California: Sales Rise as Home Prices Bottom

As foreclosures push down California housing prices, first-time home buyers surge into the market.
By: Alex Veiga: REALTOR®Magazine
The California median home price fell 30 percent in May, the sharpest decline in 20 years, since DataQuick Information Systems began keeping records.

The drop in home prices has sparked a home-buying rally that's beginning to reverse more than two years of monthly year-over-year sales declines.

"Inland markets hit hardest by foreclosures and falling prices are now the most likely to post higher sales than last year," says Andrew LePage, a DataQuick analyst. "These communities have been attracting first-time buyers, first-time move-up buyers and investors."

Richard Cosner, president of Prudential California Realty, says buyers of homes whose prices have declined in the last 18 months from $400,000 to $200,000 must compete with multiple bidders.

"For the first-time homebuyers and for that bottom tier of homes, we've found what the bottom of the pricing is," Cosner says.
Read more!

Is Hollywood Heading for Crash?

Wave of new condos in area faces soft market.
By: DANIEL MILLER: Los Angeles Business Journal online
The real estate bust has hit the downtown condo market, slowing its resurgence as a hip residential neighborhood.

Now, it appears, the Hollywood renaissance is in line for some lowered expectations.

The crane has been a dominant part of the Hollywood skyline, with more than 1,200 condo and rental units now under construction. Several experts say those units, or at least most of them, likely will be completed on time.

But there’s a big bulge of units further behind in the current development cycle, and they appear to be in greater peril. According to a March 3 study by the Community Redevelopment Agency of Los Angeles, there are 2,121 entitled units and 1,507 proposed units in larger Hollywood-area developments.

“You already know there are a number of projects that won’t see the light of day this year,” said John Given, a senior vice president at Los Angeles-based CIM Group Inc., a major player in the Hollywood renaissance that owns the popular Hollywood & Highland retail and theater project.

Of course, the problem is the tightened credit markets since the collapse of the subprime mortgage industry. It is difficult for developers to obtain financing for their projects. Even when they do, buyers find loans harder to come by.

“The credit markets are preventing people from getting any traction,” said Lew Feldman, a real estate attorney with Goodwin Procter LLP, who has worked on a handful of land deals in Hollywood. “Until that settles out, a lot of folks are going to be putting on a smiley face, but no money is going to be flowing.”

The resurgence of the Hollywood residential market has been remarkable. At the start of the decade, very little condo and apartment construction occurred there.

Impressive as the construction figures are, they undercount the real activity because they don’t count projects with fewer than 100 units, such as CIM’s 63-unit luxury apartment building at the southeast corner of Sunset Boulevard and Vine Street. That project is well underway and should be ready for occupancy by the first quarter of 2009.

Hollywood’s residential market is smaller than downtown’s, where about 7,900 units are under construction. Both Hollywood and downtown have emerged as L.A.’s big and desirable destinations for those who want to live in a high-rise in an urban environment with cultural attractions, quirky nightspots and subway stations.

Some successes

Given said his company is concerned with softness in the condo market, but believes strongly in the long-term viability of Hollywood. Indeed, there have already been success stories. For example, the Kor Group opened its 96-unit Broadway Hollywood condo project last year at the southwest corner of Hollywood Boulevard and Vine Street. There are only a few condos left and many have been sold in the $700 per square foot range, said Tyson Sayles, Kor’s executive vice president of acquisition.

“We are big believers in Hollywood as a 24-hour destination, but that said, projects have to pencil and the short-term economic outlook is a lot more uncertain,” said Sayles. “I don’t think every project will go forward, and that’s OK; it is part of the real estate cycle.”

One of the those developments that has yet to receive financing is a 23-story condo tower at 5925 Sunset Blvd. by Portland-based Gerding Edlen Development Co. LLC.
The established development company has found success downtown with two South Park condo towers and has another on the way. The company bought the Hollywood property in September 2006, but still needs to complete financing for its $160 million in construction and development costs.

Gerding Edlen Principal Tom Cody said the company is close to getting $64 million in equity financing, but acknowledged the process has been slow because of the choppy real estate and finance markets.

“We are actively working on financing, and it hasn’t delayed us because we are (still seeking) entitlements,” said Cody, adding that his company would like to break ground by fall. “But, in this market today you have to kiss a lot of frogs before you find the prince you need.”

Cody said that a year ago his company would have talked to “two or three” potential financing partners, but “now it’s more like 20.”

“The upside is we are finding it possible to put it together because the Hollywood market is so compelling. If it were a project in a marginal area, you could forget about it,” he added.

Market lynchpin

Given the state of the market, all eyes now are on the $600 million mixed-use W hotel project at Hollywood and Vine, a long moribund corner that in its heyday was the intersection of commerce and Hollywood glamour.

The 5-acre project will feature a 305-room W hotel aimed at young wealthy professionals, 143 luxury condos, 375 high-end apartments and 50,000 square feet of retail – all atop a subway stop.

“This is a critical project for Hollywood and the city’s future,” said Los Angeles City Council President Eric Garcetti, who represents the area and believes the project will do more for Hollywood than even the Hollywood & Highland tourist destination.

Dallas-based Gatehouse Capital Corp. and Norwalk, Conn.-based HEI Hospitality LLC are building the condos and hotel. Foster City-based Legacy Partners Inc. is building the apartment units. All are contributing to the retail.

Gatehouse President Marty Collins expects the condo portion of the project to be a tone setter for the market. He said the units are priced in the $1,200-per-square-foot range – high for a large Hollywood project. The company has already begun pre-selling units, which start in the high $800,000s and go up to $9 million for a luxury penthouse.

Collins said he’s not concerned about a residential slowdown despite the collapse of housing markets in far flung areas like the Inland Empire. “Clearly these units will sell for more than anything else that is out on the market. Day in day out, what happens to the subprime market out in Riverside doesn’t really have a tremendous effect on where we are with the pricing band,” he said.

Indeed, there’s a feeling among some developers that since construction on the W project is well under way and there is virtually no chance it won’t be completed, Hollywood will get a boost from it no matter what happens with other projects.

“The whole area just takes on a whole new dynamic. Critical mass is good for everybody in terms of the food and beverage venues and giving a more pedestrian nature to the street,” said Avi Brosh, who heads Palisades Development Group, a Santa Monica developer that is building the long-stay Pali House hotel nearby. He also converted the nearby Equitable office building into condos last year, so far selling about half the 65 units.

“The W is the first pie in the sky project that got done and it’s amazing it is happening,” he said.
Read more!

Some Buy a New Home to Bail on the Old

In markets hit hardest by falling home prices and rising foreclosures, borrowers with good credit buy a new home - often at a much lower price - then bail out of the "upside down" mortgage on their first home. But walking away from a mortgage has plenty of drawbacks and Fannie plans to toughen rules.
By: NICK TIMIRAOS: WSJ.com
Fannie Plans Rules To Avoid Practice Described as Fraud.
Next month, Michelle Augustine plans to walk away from her four-bedroom house in a Sacramento, Calif., subdivision and let the property fall into foreclosure. But before doing so, she hopes to lock in the purchase of another home nearby.

"I can find the same exact house as what I live in right now for half the price," says Ms. Augustine, 44 years old, who runs a child-care service out of her home. She says she soon will be unable to afford her monthly payments, which will jump to $4,000 from $3,300 in August, and she doesn't want to continue to own a home that is now worth $200,000 less than what she paid for it two years ago.

In markets hit hardest by falling home prices and rising foreclosures, lenders and brokers are discovering a new phenomenon: the "buy and bail," in which borrowers with good credit buy a new home - often at a much lower price - then bail out of the "upside down" mortgage on their first home.

