Poll Finds Homeowners Expect Home Values to Continue to Grow

Most American homeowners expect selling prices to keep rising, a recent study found.
By: Tara Siegel Bernard: The Wall Street Journal Online
They also don't believe that gains in their own homes have affected how they spend, despite what Alan Greenspan says.

Most American homeowners expect home values to keep rising and don't believe that gains in their own homes have affected how they spend, a recent study found.

That conflicts with Federal Reserve Chairman Alan Greenspan's recent research, which found that consumers have become very dependent on borrowing against their homes to fuel their spending -- and that a rise in mortgage rates may crimp expenditures.

Still, only 10% of homeowners polled said they believe that rising real-estate values had affected their spending, according to a survey of 1,001 consumers conducted this month by Royal Bank of Canada's RBC Capital Markets unit.

Some 85% of homeowners surveyed said they had experienced real-estate gains in the past three years, and more than 70% saw gains of more than 10% in that period, the study found. But more than half of those surveyed said they firmly disagreed with the idea that their spending had changed, even though half of all respondents had extracted equity from their homes through refinancing, home-equity loans or lines of credit.

"These findings raise the question of whether people spend more freely than they otherwise would because of their real-estate gains, and they simply don't recognize it," said Scot Ciccarelli, a managing director at RBC Capital Markets. "If that's the case, a simple slowing of real-estate gains, not just a fall in housing prices, could have a significant adverse impact on spending patterns."

Almost 60% of homeowners polled by RBC said they expect their home values to rise by at least 5% annually in the next several years, and a quarter of those respondents anticipate annualized gains of 10% or more in the next few years. Only 3% said they expect their home prices to decline in the same period.

Rising gas and energy prices, however, are having an effect already, with 60% of respondents saying those costs were causing them to pull back their spending.

RBC conducted the survey with assistance from InsightExpress, an online market-research firm based in Stamford, Conn., during the week of Sept. 19. The sample was spread across geography, gender and income brackets, to make it representative of the general U.S. population. The survey's margin of error was plus or minus 3%.

Email your comments to rjeditor@dowjones.com.
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Survey: Homeowners don't believe in real estate bubble

Most respondents confident about rising home prices
Inman News
Despite fears in the marketplace about a U.S. housing bubble, about 60 percent of homeowners expect the value of their homes to increase by at least 5 percent annually during the next several years, according to an online survey of 1,001 American consumers.

According to the survey findings, released today by RBC Capital Markets, the corporate and investment banking arm of RBC Financial Group, 24 percent of respondents said they expect annualized gains of 10 percent or more over the next few years. About 3 percent of respondents said they expect their home values to decline over the next few years.

The findings were released at the RBC Capital Markets Consumer Conference, which was attended by over 250 institutional investors and retail executives.

About 85 percent of homeowners who responded to the survey said they have experienced real estate gains over the last three years and over 70 percent experienced gains in excess of 10 percent during this timeframe, RBC announced.

Meanwhile, about 10 percent of the respondents said rising home values have affected their spending habits. And over half of those surveyed disagreed with the notion that real estate gains impacted their spending even though 51 percent either sold their home or borrowed against their home equity in some fashion. Ironically, those that disagreed most with the idea that real estate gains had impacted their spending were those in higher income brackets (defined as those making over $100,000) and those that had already experienced the biggest real estate gains, RBC reported.

Ultimately, these two groups were also the most aggressive in extracting equity (approximately 65 percent).

"Not only are most people expecting big real estate gains to continue, the vast majority of people don't believe these gains have impacted their spending. These opinions run contrary to most data in the marketplace regarding the real estate wealth effect," said Scot Ciccarelli, managing director of equity research for RBC Capital Markets.

"We believe these findings raise a major question. In our minds, the question is whether people have spent more freely than they otherwise would have because of their real estate gains and don't even recognize it. If that's the case, a simple slowing of real estate gains, not just a fall in housing prices, could have a significant adverse impact on spending patterns."

About 60 percent said rising gas and energy prices were already causing them to cut back on their spending. "Rising energy prices are essentially creating a flat tax that is affecting lower income consumers at a disproportionate rate and supports anecdotal evidence in the marketplace over the past two years that companies more levered towards higher-end consumers have largely outperformed those that cater to lower-end consumers," Ciccarelli said.

Finally, by a 2-to-1 ratio, people are more positive about their personal financial situation than they are on the broader economy. On average, just under 40 percent of respondents were optimistic about their personal financial situation and just over 30 percent were concerned or pessimistic, the survey found.

On the flip side, 20 percent of the respondents were optimistic about the broader economy while just over 50 percent were concerned or pessimistic about the economy.

"Not surprisingly, those that were the most optimistic about their personal financial situation were those in the upper income categories and those that had experienced the biggest real estate gains," RBC announced.

"This outlook seems to cut to the heart of the American consumer. People seem to be conscious of the macroeconomic headwinds facing them like rising energy prices, the war on terror, and the growing federal deficit and the impact it can have on others. However, they are less inclined to believe they can be affected by these same factors. Ultimately, it is this optimism that keeps the U.S. spending engine intact," said Ciccarelli. "While energy prices are certainly disconcerting, it is this real estate wealth effect that we are most concerned about and should be the primary focus of investors."

The RBC Capital Markets survey was conducted during the week of Sept. 19 and included 1,001 online respondents. Stamford, Conn.-based InsightExpress assisted RBC Capital Markets in the survey. The survey's margin of error was plus or minus 3 percent.

RBC Capital Markets is the corporate and investment banking arm of RBC Financial Group, the global brand name of Royal Bank of Canada. Royal Bank of Canada is Canada's largest bank as measured by assets, and is one of North America's leading diversified financial services companies. It provides personal and commercial banking, wealth management services, insurance, corporate and investment banking, and transaction processing services worldwide.
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The Weekend Guide! September 29 - October 2, 2005

The Weekend Guide for September 29 - October 2, 2005.
Full Article:
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Slowdown forecast for U.S. real estate market

'Soft landing' expected in California
Inman News
A quarterly housing and economic forecast released today by the University of California, Los Angeles, calls for a slowdown in the U.S. economy through 2006, with declines in housing construction on the horizon.

The latest Anderson Forecast revises an earlier prediction of a rapid slowdown in the overall economy and housing construction. "The slowdown is now considered to be more gradual than predicted in June as the projected reduction in housing construction is still in the future," according to an announcement about the forecast. "In California, there are hopes for a 'soft landing' as the economy weakens over the next two years. The Los Angeles forecast mirrors that of California, as a number or risk factors including payroll employment and residential real estate pose a threat to the moderate growth currently being experienced."

Michael Bazdarich, a senior economist for the UCLA Anderson Forecast, in June had said that "substantial declines" were expected in U.S. housing construction starting in late 2005, and these declines were expected to "drive a noticeable deceleration in U.S. economic growth in the last half of 2005 and after," though the data have shown a flattening in housing construction rather than a deceleration.

"Bazdarich...expects these declines are still on the horizon, and while the drop-off in housing construction has yet to occur, declines in consumer and business spending is happening at a faster rate than was expected three months ago. On the plus side, U.S. foreign trade trends are showing signs of turning for the better," according to the forecast announcement.

The overall forecast has been slightly upgraded from June. Bazdarich notes, "the bottom line is that an improving trade deficit will work to mitigate the economic drag coming from slowing spending growth and, next year, declining housing activity. Our June forecast looked for U.S. growth to fall into the 1 percent to 2 percent range next year.

"With slowing consumer and business spending growth hitting import sectors hardest, even a 20 percent decline in housing starts over the next two years will work to push economic growth only to the mid-2 percent range." He does caution that an abrupt plunge in housing starts and housing prices – a bursting of the housing bubble – could still drive a slump.

In his California forecast, UCLA Anderson senior economist Christopher Thornberg notes that the California economy "seems healthy on the surface," but below the surface there is no encouraging news.

The California economy, like the national economy, is being driven in part by the housing sector and consumer spending (which is being fueled by the wealth home owners are feeling). But while these sectors continue to fuel growth, core California sectors like information, manufacturing and professional services continue to languish, according to Thornberg's analysis.

Dr. Thornberg states, "The forecast for California is mediocre at best, at worst we are liable to dip into another recession." He also stated that the research group has not been able to time the end of the real estate bubble, and his latest forecast calls for a "soft landing," one in which the economy sees weak growth for the next two years but no recession.

Los Angeles, like the rest of the state, will also avoid a crash and experience a "soft landing," according to the local forecast.

UCLA Anderson senior economist Ryan Ratcliff states, "Any trouble in real estate markets is more than six months out, so our forecast is for a slowdown in housing in early 2006, leading to a broader economic slowdown in 2006-2007. At this time, there is not enough evidence from our leading indicators to suggest that this slowdown will become a full-blown recession."
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Deconstructing real estate exchanges

Tax-deferred deals get 'downright easy'
By: Robert J. Bruss: Inman News
As longtime subscribers know, my first tax-deferred exchange was the trade of a three-unit building at 1264 Third Ave. (just down the steep hill from UCSF Hospital) for a nine-unit apartment building at 4605 Balboa St. (overlooking the famous Playland at the Beach) in San Francisco. Having read in William Nickerson's great book about the benefits of tax-deferred exchanges for pyramiding real estate wealth, I was anxious to make my first tax-deferred trade.

