8 signs you're ready to buy your first home

With home prices cooling off and apartment rents heating up, is now the time to buy your own place? Here are the ways to know when it makes sense financially to purchase your first home.
By: Erin Burt: Kiplinger.com
The squeeze is on for renters. Apartment rents are expected to rise 5.3% this year, according to the National Association of Realtors. That's about double last year's increase, and it's the highest jump since 2000. Until now, rents have seen slow growth over the past few years as the booming real estate market has lured away renters into homeownership.

But that's starting to change. Interest rates are rising and home price appreciation is slowing, so fewer buyers are looking for new homes. That gives landlords the upper hand to raise rents. Meanwhile, the real estate market is starting to turn from the seller's favor toward the buyer's. So if you're a renter who has been dreaming of homeownership, is now a good time to take the leap?

Sure, a cooling real estate market is good news for buyers because it's easier for them to negotiate a deal. But it shouldn't be the main reason that pushes you into your first home. In fact, buying your first home is a personal decision that you should make independent of what the market may or may not be doing.

"Time means nothing," says Michael Eisenberg, a CPA and financial planning specialist in West Los Angeles. You can't predict what will happen to home prices in your neighborhood in the next few months, let alone the next few years. But if you're looking to make the long-term commitment of homeownership, it helps to approach the decision like you would any business decision. You don't want to buy on emotion, or because everyone else is doing it. "This is the biggest financial move a young person may ever make," Eisenberg says. "You should make the investment because it makes sense for your finances. You buy when you're ready."

So how, exactly, do you know when your finances are ready? We provide a checklist of eight things first-time home buyers should have squared away before they consider a purchase - no matter where analysts say home prices are heading.

You are ready to buy when …

No. 1: You have a budget - and you know how to use it
Owning your own place comes with a slew of new expenses, so good money management skills are a must-have. If you don't have a household budget right now, start one. (See "Build your budget" and "A simpler way to save: The 60% solution" to learn how.) You need to know where you are financially - where your money is coming from and where it goes every month - to know exactly how much you can afford to spend on a new home.

Once you have your current finances sorted out, draw up a mock budget for homeownership. Find out how much homes cost in your area and how much your mortgage payment will run. Then, factor in higher utility bills, homeowner's insurance, property taxes, homeowners association fees, and maintenance and upkeep costs, as well as higher commuting costs if you're considering a neighborhood further from work. If you simply cannot afford the increased expenses that come with a house, it's never a good time to buy - no matter what's happening in the real estate market.

No. 2: You have a sizeable down payment
Traditionally, to get your foot in the door, you'll need a down payment worth 20% of the home price. That means for a $250,000 home, you'll need $50,000 upfront. Sure, there are ways to get around that steep requirement with zero- or low-down loans, but those options will cost you. You may have to pay extra for private mortgage insurance or take out a piggyback loan with a much higher interest rate. With the slowing housing market, having that 20% down payment becomes even more important because you'll start off with some equity in case you have to move earlier than expected. "In the early years, you aren't building any equity with the mortgage payment," says Eisenberg. "If the market changes or your personal circumstances change and you're forced to sell, you could lose money" if you made little or no down payment. The equity in your home can also give you an extra source of cash in an emergency. (See "Why you need a home down payment" to learn more.)

And the money down is only the beginning. Don't forget to factor in closing costs (3% to 6% of the purchase price) property taxes, initial repairs, moving expenses and decorating costs.

No. 3: You have a reliable source of income
Buying a home is a long-term financial commitment, so you'll need consistent cash flow to cover those monthly payments - not to mention the little extra expenses that come with homeownership. If you're in school, plan to go back to school, have a less-than-reliable job or plan to start a family, you need to take a good look at your future cash-flow abilities. Will you be able to make your mortgage payment six months from now? How about six years from now? "Some couples can afford the house when they're both working, but if a kid comes along and one wants to stop working, then they have a problem," says Eisenberg.

No. 4: You have an emergency savings fund
If you have enough cash on hand to cover three to six months of your living expenses, you're one step closer to being prepared for homeownership. Just in case something happens to disrupt your steady income - say a serious illness, unexpected layoff or even a natural disaster that prevents you from working - you want to make sure you can still afford to make your mortgage payments until you can get out of your rough patch, says Bob Baldwin, a CPA in Charleston, S.C. Learn more about how and where to build your emergency stash.