Homeowners are able to pull off this gambit - which some lenders and real-estate agents call mortgage fraud - by taking advantage of mortgage-lending practices that allow them to buy a new primary residence before their existing residence has been sold. And with the lending industry in disarray as it tries to restructure millions of mortgages, some boast they are able to pull off the strategy with ease.

In some cases, homeowners are coached through the buy-and-bail process by real-estate agents and brokers who see nothing wrong with it. Some blame the phenomenon in part on lenders' unwillingness to cut deals or restructure loans made when home prices were inflated. "It's just a business decision," says Linda Caoili, a Sacramento real-estate agent who is working with Ms. Augustine and others who are considering walking away from their mortgages. "If you're upside-down $250,000, why would you keep it? It just doesn't make sense."

To be sure, walking away from a mortgage, even if legal, has plenty of drawbacks: Borrowers lose the ability to take out unsecured loans, since foreclosures can stay on a credit report for seven years. In some states, lenders can sue for assets, including a new house. Fannie Mae, the government-sponsored mortgage underwriter, recently revised the amount of time borrowers with a foreclosure must wait to receive a home loan to five years from four. Proposed Fannie Mae guidelines, which could take effect later this month, also would require those borrowers to make a 10% down payment and meet a minimum credit score after the five-year period.

While buy-and-bail is on the rise, the practice doesn't appear to be widespread. Credit is much tighter now than it was during the real-estate boom, and most families with an upside-down mortgage likely will hold on to their homes and hope the market improves in the future - even though many of them could lose their properties.

Still, with home prices falling rapidly in some parts of the country, a growing number of frustrated consumers are willing to take the risk - especially in so-called nondeficiency states such as California and Arizona, where it is more difficult for a lender to sue consumers who walk away from their mortgages. Borrowers who bought or refinanced their home with a personal line of credit, however, instead of a home-purchase loan - a common practice during the housing boom - could be sued by a lender in those states. Borrowers also could be on the hook if lenders can show that homeowners committed fraud by misrepresenting themselves on their loan application.

Yet even in cases in which a lender could attach a lien on the new home, some homeowners simply assume that lenders are too swamped. "So many people are foreclosing, is it cost effective for lenders to go after all of these people?" says Steve Hawks, a Las Vegas real-estate agent who handles lender-owned properties.

That works in the favor of borrowers such as Blair Morrow. Last year, he rented out his Sacramento home when he moved to Houston for a new job, but he lost those renters in February. He quickly arranged to buy a new home in Houston, fearing that his old residence would be foreclosed and he would take a big hit on his credit.

"I had 30 days to make a decision: Live in a rental house the rest of my life or buy a house and walk away from the one in California," says Mr. Morrow, 56, who works at a car dealership. He wrestled with the decision for a while, but justified it once Countrywide Financial Corp., the lender for his first home, approved the new home loan. "Countrywide didn't say peep," he says. Countrywide didn't return calls seeking comment.

Ms. Augustine, the Sacramento day-care provider, became a first-time homeowner in November 2006 by taking out two loans with nothing down to cover the $426,000 home purchase. With her home valued at about $220,000 now, she is actively looking in nearby communities for another one to buy before the bank forecloses on her current home.

The mortgage industry is starting to wise up to the practice and is scrambling to fight back. Buy-and-bail is "certainly fraudulent and unfortunately on an uptick," says Gwen Muse-Evans, vice president for credit policy and controls at Fannie Mae. Although she doesn't have data to quantify the size and scope of the trend, Ms. Muse-Evans says overwhelming anecdotal reports have prompted the agency to draft tougher regulations aimed at closing one big loophole that allows underwater homeowners to qualify for new home loans.

That loophole currently works like this: Homeowners provide a rental agreement showing that they will rent out their first home, and underwriters allow rental income to cover as much as 75% of the mortgage payments on the first home when determining whether the borrower can make payments on two homes. This allows homeowners to secure a second mortgage that they might not otherwise afford.

Under revised Fannie Mae guidelines, which could take effect next week, loan applicants who claim they will rent out their first home will have to produce supporting evidence, including an executed lease agreement. Borrowers also will have to prove that they can pay the mortgage, property taxes and insurance for both residences. The guidelines will make an exception only for borrowers who have at least 30% equity in their current home.

Of course, many individuals still can qualify for that second loan because of a strong credit and cash position. If they "have the intention of fraud, then at the end of the day there's really little you can do to totally prevent that," says Ms. Muse-Evans.

Some private lenders aren't waiting for Fannie's lead. In April, underwriters handling bank-owned properties at IndyMac Bancorp Inc. told brokers they would require borrowers purchasing new homes while retaining their existing home as a rental to prove that they could make full payments on both homes to qualify for a loan. A memo sent to a Southern California broker said the policy change was prompted by "losses from individuals walking away from properties after the acquisition of a new home."

An IndyMac spokesman said the bank hadn't changed its policies and had always "underwritten loans with an eye towards insuring that our borrowers could readily rent out their current property and/or reasonably support both payments."

Realtors say the new guidelines could put further pressure on sales, but Lawrence Yun, chief economist for the National Association of Realtors, says the impact of such guidelines on sales would be marginal. He calls Fannie Mae's response appropriate because any artificial increase in home sales hurts the average consumer.

Meanwhile, Mr. Hawks, the Las Vegas broker, says he receives one to two dozen inquiries every week from individuals inquiring about a buy-and-bail. "People are starting to ask how much their good credit is worth," particularly when their home is underwater by hundreds of thousands of dollars.

The tactic doesn't appeal to people such as John Ristuccia, a 48-year-old Buckeye, Ariz., paper-company sales director whose job was moved to Houston in August. He is trying to complete a "short sale" for $425,000 on his five-bedroom, 4,000-square-foot home, which was appraised for $800,000 last year. In a short sale, a lender allows the sale of property for less than the amount due on the outstanding loan and often forgives the remaining debt.

Even though he might be able to qualify for a second home loan, Mr. Ristuccia says he wouldn't consider sticking his bank with his suburban Phoenix property. "Just personally I've got a problem with that," he says. "I really can't put it in terms other than it feels wrong."


Read more!

How To Green Your Lighting

How we light up the places we live and work makes a big impact on how we feel. It also makes a big impact on the environment. Get ten tips to green your lighting.
YAHOO!Green
How to Green Your Lighting What’s the Big Deal?
The kind of bulbs, the kind of fixtures, the kind of power, and the habits we keep can all add up to a very significant greening. Start with the fact that a conventional incandescent bulb turns only around five to ten percent of its consumed energy into light, the rest goes out as heat. From there, there’s no limit to how green your lighting can be.

Top 10 Tips
Here are 10 highly effective ways to go greener. Hit it.
1. CFL: The better bulb
Compact florescent bulbs (CFLs) are those swirley little guys that look like soft-serve ice cream cones. Actually, they come in a myriad of different shapes, sizes, and colors of light. Economically speaking, they’re a great deal, too. CFLs cost a bit more than an incandescent, but use about a quarter as much energy and last many times longer (usually around 10,000 hours). It is estimated that a CFL pays for its higher price after about 500 hours of use. After that, it’s money in your pocket.

Also, because CFLs release less heat, not only are they safer, but your cooling load is less in the summer. CFLs aren’t hard to find anymore, and many cities will give them away for free. Wal-Mart has plans to sell 100 million of them.

2. Get the LEDs out
LEDs are a definite TreeHugger favorite. LEDs, or light emitting diodes, are a technology that allows for extremely energy efficient and extremely long-lasting light bulbs. LEDs are just starting to hit the consumer market in a big (read affordable) way and still cost quite a bit more than even CFLs, but use even less energy and last even longer.

An LED light bulb can reduce energy consumption by 80-90% and last around 100,000 hours. They even light up faster than regular bulbs (which could save your life it there are LEDs in the brake lights of your car). They are almost always more expensive presently, but we have seen the cost go down steadily. It’s no coincidence that the Millennium Technology Prize went to the inventor of the LED.

