stuck.

"People have seen their down payments kind of wiped out," says Harvard economist Jeremy Stein. "They are locked into their house. They can't really move, even if they thought the other house was cheap and a good deal."

So these people are making their homes more comfortable for a longer-than-expected stay. Setting aside old calculations of how much a particular improvement will add to resale value, they are making smaller tweaks that can make a big difference in livability. You might call it "psychological return on investment."

Nowadays, say real-estate agents and contractors, smaller projects like updating kitchens and baths and humble attic-bedroom conversions are more popular, while two-story master suites and $100,000 kitchen blowouts are decidedly out of fashion. Hidden improvements like insulation also are on the rise, as people realize they won't be able to pass on their drafts, leaks and other problems to the next guy. Tax credits that expire in 2010 are enticing people to make energy improvements, too.

One of the most cost-effective improvements, say contractors, is removing a wall to create an open kitchen-dining area. The project "makes the kitchen feel bigger and the kitchen and dining room more usable," says Sarah Susanka, an architect and author of "The Not So Big House" book series. "It's such a simple thing to do." It can cost as little as a couple of thousand dollars, according to David Merrick, a home remodeler in Kensington, Md., but can run much higher if plumbing and electrical work are involved.

A surprising number of people fall into the category of being above water on their mortgage but anchored to their property. According to First American Core Logic, at least 24.5 million borrowers in the U.S. have home equity of less than 25%, and of those, 13.2 million are above water. Considering the 9% in commissions and fees that typically come with buying and selling a house, as well as the typical 20% down payment on the new one, it is easy to see why people aren't house-hopping like before.

This applies even to affluent professionals. Paul Sorbera, an executive recruiter in Greenwich, Conn., is seeing it firsthand among his clients. He says many financial-services executives "bought $2 million homes in the good times and have $1.3 million houses now because of the price decline. They have some money in the bank and can afford their current living standard, but moving is very impractical for them."

Economists, whose models often assume the rationality of hypothetical consumers, say remodeling makes sense for such people. "If they don't have a lot of equity in their houses and can't move, they should have a propensity to improve rather than move," says Richard K. Green, director of the University of Southern California's Lusk Center for Real Estate. "When you renovate, you save a lot of transaction costs."

Web sites such as Remodelormove.com offer calculators to help consumers make the decision.

Kate Anderson, 42 years old, of Sunnyvale, Calif., a technical writer and homemaker, and her husband, Scott, 43, a vice president at Hewlett-Packard, say they considered buying a larger place to accommodate their growing children, a daughter, 10, and son, 8. But they surmised that buying and selling now would be too expensive. "We didn't think it was worth the whole sale purchase expense … just to get a few extra square feet," Mrs. Anderson says.

Instead, they opted to fix up their 1950s-era tract home, worth an estimated $750,000. Most houses in their neighborhood with new kitchens and baths sell for up to $850,000, she says. While their home "is a little squished," they chose to "gradually improve it," she says.

In December, the Andersons remodeled their kitchen, putting in hardwood floors, cherry cabinets and stainless-steel appliances, ripping out a closet and expanding a doorway to improve the flow. They also installed new incandescent ceiling lights and under-cabinet fixtures, which Mrs. Anderson says she especially loves.

Because they made no major structural changes, they kept the cost to about $50,000, a bargain in the pricey Silicon Valley market. It wasn't easy to hew to that budget, though; the couple decided to ditch a garden window over the sink and self-closing drawers, which would have added several thousand dollars to the cost.

Even in the ever-grander suburbs outside Washington, people are thinking smaller. A few years ago, Mr. Merrick, the contractor, says, more people were doing two-story additions, and most people who remodeled kitchens made them larger. Now, "four of the last six kitchens I did, the footprint stayed exactly the same," he says.

Journal Community discuss..
“ I see a lot more of this going on in my neighborhood. Basements, upper rooms, etc. But I am also seeing a lot more home sales. Five new homes all sold in a month. Of course it helped the builder brought the price down by almost $100K! ”
.—Michael H. Serafin.

Home-improvement retailers are seeing a clear trend toward smaller renovations. Craig Menear, executive vice president of merchandising at Home Depot, says there has been strength recently in projects involving simple décor updates such as ceramic tile, interior paint, faucets and bath fixtures. At Lowe's, customers were drawn to products to update flooring, cabinetry and countertops during the last few months of 2009, the most recent period for which data are available, spokeswoman Maureen Rich says.

Part of the reason, of course, is money. With home prices slumping, there is less equity for homeowners to tap. An April 20 survey by American Express, the first of its kind, found that 72% of affluent homeowners planned to make improvements to their houses in 2010. But they expected to spend an average of just $11,500. And most respondents planned to pay for their projects with cash; just 16% planned to use debt.

Banks also are making credit less available than they used to. Keith T. Gumbinger, vice president of HSH.com, a mortgage-data firm, says that before the housing bust, banks would often lend for projects based on the value of the house after completion of the project, but they are less likely to do so now because "there's no guarantee the improvement or the market will lead to price appreciation." The result: even affluent homeowners aren't able to borrow as much as they used to.

With little reason to expect huge price gains in the housing market in the next few years, some homeowners are thinking especially long-term. Diane Ausavich, a remodeling contractor in Milwaukee, says a pair of physicians, as part of a bathroom renovation, recently installed a barrier-free, walk-in shower and higher countertops in their three-story lakefront home built in the 1890s. They did it "so that as they get older they can wheel in and out with a wheelchair if they should have to," Ms. Ausavich says. The homeowners are in their mid-40s and, "being doctors, I'm sure they see the gamut," she says.

Likewise, Marge Kumaki, 57, a marketing and public-relations consultant who resides in Silver Spring, Md., says she and her husband decided to do some basic upgrades on the post-World War II split-level home they have owned for 21 years after their two children left the nest for good in 2007.

She says she would prefer to move to a new high-rise condominium in downtown Bethesda, but that they decided to stay and renovate because it is more cost-effective and they like where they live now. Last summer's severe thunderstorms, which flooded their finished basement and required repairs, spurred them to get started.

Ms. Kumaki says they are planning to spend in the low $30,000s to update the upstairs bathroom, kitchen and family room.

But the couple have decided to hold off on another dream. "I've always wanted an addition, since it is a split level and you can go up or down," she says. "I'd like another level on top, but that's the future."

The New Remodeling Rules
During the bubble, homeowners sought the biggest, splashiest home improvements to boost resale value. Now they're doing smaller projects that deliver a similar result for far less money.

POPULAR PROJECTS DURING THE BOOM*
Major home office remodel
Cost: $27,000
THE NEW VERSION**
Basic remodel, converting a bedroom by adding low-priced cabinets. Can cost as little as $2,000 plus rewiring and adding receptacles, according to Washington-area contractor David Merrick.
RESULT
Provides a new, dedicated work area at a fraction of the price.

POPULAR PROJECTS DURING THE BOOM*
Bathroom addition
Cost: $37,200
THE NEW VERSION**
Typical 5' x 7' upgrade within existing home dimensions, including low-flow toilets, new fixtures, mirrored walls and new architectural lighting. Cost: $16,000
RESULT
Mirrors, better lighting increase the feeling of space; low-flow toilets save money on water bills; bath fixtures including body sprays give "spa" feel to the home without the expense of whirlpool baths.

POPULAR PROJECTS DURING THE BOOM*
Major kitchen remodel/expansion
Cost: $55,500
THE NEW VERSION**
Remodel within existing dimensions, including removal of a wall for improved flow between kitchen and dining room, new energy-efficient appliances and water-saving fixtures, new cabinets and flooring, and bigger windows. Cost: $21,000
RESULT
Less wall space and bigger windows give a small home the appearance of more space and light; energy-efficient appliances save money on heat and hot water.

POPULAR PROJECTS DURING THE BOOM*
Family room addition
Cost : $79,000
THE NEW VERSION**
Screened-in porch. Starts at a few thousand dollars, assuming there is a roof and foundation in place; $15,000 to $20,000 to convert a small deck; or more than $50,000to build new.
RESULT
Screened-in porch increases usable space and brings outdoors indoors; accentuates landscaping and gardens.

POPULAR PROJECTS DURING THE BOOM*
Master suite addition
Cost: $98,863
THE NEW VERSION**
Attic bedroom. Convert unfinished space into 15' x 15' bedroom and a 5' x 7' bathroom with shower. Cost: $49,346.
RESULT
Provides more living space for a returning family member.

Economic signs show recovery, point to low rates

2010-04-22T09:03:00.000-07:00

The number of U.S. workers filing new claims for jobless aid fell last week as the labor market gradually heals and producer price data showed inflation remained muted, despite a surge in food costs last month.
By: Lucia Mutikani: Reuters.com
Housing Market

In other data, sales of previously owned home rose 6.8 percent to an annual rate of 5.35 million units in March as Americans rushed to take advantage of a tax credit for home buyers, the National Association of Realtors said.

Analysts said the data on Thursday pointed to a moderate economic recovery that should see the Federal Reserve renew its pledge to keep benchmark interest rate exceptionally low for an extended period at its regular two-day meeting next week.

"Inflation is still not an issue that the Fed is concerned about and the job market is very slowly improving, which is an underpinning for moderate economic growth being sustained," said Stuart Hoffman, chief economist for PNC Financial Services in Pittsburgh. "It's too soon for the Fed to move away from the extended period language."

Initial claims for state unemployment benefits dropped 24,000 to a seasonally adjusted 456,000, the Labor Department said on Thursday, resuming a downward trend that had been interrupted by the Easter holiday. That compared to market expectations for 455,000.

The data covered the survey period for the government's closely monitored employment report for April, which will be released on May 7.

While initial claims are still above levels viewed by analysts as in line with job market stability, anecdotal evidence indicates employment is slowly rising.

Last month, the economy recorded its largest jobs gain in three years, largely driven by private sector hiring as employers started to warm up to the economy's recovery - which is showing signs of gathering momentum.

Analysts expect the hiring trend continued in April, also supported by recruitment for the 2010 census.

The number of people still receiving benefits after an initial week of aid fell 40,000 to 4.65 million in the week ended April 10, the Labor Department said. However, it was less than market expectations for a fall to 4.60 million and the prior week's figure was revised up.

FOOD PRICES BOOST PPI

In a second report, the department said prices paid at the farm and factory gate increased 0.7 percent following a 0.6 percent drop in February on strong food and gasoline costs.

The Labor Department said 70 percent of the increase in wholesale prices in March was due to a 2.4 percent jump in consumer foods, the largest rise since January 1984. Gasoline prices rebounded 2.1 percent from a 7.4 percent fall in February.

Still, inflation pressures remain benign. Stripping out volatile food and energy costs, core producer prices gained 0.1 percent in March after rising by the same margin in February.

Government data last week showed consumer prices barely increased in March. A combination of benign inflation pressures and excess resource slack in the economy support the U.S. central bank commitment to low interest rates.

The Fed will hold a regular two-day policy meeting on Tuesday and Wednesday next week.

Markets had expected producer prices to rise 0.4 percent.

The data had little impact on U.S. financial markets, which were watching developments in Greece for direction.

U.S. stocks fell as new budget deficit data on Greece fanned fears about that country's ability to raise enough money to meet debt payments. U.S. government debt prices rose modestly and the dollar hit a one year high against the euro.

EXISTING HOME SALES JUMP

In a separate report, sales of previously owned home rose 6.8 percent to an annual rate of 5.35 million units in March as Americans rushed to take advantage of a tax credit for home buyers, the National Association of Realtors said.

Despite the rise, activity remained severely depressed from levels preceding the country's sharpest housing downturn in modern history. High home vacancies are constraining rentals, helping to put a lid on inflation.

"We're reinforcing the case that we're getting a gradual bottom in housing. Despite that, enthusiasm will be tempered by the prospect of more foreclosures ahead," said Jim Awad, managing director at Zephyr Management in New York.

In another report, U.S. home prices fell 0.2 percent on a seasonally adjusted basis in February and dropped 3.4 percent in the year, the Federal Housing Finance Agency said on Thursday.

The regulator's price index, calculated using purchase prices of homes financed with mortgages that have been sold to or backed by Fannie Mae (FNM.N) or Freddie Mac (FRE.N), has fallen 13.3 percent below its April 2007 peak.

(Additional reporting by Pedro da Costa in Washington and Lynn Adler in New York)

Washington Mutual created 'mortgage time bomb,' Senate panel says

2010-04-13T03:26:00.000-07:00

The failed bank made subprime loans it knew were likely to go bad and then packaged them into risky securities, Senate investigators say.
By: Jim Puzzanghera and E. Scott Reckard: latimes.com
Before Washington Mutual collapsed in the largest bank failure in U.S. history, its executives knowingly created a "mortgage time bomb" by making subprime loans they knew were likely to go bad and then packaging them into risky securities, a congressional investigation has found.

In some cases, the bank took loans in which it had discovered fraudulent activity - such as misstated income by borrowers - and rolled them into mortgage securities sold to investors without disclosing the fraud, according to the report released Monday by the Senate's Permanent Subcommittee on Investigations.

The actions were driven in part by greed, according to the committee report, which pointed out that WaMu's pay practices rewarded loan officers and processors based on how many mortgages they could churn out.

The new disclosures could give a boost to efforts by President Obama and congressional Democrats to pass sweeping overhaul of financial regulations, which the Senate is set to consider this spring, said Sen. Carl Levin (D-Mich.), the subcommittee's chairman.

"Washington Mutual built a conveyor belt that dumped toxic mortgage assets into the financial system like a polluter dumping poison into a river," Levin said. "Using a toxic mix of high-risk lending, lax controls and destructive compensation policies, Washington Mutual flooded the market with shoddy loans and securities that went bad. . . . It is critical to acknowledge that the financial crisis was not a natural disaster, it was a man-made economic assault."

WaMu's failure is also under investigation by the Justice Department. The Seattle-based thrift, which was seized by federal regulators in September 2008 and sold to JPMorgan Chase & Co. for $1.9 billion, had nearly a third of its 2,200 branches in California and was a major player, along with rival Countrywide Financial Corp., in helping fuel the state's housing boom.

According to the Senate report, WaMu executives were aware in 2006 of problems at its Southern California subprime unit, Long Beach Mortgage Co. Excerpts of internal e-mails and reports offer a stark and unvarnished view of the warning signs that were dismissed as the bank tumbled toward failure.

The company's chief risk officers called Long Beach Mortgage, the subprime subsidiary the firm used to stage its rapid growth in home lending, "a real problem for WaMu." Stephen Rotella, WaMu's former chief operating officer, described the unit as "terrible."

"Short story is this is not good," David Schneider, WaMu's former president of home loans, wrote in a December 2006 e-mail. "We are all rapidly losing credibility as a management team."

Long Beach Mortgage was founded by the late Roland E. Arnall, a West Los Angeles billionaire who later built Ameriquest Mortgage Co. and its sister companies into the nation's largest subprime operation.

Washington Mutual acquired the bulk of Long Beach Mortgage - the part that offered loans through brokers, not through its own employees - in 1999.

Long Beach Mortgage's lending reflected the general disintegration of standards across the industry, said Paul Muolo, executive editor of National Mortgage News and co-author of "Chain of Blame," a 2008 book about the mortgage meltdown. Companies such as Orange-based Ameriquest, Irvine's New Century Financial Corp. and San Jose's First Franklin Financial Corp. competed for ever riskier subprime loans that Wall Street banks transformed into mortgage bonds and sold around the world.

"It's hard to say which lender went berserk first," Muolo said, as the subprime rivals wound up adopting the philosophy "If he or she breathes, we will make the loan."

The subcommittee's investigators, who conducted more than 100 interviews and depositions and collected 50 million documents, found that Washington Mutual jumped headlong into subprime and other risky lending in 2003 to increase profits.

The company and its Long Beach unit "used shoddy lending practices . . . to make tens of thousands of high-risk home loans that too often contained excessive risk, fraudulent information or errors," according to a subcommittee memo.

Internal company documents highlighted the profit pressures. "In 2007, we must find new ways to grow our revenue. Home Loans Risk Management has an important role to play in that effort," read a late 2006 message from the unit's chief risk officer to the risk management team.

Adding to the problems, WaMu and Long Beach Mortgage frequently steered borrowers who qualified for prime loans into subprime loans, the subcommittee found. WaMu then spread the risk of those loans and riskier ones to investors by packaging the subprime loans into $77 billion worth of securities it sold to investors, the panel found.

"At times, WaMu selected and securitized loans that it had identified as likely to go delinquent," the report said.

A June 2008 review by the bank's main regulator, the Office of Thrift Supervision, found a "culture focused more heavily on production volume rather than quality."
Top employees could become members of the company's President's Club, which offered lavish, all-expense-paid trips to Hawaii or the Caribbean, the subcommittee found.

Levin said the findings showed the need for a new consumer financial protection agency, which Obama has proposed as part of his regulatory overhaul, to stop lenders from preying on borrowers. "The bottom line is that WaMu had poor policies, poor controls, inadequate oversight of its loans [and] turned out toxic mortgages that sunk the bank, devastated homeowners and polluted the financial system like a poison," Levin said. "This was a Main Street bank that got taken in by these Wall Street profits."

JPMorgan, which acquired WaMu, had no comment on the report.

On Tuesday, the Senate subcommittee launches a series of hearings looking at WaMu's 2008 failure as a case study of the financial crisis. Former WaMu executives are scheduled to testify Tuesday, with testimony Friday from regulators and later this month from credit rating firms and investment banks that also contributed to the bank's problems.

A report to be released Friday from the inspectors general of two agencies that regulated WaMu - the Office of Thrift Supervision and the Federal Deposit Insurance Corp. - is expected to fault the regulators for their oversight of the bank.

Tax Credits, Shoppers Lift Home Prices

2010-04-12T03:18:00.000-07:00

County median rises 4 percent in March after two-month slide.
By: Joel Russell: labusinessjournal.com
L.A. County’s median home price rose 4 percent in March after two months of declines.

The combination of federal tax credits and seasonal trends pushed up the median price of a Los Angeles County home 4 percent in March.

The median’s rise to $340,000 marks a turnaround after two successive months during which sales and prices slumped, nipping a nascent recovery begun in the second half of last year.

Many economists have attributed the strengthening of the housing market to the decision to extend until April 30 federal tax credits that had been scheduled to expire Nov. 30. The credits offer $8,000 to new home buyers and $6,500 to repeat buyers; they sparked a flurry of sales late last year.

“National housing sales have collapsed in the last three months after the stimulus package wore off,” said Christopher Thornberg, founding principal at Beacon Economics in Inglewood. “Now, again, you have these policies to restrict supply and stimulate demand in the market.”

In March, there were 4,849 homes sold in the county, an increase of 6.8 percent from February, after adjusting for the number of selling days per month as collected by HomeData, a Hicksville, N.Y., housing data firm. The median price is $13,000 higher than February, but lower than the December 2009 median of $348,000.

Geographically, sales activity in March was widespread, with ZIP codes in Lancaster, Compton, Pico Rivera, Bellflower and Granada Hills each showing more than 40 homes sold. Surprisingly, wealthy neighborhoods in Palos Verdes Estates, Calabasas and Beverly Hills also showed strong activity after years of dormancy.

