Why did home inspectors miss plumbing leak?

Buyer seeks reimbursement for re-piping work
By: Barry Stone: Inman News
Dear Barry,

Before buying our house, there were two separate home inspections, the seller's and ours. Neither inspector disclosed plumbing problems beneath the building, but two weeks after the sale, the cable TV guy found water in the crawlspace, caused by a plumbing leak. Our plumber repaired this and three other leaks that occurred in the following months, so we paid to re-pipe the entire house with copper. The plumber also installed temporary vent fans to dry out the subarea. But now we have two questions: (1) Should we install permanent vent fans to prevent water damage and dryrot? (2) Is our home inspector liable for the cost of re-piping our home? – Linda

Dear Linda,

The use of temporary vent fans to accelerate the drying process is a wise precaution. If the soil and other surfaces appear to be drying adequately, and if there is no continuing water source, there is probably no need for permanent mechanical ventilation. Just make sure that the screened vent openings in the exterior walls provide cross ventilation and that there is at least 1 square foot of vent opening for each 150 square feet of floor area.

As to the matter of inspector liability, it is too late to determine whether your home inspector was negligent, since the evidence was removed from the building when you replaced the water piping. As a general rule, home inspectors should be notified of defective conditions before making repairs. Your inspector and the seller's inspector should have been given the opportunity to review the plumbing before the house was repiped. At that time, it might have been determined whether visible evidence of plumbing deterioration was apparent during the inspections.

Although both inspectors may have been professionally negligent, it is also possible that the leaking was not occurring during the inspections, and the pipes may or may not have been visibly defective. The fact that neither inspector reported moisture below the building is a strong indication that the leakage occurred later. Unfortunately, all evidence has been removed from the scene, and without a corpus delicti, a definitive verdict is not possible.

Dear Barry,

Our home is currently for sale, and we have some concerns regarding the foundation. A contractor inspected it and said that it needs to be raised about half an inch. Our Realtor believes the house will not pass inspection if we don't have the foundation work done. Should we rely on our agent's recommendation, or are there other ways of addressing this problem? – Ron

Dear Ron,

Before proceeding with foundation repairs, you should invest in an inspection report by a licensed structural engineer. An engineer is more qualified to make that kind of evaluation and may or may not agree with the findings of the contractor. If the engineering report is positive, you can use that document to assure buyers of structural stability. If the engineer recommends upgrades or repairs, you can obtain bids from three separate contractors. At that point, you can execute the repairs or submit the bids as part of your disclosure statement. If you follow this prescription, the foundation problem should not adversely affect your ability to sell, and you can limit your disclosure liability after the sale.

To write to Barry Stone, please visit him on the Web at www.housedetective.com.
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U.S. Warns Lenders to Elevate Standards

At a time when rising interest rates threaten to push high-risk borrowers into financial turmoil, federal banking regulators have urged lenders to be cautious in approving applications for home-equity loans and credit lines and to review interest-only and no-documentation loan products or face the possibility of increased government oversight.

The guidance was issued by the Office of the Comptroller of the Currency, the Federal Reserve, the Federal Deposit Insurance Corp., the Office of Thrift Supervision, and the National Credit Union Administration in response to inadequate credit risk management policies, high demand for innovative mortgage products, and lax underwriting standards.

The agencies also warned lenders to be cautious when dealing with mortgage brokers and "correspondent" institutions, as their compensation is tied to loan volume. They further suggested that lenders frequently check consumer credit scores, determine how loans are being used, implement behavioral scoring, track neighborhood home values, and stop offering credit or raising credit limits when borrowers show signs of distress.

Douglas Duncan, chief economist for the Mortgage Bankers Association, says the tightened standards could "curtail the appetite of some lenders for taking risks and if it does, it would reduce the credit supply to some consumer groups."
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A single woman's guide to buying real estate

New book touches on high-cost-area home purchases
By: Robert J. Bruss: Inman News
If you are a single female who wants to buy a first house or condo, "Buying Solo" by Vanessa Summers provides mostly excellent advice. The theme is "You can do it."