Most LED lamps on the market have the bulbs built into them, so you buy the whole unit. For screw-in bulbs, check out Ledtronics, Mule, and Enlux. For desk lamps, check out a few affordable ones from Sylvania and Koncept. For more designer models, look at LEDs from Herman Miller and Knoll. Vessel rechargeable accent lamps represent some of the interesting new things LEDs can do as well.

3. Materials
Light isn’t all about the bulbs, though. Having eco-friendly lamps and light fixtures is key to greening your lighting. When scouting for new gear, keep your eyes out for lamps made with natural, recycled, or reused materials. Lights made from recycled materials include metal, glass, or plastic, and natural materials can include felt, cloth or wood. Interesting lamps that use reclaimed materials include these made from traffic signal lenses, and these made from wine bottles. Also, don’t be shy about borrowing ideas for reuse in your own projects (see DIY).

4. Disposabulb
Fluorescents last a long time, but when they’re dead, they have to be properly disposed of. CFLs, like all florescent bulbs, do contain a small amount of mercury, which means they definitely can’t be thrown in the trash. Every city has different services for recycling, so you’ll need to see what’s offered in your area. LEDs, to our knowledge, do not contain mercury, but the jury may still be out on how to best recycle them.

5. Wall warts
Power adaptors, or “wall warts” as they’re affectionately called, are those clunky things you find on many electrical cords, including those attached to lamps and some light fixtures. You’ll notice that they stay warm even when their device is turned off. This is because they in fact draw energy from the wall all the time. One way to green your lighting is to unplug their wall warts when not in use, attached lights to a power strip and turn off the whole switch when not in use, or get your hands on a “smart” power strip that knows when the devise is off.

6. Day-lighting
By far, the best source of light we know is (yes, you guessed it) the sun, which gives off free, full-spectrum light all day. Make the most of daylight by keeping your blinds open (sounds obvious but you might be surprised). If you want to go a little farther, put in some skylights, or, of you are designing a home or doing a renovation, put as many windows on the south-facing side of the house as possible (or north-facing if you live in the southern hemisphere). To take it even further, sunlight can be “piped” inside via fiber optics and other light channeling technologies.

7. Good habits
As efficient as your lighting equipment might be, it doesn’t make sense to have lights on when no one’s around. Turn out lights in rooms or parts of the house where no one is. Teach your family and friends about it too and it will become second nature. If you want to get a little more exact, follow these rules:
Standard incandescent: turn off even if you leave the room for just seconds. Compact fluorescent: turn off if you leave the room for 3 minutes. Standard fluorescent: turn off if you leave the room for 15 minutes.

8. Do it yourself
We’re always encouraging people to take matters into their own hands. So much great eco-innovation comes when people create the things they can’t find elsewhere. Lighting is an especially accessible and rewarding thing to tackle. For some inspiration, check out the Cholesterol lamp made from cast-off plastic egg cartons, and the recycled Tube Light. Strawbale building pioneer Glen Hunter made some LED fixtures when he couldn’t find any he liked on the market. Eurolite, the company from which he bought the lighting components, liked his designs so much they decided to sell them.

9. Dimmers and motion sensors
Motion sensors can be a good way to keep lights turned off when they’re not needed, and dimmers can give you just the right amount of life, and timers can be set to turn things on and off when needed.

10. Get green power
A great way to green your lighting is to buy green power. More and more electric utilities are offering customers a green power option on their bill. Signing up for green power usually means paying a few more dollars a month to support energy in the grid that comes from renewable sources like wind, solar, or biogas. For some more info on how to get green juice, look here, and for the greenest grids in the States, look here. More info is also available in How to Green Your Electricity.

So You Wanna Do More
Not content with just getting by? Go hardcore.
Daylight pays
From hockey rinks and schools, to Wal-Mart, to euro office buildings, natural lighting is being used to do better business, make people happier, and save energy and dollars. The presence of day-lighting often shows increased worker satisfaction and productivity in offices, better test scores in schools, increased sales in retail settings, and, of course, lower energy bills.

Working with the sun
Planning your day around the planet’s great source of free, full-spectrum light is good for the brain and body, and will mean less burning of the midnight oil. Optimization theory takes advantage of the daylight cycle. It’s not just for energy savings and bringing more natural light in your life, but that’s definitely part of it.

By the Numbers
Want the real deal? Here's where the rubber meets the road.
1. According to a report published by the International Energy Agency (IEA), a global switch to efficient lighting systems would trim the world's electricity bill by nearly one-tenth. The carbon dioxide emissions saved by such a switch would, it concludes, dwarf cuts so far achieved by adopting wind and solar power. According to Paul Waide, a senior policy analyst with the IEA and one of the report's authors, "19% of global electricity generation is taken for lighting— that's more than is produced by hydro or nuclear stations, and about the same that's produced from natural gas."

2. Studies by the Heschong Mahone Group found that sales increased 40% in stores with good natural light.

3. Through the use of day-lighting in design, builders can meet 25 to 33 percent of the necessary requirements to achieve a Silver LEED rating.

4. According to the federal Energy Star program: “If every American home replaced just one light bulb with an ENERGY STAR, we would save enough energy to light more than 2.5 million homes for a year and prevent greenhouse gases equivalent to the emissions of nearly 800,000 cars.”

Getting Techie
Not content with the high level? Here's the nitty gritty.
Light emitting diodes (LEDs) are a big deal and we’ll be seeing them pop up in more and more places. Read more about what they are and how they work on Wikipedia’s excellent page.

A heliodon is a devise that allows architects, builders, and engineers to simulate the effects of sunlight on the lighting needs of building designs.

Color temperature is measured in kelvins, and brightness is measured in lumens and footcandles, and the effect of light on colored surfaces in measured in the Color Rendering Index.
Dig Deeper Into TreeHugger
Dig deeper by perusing some of our thousands of posts.
Bringing sunlight indoors can be done in many ways. TreeHugger has covered the Sunpipe, the work of the Oak Ridge National Laboratory, developments coming out of Queensland University of Technology, FluoroSolar, and the Suntracker. The University of Nottingham has also integrated daylight into its new Creative Energy Homes.

For more lighting products, inventions, concepts, news, and activism, dive into TreeHugger's Lighting category.

Dig Deeper Into Other Sources
TreeHugger is one of many sources; here are some other great ones.

• Lamprecycle.org
• CFLbulbs.com
• Wikipedia’s CFL Page
• Description of a Kilowatt-Hour
• The U.S. Green Building Council
• Energy Star
• GE’s page on light color
• Heschong and Mahone Group has done a variety of studies on the effects of day-
lighting and productivity in buildings.

Where to Get This Stuff
Vote with your dollars and help support the green revolution.

• Ledtronics
• Osram
• Panasonic
• GE
• Phillips
• Syvania
• Luxlite
• Mule
• Eurolite
• Enlux
• Mio
• Greener Lifestyles
• Vessel
• 1000 Bulbs
• Luceplan

Read more!

Number of Foreclosed Homes Keeps Rising

The number of foreclosed homes owned by lenders continues to rise despite signs that they are increasingly willing to slash prices to sell those properties.
By: JAMES R. HAGERTY: WSJ.com
Lenders Cut Prices
To Jump-Start Sales
As Inventory Grows

Lenders and investors in mortgages owned about 660,000 foreclosed homes in April, up from 493,000 in January and 231,000 in January 2007, according to First American CoreLogic, a research firm based in Santa Ana, Calif., that collects data from lenders and county clerks. The April total works out to about one in seven previously occupied homes available for sale nationwide.

