California: Proposed Legislation to Require Tax Disclosure

By: Corrie M. Anders: REALTOR® Magazine Online
The California legislature is considering a proposal that would head off the financial jolt many first-time homebuyers get when they receive an unexpected property tax bill.

The legislation (AB 459) would require sellers, or their real estate professionals, to notify prospective buyers about the existence of supplemental property tax bills. Buyers would receive a one-page disclosure that clearly spells out their potential tax liability.

The additional tax represents the amount due on the difference between the seller’s old property value and the buyer’s new home value. The tax “sometimes creates confusion for the buyer,” according to the state’s legislative analyst, because county assessors may not mail the tax bill until three weeks to six months after the close of escrow.

Assembly member Jenny Oropeza (D-Carson), who introduced the legislation, says, “first-time homebuyers too often suffer sticker shock when they are handed a supplemental property tax bill that often may add thousands of dollars to the price of their home. This can cause substantial financial stress to families struggling to make the biggest purchase of their lives.”

The legislative analyst says many sellers and real estate professionals voluntarily disclose to buyers that they may have to pay supplemental property taxes.

The CALIFORNIA ASSOCIATION OF REALTORS® opposes the measure, which the trade group says is “unnecessarily duplicative.”
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How to Calculate a Home's Square Footage

By: Henry Savage: RealtyTimes
Have you ever noticed that real estate professionals are able come up with different square footage numbers on the same house? One reader noticed this phenomenon. Henry Savage explores the different ways square footage is calculated.

Question: Is there a standard formula to calculate a home's square footage? I have seen different publications with different square footage for the same house. For example, the county land records will say a house has 3,000 square feet, but a sales brochure will say the same house has 3,500 square feet. Are finished basements allowed in a calculation? What about hallways? I don't know what or who to believe. It seems misleading.

Answer: You have asked a very good question. I doubt if anyone is purposely trying to mislead the public, but it's true that not everyone in the real estate business calculates square footage the same way. In fact, it may be different from one geographic area to the next. I'm from the Washington, DC area, so I'll share with you what I know about how it's done here.

The square footage listed in the city and county records for condominium units are typically not questioned. These numbers are taken from the original condominium documents and are generally accurate. Unlike detached homes, square footage is less likely to change on a condominium as a result of additions and improvements.

For attached and detached single family homes, there are different ways to calculate square footage.

Most real estate appraisers measure the exterior of the home to calculate the gross living area. For example, a two-story home that measures 25 feet by 25 feet would have 625 square feet on each floor, so the appraiser would say the house contains 1,250 square feet. Since he is measuring from the exterior, the calculation includes hallways, stairwells, closets and wall space.

The appraiser will also consider the size of the basement and determine how much of the basement has been finished as living area. Instead of totaling the square footage of a basement's living area, he will make value adjustments based on other comparable homes. For example, a home with a full finished basement that includes a den, bathroom and bedroom might be credited $15,000 or $20,000 in value compared to a similar house with an unfinished basement.

In some cases, even if the lowest level is completely above grade, an appraiser may treat it as a basement. Consider an attached townhouse that has a lower level used as a garage and a den or mud room. An appraiser might consider such a room as a basement.

It gets more complicated. What if the house in our example has a vaulted ceiling in the family room with a second story balcony? This would clearly result in the second floor having less than 625 square feet of actual floor area. Most appraisers won't subtract the space left out of the second floor to make room for the vaulted ceilings. Why? Because such a floor plan often enhances the market value of the home because it's a popular feature to have. Remember that an appraiser's job is to determine the market value of the home. The total size of the living area is only part of the equation. Imagine a 3,000 square foot house that contains 20 small rooms each consisting of 150 square feet. Such a build out would not be very popular for a typical family.

Many real estate agents and builders will include all finished "walkable" areas when totaling the square feet of a house. It's certainly not misleading. A lot of prospective home buyers would want to know the total living area, regardless of whether some of it is below grade.