I shall always be grateful to Walt Lembi, and his dad Frank Lembi (now in his 80s and still selling real estate!), at Skyline Realty in San Francisco for showing me how "real world" tax-deferred simultaneous exchanges were done before 1984 (when "delayed" Starker exchanges became available).

The first step was to find a cash buyer for my three units. Walt and Frank took care of that within a few weeks. The second step was to find a property for the trade up.

Finding a qualifying replacement property to complete the trade is usually the hardest part of a tax-deferred exchange. Clyde Cournale Realty in San Francisco had a listing on a suitable nine-unit "fixer upper" building. The motivated seller accepted my exchange purchase offer, contingent on the simultaneous trade and "cash out" sale to the waiting buyer already arranged by Skyline Realty.

All went very well. I got my simultaneous tax-deferred trade up, the seller of the nine units got his taxable cash, and the buyer of my three units got a good starter investment property. Everybody was happy, even Uncle Sam who received his capital gain tax on the sale of the nine-unit building.

TODAY'S "STARKER EXCHANGES" ARE MUCH EASIER. Although simultaneous exchanges still occur, if this same tax-deferred exchange occurred today it would be much easier. The reason is Internal Revenue Code 1031(a)(3), the so-called Starker exchange rules. Starker exchanges have now become the "standard" type of realty exchange. Even large corporations use Starker exchanges to avoid capital gain tax on profitable real estate sales and property replacements.

For those not familiar with the late T.J. Starker and his very important contribution to tax-deferred exchange, I'll give you the short version of his story. He owned some Oregon timberland that Crown-Zellerbach Corp. wanted to acquire at a huge capital gain profit to Starker.

He deeded his land to C-Z, which credited Starker with the sales price, plus a 6 percent "growth factor" until he could find suitable qualifying "like kind" property to acquire with that money for completion of the exchange. After Starker acquired other property he liked with the funds C-Z was holding for him, the IRS said he owed tax on his profit because it wasn't a direct simultaneous exchange (as I did with my three units for the nine units).

Starker paid the disputed tax (to stop the running of interest) and then sued the IRS in U.S. District Court for a tax refund. He won! But the IRS appealed to the Ninth Circuit U.S. Court of Appeals. The IRS lost!

The happy result for realty investors is we now have IRC 1031(a)(3), which was enacted by Congress in 1984, establishing the Starker exchange rules. You can read the fascinating case at Starker v. U.S., 602 Fed.2d 1341.Thanks to T.J. Starker, today's tax-deferred "delayed" exchanges are downright easy.

The first step is to find a buyer for the investment or business property you want to sell. When a buyer makes a suitable purchase offer, be sure the sales proceeds will be held by a qualified third-party intermediary beyond your constructive receipt. If you receive the sales cash, or have the right to do so, that ruins your tax-deferred exchange. Leaving the sales proceeds in escrow means you have a right to receive the cash so the sale is disqualified as a Starker tax-deferred exchange.

The second step, when the sale of your old investment or business property closes, is to be sure the sales proceeds go directly to a qualified third-party intermediary, such as a bank trust department that specializes in Starker tax-deferred exchanges, or to the exchange subsidiary, which most large title companies now can provide.

There are also independent exchange facilitator companies. If you select one of these independents, be sure your funds are well protected. Some of these small companies have gone bankrupt, causing loss of tax-deferred exchanges for their clients (see In re Sale Guaranty Corp., 220 B.R. 600, for a classic example what can go wrong for exchangers when the third-party intermediary accommodator goes broke).

The third step is to use the cash from your property sale, being held beyond your constructive receipt by the qualified third-party intermediary or accommodator, to purchase the suitable replacement property to complete the tax-deferred exchange.

There are several very important rules for designating this replacement property:

1. The replacement property must be designated in writing to the exchange accommodator intermediary within 45 days after the sale of your old property closes;

2. Not more than three possible properties can be designated (however, you can withdraw one possible property from your list and substitute another property during the 45 days);

3. As an alternative, you can designate more than three properties if their total fair market value does not exceed 200 percent of the fair market value of the relinquished property;

4. IRC Regulation 1.1031(k-1(e)) allows designating within the 45 days a replacement property that includes a contract to construct, build, install, manufacture, develop or improve property to be acquired. However, a property already owned by the exchanger cannot qualify under this regulation.

Within 180 days following the sale of the old property held for investment or business use, the acquisition must be completed. No time extension is allowed by the tax statute or regulations.

To avoid being under extreme time pressure to meet the 45-day and 180-day deadlines, one method is to delay the closing date for the sale of your old investment or business property. A second method is to rent the old property to the prospective buyer on a lease-option to be exercised on a date to be designated by the seller after a suitable replacement property is under purchase contract.
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Don't risk more than 20% on real estate down payment

Finances vulnerable to natural disaster, bad investment
By: Robert J. Bruss: Inman News
DEAR BOB: You recently suggested paying no more than a 20 percent cash down payment and never paying all cash for a house or condo. The reason you gave is unforeseen circumstances, such as finding the condo association is broke or you bought near a toxic waste dump. You say if a buyer puts down 20 percent that is all you lose. Are you suggesting the homeowner walk away from the mortgage? – Jack R.

DEAR JACK: No. I didn't suggest a homeowner walk away from his/her mortgage obligation. In most states, a lender who loses money on a foreclosure sale can seek a deficiency judgment against the defaulting homeowner. However, lenders rarely do so because of the expense (unless the defaulting borrower is very wealthy).

The primary reason to make a maximum 20 percent down payment when buying a house or condo is to avoid tying up a major portion of your assets, especially if you are retired. If you are a multizillionaire, be my guest, take the risk, and pay all cash.

Especially when buying a brand-new house or condo, if you pay all cash you could become the "stuckee" if it turns out to be a "bad house" or a "bad condo." A modest 20 percent down payment limits your maximum loss. If all turns out well, you can later pay down your mortgage or refinance.

For example, who do you think suffered the biggest loss in Hurricane Katrina? Was it the New Orleans flooded-out home buyer who recently purchased with a 20 percent down payment? Or was it the homeowner who had no mortgage, no lender-required flood insurance, and lost everything?

Whether your home is vulnerable to hurricanes, tornados, earthquakes, floods, landslides, wildfires or something else, I don't want you to lose everything by buying your home with 100 percent cash, especially if that is most of your reserves.

ARE UP-FRONT REVERSE MORTGAGE FEES TAX-DEDUCTIBLE?

DEAR BOB: As senior citizens, we are thinking of getting a reverse mortgage on our home for extra income. But we wonder if the up-front expenses and interest charged are tax-deductible? – Roberto L.

DEAR ROBERTO: Reverse mortgage up-front expenses, such as the loan fee, as well as accrued interest over the life of the reverse mortgage, are added to your reverse mortgage balance. You don't have to pay these costs out of your pocket.

Because these expenses are not actually "paid," the IRS says they cannot be deducted until the reverse mortgage "matures" and is paid off in full when you eventually sell your home, permanently move out, or die.

More details are in my new special report, "The Whole Truth About Reverse Mortgages for Senior Citizen Homeowners," available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com.

IS THE REAL ESTATE "BUBBLE" READY TO BURST?

DEAR BOB: Eight months ago I purchased a single-family rental house with a 5 percent down payment using an ARM (adjustable-rate mortgage). As I read about "real estate bubbles," I worry I should either (a) refinance to a fixed-rate mortgage or (b) sell and take my profits. If I wait five years, I am afraid the home might be worth less than today. What is your opinion? – Max B.

DEAR MAX: Sorry, my crystal ball is very foggy today. If you think your area is in a so-called real estate bubble of peak market values for homes, today would be a great time to sell to take advantage of your short-term profits.

Please be aware the long-term trend of home values has always been up. But there are peaks, valleys and plateaus along the way. However, I don't know of a better long-term investment than sound, well-located single-family houses, do you?

HOW TO CALCULATE HOME-SALE CAPITAL GAIN

DEAR BOB: What is the cost basis for the capital gains exclusion on the sale of a principal residence? Isn't the capital gain the difference between the purchase price (not what is owed) and the selling price? – Elizabeth M.

DEAR ELIZABETH: I am puzzled by your first question. The answer to your second question should help.

The adjusted cost basis for your home (or any property) is its purchase price, plus most non-deductible closing costs, plus capital improvements added during ownership, minus any depreciation deducted (such as for a home office or rental use).

Your adjusted sales price is the gross sales price, minus sales costs such as the real estate sales commission. The difference between these two numbers is your taxable capital gain.

You are correct the mortgage balance is irrelevant.

From your home-sale capital gain, subtract your Internal Revenue Code 121 tax-free principal residence sale exemption up to $250,000 (up to $500,000 for a qualified married couple filing jointly).

That's presuming you owned and lived in the principal residence at least 24 of the 60 months before sale. Any remaining balance is taxable as a capital gain. Your tax adviser has further details.

STEPPED-UP BASIS EASES PROFIT CALCULATION

DEAR BOB: My mother died recently. She left me stock shares. What do I use as the base price for reporting those shares? She received them from my father many years ago – Tom R.

DEAR TOM: Because you inherited those common stock shares, your "stepped-up basis" is their market value on the date of your mother's death. The same principle applies to inherited real estate, which is received by heirs with a new market value "stepped-up basis" on the date of the decedent's death. The purchase price doesn't matter.

If your mother had transferred those stocks as gifts to you before her death, then your basis would have been her stepped-up basis when she received them from your late father.

Real estate gifts received before the owner's death have the same drawback. Thankfully, there is no need for you to determine her stepped-up basis value. For more details, please consult your tax adviser.