A surge in defaults has increased the inventory of bank-owned homes, known in the trade as REO, for "real estate owned." By cutting prices, lenders have managed to increase sales of such homes sharply in recent months in some cities hit hard by foreclosures, including Las Vegas, Detroit and Sacramento, Calif., local real-estate brokers say.

With home prices falling, "holding the assets means further losses," said Mark Fleming, chief economist for First American CoreLogic. Some lenders now are cutting prices as often as every 20 days on homes that aren't selling, said David McCarthy, chief executive officer of Integrated Asset Services LLC, a Denver-based company that helps banks value and sell REO homes.

But lenders haven't yet managed to catch up with the inflow of foreclosed homes. Mark Zandi, chief economist at Moody's Economy.com, forecasts that the inventory of REO homes won't peak before the end of 2009.

In dollar terms, foreclosed one- to four-family homes owned by lenders whose deposits are insured by the Federal Deposit Insurance Corp. more than doubled to $8.56 billion at the end of the first quarter from $3.59 billion a year earlier.

The REO glut is weighing on house prices in many areas, as banks tend to cut prices faster than other sellers. A new set of local home-price indexes, to be introduced this week by Integrated Asset Services, shows that the median price of homes sold in Riverside County, Calif., in April was down about 29% from a year earlier. The median price fell about 13% in Clark County, Nev., and 12% in Arizona's Maricopa and Pima counties. Median-price comparisons can be skewed by shifts in the proportions of high- and lower-priced homes sold from one year to the next but provide a broad indication of market trends.

To avoid or at least delay losses, many lenders are trying to avert foreclosures by easing loan terms or giving struggling borrowers more time to catch up. Hope Now, an alliance of mortgage companies and investors, said last week that mortgage companies completed loan workouts for 183,000 households in April, up from 160,000 in March.

Meanwhile, long-term interest rates rose last week, marking another potential drag on the housing market. The average rate on 30-year fixed rate loans eligible for sale to government-sponsored investors Fannie Mae and Freddie Mac was 6.17%, up from 6.02% a week earlier, according to HSH Associates, a financial publisher in Pompton Plains, N.J.
Read more!

Attention Home Buyers: Lock in Your Rate

Interest rates on mortgages have spiked in the past 10 days, and there's a serious risk that they're going get a lot higher. If you act quick, you can still find some good deals.
By: BRETT ARENDS: WSJ.com
If you are thinking about buying a home, it's time to look into locking in your rate.

Now.

Rates have suddenly spiked in the past 10 days and there is a serious danger that this could get a lot worse.

The average interest rate on a typical 30-year fixed loan has jumped to 6.02% from 5.82% in a week, according to data tracked by Bankrate.com. That's because rising inflation fears have caused a jump in the interest rates on long-term government bonds.

On a $300,000 mortgage, the increase will add $38 to your monthly payments. It will cost an extra $4,000 in interest over the total life of the loan.

You can still get some good deals. Bankrate shows some lenders still offering rates below 6%, though not many.

(These rates only apply to so-called "conforming" loans, which are $417,000 or less, in most parts of the country. These mortgages are effectively underwritten by Uncle Sam. Rates for "jumbo" loans, which are above these limits, are higher; more on jumbos below.)

No one knows where rates will go next. But if you find a reasonable deal now, it may be worth risking a deposit to lock it in for a month or two if you can.

Regular readers know I was warning about this through the winter. While others were panicking about a mythical "great depression," I was cautioning about the more likely danger – namely that as the central bankers flooded the entire system with extra cash, they would end up stoking more inflation. Higher inflation means higher interest rates and the end of cheap mortgages.

Whether we have already arrived at this unhappy state remains to be seen. But it's a danger.

How much more does a higher rate actually cost you?

As a rule of thumb, for each $100,000 you borrow, an additional tenth of a percentage point on your mortgage rate will add about $2,300 to the total amount of interest you will pay over the life of the loan.

Yes, that's before mortgage interest tax relief, and to be really technical you'd need to shrink this sum by a discount rate to put it in true, present value terms (I only mention these things because too often financial media leave them out). So the effective cost will be less. But it's still more than petty cash.

Now, about those jumbo loans. There's some good news for those buying a home in higher-cost regions, such as New York and California, and seeking to borrow a bit more than $417,000.

For those so-called "jumbo comforming" loans, says Bankrate chief economist Greg McBride, "rates have dropped dramatically in the past few months."

The reason? Uncle Sam, as part of the emergency bailout during the financial crisis, raised the size of the mortgages it would underwrite in these areas. Nationwide, loans up to $417,000 were already backed by Fannie Mae and Freddie Mac. Now lenders get some Federal protection for making bigger loans in areas where prices are higher. In some areas like New York City and San Francisco, where prices are simply absurd, these limits can go above $700,000.

(Initially, after the government first announced this measure, the lenders still remained reluctant. A few weeks ago they at last started acting. Rep. Barney Frank, chairman of the House banking committee, says this happened after he threatened to hold hearings on the matter. It may also be that the financial panic had begun to subside).
Read more!

Recessions Don’t Matter: 8 Keys to Thriving in Real Estate Investments

When the news reports that our economy is falling into a recession, many investors are afraid there’s too much risk investing in real estate, especially.
RISMEDIA
Millionaire real estate investor David Lindahl, aka the “Apartment King,” offers eight key steps that help worried investors not only survive uncertain economic times, but also prosper in them:
Lindahl is the author of “Multi-Family Millions: How Anyone Can Reposition Apartments for Big Profits” (Wiley, April 2008) and “Emerging Real Estate Markets: How to Find and Profit from Up-and-Coming Areas” (Wiley).Lindahl, who went from living in a one-bedroom apartment to owning more than 4,600 apartment units, is the principal owner of The Lindahl Group, a real estate investment company and is a popular speaker and expert at real estate investment clubs, conventions and seminars throughout the country.

Key #1: Focus on the Motives behind the Messages: Pause a moment to consider the quality of information next time you read about a real estate “crisis” or “meltdown.”

Key #2: Don’t Be a One-Trick Pony: Don’t stop learning. Make sure your tool-belt is sagging with techniques.

Key #3: Don’t Be a One-Market Pony, Either: Don’t just stick close to home. Invest in markets all over the country.

Key #4: Trust Your Instruments: Know the key financial numbers about you local market and property.

Key #5: Guard Your Cash: Invest with someone else’s instead!

Key #6: Pump up Your Lead Generators: Be on the lookout for several deals so you can choose the very best ones.

Key #7: Price Changes Everything: There’s no such thing as a bad risk, only a bad price.

Key #8: Comfort Makes Competition; Discomfort Makes Dollars: Don’t just feel comfortable about your deal, do the unexpected when your instruments tell you it’s a good one!

According to the author, “Multi-Family Millions” explains how to read the market cycle, and explains why now is a great time to get started investing in apartment buildings-especially since other forms of real estate investing are suffering. The author also says “Emerging Real Estate Markets” has a system that finally “cracks the code” to investing outside your local real estate market.
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A property tax base that moves with you.

Homeowners over the age of 55 may transfer their existing property tax base to a replacement home of the same or lesser market value.
By: Patrick Duffy: latimes.com
LIKE MANY other baby boomers, Manhattan Beach residents John Osten, 62, and his wife Rose, 61, were in search of a simpler life.

After raising their family in the "tree" section of this ocean-side city, and with plenty of equity built up during 18 years at their 3,000-square-foot, single-family home, the Ostens were hoping to return to the Strand area adjacent to the city's beach, where they had once lived an active life of surfing, running and biking.

Everything in their grand plan seemed workable except for one thing: the higher property taxes the Ostens would have to pay if they moved. Although they would have been able to sell their existing home for about what a smaller house near the beach would cost, they worried their taxes would quadruple from their existing tax base of just $220,000. Until, that is, the Ostens learned about California Proposition 60.