Other real estate agents will use the square footage that's listed in the county tax records in their marketing materials. Unfortunately, this information is often incorrect, especially with older homes. Over time, basements get finished and additions are constructed, increasing the chances that tax records will be outdated and inaccurate. It's for this reason that some agents simply choose to omit the square footage in the listing report. You've probably seen a disclaimer similar to this on a house listing: "Information deemed reliable but not guaranteed. Buyer to verify square footage."

The bottom line? Calculating the square footage of a home is more of opinion than exact science. If you're interested in buying a particular house and want to know the size expressed in square feet, my advice would be to make an appointment to visit the home and bring your tape measure, pen, paper and calculator.
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New federal Study Reports Average U.S. Home Jumped 12.5 Percent in Value Last Year

By: Kenneth R. Harney: RealtyTimes
Despite dire predictions of slowdowns and bursting bubbles, the home price boom keeps billowing, according to the latest quarterly federal study. Average home price jumped 12.5 percent from first quarter 2004 through the same period this year. Six states chalk up appreciation rates above 20 percent. Nevada homes up 31 percent.

The housing price appreciation bandwagon rolls on, according to a new federal quarterly study released last Wednesday. But the 12.5 percent average jump in the value of an existing home in the U.S. between first quarter 2004 and first quarter 2005 "raises the potential for declines in some areas later on," according to the chief economist of the Office of Federal Housing Enterprise Oversight (OFHEO), which conducts the government's definitive housing price study quarterly.

The 12.5 percent average gain flies in the face of widespread predictions of "bursting bubbles" by economists and bearish Wall Street analysts. With mortgage interest rates down again last week -- pushed by lower yields in the global bond market -- the critical fuel for hot housing prices appears likely to remain plentiful.

Home prices continue to outperform every other major sector in the U.S. economy, noted Patrick Lawler, OFHEO's chief economist. The Consumer Price Index gained just 3.1 percent during the 12 month period covered by the latest study; housing prices grew four times as fast.

Nevada continued to hold on to the number one spot as hottest housing market in the country. Average home values rose there by 31.2 percent during the year. California moved into second place with a 25.4 percent average appreciation rate -- a stunning number given the state's already high housing costs. Hawaii (24.3 percent gain), the District of Columbia (22.2 percent), Florida (21.4 percent) and Maryland (21 percent) rounded out the six states where average gains exceeded 20 percent.

Arizona, where houses had been appreciating at single digit rates for several years, caught fire in the past 12 months, with an average price gain of 19.4 percent, seventh highest in the country.

The mid-Atlantic and New England were regional hot spots, with most states exceeding the national average gains by wide margins. Virginia (18.6 percent), Rhode Island (17.1 percent), New Jersey (15.8 percent), Vermont and Delaware (14.8 percent), Maine (14.1), New York (13.5) and Connecticut (13.4) were particularly strong gainers. Only Massachusetts, which had been ranked among the top 10 high appreciation states for much of the past decade, dropped to 20th place -- and below the national average -- with a one-year gain of 11.6 percent.

The lowest-appreciating states all had rates in excess of the CPI inflation rate of 3.1 percent. Texas, which was the slowest gainer in the latest federal study, nonetheless managed a 3.8 percent average increase. Indiana (4.1 percent), Colorado and Kansas (4.8 percent) rounded out the bottom group. Utah, which had been in last place in recent years, came alive in the last 12 months and jumped to number 35 in the nation with a 6.3 percent average appreciation rate.

"There are a number of likely reasons for the sustained rapid price increases," said chief economist Lawler, including real income growth, the low cost of mortgage money, and "the apparent impact of speculation in some markets."

The full OFHEO quarterly price appreciation study can be found at their website.
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A steady market on rates

30-year fixed rate at 5.09%; 10-year Treasury up at 3.98%
Inman News
Long-term mortgage interest rates were mostly flat Friday, and the benchmark 10-year Treasury bond yield rose to 3.98 percent.