No. 5: You have your debts under control
Call 'em crazy, but lenders like to make sure you'll have enough money each month to pay your obligations. So before they'll give you a mortgage, they take a look at your so-called debt-to-income ratio. Generally speaking, they want to make sure your monthly housing costs - including principal, interest, taxes and insurance - will consume no more than 33% of your monthly gross income; and that your total debt payments, including your mortgage, credit cards, student loans and auto loans, will remain below 38% of your total pay. So if you have large outstanding debts, it's a good idea to try to pay them down before applying for a mortgage to make sure you can qualify for as much money as you'll need. This also means you should avoid taking on any substantial new debt six months to one year prior to your purchase, or you may throw your ratio off. So, it may be best to drive that clunker for a little while longer, or put off charging that European vacation. Find out here how much you can qualify to borrow.

No. 6: Your credit report is in good shape
Nowadays you don't have to have perfect credit to become a homeowner, but a decent history can help you get a lower interest rate on your mortgage and a lower monthly payment. The government allows you to check your credit history free once a year from each of the three main credit bureaus at AnnualCreditReport.com. So take a peek to find out what lenders see about you. If you see any errors, correct them now. If you see room for improvement, find out how you can boost your score.

"Don't be sloppy the year or two before you buy the house," says Baldwin. You don't want any missed payments or other black marks that could lower your estimation in the eyes of lenders.

Having bad credit, however, may not be your biggest concern. If you're just starting out, you need to make sure you have a credit history. If you hold a credit card or took out student loans, you're probably covered. If not, find out how you can build a stellar credit history from scratch, preferably one year or more before you plan to buy.

No. 7: You can make a long-term commitment
Are you ready to stay put for at least three to five years? Typically, that's how long you'll have to keep the house in order to recoup your buying and selling costs. If you sell before then, you may lose money on the deal. And if you do turn a profit, you'll have to pay capital gains taxes if you lived in the house less than two years. The length of your stay becomes even more important now that home appreciation is beginning to slow from its previous pace. If you don't think you'd stay put for that long, you may be better off renting.

Don't fret: Renting can actually make better financial sense for some people at different times in their lives, says Eisenberg. If you think you may get a job transfer, go back to school or otherwise need to move within the next five years, renting gives you the flexibility you need and could possibly save you money.

Want to find out if renting or buying makes the most sense for you? Our calculator will crunch the numbers to help you decide. In the slot for "appreciation rate," assume your home will appreciate at the rate of inflation or a little more, just to be safe. Right now, that's around 3% to 4% annually.

No. 8: You are prepared to become your own landlord
Even if you can afford homeownership, don't buy simply because you can. You need to make sure you're ready to live the lifestyle. Owning a place comes with a fair share of new responsibilities, headaches and costs - not the least of which is becoming your own landlord. When you rent an apartment, you simply call the landlord if something breaks. With your own home, if it's broke, you fix it - or you'll have to pay someone else to fix it. You're also responsible for upkeep, including yard work and shoveling snow (unless, of course, you buy a condo without a yard). Will you have the time, energy or desire to maintain the property? How about the money for all those little extras, such as buying your own lawn mower and hiring the occasional plumber? Make sure you know what you're getting into.
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Homefree Helps Homeowners Be Proactive about Emergency Preparedness

Home safety expert Roger Faris offers homeowners advice on preparing a home for emergencies during National Preparedness Month.
RISMedia
Each year the U.S. Department of Homeland Security sponsors National Preparedness Month, a nationwide effort to encourage Americans to take simple steps to prepare for emergencies in their homes, businesses and schools. On www.Homefree.com, Roger Faris, home safety expert, provides homeowners with advice and steps they can take to prepare their homes for an emergency.

Homefree (www.homefree.com), a personalized, online toolbox helps simplify home maintenance for busy homeowners so they can make maintenance decisions in just minutes a month. Homefree features personalized schedules that trigger helpful reminders with information homeowners need to make smart decisions about the upkeep of their homes and expert advice on all aspects of home maintenance.

As Disaster Mitigation Councilor for FEMA, Faris helps homeowners learn ways to reduce or prevent damage from earthquakes, fires, floods, landslides and severe weather.

"I love helping homeowners stop trouble before it starts," says Homefree subject matter expert, Roger Faris. "Fortunately, people are starting to realize that it's far easier and less expensive to take action before a disaster than to repair and rebuild after the wind, flood, fire, earthquake, etc. has taken its toll."

On Homefree's expert advice pages, Faris offers homeowners practical steps they can take to prepare in the case of an emergency, such as a natural disaster. Some of the topics discussed on the Homefree web site include:

• Home emergencies - be prepared: severe weather or seismic events can cause power outages, fires, gas leaks or other damage to your home. Homeowners can get through these difficult times easier by:

1. Knowing how and when to shut off utilities;
2. Having a power outage kit handy;
3. Having an evacuation plan in the case of a fire;
4. Having an emergency supply of food, water and medications readily accessible.