“The traditional market weak spot – homes in the $1 million-$2.5 million range – has come back to life,” said Tom Dunlap, general manager at Prudential California Realty in Beverly Hills. “There is a lot of cash parked on the sidelines and the price is coming down now to where people who have been watchful are coming off the sidelines.”

Leslie Appleton-Young, chief economist at the California Association of Realtors in Los Angeles, sees the movement in luxury homes as the next phase in the recovery of the housing market, which started its collapse as subprime loans soured. The problems took longer to reach affluent home buyers, who had enough assets and income to wait out the market. But now even the owners in swanky neighborhoods need to sell and have dropped their asking prices significantly, especially as job losses have taken their toll on all wage groups.

“You’re seeing values at the high end,” Appleton-Young said. “Also, the spread of foreclosures starting a year ago has affected the high end. You’re seeing more nondiscretionary sellers now than earlier in the recession.”

David Jervis, a broker at Century 21 Jervis & Associates in Downey, said large homes in his market that previously fetched $2.5 million now sell in the $800,000-$1.1 million range.

“Typically, the people who sell are those who need to sell,” said Jervis, who specializes in selling bank-owned properties.

For homes selling for less than $550,000 that qualify for Federal Housing Administration-backed loans, “as soon as the property hits the market, we see a minimum of 10 offers and as many as 20,” he said. “People are overbidding each other up to 12 percent above asking price because there’s so little sellable inventory.”

Jervis believes the expiration of the federal tax credits shouldn’t slow demand for homes as long as banks don’t flood the market with their full list of foreclosure properties and other elements in the market remain stable, particularly liberal FHA loan terms.

In the L.A. condominium market, the number of units sold in March totaled 1,777, a gain of 2 percent compared with February after adjusting for the number of selling days each month. The median condo price in March was $300,000, a 1.7 percent rise compares with February.

Obama administration adopts get-tough stance on mortgage bias

2010-04-11T06:59:00.000-07:00

The Justice Department takes aim at brokers who overcharged minority applicants for loans during the housing boom, along with the companies that purchased those loans.
By: Kenneth R. Harney: latimes.com
A new Obama administration get-tough policy on home mortgage discrimination is drawing kudos from consumer advocates, along with expressions of serious concern from lawyers who represent lenders and brokers.

In a settlement last month with two subsidiaries of ailing insurance giant American International Group Inc., the Justice Department took aim at one of the most controversial practices of the housing boom years: National subprime mortgage lenders originated billions of dollars in high-interest-rate loans through local brokers who sometimes hit African American and other minority applicants with excessive loan charges.

Mortgages extended to African Americans often carried higher fees than those paid by white subprime applicants - even when the borrowers' credit profiles and other factors were roughly the same. But did these disparities in fees open those lenders who purchased the loans from local brokers to legal attack?

Weren't the higher fees solely the result of predatory pricing by individual brokers operating independently of their wholesale lenders? If a broker charged African Americans higher fees than whites, wasn't this violation of fair lending laws on the broker's shoulders?

The Obama administration gave a resounding answer to that question: no. The consent order requires AIG's subsidiaries to pay $6.1 million to about 2,500 African American borrowers, or an average of $2,300 in cash restitution for overcharges per loan.

The companies are also required to spend at least $1 million on consumer financial education programs. None of the firms admitted wrongdoing as part of the settlement. AIG Federal Savings Bank and Wilmington Finance Inc. no longer are involved in the wholesale mortgage market. AIG took a $182-billion bailout from the government in 2008 and is in the process of reorganizing its business activities. No individual mortgage brokers were cited in the case.

The core message here, according to Justice Department officials: Lenders who use independent brokers to originate mortgages cannot ignore what those brokers are doing to their minority customers. They will be held responsible for civil rights violations because they should have been monitoring their broker networks for signs of discriminatory pricing - which should be detectable by examining loan packages and performing statistical analyses.

Assistant Atty. Gen. Thomas E. Perez said: "Discriminatory practices by lenders, brokers and other players contributed to our nation's housing crisis and economic meltdown. Lenders who looked the other way and ignored the discriminatory practices of brokers must be held accountable."

Perez warned that many other lenders who use broker networks could also be vulnerable to legal actions.

Community groups and civil rights advocates hailed the settlement as a huge step forward.

"It's a new day for borrowers," said David Berenbaum, chief program officer for the National Community Reinvestment Coalition. "Borrowers should see fewer backdoor pricing abuses" - especially the bloated fees, interest rates and unequal underwriting standards that were commonplace during the housing boom years.

But some mortgage industry groups and lawyers who specialize in financial issues disagree. They contend that holding giant wholesale lenders responsible for illegal acts they did not themselves commit not only is unfair but also will do long-term harm to all borrowers.

"We absolutely oppose discrimination in any form," said Roy DeLoach, chief executive of the National Assn. of Mortgage Brokers. "But we think the government's target should be the persons who actually do the discriminating" - in this case, individual, local brokers - not the lenders who acquired the loans with no knowledge of the discriminatory fees.

DeLoach argues that the administration's approach will discourage some lenders from dealing with brokers in general, thereby reducing competition in the marketplace, especially in areas with significant minority populations.

Paul F. Hancock, a partner with the law firm K&L Gates who served for 20 years in the Justice Department's civil rights division and was a deputy attorney general in Florida, says the AIG settlement "is really stretching the law, maybe even going beyond the law" by holding lenders responsible for the actions of independent brokers.

Bottom line for consumers: Look for more fair lending settlements, more financial restitution and much closer supervision of loan officers - whether they're on lenders' staffs or independent brokers - to ensure that every mortgage applicant gets equal treatment.

Two Energy Credits To Trim 2010 Taxes

2010-04-10T09:06:00.000-07:00

Two energy tax credits hold appeal both for true green diehards and those who are staying put due to housing market doldrums.
By: LAURA SAUNDERS: wsj.com
Still smarting from your 2009 taxes, due in a few days? Start whittling the bill for next April.

A good place to begin: two federal tax credits for homeowners who want to save energy, one of which expires at the end of this year. The credits have appeal both for true green diehards and those who are staying put due to housing market doldrums.

The credits took effect in their current form in February 2009. Both offer dollar-for-dollar write-offs against taxes, not just a deduction from income. And unlike many tax benefits, there are no income limits on who can use them.

Yet experts say many people are still unaware they exist. Bill Shaw, a remodeler in Houston, says his best marketing has been done by—of all people—tax preparers. "Since January, my phone has been ringing off the hook with people whose accountants told them" about the credits, he says.

The smaller benefit, known as the Residential Energy Property Credit, will appeal to a broader swath of taxpayers. It applies to 30% of the cost of retrofitting an existing home to save energy, up to $1,500. That means you have to spend $5,000 to receive the maximum credit. This benefit expires at the end of 2010, and amounts claimed in 2009 count toward the $5,000 total.

Items that qualify include insulation, windows, doors, roofing, hot water heaters and air-conditioning systems. Not included: ceiling fans or window air-conditioning units. Installation costs are permitted for some items but not others (see chart below). The Internal Revenue Service recently said that qualified items installed in an addition to an existing house also are eligible.

The other credit, known as the Residential Energy Efficiency Property Credit, is far more generous but typically requires greater expense and commitment to green living. It is for 30% of the total cost of items such as solar panels, windmills and geothermal heat pumps, and the credit amount is unlimited. It expires at the end of 2016.

Jeremy Skogquist, an executive with NIH Homes in the Minneapolis area, says he has sold more than a dozen $25,000 packages in the past year tied to this credit. The package offers a geothermal system to store water for heating and cooling deep in the ground where the temperature is a constant 52 degrees. "The tax credit cuts my clients' payback time to about four to five years from six to eight at current rates," he says.

Far to the south, Houston architect Kathleen English is using both credits to save nearly $15,000 on the cost of a "green" house she is rehabbing for her family. In addition to a geothermal system, it will have solar panels, special insulation, a reflective roof and energy-efficient windows. She is springing for solar panels now, hoping that her local utility at some point will pay homeowners to feed excess power back into the grid.

If you want to use either credit, do your research. The specifications for what is eligible are precise and stringent. For example, some Energy Star-rated items qualify for the credit while others don't. Taxpayers claim either credit on Form 5695, and for your records you should keep the manufacturer's certification that the component is eligible. (Many contractors, like Bill Shaw, will help with the paperwork.)

Those planning to upgrade windows may want to wait a bit, because a pending bill expected to pass Congress in the next few months would expand the law to include all Energy Star windows, whereas only some are currently allowed. The provision should take effect 90 days after enactment.

Comprehensive information about eligibility is available on the National Association of Home Builders Web site and from the IRS. Retailers like Home Depot and Lowe's also provide useful guides. For a listing of separate state and local energy tax incentives, see www.dsireusa.org.

Evoluciona el movimiento verde en la Isla

2010-04-10T08:58:00.000-07:00

Según el doctor Abruña, no se puede negar que se están dando pasos, pero el camino es todavía extenso.
By: Raisa Rivas Español / Especial para Construcción: elnuevodia.com
Si usted piensa que la construcción verde es una moda del Siglo XXI, o simplemente una tendencia nueva y pasajera, se equivoca. Pero más aún, le sorprenderá saber que en la Isla se han hecho innumerables esfuerzos desde hace tres décadas.

“Si bien es cierto que si nos comparamos con el resto del planeta, estamos en una etapa casi embrionaria y nos falta muchísimo por desarrollar, también lo es que hemos dado pasitos y que cada vez hay más profesionales multidisciplinarios interesados genuinamente en el tema”, dijo el arquitecto Fernando Abruña, quien es el primero a quien se asocia con la arquitectura verde en la Isla.

Esa conexión “Abruña-Arquitectura Verde” no es casual. Lleva más de 35 años practicando la profesión y desde que comenzó tenía tanto interés en el tema que en el 1980 publicó su libro “Fresco Gratis”, donde exponía ideas para usar la naturaleza al ambientar los edificios.

“Tenemos que remontarnos a 1973. A grandes rasgos, el despertar fundamental se inició a raíz del embargo petrolero de esa época, que dio como resultado el aumento exagerado de los precios del petróleo y la histeria de la gente. Una de sus consecuencias más conocidas fue la caída de la industria de la construcción y el increíble aumento de los intereses hipotecarios, pero también esa crisis tuvo un efecto de crear conciencia de la cantidad de energía que consumía el mundo occidental”, explicó Abruña.

A raíz de ese momento histórico que abrió los ojos al mundo, se hicieron grandes esfuerzos para identificar estrategias de ahorro de energía, como sellar herméticamente las ventanas de los edificios para que no se escapara el frío o el calor, dependiendo del área donde estaban construidos. Sin embargo, el remedio resultó peor que la enfermedad, porque se dieron cuenta que el aire del interior de esos edificios se viciaba, dando como resultados los temidos hongos en las propiedades.

Más tarde (en 1976) se añadió otro evento importante, que fue el caso de la legionelosis, una enfermedad bacteriana que puede producir neumonía. Una epidemia de esta enfermedad afectó a los participantes de una convención estatal de la Legión Americana y, por esto, se le dio el nombre de ‘enfermedad de los legionarios’. Se encontró que los brotes de legionelosis aparecen en diversos tipos de sistema de agua, como por ejemplo, los procedentes de torres de agua para refrigeración de acondicionadores de aire.

“Podemos decir que esos eventos dieron paso a la arquitectura verde, que es una vertiente que incluye la búsqueda de la calidad del ambiente interior’, abundó el arquitecto y profesor universitario. “Es una combinación de ver cómo conservamos la energía, pero a la vez logramos un ambiente adecuado y saludable”, dijo.

Más tarde, dos desastres ambientales siguieron abonando al movimiento que ya se había iniciado: el petrolero Exxon Valdez, en 1989, que derramó en el Prince William Sound en Alaska, más de 37,000 toneladas de crudo al Océano (la peor tragedia ecológica en la historia de ese estado), y el desastre ambiental de Chernobyl, en Ucrania, en 1986. Éste tuvo un componente adicional, pues se vio que la nube radiactiva se extendió a otros países, ya que se estimó que la cantidad de material radiactivo liberado fue unas 500 veces mayor que la bomba atómica de Hiroshima. La magnitud del daño causado contribuyó a que la gente entendiera que el problema ambiental que sucede en una región del mundo puede afectar a todo el planeta.

Posterior a esa etapa, se inicia el Departamento de Energía Federal y más tarde en la Isla, la Oficina de Energía de Puerto Rico, para promover las fuentes de energía alternas. Esa oficina pasó luego al Departamento de Asuntos al Consumidor (DACO) y eventualmente se constituyó en la Administración de Asuntos de Energía que ahora se llama Administración de Asuntos Energéticos.

“Ha pasado el tiempo, pero sigue existiendo un denominador común: tiene un presupuesto irrisorio”, expresó el experto.De acuerdo a Abruña, en la Isla hay un problema adicional al del pobre presupuesto, pues todos los combustibles son fósiles, lo que implica que por persona se abona grandemente al calentamiento global. “Desde el punto de vista per cápita, tenemos la triste distinción de ser uno de los líderes en consumo y generación de CO2, y aunque hay diferentes estadísticas para decir cuánto es dicho consumo, el promedio está entre las 12 a las 22 toneladas por persona. Una cantidad exorbitante”.

SOSTENIBLE, SUSTENTABLE, VERDE Y ECOLÓGICO

Los cuatro son términos que se utilizan, aunque sostenible es el correcto desde el punto de vista de la academia, según Abruña, quien dice que, no obstante, todo lo que falta por hacer, afortunadamente ha visto un cambio sustancial en esa materia en los últimos diez años.

Un ejemplo de esto es que cuando fundaron e inscribieron el Capítulo de Puerto Rico y el Caribe del US Green Building Council (entre 2004 y 2005) estaba formado ‘por dos o tres personas’. Ahora ha visto con gran satisfacción un dramático crecimiento en los miembros. Al grupo se han unido profesionales de diferentes ramas de la construcción incluyendo ingenieros, corredores de bienes raíces, arquitectos y tasadores, una prueba fehaciente del interés que despierta el tema para Abruña, quien fue su primer presidente y sigue siendo parte de la Junta de Directores.

En cuanto a la construcción de propiedades que reúnan los criterios de ‘vivienda sostenibles’, Abruña quiso dar un paso al frente y predicar con el ejemplo.

“Comencé a diseñar casas ecológicamente sostenibles desde que entré en la Universidad de Puerto Rico en la década de 1970. Diseñé varias casas que por diferentes razones nunca se construyeron, pero me quedé con el saborcito de hacerlas, pues creía firmemente en este concepto’, y el sueño largamente acariciado se hizo realidad contra viento y marea.

En el 2000 construyó en Vega Alta la ‘Casa Ausente’, una propuesta tan revolucionaria que se hizo famosa no sólo en Puerto Rico, sino también internacionalmente. Construida originalmente para él vivirla, esa construcción fue considerada la primera casa ecológica de la Isla. En ella se dio el gusto de aplicar todas las teorías en que creía, con la que en esencia quería demostrar que se puede vivir en un lugar sin dañar al ambiente, y de una manera costo accesible.

En el 2001, participó en otro proyecto de envergadura, con grupos estudiantiles y profesionales no sólo de la Escuela de Arquitectura de la Universidad de Puerto Rico sino también del Recinto Universitario de Mayagüez.

Diseñaron y construyeron la Casa Solar, que los llevó al primer evento del Décalo Solar en Washington.

¿Un esfuerzo costoso?

Hay un principio equivocado de que este tipo de construcción es sólo para millonarios o al menos personas muy adineradas. ‘Es erróneo. Puedes tener un edificio verde, bien orientado, con el uso de materiales apropiados. Hay muchas oportunidades de diseñar edificios que no sean impactados grandemente desde el punto de vista de costo, y parte de nuestra misión es seguir educando a la ciudadanía y a los profesionales’.

Abruña otra vez quiso pasar de la teoría a la práctica para dar un ejemplo real de que se podían construir casas con los criterios sostenibles, pero económicas. “En el 2004 diseñamos un modelo con esas especificaciones, pero nos tomó varios años más para encontrar quién se enamorara del proyecto. Lo logramos con los empresarios de Villas Miantojo”. El año pasado terminó para esa empresa la Casa Solaria, un prototipo que está en la Universidad del Turabo.

‘Tenemos que hacer un cambio bien radical de la manera en que construimos. Se estima que para el 2030 los edificios deberán ser ‘carbón neutral’ o neutros en emisiones de CO2, porque, de otra manera, el asunto del calentamiento global se va a agudizar dramáticamente. Parte del calentamiento global tiene que ver con la construcción y, según muchos expertos, el problema del calentamiento va a ser más sombrío que lo que pinta Al Gore en su documental ‘Una Verdad Incómoda’, por el que ganó el Nóbel de la Paz’.

Según el doctor Abruña, no se puede negar que se están dando pasos, pero el camino es todavía extenso.

Haga la diferencia...

2010-04-10T08:57:00.000-07:00

Son muchos los que se preguntan qué pueden hacer para poner su casa verde, es decir, un hogar que utilice menos energía y agua, se produzca menos basura y sea más saludable para vivir.
By: Raisa Rivas Español / Especial para Construcción: elnuevodia.com
A continuación, se aclaran varias dudas, dependiendo la magnitud de los cambios.

Mitos y realidades

MITO: Si mi casa fue construida sin los estándares verdes, no podré arreglarla.

REALIDAD: Falso. Aunque es todo un proyecto y requiere su compromiso, podrá lograrlo. Debe empaparse de todos los detalles, incluyendo los materiales usados en la construcción y el tipo de pintura que se usó. Esta última es uno de los elementos que más puede afectar su salud.

MITO: Estando en casa, estamos protegidos de la contaminación del aire.

REALIDAD: Sí está protegido del aire exterior, pero el de su casa puede ser más dañino que el de afuera. ¿Cómo? Teniendo los abanicos, acondicionadores de aire y los filtros sucios; usando detergentes no recomendados y pintura dañina a su salud. Los abanicos de los baños o extractores que no funcionan causan humedad que puede crear hongos. Hasta los muebles pueden tener componentes dañinos a su salud. Algunos de estos factores causan condiciones crónicas.

MITO: Una casa verde es más costosa que una que no lo sea.

REALIDAD: Dependiendo de lo que escoja, la realidad es que, inicialmente, podría invertir más, pero no sólo verá reducciones en su factura de luz y agua mensualmente (lo que ya es un ahorro), sino que las probabilidades de enfermarse de ciertas condiciones, como las respiratorias son menores.

MITO: En Puerto Rico no se consiguen los productos para poner mi casa verde.

REALIDAD: En la Isla puede encontrar desde los accesorios para el baño y cocina ecológicamente amigables, hasta los enseres para toda la casa, con el sello de ‘Energy Star’. Pregunte en su tienda o ferretería favorita y busque en Internet.

Speeding Up Short Sales

2010-04-09T03:16:00.000-07:00

This week, new federal rules were implemented to expedite and streamline the short sale process–but not every short sale qualifies.
By: JUNE FLETCHER: wsj.com
Q: When I bid on a short sale, why does it take months to hear back from the seller's lender, even though the offer is close to the broker's price opinion? Would it speed things up if I added a provision that the offer becomes invalid after three months, or some other time period?