The 30-year fixed-rate average stayed at 5.09 percent, and the 15-year fixed-rate dipped to 4.66 percent. The 1-year adjustable was down at 3.57 percent.

The 30-year Treasury bond yield increased to 4.28 percent.

Rates are current as of 7:15 p.m. Eastern Standard Time.

Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.

In other economic news, the Dow Jones Industrial Average fell 92.52 points, or 0.88 percent, finishing at 10,460.97. The Nasdaq lost 26.37points, or 1.26 percent, closing at 2,071.43.

Stock and bond figures are current as of 7:30 p.m. Eastern Standard Time.
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Tucson, Arizona, Real Estate Heats Up With Fleeing California Buyers

RealtyTimes
California's high housing costs are causing many buyers to migrate one state over to Arizona, say Tucson Realtors, where they can get much more house for their money. But prices are quickly escalating, they warn.

"Welcome to Tucson, where home sales continue at a very hot pace," says Realtor Jon Quist. "Record-setting trends continue. Arizona is the second fastest growth area in the country. Investment in Tucson real estate remains a strong value for the future. We have a wide variety of homes and areas. Tucson continues to have housing to suit any need, with homes to fit any lifestyle. The resale market continues to be very strong, and there are a variety of new home builders to work with as well. New construction trends are also up."

Quist advises, "In spite of Tucson's higher prices, continued lower interest rates and good home values compared to some other parts of the country, as well as the continued wonderful lifestyle associated with Tucson has kept the market healthy."

Observe Realtors Janie and Barrie Herr, "We've seen many markets over the years we've been in Tucson real estate sales, and none have been as fast or competitive for buyers as we are currently experiencing. Buyers must be ready to make their offers with lender approvals in hand, if they will be financing. They will often be in competition with other offers. Sellers, however, are enjoying rapid appreciation, and very few days on market." Tucson Association of Realtors President, Judy Lowe, said, "The first quarter of 2005 has shown record breaking increases in the average sales price, total home sales units, total home sales volume, and total listings under contract, as compared to any other quarter of the last nine years. Closed sales units are up 13.3 percent from first quarter of 2004, Total Volume is up 30.2 percent, median sales price is up 21.4 percent, total number of active listings is down 25.2 percent, and average days on market is down 38.3 percent from the first quarter of 2004."

"The average price for a home in Tucson remains significantly lower than competing market such as Orange County and San Francisco that are over a staggering $650,000," says Realtor Alex M. Chandler. "Despite speculation of increases, interest rates have remained stable while Tucson has become one of the fastest growing cities in the nation. The demographics of second home purchases and retirement of baby boomers is speculated to maintain despite shaky conditions in competing markets."
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Wood flooring stirs up quality, maintenance concerns

Homeowners get advice to last a lifetime
By: Bill & Kevin Burnett: Inman News
In a recent column a reader wondered why prices for hardwood floors varied so much. As is often the case, one question begets another – and another. Today, we answer several of the many questions that arrived on wood flooring.

Q: What is your opinion of the quality and durability of wood laminate floors? Do they add any more value to a home than a quality carpet?

A: Comparing carpet to laminate flooring is like comparing apples to oranges. Some folks like apples better than oranges and vice versa. It's the same with floor coverings.

As far as quality and durability go, laminate floors (also known as floating floors) have been around for a long time. If they are installed properly according to the manufacturer's instructions and they are subject to normal wear and tear, they will have a longer life than carpet.

Laminate floors are easier to clean and do not retain dirt and grit the way carpet does. Carpet, on the other hand, has a softer, some say more luxurious feel. In value-added terms, there is no firm answer. It depends on a person's taste.

Q: My wife and I are about to install a hardwood floor in one of our rooms.

I have spent the past few weeks shopping at flooring shops and online retailers. It's frustrating how much conflicting information (not to mention prices) you get. We have it narrowed down to pre-finished Brazilian cherry or solid unfinished reclaimed jarrah.