• Protecting Your Home from Basement Flooding: In many cases, faulty roof drainage, poor lot grading, improper or clogged foundation drains or disposal of storm water in the sanitary sewer are the reasons behind basement flooding. Homeowners can take specific actions to avoid many types of basement flooding by:

1. Ensuring downspouts extend at least 6 feet from the basement;
2. Installing flood-proofing devices, such as a sump pump or back flow value;
3. Connecting a backwater valve to prevent sewage from backing up into your basement.

• Earthquake Preparedness: Older homes often need a seismic retrofit to help them better withstand the forces generated by large earthquakes. Non-structural improvements such as proper strapping of the water heater, securing heavy or tall objects and cabinet latches are easy ways to make a home safe.

"Homefree gives homeowners peace of mind," Faris continues. "If a natural disaster hits or they face any type of emergency that may affect their home, homeowners who have gained knowledge from our Homefree resources know how to keep their houses in the best condition. It's a great feeling to know that everything from the roof to the foundation is in optimal shape because it has been well maintained and cared for."
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Emotions take control when selling FSBO

Why hiring an agent may be better alternative
By: Bernice Ross: Inman News
You're an agent about to sell your own home. Would you hire yourself to take the listing?

Recently, my husband and I decided that we want to build a new home. We picked out the lot and are in the process of finalizing the plans. An important issue we must now address is how to handle the sale of our current property. I've been in the real estate business since 1978. During that time, I've represented some of the wealthiest and most sophisticated sellers in the world. I speak all over the country on how to generate more leads, market your listings, and earn a full commission. If you were in my shoes, would you hire another agent to list your home when you clearly had the skill set and the license to sell it yourself?

The way you answer this question provides a clear snapshot of how you view the real estate profession and the value that a professional Realtor brings to the table. If you answered that you would hire the best Realtor you could find, you are clearly aware of each of the following facts:

1. You can never negotiate as well for yourself as someone who is not emotionally involved in the transaction.

2. Like most sellers, you probably lack the objectivity to see your property and the market with the same detachment as a highly qualified listing agent.

3. Your presence during showings may scare off buyers who prefer not to have the seller hovering over them as they view the property.

4. Buyers and their agents are reluctant to share objective feedback with you.

On the other hand, if you said you would represent yourself, chances are that you are not hiring the best person to represent you. Perhaps you would argue, "Why should I throw away 3 percent of the sales price when I can do this myself? I can put the property on the market, list it in the MLS, and handle the marketing myself." All of this is true; however, isn't this the same argument that for-sale-by-owners make?

When we become sellers, we shift from being objective professionals to having a strong emotional attachment to the property. For example, about half the homes in our neighborhood have a pool. My husband and I have no interest in having a pool because we travel so much. Furthermore, our community pool, which is only two blocks from our home, is one of three Olympic training facilities in the country. It is a beautiful facility and a focal point for our neighborhood. Nevertheless, our agent is telling us that without a pool, we will get less for our home. In response, I'm tempted to say, "Find someone who doesn't want a pool that appreciates a beautiful backyard where they can garden rather than look at a bunch of cement." Granted, we may find the buyer who loves to garden and appreciates our lush backyard. The truth of the matter is, however, no pool means less purchase price in our area.

The real issue here is that when we decide to market our own property, we are no longer selling a house. We're selling our home. Like most sellers, we're inclined to think that it's worth more than the comparable sales suggest. It's tempting when you're doing your own comparative market analysis, or CMA, to say that your home favorably compares to the most expensive comparable sales rather than the ones that accurately reflect what price you will achieve.

Negotiation is another sticky problem. Granted, negotiating with the buyer is difficult enough. The challenge, however, occurs when you disagree with your co-owner. For example, who will mediate between the two of you when you cannot reach an agreement? This is particularly difficult because of the stress involved with "losing your home." When you move, you're pulling up roots. You haven't moved into your new property and yet, you're being forced out of your old property. While this makes perfect sense logically, emotionally it creates extraordinary amounts of stress. Perhaps the most important role that an agent plays in the transaction is being the calm in the middle of the storm. You may not be able to persuade your co-owner to be rational or unemotional. In contrast, a competent agent can often provide the dose of reality necessary to achieve a satisfactory solution.

Would you hire yourself to sell your home? While I can't answer for you, I know what I'm going to do. I'm going to happily pay the commission to the best agent in town and be grateful knowing that I'm in the best possible hands no matter what happens.