Proposition 60, a constitutional amendment passed by California voters in 1986, provides tax relief to homeowners older than 55 by allowing them, with certain restrictions, to transfer their existing property tax base to a replacement home of the same or a lesser value within the same county if the transactions take place within a two-year period. In 1990, Proposition 110 extended those same benefits to severely physically disabled homeowners of any age. Proposition 90, approved in 1988, allows California counties to accept an existing property tax base from another participating county.

The savings in taxes was the deciding factor for the Ostens to sell their larger home three miles from the beach for $880,000 and buy - for $1,000 less - a three-level house on a lot shared with another home just steps from the sand.

"I really could not have afforded to get back to the beach," said John Osten, who credits real estate agents Serene and Barry Sulpor for telling him about the money-saving tip and following up with the paperwork.

The Sulpors, a Shorewood Realtors husband-and-wife team covering the South Bay region for 20 years, said they are seeing the use of this tax break increase as boomers begin to retire and look to trade more spacious homes in the suburbs for smaller ones, often in lifestyle-oriented locations near golf courses, lakes and beaches.

"It's becoming more and more popular," Serene Sulpor said, "but we're often surprised at how unfamiliar people are with the law."

Consequently, the Sulpors strongly recommend sellers work with agents and escrow companies familiar with the necessary paperwork to ensure that all rules are followed and deadlines met.

Benefit can be used once

For one, there are numerous restrictions for eligibility: either a single person or a spouse must be at least 55 years of age when selling the original property, the replacement property must be a principal residence with a current market value equal to or less than the original principal residence, and the new property must be purchased or built within two years of the first home being sold. Moreover, because homeowners can benefit from Proposition 60 only once, it's important to choose that second home wisely.

But Proposition 60 covers only property transfers within the same county. Proposition 90 allows broader existing property tax base transfers - but only if the county in which the replacement property is located chooses to participate.

So far Proposition 90 has not proved very popular, with only seven of the state's 58 counties allowing these inter-county exchanges, and several others passing ordinances in favor of it, then rescinding them later. So, although Southern California residents over 55 who live in the counties of Ventura, Los Angeles, Orange and San Diego can downsize and keep their existing tax base, those who might consider a move to retirement areas around Riverside County's Coachella Valley (including the cities of Palm Springs, Rancho Mirage, Palm Desert and La Quinta), the vast mountain areas of San Bernardino County or even much of the San Francisco Bay Area, are out of luck.

Riverside County rescinded its ordinance allowing Proposition 90. According to Larry Ward, the tax assessor for Riverside County, his office received several thousand applications between 1990 and 1995 - an average of 1,200 to 1,500 per year - but a financial analysis discovered ongoing losses from the assessment roles, so the county Board of Supervisors decided to repeal participation in 1995.

Given that Ward still receives regular calls about the now-defunct law - and must inform potential applicants that county leaders have yet to consider reinstatement - he suggests that some sort of means test or income cap for eligibility might help persuade more counties to enact it.

Real estate agent Lana Fears, with Prudential California Realty in Palm Springs, said it's traditional retirement communities like hers that suffer the most from Riverside County's decision to disallow Prop. 90. Fears also argues that since the potential tax benefit is specifically oriented toward retired people, its absence can severely limit newcomers from other counties. "People on very limited incomes simply can't afford that higher tax base."

Southeast of Palm Springs in La Quinta, agent Carey Ann Parker, with Desert Homes Today Realty, regularly receives calls from potential buyers who are surprised and upset to learn that Proposition 90 doesn't apply there. "For some, it would truly make a difference, allow them to buy their dream homes and live out their retirement."

Prop. 90's pluses

Meanwhile, San Bernardino County could soon be the eighth county statewide to allow Proposition 90. Armed with a proposal drafted by Assessor Bill Postmus, a pair of county supervisors recently introduced a compromise measure that would enact the tax-relief program for five years. It is currently under review but not yet approved. Supervisor Brad Mitzelfelt argues that even a five-year period could help boost the county's attraction as a relatively low-cost alternative to coastal regions.

Since many county governments see Proposition 90 only as a revenue loss, they miss its potential benefits, such as assisting retirees, supporting local businesses or reducing foreclosures, according to Michelle Steel, the 3rd District board member for the state Board of Equalization, which oversees California sales tax revenues.

"Local governments will easily make up this lost revenue in the economic activity and tax revenue generated by new residents," she said, citing recent government studies. Assuming 500 applicants per year, Steel said, an anticipated property tax loss of less than $400 compares to an estimated $860 in sales taxes each new resident to the county generates.

Proposition 90 also might make a dent, however small, in the rising tide of foreclosures now hitting the Inland Empire, she suggested.

"In most cases, foreclosed homeowners fail to pay the assessments for park fees, lighting districts, Mello-Roos taxes and other specialized fees in addition to property taxes," Steel said. These are essential to maintaining basic neighborhood infrastructure, including schools, parks, roads and fire protection.

Given that San Bernardino County recorded the state's third-largest number of mortgage default notices during the first quarter of 2008 - more than 11,000 homes according to DataQuick Information Systems - she argues that the county's real estate market needs all the help it can get.

Palm Springs agent Fears echoes her sentiment. "Anything any government entity can do to activate the real estate market in any form is good."

It certainly helped the Ostens of Manhattan Beach. Thanks to Proposition 60, John Osten said, "I went home."
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Where Home Prices Are Holding Up

Downtown: It's been among the safest places to hide from the housing downturn.
By: Jeff D. Opdyke: WSJ.com
Much has been made of the way the nation's real-estate bust is affecting some American cities far more than others. But even within a single metro area, changes in housing prices can show wild variations.

And in big cities, prices in the central cores often fare the best. Far-flung suburbs - where home building exploded in recent years - have more typically gotten hammered. In between is a patchwork of established suburbs and city neighborhoods peripheral to downtown that can be all over the map in terms of price declines - or even increases.

Consider the San Francisco Bay area. Overall, prices there slid 17% in the 12 months through February, the most-recent data available, and were down 8% over the first two months of 2008 alone, making it one of the worst-performing metro areas in the country, according to the S&P/Case Shiller Home Price Indices. Yet prices within the city of San Francisco are up 0.3% over the first quarter of 2008, according to DataQuick Information Systems, a San Diego-based real-estate-data firm.

For today's buyers, all this means that shopping for housing bargains is increasingly complicated. The best deals may be where prices have slid the most, but such areas could easily fall a good bit more before hitting bottom. Meanwhile, you'll get few bargains if you buy a home in San Francisco or Manhattan or downtown Boston. Of course, if the housing crisis broadens, the central core areas also could see price drops.

Here's a cheat sheet to understanding home-price patterns in some of the country's biggest metro areas.

Chicago

It's a mixed picture in Chicago's downtown area. A flurry of condominium building has kept prices down on much new construction. At the same time, some established apartment buildings are still seeing buoyant prices, even as properties spend more time on the market. The Carlyle, a 1960s-era glass-and-concrete tower along the city's prized Gold Coast neighborhood, recorded the highest price ever - $2.4 million - for one of its "C"-tier units earlier this year, for example.

Jim Kinney, president of Rubloff Residential Properties in Chicago, says "80% to 90% of the buildings along the Gold Coast achieved a record sales price in the last year." The older buildings are often in blue-chip locations and are generally cheaper, per square foot, than new units.

Bargains abound in Chicago's periphery. Seven miles south of the Carlyle is Bronzeville, a gentrifying community that during the housing boom was a favorite of buyers who couldn't afford Chicago's glitzier core. Just last month, a bank that owns a foreclosed duplex in Bronzeville dropped the asking price to just $85,000, from the January listing price of $129,900. The owners who lost the property originally paid $330,000 in November 2005, about a year before the Chicago market peaked.