—Mountain View, Calif.
A: You won't need Zen-like patience to wait for a lender to approve your short sale bid any longer. That's because this week, new federal rules were implemented to give lenders financial incentives to expedite and streamline the short sale process.

But bear in mind that these rules don't cover all loans: Only those that aren't guaranteed by Freddie Mac or Fannie Mae, which have their own short-sale procedures. Moreover, the homeowner must be behind in payments or at risk of default; the unpaid principal balance must be equal to or less than $729,750, and the total mortgage monthly payment must be greater than 31% of the borrower's income. So if you're looking to buy someone's McMansion or vacation home, you may still face a lengthy wait.

For all these properties that don't fall under the new federal guidelines, the process is still likely to remain grueling, simply because it's complicated: Sellers have to document hardship. Brokers need to offer their opinion of the property's current value, based on comparable sales. Lenders need to determine whether their net proceeds from the short sale would exceed what they'd get if the property went into foreclosure, and must make sure that the proposed transaction is "arm's length" (that is, that the buyer isn't a friend or relative of the seller, or worse, a "rescue scammer," that is, someone who promises to "save" your house if you sign over the deed, or who promises to negotiate with your lender on your behalf for a fee. And all parties to the original loan, including investors who own even tiny pieces of it (there may be a long list), servicers and private mortgage insurers must sign off on the sale.

Furthermore, sometime during the process, one of the parties who are being asked to take a loss may insist that the sellers take a personal note to cover some of the debt after the sale goes through. In that case, the sellers may decide to let the property go into foreclosure instead of proceeding with the sale. Or the sellers' circumstances may change—for instance, they may go into bankruptcy—which could delay or halt the sale.

During this entire ordeal, the paperwork is handled by the lender's loss mitigation department, which is undoubtedly swamped with applications. Short sales are the number one category of distressed property, rising to 17.1% of all sales in February, according to the latest Campbell/Inside Mortgage Finance Survey.

So putting a time limit to your offer isn't going to do you any good. It's better simply to look for short-sale properties that fall under the federal guidelines or to concentrate on "pre-approved" properties that are being handled by experienced negotiators.

FBI probes L.A. Housing Department’s actions in apartment project for homeless seniors

2010-04-08T16:37:00.000-07:00

The FBI is investigating an affordable-housing deal in which Los Angeles officials channeled $26 million to a developer who they knew was under criminal investigation for alleged misuse of public funds, city officials said Thursday.
By: Jessica Garrison at Los Angeles City Hall: latimes.com
The developer, David Rubin, was indicted last fall in New York for alleged bid-rigging and fraud, charges unconnected to the L.A. project.

The $26 million went toward construction of a 92-unit apartment building near downtown L.A. for disabled homeless seniors. It has sat empty since October while its prospective tenants live in shelters or substandard housing.

The city's Housing Authority, concerned about irregularities in the deal, has refused to release money that would pay the tenants' rent. Without that rental income, the developer could be forced into default. In turn, the city could be on the hook for millions of state and federal dollars that it helped arrange for the developer, City Controller Wendy Greuel said in an interview Thursday.

The controversial deal came to light in an audit released by Greuel's office. FBI agents have requested notes and documents gathered during the audit, the controller's office said.

The agency involved in the deal is the Housing Department, which oversees compliance with rent control laws and aids construction of privately run, affordable apartments. The Housing Authority, a separate agency, manages federal Section 8 rental vouchers and city-owned housing projects.

The audit found that in 2008, Housing Department officials "blatantly disregarded information that ... one of the partners was under federal investigation."

Officials "then chose not to share this information with the city attorney or other stakeholders," Greuel said in a letter to Mayor Antonio Villaraigosa and other city leaders.

The audit does not accuse any city officials of criminal behavior, or allege that the $26 million was misspent.

Doug Guthrie, the newly appointed head of the Housing Department, said he was working to find a way to "get these people housed."

Guthrie succeeded Mercedes Marquez, who headed the agency when the deal was made.

"We are left today with a much-needed project [that] sits empty," Greuel said, calling it "a fiasco."

Officials in the housing department, she added, "appeared to act in the developer's best interest, as opposed to the best interest of the city and the taxpayers."

Rubin could not be reached for comment. His attorney, Donald Etra, was not immediately available. Marc Gelman, chief executive of Enhanced Affordable, said the company had done nothing wrong, adding that it has severed ties with Rubin. Gelman blamed squabbling city agencies for keeping homeless seniors from moving in to the new building, and said he might sue the city for not releasing the rent money.

"I have an empty building that every day costs money to operate, pay the debt ... a minimum of a few thousand dollars a day," Gelman said. "And these poor homeless people, we have them coming to our office, our building, on a daily basis."

Added Rudolf Montiel, the head of the Housing Authority: "It is reprehensible that public officials would aid and abet in the misuse of federal dollars. ... Unfortunately, the tenants are the ones who are bearing the brunt of the misdeeds of this developer."

Calif. lawmakers approve foreclosure tax-relief measure

2010-04-08T15:55:00.000-07:00

The bill would waive state taxes on mortgage debt that has been forgiven in a foreclosure or short sale and could affect some 34,000 taxpayers.
By: Patrick McGreevy: latimes.com
Legislature approves tax break for people in foreclosures, short sales.
The measure, which is expected to be signed by Gov. Schwarzenegger, would waive state taxes on mortgage debt that has been forgiven in a foreclosure or short sale.

Thousands of Californians whose homes were foreclosed on or sold at a loss will likely get tax relief under a measure approved Thursday by the state Legislature.

The bill would waive state taxes on mortgage debt that has been forgiven in a foreclosure or short sale. It is expected to affect about 34,000 taxpayers.

Gov. Arnold Schwarzenegger is expected to sign the measure, which would also provide about $60 million in tax credits to green-energy companies, so people can take advantage of it by the April 15 deadline for tax returns.

Californians can already claim the tax breaks on federal returns. "This is a great example of what we can accomplish when we work together to solve problems for Californians," said Schwarzenegger spokesman Aaron McLear. "This bill will protect homeowners from unfair taxes and encourage California solar companies to expand and create jobs."

The short-sale provision would mean about $34 million less in tax revenue for the state over three years, according to the Franchise Tax Board.

Other parts of the measure, SB 401 by Sen. Lois Wolk, D-Davis, would increase penalties and interest payments on some tax bills. Republicans called that a tax increase, and several GOP members of both houses voted against the bill, which was opposed by the Howard Jarvis Taxpayers Assn.

As the real estate market has slumped, many Californians have found themselves owing much more on their mortgages than their homes are worth. Some have walked away, resulting in foreclosure, or asked their lender to approve a short sale, in which a home is sold for less than the debt, some of which is waived.

The amount waived has been considered taxable income under California law; the measure passed Thursday would eliminate that tax when a bank agrees to accept less than what is owed on a home.

The governor vetoed a similar bill last month because it included a provision, since removed, that would have increased penalties against businesses and wealthy individuals who abuse tax credits.

Business groups including the California Chamber of Commerce and Western States Petroleum Assn. complained that the provision would have made businesses reluctant to claim the tax breaks for fear of making a costly error. The businesses also said California's tax penalties were already tougher than those enforced in other states.

Wolk said the penalties would not have applied to honest mistakes.

The "green" state credits are a response to the federal American Recovery and Reinvestment Act, which provides grants to firms for power plants that produce renewable energy.

The federal government does not tax the grant money. Under the bill approved Thursday, California would provide similar relief.

Calpers to Bow Out of Condo Project in Venice

2010-04-08T15:49:00.000-07:00

Pension fund had pushed partner to reduce unit prices.
By: Daniel Miller: labusinessjournal.com
The upscale Dogtown Station condominium project at 700 Main St. in Venice has had an interesting year.

The 35-unit project was completed in January 2009, right as the recession was kicking into high gear. The developer, RAD Ventures LLC, managed to close seven of 20 pre-sales. However, sales ground to a halt in spring of that year, and the Venice development company’s equity partner, California Public Employees’ Retirement System, sought to push things forward.

“They would have been happy to accelerate sales and get out of the project and move on. I am more interested in taking my time,” said RAD Managing Partner Robert D’Elia, who opted to not lower prices, which range from $575 to $600 per square foot. “It’s a delicate balance between maximizing price and the cost of money.”

Now, though, the $40 million project is undergoing changes.

D’Elia is in the process of buying out the pension fund’s stake, in addition to getting a new mortgage, allowing him to replace lender iStar Financial Inc. D’Elia said specifics of the deals couldn’t be disclosed because they were still being finalized.

Meanwhile, Dogtown has found some success with a marketing campaign that highlights how the units can serve both as residences and offices. Units are built with open floor plans and include rooftop patios or balconies. The high ceilings and loft layouts have attracted live-work occupants.
“Our marketing has been geared almost exclusively toward the entertainment industry,” said Charlotte Bjorlin D’Elia, the developer’s wife and managing partner of RAD Marketing L.A., which is handling the marketing.

The company has sold seven more units since the campaign started and another five are in escrow. Bjorlin D’Elia said that 75 percent of buyers have said they will use the lofts as live-work spaces. Owners include artists; producers; and actors, such as Dylan McDermott, who will house his production company there.

A spokesman for the pension fund said it doesn’t comment on properties managed by partners. Stockbridge Real Estate Funds, which manages the investment on behalf of the pension fund, did not return calls seeking comment.

Lender Sells

A 16-unit Panorama City condo building operating as a rental property has been sold for $3.75 million. Tobias Group LLC, a partnership of two L.A. real estate investors, purchased the building from bridge lender Lone Oak Fund LLC.

The Brentwood lender took ownership of the 9201 Tobias Ave. property in May 2009 after foreclosing on the former owner. Tobias paid $3.75 million, or $234,375 per unit.

Charles Dunn Co. broker Michel Hibbert, who represented both parties, said the March 12 transaction wouldn’t have happened if Lone Oak didn’t provide the buyer with a loan on favorable terms. Tobias was required to put down only 15 percent of the purchase price, with the remainder financed. Other lenders likely would have required a 30 percent down payment, he said.

Gerald Ducot, Lone Oak co-founder and principal, said his company acted aggressively because it dislikes keeping properties acquired through foreclosure. The firm has sold five such properties since 2009.

Hibbert said that Tobias will sell the units as condos once the market turns, though that could take as long as seven years. The units all have three bedrooms and average about 1,600 square feet.

Investor Jeff Bazyler of Tobias declined to comment.

Local Hiring

Pacific Office Properties Trust Inc., a small real estate investment trust focused on commercial office space, has hired a new chief executive.

The Santa Monica company, which has a 4.7 million-square-foot portfolio, named James R. Ingebritsen its chief executive March 29. He was the firm’s executive vice president in charge of capital markets.

Ingebritsen replaced interim Chief Executive Jay Shidler, chairman of the company. Pacific Office Properties was formed in March 2008 after the merger of the Western U.S. portfolio of Shidler’s company – real estate investment firm Shidler Group of Honolulu – and the Arizona Land Income Corp., another investment company.

“I will be taking on the responsibility of the strategic direction of the company as opposed to day-to-day operation, which is what I was doing previously,” said Ingebritsen, a co-founder and major investor in Pacific Office Properties, which owns a handful of Southern California buildings.

Shares of Pacific Office Properties closed at $4.01 on the NYSE Amex Equities exchange April 1.

Pending Home Sales Show Healthy Gain, Hint at Spring Surge

2010-04-07T09:24:00.000-07:00

Pending home sales rose in February 2010, potentially signaling a second surge of home sales in response to the home buyer tax credit, according to the National Association of Realtors.
RISMEDIA
The Pending Home Sales Index (PHSI), a forward-looking indicator based on contracts signed in February, rose 8.2% to 97.6 from a downwardly revised 90.2 in January, and remains 17.3% above February 2009 when it was 83.2.
The data reflects contracts and not closings, which usually occur with a lag time of one or two months.

Lawrence Yun, NAR chief economist, said the improvement is another hopeful sign. “The rise in buyer contact activity may signal the early stages of a second surge of home sales this spring. The healthy gain hints home prices are continuing to flatten,” he said. “We need a second surge to meaningfully draw down inventory and definitively stabilize home values.”

The PHSI in the Northeast rose 9.0% to 77.7 in February and is 18.9% higher than February 2009. In the Midwest the index jumped 21.8% to 97.9 and is 18.7% above a year ago. Pending home sales in the South increased 9.2% to an index of 107.0, and the index is 17.5% higher than February 2009. In the West the index fell 4.8% to 98.0 but is 14.6% above a year ago.

“Anecdotally, we’re hearing about a rise of activity in recent weeks with ongoing reports of multiple offers in more markets, so the March data could demonstrate additional improvement from buyers responding to the tax credit,” Yun said.

Green Design Trends in 2010

2010-04-06T07:05:00.000-07:00

The recession may have you staying put instead of moving up. Let's look at what the experts say are some of the green design trends for your home in 2010.
By: Carla L. Davis: RealtyTimes
The American Institute of Architects reports that "without the rapid appreciation in home values seen between 1995 and 2005, design of kitchens and bathrooms has recently been somewhat more modest.
Functionality is now preferred to more and larger kitchens and bathrooms within U.S. homes. Households are placing a premium on products and features that promote energy efficiency, and adaptability in the use of space for seniors and those with accessibility concerns. ... Integrating kitchens with family space remains a design priority, as does including areas devoted to recycling, pantries, computer workstations, and spaces devoted to recharging laptops, cell phones and PDAs.”

This kind of "reverse growth" is a blessing when it comes to cost savings. The average U.S. household spends around $1,900 a year on utility bills. The U.S. Department of Energy says green ways can cut your bills by up to 25 percent. Functional design is a good place to make big changes.

Some other popular green trends include:

•LED lighting: The abbreviation for "light-emitting diode," these environmentally friendly lights give off the same light as regular 40 watt bulbs, but they last 50 times longer, making them a cost-effective option for lighting your home.

•Water saving toilets: Low flush toilets use only 1 to 2 gallons of water per flush compared to the usual 3 to 5 gallons.

•Renewable flooring: All renewables are not made the same, and a savvy homeowner should explore what option best fits their needs. You can choose from bamboo, natural linoleum, cork flooring, and even wood floors.

Other design trends take us to color. Following the green movement, color choices for 2010 reflect the return to an earthy mentality. Earth tones are very popular, using less dye and chemicals to produce. And while global colors are also popular for design, such as yellow, orange, green, and plum, there is another issue to take into consideration when choosing them.

Green hues may be optimistic and uplifting, but recent studies have shown that the color green -outside of natures - can itself be toxic. According to the New York Times article, The Toxic Side of Being, Literally, Green, "Take Pigment Green 7, the commonest shade of green used in plastics and paper. It is an organic pigment but contains chlorine, some forms of which can cause cancer and birth defects. Another popular shade, Pigment Green 36, includes potentially hazardous bromide atoms as well as chlorine; while inorganic Pigment Green 50 is a noxious cocktail of cobalt, titanium, nickel and zinc oxide."

The best alternative to chemicals, when it comes to paint, could be low and zero voc. As well, a wealth of organic upholstery fabrics are found on the market today. Go green!

In Santa Monica, affordable-housing rental agreements are often not enforced

2010-04-05T16:40:00.000-07:00

The city is now vowing to crack down after complaints of violations by developers, who have been allowed to exceed zoning restrictions in exchange for offering low- and moderate-income rentals.
By: Martha Groves: latimes.com
For decades, Santa Monica has allowed developers to add floors to their buildings or exceed other zoning restrictions in exchange for providing affordable housing to poor and moderate-income tenants.

Such was the case with Dorchester House, a luxury condominium low-rise just blocks from the Pacific Ocean. Almost three decades ago, the city approved a development plan in which 15 first-floor units were earmarked as affordable housing.

But as real estate attorney Stanley Epstein learned recently, the city has done little to enforce these agreements.

Epstein said he made this discovery when he went to look at a Dorchester House condo earlier this year. He found condo owners living in the income-restricted units instead of renting them to low- and moderate-income tenants.

In one instance, Epstein said, one rental was advertised as $2,000 per month, although the rent-control price would have been about $1,200.

In response to complaints and threats of litigation, the city is vowing to crack down on violators.

City Manager Rod Gould acknowledged that Santa Monica needs "to tighten it up" when it comes to ensuring that developers live up to their requirements to provide affordable housing. Officials are devising a plan "to monitor and ensure compliance," he said.

The city has negotiated 11 such development agreements, and several others are in the works. Currently, 861 deed-restricted residences are on the books, but more are anticipated as the city prepares to adopt a long-range plan that emphasizes development of affordable housing as part of mixed-use and transit-oriented projects.

City officials have declined to say how they plan to respond to allegations regarding the Dorchester House, but in February, the city filed suit against the owners of the Plaza at the Arboretum, a 350-unit complex near Santa Monica's creative office district.

The suit alleges that owners were not complying with a 1998 agreement to provide 97 units for low- and moderate-income tenants. After receiving complaints from tenants, the city conducted an audit and found many violations, including failure to verify tenants' eligibility for affordable housing and to rent to qualified residents.

"This is the first time this kind of case has been brought," said Adam Radinsky, head of the city attorney's office's consumer protection unit. Asked whether the city might seek to evict ineligible tenants, he said: "The initial policy being discussed is a policy to enforce agreements with developers who get the benefit of the bargain."

The owners and managers of the Arboretum named in the lawsuit were BlackRock Realty Advisors Inc., CSHV Arboretum LLC and Riverstone Residential Group.

Epstein has vowed to challenge the city in court if it does not begin to aggressively investigate and enforce the agreements. "If they're going to be too cowardly to do what they're supposed to do, we're looking at litigation," he said. "They have an obligation on behalf of prospective tenants."

101 Freeway Park Proposal Ramping Up

2010-04-05T14:34:00.000-07:00

Federal lawmaker plays up plan.

COURTESY ART

Artist rendering of proposed Hollywood Central Park atop the Hollywood (101) Freeway.
By: Alexa Hyland; labusinessjournal.com
The idea of creating a public park out of thin air above the Hollywood Freeway may not be a pie-in-the-sky notion anymore.

Rep. Xavier Becerra (D-Los Angeles) has agreed to request $5.85 million to launch planning for the park. That’s viewed as a crucial early step and vote of confidence.

“We were surprised,” said Laurie Goldman, president of the non-profit created to spearhead the effort, Friends of the Hollywood Central Park. “We didn’t think we would make it this round, but we did. It doesn’t mean we will get what we asked for, but it’s a huge first step of many steps.”

The park, which would be built on a concrete cap atop the Hollywood (101) Freeway, has been favored largely by business groups. The money to build the park – estimated at $950 million – would come mainly from foundations.

Of course, there’s no guarantee that the federal funding for planning will win approval. But if it does, it could put the park on a slide toward reality. That’s significant partly because the idea for the park has been viewed by some as a nice concept that probably wouldn’t go anywhere, especially with the downturn in the economy.