LENDER SETS THE RULES ON GETTING RID OF P.M.I.

DEAR BOB: My mortgage lender is unwilling to discuss dropping my $118 monthly PMI (private mortgage insurance) payment until May 2006 when I will have 24 months of ownership. I am willing to pay for an appraisal to prove there is no need for PMI because I now have well over 20 percent equity. But I don't want to sell or refinance. My FICO credit score is 750. Do I have any other recourse than refinancing to get rid of my PMI? – Randy H.

DEAR RANDY: You are the PMI "stuckee" because your mortgage lender gets to set the rules for removing that wasteful $118 monthly PMI premium.

Yes, there is a federal law on this issue. But it won't help you (or any PMI borrower) because it requires the mortgage to be paid below 78 percent of the purchase price.

For most PMI borrowers, that won't happen until at least the 10th year of the mortgage. Increased market value due to capital improvements and market value appreciation doesn't count under the useless federal law.

Now you know why I recommend avoiding PMI whenever possible. Unless you are willing to refinance with another lender who doesn't require PMI, you will just have to wait until you meet the lender's nonsense 24-month requirement in May 2006.

PROS AND CONS OF A REVERSE TAX-DEFERRED EXCHANGE

DEAR BOB: I found a property for rental investment that I want to buy and exchange. But I have not yet sold my rental unit. Can I do a "reverse mortgage" in a Starker exchange? What happens to the money received when my rental property sells? – Beverly C.

DEAR BEVERLY: Yes, you can do a tax-deferred "reverse exchange" by acquiring the replacement investment property before selling your current investment or business property.

However, title must be taken in the name of a qualified third-party accommodator, using your money. Unless you are very wealthy with lots of cash sitting around the house, you might be better off tying up the replacement property with an option, or a lease-option, to give you time to first sell your current rental property. For details, please consult your tax adviser.

NO WAY TO AVOID CAPITAL GAIN TAX ON THIS HOME SALE

DEAR BOB: I have lived in my home less than a year. But I wish to sell it to build a new home. Isn't there some way around the capital gain tax? I heard you can invest the gain to avoid the tax? – Dana C.

DEAR DANA: Sorry. The old "residence replacement rule" of repealed Internal Revenue Code 1034 was abolished in 1997.

If the reason for selling your principal residence after less than 12 months of ownership is to build a new house, your long-term capital gain will be taxed at the 15 percent maximum federal tax rate, plus any applicable state tax.

However, if the reason for your home sale is a job transfer qualifying for the moving cost tax deduction, unemployment, divorce, health reasons, or other "unexpected circumstances," you might be eligible for a partial Internal Revenue Code 121 principal residence sale exemption. Your tax adviser has details.

The brand-new Robert Bruss special report, "24 Key Questions: Living Trust Secrets Reveal How to Avoid Probate Costs and Delays," is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.
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Hitting a Profit 'Sweet Spot'' From Property Flipping

A new study pinpoints how long you should hold a property before selling for a quick gain.
By: Lew Sichelman: The Wall Street Journal Online
Issues on people's minds: The ways in which property "flippers" may be getting frustrated and how to calculate where the maximum gain from flipping might come.

Question: I recently bought a home priced below market. I tried to sell it right after closing escrow. I received an offer the next day and we opened escrow right away. After two weeks, I was contacted by my broker telling me that I couldn't sell my house right away and that I have to wait three months before putting it back into the market. Is this accurate? The escrow was cancelled and I need to know if my broker is right.

Answer: As far as I know, there is no law or regulation that prevents anyone from purchasing a house one day and selling it the next, a process known as "flipping."

Some builders have clauses in their sales contracts that prohibit buyers from putting their houses back on the market for a period of time after closing -- usually a year. Whether such clauses are enforceable has yet to be proven.

If you bought a new house, your agent may have been correct, or at least prevented you from winding up in court to test your rights. But if you purchased an existing home, I'd love to hear the agent's explanation as to why you couldn't resell right away.

That said, a new research study by Christopher Cagan, an unusually glib economist who is director of research at First American Real Estate Solutions, indicates your agent may have been doing you a favor. As it turns out, the "sweet spot" for flippers is between three and six months. Hold a house any shorter or longer than that and you won't do nearly as well.

Of course, we're not talking about scam artists who use false information to buy a house. Rather, we're talking about savvy investors who purchase distressed or undervalued properties, raise their value by making repairs or even remodeling or simply taking advantage of a hot and getting-hotter housing market.

Most folks buy a house to make it their home. And they reside there for seven years on average. Flippers have a much shorter time frame, usually less than two years and often much shorter. They may or may not live in it themselves, and they may or may not rent it to others. They may make only cosmetic repairs or they might perform a complete overhaul.

About the only thing they have in common is that they typically want to get in and get out, making a substantial return on their money in the process. And that kind of flipping is very much a legitimate form of investment, even if it is sometimes highly speculative.

Since it's difficult to determine exactly what the buyer-owner-seller had in mind from a bunch of numbers, Cagan looked at all resales within the first 24 months after purchase (but not preconstruction flips) in three superheated housing markets -- Orange County, Calif.; Miami-Dade County, Fla., and Clark County (Las Vegas), Nev.

The economist was unable to know how much the investor spent beyond his down payment. But based on the price paid and the price received, he was able to calculate the gross profit and adjust for the length of ownership to estimate an annualized appreciation rate.

He found that flippers in all three markets almost always earned 15% or more in gross profit. But those who sold between three and six months often earned 50% to 100% as an annualized rate.

Similarly, almost all sellers made more than 15% when they held their properties for six months but sold before a year was out. And as did those with quicker trigger fingers, some did better than 15%. But the rate of return of those who didn't sell until sometime during their second year of ownership wasn't nearly as strong.

But Cagan's findings beg another question: Did flippers beat the market or did they merely participate in it like everyone else?

To answer that question, he looked at annualized rates of appreciation for different years of sale and different elapsed sales times, and then compared that with the year-over-year price appreciation of all single-family residences in each of the three counties, whether they were flips or not.

In perhaps his most striking discovery, Cagan found that the annual rate of return for sales in 12 months to 24 months was just a little above or a little below the rate for the overall market. The rate for a 6-to-12-month hold tended to be a little better than the market as a whole.

But appreciation in the three to six-month category, which represents almost an immediate turnaround as far as real estate is concerned, was usually 20% to 40% or more ahead of the market.

Cagan calls this time frame the "sweet spot of flipping," and said that when the market in the three towns was booming, flippers who hit that spot "reaped almost incredible returns."

In other words, to paraphrase country singer Kenny Rogers, if you are going to speculate in the housing market, you've gotta know how long to hold 'em and you've gotta know when to fold 'em.

Email your comments to rjeditor@dowjones.com.
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NAR: Existing-Home Sales at Second-Highest Level

NAR
Existing-home sales rose in August to the second-highest pace on record, with strong price gains in a market of tight supply, according to the NATIONAL ASSOCIATION OF REALTORS®.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 2.0 percent in August to a seasonally adjusted annual rate1 of 7.29 million from a pace of 7.15 million in July. Sales were 7.8 percent higher than the 6.76 million-unit pace in August 2004; the record was 7.35 million in June of this year.

David Lereah, NAR’s chief economist, said the fundamental factors for housing remain positive. “With a general background of growing population and favorable affordability conditions, home sales are staying at very healthy levels,” he said. “Housing inventory improved in August but remains tight, and we have some way to go before we get into a range of balance between home buyers and sellers. As a result, we’ll continue to see above-normal home price appreciation for the foreseeable future.”

Total housing inventory levels rose 3.5 percent at the end of August to 2.86 million existing homes available for sale, which represents a 4.7-month supply at the current sales pace. Historically, a supply of around six months is reflective of a market in balance between home buyers and sellers.

The national median existing-home price for all housing types was $220,000 in August, up 15.8 percent from August 2004 when the median price was $190,000. The median is a typical market price where half of the homes sold for more and half sold for less. This is the strongest rate of appreciation since July 1979 when annual price growth was 17.2 percent.
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 5.82 percent in August, up from 5.70 percent in July; the rate was 5.87 percent in August 2004.

NAR President Al Mansell of Salt Lake City said there was some disruption from Hurricane Katrina at the end of August, but there was no measurable impact on August sales. “There will be a mixed impact in figures over the next couple months with total disruption in the hurricane disaster zone, offset by spiking sales from displaced residents in nearby regions which escaped heavy damage,” he said.

“Unfortunately, multiple listing services in some of the affected areas are out of commission and we can’t get direct data. We’ve been talking with member boards and associations in those areas for an anecdotal feel, but some data is missing from our measurements for the South.”

Mansell personally traveled to affected areas in the Gulf Coast region to meet with state and local Realtor® associations and boards, and to dispense relief checks. To date, the Realtors® Relief Foundation has collected more than $4.1 million to provide emergency relief for hurricane victims; administrative costs are absorbed by NAR.

Single-family home sales increased 1.9 percent to a record seasonally adjusted annual rate of 6.35 million in August from 6.23 million in June, and were 6.9 percent above the 5.94 million-unit level in August 2004. The median single-family home price was $219,400 in August, up 16.2 percent from a year ago.