But beware: Prices may be stagnant or worse for a long time to come. "Because of the huge inventory, it will take years to recover," says Christina Miller, a Rubloff agent, citing periphery neighborhoods such as Wicker Park, Ukrainian Village and Bucktown.

Chicago's desirable North Shore suburbs are, for the most part, doing well. Median prices in Evanston, Wilmette and Winnetka, all hugging Lake Michigan's shoreline, are up over the past year to varying degrees, though sales volume is down sharply, according to a Zip Code analysis by DataQuick. Sellers are receiving about 89% of the list price, according to March data from the North Shore-Barrington Association of Realtors. That's down from about 95% at the peak of the market.

In upscale Highland Park, about 25 miles north of downtown, prices are down more than 6%. But that average is being skewed by a high number of sales of low-end homes, some forced by foreclosure.

New York

While New York's commuter market - which includes suburban New York, New Jersey and Connecticut - is down about 8% from its peak in mid-2006, much of Manhattan continues humming along. Neighborhoods such as SoHo, the Lower East Side, Greenwich Village, Chelsea, Murray Hill, the Upper West Side and Harlem are all up in the past year, according to DataQuick's Zip Code analysis.

Bidding wars still happen. Toni Haber, an executive vice president at Prudential Douglas Elliman, a New York City real-estate firm, says 60 people waited in line recently at an open house to view a three-bedroom apartment in Greenwich Village. The owner had four competing offers within the week, and agreed to sell for about $2.5 million - $300,000 over the asking price.

Part of the city's strength comes from the fact that few buyers were investing in properties to flip them. Moreover, many apartment buildings in New York aren't condominiums but co-ops, which impose financial demands on potential buyers far more rigorous than banks do - which helps keep the number of foreclosures down. In addition, foreign investors have been exploiting the weak dollar by grabbing Manhattan real estate.

One area of weakness: the Financial District in Lower Manhattan, where median prices are down, in part because of an abundance of new construction in the area.

Those areas of Brooklyn that are close to Manhattan are also holding up well. On the periphery, places like Jamaica, Queens; parts of the Bronx; and nearby New Jersey towns such as Jersey City and Hoboken are off between 3% and 14%.

Farther out, popular commuter towns like Summit and New Providence, N.J., are down at much as 16%. Pockets of suburban strength do exist, though. High-end suburbs in New York's Westchester County such as Chappaqua are up over the past year.

Boston

Michael DiMella, managing partner at Charlesgate Realty Group, recently sold a one-bedroom condo in Boston's South End district for $365,000, roughly $100,000 more than the owners originally paid in 2000 and about what they could have expected at the peak of the Boston real-estate market in late 2005. But the condo sat on the market for nearly four months before a buyer came along.

That sale typifies many parts of core Boston these days: flat to modestly higher prices but a longer time to sell. Prices in the city's core are off less than 1% over the past year, according to first-quarter data from Listing Information Network, Boston's MLS system. The real difference today is that homes are staying on the market for 111 days on average, up from 85 days in 2005.

Prices in key neighborhoods, such as Back Bay, the South End, Fenway and the Waterfront, are all up between 3% and 10%. Beacon Hill and the North End, however, are down sharply, as much as 33%. That's partly the result of a slew of high-end properties that hit the market in 2006 and 2007 that were priced as high as $1.5 million, skewing the price data upward. Even without those sales, however, the median price would be down by double-digit amounts.

"No one is taking prices higher these days just to see if they can get it, like they used to," Mr. DiMella says of Boston's downtown core. "But you have to come with realistic expectations. This is a highly desirable area, and you're not going to find a steal."

Nearby communities are a mixed bag. Condos in suburban Brookline, one of the most desirable Zip Codes - 02445 - are down about 8%, while neighboring 02446 is up nearly 7%, for example. Among city neighborhoods, Dorchester is down across the board by as much as 25%, yet Jamaica Plain and West Roxbury are each up between 7% and 9%.

San Francisco

"I get buyers who come in thinking they're going to get a real bargain these days because prices are down all over the country, and we just laugh," says Caroline Werboff, an agent with San Francisco real-estate firm Hill & Co.

People want to live in San Francisco's urban core. Median prices around the Financial District, North Beach, Telegraph Hill and Russian Hill are up - in some case strongly.

Ms. Werboff says a Russian Hill home that sold for $7.7 million in April 2004 sold again in February for $10.3 million. A newly listed house in Pacific Heights, another core neighborhood with strong price appreciation, sold three years ago for $6 million. Ms. Werboff says that the owners "will get $10 million now."

Still, some San Francisco neighborhoods are down, particularly along the edges of the city, such as Portola, Bayview, Hunters Point and Sunset. Edward Leamer, director of the UCLA Anderson Forecast, an economic research center at the University of California Los Angeles, warns that "the housing problems won't bypass San Francisco proper. The decline will just take more time."

Meanwhile, both closer-in and distant suburbs are weak, too, often markedly so. On the periphery, San Mateo County and high-end Marin County are doing the best, both down more than 4% between March 2007 and 2008, according to DataQuick. Alameda and Contra Costa, across San Francisco Bay from the city and chockablock with anonymous tract housing, are down 18% and 27%, respectively. Bargains exist, but with so much inventory, prices aren't expected to rebound quickly.

Santa Clara County, home to Silicon Valley, is down more than 9%, though pockets of strength exist in communities such Sunnyvale, Mountain View and Los Altos. Napa County, meanwhile, is one of the weakest in the region, with median prices off more than 20%.

Los Angeles

L.A. is an anomaly. No real urban core exists. The area is just a sprawling string of suburbs that run together.

And most of that sprawl is bathed in red ink. Median prices in communities throughout Riverside and San Bernardino counties -the distant, inland suburbs that are at the epicenter of the region's subprime and foreclosure crises - are down, often sharply.

Lower-priced homes in tony Palm Springs have lost about 24%, though more-expensive homes are up slightly. Less-affluent cities such as Ontario, Chino and Rancho Cucamonga are all down between 15% and 31%. Los Angeles County, Orange County to the south and Ventura County to the north are suffering equally.

The only notable area of strength: high-end real estate. L.A.'s Westside, home to affluent neighborhoods such as Brentwood and Westwood, "tends to be more insulated because this is where people with money want to be," says Madison Offenhauser, regional director in Los Angeles for Keller Williams Realty.

Median prices in Brentwood are up 16%. The Hollywood Hills, up 26% to a median price of more than $2.1 million. Rancho Palos Verdes and the Palos Verdes peninsula, up 17%. Parts of Newport Beach, one of Orange County's poshest addresses, are up as much as 67% to $2.75 million. The coastal village of Laguna Beach is up 6%.

Lee Ann Canaday, owner of the Canaday Group, a Laguna Beach real-estate firm, says "almost every deal I've done this year" in Laguna and Newport Beach has had multiple offers.
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Home Sales, Prices to Pick Up In Second Half of 2008, Says NAR Chief Economist

Home sales and prices throughout most of the country are poised for improvement in the second half of 2008, and the recovery will vary by market, Lawrence Yun, chief economist for the National Association of Realtors® said during NAR’s Midyear Legislative Meetings & Trade Expo.
RISMEDIA
More than 9,000 Realtors and guests attended the conference that ran through Saturday.

Middle-America cities that performed evenly over the past few years - like Cincinnati, Milwaukee and the Kansas City, Mo., area - are likely to experience home price gains in the 20 to 30% range over the next five years, while markets like Miami, Las Vegas and Phoenix could see prices go up as much as 50% during that time period, Yun said.

Yun blamed most of the softening of the housing market over the last year on the “subprime mess,” where consumers with blemished credit records got loans they couldn’t afford when the interest rates reset to higher levels.