The Business Journal first reported the park proposal in October 2006. Don Scott, senior vice president at First Financial Bancorp, told his fellow Hollywood Chamber of Commerce board members about the idea and they adopted it.

The chamber called for a park that would cover from Hollywood to Sunset boulevards between North Bronson Avenue and North Wilton Place. That would mean stretching the park over the freeway on a platform, or “cap,” that would turn the open-air freeway into a tunnel.

Councilman Eric Garcetti led a City Council vote in 2007 that expanded the project, which now would stretch from Hollywood to Santa Monica boulevards and boost the parkland to 44 acres.

The project would generate 4,500 construction jobs in the short term.

Gary Toebben, president and chief executive of the Los Angeles Area Chamber of Commerce, said the park’s biggest economic benefit would be in the long term: The grassy tree-lined area would boost business for nearby establishments and drive the development of new ones.

“Having a park there will do what other parks do – encourage people to come there and walk around,” Toebben said. “Usually, that’s a real asset to the businesses around the park. And certainly, it’s a place right now where it’s a freeway, so you don’t have people who are lingering in that area right there because it’s not possible.”

Leron Gubler, president and chief executive of the Hollywood chamber, said his organization has supported the plan because it would be good for area businesses.

“We wouldn’t have undertaken the project if we didn’t think this would be good for the businesses,” Gubler said. “It takes the community to the next level.”

Needing green

Hollywood has seen a boom in apartment and condo buildings thanks to efforts to revitalize the area. Those include the W Hollywood Hotel & Residences, with 143 condos and an adjacent apartment building, and the Sunset Vine Tower, a mixed-used development with 63 luxury apartments.

As the redevelopment of Hollywood continues, the need for green space becomes more apparent. While all of Los Angeles has 0.012 acres of open space per resident, one of the lowest ratios in the state, Hollywood has far less at only 0.005 acres per resident.

“The benefits are incredible for a community that’s starved of open green space and children who have never been on a picnic,” said Goldman, who’s been working on the project since it was proposed. “What better use of our freeways but to cover them with a park?”

The chamber worked behind the scenes to build support among local developers, neighborhood councils, elected officials and, most importantly, the California Department of Transportation. The City Council then approved funding for an economic feasibility study and park backers began meeting with community members to discuss how the space should be designed. Meanwhile, Goldman and others formed a non-profit, Friends of Hollywood Central Park, to coordinate predevelopment planning.

Backers of the park met with Becerra during a chamber trip to Washington in March, and convinced the congressman to request the money, which would pay for reports required under the California Environmental Quality Act, civil engineering and design plans, and land-use and entitlement applications toward the project.

The plan discussed in the feasibility study includes a small, informal amphitheater, a baseball field next to Helen Bernstein High School, a picnic and playground area, sculpture garden and a large, multipurpose plaza at Fountain Avenue and St. Andrews Place.

The feasibility study puts the cost at about $950 million, with government funding covering some of the costs and foundations paying the remainder. The study stated that likely contributors would be the California Endowment, the William and Flora Hewlett Foundation and the California Wellness Foundation. The groups are committed to projects related to air quality and environment health.

One foundation representative said that his organization backs park projects, but it hasn’t been involved in anything as big as Hollywood Central Park.

“We have funded projects that improve quality of life and environment, especially in low-income communities, in the past,” said Eric Brown, a communications director at the Hewlett Foundation. “It’s usually through some kind of organization such as Trust for Public Land, although never at a scale of this size.”

Indeed, the eye-popping price tag is the park’s biggest hurdle.

“It’s expensive,” Toebben acknowledged. “And I think that is the major challenge and one of the reasons why the project was part of our agenda in Washington.”

Goldman said Friends of Hollywood Central Park has been working to raise funds for an environmental impact report, which the organization hopes will be under way by the beginning of this summer, and a study by Beacon Economics looking at the impact the park would have on the local economy.

“Before you know it, we will have a park and won’t even remember how long it took us to get there,” Goldman said.

Applications surge for home-purchase loans; tax credits expire April 30

2010-03-31T16:45:00.000-07:00

With special tax credits set to expire at the end of April, applications for loans to purchase homes are at their highest level in five months, a mortgage trade group said Wednesday.
By: E. Scott Reckard: latimes.com
Releasing a survey for the week that ended Friday, the Mortgage Bankers Assn. said its seasonally adjusted purchase index rose 6.8% from a week earlier.

Michael Fratantoni, the group's vice president of research and economics, noted that a similar surge took place in October, when an $8,000 credit for first-time buyers was set to run out. As an economic stimulus measure, Congress extended the program through April 30 and added a $6,500 tax credit for some trade-up buyers.

By contrast, the mortgage group's index of home-loan refinancings fell by 1.3%.

Refinancings are sensitive to slight changes in mortgage interest rates, which have edged higher recently. One reason for that is the expiration at the end of March of a Federal Reserve program to buy $1.25 trillion in mortgage bonds backed by government-controlled Freddie Mac and Fannie Mae.

The refinance share of mortgage activity decreased to 63.2% of total applications from 65.0% the previous week, the Mortgage Bankers Assn. said. That's the lowest refinance share since the week ending Oct. 23.

In a separate survey that appears to bode well for housing, an association of mortgage insurers said borrowers with private mortgage insurance who caught up on their overdue home loans outnumbered people who fell behind. It was the first time that happened in almost four years, Bloomberg News reported.

Private mortgage insurance typically covers loans made with low down payments, which are at greater risk of default, especially when home prices fall. In a survey of these insured loans, the Mortgage Insurance Cos. of America said 68,675 went into delinquency in February while 80,758 were brought current.

Weekend Do-it-Yourself Projects

2010-03-30T07:09:00.000-07:00

Spring is here at last, and like many other homeowners you may be looking for simple do-it-yourself projects to spruce up your home or to increase its value.
By: Carla L. Davis: Realty Times
Keep reading to get ideas on a few weekend updates and upgrades that are sure to be worth your while.

We've all heard the term "curb appeal." And that's where our projects start today. Curb appeal is another way of saying your home's "first impression." It can affect your home's value and saleability.

One easily overlooked element can be your driveway, sidewalks, and steps. Dirt, oil, and grime can darken and stain your concrete, giving it the appearance of being unkempt. This is not a first impression that sits well with buyers. But have no fear, there is a simple solution.

Power washing your concrete can be a great way to renew its look. You can rent a machine at your local Home Depot or local home improvement store. You could also buy one for use over and over again. Pressure "power" washers start for as low as $100.

Another concrete solution can be using stain. This is as simple as choosing the color, buying a gallon, and then rolling it onto your surface.

To prep your concrete, sweep the surface and then power wash or scrub it with soap and water.

Another great curb appeal booster is your front door. Many homeowners make the design mistake of picking a color that matches the house and recedes into the background. For just a few dollars and an hours work, you can make your front door noticeable and more welcoming. Consider selecting a bright or contrasting color. Red complements green hues, and blue complements orange hues.

Once you're inside the house, a quick fix can be changing and updating light fixtures. Nothing says dated like track lighting. Safety first, however, so be sure to turn off the breaker before you start working with anything electrical. Next, take out any light bulbs in the fixture to avoid broken glass. And finally unbolt and unscrew plates and mounts.

Moving into the backyard we find the next weekend project. While it may not be the huge equity booster that many projects can be, it does add a different kind of value to your home life. What are we talking about? Vegetable gardens. According to Texas A&M, "Home gardening continues to grow in popularity. One of every three families does some type of home gardening, according to conservative estimates, with most gardens located in urban areas."

It's not only popular, it can help you save big when it comes to providing your family with organic or fresh produce.

To find out when to plant what and how, check out the National Gardening Association website at www.garden.org.

The Weekend Guide for February 25 - February 28, 2010

2010-02-26T01:05:00.000-08:00

What to Do This Weekend!
The Weekend Guide for February 25 - February 28, 2010.

Full Article:

Bernanke Says ‘Nascent’ Recovery Requires Low Rates

2010-02-24T10:05:00.000-08:00

Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is in a “nascent” recovery that still requires low interest rates to encourage demand by consumers and businesses once federal stimulus expires.
By: Craig Torres: Bloomberg.com
“A sustained recovery will depend on continued growth in private-sector final demand for goods and services,” Bernanke told the House Financial Services Committee today in Washington at the start of his two days of semi-annual testimony before Congress. “Private final demand does seem to be growing at a moderate pace.”

The 56-year-old Fed chairman, who began his second four- year term this month, said slack labor markets and low inflation will allow the Federal Open Market Committee to keep the benchmark lending rate, which has been in a range of zero to 0.25 percent for more than a year, low “for an extended period.” He said the Fed will need to start tightening policy “at some point.”
“The FOMC continues to anticipate that economic conditions - including low rates of resource utilization, subdued inflation trends, and stable inflation expectations - are likely to warrant exceptionally low levels of the federal funds rate for an extended period,” he said.

The Standard & Poor’s 500 Index rose 1 percent to 1,105.05 at 10:50 a.m. in New York. The yield on the benchmark 10-year note fell two basis points, or 0.02 percentage point, to 3.66 percent in New York, according to BGCantor Market Data.

Decision Last Week

Bernanke’s testimony follows the Federal Reserve Board’s decision last week to raise the cost of direct loans to banks by a quarter-point to 0.75 percent. The Fed portrayed the move as a “normalization” of bank lending and said it didn’t change the outlook for the economy or monetary policy, a message the Fed chairman reiterated today.

Bernanke cited “tentative” signs of stabilization in labor markets such as fewer job losses, a rise in manufacturing employment, and stronger demand for temporary help.

“Notwithstanding these positive signs, the job market remains quite weak, with the unemployment rate near 10 percent and job openings scarce,” Bernanke said. He said the 40 percent of the unemployed who have been without work for six months or more are a “particular concern.”

Policy makers are trying to ensure a durable expansion that will start generating enough jobs to bring down an unemployment rate they forecast to end the year at 9.7 percent, above their estimate of full employment of around 5 percent. At the same time, they want to convince investors that they can start withdrawing $1.1 trillion in excess cash from the banking system in time to keep inflation at bay.

Inflationary Pressures

“As the expansion matures, the Federal Reserve will at some point need to begin to tighten monetary conditions to prevent the development of inflationary pressures,” the Fed chairman said. “Notwithstanding the substantial increase in the size of its balance sheet associated with its purchases of Treasury and agency securities, we are confident that we have the tools we need to firm the stance of monetary policy at the appropriate time,” he said.

Manufacturing is leading the rebound from the worst recession since the 1930s as companies prevent inventories from being further depleted and invest in new machinery and equipment to take advantage of a rebound in global demand.

The economy grew at a 5.7 percent annual pace in the fourth quarter of last year, the fastest in six years. Fed officials last month forecast growth in 2010 of 2.8 percent to 3.5 percent, and minutes of their January meeting showed they are seeking more evidence the recovery is sustainable.

Conditions Improved

Bernanke said that conditions in financial markets have improved, making equity and debt financing available for larger firms. “In contrast, bank lending continues to contract, reflecting both tightened lending standards and weak demand for credit amid uncertain economic prospects,” he said.

The Fed has expanded its balance sheet to $2.28 trillion in an attempt to supplement credit to the economy. U.S. central bankers are finishing up a $1.43 trillion program of mortgage- backed securities and housing agency debt purchases next month.

“The FOMC will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets,” Bernanke said.

The actions by the central bank haven’t stimulated private bank credit. Total loans and leases by banks in the U.S. have fallen 7 percent for the 12 months ending January. Consumer loans have fallen 6.5 percent over the same period.

‘Sustained Job Growth’

“They want to see sustained job growth and credit growth to small businesses,” Michael Darda, chief economist at MKM Partners LP in Greenwich, Connecticut, said before the testimony was released. “The Fed is going to keep rates low and the balance sheet big until you see those two things start recovering.”

The Fed’s actions to combat the financial crisis have led to scrutiny of the central bank in Congress, which is drafting the biggest overhaul of financial regulation since the 1930s.

The House voted Dec. 11 to approve a proposal by Representative Ron Paul, a Republican from Texas, to end a ban on audits of monetary policy. House legislation would also strip the Fed of consumer-protection powers and give the authority to a new agency. A Senate discussion draft proposed stripping the Fed of all bank supervisory powers.

Emergency Powers

Bernanke said the use of emergency powers to support businesses and firms other than banks created a “special obligation” to the Congress and the public. He invited the Government Accountability Office to inspect the Fed’s facilities.

“We are also prepared to support legislation that would require the release of the identities of the firms that participated in each special facility after an appropriate delay,” he said.

Monetary policy, he said, must be shielded from political pressures to protect independence.

“It is vital that the conduct of monetary policy continue to be insulated from short-term political pressures so that the FOMC can make policy decisions in the longer-term economic interests of the American people,” he said.

Industrial production in the U.S. rose more than anticipated in January as factories churned out more consumer goods and equipment. The 0.9 percent increase followed a 0.7 percent gain the prior month, according to Fed data.

Analysts’ Estimates

Deere & Co., the world’s largest maker of farm machinery, posted first-quarter profits Feb. 17 that topped analysts’ estimates and raised its 2010 forecast as projections improved for agricultural-equipment sales in the U.S. and Canada.

Job losses are damping the confidence of consumers whose spending accounts for 70 percent of the world’s largest economy. The Standard & Poor’s 500 Stock Index has fallen 1.8 percent this year, after rising 23 percent in 2009.

Consumption rose at a 2 percent annual pace in the final three months of 2009, below the 2.8 percent pace the previous quarter. The New York-based Conference Board said yesterday that its consumer confidence index fell this month to the lowest level since April 2009.

Wal-Mart Stores Inc., the world’s largest retailer, reported fourth-quarter sales on Feb. 18 that trailed its projection after cutting grocery and electronics prices, and predicted a “challenging” first quarter for U.S. stores.

For Landlords, the Numbers Are Starting to Look Better

2010-02-20T10:21:00.000-08:00

Home prices are falling, rents are tumbling, and apartment vacancies are rising. So why are thousands of small investors becoming landlords?
By: M.P. MCQUEEN: wsj.com
Because real-estate prices have fallen much faster than rents, the math of buying a rental has actually improved substantially in most parts of the country.
Money invested in an apartment complex today typically generates annual returns of 7% to 8% right off the bat, up from less than 6% at the peak of the housing bubble in 2006.

If your property appreciates in value or rents rise, you could end up with double-digit annualized returns when you sell it. But higher returns usually come with higher risks. If you overpay for a rental property or you buy in the wrong market at the wrong time, you can lose a lot of money.

In general, landlords should pick communities where real-estate prices and rents appear to have nearly bottomed out, and jobs are stabilizing. Some of the best deals are in places like Fort Worth, Texas, or Columbus, Ohio, where prices never went wild. Markets like Las Vegas and Phoenix, both plagued by overbuilding, and Detroit, hurt by auto-industry woes, still look dicey.

But other markets like San Francisco or Chicago can still be attractive for landlords who find the right neighborhoods. Fred Bertucci, 50 years old, has been investing in small apartment properties in the Chicago suburbs since 1990. In August, he and his business partner, Kevin Moriarty, 54, bought a six-unit apartment house out of foreclosure for $280,000. It brings in about $25,000 per year in net operating income, he says, or about a 9% yield on the dollars invested. That's up from roughly a 5% yield several years ago when prices were higher, he says.

Being a landlord now isn't easy. You need good credit and plenty of cash—as much as 50% of the purchase price—because banks are still skittish about lending. You need extra cash for handling repairs and vacancies, and you must have the patience to deal with difficult renters.

If you buy an investment property, you should expect to hold it for three to five years or more. Much of the big money from quickly flipping properties already has been made, and conditions now favor long-term owners who want an investment that will throw off income and slowly gain value over time.

"It's a great time for someone who is focused on increasing his net worth, rather than doubling his money in a short period of time," says John Burns, a real estate consultant in Irvine, Calif.

Geoffrey Koblick, 55, who has been investing in residential and commercial real estate for many years, recently scooped up two apartment buildings in Northern California. He didn't buy any properties from 2003 through 2007, when "prices were too high based on the income the properties were generating," he says.

Mr. Koblick says he and his partners paid $3.3 million in May 2009 for a 23-unit building in Berkeley that generates $199,500 in net operating income, for a 6% return. They are upgrading the property, and Mr. Koblick expects its value to increase dramatically over the next seven to 10 years, when he hopes to sell it. Since they bought the building with a 33% down payment, he projects the partners will end up with an annualized return of 15%.

Of course, things often don't go as planned in real estate. J.P. Botha, 33, bought a new one-bedroom condo in Manhattan for $775,000 in 2007. Property values were rising, and he figured he'd sell it for a profit. Instead, its value on completion fell more than 25%. So he rented it out. His first tenant bailed after five months when she lost her job. He had to make a price concession to find and keep a second tenant.

"I'm hemorrhaging over a grand a month," said Mr. Botha, who took out a 30-year mortgage to finance his investment. Still, he says he is taking the long view on his investment: "Once I pay off the loan I will have an income-generating property for the rest of my life."

U.S. Mortgage Delinquencies Edge Down

2010-02-19T10:15:00.000-08:00

Fewer people fell behind on their home-mortgage payments in last year's fourth quarter, a sign that the default crisis may be peaking, the Mortgage Bankers Association reported Friday.
By: JAMES R. HAGERTY: wsj.com
Separately, the Obama administration announced plans to provide $1.5 billion to housing agencies in five states hit hardest by the crisis that would fund programs to help people avoid foreclosure.

The trade group said 3.63% of mortgage borrowers were between 30 and 59 days overdue in the fourth quarter, down from 3.79% in the third quarter, based on its quarterly survey of lenders. Normally, that rate rises in the fourth quarter as heating bills and holiday expenses cause some people to fall behind.

The decline in this category of newly delinquent borrowers reflects a drop in the number of people losing their jobs, said Jay Brinkmann, the MBA's chief economist.

But the overall number of people in trouble with their mortgages—those behind on payments or in the foreclosure process—continued to grow. At the end of the fourth quarter, 15% of home loans on one-to-four-family homes were in that category, up from 11% a year earlier. For the latest quarter, that equates to about 7.8 million households.

"We have fewer problems coming into the system," Mr. Brinkmann said. But "we still have a big problem we have to deal with."

The overall number continued to rise because people delinquent on their loans are staying in their homes longer before losing them to foreclosure. Lenders are overwhelmed with paperwork from foreclosure cases. At the same time, federal and state programs aimed at saving many borrowers mean that lenders are going through lengthy procedures to determine which people are eligible for easier loan terms. While waiting to be helped or evicted, many people don't make payments.

Some borrowers say they have trouble getting in touch with employees at lenders and often are asked to provide the same documents repeatedly.

About 2.9 million households are 90 days or more behind on payments, but not yet in foreclosure, nearly triple the total of two years ago, according to LPS Applied Analytics, a data provider. On average, those households are nine months behind on payments.

There is no guarantee that the number of households newly behind on payments will continue to shrink. LPS, which uses separate data from lenders, estimated that 3.4% of borrowers were 30 to 59 days behind in January, up slightly from 3.3% in December.