As I enjoyed the first part of this book, I thought even men should be allowed to read this great, new, home-buying book. It offers sage advice on what steps to take and how to purchase a home even in high-cost areas.

Summers first tackles topics such as "How much house can I afford? "How can I get a mortgage?" (she recommends getting pre-approved in writing rather than just pre-qualified) and "Should I work with a real estate agent?"

Although the author is a bit mixed up on how sales commissions are split among realty agents, it's nothing of major concern to home buyers.

However, the author then swerves into unrealistic suggestions such as "Get an appraiser to give you a comparative analysis of the upside of home values in each neighborhood, present vs. future." Appraisers don't have time for that nonsense, especially without payment.

Although the book cover is unclear about what Summers does in real life to qualify her to advise first-time, single, women home buyers, she offers mostly good advice for prospective home purchasers. In an attempt to be Internet-savvy, the author lists some Web sites. However, she obviously hasn't personally used all of them recently because www.norwest.com merged with Wells Fargo Bank years ago.

In the section about different types of mortgages home buyers should consider, I found especially valuable a little chart comparing the monthly payments on a $100,000 mortgage at 5 percent, 6 percent, 7 percent and 8 percent interest. The 5 percent loan costs $417; at 6 percent the payment is $500; at 7 percent the payment jumps to $583; and at 8 percent the payment is $667. The importance of getting a lower, fixed-interest-rate mortgage is emphasized by that comparison.

Perhaps I am too critical. This new book provides valuable information for first-time home buyers, whether female, male, single, married, or otherwise. However, it should have been "previewed" by a knowledgeable real estate expert who would have corrected the obvious errors and misleading information.

Topics include "Why a Home is the Best Investment a Single Woman Can Make"; "How Much House Can I Afford?" "Is My Credit Good Enough?" "What Kind of Mortgage Should I Get?" "What If I Don't Qualify for a Regular Mortgage?" "Should I Work with a Real Estate Agent?" "Where Should I Look?" and "How Do I Negotiate the Best Deal Possible?"

The idea for this book of giving encouragement and advice to first-time female home buyers is great. Unfortunately, Vanessa Summers was not the right person to write this book because she obviously doesn't have much real estate experience and she often provides misleading information. On my scale of one to 10, this disappointing book rates only a seven.

"Buying Solo," by Vanessa Summers (Perigee-Penguin Group, New York), 2005; $14.95; 175 pages; Available in stock or by special order at local bookstores, public libraries, and www.amazon.com.
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Should I recruit a mortgage broker or lender to find a real estate loan?

Quiz will determine which path is best for you
By: Jack Guttentag: Inman News
"How do I know whether I am better off going to a mortgage broker or a lender?"

This question has no answer. The better question is whether you should shop the retail market yourself or retain a broker as your agent to shop the wholesale market for you.

If you shop the retail market, it doesn't matter whether the loan providers you shop are brokers or lenders. You are looking for the best deal, and it could come from either. The brokers you encounter when you shop the retail market are independent contractors. They receive wholesale prices from lenders, which they mark up, offering retail prices to borrowers in competition with retail lenders.

If you retain a broker as your agent to shop for you, you will pay the agent for that service, but you will receive a wholesale price. Brokers who act as agents for borrowers, called Upfront Mortgage Brokers (UMBs), negotiate a fee for their services upfront, and pass through the best wholesale prices they can find.

Some people should shop for a mortgage, while others should retain a UMB to shop for them. The case for shopping is strongest for borrowers who enjoy haggling, who understand the market or are willing to learn, and whose loan is mostly "plain vanilla."

To help you make a decision, I have developed a little quiz. Give yourself the number of points shown at the front of the first statement if that statement describes you best, 0 points if the second statement describes you best, and average the two if you are in-between.

• 6 points: I like to bargain and have no hesitancy in speaking up if I think someone is trying to take advantage of me.
or 0. I avoid confrontation at all costs.

• 2 points: When significant money is at stake, I like to control things myself.
or 0. When significant money is at stake, I like to find someone I can trust to make critical decisions for me.

• 1 point: I feel very comfortable using a computer.
or 0. I am computer-phobic.

• 2 points: I know exactly what kind of mortgage I want.
or 0. I have no idea what kind of mortgage I want.