“In fact, if you look at where home prices fell the most, it’s the markets were subprime loans were prevalent,” Yun said. Cape Coral, Fla.; Detroit; Las Vegas; Miami; Orlando, Fla.; Phoenix and Riverside, Calif. were among the cities with a high percentage of subprime lending and where the markets suffered the biggest downturns, he explained.

“It’s important to keep things in context,” he said. “While much of the media is focusing on the fact that the rate of foreclosures doubled this year from historic averages, the foreclosure rate has gone from 1 percent of all homeowners with mortgages to 2 percent. Foreclosures are being driven principally by subprime loans.”

He further explained that more than half of today’s foreclosures are concentrated in the subprime market. The great majority of homeowners are making their mortgage payments on time.

Now that the subprime market has dried up, and loans insured by the Federal Housing Administration and those purchased by Fannie Mae and Freddie Mac are making a comeback, the housing markets will strengthen and prices are likely to begin a steady uptick in the coming months, Yun said.

Yun urged the Congress and White House to enact NAR-supported legislation to modernize FHA programs, reform regulation of the government-sponsored enterprises (Fannie Mae and Freddie Mac), establish a first-time home buyer tax credit, and make the temporary increases to the conforming loan limits established by the Economic Stimulus Act of 2008 permanent.

“These measures would quickly stabilize the housing markets and get fence-sitters into the market to buy homes,” Yun said.

“There are many reasons for people to get into the housing market today, and very few reasons not to. With the plentiful supply of homes for sale at affordable prices, interest rates approaching 40-year lows, and the strong track record of housing as a good long-term investment, conditions are ripe for buyers,” he added. “Those are the facts, plain and simple.”

As for a recession, it’s not happening, Yun said. “A slowdown, yes, but the definition of a recession is two consecutive quarters of negative GDP growth. It’s not in the cards - no matter how you look at it.”
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Bernanke urges banks to raise capital if needed

Recent turmoil in financial markets underscores the need for banks to hold "generous" capital cushions, U.S. Federal Reserve Chairman Ben Bernanke said on Thursday as he urged them to actively raise money.
By: Ros Krasny: Reuters
"I strongly urge financial institutions to remain proactive in their capital-raising efforts," Bernanke told a conference on bank structure and competition in Chicago. Analysts said the Fed was saying that banks need to step up their efforts to get past a credit crisis just as the U.S. central bank did.

"Doing so not only helps the broader economy but positions firms to take advantage of new profit opportunities as conditions in the financial markets and the economy improve," Bernanke said.

He said he has been encouraged at the success of many banks in raising new capital and praised foreign-owned sovereign wealth funds for the positive role they were playing as suppliers of badly needed capital.

"They have generally provided unleveraged, patient money, which is what is needed here. They have not asked for extensive control or management of the firms," Bernanke said. "So I think it has been very constructive to have had this source of funding coming into our banking systems."

CLEAR OUT LOSSES

Economist Cary Leahey of Decision Economics in New York said Bernanke was clearly telling banks to carry on with their efforts to not only raise capital but get rid of less productive assets as they have been doing since a credit crunch developed last year so that they can resume lending.

"The Fed thinks it's done a lot to ease the credit crisis and now the financial institutions have to pick up the ball and run with it," Leahey said.

Bernanke said regulators were pushing for better disclosure by banks to increase transparency and to bring greater market discipline on them. He said lax risk management at financial firms had contributed to credit turmoil.

Bernanke said, in hindsight, it was evident "problems occurred at each step of the credit-extension chain" and had contributed to the credit crisis that the economy encountered.

He said stiffened capital requirements set by the newly introduced Basel II regulatory standards will help bring more discipline to the industry but won't be a panacea.

"Although Basel II will by no means eliminate future episodes of financial turbulence, it should help to make financial institutions more resilient to shocks and thus enhance overall financial stability," Bernanke said.

RISKS MANAGEABLE

In response to questions, Bernanke said he did not think banks faced significant risk from the problems that big bond insurers like MBIA Inc (MBI.N: Quote, Profile, Research) and Ambac Financial Group Inc (ABK.N: Quote, Profile, Research) had run into as a result of losses on residential mortgages.

"The large financial guarantors have raised some capital and they have maintained their ratings, which is certainly good news," he said. "Our assessment is that the implications of the financial guarantors' situation for banks are moderate and manageable relative to the capital of those banks."

Bernanke acknowledged financial turbulence is not yet fully past but pointed to evidence that lenders already were taking the remedial steps for an eventual return to normal conditions.

"I have been encouraged by the recently demonstrated ability of many financial institutions, large and small, to raise capital from diverse sources," Bernanke said.

"Importantly, capital raising and balance sheet repair allow for the extension of new credit, which supports economic expansion," he added.

(Additional reporting by Alister Bull; Writing by Emily Kaiser and Glenn Somerville in Washington; Editing by Neil Stempleman)
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7 Tips to Buy Smart in Today’s Market

When it comes to home purchases, everyone wants to buy low and sell high. “Now is the low; high is just around the corner,” says Alexis McGee, foreclosure information expert, educator, and president of foreclosure property information specialists ForeclosureS.com.
RISMEDIA
“Already pending home sales are climbing in the North, and appear poised to rebound in the South and West, according to the most recent National Association of Realtors Pending Home Sales Index. NAR also predicts existing home sales will climb more than 6% next year, and that median prices — down this year — also will climb in 2009.”

With interest rates at a 35 year low, affordable financing, and abundant inventory, it’s a buyer’s market. “There are plenty of great opportunities that make the American dream of homeownership more affordable today if you know where to look and how to make the right deal,” says McGee, also author of “The ForeclosureS.com Guide to Advanced Investing Techniques You Won’t Learn Anywhere Else” (Wiley) and “The ForeclosureS.com Guide to Investing in Pre-foreclosures Without Selling Your Soul” (Wiley).

A recent survey from Trulia.com by Harris Interactive® indicated that more than half of Americans would consider purchasing a foreclosed home. “It sounds like those Americans recognize a good deal,” adds McGee. “So what are you waiting for? It’s bargain time. Buy now.”

McGee offers a few tips to help you buy right in today’s markets:

- Do your homework before you buy. That means know the local market, the going price in a specific neighborhood, and what kind of financing is available. You can get free information and guidance online at sites like ForeclosureS.com (www.ForeclosureS.com) and the National Association of Realtors (www.Realtor.org). But beware those websites that promise instant riches for “no effort and no money down.”
- Open your eyes to the opportunities that surround you. Even cities with high foreclosure rates have motivated sellers in sought after neighborhoods — where well-priced homes resell quickly.
- Make sure you know the current prices for comparable properties in the area. With markets in flux, prices from three months ago no longer are good enough.
- Don’t be afraid to ask for a discount. To figure your offering price don’t forget to deduct the costs of necessary repairs and rehab and your profit. If you’re buying a property with plans to turn around and resell it, deduct from your offering price the cost of buying, holding and selling the property until you find a buyer - and don’t forget to pencil in your profit!
- Don’t be derailed by marketing come-ons, gimmicks, and “insider secrets”. If it sounds too good to be true, it is.
- Beware the “great deals” at the auctions. Competitive bidding drives up prices. Instead of buying a house at discount, you could end up paying full market price or more if you factor in auction commissions and fees.
- Consider FHA as a low-cost, safe financing alternative. With new higher loan limits, interest rates at 35 year lows, and home buyer tax incentives still being ironed out in Congress, this is an excellent opportunity for you to buy low.
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Home Buyers, Start Your Engines

The latest data on the housing market shows that prices are falling at last. If you're thinking of buying, now's the time to look.
By: BRETT ARENDS: WSJ.com
If you were thinking of buying a home, start looking.

The latest data from the housing market shows that sellers, after months and years in denial, are finally giving in to reality and slashing prices.