The default problem is largely concentrated in states hit hardest by falling home prices—Arizona, California, Florida, Nevada and Michigan. Those are the states that are designated to get portions of the latest $1.5 billion federal program, dubbed Help for the Hardest-Hit Housing Markets.

Those funds will be awarded to state and local housing-finance agencies that propose programs meet federal criteria. The money is to be spent helping unemployed homeowners and those whose home values have dropped far below the amount they owe on their mortgages.The administration said the agencies "may experiment with programs that would assist borrowers to negotiate with lenders to write down mortgages."

The money also can be used to help resolve problems arising from home-equity loans and other second-lien mortgages; in such cases, conflicts between the holders of the first- and second-lien mortgage often stymie efforts to work out a plan to lower payments. In addition, the funds could go to "other programs encouraging sustainable and affordable homeownership," the administration said.

The funds will come from the federal Troubled Asset Relief Program. Administration officials said they believed state and local housing agencies could design relief programs tailored to local needs.

The new program is the latest in a wide array of federal efforts to prop up the housing market, including the $47 billion Home Affordable Modification Program, known as HAMP, which gives lenders incentives to reduce payments for struggling borrowers. That program, launched a year ago, is often criticized for failing to do enough for people who have lost their jobs or owe far more than the current value of their homes.

More Benefit From Loan-Mod Program

2010-02-18T08:35:00.000-08:00

The U.S. Treasury said its foreclosure-prevention program has cut mortgage payments for about 947,000 households, at least temporarily.
By: JAMES R. HAGERTY: wsj.com
That was the number of households benefiting from easier loan terms at the end of January through the Obama administration's Home Affordable Modification Program, known as HAMP.
The total was up about 11% from a month earlier. The administration estimates that 1.7 million households—about 3% of those with mortgages—are eligible for the program.

HAMP, announced a year ago by President Barack Obama, gives lenders incentives to help struggling borrowers avoid foreclosure by shrinking their payments through a reduction in the interest rate to as low as 2%. In some cases, loan terms are extended to 40 years.

Participants first are given three-month "trial" modifications. If they make payments on time and meet other requirements, including documentation of their income, they are given permanent modifications. As of Jan. 31, about 116,000 borrowers had such permanent fixes, up 75% from a month earlier.

On the Rise
Permanent loan modifications granted under the Obama plan.

September 1,711
October: 5,181
November: 31,382
December: 66,465
January: 116,297
Source: U.S. Treasury

The Treasury said 60,000 trial modifications have been canceled. Many more are likely to fall out of the program this month because extensions of the time available to verify incomes have run out.

For those who fail to qualify, lenders may proceed with foreclosure or seek other solutions, including short sales, in which homes are sold for less than the loan balance due.

The program's dropout rate is likely to be high, partly because lenders allowed many people into trials without first making sure they qualified. Wells Fargo & Co. said 92,000 of the borrowers it services had made three trial payments by Jan. 31. It expects about half of them to get permanent modifications. Others failed to provide all or some of the required documents or were found to be ineligible after the paperwork was reviewed.

Among loans with permanent modifications, the median monthly savings is about $522, the Treasury said. It said borrowers in trial and permanent modifications have saved more than $2.2 billion so far.

Prodding lenders to saving more borrowers, the Treasury is publishing monthly comparisons of their performance. As of last month, it said Citigroup Inc. had provided modifications to 50% of the estimated number of eligible borrowers. Both J.P. Morgan Chase & Co. and Wells Fargo were at 38%, and Bank of America Corp. was at 22%.

In a statement, Bank of America said it had made stronger gains than rivals last month in providing trial modifications and converting trials into permanent fixes.

What's ahead for the housing market?

2010-02-10T15:22:00.000-08:00

Will your house hold its value as a financial investment and a good place for you to live during the next decade? What's ahead for the housing market?
By: Marcie Geffner: Bankrate.com
To answer those questions, homeowners and homebuyers should watch four trends:

1. Echo boomers' entry into their peak homebuying years.
2. Baby boomers' entry into their peak home-selling years.
3. The new demand for smaller homes.
4. The new demand for more energy-efficient homes.

More demand, but more supply, too
The demand for housing has diminished as unemployment and other financial pressures have forced college graduates to stay with their parents and whole families to move in with their relatives. But longer term, that demand is expected to be "extremely sound," says Steve Melman, director of economic services at the National Association of Home Builders, or NAHB, in Washington, D.C.
Melman expects a resurgence to occur as economic conditions improve and the children of the baby boomers, called the echo boomers, enter their peak homebuying years.

Demand for housing already has returned to some extent and may increase further in 2010. The National Association of Realtors, or NAR, recently reported that pending home sales rose for nine consecutive months through October 2009. NAR Chief Economist Lawrence Yun said in a statement that existing home sales should number 5.5 million to 6 million annually based on population growth, but that sales were "well below the 5 million mark" before the federal homebuyer tax credit was offered.

Yet even an increase in demand may not be enough to match the number of sellers, warns Dowell Myers, a professor of urban planning and demography at the University of Southern California School of Policy, Planning and Development in Los Angeles.

"Before, there was an unlimited supply of buyers because of the baby-boom generation," he says. "But now that unlimited supply of buyers is going to turn into an unlimited supply of sellers."

Myers says sellers eventually will outnumber buyers, unless a greater effort is made to "cultivate" them.

"There is a shortage of young people all over the country relative to the number of seniors in the future, so they'll all need to step up to meet the supply of homes for sale," says Myers.

The implications for current homeowners could be dire if Myers' read is correct as a supply-and-demand imbalance of such magnitude could cause home prices to decline. The solution? Myers recommends a greater investment in education so more young people will be able to afford to own a home in the future.

New homes to be compact, energy-efficient
As the population ages, again due to the baby boomers, smaller homes may be in greater demand. As Melman points out, empty-nesters need one spare bedroom for visiting grandchildren, not four bedrooms for growing teenagers. Smaller homes are also cheaper and easier to maintain and should be less costly to heat and cool.

An NAHB report, "Home of the Future," states that the size of new single-family homes reached a 35-year record of more than 2,400 square feet in 2006. But that growth spurt isn't expected to continue into this decade. Instead, the average size of a new home will range from about 2,300 to 2,500 square feet in 2015.

Myers says new houses will be more compact, more efficiently designed in their use of space and richer in amenities inside the home and nearby in the neighborhood. These trends are seen as another likely result of an aging population and the push toward more efficient land use.

"The new house will be an efficient house that's easy to live in for one or two people only and may be located in more dense configuration, so people can walk to nearby amenities," he says.

New homes also will be more energy-efficient in terms of windows, doors, insulation and even site planning due to concerns about climate change and the need to reduce energy consumption and emissions.

Homebuyers generally are willing to pay about 2 percent to 2.5 percent of the purchase price of the home for greater energy efficiency, Melman says. After that, the willingness to pay more for green-built features wanes.

That desire for energy-efficiency doesn't necessarily mean current homeowners should invest heavily in such upgrades in 2010. Instead, Myers suggests, homeowners should study up on new technologies and be ready to adopt them when the time - and the price - seems right.

"I don't think there is a big rush because the technology keeps evolving," he says.

Buyers also might start to think more about utility and transportation costs when they purchase a home, Melman suggests.

"If you look at prices and interest rates, affordability has never been better for a long time. But people are also looking at the operating costs and energy efficiency of a home. You want to make sure you can afford the mortgage payment, but you also don't want to have $1,000-a-month utility bills," he says.

6 keys to first-time homebuyer tax credit

2010-02-10T15:12:00.000-08:00

Most people welcome any extra cash when buying a home. And, thanks to a government tax credit of up to $8,000 for first-time homebuyers and up to $6,500 for move-up buyers, they're getting it
By:Tracey C. Velt: Bankrate.com
But, you have to act quickly. The tax credit applies to a principal residence bought by April 30, 2010, and you must close by June 30, 2010.
However, there are many misconceptions about who qualifies and for how much. Here are six essential facts about the tax credit.

1. In some cases, you can use it as a down payment or for closing costs. For the most part, homebuyers can't use the tax credit as an automatic down payment, although "tax credit funds can be used for the basic down-payment requirement (3.5 percent) on an FHA-insured loan only when it's handled through a state housing finance agency (HFA)," says Lemar Wooley, a spokesman for the U.S. Department of Housing and Urban Development.

If the home loan is handled through an FHA lender (and not an HFA), the tax credit can be "used to add to the down payment above the 3.5 percent required amount. It can also be used for closing costs," says Wooley.

Many state HFAs are running or sponsoring programs that will use a tax credit for a down payment. These programs often place a second lien on the home as collateral to secure the eventual repayment of the tax credit funds. Some HFAs lend directly to homebuyers while others work through networks of state-approved lenders. For a list of what state HFAs are doing, go to www.ncsha.org.

2. You don't get a check at closing. Many homebuyers assume that the $8,000 is given to them at closing. Not true, says Winter Park, Fla.-based accountant David Keeler.

"Taxpayers need to wait until they've actually filed their income tax return to receive the tax credit," says Keeler. "The homebuyer credit reduces one's tax liability on a dollar-for-dollar basis, and if the credit is more than the tax you owe, the difference is paid to you as a tax refund."

The IRS says first-time homebuyers who purchased a home in 2009 can claim the tax credit on either a 2008 return, due April 15, 2009, or a 2009 return, due April 15, 2010. The credit may not be claimed before the closing date. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting a filing extension or by filing an amended return.

3. You don't always get the full credit. "This is one of the biggest misconceptions out there," says Maynor Perez, a real estate sales associate with Positive Realty in Doral, Fla. "If you pay $50,000 for a home, you will not get the full $8,000 tax credit."

In fact, the top credit for homes bought in 2009 is $8,000 ($4,000 for a married individual filing separately) or 10 percent of the residence's purchase price - whichever is less. So, for a $50,000 home, the homebuyer would receive a $5,000 tax credit. And, if you buy a house for $800,000 or more, you're not eligible for the tax credit.

4. You may have to pay it back. Taxpayers who claim the credit must use the home as a principal residence for the next three consecutive years. If you sell the house before living in it for three years, you may have to pay back the tax credit.

Who doesn't have to pay back the tax credit? Qualified military service members who sell or move from a tax credit home within three years of the initial purchase, due to official extended duty, are exempt from paying back the money, says Lisa Ellis, sales manager of Century 21 Prestige Real Estate Inc. in St. Robert, Mo.

"Members of the military don't have control over how long they stay in one place. At Fort Leonard Wood, the typical military member stays only two to three years," says Ellis.

5. You don't have to be a first-time homebuyer. A first-time homebuyer is defined as someone who hasn't owned a principal residence in the past three years. If you have owned a home before but haven't owned one recently, you may still qualify for the full $8,000.

If you currently own a home, the tax credit was recently amended to include move-up buyers. As a move-up buyer, you may qualify for up to $6,500. Vacation homes and rental properties are not eligible.

6. There are income limits. "The homebuyer credit is available to higher income taxpayers," says Keeler. "For purchases after Nov. 6, 2009, the homebuyer credit phases out over higher modified adjusted gross income levels, making the credit available to a much bigger pool of buyers."

For homes purchased after Nov. 6, 2009, and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

The tax credit expansion can give you incentive to start looking. But, act quickly and carefully to ensure you receive the full benefit.

Extienden incentivos para compra de vivienda

2010-01-23T11:38:00.000-08:00

Los programas ya han beneficiado a 2,724 familias.
Por: Joanisabel González: elnuevodia.com
El gobernador Luis Fortuño ordenó la extensión de los incentivos para la compra de vivienda, iniciativa que sirvió de alivio al sector de los bienes raíces en el 2009 al promover la venta de unos $341 millones en hipotecas.

Fortuño informó de su determinación ayer, luego de una reunión con su consejo de economistas, cuando también reiteró que su administración está decidida a utilizar todas las herramientas a su alcance para impulsar la economía.

El mandatario sostuvo que la extensión del programa hasta el verano surge en respuesta al hecho de que los incentivos están dando frutos.

“Vamos a estar asegurándonos de que haya suficiente dinero para el programa de bonos, por lo menos hasta el verano”, dijo Fortuño mientras agregaba que en los meses de noviembre y diciembre se registró “un aumento significativo” en el número de casos gestionados.

De acuerdo a datos de la Administración para el Financiamiento de la Vivienda (AFV), hasta el 19 de enero, los incentivos para la compra de vivienda -que forman parte del Programa de Estímulo Criollo (PEC)- han hecho posible que unas 2,724 familias hayan adquirido un hogar.

George Joyner, a cargo de la AFV, indicó que hasta el 19 de enero, han otorgado 2,347 bonos para gastos de cierre que equivalen a $11,873,000 en fondos desembolsados por el gobierno. “Esos bonos incentivaron compraventas con un valor ascendente a $287,864,000”.

Mientras, hasta la misma fecha, la AFV había avalado 725 segundas hipotecas que, en conjunto, suponen otros $12 millones. Esos préstamos, que el consumidor utiliza para el pronto pago de la residencia, redundaron en ventas ascendentes a $122.5 millones.

Joyner explicó que tanto la cifra total de ventas como las familias beneficiadas es menor que los totales de ambos incentivos, ya que unas 348 personas utilizaron ambos programas para comprar su propiedad.

Asimismo, mencionó que los programas prácticamente comenzaron en agosto pasado debido a que la agencia tuvo que esperar por diversos asuntos técnicos como la aprobación del gobierno federal para poder dar curso a la iniciativa.

“La combinación de los dos programas está haciendo su labor”, agregó el funcionario al recalcar que las personas beneficiadas son consumidores que pueden hacer el pago de una hipoteca, pero no tienen el pronto pago o recursos para los gastos de cierre.

A fines del año pasado, el gobierno modificó los términos del programa de incentivos para permitir que familias con un ingreso de hasta $125,000 pudieran beneficiarse del estímulo gubernamental. También se elevó el precio de las propiedades hasta $300,000 y se extendió la vigencia del programa hasta marzo próximo.

Asimismo, sostuvo que pese a que se aumentaron los límites de participación, los más beneficiados han sido personas de clase media, pues el precio promedio de las viviendas adquiridas asciende a $122,000.

El programa de incentivos incluye hasta un bono de hasta 5% de los gastos de cierre y/o acceder a una segunda hipoteca, de hasta $25,000, para el pronto pago de la unidad de vivienda.

6 Surprising Facts About the Buyer Tax Credit

2010-01-23T11:19:00.000-08:00

Make sure your buyer isn't caught off guard and knows these six facts if they plan to take advantage of the expanded homebuyer tax credit.
REALTOR®Magazine
The homebuyer tax credit is not as simple or straightforward as you might think. Here are some nuances that will affect homebuyers who plan to use it.

    ·To qualify for the move-up tax credit, a home owner must have occupied the same
     principal residence for five of the last eight years consecutively.

    ·Buyers can elect to claim the credit on either their 2009 or their 2010 tax
     return, whichever is best for them.
 
    ·Buyers who claim the credit in 2009 can’t file electronically because the
     Internal Revenue Service hasn’t put the required forms on line. The wait for a
     refund is three or four months.

    ·The home can be a mobile home or travel trailer that is fixed to land owned or
     leased by the home owner. A mobile home or travel trailer that is actually
     mobile doesn’t qualify.

    ·The home can’t be purchased from a close relative, including a parent, spouse,
     child, grandparent or grandchild.

    ·A buyer who earns no taxable income or doesn’t owe any federal income tax can
     qualify for the tax credit and file a tax return just to claim it.

Early Tax Deduction for Haiti Relief Passes Congress

2010-01-21T11:09:00.000-08:00

Taxpayers will be able to deduct donations for Haiti earthquake relief on their 2009 returns instead of waiting until 2010, under a bill approved by Congress.
By: Margaret Collins: Bloomberg.com
“This legislation is an additional incentive for Americans to contribute,” Finance Committee Chairman Senator Max Baucus, a Democrat from Montana, said in a statement.

The Haiti Assistance Income Tax Incentive Act passed unanimously in the Senate today. The House unanimously adopted a similar bill yesterday. President Barack Obama will sign the measure into law, said White House spokesman Josh Earnest.

The legislation allows taxpayers to claim charitable contributions to relief efforts until March 1 as deductions on their 2009 tax returns. Taxpayers generally can deduct donations up to 50 percent of their adjusted gross income, said Eric Smith, a spokesman for the Internal Revenue Service. It may be possible to carry over contributions above that amount for up to five years, he said.

The American Red Cross has raised $25 million as of yesterday out of $137 million overall from the “Text Haiti” appeal that lets mobile-phone users make a $10 donation via text message, said spokeswoman Megan Allday in an e-mail. Those who give money by text can use a phone bill as proof of a donation.

A 7.0-magnitude earthquake struck the poorest country in the Western Hemisphere earlier this month, destroying about a third of buildings in its capital of Port-au-Prince, the city’s sea port as well as water and sewage systems. The Haitian government has buried more than 72,000 bodies and the overall death toll may be higher than 200,000, Prime Minister Jean-Max Bellerive said Jan. 19.

Congress unanimously passed similar tax deduction legislation in 2005 after the tsunami along the Indian Ocean.

“This measure encourages Americans to give to the Haitian relief effort immediately,” said Senate Majority Leader Harry Reid, a Democrat from Nevada, in a statement.

Going Green Trims Taxes

2010-01-21T10:58:00.000-08:00

Installing energy-efficient home improvements like windows and doors in your principal residence will qualify you for a tax credit.
By: Julian Block: RealtyTimes.com
The credit equals 30 percent of the cost, capped at a maximum of $1,500. There's another credit of 30 percent of the cost of installing renewable-energy improvements like solar water heaters and solar panels. This credit isn't capped, and the residence doesn't have to be your principal residence. For detailed information on the laundry list of items that qualify for the two credits, go to www.energytaxincentives.org.

Buy a Home and Lower Taxes

New rules that took effect on Nov. 7, 2009, extend and liberalize tax credits for homebuyers. Now there are two kinds of credits for homes costing under $800,000. One is a credit of up to $8,000 for first-time buyers of a principal residence who didn't own another principal residence during the three-year period ending on the date they purchase the new place. The other is up to $6,500 for buyers who owned a principal residence for any five consecutive years during the eight-year period that ends on the purchase date. Both credits allow buyers with higher incomes to qualify and require them to sign a binding contract by April 30, 2010, and complete the deal by June 30, 2010.

If you own more than one dwelling, principal residence or main home means the place you live most of the year, as opposed to a vacation retreat or property for which you charge rent. A principal residence is not just a conventional single-family home. It also can be a condominium, a co-op apartment, a housetrailer, a mobile home or anything else that provides all the amenities of a dwelling, such as a houseboat or yacht that has facilities for cooking, sleeping and sanitation.

Credits Versus Deductions

Most taxpayers do not understand the difference between credits and deductions. Credits lower a person's taxes dollar for dollar, making them more valuable than deductions, which merely reduce the amount of income on which taxes are figured. The distinction is critical. A deduction of $1,000 saves $350 in taxes for someone in the highest bracket of 35 percent, but only $100 for someone in the lowest bracket of 10 percent. A credit of $1,000 reduces taxes by that amount, whatever someone's bracket is.