• 1 point: I understand why I must shop loan providers on the same day if the price quotes are to be meaningful.
or 0. I don't understand that.

• 1 point: I know where to go for mortgage price quotations that shoppers can rely on, and which sources of price quotes are suspect.
or 0. I don't understand that.

• 1 point: I understand when it is and when it is not safe to rely on the APR in making comparisons between alternative deals.
or 0. I don't understand that.

• 1 point: I understand why house purchasers should lock the price of a mortgage as soon as possible, and never allow the price to float with the market.
or 0. I don't understand that.

• 1 point: I understand the features of a loan transaction that the loan provider might change even after the price is locked, and how to protect myself against that happening.
or 0. I don't understand that.

• 5 points: I have the capacity to learn as much about mortgages as I will need to know to take care of myself in the marketplace, and I am prepared to make the investment.
or 0. I feel overwhelmed by the complexity of mortgages, and I don't have the time, energy or desire to educate myself about them.

• 2 points: My credit rating is excellent.
or 0. My credit rating is poor.

• 2 points: I can fully document my income and assets.
or 0. I can't document either.

• 2 points: I can make a down payment of at least 5 percent.
or 0. I can't make a down payment or pay any settlement costs.

• 2 points: The total of my new monthly housing expense and my existing debt service payments are not likely to exceed 35 percent of my gross income.
or 0. They could exceed 45 percent.

• 1 point: My property is a single-family, detached home.
or 0. My property is multifamily, or co-op, or in a high-rise or non-warrantable condo, or in a planned unit development.

The maximum score is 30 points. If your score is 20 or higher, you are positioned to shop effectively for a mortgage. If your score is 10 or less, you should use a UMB to shop for you. If your score is in-between, think about it and then decide which way to go.

But do one or the other. If you contact only one loan provider who is not upfront, without shopping alternatives, you are likely to overpay – and especially if that one loan provider found you through a solicitation to which you responded.

The writer is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.
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FHA Aims for Buyers in Subprime Market

FHA is unveiling mortgage products that U.S. Housing and Urban Development Secretary Alphonso Jackson believes will help the agency compete with subprime lenders for first-time buyers who have below-average credit scores and limited cash for down payments.

On June 4, the FHA will introduce a low-downpayment mortgage that will allow the borrower to add another $15,000 to the loan to renovate a home to the agency's minimum property standards. Additionally, a hybrid five-year adjustable-rate mortgage carrying 2 percent annual rate-increase limits and 6 percent life-of-the-loan limits also will be available to consumers by the spring or summer. Moreover, FHA-approved lenders will offer forbearance agreements or loan modifications to help borrowers who miss payments stay in their homes and avoid foreclosure.

Jackson believes the FHA loans offer better rates, fees, and consumer protections than subprime lenders--which have seen their market share jump from single digits to 25 percent over the last 10 years, while the FHA has fallen from 11 percent in 1995 to 3.3 percent last year.
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Households Anticipate Home Price Easing

The term "housing bubble" is familiar to only a third of households, but 40 percent of all households believe a period of price declines could occur at some point during the next few years, an Experian/Gallup Personal Credit Index survey of 1,001 adults finds.

For the coming year, though, households see prices continuing to rise. Some 70 percent of households anticipate a jump in local home prices in the coming year. Gains of 10 percent or more are expected by 33 percent of those polled, while 10 percent are awaiting appreciation rates of 20 percent or more.

As for mortgage rates, 75 percent of respondents believe they will rise in the year ahead--with close to 50 percent predicting a hike of at least 1.5 percentage points.
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California real estate prices march higher

Sales slow statewide
Inman News
Home sales in Southern California slowed last month as prices hit new highs, rising at their slowest pace in more than three years, according to DataQuick Information Systems, a real estate information service.

A total of 31,431 new and resale homes were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in April. That was down 3.8 percent from 32,674 in March, and down 4.5 percent from 32,916 for April last year, DataQuick reported.

Last year's April was the strongest April in DataQuick's statistics, which go back to 1988. Last month was the second-strongest.