Do you think a prefinished floor looks different from a floor that is finished after it is installed, in the sense that finishing after installation covers the areas where the planks meet, which is not the case with prefinished?

A: Prefinished flooring is manufactured to be defect-free. Traditional wood flooring is, well, wood.

Wood has inherent defects that you may or may not choose to address. The main difference between prefinished flooring and traditional wood flooring is the method of installation.

Prefinished flooring floats on a thin, foamlike pad on the subfloor. A traditional floor is nailed to the subfloor. Prefinished floors do not require filling nail holes or voids in the wood because there are none. You should not have any gaps at the joints, either.

Traditional flooring is finished by filling the nail holes with putty. This usually means that any defects in the "reclaimed" wood will also be filled. With proper installation, joints should not be "gappy."

You also have a choice of finishes that can be applied to traditional floors. As to which looks better, that is a matter of taste.

Q: I was pleased to see your article on wood floors because we have just purchased a new home that has these all over, including the kitchen.

You didn't indicate how to take care of them. The only advice I've been given is: "Don't wax; don't mop." But how do you keep them clean? We watched our floors getting installed, and they had three coats of finish. The wood is white oak. Any suggestions for maintenance?

A: We've found that the best way to clean hardwood floors is to use a sponge mop and a solution of 1 cup of white vinegar to a gallon of warm water.

We would recommend against using soap, especially the oil soaps that are on the market. Also, do not wax.
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Report: Foreclosure Scams on the Rise

Soaring prices have put the homes of many financially distressed owners—and especially those with high-cost, subprime mortgages—in jeopardy, as a job loss, illness, or other unexpected event can push them into foreclosure.

These borrowers often turn to foreclosure rescue specialists, who offer to pay off the outstanding mortgage debt if the homeowner is willing to sign over the title, pay rent, and then repurchase the home sometime in the future.

A new report by the National Consumer Law Center reveals that these unscrupulous professionals have taken homes from thousands of unsuspecting homeowners who do not have the money to buy their property back—a problem that could swell to crisis proportions if rising interest rates push many more homeowners to the brink of foreclosure.

The center reports that such scams are prevalent in metropolitan Washington, D.C., Florida, and New York; and it urges struggling homeowners to either sell before the lender forecloses, attempt to refinance, or work with their lender to adjust their payment schedule.
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Californians rich in real estate, builders' group reports

Home equity increases over $1 trillion in five years
Inman News
California's housing boom has generated $1 trillion in increased home equity since 2000 and pumped billions of dollars into the state's economy, the California Building Industry Association reported today.

The report, prepared by Alan Nevin, chief economist for the association, also found that the median equity gain for those who owned a single-family home in 2000 was $230,386, while the median equity gain was $200,544 for condominium owners.

"For the person who owned a single-family home in the year 2000 and bought that home with a 15 percent down payment, their return on equity would be approaching 1,000 percent," Nevin said. "Economists and housing experts have known for years that home ownership is the leading source of wealth creation for the vast majority of Americans. Now we have a better feeling for just how much wealth home ownership has created here in California."

Nevin also said that much of this equity has already been plowed back into the economy through refinancing, allowing homeowners to buy goods and services they wouldn't have been able to afford otherwise and helping keep California's economy growing.

The study, released at builders' conference in San Francisco, found that the 2.5 million homes purchased since 2000 have increased in value about $378.7 billion, while the 4.3 million homes owned but not sold in that time period have increased in value by $641 billion. The total gain in home equity was $1.02 trillion. Homes sold in the San Francisco Bay Area and Los Angeles County have appreciated the most: $83.24 billion and $82.16 billion, respectively.

Nevin said despite the steep increases in home values he doesn't foresee a housing "bubble," as some have speculated, because the underlying demand for homes remains strong while the supply – constrained by governmental barriers, slow-growth pressures and other factors – remains inadequate to meet the demand. But he does foresee the rate of appreciation slowing to more sustainable and healthier levels.