Another difference is that credits come in two flavors, nonrefundable and refundable. Nonrefundable means credits cannot be refunded to the extent that they exceed your income tax. Put another way, credits like the one for child care provide no help after your income tax becomes zero. Refundable means credits like the recently revised one for first-time homebuyers can be refunded to the extent that they exceed your income tax. So even buyers who have no income-tax liability could receive as much as $8,000 from the IRS.

Julian Block is an attorney and author based in Larchmont, N.Y. He has been cited as "a leading tax professional" (New York Times), "an accomplished writer on taxes" (Wall Street Journal) and "an authority on tax planning" (Financial Planning Magazine). This article is excerpted from "The Home Seller's Guide To Tax Savings." Law professor James Edward Maule of Villanova University praised the book as "An easy-to-read and well-organized explanation of the tax rules. Home sellers would be well advised to buy this book." To order it, go to www.julianblocktaxexpert.com.

Housing Starts in U.S. Fell More Than Forecast, Permits Climb

2010-01-20T05:45:00.000-08:00

Housing starts in the U.S. fell more than anticipated in December, while building permits unexpectedly jumped, signaling inclement weather may have kept builders away from worksites.
By: Bob Willis: Bloomberg.com
Work began on 557,000 houses at an annual rate, down 4 percent from November, figures from the Commerce Department showed today in Washington. Permits, a sign of future construction, climbed to the highest level in a year.

The government’s extension and expansion of a tax credit for first-time buyers may help underpin demand in the first half of 2010, giving builders reason to ramp up new projects. The gain in permits, which are less influenced by weather, indicates an unseasonably cold and wet December probably prevented some work from getting started last month, according to economists like Maury Harris.

“It’s the weather,” Harris, chief economist at UBS Securities LLC in New York, said before the report. “The deadline for the homebuyer tax credit is going to accelerate sales and building activity” in coming months.

Starts were projected to fall to a 572,000 pace last month according to the median estimate of 72 economists surveyed by Bloomberg News. Projections ranged from 495,000 to 630,000. The government revised November’s reading up to a 580,000 from the 574,000 previously estimated.

For all of 2009, builders broke ground on 553,800 houses, the fewest since records began in 1959. The annual rate was down 39 percent down from 2008’s 905,500, which was the second-lowest ever.

More Permits

The report showed building permits increased 11 percent to a 653,000 pace, the most since October 2008. Permits were forecast to fall to 580,000.

Construction of single-family houses decreased 6.9 percent to a 456,000 rate.

Work on multifamily homes, such as townhouses and apartment buildings, climbed 12 percent to an annual rate of 101,000.

Three of four regions showed a decline in starts in December, led by a 19 percent drop in the Northeast. The South showed a 3.3 percent gain.

There are still headwinds to a housing recovery. Rising foreclosures are adding to inventory and may discourage builders. A record 3 million U.S. homes will be repossessed by lenders this year as high unemployment and depressed home values leave borrowers unable to make their house payment or sell, according to a RealtyTrac Inc. forecast on Jan 14.

Last year there were 2.82 million foreclosures, the most since RealtyTrac began compiling data in 2005.

Credit Extended

President Barack Obama on Nov. 6 extended an $8,000 first- time buyer credit that was due to expire at the end of the month and expanded it to include current homeowners. The extension covers closings through June as long as contracts are signed by the end of April. Still, the measure may have pulled sales forward, depressing demand in the second half of the year.

Sales of new houses dropped 11 percent in November, the month the government’s tax credit was due to expire. A jump in purchases of existing homes pushed total sales up to a 6.895 million annual pace, the most since March 2007.

Weather may have also played a role in depressing December housing starts, economists said. Last month was the 14th coldest December and 11th wettest in 115 years of record keeping, according to the National Climatic Data Center, in Asheville, North Carolina.

Less Confidence

Confidence among U.S. homebuilders unexpectedly dropped in January to the lowest level since June, the National Association of Home Builders/Wells Fargo said yesterday.

Any sustained recovery will require gains in employment, economists said. The U.S. has lost 7.2 million jobs since the recession began, and economists surveyed by Bloomberg early this month forecast joblessness will average 10 percent this year.

KB Home, the Los Angeles-based homebuilder that sells to first-time buyers, is among homebuilders struggling. The company last week reported a pretax loss of $91 million on declining revenue for the fiscal fourth quarter that ended Nov. 30.

KB Home’s orders rose 12 percent to 1,446 from 1,296 in the year-earlier quarter, while completed sales dropped 22 percent to 3,042, according to the report. The average price declined 12 percent to $203,400.

KB Home is “not going to make money in the first quarter” and plans to “restore profitability” in the second half of 2010, Chief Executive Officer Jeffrey Mezger said Jan. 12 in a conference call with analysts and investors.

New Tax Credits Benefit Both First Time Buyers and Current Homeowners

2010-01-20T04:54:00.000-08:00

Closing deadline extended to June 30, repeat buyers offered up to $6,500
By: Annalisa Burgos: FrontDoor.com (Originally posted 11.03.09)
First time homebuyers aren't the only ones who can claim a tax credit when they purchase a home. Now current homeowners can take advantage of the tax break too, if they qualify.

President Barack Obama signed into law a $24 billion economic stimulus bill on Friday, which includes an extension and expansion of the popular first time homebuyer tax credit. It was set to expire on Nov. 30. Prospective buyers now have until June 30, 2010, to close on their purchase and will need to submit documentation with their tax returns to claim the credit. The new program is estimated to cost $11 billion. Here are the details:

FIRST TIME BUYERS

Credit: Equal to 10 percent of the home's purchase price, up to $8,000

Who Qualifies:

    •Those who haven't owned property in the last three years

    •Those with income up to $225,000 for couples and $125,000 for individuals
     (credit phases out for people who make more than these amounts)

    •Must be at least 18 years of age to claim credit

    •Purchase price must be $800,000 or less

Deadlines:

    •Have until April 30, 2010, to enter into contract for a home purchase

    •Have until June 30, 2010, to close on the purchase

CURRENT HOMEOWNERS

Credit: Equal to 10 percent of the home's purchase price, up to $6,500

Who Qualifies:

    •Those who have owned and lived in their principal residence for at least five
     consecutive years during the past eight years

    •Those with income up to $225,000 for couples and $125,000 for individuals
     (credit phases out for people who make more than these amounts)

    •Must be at least 18 years of age to claim credit

    •Purchase price must be $800,000 or less

Deadlines:

    •Have until April 30, 2010, to enter into contract for a home purchase

    •Have until June 30, 2010, to close on the purchase

In addition, buyers have another year to take advantage of the higher loan limit for mortgages backed by the Federal Housing Administration, Fannie Mae or Freddie Mac - set at 125 percent of local median home sales prices, up to a maximum of $729,750 in high-cost housing markets. The limit in normal markets will remain $271,050 for FHA and $417,000 for Fannie Mae and Freddie Mac.

What this all means is that many more buyers qualify for a tax credit. So what are you waiting for? If you're even remotely considering buying a home, now's the time to do it. Don't let the first time buyers have all the fun.

Real Estate Outlook: Strong Sales Predicted

2010-01-19T04:49:00.000-08:00

Will housing outperform the overall economy in 2010 as we pull out of the Great Recession?
By: Kenneth R. Harney: RealtyTimes.com
Nothing is absolute in the predictions business, but there are solid indications that, yes, housing is likely to rebound more energetically than the overall economy.

Here's why: Even the most bearish Wall Street analysts now concede that home sales are up in many areas from year-earlier levels - sometimes by extraordinary percentages.

For example, MDA DataQuick reports that sales in the greater Phoenix market in November were 62 percent higher than the year before.

Prices either have bottomed out in dozens of these markets or are close to it. That's because the distressed sales component of local volume - short sales, REOs and foreclosures - has been declining slowly but steadily.

In his latest forecast, Jay Brinkmann, chief economist for the Mortgage Bankers Association, says both existing and new home sales will be higher in 2010 than in 2009 - and 2009 was better than 2008.

No question that a key part of the energy in housing will be the direct result of stimulus efforts by the federal government - especially the two tax credit programs - that will push sales and even pricing through mid year.

The overall economy, on the other hand, according to Brinkmann, is likely only to grow slowly in the first half of 2010, and not really warm up until the second half.

The heavy anchor dragging on national economic growth - and on housing demand - will continue to be unemployment. Brinkmann says that "the time of job destruction is over" in this cycle - that is, the number of new layoffs and new unemployment insurance claims filings are trending down.

But we haven't yet moved into the next phase nationwide - that of "job creation," which may not begin until later in the year, he says, and may be a long, slow process.

The National Association of Realtors' chief economist, Lawrence Yun, sees a strong sales year ahead - up 20 percent over 2009. In some markets, he also expects to see a return to modest and sustained price increases - anywhere from two to five percent on average.

Will higher interest rates put a big dent in these projections? Many economists are forecasting 30 year rates in the upper 5 percent range later in the year.

Those higher rates won't help - but last week they headed in the opposite direction. Thirty year fixed rates averaged 5.1 percent and 15 year rates were half a point below that - both down slightly from the week before, according to the Mortgage Bankers' national survey.

Mortgage Rate Inches Back Toward 5%

2010-01-15T04:01:00.000-08:00

Mortgage rates mostly fell in the past week, with 30-year fixed-rate mortgages edging toward 5%, according to a survey by Freddie Mac.
By: NATHAN BECKER: WSJ.com
Chief Economist Frank Nothaft noted home sales, especially for lower-priced homes, have improved as the economy gets better. Also, "with fixed mortgage rates staying near a record low, many homeowners are taking the opportunity to refinance."

The 30-year fixed rate averaged 5.06% for the week ended Thursday, down from last week's 5.09%, according to Freddie's Primary Mortgage Market Survey. A year earlier, the rate was 4.96%. The 15-year fixed-rate mortgage rate fell to 4.45% from 4.5% and 4.65%, respectively.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.32% this week, down from last week's 4.44% and the prior year's 5.25%. One-year Treasury-indexed adjustable-rate mortgages rose to 4.39% from 4.31%; the year-earlier average was 4.89%.

Meanwhile, mortgage applications rose a seasonally adjusted 14.3% during the week ending Jan. 8, compared with the week before, the Mortgage Bankers Association said earlier this week.

What Home Sellers Don't Tell Buyers

2010-01-14T03:40:00.000-08:00

As buyers ease back into the battered real-estate market, they're often hitting a stumbling block: fibbing by home sellers.
By: M.P. MCQUEEN: WSJ.com
Eager to unload their abodes, some sellers exaggerate the size of their lots or their houses. Others minimize their property-tax or utility bills, conveniently forget about pests, or downplay flooding problems or noise.

Real-estate experts say that while such misrepresentations aren't new, the tough market of the past few years has made buyers more wary, partly because they can't expect rising home prices to bail them out of costly mistakes. As a result, deals are taking longer, and more of them are falling apart as buyers find properties sometimes aren't all they're supposed to be.

More than 30 states have disclosure laws requiring sellers to tell prospective buyers and agents about leaky roofs and other problems, according to the National Association of Realtors. But there's often a gray area involving the disclosure of problems the seller may not know about, such as a long-ago flood or hidden mold.

States are also increasingly passing laws requiring homeowners to disclose environmental issues, such as the presence of radon gas, a contaminant linked to lung cancer, and underground fuel tanks. In California, the checklist of required disclosures is so long that a cottage industry has sprung up of firms that help sellers prepare the forms.

Given the complexity of disclosure laws, it's not surprising that potential buyers don't hear about every problem in a house. Besides the issue of fibbing, sellers may genuinely not know about problems. And even if they do, the laws generally don't apply to bank-owned homes transferred in foreclosures, which now constitute a larger share of sales.

Buyers need to do their own due diligence and not rely exclusively on what sellers and agents say. They should hire an independent home inspector or home-inspection engineer, one not referred by the seller—and be aware that real-estate agents typically represent the seller.

Here are some of the common misrepresentations and white lies that buyers may hear as they shop for a house, according to real-estate experts and state regulators:

• "This house is on two acres." Disputes about property dimensions—how many square feet in a house or condo, or its exact boundaries—are common. Sometimes buyers don't learn the exact dimensions until the lender's appraisal.

Listing agents usually accept a seller's word on property dimensions, says Diane Saatchi, a senior vice president at Saunders & Associates, a real-estate firm in Bridgehampton, N.Y. "We tell everyone to verify," she says. Smaller dimensions also can cause an appraisal to come in lower than the agreed-upon purchase price. Low appraisals are a leading cause of ruined deals in today's market. A properly worded appraisal contingency in the purchase contract would allow you to scuttle the deal or find other financing if the appraisal comes in low, says New York real-estate attorney Michael Xylas.

How to Learn More About a Home
If you want to know more about a home's history of property damage, you can ask the seller to provide you with a copy of his or her C.L.U.E., or Comprehensive Loss Underwriting Exchange report from LexisNexis at www.choicetrust.com. A Home Seller's Disclosure report lists claims for property losses, such as fire damage, from the last 5 years as reported by insurance companies at the stated address, but doesn't disclose personal information such as the homeowner's social security number or date of birth. The seller's disclosure report can tell you about problems that might affect the availability or price of homeowners insurance, including claims for fire or hail damage. It costs $19.50, but homeowners also can obtain a free annual personal property report, which lists a 7-year history of losses associated with both the property and the individual, under the federal fair credit act. No claims in the last 7 years will produce a clean report.

A similar loss report, called A-PLUS, is available from the Insurance Services Office, Inc. or 800-627-3487.

• "We don't have pests." A basic home inspection generally doesn't include a peek inside walls or underground for termites and mold, which are among the top complaints. Inspections for mold and radon gas also generally aren't included; usually buyers must order these inspections separately. Other inside-the-wall problems include faulty wiring and old plumbing, which also may require specialists.

James Holtzman, a financial adviser at Legend Financial Advisors Inc. in Pittsburgh, says sellers of the 1901 house he bought in August 2006 said its electrical wiring was completely upgraded, yet an electrical inspection revealed only one of three floors had been totally upgraded. The seller then knocked $6,000 off the sales price before they went to contract so Mr. Holtzman, 35 years old, could pay for the necessary work.

• "This place never floods." Even arid states such as Arizona and New Mexico have occasional flash floods, and water and drainage problems aren't always obvious. June Walbert, 52, a certified financial planner at USAA, a financial-services company, says her San Antonio house received a clean bill of health from a home inspector before she bought it six years ago. But 10 days after she moved in, the sewer backed up, flooding the house, and she had to fork over $2,800 for repairs. "It was a rude surprise," says Ms. Walbert, who adds she asked her home inspector and the seller for compensation, but didn't get it.

Bill Richardson, outgoing president of the American Society of Home Inspectors, says a general home inspection wouldn't catch that unless the sewer line was visible from the basement or water backed up into sinks and tubs or toilets.

• "Taxes and maintenance costs are low." Home buyers often gripe about tax and utilities bills that are higher than sellers said they were. Homeowner association and condo dues and assessments are also common complaints. Sometimes sellers simply underestimate the bills, or forget to include recent or expected increases, agents and brokers say. Taxes can also be deceptively low because of unrecorded improvements like decks and finished basements. Ask to see recent bills, and check with the tax assessor's office for up-to-date information.

• "This is a quiet neighborhood." Sellers may play down distractions that could drive you crazy, such as barking dogs or idling buses. A charming park by day could be a teen hangout at night. Your best bet is to view a property at different times of the day. "I can't tell you how many times in my career buyers didn't go there in the night time, even though I told them to. You spend more time in the house at night than during the day," says Ms. Saatchi, the New York real-estate agent. Talk to neighbors and peruse the local newspapers and blogs to get a feel for a place, and check with police for crime.

• "There's going to be a golf course, a pool and a party room." Builders of many developments that broke ground during the housing boom ran out of money before the project was completed. Many homeowner and condo associations also are strapped because of delinquencies and defaults. Some states require upfront disclosures about this, but you should also ask neighbors, not just sellers, about any promised facilities. Also, check titles to be sure that specific parking spaces, storage units or other facilities are included in a property sale.

December Delivers Higher Home, Condo Prices

2010-01-11T04:20:00.000-08:00

Sales volume drops, stoking concern over strength of rebound.
By: DAVID HALDANE: Los Angeles Business Journal Online
Home prices in Los Angeles County bounced back in December, the first month since the housing bust that the median price for both homes and condos was higher than the year before.

The median price of a home was $348,000, up from $339,000 in November and $345,000 the year before, according to data supplied to the Business Journal by HomeData of Hicksville, N.Y. The median price of condos was $315,000, up from $305,000 in November and $310,000 in December 2008.

But there are signs that the road to recovery may be a rocky one.

The number of homes sold dropped by about 7 percent from November, but it was 30 percent higher than November 2008.

Analysts viewed the rising prices as further evidence that the real estate market is rebounding, though some characterized the upswing as a temporary respite before it once again recedes.

Last week, analysts were alarmed when the National Association of Realtors reported that the number of pending home sales across the United States dropped 16 percent from October to November. L.A.’s November sales volume dipped by 1.6 percent.

The market had softened until President Obama extended a tax credit through April 30.

“What we’re seeing today is not due to fundamentals but to government intervention in the economy,” said Christopher Thornberg, principle analyst for Beacon Economics, a West L.A. consulting firm specializing in real estate.

Thornberg said the tax credit and other government policies aimed at encouraging low mortgage rates, including financing from the Federal Housing Administration, were propping up the market. In addition, he added, the rate of foreclosures has been artificially slowed by federal pressure on banks to allow upside-down homeowners to modify their loans.

How it all turns out, Thornburg said, will become more apparent over the next several months.

“We have a big excess supply of units that have to be burned off when foreclosures start going on the market,” he said. “If that wipes out demand, it will push prices down.”

Nonetheless, Thornberg said that the historic lows of mortgage interest rates are an advantage for buyers.

That point of view is shared by many in the real estate business.

“I’m feeling very optimistic,” Betty Graham, president of Coldwell Banker Residential Brokerage in Los Angeles, said of December’s price hike. “I think it shows that we’re moving in the right direction.”
Graham said her company is doing brisk business, especially at the market’s upper end. And while obtaining financing is still difficult, many customers are tapping other sources – such as stock holdings – to pay for homes.

“They’re tired of waiting,” she said. “The buyers out there really want to steal something; but bottom fishers looking for desperate sellers may find disappointment in this market because there isn’t a deep need to sell.”

In other words, she said, when homeowners put their houses on the market they can usually hold out for their price.

One place that is occurring, Graham said, is in Malibu, where – after weak sales for the last two years – an agent recently sold three homes priced at more than $6 million each.

HomeData figures show that seven homes in Malibu were sold in December at a median price of $1.2 million.

Another area where sales were booming was Beverly Hills, Graham said.

“One of my top agents had her best fourth quarter in 30 years,” she said. “And she’s been selling real estate in Beverly Hills the whole time.”

HomeData reported that 15 homes were sold in Beverly Hills’ 90210 ZIP code in December at a median price of $1.9 million.

“This was better than most Decembers,” Graham said. “I go out to these offices and can almost touch the feeling of optimism.”