Home sales dropped in the San Francisco Bay Area region, too. A total of 11,158 new and resale houses and condos were sold in the nine-county region in April, which was down 1.3 percent from 11,310 for the previous month and down 10.2 percent from 12,421 for April last year.

"There are two factors that can lead to a decline in sales. The first is that potential buyers cannot or will not buy. The second is that there aren't enough homes for sale. Right now we're probably looking at a combination of the two. More homes will probably be put on the market in coming months, as potential sellers try to sell at the peak in their local markets," said Marshall Prentice, DataQuick president.

The median price paid for a Southern California home was $445,000 last month, a new record. That was up 1.4 percent from $439,000 in March, and up 15 percent from $387,000 for April 2004. Last month's year-over-year price increase was the lowest since March 2002 when the $257,000 median was up 12.7 percent from the year before. Last month's year-over-year increase varied from 9.5 percent in Ventura County to 32.8 percent in San Bernardino County.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $2,019 last month, down from $2,037 for the previous month, and up from $1,760 for April a year ago.

Adjusted for inflation, current payments are about 5 percent below what they peaked in the spring 1989.

Indicators of market distress are still largely absent.

Foreclosure activity has bottomed out, but is still low. Down payment sizes are stable, as are flipping rates and non-owner occupied buying activity, DataQuick reported.

Last year's April for the San Francisco Bay Area was the strongest April in DataQuick's statistics, which go back to 1988. Last month was the second-strongest, and last month's year-over-year sales decline was the first of this year.

"We're watching carefully for any turn in the market. Right now we just don't see anything. Appreciation is pretty even across the different categories, there are really no changes in market mix, purchase and financing profiles are stable. Mortgage rates haven't gone up as they were expected to do, and demand appears to be strong," said Marshall Prentice, DataQuick president.

The median price paid for a Bay Area home was $586,000, a new record. That was up 3.2 percent from $568,000 in March, and up 19.1 percent from $492,000 for April a year ago.

Prices are going up at their fastest pace in four years, the Bay Area appreciation rate has now passed Southern California's for the first time in four years.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $2,659 in April, an all-time high. A year ago it was $2,237.

Indicators of market distress are still largely absent for both the Southern California and Bay Area markets, DataQuick reported. DataQuick is a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, which monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

SOUTHERN CALIFORNIA

All Homes        #Sold     #Sold     Pct     Median     Median     Pct
                  4-Apr       5-Apr  Chng.      4-Apr      5-Apr   Chng.

Los Angeles       10,749     10,299    -4.20%   $387K      $447K    15.5%
Orange County      4,577      4,547    -0.70%   $523K      $576K    10.1%
San Diego          6,094      5,345   -12.30%   $439K      $484K    10.3%
Riverside          6,116      5,718    -6.50%   $308K      $374K    21.4%
San Bernardino     3,954      4,007     1.30%   $229K      $304K    32.8%
Ventura            1,426      1,515     6.20%   $483K      $529K     9.5%
So. California    32,916     31,431    -4.50%   $387K      $445K     15%

SAN FRANCISCO BAY AREA

All Homes         #Sold   #Sold     Pct.     Median     Median     Pct.
                 4-Apr       5-Apr  Chng.       4-Apr      5-Apr   Chng.

Alameda            2,546     2,244    -11.90%   $467K      $552K    18.20%
Contra Costa       2,419     2,119    -12.40%   $432K      $530K    22.70%
Marin                535       481    -10.10%   $666K      $779K    17.00%
Napa                 185       205     10.80%   $477K      $574K    20.30%
San Francisco        759       681    -10.30%   $625K      $751K    20.20%
San Mateo            861       850     -1.30%   $610K      $731K    19.80%
Santa Clara        3,344     2,830    -15.40%   $526K      $619K    17.70%
Solano               944     1,037      9.90%   $344K      $409K    18.90%
Sonoma               828       711    -14.10%   $415K      $534K    28.70%
Bay Area          12,421    11,158    -10.20%   $492K      $586K    19.10%

Source: DataQuick Information Systems, DQNews.com.
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Female Painters Offer New Trend

by Phoebe Chongchua
There's lead-free paint and now there is nearly testosterone-free painters. A Hillcrest, California, company is capitalizing on its mostly female staff.