Existing condominium and cooperative housing sales rose 2.2 percent to a seasonally adjusted annual rate of 942,000 units from an upwardly revised pace of 922,000 in July, and was second only to a record of 963,000 in June of this year. Last month’s sales level was 14.3 percent above the 824,000-unit pace in August 2004. The median condo price was $226,800, 2 up 14.5 percent from a year ago.
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Key to Remodeling? Know Your Objective

By: Lisa Schmeiser: REALTOR® Magazine Online
Homeowners stand to recover 80 percent of the money they put into renovations, but National Association of the Remodeling Industry President Paul Winans says the extensive cost of improvement projects makes them practical only if the owner plans to stay put for five or more years.

Remodeling Magazine's 2004 cost vs. value survey indicates that minor kitchen remodels cost more than $15,000, and homeowners will shell out anywhere from $21,087 to $41,587 for a new bathroom.

Homeowners should make a list of why they want to remain in the property and refer to it during the remodeling process, recommends Winans.

Meanwhile, those who plan to remodel and sell the home at a profit should formulate a strict budget and follow it, because over-improving can hamper a sale.

Homeowners should also keep in mind that improvements tend to increase property value, so they should contact their insurance companies to get additional coverage.
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California: Slower Rise in Home Prices Forecast

By: Annette Haddad: REALTOR® Magazine Online
The CALIFORNIA ASSOCIATION OF REALTORS® expects the statewide median home price to rise about 10 percent to $575,500 in 2006, marking the second consecutive year of slower home-price growth.

CAR Chief Economist Leslie Appleton-Young says the projected appreciation rate for this year is 16 percent, down from 18 percent in 2003 and 21 percent in 2004. However, the direction of home prices hinges largely on location.

DataQuick Information Systems notes that prices are up over 30 percent from last year in downtown Los Angeles but are posting more modest gains and even declines on the Westside.

Additionally, coastal areas are showing signs of weakening, while reasonably priced inland communities continue to record double-digit appreciation rates.
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Downsizing Without Super-Sizing Your Property Taxes

By: Phoebe Chongchua: RealtyTimes
Here's a topic that may be encouragement for seniors who have desired to move but are holding out because of increased taxes. There are many seniors who decide that the home they're living in is too big for them. Downsizing is just the answer but some worry that they still may face a property tax increase should they move into or build a new home.

In California, tax relief for seniors 55 and older helps ease the cost of moving and finding a replacement home by transferring the taxable value on the senior's original home to the replacement home.

Here's how it works. Under Proposition 60/90, seniors may carry approximately the same annual property tax basis as they did with their old home to a new home that is purchased of equal or lesser value.

This basically means that seniors get a break from a property tax reassessment that would ordinarily occur when a home is bought and appraised at full market value at the time of its purchase.

The program is based on a comparison using the full market value of the current property and the full market value of the replacement home as of its date of purchase. It is not based on the sales price of the current home which can be different than the market value. The assessor determines the market value of both properties.

Originally California Proposition 60 limited where a senior could move and still get the same property tax basis. But that later changed to include several cities in California. However, currently only a few counties honor the tax break so it's wise to check which do before you buy a replacement home there.

This benefit for seniors is a one-time break; you cannot move multiple times and qualify. A few other restrictions also apply, such as: it has to be your primary residence that you're selling and the replacement property must be the location of your new primary residence; if you're married, only one person needs to be 55 years or older at the time of the sale; you must sell your current home and buy your replacement home within a two-year period, and the application must be filed within three years of the date a replacement home is purchased or new construction of a replacement home is completed.

For some seniors this is the exact benefit they need to encourage them to move. However, it's important to understand a few other specifics of Proposition 60/90 Reappraisal Exclusion for Seniors.

For instance, no partial exclusions are allowed. So if you decide to buy a home that is of a higher value than your current home, you will not qualify for the program.

Here is how the property value limits work according to the San Diego County Tax Assessor Office. If you buy a replacement property before you sell your current home then the limit is 100 percent of the market value of an original property. The percentage jumps to 105 percent of the market value of an original property if a replacement home is purchased within one-year after the sale of the original property.

The percentage increases to 110 percent of the market value of an original property if a replacement home is purchased within the second year after the sale of the original property.

One other significant benefit with this program is that if an addition is made to a replacement home it may qualify for a re-assessment exclusion. According to the law, new construction performed on the replacement home after the base year value has been transferred, is excluded from assessment if the following criteria are met: the new construction must be completed within two years of the date of sale of the original property; the owner within 30 days and in writing notifies the assessor of the completed new construction; and the market value of the new construction plus the market value of the replacement home is not greater than the market value of the original property.

If you're considering using Proposition 60/90, be sure to check with your realtor and the local county tax assessor for more specific details and restrictions about the program.
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Autumn home sale provides unique advantage

Get top dollar during second-best sales season
By: Robert J. Bruss: Inman News
Fall is known among real estate professionals as the second-best season of the year to sell homes. The reason is the second-largest numbers of prospective buyers are in the house and condo purchase market from now until Thanksgiving.

2005 might prove to be an especially good year to sell your home, if you want top dollar, because many prospective buyers realize they should buy before mortgage interest rates rise further.

Just in case you are wondering, spring is the best season for home sales because that is when there are the most prospective buyers in the market. But with home sales volume and median sales prices still at record nationwide levels, according to the National Association of Realtors, this fall promises to be a robust home sales season in most communities.

HOW TO TAKE ADVANTAGE OF TODAY'S HOME SALES MARKET. If you are thinking of selling your house or condo, now is the time to act. The first step is to be sure you really want to sell and have a strong motivation for doing so.

The second step is to get your home prepared for sale. Look at it critically, through a prospective buyer's eyes. Painting (inside and outside), repairing and cleaning will usually pay off in thousands of extra profit dollars. Pay special attention to the kitchen and bathrooms, but don't go overboard with major renovation.

If you can't afford minor fix-up, then sell your home "as is" but with the knowledge you probably won't get top dollar. Most home buyers want to turn the key in the door and move in. If your home needs considerable work, many prospective buyers won't be interested, except at a heavily discounted price.

The third step is to interview at least three successful realty agents who sell homes in your vicinity. Even if you think you want to become a "for sale by owner" (known as a FSBO or fizz-bo), the agents you interview won't mind. The reason is they know most do-it-yourself home sellers give up after 30 to 60 days, usually listing with an already-interviewed realty agent.

KEY QUESTIONS TO ASK THE THREE PROFESSIONAL AGENTS. After your home is ready for sale, it's time to interview the three successful agents you select. The reason to interview at least three agents is to compare their pros and cons. Then you won't be misled by a charismatic agent.

1. HOW MUCH CAN YOU GET FOR MY HOME? Be blunt. Notice the question is not: "How much do you think my home is worth?" As a savvy home seller, you want each agent's expert opinion how much he or she can get for your home.

To justify his/her answer, each agent should prepare for you a written CMA (comparative market analysis). The CMA form shows (a) recent sales prices of comparable nearby homes, (b) current asking prices of neighborhood homes listed for sale (your competition), and (c) asking prices of recently expired comparable listings that didn't sell (usually because they were overpriced).

Don't feel you are being unreasonable insisting each agent give you his/her CMA to study. Thanks to computers, competent agents can often prepare their CMA within an hour, including photos of the comparable homes.

If an agent refuses to leave the CMA with you, that agent doesn't trust you. To prevent an agent from misleading you into listing too high (called "buying the listing") or too low (low balling), smart sellers compare the CMAs of the three or more agents interviewed.

2. HOW LONG HAVE YOU BEEN SELLING HOMES IN THIS AREA? ARE YOU A FULL-TIME AGENT? WHAT PROFESSIONAL COURSES AND DESIGNATIONS HAVE YOU COMPLETED? The best agents will anticipate these key questions either in their listing presentation or by handing you their professional brochure.

Don't necessarily dismiss a motivated new agent if he or she works full-time and has adequate managerial supervision in a highly respected local brokerage. If a new agent has only a few listings, that could be better than listing with an "old pro" agent who has too many listings to adequately handle yours.

Incidentally, don't be overly impressed by a well-known name on the broker's door; you're hiring an individual agent, not the firm.

3. WHAT IS YOUR MINIMUM LISTING TERM? This question is very important. The correct answer is 90 days.

If an agent attempts to get a 120- or 180-day listing, unless you have a unique or very expensive home with a limited market, your reply should be, "Don't you think you can get my home sold in 90 days?"

Watch out for a favorite tactic of agents who want long listings. They say, "Well, the average days on the market for homes in this area is 110 days." Don't be fooled. Your reply should be, "Well, I don't want just an average listing agent."

However, you can safely make an exception if the agent insists on a 180-day listing but includes in the listing a written clause "Seller may cancel this listing after 90 days without reason or cost." If the agent is doing a good job, but your home is unsold after 90 days, you probably won't cancel.

4. WHAT SALES COMMISSION RATE DO YOU CHARGE? Most realty agents will tell you their "standard commission" rate is 6 percent or 7 percent. However, you should know, real estate commissions are negotiable.

According to a recent nationwide survey by Real Trends, the average real estate sales commission is now 5.1 percent of the home's gross sales price.

The higher the market value of your home, the greater the probability the realty agent will discount their commission rate to get your listing. To illustrate, if you are selling a $1 million house, most listing agents will gladly accept a 5 percent commission rather than insisting on a 6 percent commission and not getting your listing.

However, if you are selling a $200,000 home, many agents are very reluctant to cut their commission from 6 percent to 5 percent. The reason is not the $2,000 difference.