But she quickly noted that it’s not overly exuberant optimism.

“The recovery is going to be a little anemic,” she acknowledged. “Any hope of it being something else is naïve.”

A case in point, she said, is the San Fernando Valley, where sales have been flat for several months.

“I can’t really say why,” she said, “but I believe that their time will come.”
Twenty-one homes were sold in each of Woodland Hills’ two ZIP codes in December at a median price of $660,000 in 91364 and $559,000 in 91367.

New Rules Help Borrowers at Closing

2010-01-11T04:05:00.000-08:00

Plenty of home buyers have found themselves at the closing table, ready to sign the myriad documents that will officially make them new homeowners-only to get nasty sticker shock.
By: LISA SCHERZER: WSJ.com
What was originally supposed to cost them, say, $2,500 in closing costs, has turned into $3,000.

The Good Faith Estimate (GFE), a tally of the fees associated with a mortgage loan due at closing, is exactly that – an estimate. Often these costs, which are provided by mortgage brokers and lenders to borrowers within three days of getting a loan application, escalate by closing time.
But on Jan. 1, new federal rules adopted by the Department of Housing and Urban Development took effect, mandating the use of a redesigned, simplified Good Faith Estimate form. The idea behind the revision: to avoid those closing-table surprises.

The main change is how lenders communicate fee information to borrowers. Under the old system, there was no standardized format. "Fees were communicated in multiple ways, which adds to the confusion when comparing costs," says Keith Gumbinger, a vice president at HSH Associates, which tracks the mortgage market. Under the new rules, lenders will all be required to use the same form for their Good Faith Estimates – a three-page document issued by HUD.

More on the Good Faith Estimate
Developments: Uncle Sam's New Guide to Mortgage Shopping (12.30.09 Post)

There are also new rules capping increases in costs that are disclosed on the Good Faith Estimate and guidelines so that fees listed on the initial GFE reflect the actual cost at settlement. "Those fees on the GFE at the beginning of the process will be the same on HUD-1 form [final settlement statement] at the end of the process," says Mr. Gumbinger.

The new GFE guidelines are certainly better than the old ones and will reduce closing costs modestly – but there are still some kinks in the process, namely opportunistic pricing, says Jack Guttentag, professor of finance emeritus at the Wharton School who also operates a web site that offers free mortgage information.

That means that two different borrowers can go to the same lender but get two different estimates. The lender can size up the first one as a sophisticate, the other as a dupe, and charge the latter more than the former – just because he thinks he can get away with it. "There's no ready way a disclosure statement can prevent that," Mr. Guttentag says.

Prospective buyers should also be aware that while overall costs associated with closing on a home may come down as a result of the new GFE, they might have to pay up down the line in other ways. It will cost lenders to comply with the new regulations: they have to buy new software, print new documents, train loan originators to fill out the new forms properly. "They will be built into fees, so eventually consumers will pay" for these overhead costs, says Mr. Gumbinger.

So will the new good faith estimate make borrowers savvier about shopping around for a loan? Some are doubtful. "The forms are still pretty complicated," says Richard Vetstein, a real estate attorney with Vetstein Law Group in Framingham, Mass. "Even for me – a real estate attorney – it took several hours to go through the forms and all the changes, and figure out what's going on."

Here, a summary of the types of charges you can expect to see on your Good Faith Estimate.

1. Fees that cannot change from the original GFE to final settlement. These include the lender's origination and underwriting charges, and the credit or "points" based on the specific interest rate chosen.

2. Fees that can increase up to 10% at settlement. These include services required and recommended by the lender. If the borrower selects a third-party provider (for title services, title insurance and recording charges) from the lender's approved list, the fees cannot increase by more than 10% from the upfront estimate to the final.

3. Fees that can change without limit. These include charges from service providers (for title insurance) chosen by the borrower, but not recommended by the lender. This category also includes things like daily interest charges, homeowner's insurance, as well as flood and pest insurance, if necessary. It encourages borrowers to do their own shopping. "It prevents the worst abuses of price escalation on third-party charges for service providers selected by the lender," says Mr. Guttentag.

Venice condos have juicy past - and views

2010-01-10T04:26:00.000-08:00

The boardwalk building once housed a juice bar and apartments but has been converted into two condominiums by a former renter.
By: Dinah Eng: latimes.com
This contemporary condominium on the Venice boardwalk offers up-close ocean views through floor-to-ceiling glass walls and a rooftop deck that overlooks the beach.

The four-level contemporary condominium was designed by Jim Gelfat, an architect with Equinox Architecture Inc. in Culver City. The two units have five bedroom, four bathrooms and three half-baths in 5,000 square feet of living space.

The newly constructed condo, situated between a hotel and a gift shop, is one of the few single-family residences among the boardwalk's retail establishments.

The building's two units can be bought separately or together.

"I love the mix of this beach community," says Frank Murphy, a Venice developer who lived in the building when it was a juice bar with apartments above. "You've got everyone from the wealthy and famous to the homeless, with every demographic you can think of here. I purchased this with the idea of making it into a condo."

Jim Gelfat, an architect with Equinox Architecture Inc. in Culver City, has created a four-level home with exposed concrete walls and floors in most of the rooms, giving the building an urban, minimalist feel. Stenciled siding by artists Randy West and Nancy Monk wraps around the exterior in a blue wave pattern.

The lower Unit B has a living room/dining area with a fireplace, and a half-bath with storage space. The kitchen features white Caesarstone counters, Jenn-Air stainless-steel appliances - including stove, refrigerator and dishwasher -- and an open-frame, steel-beam ceiling.

The bottom floor of the unit is semi-subterranean, with windows that look up to the boardwalk. Each of the two bedrooms on this level has a bathroom. The master bathroom has a double shower with two shower heads and pebbled river rock flooring.

Unit A, on the upper floors, is slightly larger, featuring three bedrooms, a media room, den, two bathrooms and two half-baths. A private rooftop deck - with electrical, gas and water outlets - is designed for outdoor entertaining, with a panoramic view of the ocean from Point Dume to the Palos Verdes Peninsula.

The rooms in the rear are connected by a glass-enclosed walkway to the living room, which features a cantilevered window in the middle of the front glass wall. When the window is open, the sounds of the boardwalk and view create the illusion of being able to walk right out onto the beach.

Uncle Sam’s New Guide to Mortgage Shopping

2009-12-30T04:11:00.000-08:00

My guess is that the typical American puts more thought into the search for a flat-screen TV than into the choice of a mortgage lender.
By: James R. Hagerty: WSJ.com
Shopping for a TV is fairly straightforward. You read reviews online or in Consumer Reports; you eyeball a few models in the store to see if the image looks sharp; then you buy from whichever merchant has the lowest price. If the TV doesn’t work, the merchant gives you a new one.

Shopping for a mortgage is more complicated, less fun and infinitely more dangerous to your long-term financial interests. At the end of the process, you probably have no idea of whether you got the best deal available. Was the upgrade on those cherry kitchen cabinets really worth the high rate and fees you paid to the lender affiliated with your friendly home builder? Probably not, but that salesman sure was persuasive, and you were glad to be relieved of spending the next three days shopping for mortgages.

Now help is on the way from a most unlikely source: The U.S. Department of Housing and Urban Development, or HUD.

Federal rules that take effect Friday mandate a standard, three-page Good Faith Estimate that urges consumers to shop around for the best loan and helps them compare lenders’ offerings. The rules, announced by HUD in November 2008 but just taking effect this week, are an update of the Real Estate Settlement Procedures Act, a 1974 law known as Respa. (See WSJ story.)

One difficulty of shopping for mortgages is that the lender with the lowest rates often isn’t offering the best deal. High fees can wipe out the benefits of low rates, and little-noticed features such as prepayment penalties might blow up on you later on. Even for members of Mensa, it’s hard to compare different combinations or rates, “points” (paid in exchange for a lower rate), fees and other terms. Lenders often sprinkled in lots of confusing charges, such as processing and messenger fees, to pad their margins. Dickering over theses “junk” fees distracted borrowers from the bigger picture of total costs.

All of these complexities favor lenders, of course. The more confused you get, the less likely you are to realize you just got fleeced.

To address those problems, the new estimate form requires lenders to wrap all the fees they control into one “origination charge.” That lets you compare one lender’s fees with another’s. Jack Guttentag, a finance professor emeritus at the University of Pennsylvania’s Wharton School, recommends that borrowers focus on two items as they shop: the interest rate and the “adjusted origination charge,” which includes any points paid to lower the rate.

Good Faith Estimates have been around for decades, but there was no standard format. Under the new rules, lenders and mortgage brokers are required to give consumers the standard estimate forms within three days of receiving a loan application.

Lenders aren’t allowed to increase the origination fee from the estimate. Some additional charges, including title services and recording charges, can increase by as much as a combined 10%. Estimates for other charges, such as homeowner’s insurance and other services provided by third parties selected by the borrower, aren’t subject to such limits.

Title insurance typically is the largest fee, and the new forms let consumers know they don’t have to accept the insurer suggested by the lender. Mr. Guttentag says title insurance can be “vastly overpriced” and consumers should take the time to shop for it.

Settlement firms, which organize the closings of home sales, will be required to issue a new version of the HUD-1 form used in closings. This new HUD-1 includes a comparison of the estimated and final costs, as well as a summary of the loan terms.

Will all this make a big difference? Mr. Guttentag, who has been exposing the tricks of lenders and brokers for decades, thinks the new rules will help, though they aren’t a cure-all.

Much depends on whether Americans want to put in a bit of effort rather than simply accept the often biased mortgage advice of a real estate agent, home builder, broker or banker. The real estate agent may urge you to use an affiliate of his firm, or recommend the lender most likely to grant a loan quickly rather than the one with the best terms. The builder wants you to use his in-house lender. The brokers and loan officers are working for themselves, not for you.

When you’re trying to pick a new TV, you don’t rely on a TV manufacturer to give you an impartial review of the alternatives.

Plan to demolish building on Wilshire Boulevard is opposed by L.A. Conservancy

2009-12-02T09:16:00.000-08:00

The conservancy says the 1965 Columbia Savings building at La Brea Avenue is worth saving. Area residents worry that a planned 482-unit apartment and retail complex would add to congestion.
By: Cara Mia DiMassa: latimes.com
The stretch of Wilshire Boulevard between downtown and the Miracle Mile was for decades a center of commerce, with buildings once occupied by such business powerhouses as Union Bank, Texaco, IBM and Getty Oil.

In more recent years, it's been transformed into a residential hub, with a construction boom of mid-rise condo and luxury apartment buildings.

Yet for all of the momentum - more than two dozen residential developments either have been completed or proposed for the corridor - a backlash is now gaining steam, and it's centered on a mid-century former savings and loan building at Wilshire and La Brea Avenue.

The squat building, with a ribboned facade and a stained-glass skylight, is an example of a type of architecture that was prevalent in the years after World War II, when financial institutions pushed for bold buildings to symbolize their own emergence from staid practices and reputations.

Preservationists have joined with some residents in an effort to save the structure, which they consider architecturally significant, a gem of Modernist design that the public has only recently begun to appreciate. They have filed a request with the state of California to give the building landmark status.

Some residents are backing the request, saying the boom in mid-rise apartment complex construction along Wilshire has gone too far.

But the developers say that the building's significance has been overstated and that the neighborhood would be better served with the 482-unit apartment and retail complex they have proposed for the site.

Dale Goldsmith, a land-use attorney representing BRE Properties, the building's owner and developer, said the project "will reflect the demographics of the area."

At a hearing of the Los Angeles City Council's Planning and Land Use Management Committee on Tuesday, Councilman Dennis Zine called the project "well worth it for the community."

The committee approved the developer's plan Tuesday, sending it to the full council for final approval, which is expected as early as later this week.

But that, said Mike Buhler, the Los Angeles Conservancy's director of advocacy, is short-sighted.

He said that the city failed to consider the historical significance of the building and that the developer could put the structure, which is only a portion of the block that BRE wants to develop, to an alternate use such as a restaurant, store or gym rather than demolish it.

"We were surprised that the draft environmental impact report refused to recognize the building's significance in any way," Buhler said.

Should the building be recognized by the state as architecturally significant, the city would have to go back and reconsider that as a part of the environmental impact report. A hearing on the state matter is scheduled for Jan. 29, and the conservancy is asking the city to delay a vote on the Wilshire-La Brea project until after then.

The Columbia Savings building, which opened in 1965, is at the center of the conservancy's "60s turn 50" initiative.

The effort recognizes a class of buildings in Los Angeles from that era whose significance has not been widely acknowledged.

The building, which most recently served as a church, isn't mentioned in the city's definitive architectural guide, and the City Council overturned a recommendation by the city's Cultural Heritage Commission supporting the application for state landmark consideration.

The BRE design for the block, bordered by Wilshire, La Brea, Sycamore Avenue and 8th Street, calls for a public pocket park as well as undulating edges and double rows of trees - all efforts that Goldsmith said were aimed at softening the building's effect on the neighborhood and keeping it from being too monolithic. A previous proposal called for a structure at Wilshire and La Brea to be 17 stories; that was scaled down to seven stories after community objections.

The back-and-forth over the project comes on the heels of a profound change in the Wilshire Corridor, with sleek glass-and-steel towers being added to the cityscape while formerly shuttered office towers have been rehabbed as residences.

Goldsmith said he's worked on five projects in the area, and BRE finished the 5600 Wilshire project, just west of La Brea, earlier this year.

Because Wilshire is considered a transit corridor - with rapid bus lines and Metro stops - and because it's one of the few places in the city where high-rise towers are allowed, many developers see the changes along the boulevard as a symbol of the city's evolution.

The economic slowdown has had little effect on their progress, and longtime residents worry that the growing number of people along the corridor will put added pressure on transportation and infrastructure that is already struggling to keep up.

In a letter to the city planning department, resident Susan Baker objected to what she called "the Manhattanization" of her neighborhood, and she worried that the Wilshire-La Brea project would bring more traffic and noise pollution.

"This entire area is becoming overbuilt with brand-new apartments," Baker wrote. "Who $ay$ we have to have $till more?"

Jim O'Sullivan, president of the Miracle Mile Residents Assn., said he saw residents divided about the Wilshire-La Brea project: Some welcomed the development of the building and the area around it, and others objected to even more construction in their area.

But he said that almost everyone worried what effect the economy would ultimately have on their area. Already, he said, he's noticed that potholes are not fixed as quickly, and streetlights can be out of order for weeks.

"I think at the moment, everybody is just holding their breath with what is going on in the city and elsewhere," O'Sullivan said. "We're trying to figure out what happens next."

Mortgage Applications in U.S. Increased 2.1% Last Week, MBA Index Shows

2009-12-02T08:52:00.000-08:00

Mortgage applications in the U.S. rose last week, led by a gain in purchase applications as mortgage rates approached historic lows.
By: Bob Willis: Bloomberg.com
The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan rose 2.1 percent to 613.7 in the week ended Nov. 27 from 601 the prior week.
The group’s gauge of purchases gained 4.1 percent, a second consecutive advance, while its measure of refinancing climbed 1.7 percent.

Cheaper borrowing costs and a tax credit for first-time homebuyers are giving demand a lift and may pave the way for a self-sustaining housing recovery. An unemployment rate that is forecast to exceed 10 percent through the first half of 2010 is one reason why any improvement is likely to be uneven.

“The combination of falling rates, the tax credit extension and improved affordability point toward a rebound in housing demand,” Michael Larson, a housing analyst at Weiss Research in Jupiter, Florida, said before the report. “Purchase applications should enter 2010 with the wind at their back.”

The purchase index rose to 232.3 from the prior week’s 223.1. The measure reached a 12-year low in mid-November. The mortgage bankers’ refinance gauge increased to 2866.4 last week from 2818.7, today’s report showed.

The share of applicants seeking to refinance loans rose to 72.1 percent of total applications last week.

Rates Fall

The average rate on a 30-year fixed-rate loan declined to 4.79 percent last week, the lowest since May, from 4.83 percent, according to the mortgage bankers group. The rate reached 4.61 percent at the end of March, the lowest level since the group’s records began in 1990.

At the current 30-year rate, monthly borrowing costs for each $100,000 of a loan would be $524, or about $43 less than the same week a year earlier, when the rate was 5.48 percent.

The average rate on a 15-year fixed mortgage fell to 4.27 percent from 4.32 percent. The rate on a one-year adjustable mortgage declined to 6.56 percent.

President Barack Obama on Nov. 6 extended the deadline for a tax credit of as much as $8,000 for first-time buyers to April 30, and added buyers who have owned a home for at least five years.

The tax credit, together with foreclosure-driven declines in prices and low rates, has helped boost housing sales from record low levels this year.

Mounting Joblessness

Even so, unemployment at a 26-year high is making most people reluctant to buy a home. Tighter credit standards are making it harder to get mortgages for those who want to buy.

Homebuilders, while seeing signs of improvement, remain cautious. Beazer Homes USA Inc. had a 2.4 percent gain in new orders in its fiscal fourth quarter, helping it post its first quarterly profit in three years, the Atlanta-based builder said Nov. 10.

“Elevated unemployment and rising foreclosure activity make it difficult to predict when and to what extent the housing market will sustainably recover,” Chief Executive Officer Ian McCarthy said in the statement.

The Washington-based Mortgage Bankers Association’s loan survey, compiled every week, covers about half of all U.S. retail residential mortgage originations.

Obama administration pushes to make mortgage modifications permanent

2009-12-01T09:37:00.000-08:00

New guidelines follow complaints involving restructured mortgages meant to keep homeowners from foreclosure. Lenders and servicers could face sanctions if requirements are not met.
By: Jim Puzzanghera: latimes.com
The Obama administration today announced a renewed push to get mortgage companies to convert hundreds of thousands of temporarily restructured home loans into permanent ones by the end of the year to help keep struggling homeowners from falling into foreclosure.

As part of its aggressive action, the administration is summoning executives from the nation's top mortgage servicers to Washington next week to prod them to speed up their efforts.

It also is sending what administration officials described as three-person "SWAT teams" to the offices of those firms to help them obtain the necessary documents from borrowers and trouble-shoot problems.

"In our judgment, servicers to date have not done a good enough job in bringing people a permanent modification solution," Assistant Treasury Secretary Michael Barr said.

The administration is hoping to embarrass mortgage servicing companies into doing more to make trial modifications permanent by highlighting those that are not performing well. But it also could levy penalties or other sanctions against laggards based on the agreements they signed to participate in the program.

"Servicers that don't meet their obligations under the program are going to suffer the consequences," Barr warned.

The moves come amid complaints of bureaucratic nightmares from people who have received the short-term reductions in their payments but have been unable to get their servicer to make the changes permanent. The mortgages have been altered under the administration's $75-billion Home Affordable Modification Program, which uses financial incentives to get banks and other mortgage holders to reduce the payments for homeowners who meet certain qualifications.

The program has temporarily modified more than 650,000 mortgages as of Oct. 30, with an average monthly payment reduction of $576. But few of those three-month trials are estimated to have been made permanent. As of Sept. 1, only 1,711 trial modifications had become permanent, according to the oversight panel monitoring the $700-billion Troubled Asset Relief Program. TARP money is used to fund the program.