"We have a female painting crew that provides the labor and also a higher level of customer service. They are fantastic communicators with clients. They have all been trained by me on tinting colors on job sites for clients. They're also trained in any kind of faux finishes or plasters," says co-owner, Jennifer Guerin.

Guerin and the lone male in the company, co-owner, Eddie Wheatley, started the business three-and-a-half years ago.

"I think when you let strangers in your house, people feel more comfortable having a girl group come in. It's just different from having a bunch of guys walking around in your house... also a lot of times women have a better sense of color," says employee Susan Suyao.

Ox and Olive Painting specializes in interior projects. Guerin says her female staff brings a warm, caring style to each job site.

The company offers a wide selection of wall finishes and painting styles including murals and Trompe l'oeil -- a style of painting that creates a three-dimensional illusion.

Another highly requested look is the Venetian Plaster.

"It's a specialty finish that is applied in thin, translucent layers to create a rich visual finish with the illusion of depth and substance. Its composition is of slaked lime and finely grounded marble dust that can serve as a luxurious accent wall, or throughout an entire home," explains Guerin.

Still another popular trend is the use of 100 percent natural clay. "American Clay plasters are the newest in finishes," says Guerin.

They're dug from the earth in Albuquerque, New Mexico. The actual clay is then tinted, and applied to walls using a trowel.

Guerin says it's growing in popularity because there are "No fumes and it can duplicate the Venetian plaster (look by using) a Porcelina finish or it can have more of a rustic and organic (look) in the Loma finish. It comes in 32 different colors."

The American clay isn't just used for its appearance. The clay helps control the temperature in your home. It regulates arid, and humid air and absorbs and releases moisture as the weather changes. The non-toxic clay can be painted, stained or plastered. It also helps to absorb sound.

When it comes to paint, Guerin says "Color washes are really popular, which is a layer of translucent color applied on top of a coat of paint. Also what's really popular... is adding accent walls and splashes of color where (an owner's home) was completely white, now it brings personality into the walls."

Color blocking is a style that uses several colors painted in various sized blocks on the wall. It creates an interesting look that can often take the place of artwork on a wall in a living room. It's best to use varying intensities of color from the same color card.

Sheen striping uses vertical stripes of the same color, but different sheens to create a subtle design. Typically this style is used in the dining rooms. In rooms with low ceilings this look can create an illusion of height.

Finally, some tips for getting started on your painting project:

    • Call ahead for an estimate; the better contractors are booked in advance
    • Before you hire a painting company or become a weekend warrior, choose
      the complete color palette before you begin; re-do jobs just to change 
      color can be a headache
    • Colors always come out two times darker than on the chip
    • After painting is complete, dispose of paints by calling your local 
      Hazardous Waste program
    • Make sure there are contracts and written payment forms
    • Never pay full price for the service before work has begun

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Bank of America real estate loan eats closing fees

Program could save home buyers thousands
By: Janis Mara: Inman News
Anyone who has been confounded with unexpected and seemingly inexplicable fees at the closing table will probably appreciate a new Bank of America mortgage loan program, Mortgage Rewards.

The program, currently available only to Bank of America customers, could save home buyers about $2,000 on a $200,000 loan, according to the bank. Higher loan amounts would yield greater savings, the bank said, varying according to location and other factors.

The program waives the loan origination fee, application fee, appraisal fee, flood determination fee, tax service fee and most other fees associated with closing. It doesn't pay for title insurance, though.

"Application volume is way up" since the program rolled out in late April, according to Steve Ozonian, national home-ownership services executive for the bank. Ozonian wouldn't give more specific numbers.

This has been an eventful year for the bank, which in April reported soaring profits, with first-quarter net income of $4.7 billion. Its quarterly profits are up from $2.68 billion, or 91 cents a share, during the same quarter a year ago.

The Mortgage Rewards program sounds a bit too good to be true. But Ozonian says the bank is able to absorb the closing fees because it speeded up and simplified its loan processing procedures, saving the bank money.