The true reason is offering a 3 percent, rather than a 2.5 percent, commission split to a cooperating buyer's agent is often very important for getting your home sold. If agents representing buyers can show your home with a 2.5 percent commission to the selling agent, or a similar home offering a 3 percent commission, which home is that agent likely to show first?

If you are willing to do some of the work selling your home, such as holding weekend open houses, you might consider local discount brokerages such as Assist2Sell and Help-U-Sell.

However, be sure your listing will be in the local MLS (multiple listing service) and the all-important www.Realtor.com where 70 percent of today's home buyers begin their home searches.

5. WHAT IS YOUR MARKETING PLAN FOR MY HOME AND WHAT SERVICES WILL YOU PROVIDE? Each agent you interview should have a written marketing plan for your home. At a minimum, these services should include listing your home in the local MLS, on the agent's individual as well as the brokerage Web site, and on www.realtor.com. Any realty agent who is not Internet savvy today is hurting their sales volume and their home sellers.

In addition, each agent's marketing plan should include newspaper advertising, weekend open houses, local broker open houses for other agents, and ads in local homes magazines. More expensive homes might justify the broker using brochures and mailers to neighboring home owners who could know prospective buyers.

6. OTHER THAN YOURSELF, WHO IS THE BEST REAL ESTATE AGENT IN THIS AREA? Savvy agents will try to evade answering this question. Then ask what do you think of these other agents I am interviewing. Respect the agents who honestly answer this question. Of course, be sure to verify any negative information.

7. WHAT ARE THE NAMES, ADDRESSES AND PHONE NUMBERS OF YOUR FIVE MOST RECENT HOME SELLERS? Hopefully, each agent you interview will provide this ultra-important information without your asking.

Before signing a listing, take time to phone each agent's recent home sellers to ask, "Were you in any way unhappy with your agent and would you list your home for sale again with the same agent?" Then, shut up and listen carefully, especially if there is hesitation or a vague answer.

8. WHAT SUGGESTIONS DO YOU HAVE TO BETTER PREPARE MY HOME FOR SALE TO EARN TOP DOLLAR? DO YOU RECOMMEND STAGING IT? Most agents will hesitate to criticize your home until they have your signed listing. But you need to know before signing the listing if the agent wants you to fix up your house or condo before putting it on the market for sale.

Be sure each agent tells you if he or she thinks your home should be "staged." That means most or all of your furnishings are moved out and a "professional stager" moves in more attractive rented furnishings. Of course, staging costs money the home seller gets to pay. If you are a savvy negotiator, you might get the listing agent to pay for staging if your home will sell for a large commission.

Staging can help sell an otherwise drab house. For example, I recently visited a broker's open house for an $18 million estate home listed for sale. The broker did a superb job of making a vacant "dated" house look good by having it professionally "staged" by an interior decorator.

9. HOW MANY LISTINGS DO YOU HAVE NOW? IF I LIST WITH YOU, WILL I BE DEALING WITH YOU OR AN ASSISTANT? HOW OFTEN WILL YOU CONTACT ME ABOUT SALES PROGRESS? If an agent has more than 15 to 20 listings, there is no way he or she can personally do a superb job for those home sellers without having one or more personal assistants.

There is nothing wrong with realty agents having assistants, just as dentists and physicians do. However, you need to know you won't be "just another number" to the listing agent and how you can personally contact the agent if you have questions.

Just between us, many of these "numbers agents" know a certain percentage of their listings will sell, and a percentage won't sell. If you don't have confidence in the success record of the agent you interview, and his or her recent seller recommendations, keep looking.

10. SHOULD MY HOME BE SOLD "AS IS?" Sometimes it doesn't pay to fix up a house or condo before listing it for sale. If the seller doesn't want the hassles of fixing up and is willing to sell at a below-market price, "handyman special" home sales appeals to the bargain hunters. If your home is in less than tip-top condition, ask each agent you interview if an "as is" sale, with full written disclosure of all known defects, is recommended.

SUMMARY: Home sellers who want to take advantage of today's excellent home sales market in most communities can't ask too many questions before listing their residences for sale during the fall "second best" time of the year to sell a home.
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Energy Concerns Reflected in Design and Features of Homes

A survey by the American Institute of Architects shows that rising gasoline costs are sparking a demand for home offices.
By: Al Heavens: RealtyTimes
Early in the summer, I was talking with a veteran builder about the differences in selling houses when he started in the 1970s and now.

How did distance from centers of population affect sales, I asked him.

"Funny you should mention that," the builder said. "In 1973, just when the oil embargo was creating long lines and shortages at the gas stations, we opened a community a 45-minute drive from the city."

The first week, no one came, so we took out an ad offering a tank of gas to anyone who drove out to see our models," he said.

The plan worked, and the project sold out quickly.

The shortages of the 1970s forced a lot of changes in the way we look at how and where we live and how we get there, with energy-efficient houses, proximity to centers of population, the search for more efficient cars and renewed interest in public transportation.

We seem to be in that situation again. Gasoline prices are high, there were spot shortages in some states when Hurricane Katrina disrupted production and distribution on the Gulf Coast, and the utilities are warning that the cost of heating our houses this winter could be more than double what they were last year.

So how is this all playing out?

The latest design-trends survey by the American Institute of Architects shows that concerns over the price and availability of gasoline have increased consumer interest in telecommuting and home offices.

Not surprisingly, the AIA survey also showed an increasing consumer interest in energy-efficiency, especially in alternative sources such as geothermal, solar power and renewable electricity.

The survey was taken of AIA members, reporting on the wishes of their clients.

The survey found that although some homeowners are looking for less space in their home that is more customized to their lifestyle, others remain interested in enlarging their living space, particularly with additional rooms to provide opportunities for special functions.

Home offices, for instance, continue to grow in popularity. The desire for exercise rooms appears to have peaked in many regions.

Other features being sought include low-maintenance materials and more storage space - kitchen pantries and closets -- are growing more popular. Features generally associated with more formal homes, such as upscale entryways and defined hallways, are becoming less popular.

Despite growing interest in a trend toward smaller houses advocated by Sarah Susanka and others, the AIA survey confirms studies by the National Association of Home Builders that houses are growing larger.

Because of that, homeowners are finding it easier to add more features to accommodate their changing lifestyles.

The AIA survey focused on the home office. These spaces not only accommodate home businesses, the self-employed and the telecommuters, but "also provide flexibility for a working a portion of the workweek at home, or for those working some extra hours on nights or weekends," the survey reports.

Other "function rooms" gaining popularity include spaces for recreation and "mud rooms." The mud rooms allow households, especially those with growing families, to find a place outside the main living spaces of the house for raincoats, overcoats, boots and other outerwear.

Media rooms also are gaining popularity, but only in some markets, the survey showed.

“Dedicated living space" for other household members also appears to be a trend. This may be a wing of the house for children or guests, or a suite -- typically with a private bath and often with separate kitchen and living space -- for aging parents or live-in child-care providers.

More than one-third of the respondents reported increased popularity in au pair or in-law suites.

Laundry rooms also are a popular feature.

And speaking of popular features: low-maintenance materials are high on the list. These include siding, decking, floor and wall finishes and countertops.

Close behind is storage, which includes an enlarged pantry off the kitchen or more closet or general storage space throughout the house. Other surveys have shown that the chief complaint of new-home buyers after they have moved into the house is the lack of storage space, even if what the house has meets the specifications they established when they bought it.

Some features are growing less popular. The demand for garages that can accommodate three or more cars is not increasing as quickly as previous surveys had indicated, even though the number of cars per family continues to increase.

Houses are becoming more sensitive to energy use, and are concerned with more efficient energy-management systems. Security systems, including home monitoring systems, also are increasing in popularity, the AIA survey indicated.
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Tips for sprucing up home's driveway

Don't settle for boring gray concrete
By: Paul Bianchina: Inman News
As you approach the comfort of your home, think of the driveway as one big welcome mat. An attractive driveway can do a lot for your home's appearance and curb appeal, so if it's time to be thinking of a new set of welcoming arms for your house, you've got some options to consider.

CONCRETE

Concrete has long been the favorite choice for a driveway. Concrete is sturdy and long lasting, relatively inexpensive compared to some of the other options, and simple to install. It's a little on the bland side, however, so if you're looking to dress up the approach to your home, you might want to think about some of concrete's many optional faces.

For one, concrete can be colored to get away from the standard gray of its natural tone. There are powdered dyes that can be added to the concrete while it's still wet, producing a consistent color that extends through the entire mix. There are also a number of liquid and dry powder stains that can be applied to the concrete after it's placed, and some types even work on existing cured concrete.

You also don't need to be limited to just one color. By employing different masking techniques, colors can be intermixed in a virtually unlimited number of patterns and designs.

Another option is concrete stamping. As the wet concrete begins to set up, special steel stamps are used to imprint the concrete surface with patterns ranging from cobblestones to tiles to antique slate. Properly done and combined with various colorants, stamped concrete creates a stunning new driveway, either for the entire surface or just for strips along the edges.

Yet another possibility is the combining of concrete with other materials. At the time the concrete is formed and poured, open areas can be left along the edges, down the center, or anywhere on the driveway that you want a contrasting look. After the forms are removed, the open areas are filled in with bricks, stone, pavers, cobbles, or any other hard surface material that will handle the elements and the weight of the vehicles on them. Here again, the possibilities are almost limitless.

Concrete doesn't need to be a solid slab that stretches the full width of the garage either. Two strips of plain or colored concrete for the car to drive on combined with grass between them is a great look, and works particularly well with some of the older styles of homes such as Victorian and Craftsman.