Bernice Ross, national speaker and CEO of Realestatecoach.com, is the author of "Waging War on Real Estate's Discounters" and "Who's the Best Person to Sell My House?" Both are available online. She can be reached at bernice@realestatecoach.com or visit her blog at www.LuxuryClues.com.
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Housing Shifts More Toward Buyer's Market This Year

Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey® (PMMSSM) in which the 30-year fixed-rate mortgage (FRM) averaged 6.47 percent with an average 0.4 point for the week ending September 7, 2006, up from last week's average of 6.44 percent. Last year at this time, the 30-year FRM averaged 5.71 percent.
Realty Times
The average for the 15-year FRM this week is 6.16 percent with an average 0.4 point, up from last week when it averaged 6.14 percent. A year ago, the 15-year FRM averaged 5.30 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.14 percent this week, with an average 0.5 point, up from last week's rate of 6.11 percent. A year ago, the five-year ARM averaged 5.24 percent.

One-year Treasury-indexed ARMs averaged 5.63 percent this week with an average 0.7 point, up from last week when it averaged 5.59 percent. At this time last year, the one-year ARM averaged 4.45 percent.

"We expect that mortgage rates will continue to fluctuate as new economic data are released, but still remain in the 6.5 percent to 7 percent range for the rest of the year," said Frank Nothaft, Freddie Mac vice president and chief economist. "Slowly rising mortgage rates are offset in part by a slowdown in house price appreciation."

"Consequently, higher rates have resulted in houses sitting on the market for longer periods of time, changing the real estate sector into more of a buyer's market from the seller's market of the last few years. This is a plus, as it allows potential homebuyers more time to look around and decide what they really want and what they can afford."
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The Weekend Guide! September 7 - September 10, 2006

The Weekend Guide for September 7 - September 10, 2006.
Full Article:
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Home Prices Rising After 2Q Slowdown

U.S. home prices continued to rise in the second quarter but showed the biggest slowdown in three decades, federal regulators reported Tuesday.
By: MARCY GORDON: AP Associated Press
The figures released by the Office of Federal Housing Enterprise Oversight, the agency that oversees the big mortgage-finance companies Fannie Mae and Freddie Mac, provided the latest indication that the housing market is cooling substantially.

Average home prices rose 1.17 percent in the April-June period, compared with 3.65 percent in the second quarter of 2005 - the biggest decline in price growth since OFHEO started keeping track of home prices in 1975, the new report showed.

The agency cited higher interest rates and rising inventories of homes for sale as possible factors in the slowdown in price growth.

"These data are a strong indication that the housing market is cooling in a very significant way," OFHEO Director James B. Lockhart said in a statement. "Indeed, the deceleration appears in almost every region of the country."

Data issued last month provided proof that the housing boom is over. The Commerce Department reported that sales of new homes dropped in July by 4.3 percent, the largest amount since February, while the inventory of unsold homes climbed to a record high. And sales of previously owned homes fell 4.1 percent in July to a 2 1/2-year low, according to the National Association of Realtors.

Sales of both new and existing homes set records for five consecutive years as the housing industry enjoyed a boom powered by the lowest mortgage rates in four decades. But rates have been steadily rising this year as the Federal Reserve tightened credit conditions to slow the economy and keep inflation under control.

Analysts expect home sales to drop by some 10 percent this year.

Still, the OFHEO report noted, house prices grew faster from the second quarter of 2005 to the same period this year - by 10.06 percent - than did prices of other goods and services, which rose 4.41 percent.

The second-quarter figure is derived from an average of home prices in April, May and June. Prices in that April-June period were up 1.17 percent from the first quarter of the year, the smallest rate of quarterly price growth since a 1.12 percent gain in the fourth quarter of 1999, OFHEO said.

The OFHEO report, based on data from Fannie Mae and Freddie Mac on repeat sales and refinancings of single-family homes, also found that:

-All 50 states and the District of Columbia showed increases in home prices from last year's second quarter compared with the same period this year, but five states - Maine, Massachusetts, Indiana, Ohio and Michigan - registered small price declines in the most recent second quarter from the first.

-Home prices continue to increase relatively strongly in Louisiana and Mississippi, the two states hardest hit by Hurricane Katrina a year ago. Year-to-year rates for the second quarter were well above the national average in several metropolitan areas in the affected area, including New Orleans-Metairie-Kenner and Baton Rouge in Louisiana, and Gulfport-Biloxi and Pascagoula in Mississippi. The latter two, in fact, logged their strongest price increases since the 1975 start of OFHEO's tracking.

-The South Atlantic area - with Delaware, the District of Columbia, Maryland, Virginia and Florida - registered its biggest slowdown in prices since at least the early 1980s. Its rate of increase from the second quarter of 2005 to the same period this year was 13.7 percent, far below the 17.4 percent rise posted from last year's January-March quarter to the first quarter of 2006.

-In New England, the year-to-year rate dropped to 5.68 percent from 8.71 percent.