"We took a look at the entire mortgage process, application, approval and fulfillment and tightened that up using technology and better procedures," Ozonian said. "This enables us to create a more efficient mortgage process and instead of dropping it into our pockets we are passing the savings on to the consumer."

The executive said the fees will not be rolled into the loan's interest rate.

"The note rate is still the comparative street rate. We're not marking up interest rates and then bundling these services in because we're marking up rates. We encourage consumers to check our rates. They will find we have competitive rates," Ozonian said.

"What a lot of lenders will do is they will say we can take care of all these fees but you end up paying a higher interest rate, note rate, on the mortgage instrument," Ozonian acknowledged. "But we are not doing that."

The bank will pay the appraisal fee, he said. Consumers won't have to front the money when the appraiser shows up to scope out the house.

"We assign the appraiser and the appraiser knows they are working with the bank and the bank doesn't require that the existing customer who is part of the program write a check for the appraisal," the executive said.

The program doesn't include title insurance, Ozonian said. "We don't have the process internally – that's done by the title company."

As another extra, those who borrow using Mortgage Rewards get one free year of the company's borrower's protection plan. The plan pays mortgage principal and interest for up to six months if the customer loses his/her job, and pays off the whole mortgage if the mortgage holder should die.

When the free year is up, customers will be notified by a letter or phone call and given the option to continue on a paying basis.

"It won't continue by default," Ozonian said.

Currently, the program is available in 21 states and the District of Columbia and will be available in the northeast United States in the fall, according to Ozonian.
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A wood deck to weather the elements

Engineered product a sturdier, longer-lasting alternative
By: Bill & Kevin Burnett: Inman News
Q: I am replacing a rotted-out deck at home and would like to know if I should use redwood or treated wood and also whether I should stain the deck.

The structural engineer who drew the plans recommends using all redwood, including the support posts. A general contractor says the posts should be treated wood.

The engineer also recommends the redwood be stained every two years. The contractor says the treated wood needn't be stained.

Where I live, in San Francisco, it's often foggy and damp. I want a deck with less maintenance but want to be sure that the deck will last 10 to 15 years. I'm willing to pay a little extra for the right type of wood.

A: We understand your confusion. There truly are a lot of choices out there. We've built and maintained many decks over the years and have formed some strong opinions about the pros and cons of various materials and methods in deck building and maintenance.

We disagree with your structural engineer's recommendation of a deck made entirely of redwood. Redwood is very expensive and while it is rot-resistant, it is high-maintenance. If you don't clean and treat it regularly, it won't be long before it will look shabby. And, depending on the amount of sapwood – the white wood in the boards – it will eventually rot.

So, the way we see it, you want your new deck to look good, last a long time and need little maintenance. You're considering just two materials for the decking and the supporting structure – redwood and treated wood. We suggest you consider a third choice, one that is not wood at all. Give some thought to using an engineered wood product, at least for the decking.

Remember that decking, whether redwood or treated wood, should be sealed or stained every couple of years to maintain its look and help prevent rot.

Sealers are clear, while stains are colored. Stains can be transparent, semitransparent or opaque. Over the course of time as it weathers, wood loses moisture. Stains and sealers help stabilize this moisture loss and help maintain the look of the wood. In untreated wood, stains and sealers also help prevent decay.

Treated wood is usually a soft wood, such as fir or hemlock, which has been impregnated with a chemical preservative. We've seen brown and green treated lumber. So, if you are planning on staining, you should take into account the color of the treatment when choosing a stain.

We agree with your general contractor that treated lumber does not require regular sealing or staining to prevent decay, but you'll probably want to do it anyway to preserve the look of the wood.

If we were doing your job in the moist climate of San Francisco, we'd use treated lumber for the posts and joists.

You don't mention handrails, but if any part of the posts will be exposed above the deck and are part of a handrail system, specify S4S treated lumber. This means "surfaced four sides" and is smooth – no splinters. If none of the support structure is exposed, rough or smooth grades work equally well.

For the decking itself we'd use an engineered product, such as TimberTech or Trex. Because this "lumber" is made of everything from sawdust to plastic to peanut shells, it tends to be more stable and wears better than wood.