PAVERS

A growing number of homes are incorporating interlocking pavers into their landscaping themes, both as walkways and driveways. Pavers are a great do-it-yourself project, and come in a wide variety of colors and patterns that will compliment virtually any architectural style.

Pavers are laid over a sand base, and correctly installed they offer excellent strength, stability and weather resistance. The fact that they are individual units allows for expansion and contraction without cracking – a real plus in areas with hot summers or freezing winters. And, should the driveway get damaged for any reason, one or more of the units can simply be removed and replaced without affecting the rest of the driveway (buy and store several extra pavers with your initial order so you always have access to units of the same size and color as the originals).

ASPHALT

OK, it might not be the first thing that comes to mind when you think of attractive, but asphalt has a lot of virtues as a driveway material. For one, it's sturdy and weather-resistant, and requires little in the way of ongoing maintenance. A periodic application of top sealer, which you can do yourself, is all that's needed to minimize cracking and keep it looking shiny black.

Because of the type of equipment that is used and the setup time for installing asphalt, this may not be a cost effective material for small installations. Once the equipment is there, however, the installation costs drop per square foot, so conversely asphalt can be very economical for long driveways when compared to concrete or pavers.

Don't get hung up on that industrial image either. As with concrete, asphalt can easily be combined with pavers, rock or even stamped concrete to create an eye-catching front driveway that will last for decades.

Remodeling and repair questions? E-mail Paul at paul2887@direcway.com.
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Childproof family room doesn't have to be 'Plain Jane'

Designers find happy medium between comfort, function
By: Katherine Salant: Inman News
When your kids are teenagers, your family room might finally look the way you imagined when you decided to buy a new house. But if they're very young when you move in, you'll be happier if you start out on the spare side and let the family room "grow" with your children, advised Skip Sroka, a Bethesda, Md., interior designer and one of nine children himself.

When kids are small, they need space to crawl, play and run around, Sroka said. If you put a lot of furniture in there, it will just be in the way. A sofa, a side table and possibly an arm chair will be plenty, especially since only the adults will be using them – your kids will spend most of their time on the floor.

Since you'll be down there at least half the time as well, you'll want a flooring that you can sit on comfortably. Your best option comfort-wise and cost-wise is wall-to-wall carpet with a good pad. That way, no matter where your children take a fall, they'll have some cushioning.

To keep your sanity, your carpet must be easily cleaned in a color that will hide the dog accidents, throw-up, spilt juices, dirt, and all the other abuses that will be inflicted on it during those early years of child rearing, added Deborah Wiener, an interior designer in Silver Spring, Md., and the mother of two energetic boys.

A wool carpet will do nicely, but wool is pricey and some kids are allergic to it. For durability, she recommended a synthetic carpet material such as polyester, olefin or nylon treated with Dupont's Stainmaster. Most home builders offer all of these as upgrades. Darker colors like chocolate brown, medium to dark blue or a dark taupe will hide stains, but they can make the room look more somber than you want. To add some fun, Wiener suggested a bright colored but inexpensive throw rug from a store like Pier One or Target. The rug should also be cleanable, but if something awful happens, you can pitch it and get another one.

Comfort in a family room also means adequate lighting – both natural and artificial, Wiener said. All those windows that make the family room in the builder's model a bright and sunny space are not necessarily included in the base-priced house, but they definitely enhance the space. On those cloudy days and in the evening you also need illumination. Wiener suggested recessed light fixtures because with these you don't need lamps with chords that will get tripped over and pulled out of the wall all the time.

Some Web sites to check out:

Crypton: www.cryptonfabric.com

Gore Seating Protection: www.goreseatingprotection.com

Arc-Com (a commercial fabric manufacturer offering both Crypton and Gore Seat Protection treated fabrics): www.arc-com.com

Duette Shades: Many manufacturers make these. Among the most widely available are made by Hunter Douglas: www.hunterdouglas.com

If you plan to have furniture in there that "floats" – it's in the middle of the room, not against the wall – when your kids are older, you should get outlets installed in the floor during construction. Otherwise when you eventually put in side tables and reading lamps the chord will be stretching halfway across the floor to a wall outlet. Figure out approximately where your furniture pieces will go, put in the outlets, and childproof them until they are needed.

You'll need some kind of window treatments, and both Sroka and Weiner recommend a honeycombed duette type of shade. When pulled down during the day, the light that comes through is wonderfully soft and diffuse, and the shade can be opened from the bottom up or the top down. The latter position provides both sunlight and privacy, which can be an issue if your neighbor's house is only 10 feet away, as it is in many new subdivisions now. Many manufacturers offer a duette. Whatever you select, make sure it has safety features so that a small child can't get a cord wrapped around his or her neck or swallow plastic parts.

Practicality and initial spareness in the family room does not mean you have to look 100 percent Plain Jane, both designers said. Hang artwork on the walls and splurge in good conscience on a sturdily built sofa that looks great while withstanding the rigors of child rearing.

Questions or queries? Katherine Salant can be contacted at www.katherinesalant.com.
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Appliances Are Going Hollywood With TV Product Placements

Furniture and home-appliance companies are seeking out celebrity connections and airtime on popular television programs.
By: Cheryl Lu-Lien Tan: The Wall Street Journal Online
The fourth season of NBC's "The Apprentice" with Donald Trump begins tonight, promising more bickering and backstabbing as the latest crop of wannabe bosses elbow their way to the top. But one company is betting that it already has a breakout star on the show: the kitchen cabinetry in the Trump Tower apartment where the contestants live.

Poggenpohl U.S. Inc., the German maker of the red and titanium-gray cabinets, is already aggressively promoting its connection to the hot show. To grab attention, the company is sending out news releases to alert the media that viewers can learn all about its pricey cabinets by visiting the TV show's Web site.

After years of watching fashion and beauty brands shine in the Hollywood spotlight, makers of furniture and appliances are now eager to get in on the product-placement act. Brands from Bosch appliances to Big John Toilet Seat -- maker of a super-wide toilet perch -- are wooing set designers and cozying up to TV and movie stars. Some are also setting up booths at events such as New York's Fashion Week and the Country Music Awards to increase their visibility in the style crowd.

Popular tool company Barbara K. Enterprises Inc. works with a product-placement company to get its female-friendly kits in movie and television scenes. Recently, the tools landed a bit part, alongside Brad Pitt and Angelina Jolie, in the summer flick "Mr. and Mrs. Smith."

Blu Dot Design & Manufacturing Inc., meanwhile, was approached by MTV to provide several pieces of furniture for the network's "The Real World." Since the shows aired, sales of the featured chairs and shelving units have risen. But there was another benefit: being a part of the MTV show cast his hip company in an even hipper light, says John Christakos, president of modernist Blu Dot. "All the beds are ours," he says. "And there seems to be a lot of, um, action and footage that happens in bed. I think that's good -- it's in keeping with our brand."

Some old-line home brands have been reluctant to try these nouveau marketing tactics. Whirlpool Corp., for example, is often approached by home-improvement and other TV shows to donate its refrigerators or ranges, but the company is generally reluctant to participate. "You can't tell from 30 feet away whose appliance it is," says Jeffrey Davidoff, marketing director for the company. "It really is only of value to me when we can integrate the product in the storyline or have an interactive experience with it."

But other companies believe that consumers are indeed taking style and decorative cues from items lurking in the background. When Kate Spade launched a tableware line last year, the company promoted its new tableware line by lending dishes and stemware to the set of the Jennifer Lopez romantic comedy "Monster-In-Law."

New Yorker Emily Prawda Weiss homed in on the Spade wineglasses right away, partly because she had registered for them. "It's definitely something that a bride would notice," she says. "I told all my friends to look out for the glasses in the movie. They were so excited."

The deals occur in a number of ways. For placement on TV shows and movies -- the brass ring for many marketers these days -- some companies, like Barbara K., make appeals to set designers and production companies. Others, like Blu Dot, are lucky enough to get approached. Another common route to fame, which home accessories brands are now exploring, is the celebrity gift bag, in which they provide samples of their products as give-aways to influential guests at tony events, in hopes of winning publicity mentions.

At New York's Fashion Week, for example, the theme for one such bag was "Backyard BBQ in a Bag." It featured a coupon good for a $650 Char-Broil grill and a $1,000 Tupperware gift certificate.

Sometimes, prominent product-placement spots can be a mixed blessing. Executives at Delta Faucet Co. were thrilled to hear that one of the company's jetted showerheads was prominently featured in a scene in CBS's "CSI: Miami" -- until they saw the episode. "The girl was taking a shower and then all of a sudden she fell and hit her head on one of the jetted showerheads," says Joao Rodrigues, a Delta spokesman. The character in the scene died -- a delayed reaction to smoke inhalation, it turned out.

Delta decided not to tout its appearance on the show. "Our product didn't cause the negative outcome," he says, "but we didn't want to connect that outcome to our brand."

Makers of other utilitarian products are pleased with the new coverage they have managed to get. Hanging out with Hollywood types is "a great way to break through the clutter," says Dave Manly, vice president of marketing for Keurig, Inc., whose $150 one-cup coffee maker was part of the "talent gift lounge" at a star-studded "Fashion Rocks" event in New York earlier this month. Performers including Heather Graham took home gratis machines.

"So much is driven by which celebrity is doing what," says Mr. Manly. "We're just waiting for Teri Hatcher to be making coffee with a Keurig brewer and for people to go, 'What's that?"'