-Despite a year-to-year decline of 9 percentage points, house prices in Arizona still showed the highest growth rate of all the states, about 24 percent.

-Metropolitan areas in North Carolina, South Carolina and Washington state have entered the list of markets with the fastest growing prices.
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California Consumer Confidence Up

California consumers were more upbeat in the third quarter as they responded favorably to the halt in interest rate hikes by the Federal Reserve, according to a survey released Wednesday from Chapman University.
By HOWARD FINE: Los Angeles Business Journal Online
The A. Gary Anderson Center for Economic Research composite index of California consumer sentiment jumped to 88.6 in the third quarter from its recent lows of 79.5 in the second quarter and in the third quarter of 2005. This increase came despite stubbornly high gas prices and a slowing real estate market,

But the index remained below 100 for the sixth straight quarter, meaning that more consumers continue to be pessimistic about future economic performance than optimistic.

A key reason for the third quarter rebound in consumer confidence was the end of more than two years of interest rate hikes by the Federal Reserve Board. That spurred a huge jump in California consumers’ outlook on future economic conditions to 90.3 in the third quarter from 70 in the second quarter.

The major cloud on the horizon was consumers’ planned spending on big-ticket items, which dropped to 86.3 in the third quarter from 92.4 in the second quarter, indicating a likely slowing in big-ticket purchases in the next six months.

The Chapman index is based on a survey of several hundred residences throughout the state.
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Real estate loan applications rise 1.8%

Borrowers eye home purchases as rates fall
Inman News
Overall mortgage applications were up 1.8 percent last week on a seasonally adjusted basis from the week before, as refinancing activity dropped for the first time since July, the Mortgage Bankers Association reported today.

The seasonally adjusted purchase index increased by 3.7 percent to 389.7 from 375.9 the previous week, while the refinance index decreased by 0.9 percent to 1,594.7 from 1,609.2 one week earlier.

The refinance share of mortgage activity decreased to 41 percent of total applications from 41.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 26.2 percent of total applications from 26.8 percent the previous week, and is now at its lowest level since October 2003.

The average contract interest rate for 30-year fixed-rate mortgages decreased to 6.31 percent from 6.39 percent, with points including the origination fee increasing to 1.1 from 1.03 for 80 percent loan-to-value ratio loans.

Points, which are fees charged by lenders for loan processing, are expressed as a percent of the total loan amount.

The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.97 percent from 6.06 percent. Points including the origination fee increased to 1.14 from 1.06 for 80 percent loan-to-value ratio loans.

The average contract interest rate for one-year ARMs decreased to 5.91 percent from 5.97 percent, with points including the origination fee decreasing to 0.83 from 0.91 for 80 percent loan-to-value ratio loans.

Washington, D.C.-based Mortgage Bankers Association is a national association representing the real estate finance industry. The survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.
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Bankers Split on Wisdom of 40-Year Mortgages

Some lenders are beginning to venture into 40-year, fixed mortgages, which proponents say will boost home ownership.
By: Mike Copeland: REALTOR® Magazine Online
Some lenders are beginning to venture into 40-year, fixed mortgages, which proponents say will boost homeownership rates by lowering monthly payments.

However, critics contend that borrowers will build equity too slowly, and that those who could not otherwise achieve home ownership may encounter difficulty making their monthly payments as other expenses rise.

The product is not generating much interest so far, but some loan officers believe 40-year mortgages are suitable for families who plan to move or refinance within five to seven years and want to free up cash each month in the short-term. Fannie Mae already purchases 40-year loans, and Freddie Mac will follow suit beginning next month.
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Will We See a Rising Tide of FSBOs and BUBBAs?

With home prices slowing and in some cases falling, will we see a decline in broker representation for buyers or sellers? Peter G. Miller comments.
By: Peter G. Miller: Realty Times
Whether home values rise or fall there are always self-sellers in the marketplace. To some in the real estate community this is a great cause of alarm, an apparent assault on their self-worth, but in reality those who engage in For-Sale-By-Owner (FSBO) transactions are hardly a threat to the value of brokerage services.

According to the National Association of Realtors, 85 percent of all homes were sold through the brokerage system in 2005. Of the rest, 11 percent were FSBO sales; 1 percent first listed with a broker and then sold by themselves; 1 percent sold to a homebuying company and 2 percent sold in "other" ways.

Ten years earlier - before the emergence of the Internet - the percentage of FSBOs was actually larger. NAR figures show that 81 percent of all homes were sold by brokers in 1995. That same year 15 percent were FSBO sales, 2 percent involved homebuying companies and 2 percent were "other."