"Rates of gain will not go up as fast as they have in the last three years," he said. "We anticipate that over the next three years, the appreciation rate will be in the 5 to 8 percent range per year."
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Ceiling remodel may cause adverse health effects

Make sure contractor takes necessary precautions
By: Barry Stone: Inman News
Dear Barry,
After buying our 1971 home, we hired a remodeling contractor and had him remove the acoustic (popcorn) ceilings. We asked if he was going to test for asbestos before starting the removal, but he said this was not necessary since he would wear a mask while doing the work. Now that the job is done, we're worried about air contamination and possible health effects on our daughter. What's your take on this situation? – Theresa

Dear Theresa,

What your contractor did was totally illegal and could result in suspension of his license (assuming that he has a license). What's more, he could be financially liable for consequential asbestos contamination that may have occurred in your home.

In most cases, acoustic ceiling texture dating from the 1970s, particularly the early '70s, contains some asbestos. Testing is always required prior to removing such material. When testing reveals asbestos content, far more than a mere mask is needed to prevent air contamination and to comply with applicable safety requirements. Furthermore, removal of asbestos containing materials is only legal when performed by persons who are appropriately licensed, and both removal and disposal of such materials must be performed in ways that comply with applicable safety requirements.

To determine whether the contractor's ill-advised removal of the ceiling texture released asbestos fibers into your home, an air test should be performed by a certified asbestos inspector. Hopefully, no contamination will be found.

Dear Barry,

We have cement tile siding and have been told that it contains asbestos. Some tiles have fallen off or are loose and need to be replaced or reattached. We are reluctant to do anything because we are concerned about asbestos health hazards. What are your thoughts on this issue? Can we do the work ourselves, or do we need to hire specialists? If specialists are needed, what qualifications are required? – Judy

Dear Judy,

The tile siding on your home consists of a material called transite, a composite of cement and asbestos fibers. Since the asbestos is encapsulated in a solid medium, fibers are not readily released into the air. Therefore, transite is not regarded as a significant health hazard if left alone. Abrasive processes, such as sawing, drilling, grinding, scraping, or sanding are the only likely means of producing dust that would be unsafe to breathe.

If the tiles can be resecured without releasing asbestos fibers, you should be able to perform the necessary repairs without adverse consequence. However, work that might release asbestos fibers should be referred to a licensed asbestos abatement contractor. If you choose to do the work yourself, consult an asbestos abatement contractor for an evaluation of the situation and for advice regarding appropriate safety procedures.

To write to Barry Stone, please visit him on the Web at www.housedetective.com.
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The Weekend Guide! June 2 - June 5, 2005

The Weekend Guide for June 2 - June 5, 2005.
Full Article:
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California: Natural Disaster Bill May Extend Aid

The California Senate has approved legislation that would force insurers to cover the living expenses for two years incurred by homeowners whose houses are destroyed by fires or other natural disasters during a state of emergency.

The bill's author, state Sen. Jackie Speier (D-Dale City), says insurers will pay out the same amount, as the legislation simply extends the coverage period by 12 months but does not affect the payout amount.

The bill is in response to the 2003 wildfires in Southern California, since many of the owners of the more than 3,600 ravaged homes could not get a contractor to rebuild within one year. The bill has been sent to the Assembly for consideration.
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Expensive markets: California’s Affordability Crisis

Practitioners get creative to help first-time buyers in a state where median-priced homes are unaffordable for most households.
By: Corrie M. Anders: REALTOR® Magazine Online
California homebuyers trying to cope with the highest real estate prices in the nation are increasingly being priced out of the market or are forced to move further away from where they really want to live.

The state has undergone such a spectacular surge in housing values that it has plunged into the worst affordability doldrums since 1989, when Ronald Reagan was in the last year of his presidency, according to CALIFORNIA ASSOCIATION OF REALTORS®’ annual housing affordability index.

The crisis has forced practitioners to get creative in finding solutions to help their clients overcome ever-spiraling home prices.