Mr. Manly is starting to see some results from the buzz he's generating through blanketing Hollywood with his coffeemakers. This spring, the product-placement firm Keurig works with received a call from set designers for "Poseidon," a big-screen remake of 1972's "The Poseidon Adventure" slated to open next year. Mr. Manly says the moviemakers requested coffeemakers and Keurig signage.

Stars are usually happy to be photographed showing off fashion graft, such as a blouse or purse. But when it comes to certain home items, celebrities aren't necessarily flush with public praise.

Big John Toilet Seat, for example, has been actively promoting the list of celebrities it says requested freebies following its participation at a celebrity golf tournament this summer in Lake Tahoe.

Through their publicists, former NFL quarterback Dan Marino and actor John O'Hurley declined to comment on the $168 toilet seats.
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First impressions play key role in real estate sale

Should I sell my house vacant?
By: Dian Hymer: Inman News
One of the first things you should do if you're thinking about selling is to walk through your home and examine it with a critical eye. Imagine yourself as a buyer and force yourself to make mental note of all the imperfections you've ignored for years.

Don't be surprised if you're overwhelmed by what you see. The drapes may be faded and frayed from years of sun exposure. If you have children or pets, the interior doors and baseboards may be nicked and need paint. Your furniture might be outdated and the floors might look worn. It may strike you that the place needs so much work that you ought to just move out, slap on a fresh coat of paint, redo the floors and sell the house vacant.

Painting and floor refurbishing are good ideas. Renewing the interior surfaces of your home when you sell is one of the most cost-effective improvements you can make to increase your net proceeds. Buyers usually pay more for homes that are in move-in condition.

However, selling a vacant home could result in a lower net return. The main reason for this is that first impressions play a big part in selling homes. When buyers walk into a home that looks bright, inviting and comfortable, they feel good. When most buyers walk into a vacant home, they feel that something is missing.

HOME SELLER TIP: Many people have a hard time imagining what a vacant home will look like when it's furnished. For these buyers, a vacant house poses a problem. They walk into an empty living room and start worrying about how they'd furnish it. It can be a threatening experience.

Home buying is stressful enough without having to worry about how the floor plan works and which room is used for what. A strategically furnished house creates a more pleasurable viewing experience and reduces the stress of buying.

Granted some buyers, such as architects and designers, have the ability to conceptualize in three-dimension. Some experienced buyers have moved so many times that they've developed the knack of visualizing their furniture in an empty space. But, you are likely to sell your home for more money if you can appeal to the entire pool of prospective buyers, not just those who have a particular expertise.

You can certainly sell your home vacant. Virtually everything sells at a price. The question is how much more could you sell your home for if it was attractively furnished?

A listing in the Oakland Hills (Calif.) was put on the market last fall. It had a great view, but was vacant. It did not sell after three months on the market during a time when all well-priced listings in the area were selling. The listing was temporarily withdrawn from the market and staged with rental furniture and accessories. It was put back on the market at the same price and sold right away.

The cost of staging your home for sale may seem prohibitive, but it needn't be. Many sellers who stage their homes for sale use their own furniture after removing outdated pieces and rearranging the rest.

Tattered draperies can be removed and often don't need to be replaced, unless they cover an unsightly or distracting outlook. For selling purposes, it's important to let in as much light as possible.

It's a good idea to consult with a decorator who specializes in staging homes for sale. A stager can arrange to bring in furniture if you decide that's what you need. To keep costs down, you may be able to create an inviting ambiance without furnishing your entire house or condo.

THE CLOSING: The living and dining room, kitchen, family room and master bedroom are the most important places to concentrate your staging efforts.

Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
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'Excess mortgage' spells trouble for longtime homeowner

Property sale may bring heavy taxes
By: Robert J. Bruss: Inman News
DEAR BOB: I recently sold my home and am trying to figure out if I owe any capital gain tax. My purchase price was $57,000 and we added about $125,000 of improvements over the years. The net sales price was $642,000. The mortgage balance was $422,000. I figure my capital gain is $220,000 ($642,000 minus $422,000). But my friend says my capital gain is $642,000 minus my $182,000 basis, for a $460,000 capital gain, of which $250,000 is tax-free. Who is right? – Hamilton R.

DEAR HAMILTON: Your friend is right. You are wrong.

Forget the irrelevant mortgage balance. You have a situation where the $422,000 mortgage (probably from a refinance) exceeds your $182,000 adjusted cost basis ($57,000 plus $125,000 capital improvements). This is called an "excess mortgage."

To calculate your capital gain from your $642,000 net or adjusted sales price, subtract your $182,000 basis to arrive at a $460,000 capital gain.

Presuming you owned and occupied the home as your principal residence at least 24 of the 60 months before its sale, you qualify for the $250,000 home-sale tax exemption of Internal Revenue Code 121. Subtracting the $250,000 exemption from the $460,000 capital gain leaves a $210,000 taxable capital gain.

However, you said, "We added about $125,000 of improvements over the years." If you are married, and your spouse meets the 24 out of last 60 month occupancy test, and if you file a joint income-tax return in the year of home sale, then she can claim an additional $250,000 tax exemption under IRC 121.

Or, if you have a co-owner on the title who also meets the occupancy test, then he or she is entitled to a $250,000 principal residence sale tax exemption, making the sale 100 percent tax-free. For full details, please consult your tax adviser.

REALTY AGENT DISAGREES ABOUT 90-DAY LISTINGS

DEAR BOB: As a realty agent, I agree with about 85 percent of your answers. The big disagreement we have is realty agents need more time than the 90-day listings you recommend to sell most homes. In my local market, the average days on the market for a house is currently 105 days. When sellers point to your articles where you say a 90-day listing is sufficient, I show them why I need more time. Please stop saying 90 days is the ideal listing time – Curt R.

DEAR CURT: If you are an "average" realty agent in your community where the average days on the market for a house is 105 days, you are correct than you probably can't get a listed home sold in 90 days.

But my readers are above average, and I don't recommend they hire just average listing agents.

The biggest reason I recommend 90-day listings for home sellers is then they aren't stuck with a lazy agent for a long time, just in case they chose a "bad agent." I suggest you improve your sales skills so you become an above-average agent who sells listings in less than 90 days.

MUST LISTING AGENT SHARE LISTINGS?

DEAR BOB: I am a fairly new real estate agent. To get started, I represent mostly buyers (rather than sellers). So far, I have sold two houses and one condo in my first three months in the business. But there are several independent brokerages in our area that refuse to share their listings. They don't put them into the local MLS (multiple listing service) although they are members. The reason, they say, is their sellers want the listing firm to have an "office exclusive" for the first 30 days. This makes it tough on buyer's agents like me whose buyers ask me about newspaper ads for houses where the listing agents won't cooperate. Isn't there a law the listing agents must cooperate? – Ted W.

DEAR TED: No. If the seller is aware in the listing contract that the listing agent's firm will have an "office exclusive" for the first 30 days, there is nothing the other local realty agents can do to force such an agent to allow you to show those listings.

However, an exception could occur if the local MLS has a rule that a member brokerage must immediately place all listings into the MLS within 24 hours. But it's easy for a listing agent to get around such a rule.

The new Robert Bruss special report, "24 Key Questions Answered: Living Trust Secrets Reveal How to Avoid Probate Costs and Delays," is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant internet PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.
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How to avoid tax on sale of rental house

Owner seeks alternatives to IRS 1031 exchange
By: Robert J. Bruss: Inman News
DEAR BOB: My rental house in Scottsdale, Ariz., is worth $375,000. It cost me $57,000 in 1977. I depreciated it on a 20-year straight-line basis since I moved out in 1981. If I decide to sell this property to exchange it for a more expensive property, then I'm back in debt. Is an Internal Revenue Code 1031 exchange the only way to sell and avoid tax? – Terry S.

DEAR TERRY: Yes. If you want 100 percent tax deferral, an IRC 1031 tax-deferred exchange for another investment or business property of equal or greater price and equity is the way to go.

If you are tired of "tenants and toilets," an alternative is to make a tax-deferred trade into a management-free TIC (tenant in common) investment, such as a shopping center, office building or apartment building. Finding quality TICs isn't easy, but you won't owe any capital gain or recapture tax with such a trade.

Or, you can kick the tenant out, move into your Scottsdale house, and live there at least 24 months as your principal residence. Then its sale can qualify for up to $250,000 tax-free profits (up to $250,000 additional if your spouse also moves in and you file a joint tax return in the year of the sale).

However, the depreciation you deducted will then be taxed at the special 25 percent federal "recapture" tax rate. Also, you will probably owe state tax. For full details, please consult a tax adviser where the property is located.

IS THERE A SALES TAX ON VACANT LAND?

DEAR BOB: In a recent article, you said the maximum federal capital gain tax is 15 percent. Does this apply to any type of capital gain? Is there any sales tax on the vacant land we sold? – Lori G.

DEAR LORI: I am not aware of any state that imposes its retail sales tax on property sales. Please don't give those government bureaucrats any ideas.

Capital gain tax refers to the tax on sales of long-term capital asset investments held over 12 months, such as stocks, bonds and real estate such as land. But state income tax rules vary widely on capital gain taxes, depending on where your vacant land is located. Please consult a tax adviser in that state.

WHERE TO GET CD-ROM ABOUT LIVING TRUSTS

DEAR BOB: In a recent article you recommended a CD-ROM about doing your own living trust. But I lost the article. Where can I obtain that CD-ROM for living trusts? – Conrad H.