There is a distance still to go. There may even be a lot to go. But the process, long delayed, is now well underway.

The National Association of Realtors on Tuesday released its long-awaited report on prices from the first quarter. The price drops were startling.

In many of the former hot spots, from Florida to Nevada to the Californian "Inland Empire," single-family home prices plunged by 20% to nearly 30% in a year.

Even more remarkable was how far prices had fallen just from the previous three months. In greater Las Vegas, for example, single-family home prices are down about 20% compared to the first quarter of 2007… and about 9% compared to last fall. In certain parts of California, the quarter-on-quarter declines are more than 10%. And there are similar pictures from Boston, Mass., to Tucson, Ariz., to, well, lots of places in Florida.

Nationwide, the decline from the previous quarter was about 5%, says the NAR.

And this, ultimately, is good news. We know prices have to fall. The sooner it happens, the quicker the market can clear.

We may not be at that stage known on Wall Street as "capitulation," but there is more than a whiff of it in the air.

Far too many people in the real estate market have spent far too long insisting that denial is just a river in Egypt. They refused to accept there was a bubble on the way up, and refused to admit it even on the way back down. (There's a few still out there: Last week I got an angry email from a broker who blamed the whole slump on "the media".)

It is simply remarkable how slow this bubble has been to deflate. That, bluntly, is part of the problem.

In the Las Vegas area, for example, NAR data shows single home prices peaked in early 2006. Yet by the middle of last year, when everyone and their Aunt Sally already knew we were deep into the biggest housing bust since the Great Depression, prices had only been cut by around 4%.

No wonder sales volumes collapsed and the number of unsold homes skyrocketed.

You can imagine what fantasies the sellers were clinging to. "Well, two years ago this home was worth half a million bucks."

The problem: So what? It doesn't matter what prices were three or two years ago. We were in a bubble. Market psychologists call this "anchoring", because people anchor their expectations to the past, and it's a fallacy.

Just five years ago, the same home sold for $270,000 and 10 years ago just $200,000. Are those relevant anchor points too?

Fact: Even though Las Vegas single family home prices are down about a quarter from their peak, NAR data shows they are still nearly 45% above their levels in early 2003.

The picture is similar in other former hot spots.

It remains to be seen how much further prices have to fall.

As always, quality and scarcity command a premium. But remember that a burst bubble is still a burst bubble and everything is affected.

Cisco Systems is a top quality technology company with real profits, but its shares still fell about 80% in the dotcom crash.

There is no desperate rush to buy real estate. (The best way to play the real estate crash was to buy the homebuilding stocks when they bottomed out in January, as written in this column at the time.)

But sellers have at least returned to the bargaining table. If you are in the market for a home, it is time, cautiously, to take a look and, maybe, see if you can play, "Let's Make A Deal."
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Sales Increase as Home Prices Fall

County home sales continued to rebound in April, with the number of homes sold rising 15 percent compared to March.
By: DEBORAH CROWE: Los Angeles Business Journal Online
REAL ESTATE: Volume rises 15 percent from previous month.

Los Angeles County home sales continued their rebound in April as warmer weather and falling prices coaxed homebuyers back into the market.

Sales for the month rose about 15 percent over March as the median price slid 2 percent to $456,000, according to data provided to the Business Journal by Melville, N.Y.-based HomeData Corp.

That increase is more typical of spring sales volume than what occurred a year ago as the region’s housing boom began to sputter: March-to-April 2007 sales fell nearly 4 percent.

Steven Thomas, a regional president for RE/MAX Real Estate Services, said that the increased sales last month partly reflect more first time home buyers entering the market as prices fall.

“We’re seeing a first-time-home-buyer wave in both L.A. and Orange County,” said Thomas, who doesn’t believe prices will stop falling year-over-year until early next year. “I think we’ll be at a flat market for a couple of years price-wise, probably moving not more than the rate of inflation. But at least we’ll have a lot more transactions.”

Still, home sales are sharply down from a year ago when 5,096 homes were sold in April. In raw numbers there were 3,647 home sales last month, but that reflects a five-week HomeData reporting period. Adjusted to reflect the four-week period of a year ago, that number falls to 2,918 units – a 43 percent drop year-over-year.

While prospective buyers are leaving the sidelines, real estate observers believe it will take the market a few years or more to recover as foreclosures continue to muddy the market.

Foreclosures rose 130 percent in Los Angeles County in the first quarter year-over-year, with 20,339 homeowners receiving foreclosure notices, according to DataQuick Information Systems of La Jolla. And in places where foreclosures were hitting particularly hard, such as the Antelope Valley, sales were being supercharged as prices continued to fall.

In Lancaster’s 93536 ZIP code, sales fell 42 percent in March year-over-year, but in April jumped 28 percent year-over-year. At the same time, the April median price fell to $285,000 –$9,000 less than March and $90,000 less than a year ago.

Conversely, home sales in the county’s priciest neighborhoods were at a virtual dead standstill – the opposite of last year when luxury home sales were propping up the market. In Beverly Hills’ 90212 and 90210 Zip codes, where median prices top $2 million, there were a total of just 10 sales.

Falling too fast

Cal Poly Pomona finance and real estate professor Michael Carney said he is worried about the sharp drop in prices, especially when compared to the last real estate bubble that burst in the early 1990s. He believes it may mean the bottom is even further off than most people expect.

This time last year he was anticipating that prices might bottom out 15 percent lower than at the peak of the boom. He now fears that a fall of more than 20 percent could be possible. Carney tracks long-term price trends with a model that follows changes in appraised value of individual homes over time.
“That prices are falling faster than sales is not a good sign in terms that the bottom is near,” said Carney, noting that in the 1990s housing bust it took almost six years for prices to drop 20 percent. “You’ll start seeing year-to-year sales volume pick up long before we see a turnaround in prices.”

The median home price jumped off a cliff last October as the credit crunch, which started in the subprime category, spread to more affluent homebuyers. They became unable to obtain jumbo loans (exceeding the $417,000 conforming loan limit) at a time when the county median price topped the limit – and homes in desirable areas could easily double it.

Earlier this year Congress temporarily stretched the definition of a conforming loan to as much as $729,500 in high-cost areas like California, but the program has been slow getting off the ground. In San Pedro’s 90732 ZIP code – where a median-priced home last year would have required a jumbo loan – there were just 10 sales last month as the median price fell 40 percent to $475,000.

Rock bottom models

Conversely, some first-time homebuyers who have been waiting on the sidelines for years are now finding prices within their range.

In Covina’s 91722 ZIP code, sales volume rose 80 percent to 27 homes, as the median price fell 30 percent to $345,000. In Palmdale’s 93550 ZIP code, the median price fell 39 percent to $202,000 as sales rose to 62 homes, 35 percent higher than a year ago and 63 percent higher than March.

Even so, just three years ago a typical month in that once fast-growing Palmdale neighborhood might see more than 150 sales. That change in the market is causing particular challenges for sellers of new homes.

Typically, when a development is nearly sold out, the highly desirable model homes – fully landscaped and filled with upgrades like marble counters and granite floors – get sold at auction for premium prices. But not these days.

Rhett Winchell, president of Beverly Hills’ Kennedy Wilson Auction Group, has just such an auction scheduled June 1 to help builders in the Palmdale-Lancaster area dispose of 17 luxury model homes.

Winchell said that given the current market conditions, the starting price will range only between $125,000 and $250,000 – for homes that during the height of the boom would have sold for $289,000 to $605,000 on the open market.

That’s much lower than the discounted minimum starting bid Kennedy Wilson normally sets.

“There are properties in this area that have been on the market six months to a year,” Winchell said. “We don’t have that much time to sell these (model) homes. Our program works for builders because we price them below market, and let the buyers determine the market.”
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