In the last five years, home prices in the Golden State have more than doubled to a median $450,990 in 2004 from $217,510 in 1999, according to CAR. Seven of the 10 most expensive housing markets in the nation last year were located in California, according to Coldwell Banker’s annual Home Price Comparison Index.

All of the California markets in the Coldwell Banker survey were along the coast, with the fashionable enclave of La Jolla in the spotlight as the most expensive city in the country for the second consecutive year. La Jolla buyers paid an average $1.7 million for their swank address, Coldwell Banker says. (The La Jolla price tag for a 2,200-square-foot home is in sharp contrast to the country’s most affordable city—Minot, N.D.—where $130,300 purchased a similar-size home.)

For California as a whole, only 18 percent of its residents in March could afford to purchase the median-priced $495,400 home, down 3 percent from a year earlier, and buyers had to earn $115,910 annually to qualify for an 80 percent mortgage loan. A regional breakdown showed the pain was harshest for buyers in Santa Barbara County and the Northern California wine country, where only 9 percent could afford homes costing the local median $595,830 and $596,970, respectively. The easiest region in which to purchase was in the High Desert area, where 36 percent of residents could afford a median $264,320 home.

Pain Across the Board

There are no signs of relief to price run-ups this year. CAR predicts home prices will balloon another 15 percent in 2005, thanks to low mortgage-interest rates, an awakening economy, and a severe shortage of housing in the state.

The flip side of the hot real estate market is that many buyers are scuffling just to get in. The problem is pervasive and cuts across class and economic landscapes—from farmers in small agricultural towns and working-class families in rural mountain hamlets to highly-paid professionals in urban cities. For example, take a look at these markets:

     • Grass Valley. In this small Gold Rush town in the Sierra
       foothills of Nevada County, the average home in the county cost $397,000 last
       year, according to Tom Dykstra, a broker with Coldwell Banker Grass Roots
       Realty in Nevada City. But wages haven’t kept up with home prices in Nevada
       County’s tourism, service, and agricultural-based economy.
      “A firefighter makes $32,000. A school teacher makes $47,000, and a registered
       nurse makes $53,000” says Dykstra. “You need to make $76,800 to qualify for a
       loan” to purchase that home. Local residents have few choices; they can “buy
       small homes that may or may not need work, mobile homes, or move to the
       outskirts of the county,” Dykstra says
     • San Francisco. The median price for a single-family home 
       hit $870,000 earlier this year, and homes in traditional starter 
       neighborhoods cost $500,000, says John Wong, CRB, a broker with Prudential 
       California Realty in San Francisco. “This is a scary thing to think about. 
       People start giving up when you reach that plateau,” says Wong, who’s also 
       president of the San Francisco Association of REALTORS®.

     • San Diego. Just 10 percent of the area’s residents could 
       afford March’s median $588,800 house—and needed a $137,760 annual paycheck to 
       be able to purchase it. Many buyers fled to La Mesa, El Cajon, Santee, and   
       other less expensive cities in the eastern part of San Diego County. But the 
       ripple appreciation has made it “very difficult for most first-time buyers to
       qualify (for houses) in the East County—and that’s the most affordable
       portion of San Diego,” says Ron Faul, a sales associate with Coldwell Banker
       Southern California in La Mesa.

     • Sacramento. A recent study shows just how precarious the 
       situation has become in the Sacramento area, where only one in four residents 
       can afford the median $357,360 home. Approximately one-third of the area’s 
       residents are prepared to pack and move—most of them out of the state—because 
       of high housing costs, according to researchers at California State 
       University in Sacramento.