Engineered decking looks and feels like real wood and cuts and installs like regular lumber. Also, it's easier on the environment. Begin your research at www.timbertech.com or www.trex.com.

Whichever way you go, do plan on cleaning the deck at least once a year. Get out the pressure washer and give it a good bath to get rid of the dirt and debris that gets in the nooks and crannies. Pick a warm day and cool off.
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Architecture finds 'comfort' in circles

How to maximize positive space when designing a home
By: Arrol Gellner: Inman News
Positive space, negative space. They sound like some kind of flaky New Age terms. But actually, they're one of the oldest and most basic concepts in design. Nothing could be more deeply rooted in the human psyche – yet both amateurs and architects routinely ignore their implications.

Simply put, positive space represents space that we want, while negative space is what's left over. To draw a simple analogy, imagine cutting out cookies from dough. The cookies represent the positive space, and the pointy scraps left over are the negative space. In architecture as in baking, the idea is to maximize the number of cookies and minimize the leftover scraps.

As it happens, maximizing positive space is even more important in architecture than in baking, since you can't ball up the leftover scraps and roll more dough out of them. You've pretty much got to cut things out right the first time.

To stretch the analogy even further, it also happens that architectural forms that are roughly circular – like cookies – provide a much stronger sense of comforting enclosure than do those nasty angular scraps left over from cutting them out.

As basic as this principle seems, you'd be surprised how often architects violate it. Acute angles, with their jagged, knife-like shape, are inherently dramatic, and we architects are nothing if not suckers for drama.

But there's a price to pay for this kind of cheap effect. Acute angles inside buildings can't be comfortably inhabited by anything other than gnats and spiders, and it's not too much to say that they also have an unsettling effect on the human psyche. Deep in our primitive brains, converging angles still give us an uneasy sense of walls closing in, of entrapment – not exactly the ambience you want for your living room.

The Chinese design principles known as Feng Shui have long warned against acute angles – "secret daggers" – which are thought to generate malevolent forces. It's just another way of saying that sharp angles creep people out. For their part, Western psychologists might allude to the womb to explain why humans gravitate toward rounded spaces and shun angular ones. To be sure, more-or-less circular shapes are one of nature's favorite forms, appearing in practically every living thing from the cell on up.

Now, none of this implies that rooms should be literally round – a pretty impractical idea, what with all our relentlessly linear building materials. But it does suggest that rooms shouldn't contain wall or ceiling angles sharper than 90 degrees, and that they shouldn't be more than half again as long as they are wide. Nor should they have sharp angles intruding into them, or far-flung, dead corners with no through traffic. This applies to outdoor rooms as well, except that here, you can use landscaping to produce a pleasingly positive space for people to inhabit.

In short, the closer you come to approximating a circular shape – whether using architectural features, furniture arrangements, or planting – the more comfortable your rooms will be. Whether we call the result intimate, auspicious, secure, or just plain cozy – we all know positive space when we feel it.
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The Next 3 Hot Real Estate Sectors

Although some real estate sectors might “decelerate”—with price growth at slower rates than before—there are three areas of the market that have a strong potential to see home-price acceleration in double-digits over the next two years, according to Lawrence Yun, senior economist at the NATIONAL ASSOCIATION OF REALTORS®.

Yun made the prediction to members of the Research Committee on Thursday at the 2005 REALTORS® Midyear Legislative Meetings & Trade Expo, being held May 9-14 in Washington, D.C.

These next hot markets to look out for are:

• Heavy in-migration regions — Places where a high number of residents move in from other parts of the country, including Nevada and Florida.

• Future retirement destinations that are still currently affordable — Places where homebuyers plan to buy now and live once they retire, including Charleston and Myrtle Beach, S.C.; Virginia Beach, Va.; the panhandle of Florida; Alabama; and the North Carolina coast.

• Tech-sector heavy markets — Markets where the technology industry is making a comeback, including Seattle; Denver; Austin, Texas; and Raleigh-Durham-Chapel Hill, N.C.