DEAR CONRAD: I said there is an excellent book, "Make Your Own Living Trust, 7th Edition," by attorney Denis Clifford, which includes a CD-ROM. Nolo Press publishes this superb book available for $39.99. It is available in stock or by special order at local bookstores, public libraries, and www.amazon.com.

NO SPECIAL TAX LAW FOR SECOND-HOME SALES

DEAR BOB: My husband and I must sell our three-level villa (our second home for 15 years, never rented). We understand our profit, minus capital improvements and real estate sales commission, carries a capital gains tax. Can you e-mail us the tax law concerning second-home sales? – Beverly J.

DEAR BEVERLY: Sorry, there is no special tax law applicable to sales of vacation or second homes. Your villa sale is a capital asset transaction, reportable on Schedule D of your federal income-tax return. For full details, please consult your tax adviser.

The brand-new Robert Bruss special report, "24 Key Questions Answered: Living Trust Secrets Reveal How to Avoid Probate Costs and Delays," is now available for $5 sent to Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant internet PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.
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2005 Still On Track To Be A Record Year For Housing Sales And Starts

RealtyTimes
Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market SurveySM (PMMSSM) in which the 30-year fixed-rate mortgage (FRM) averaged 5.80 percent, with an average 0.6 point, for the week ending September 22, 2005, up from last week when it averaged 5.74 percent. Last year at this time, the 30-year FRM averaged 5.70 percent.

The average for the 15-year FRM this week is 5.37 percent, with an average 0.7 point, up from last week when it averaged 5.32 percent. A year ago, the 15-year FRM averaged 5.10 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.31 percent this week, with an average 0.8 point, up from last week when it averaged 5.26 percent. There is no annual historical information for last year since Freddie Mac only began tracking this mortgage rate at the start of this year.

One-year Treasury-indexed ARMs averaged 4.48 percent this week, with an average 0.7 point, up slightly from last week when it averaged 4.46 percent. At this time last year, the one-year ARM averaged 4.00 percent.

"Mortgage rates look like they are back on track where the Fed wants them, which is gradually rising," said Frank Nothaft, vice president and chief economist at Freddie Mac. "Freddie Mac’s economic forecast calls for a cooling of the housing market going into next year, and gently rising rates are part of that scenario."

"However, the resiliency of the housing sector continues to amaze. Mortgage applications are running at a strong pace, according to the Mortgage Bankers Association, and the most recent housing starts figures, although coming in lower than expected, were still at near record levels. 2005 will be another banner year for the housing industry."
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When Is It A Sellers' Market?

With all the talk of a real estate bubble, it makes a lot of people wonder - "When does it turn from a sellers' market (hot) to a buyers' market (cold)?"
By: M. Anthony Carr: RealtyTimes
The ever elusive bubble that the media discusses has pretty much yet to evolve. I did some research and found the first mention of over-inflated properties back in 2001 when RealtyTimes.com columnist Broderick Perkins interviewed several real estate bubble watchers to find out their definition of a sellers versus a buyers market.

Simply put, you know you're in a sellers market when the buyers have little or no power in the negotiating arena during the sales process. These bubble watchers were defining a buyers market as a market where there was a certain amount of inventory on the market -- generally upwards to nine months of homes. Some brought it down to as low as three months and others pegged it right in the middle at six months.

I would default to the lower end at three to six months of inventory. At this level, while buyers are not in absolute control of the market, if sellers prepare the house well and price it right, they'll find multiple buyers at the door; however, all things being equal, it will linger on the market and sellers are more willing to provide subsidies and drop prices.

The way you determine this supply of inventory is by dividing the number of homes on the market in a given month by the number of houses sold that same month. Example: 5,000 houses on the market; 2,500 of them sell. This equals a 2 months' supply of homes, meaning that if no other houses come on the market, all the houses will be sold within 2 months.

Generally, here are the characteristics of a sellers' market:

    • Booming local economy. Local businesses are hiring at a brisk pace. New
      companies are opening up shop.

    • Low existing housing inventory. More jobs are coming into a market where
      there's not enough inventory to house all the workers, thus creating financial
      pressure on local resale units.

    • Builders are not producing enough homes to fill the job base. In the
      Washington, D.C. market, for instance, the local economy is pumping out more
      than 80,000 jobs in 2005, yet only about 35,000 houses are coming on line
      during the same period of time.

    • Home sales prices are escalating. Over the last several years, the national
      increase has been in the five to seven percent range. In a seller's market,
      it's not unusual to experience double digit increases. Some communities could
      double in price in just a year or two.

    • Buyer contracts begin to come in non-contingent. Buyers want to purchase a
      house, period. They no longer offer under list price, ask to sell their house
      first before settlement, or try to buy without financing already approved.
      There is no negotiating for the "perfect" terms. Getting the house, is the
      perfect term.

    • Seller subsidies disappear. While buyers used to ask for some sort of
      assistance - lower price, points paid, closing costs - the buyers must come to
      the table without any help from the seller.

    • High down payments become the norm. Buyers benefit from high appreciation and
      begin bringing down payments such as 25-plus percent to the transaction.

    • Appraisals are no longer needed to qualify for the purchase price. With down
      payments of $100,000-plus, there's plenty of equity coming to the table to
      ease the risk factor for most lenders so that the appraised value is not as
      important as the actual purchasing price. If the appraisal comes in $20,000
      less than asking price - that's okay, because the buyer has enough cash to
      compensate for the lower value.

When you're looking at the other end of the spectrum, the buyers' market would look like this:

    • Job growth eases or turns into job losses. Local companies are closing, a
      particular sector goes bust (telecom, manufacturing, etc.) and there are no
      longer enough people in town to support the local housing inventory.

    • The above situation creates a higher standing inventory, thus more houses
      appear on the market as people move out of town to find jobs elsewhere.
      Builders, who may have been building homes in the tail end of a seller's
      market, may find that they are now stuck with speculation homes they can't
      sell.

    • Foreclosures increase as the local job market softens. This creates a new
      venue of market with investors moving in to find good deals.

    • Home prices begin to depreciate and some homeowners will find
      themselves "upside down" in their property - owing more on the house than what
      it's worth.

    • Some sellers may have to come to the table with money to sell the house
      instead of reaping a large amount of equity. Meanwhile, other sellers will
      option for a short sale where they take action to return the property back to
      the lender instead of filing foreclosure.

    • A first-time buyer market emerges as the once high prices drop to a level
      where some can afford to purchase now. This will bring about the use of low-
      to no-down payment mortgages in a market where they can negotiate the use of
      such mortgages.

    • Seller subsidies increase. Whereby the buyers once had to turn over first-born
      children to the sellers, now it's the other way around. Price drops, closing
      costs assistance, and other seller subsidies become the norm.

If you noticed, interest rates and the prices of houses did not determine a sellers' or buyers' market. Some of the hottest markets in the past existed in high priced and high interest rate environments.

Mr. Carr has covered real estate since 1989. He is the author of Real Estate Investing Made Simple. Got a personal real estate issue? Post your questions and comments at Anthony's blog.
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The Weekend Guide! September 22 - September 25, 2005

The Weekend Guide for September 22 - September 25, 2005.
Full Article:
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Home-price gains to ease in 2006

Forecast calls for lower sales rate
Inman News
The rate of home-price appreciation will moderate next year following four years of steep increases, while sales in 2006 will decline slightly from this year's record pace, according to the California Association of Realtors' "2006 Housing Market Forecast" released today. The forecast was presented during the association Centennial Realtor Expo at the San Diego Convention Center.

The median-home price in California will increase 10 percent to $575,500 in 2006 compared with a projected median of $523,150 this year, while sales for 2006 are projected to reach 630,610 units, falling 2 percent compared to 2005, the association announced today.

The double-digit gain in the median price of a home, which California has experienced for most of the past five years, will again be fueled by the continuing shortage of housing across much of the state, according to association economists. California typically gains nearly 250,000 new households yet will build about 200,000 new housing units this year, creating a shortfall of about 50,000 units, the association reported.

"We expect the fixed mortgage interest rate to rise to 6.4 percent next year, and the adjustable-rate to hit 5.1 percent, which will make it more difficult for many families in California to be able to afford a home," said Jim Hamilton, association president. "While still near their historic lows, upticks in interest rates coupled with the continued increase in the median home price will push affordability in California to a new all-time annual low of 15 percent next year."

"The economic fundamentals at both the state and national level continue to support a strong housing market in the Golden State for the foreseeable future," said association vice president and chief economist Leslie Appleton-Young. "However, we also expect that the wave of new loan products that have flooded the market over the past several years have injected a higher level of risk into the market, while affordability barriers to home ownership will continue to push residents inland and even out of state.

"Declining affordability will constrain sales in 2006 at a greater rate than we've previously experienced, especially in markets where there are higher price points compared with the state as a whole," she said. "Not all areas of the state will continue to experience the unprecedented double-digit median price increases of the past five years. Some high-cost areas, especially those in the more costly coastal regions, face a potential leveling off of median price gains compared with the 10 percent gain we expect for the state as a whole."

Home sales for California in 2005 are expected to reach a record 643,480 units, surpassing the prior sales record of 624,740 set in 2004, according to association economists.

Appleton-Young will deliver a presentation on the forecast today during the association Centennial Realtor Expo at the San Diego Convention Center. The convention and trade show attract more than 9,000 attendees.

The California Association of Realtors has about 180,000 members.
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