How to Help First-Time Buyers

Real estate practitioners in California are using a number of approaches to help their clients—especially first-time buyers—afford a home. These tips also can work for practitioners in other high-priced markets who want to help their clients achieve homeownership:

     • Keep current, and educate buyers about the myriad mortgage loan programs that
       conventional lenders offer. “The only thing that has saved our ability to
       work with first-time homebuyers in this market has been the advent of no-doc,
       low-doc, low start-rate option ARMs, interest-only loans, and other flexible
       loan programs,” says Jeffrey S. Gill, broker-owner of Realty World of Contra
       Costa in the suburban San Francisco bedroom community of Antioch.
     • Become knowledgeable about state and local government housing programs, which
       can offer everything from downpayment assistance to silent second loans
       (forgivable state or local loan) to first-time buyers. Two state programs in
       particular are commanding attention:

          • The California Housing Finance Agency in April rolled
            out a 35-year,fixed-rate loan with interest-only payments for the first 
            five years. The program allows some buyers to obtain a 100 percent loan,
            plus another 3 percent in closing costs.
          • The nonprofit Pacific Housing and Finance Agency last
            year launched a lease-to-purchase program that lets renters obtain 100
            percent financing on eligible homes costing up to $475,000. “Renters get
            a lease for six years and at the end of the lease can purchase the house
            at the six-years-ago price,” says Pete Yackley of Roberson Real Estate in
            Bakersfield. “It’s like a godsend.”

     • Stay on top of the local MLS on a daily basis because below-market homes
       built under government auspices may come on the market unannounced.
     • Become familiar with downpayment or other housing-assistance programs that a
       growing number of private employers offer their workers.
     • Lobby governmental agencies and elected officials for more affordable housing
       and higher densities. Wong, for example, argued for higher densities in San
       Francisco during his installation address as 2005 president of the San
       Francisco Association of REALTORS®. Rochelle Hair, president of
       Time+Place Consulting and Real Estate in the ski resort town of Mammoth Lake,
       says “our firm has taken an active part in the planning commission and the
       revision of the town’s general plans. We attend every single workshop and
       town council meeting.”
     • Don’t be wary of seeking terms that can help buyers, even though it’s a
       seller’s market. “I’m having buyers ask for closing costs and they’re getting
       them,” says Christopher Gately of Keller Williams Realty in Palmdale.
     • Be positive and patient with novice buyers. “Just encourage them to buy
       something in whatever price (range) they can. … Don’t consider it your dream
       house. Just purchase something so you can get a leg up on appreciation, keep
       up with market value, and move up from there,” says Judy Zeigler, CRB, CRS,
       with Prudential California Realty in Palm Desert.

       “I remind new buyers this is a stepping stone to greater things,” says
       Patricia Bini with RE/MAX Monterey Peninsula, Del Rey Oaks. “In two years,
       you can move. For now, fix your homes, save some money, improve your FICO
       scores.”

Some Affordable Options

Although the housing squeeze is real, it’s not all doom and gloom. There still are some “affordable” neighborhoods for California homebuyers. Real estate professionals point to these options:

     • Homes in Soledad, Gonzales, and Greenfield in southern Monterey County cost
       $100,000 less than in Monterey, says Bini of RE/MAX. Those towns are about 30
       miles from Monterey, where homes cost a median $694,000.
     • The Coachella Valley has homes that working-class families can afford,
       despite the area’s reputation as a vacation and second-home resort for
       wealthy residents of Rancho Mirage and Palm Desert. “We really have both ends
       of the spectrum,” says Zeigler. Because there is so much buildable land to
       accommodate the influx of people, the median price for a home is $275,000 in
       Indio, $312,000 in Cathedral City, and $307,700 in Palm Springs, Zeigler says.
     • Finding a home for $500,000 “may be difficult” in San Francisco, San Mateo,
       or Marin counties, but buyers can still find homes for about that price in a
       few close-in, urban neighborhoods in San Leandro, Union City, Newark, and
       Hayward. Or, buyers could head further out to Santa Rosa, Brentwood,
       Fairfield, Cloverdale, and other bedroom communities where Goldman says “you
       won’t be in as many multiple offer” situations.
     • In Oakland, young couples and singles escaping astronomical prices in nearby
       San Francisco have discovered Maxwell Park, a middle-class neighborhood of
       two- and three-bedroom Bungalow homes that sell in the $450,000 to $550,000
       range. “You get more house for your money,” says Kate Phillips, CRS, GRI, a
       sales associate with Wells & Bennett, REALTORS®, in Oakland. “People think of
       it as one of the last neighborhoods that’s really nice and
       more, ‘affordable.’”