“So, as the rest of the country takes somewhat of a breather, these markets will see acceleration of prices into double-digit levels,” Yun said.
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Local housing bubbles could burst in next couple of years

But outlook for overall real estate market stands strong
By: Glenn Roberts Jr.: Inman News
WASHINGTON, D.C. – The housing market remains unusually strong, but speculators and lenient lending practices do pose a risk for the real estate industry, said David Lereah, chief economist for the National Association of Realtors.

Lereah, during a presentation Thursday at the National Association of Realtors' midyear meetings, said he expects that some hyper-extended local real estate markets will sour within the next couple of years, while the overall housing market should remain robust for at least the next couple of years.

"Loose lending and speculative buying – that, in my opinion, is the greatest risk that our industry faces right now," Lereah said.

Wall Street analysts are definitely paying attention to the migration of investors to the real estate sector, and that has put the industry under increasing scrutiny, he also said. "They are watching us. We are under a microscope."

Analysts have found some reason to be concerned – increasing debt, fast-rising home prices in some markets, a larger share of adjustable-rate mortgages, and a higher share of home-price-to-income and home-price-to-rent ratios in some markets. Financial scandals that have plagued mortgage giants Fannie Mae and Freddie Mac could lead to some industry-shaking reforms, the trade deficit is swelling, oil prices are gushing, and the value of the dollar is dropping.

Most local "balloons" in home prices "will deflate rather than pop," though "several local markets will pop over the next couple of years," he said.

Among the indicators of a market headed for a bust: home sales falling, price growth below historical average, more than a 6.5-month supply of housing, properties taking longer to sell, job loss in the area, rising mortgage rates, negative net migration, and rising loan-to-value ratios.

The days of successful speculative buying in some real estate markets are numbered, Lereah said, citing the example of pre-construction buyers in a hot real estate region.

"People will purchase pre-construction and they'll flip it and make some money. Can they sustain it? No. At some point that won't work." While there are speculators, their activity represents only a small part of overall home buying, he said.

There is definitely a flip side to the negative indicators, though, Lereah added. Inventory is still constrained in many markets, producing the simple economics of high demand. "How many times do we have to tell Wall Street that demand is higher than supply?"

The Baby Boomer generation continues to invest heavily in real estate, and housing is still largely affordable in most parts of the country. "The stars are aligned for the housing sector. I say this is the Golden Age of real estate," Lereah said.

For the past four years, Lereah has predicted a let-up in the galloping housing market, but he said it hasn't yet paused for breath.

Unless interest rates rise above 8.5 percent, affordability should not be a problem, he also said. Modest increases in interest rates and inflation should allow a soft landing rather than a freefall for the real estate industry, he added.

Housing markets in other nations exhibit more bubble-like symptoms than the U.S. market, Lereah noted, with the United Kingdom and Spain, for example, reporting some very high price-to-rent and price-to-income ratios.

Lereah expects 6.5 million existing-home sales in 2006, compared to a projected 6.71 million this year. New-home sales should also drop slightly, from a projected 1.18 million this year to 1.05 million next year.

Rates on the 30-year fixed mortgage, meanwhile, could increase from about 6.1 percent this year to 6.7 percent by year-end 2006. And existing-home prices should slow, from 7.1 percent appreciation this year to 4.5 percent appreciation in 2006.
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FDIC IDENTIFIES 55 HOUSING BOOM MARKETS

U.S. Home Prices: Does Bust Always Follow Boom?
The number of boom markets in the U.S. increased by 72 percent to 55 metro areas in 2004, according to a recent report released by the Federal Deposit Insurance Corporation (FDIC). Using the house price index published by the Office of Federal Housing Enterprise Oversight (OFHEO), the FDIC defines a "boom market" as areas where inflation-adjusted home prices increased 30 percent or more in three years. More than 90 percent of the boom markets in 2004 were located on or near the coasts, with 21 boom markets located in California, 18 in the Northeast and New England and 11 in Florida.

According to the FDIC report, housing availability, prices and the terms of mortgage credit are factors that may be driving the increase in boom markets. The report also notes that a housing bust, defined as a market where home prices decline by at least 15 percent over a five-year span, does not necessarily follow a housing boom. Since 1978, only nine housing busts have occurred after a housing boom.
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