These results are notable because the Internet was supposed to do away with the need for brokers, or to at least reduce their role to a sort of clerical activity worth at most a few hundred dollars per transaction.

The problem with such predictions, and the reason for their failure, is that homes are not stocks, bonds or airline tickets. A hundred shares of IBM are exactly the same as any other hundred shares - it makes no difference which hundred shares you own.

Houses are all different. Every property has an inherent physical nature and few buyers are willing to miss an in-person, tactile examination of a property before making the massive financial and psychological commitment real estate transactions require.

But with the market slowing, will we see an increase in FSBO activity? And what about buyers without brokers?

As a matter of logic, self-selling should increase when markets are hot because homes are easier to sell. In contrast, when markets slow the demand for listing brokerage services should increase because it's more difficult to find buyers.

And yet, oddly, compared with a decade earlier we can see that self-selling actually declined in super-hot 2005.

In the same way that we have self-selling FSBOs, we also have self-buyers. About the best acronym for these folks comes from Terry Crook, a Realtor in Chapel Hill and Carrboro, NC. A self-buyer, says Crook, can be described as a "Buyer Unrepresented By a Buyer Agent" or a BUBBA.

In a hot market, such as last year, you might think that purchasers would want to use buyer brokers because good properties were scarce and buyers wanted an edge. Conversely, in a slower market you would expect the use of buyer brokers to decline because many homes are on the market.

In fact, 40 percent of all purchasers used a buyer broker in 1995, a figure that rose to 63 percent by 2005, according to NAR.

One reason for the growing use of buyer representatives is that the concept has gained greater public acceptance. Consumers increasingly understand that if a seller has a broker, then a buyer without representation has a substantial disadvantage.

Now we have a market which has begun to slow. NAR reported last month that of 151 metropolitan statistical areas, 37 had double-digit annual price increases and 26 showed price declines.

What will a changing market mean for brokers and representation?

First, the pricing and volume fall-off we have witnessed to date has been mild - essentially activity in some areas are at levels seen in 2005 and 2004. Those years were considered excellent by historic standards.

Second, reduced unit volume means fewer opportunities for brokers, lenders and tax collectors. Look for the ranks of real estate professionals to be thinned and state coffers to contract.

Third, the ranks for FSBOs and BUBBAs will decline.

How come? Each year the buying and selling process becomes more complex. Here's an example: The first real estate contract I saw fitted nicely on a single page. In my last transaction there were some 65 pages of documentation.

If you had asked about self-selling or self-buying 20 years ago it would have made sense to say that such choices were viable marketplace options. But today that's not the case. Forget some paperwork and you could be out thousands of dollars or have a deal that's void or voidable. Go into a transaction unrepresented and the odds of success very much favor the other party.

So while some brokers may be distressed by the idea of self-selling and free-roaming buyers, the odds are overwhelming that both the marketplace will contract and that the percentage of transactions which involve a broker will increase.
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If a new look is on your holiday list

The rush is already on to spiff up homes, so pull out the checkbook and get those projects started.
By: Jake Klein: Los Angeles Times
LABOR DAY may still lie ahead, but for anyone hoping to spruce up the home before Thanksgiving, the calendar is screaming something else entirely: Get moving.

Interior designers in Southern California say savvy clients have already come calling — some as early as July — to ensure that their kitchens, dining rooms and living rooms will have been transformed from construction zone to showpiece by the time the gravy boat lands on the turkey table.

"People don't start to get nervous until the kids go back to school," says Los Angeles-based interior designer Mark Cutler. "Depending on what your project entails, we need anywhere from a six- to a 16-week lead time. If you're looking for a Christmas installation, if we're up and running at full steam by October, you're probably going to be fine."

But want all work finished by Thanksgiving? Better start making those calls, and don't be surprised if your options are limited.

A rule of thumb: If you want custom draperies, furniture, cabinets or flooring, you should get your orders in by early September, at the latest. To be absolutely sure all work is wrapped up on time and to your satisfaction, major renovations on complicated spaces such as kitchens or bathrooms should have started in June or July.

Even do-it-yourselfers willing to work with off-the-shelf products from catalogs or big-box stores such as Crate & Barrel or Expo Design Center should begin now. Something as seemingly simple as ordering carpeting from a home improvement center can take twice as long during the holiday redecorating season; some subcontractors who measure rooms and install the product see their schedules start to back up in October. Ditto subcontractors for other redecorating services.

And by November?

"I'm looking for things I can buy off showroom floors, period," Cutler says.

Lana Olmstead of Cheaper Than a Wife, a firm that designs interiors for coastal Orange County residences and decorates homes for Christmas, says the coming month is best. "The kids are at school," Olmstead says, "and clients have time to sit down and plan."