The Treasury Department, for the first time, will release its own numbers next week. But Barr said the number was "low."

About 375,000 of the trial modifications are eligible to be made permanent by the end of the year. About a third of the homeowners with those temporary reductions have submitted the needed documents, including current income statements, so servicers can decide on permanent modifications, said Phyllis Caldwell, head of the Treasury Department's Homeownership Preservation Office.

"These homeowners, who took the time and effort to complete documentation, deserve a decision by their servicer," she said.

The administration's new plan focuses on increasing accountability by mortgage servicers. The leading mortgage servicers will be required to submit a schedule of their plans to reach a final decision on each loan for which they have the proper documentation and to send the borrower a permanent modification agreement or denial letter.

Many people in the program have complained of a bureaucratic runaround and inability to get a straight answer on their status from their mortgage holder.

Special account liaisons from the Treasury Department and Fannie Mae will be assigned to the eight largest servicers and monitor the progress as frequently as daily. The administration will require those companies to submit twice-daily updates throughout December on their progress. Mortgage servicers that fail to meet standards they agreed to as part of the program "will be subject to consequences, which could include monetary penalties and sanctions," administration officials said.

The administration also is providing new information for homeowners on its website, www.makinghomeaffordable.gov, including links to lists of documents and a new instructional video, to help them get their trial modification made permanent.

Guidelines Aim to Ease Short Sales

2009-12-01T09:00:00.000-08:00

The Obama administration laid out final guidelines on Monday that should make it easier for some financially troubled borrowers to sell their homes.
By: RUTH SIMON: WSJ.com
The guidelines are designed to encourage the use of short sales, transactions in which the borrower with lender approval sells the home for less than what is owed on the loan.
The program also makes it easier for borrowers to voluntarily transfer ownership of properties through a "deed in lieu of foreclosure."

Short sales can result in higher prices than foreclosures and can be less damaging to local neighborhoods, in part because homes aren't left vacant and exposed to vandalism. But these transactions are often difficult to complete.

Under the plan, borrowers will receive $1,500 from the government if they sell their homes for less than the amount of their mortgages. Mortgage-servicing companies will also receive $1,000 for each completed short sale. The program is open to borrowers who may be eligible for the government's loan-modification program, but don't end up qualifying, or are delinquent on their modification, or request a short sale or deed-in-lieu transaction.

The short-sale program is the latest addition to the Obama administration's $75 billion foreclosure-prevention plan, which includes incentives for mortgage companies and investors to rework troubled loans. The government first said in May that it would include short sales in the program, but it has taken months to finalize the details.

Under the new guidelines, second-mortgage holders can receive up to $3,000 of the sales proceeds in exchange for releasing their liens. Investors who hold the first mortgages, meanwhile, can collect up to $1,000 from the government for allowing such payments.

Borrowers who complete a short sale under the program must be "fully released" from future liability for the debt, according to the guidelines.

Give a Home for the Holidays

2009-11-27T10:26:00.000-08:00

Tired of the offerings at the mall? Consider giving your children something grander, like the gift of a down payment to buy a home—or even a home itself. Uncle Sam encourages such generosity.
By: JUNE FLETCHER: WSJ.com
'Tis the season of giving. But if you're tired of the offerings at the mall, why not consider giving your children something grander, like the gift of a down payment to buy a home—or even a home itself?

Uncle Sam encourages such generosity, at least within limits (the IRS site has details). You and your spouse are each allowed to give gifts of $13,000 of money or property to as many people as you want, without triggering taxes for you or the recipients. If you give more than this amount to any one person, the excess counts, dollar for dollar, against your $1 million lifetime gift-tax exclusion ($2 million for married couples).

So if you and your spouse wanted to give $50,000 to your son for a down payment on a house, together you could gift him $26,000 this year, and $24,000 next year, tax-free.

This gift could help him qualify to buy a home before the federal government's tax credit stimulus expires early next summer. If the gift allows him to make a down payment of 20% or more of the sales price, he'd also avoid having to pay private mortgage insurance.

Or, if you are interested in selling your home to your child, you could gift some of the equity in the home rather than cash. Lenders usually will accept such a gift, but may require two appraisals to make sure that the home is really worth the sales price, and will ask you to sign an affidavit affirming that you are giving a gift and don't expect repayment.

Alternatively, you could finance your deposit-poor child's second mortgage. Then you and your spouse could each give $13,000 to your child, and an equivalent amount to the child's spouse, until the loan is paid off. Or you could transfer a percentage of interest in the property each year, up to $13,000 per person, until the property belongs to your child.

It may make sense to give more than the tax-free limit each year if you think you'll be subject to the estate tax, which kicks in for those worth more than $3.5 million when you die (or $7 million for married couples), according to San Diego certified public accountant Michael Fitzsimmons. That's because if you live more than three years after the date of the gift, any appreciation on the property, plus the original value of the gift, escapes estate taxes.

What if you want to gift a property that has decreased in value since you purchased it? Not so uncommon in these post-bubble times. If you own a rental property that has dropped in value, Mr. Fitzsimmons says that it's better to sell it and take a tax loss than to gift it, since neither a donor nor a recipient can deduct a tax loss on a decrease in value that happened before the date of the gift. Losses on primary and vacation homes are non-deductible.

And what if the mortgage on the property exceeds the home's current value? It's possible to give such a property away, but according to Jenkintown, Pa., certified public accountant Michael Solomon, most lenders wouldn't allow ownership to be transferred unless the recipient was in as good or better financial shape than the donor—and might also require that the donor remain on the mortgage. Meanwhile, if you're asked to take on a home that's underwater, remember that you can't return it if it doesn't fit your lifestyle. "Declining the gift does make sense," says Mr. Solomon.

Sales of existing homes surge 10.1% in October

2009-11-23T09:33:00.000-08:00

Even as builders pulled back their construction of new homes in October, buyers snapped up previously owned properties at the briskest pace in more than two years, a national organization said this morning.
By: Alejandro Lazo: latimes.com
The National Assn. of Realtors in Washington said sales of previously owned homes increased 10.1% to a seasonally adjusted annual rate of 6.1 million units in October from a downwardly revised pace of 5.54 million in September.
That is up 23.5% from the seasonally adjusted annual rate of 4.94 million units in October 2008. The last time the sales pace was that swift was in February 2007.

The buying - motivated by low interest rates, cheap housing and a credit for first-time buyers - pushed housing inventory at the end of October down 3.7% to 3.57 million existing homes available for sale, which represented a seven-month supply at the current sales pace, according to the Realtors group.

“The supply of homes on the market is now at the lowest level in over 2 1/2 years - we’re getting closer to a general balance between buyers and sellers,” Lawrence Yun, chief economist for the group, said in a statement.

The national median existing-home price for all housing types was $173,100 in October, down 7.1% from October 2008. Distressed properties accounted for 30% of sales in October.

In the West, which includes California, sales of previously owned homes increased 1.6% to an annual rate of 1.31 million in October and are 12% above a year ago. The median price in the West was $220,200, which is 14.7% below October 2008. It was the weakest performance for both sales and housing price improvement among the four national regions.

While a rush of first-time buyers to use the credit ahead of its initial Nov. 30 tax credit helped boost sales in October some economists are predicting a drop-off in sales in the winter months despite the credit’s extension and expansion earlier this month.

In a note to clients this morning Patrick Newport, U.S. economist for IHS Global Insight, predicted that given that the Mortgage Bankers Association's purchase Index - a measure of mortgage loan application volume - dropped to its lowest level in 12 years in its most recent release, a December sales plunge is likely.

“This surge may last one more month,” Newport wrote.

New Tax Credits Benefit Both First Time Buyers and Current Homeowners

2009-11-03T05:07:00.000-08:00

Closing deadline extended to June 30, repeat buyers offered up to $6,500
By: Annalisa Burgos: FrontDoor.com
First time homebuyers aren't the only ones who can claim a tax credit when they purchase a home. Now current homeowners can take advantage of the tax break too, if they qualify.

President Barack Obama signed into law a $24 billion economic stimulus bill on Friday, which includes an extension and expansion of the popular first time homebuyer tax credit. It was set to expire on Nov. 30. Prospective buyers now have until June 30, 2010, to close on their purchase and will need to submit documentation with their tax returns to claim the credit. The new program is estimated to cost $11 billion. Here are the details:

FIRST TIME BUYERS

Credit: Equal to 10 percent of the home's purchase price, up to $8,000

Who Qualifies:

    •Those who haven't owned property in the last three years

    •Those with income up to $225,000 for couples and $125,000 for individuals
     (credit phases out for people who make more than these amounts)

    •Must be at least 18 years of age to claim credit

    •Purchase price must be $800,000 or less

Deadlines:

    •Have until April 30, 2010, to enter into contract for a home purchase

    •Have until June 30, 2010, to close on the purchase

CURRENT HOMEOWNERS

Credit: Equal to 10 percent of the home's purchase price, up to $6,500

Who Qualifies:

    •Those who have owned and lived in their principal residence for at least five
     consecutive years during the past eight years

    •Those with income up to $225,000 for couples and $125,000 for individuals
     (credit phases out for people who make more than these amounts)

    •Must be at least 18 years of age to claim credit

    •Purchase price must be $800,000 or less

Deadlines:

    •Have until April 30, 2010, to enter into contract for a home purchase

    •Have until June 30, 2010, to close on the purchase

First-Time Homebuyers Buoy Real Estate Market

2009-10-02T11:51:00.000-07:00

The housing market is getting a much-needed boost as first-time homebuyers rush to take advantage of an $8,000 federal tax credit that is set to expire Nov. 30, 2009.
By: David Bracken: RISMEDIA
The incentive is helping to slow the decline in home sales. In August, sales were down 1% over the comparable period last year, the smallest year-over-year decline in any month since late 2007. As Congress considers extending the credit, real-estate agents and home builders worry sales could slump again if it's allowed to expire.

A full accounting of the program’s popularity won’t be available for several months, but brokers say first-time buyers have been driving much of the activity in the market in recent months, especially for cheaper homes.

Kelly Cobb, a broker with Fonville Morisey Realty in Cary, North Carolina, said four of the six listings her office put under contract in the last month involved first-time buyers. Cobb said that as the deadline gets closer, she’s seeing more lower-end homes with multiple offers on them. “It has really, really fueled our market,” she said. “I think anybody who waited until now is going to pay top dollar.”

In order to qualify for the tax credit, a buyer must close on their property by Nov. 30. Brokers say in most cases that gives potential buyers about five more weeks to begin the closing process. The tax credit has been available since the start of the year, and for many families it has been too good to pass up. Terri Hutter and her husband, Fred Neumann, had been repaying credit-card debt and trying to build up savings in recent years. Hutter said the couple originally planned to continue renting for a year or two longer. “With that deadline I’m like, ‘Oh, let’s do it,’” said Hutter, who runs the culinary job training program for the Inter-Faith Food Shuttle. Hutter and Neumann expect to close Oct. 9 on a 1,360-square-foot home in Durham, N.C. The couple paid the listing price of $145,000 for the house and got a 30-year mortgage at a 4.875% interest rate.

Albert Blackmon and his fiancee, Rachel Blair also expected to wait a few years before buying a home. But Blackmon, who works as a Web developer in Apex, N.C., said the tax credit put buying a home within reach. The couple got a U.S. Department of Agriculture Rural Development loan with a 5% interest rate that required no money down. They paid $134,500 for a 1,250-square-foot home in Clayton, N.C. “We’re basically borrowing some money from some family members interest free, and when the credit comes back, we’re going to pay them right back and we have some instant equity in the house,” Blackmon said.

Those hoping to take advantage of the tax credit will need to have their financial house in order, as skittish lenders are closely scrutinizing a potential borrower’s credit and income history.

Tom Simon and his fiancee Tera Caldwell recently used the tax credit to purchase a home near downtown Raleigh. Simon admitted that getting financing was a long process, but he said that made him more confident that the couple could realistically afford the $193,000 house they ended up buying. Simon said the tax credit was not the deciding factor in the couple’s buying a home, but it did make them start seriously looking for a house sooner than they would have otherwise.

There’s still a chance that Congress could extend the tax credit in its current form or amend it. Some lawmakers worry about the program’s cost, which may hit an estimated $15 billion, more than double the amount projected in February’s economic stimulus bill, according to the Associated Press. Critics of the program also say it is artificially inflating demand at the expense of the taxpayer. “I would argue that it has the same effect of manipulating the real estate market that we’ve had with some other problems,” said Dallas Woodhouse, state director for the conservative group Americans for Prosperity. “There will be a day of reckoning for that.”

If the program is allowed to expire, real estate professionals will be watching closely to see what happens to home sales after it’s gone. George Pittman, CEO of Ammons Pittman GMAC Real Estate in Raleigh, said increased sales of lower-priced homes have not translated into more sales at the higher prices. Pittman said he would normally expect those selling $150,000 homes to then buy more expensive homes. “The thing we’re trying to figure out is why it is not snowballing up,” Pittman said. “It’s had some impact, but the upper end is still a bit soft right now.”

The tax credits have already had an effect on new home construction. As the inventory of modestly priced homes shrinks, builders are able to convince lenders that there is a need to replace them. The average cost of homes built in Wake County, N.C., was $165,000 in July, down from $195,000 during the same month a year ago, according the Home Builders Association of Raleigh-Wake County. There’s also been a spike in the number of building permits issued in Wake County in recent months. Tom Anhut, a division president in Raleigh for Toll Brothers home builders, said he believes the increase is a result of builders rushing to get homes finished by the end of November. “I think that there is a demonstrable increase in construction activity at the lower end right now because of that,” he said.

Tim Minton, executive vice president of the Home Builders Association of Raleigh-Wake County, said there’s no question the credit has helped stabilize a volatile market. “The question is, from a long-term standpoint, at some point that spigot does have to be turned off,” he said.

Worried Mortgage Rates Will Rise? You Have Options

2009-10-02T11:46:00.000-07:00

Prospective home buyers can protect themselves from an interest rate spike by investing in a mutual fund that tracks rates, or buying options on one of those funds, writes Brett Arends.
By: Brett Arends: WSJ.com
Good news for prospective home buyers: You can find 30-year mortgages for less than 5% again. But those rates may not last . And these days it's almost impossible to lock in a rate while you hunt for a home. Banks—for understandable reasons—now want to evaluate a property before pre-approving borrowers.

Mortgage rates have been falling in concert with sinking interest rates on long-term Treasury bonds. The two are closely related, through a complex mechanism involving mortgage-based securities. And if mortgage rates start rocketing again in the next few months, a rebound in long-term Treasury yields will likely be the cause.

People who worry that rates will spike again before they find a home can protect themselves by investing in a mutual fund that tracks long-term interest rates. Or they can buy call options on one of those funds instead. If Treasury rates suddenly skyrocket, you may make back what you would lose on the mortgage rates.

This may sound like some incredibly complex footwork, and most people will shy away from trying these moves. But considering the cost of even a slight rate change over the life of a mortgage, they're worth considering.

After all, if you're looking to buy a typical $200,000 home, a rise in mortgage rates from 5% to 6% will cost you an extra $1,300 a year for the next 30 years.

Several funds track long-term interest rates. Among them are two exchange-traded funds that you buy like shares on the stock market, the ProShares Short 20+ Year Treasury fund (TBF) and the ProShares UltraShort 20+ Year Treasury fund (TBT). There is also the Rydex Inverse Government Long Bond Strategy mutual fund (RYJUX). (Technically, these funds track the inverse of the price of long-term government bonds, which in turn is inversely related to the yield.)

These funds come with risks. The two exchange-traded funds, TBF and TBT, are specifically designed to track daily moves in the long-term bond market rather than long-term moves. The TBT is particularly volatile because it is what is known as an "Ultra" fund—it will give you double the market move, up or down. The drawback: If rates fall further while you are house hunting, you will save extra money on your mortgage —but you'd lose money on these funds.

That's why the options market looks especially interesting.

You can purchase call options on the TBT fund. These calls wager that the $4 billion fund will see a sharp rise in share price in the next few months, and could operate like a form of insurance if mortgage rates suddenly spike during your real-estate search.

Here's how it works: Today, with 30-year Treasury rates at just 4%, the TBT is about $44 a share. But for $1.20 a share you could buy a $50 call option on the fund, good for any time between now and January. That would simply give you the right to buy the TBT at $50 between then and now. So if long-term interest rates were to skyrocket over the next few months, and the TBT soared to, say, $60, you'd pocket a profit of $10 a share (less the $1.20 in costs for the option).

Because the TBT tracks daily performance, there is no absolute way of knowing what long-term Treasury rate would correspond to any given price on the TBT. But the fund was about $59 in June.

Issues like compliance and complexity probably deter most financial intermediaries from offering any such product. That's a shame, because an options hedge could be very useful to a lot of middle-class Americans.

No strategy can offer perfect protection against mortgage rates: it's a work-around, based upon derivatives of derivatives of the Treasury market. But anyone who thinks or fears that long-term interest rates will rise dramatically in the next few months might look at buying call options on the TBT.

Real Estate Outlook: Recession is Over

2009-09-22T10:23:00.000-07:00

Now it's official. The chairman of the Federal Reserve Board himself has said it publicly that it looks like the recession is over.
By: Kenneth R. Harney: RealtyTimes.com
Here comes the recovery.

But there was a big footnote in Bernanke's speech on the economy last week in Washington: Don't look for a dramatic recovery.

It'll be more like a slow moving, plodding sort of improvement where the economy inches toward expansion. But there'll be no sudden, splashy return to economic boomtime anytime soon.

Bernanke's point about the end of the recession was underscored by a 2.7 percent jump in retail sales for the month of August, according to the Commerce Department.

That's an important indicator because the key to pumping up the economy again is to get consumers spending, and that appears to be happening. Not just for auto sales, which got a big boost in August from the government's "cash for clunkers" program, but also for other key categories, like food and clothing purchases, department store retail, entertainment and restaurant spending, sporting goods.

They were all up for the month, after having been mainly down for well over a year.

One reason for the pick-up in consumer spending: People feel more confident about the direction of the economy in the months ahead. They see the stock market up, so their retirement funds and 401 K plans are bouncing back.

They see home values stabilizing or growing in most areas, so their equity is beginning to increase again.

The one big negative - and it's definitely a drag for housing - is the unemployment rate, which Mr. Bernanke said won't be coming down fast, even with the end of the recession.

Nonetheless, the vast majority of Americans who do have jobs have seen their real wages rise this year, up five percent. That's the largest annual gain in fifty years.

All of this is feeding into the housing sector in key markets, such as southern California, where August sales were up 11 percent compared with the year before, according to MDA DataQuick. Even prices are rising slightly.

In the combined markets of Los Angeles, San Diego, Orange County, San Bernadino-Riverside and Ventura, the median price of homes sold gained 2.6 percent in August, which is very encouraging for one of the hardest-hit boom-to-bust areas of the country.

Meanwhile, the mortgage market continues to be exceptionally positive for housing sales and values: 30 year fixed rates averaged just above 5 percent last week, according to the Mortgage Bankers Association, and 15 year loans averaged 4.4 percent.