The current state of housing prices in California means that homebuyers have to work a little harder to buy a home. Practitioners also may have to work a little harder to help their clients achieve homeownership, but persistence pays off.

Buyers can trade off their dreams for a detached home for a less expensive condominium, accept a neighborhood that is not their first choice, or move further out of town, says Avram Goldman, CRB, president of Coldwell Banker Northern California in San Ramon. “A lot depends on where you want to live and what you’re willing to sacrifice,” he says.

10 Most Expensive Markets in the United States

     1. La Jolla, Calif. $1,708,333
     2. Beverly Hills, Calif. $1,313,750
     3. Santa Barbara, Calif. $1,230,000
     4. Palo Alto, Calif. $1,212,000
     5. Greenwich, Conn. $1,192,500
     6. Newport Beach, Calif. $1,174,375
     7. San Mateo, Calif. $1,142,500
     8. San Francisco, Calif. $1,125,500
     9. Wellesley, Mass. $1,102,500
    10. Kailua Kona, Hawaii $1,087,500

Source: Coldwell Banker® Home Price Comparison Index, 2004
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NAR Pending Home Sales Index Hits Record

The Pending Home Sales Index, a leading indicator for the housing market, has risen to the highest level on record, according to the NATIONAL ASSOCIATION OF REALTORS®.

Based on data collected for April, the Pending Home Sales Index stands at 128.2, which is 3.6 percent higher than March and 9.2 percent above April 2004. The previous record was 128.1 in October 2004.

The index is based on pending sales of existing homes, including single-family homes and condos. A sale is pending when the contract has been signed but the transaction has not closed. Pending home sales typically close within one or two months of signing.

David Lereah, NAR’s chief economist, says the index shows record levels of home sales are possible for May and June.

“Although the record we set for existing-home sales in April was a bit of a surprise, the rise in sales contracts results from declining mortgage interest rates,” he says. “Home sales were expected to be tapering this year, but the index tells us that historic home sales are likely to continue.”

The report on May existing-home sales will be released June 23.

An index of 100 is equal to the average level of contract activity during 2001, the first year to be analyzed. Coincidentally, 2001 was the first of four consecutive record years for existing-home sales.

2001 sales are fairly close to the higher level of home sales expected in the coming decade relative to the norms experienced in the mid-1990s. As such, an index of 100 coincides with a historically high level of home sales activity.

Regionally, the index in the South jumped 7.7 percent to 138.9 and was 12.5 percent higher than a year ago. In the Midwest, it rose 4.5 percent to 122.0 in April, and was 4.5 percent above April 2004. The Northeast increased 4.1 percent to a reading of 120.8 in April, and was 10.1 percent higher than a year earlier. The index in the West declined 3.9 percent in April to 123.8, but was 8.0 percent above April 2004.
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Homeowners Consider Cashing Out to Rent

By: Amir Efrati: The Wall Street Journal
Homeowners in the hottest real estate markets increasingly are thinking about cashing out and renting until property prices weaken. They are attempting to time the market themselves, monitoring local prices to determine when the peak has been reached.

These are run-of-the-mill homeowners who have watched the value of their primary assets soar in recent years, as opposed to speculators who specialize in flipping homes and rentals to turn a profit.

However, financial experts recommend cashing out only if downsizing or a relocation was already on the horizon. They take the risk of selling too soon and missing out on substantial gains in value, and some discover that they have priced themselves out of the market.

According to research by the Corcoran Group, a Manhattan apartment purchased in 1982 for $237,000 was worth 187 percent more, or $660,000, in 1988. However, the value of the same apartment slid to $397,000 in 1995, bouncing back up to its previous peak four years later.
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