Santa Monica-based interior designer Kathryn M. Ireland, known for her breezy, layered elegance, says early planning ends up being a client's best friend.

"If we started right now, anything is possible, frankly," she says. "I could renovate your whole house."

Many designers say they are only as good as their vendors, which is why Jennifer Bevan Interiors in South Pasadena sets today as its deadline for accepting pre-holiday jobs.

"We have nothing but the best work rooms that we have been working with for 20 years, and they are the ones who set the pace," says Denise Ranalli, head designer for the firm. She says the legions of pros who paint, plumb, make cabinets or install new lighting largely determine if a project will be completed by the holidays.

"If a tradesman is booked up and your client needs drapes yesterday, you're in trouble," Cutler says. "We send end-of-summer gifts to our vendors." Bottles of wine and tequila go to drapery makers, upholsterers and other artisans who keep his projects on schedule. Toys go to their children.

For procrastinators, the good news is that there's always hope — as long as you're willing to pay. Carpet installation and sales specialist Robert Rickun of Carpet Design in Los Angeles says his turn-around time is usually four to six weeks, but …

"This is Hollywood, and if it exists, we can make it happen," Rickun says. "People here are always willing to pay for what they want."

One client insisted that a custom-made, hand-tied wool carpet be delivered to her home in time for a holiday party, scheduled for just a few weeks later. Rickun had it air-freighted from the Czech Republic at a cost almost equal to the price of the carpet.

After Labor Day, some designers work 16-hour days to satisfy their best clients.

"I'm one of those people if you want something tomorrow, I can do it for you," Ireland says, adding with a laugh, "but no good deed goes unpunished." If you don't plan now, she says, "you will pay rush fees across the board."

Jay Jeffers of the Jeffers Design Group in L.A. and San Francisco says he doesn't charge customers a premium for rush service, but many of the manufacturers he uses do. "We end up having to pass those 15% to 25% differences in cost to them when a job is last-minute," he says.

Instead of rushing on an overly ambitious project, Ireland suggests focusing on the living and dining rooms.

"August and September is a great time to have new slipcovers made for your couches and chairs," Ireland says. Her lead time on new drapery or upholstery projects is about 12 weeks. "Though you can always do projects quickly if you're in a pinch, fabric and labor is so expensive, you don't want to do a rush job."

Ranalli suggests simple changes, such as painting a room or changing the pillows to "spruce up the color."

Even easier: Cutler suggests cleaning walls, floors and furniture, from top to bottom. "You'll be amazed at how this simple act will make everything feel fresh and new." And it's much easier than ripping out your kitchen.
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Pending Home Sales Index Fell 7.0% in July, NAR Reports

A gauge for future home demand fell sharply during July, the largest monthly drop since the index was created, indicating that the rate of home sales will be leveling out a lower pace in the months ahead.
By: Benton Ives-Halperin: The Wall Street Journal Online
The National Association of Realtors' index for pending sales of existing homes decreased at a seasonally adjusted annual rate of 7.0% to 105.6 from June's 113.5, the industry group said Friday.

July's index level is the lowest since February 2003, when it was 99.3.

And July's index reading was 16.0% below the level of July 2005.

David Lereah, NAR's chief economist, said the year-to-year numbers have been a good predictor of the actual pace of home sales.

"Based on recent changes from a year ago, the index shows existing-home sales should continue to ease after a stronger-than-expected decline in July, but are likely to flatten in the months ahead," Lereah said in a statement.

By region, the index showed a 7.7% drop in the Northeast in July from June - and a 15.5% decrease since July 2005.

In the West, the index dropped 5.5% in July and 20.3% below a year prior.

The South fell 6.4% in July and was 11.3% below July 2005. The Midwest decreased 9.0% in July and was 20.1% below the level a year earlier.

Lereah attributed much of the drop in the July index to "psychological factors."

"We've never seen a general decline in the housing market against a healthy economic backdrop where jobs are being created, the economy is growing and interest rates are favorable," he said.

"Psychological factors are causing some buyers to remain on the sidelines, waiting for prices to stabilize or for more favorable news about the market and the economy...in the end we believe that underlying market fundamentals will prevail," Lereah added.

The NAR's pending home sales index was designed to try measuring the direction of the housing market in the future. It is based on pending sales of existing homes, including single-family homes and condominiums. A home sale is pending when the contract has been signed but the transaction has not closed. Pending sales typically close within one or two months of signing.
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Wind Energy Becoming a Part of the Nation's Power Portfolio

Whether there is global warming is debatable, but the excessive heat wave of 2006 and the thousands of families left without power for as many as eight days left many Americans wondering if the current structures for generating electricity - coal, natural gas and nuclear power - are enough to meet the demands of the growing number of homes and businesses in need of power.
By: Peter Mosca: Realty Times
Future homeowners and corporate America - not to mention savvy entrepreneurs and environmentalist - likely will be looking toward innovative renewable energy sources to assume a greater portion of power production.

There’s good news on the horizon. The American Wind Energy Association (AWEA) recently announced that U.S. wind energy installations now exceed 10,000 megawatts (MW) in generating capacity, and produce enough electricity on a typical day to power the equivalent of over 2.5 million homes. With a megawatt of wind power generating enough to serve 250 to 300 average homes, is America ready to embrace this environmentally-friendly source of energy?

“Wind energy is providing new electricity supplies that work for our country’s economy, environment, and energy security,” said AWEA Executive Director Randall Swisher. “With its current performance, wind energy is demonstrating that it could rapidly become an important part of the nation’s power portfolio.”

The record growth in wind power is driven by demand for the popular energy source and concerns over fuel price volatility and supply. It was also made possible by a timely renewal of the production tax credit (PTC), a federal incentive extended in the Energy Policy Act signed a year ago by President Bush. Previously, the credit had been allowed to expire three times in seven years, and this uncertainty discouraged investment in wind turbine manufacturing in the country. AWEA is calling for a long-term extension of the PTC before its scheduled expiration at the end of 2007 to avoid further “on-again-off-again” cycles and encourage long-term investment.

In addition to tax credits, consumers interested in renewable energy are now able to recover the cost of installing renewable energy systems by selling back to utilities power they do not use themselves. They are able to do this via new technology called “net metering,” a technology that spins electricity meters in reverse to measure the amount of unused renewable electricity. According to the Database of State Incentives for Renewable Energy (DSIRE) some 40 states and Washington, D.C., have net metering programs sponsored either by the state or by local utilities. DSIRE has a list of links to other renewable energy resources at dsireusa.org/links.

The renewable energy industry is gaining momentum as it grows. The first commercial wind farms, for example, were constructed in California in the early 1980s, and after reaching 1,000 MW in 1985, it took more than a decade for wind to reach the 2,000-MW mark, in 1999. Since then, however, installed capacity has grown fivefold. Today, the industry is installing more wind power in a single year (3,000 MW expected in 2006) than the amount operating in the entire country in 2000 (2,500 MW).

While the environmental benefits are obvious, such as less global warming pollution and better air quality, the economic benefits are equally impressive. As a supplier of electricity, wind was the second-largest source of new power generation in the country in 2005 after natural gas, and is likely be so again in 2006, according to the Energy Information Administration. As a result, more wind turbine manufacturing facilities are opening up, such as those in Iowa (Clipper Windpower), Minnesota (Suzlon), and Pennsylvania (Gamesa), and new jobs are being created. In fact, President Bush said earlier this year that wind could meet 20 percent of the country’s electricity supply (the share that nuclear power provides today).
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Mortgage Rates Continue to Drift Lower as Housing Market Eases Back from Record Highs

Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 6.44 percent with an average 0.4 point for the week ending August 31, 2006, down from last week's average of 6.48 percent.
Realty Times
Last year at this time, the 30-year FRM averaged 5.71 percent. This is the lowest the 30-year FRM has been since the week ending April 6, 2006, when it averaged 6.43 percent.

The average for the 15-year FRM this week is 6.14 percent, with an average 0.4 point, down from last week when it averaged 6.18 percent. A year ago, the 15-year FRM averaged 5.32 percent. This is the lowest the 15-year FRM has been since the week ending April 6, when it was 6.10 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) fell to 6.11 percent this week, with an average 0.5 point, down from last week's rate of 6.14 percent. A year ago, the five-year ARM averaged 5.30 percent. This is the lowest the five-year ARM has been since March 30, 2006, when it was 6.02 percent.

One-year Treasury-indexed ARMs averaged 5.59 percent this week, with an average 0.7 point, was down from last week when it averaged 5.60 percent. At this time last year, the one-year ARM averaged 4.48 percent. This is the lowest the one-year ARM has been since April 6, 2006, when it was 5.57 percent.

"Mortgage rates continued to drift lower this week in large part because of the cooling in the housing market and in consumer confidence, thus giving financial markets reason to believe that economic growth will moderate and inflation will remain in check," said Frank Nothaft, Freddie Mac vice president and chief economist. "As a matter of fact, the 30-year FRM is nearly 40 basis points lower than its peak of 6.8 percent in July of this year."

"By some indicators, personal incomes are growing faster than the cost of housing. Combined with the still historically low mortgage rates, this will help to support the housing industry as it levels off from the record highs of the last few years."
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