The Weekend Guide! November 30 - December 3, 2006

The Weekend Guide for November 30 - December 3, 2006.
Full Article:
Read more!

Greenspan Says the Worst is Over for Housing

Former Federal Reserve Chairman Alan Greenspan says that the worst of the housing adjustment is over and "sales figures have stabilized."
By: Vinnee Tong: REALTOR® Magazine Online
He predicted that inventory levels will come down at a "reasonably rapid pace.” He also foresees housing price declines that will have an impact on consumer expenditures. “We haven’t see it yet,” he says.

Greenspan also announced he is preparing to publish an analysis of the effect of mortgage wealth on consumer spending. The paper will include data on gross equity extraction dating to 1968 and a more detailed analysis of data from 1991 to the present.

The thesis, he says, is whether extracted equity is "acting as a proxy for all types of financing of goods that would've been bought anyway."

Greenspan didn’t say when the analysis will be available.
Read more!

October Existing-Home Sales Show Modest Gain

Total existing-home sales rose 0.5 percent to a seasonally adjusted annual rate of 6.24 million units in October, but were down 11.5 percent from a year earlier.
NAR: REALTOR® Magazine Online
Sales of existing homes held steady with a modest gain last month, another indication the housing market is transitioning into a more normal market in contrast with unsustainable activity last year, according to the NATIONAL ASSOCIATION OF REALTORS®.

Total existing-home sales — including single-family, townhomes, condominiums and co-ops — rose 0.5 percent to a seasonally adjusted annual rate of 6.24 million units in October from an upwardly revised pace of 6.21 million in September, but were 11.5 percent below the 7.05 million-unit level in October 2005.

“The present level of home sales demonstrates some confidence in the market, but sales are lower than sustainable due to psychological factors,” says David Lereah, NAR’s chief economist. “The demographics of our growing population, historically low and declining mortgage interest rates, and healthy job creation mean the wherewithal is there to buy homes in most of the country, but many buyers remain on the sidelines. After a period of price adjustment, we’ll see more confidence in the market and a lift to home sales should be apparent in the first quarter of 2007.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional fixed-rate mortgage was 6.36 percent in October, down from 6.4 percent in September but up from 6.07 percent in October 2005. Last week, Freddie Mac reported the 30-year rate dropped to 6.18 percent — the lowest since January of this year.

NAR President Pat Vredevoogd Combs, from Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt, says sellers in most of the country are doing what it takes to attract buyers. “With the exception of parts of the West, sellers are cutting their price enough to encourage sales,” she says. “It’s an especially good market for sellers in areas with rising jobs and a growing population where prices remain moderate — those are the areas now with the strongest price growth. On the opposite extremes, about 10 percent of the country is experiencing economic weakness, and a fourth of the nation — areas that had the biggest boom — is in a correction that will take longer to balance.”

The national median existing-home price for all housing types was $221,000 in October, which is down 3.5 percent from October 2005 when the median price spiked above adjacent months to $229,000.

“The annual decline in the October median home price is skewed because there was an uncharacteristic spike in October 2005, but the trend for the fourth quarter will be prices remaining slightly below a year ago. Overall prices are projected to see modest appreciation around early spring,” Lereah says.

National Numbers

Total housing inventory levels increased 1.9 percent at the end of October to 3.85 million existing homes available for sale, which represents a 7.4-month supply at the current sales pace.

Single-family home sales rose 1.3 percent to a seasonally adjusted annual rate of 5.5 million in October from a level of 5.43 million September, but were 11 percent below the 6.18 million-unit pace in October 2005. The median existing single-family home price was $221,300 in October, down 3.4 percent from a year earlier.

Existing condominium and cooperative housing sales fell 4.8 percent to a seasonally adjusted annual rate of 741,000 units in October from an upwardly revised 778,000 in September, and were down 14.5 percent from the 867,000-unit level in October 2005. The median existing condo price was $214,300 in October, which is 5.3 percent lower than the previous year.

Regional Reports

Existing-home sales in the West rose 6.4 percent to an annual pace of 1.33 million in October, but were 18.9 percent lower than a year earlier. The median price in the West was $340,000, down 0.6 percent from October 2005.

In the Midwest, existing-home sales were unchanged in October, holding at a level of 1.41 million, but were down 10.2 percent from a year ago. The median price in the Midwest was $170,000, a drop of 1.2 percent from October 2005.

Existing-home sales in the South slipped 1.2 percent to an annual sales rate of 2.49 million in October, down 8.8 percent from the same period a year ago. The median price in the South was $185,000, down 7 percent from a spike in October 2005.

Existing-home sales in the Northeast declined 2.9 percent to a level of 1.01 million in October, and were down 9.8 percent from October 2005. The median existing-home price in the Northeast was $254,000, a drop of 5.2 percent from a year earlier.
Read more!

Not all pricing news is gloomy

Housing prices continued to climb in the third quarter, according to the only national survey that covers the sale of both new and existing homes.
By: Lew Sichelman: latimes.com
The ascent wasn't nearly as relentless — just 3.1% — but prices are still rising nonetheless, according to the quarterly figures from the Federal Housing Finance Board.

The average in the nation's 32 largest markets was $326,700 as of Sept. 30, up from $317,000 a year earlier. Of the 32 markets, 19 showed increases, including surprising double-digit gains in several places.

Like studies conducted by other government agencies and the National Assn. of Realtors, the housing finance board's survey is not without drawbacks. It doesn't include houses sold with government financing, for example, so the numbers tend to skew a bit higher.

But it is the only one that includes new homes, and new homes typically are price leaders on which all other sellers base their asking prices. And in most places, builders are holding the line on their prices.

Builders may be offering all sorts of incentives — help with financing, free options and upgrades, free vacations and even free cars. But most have not resorted to cutting their prices.

Another take-away from the latest survey is the old real estate bromide that houses in good neighborhoods that show well and are priced right will sell, even in a market where many buyers are afraid to pull the trigger because they've heard nothing but doom and gloom about the faltering housing sector.

Nationally, there are some surprising numbers. One is that Las Vegas showed a whopping 18.9% gain in housing prices. Las Vegas, of course, is the poster child for all things bad in the housing market. The place is so overbuilt that several developers there have canceled major projects — not just put them on hold but scratched them altogether. Yet the average selling price in Sin City was $402,100 in the third quarter, up from $338,200 a year earlier.

Of course, some of that gain is a result of more than the usual number of houses and condos selling in the higher price ranges. But that's exactly the point. Good houses, good places, good prices equal sales in any price bracket.

Two other markets also nailed double-digit increases in the third quarter. Columbus, Ohio, sported better than a 14.5% gain, from $210,100 to $241,300, in the 12-month period covered by the latest government numbers. And Portland, Ore., was up 13.2%, from $297,900 to $337,300.

None of the 13 "down" markets had double-digit declines. But three came close. In Detroit, prices fell about 9.8%, from $202,100 to $182,200. In Boston, they dipped about 9.1%, from $411,700 to $374,100. And in St. Louis, they dropped 9%, from $230,500 to $209,800.

But part of the decline is related to more activity than normal in the lower end of the market. And again, at least houses were selling in those places.

As usual, San Francisco is the nation's housing price leader. Prices in the Bay Area averaged $667,300 in the third quarter, a gain of about 2.8% from $649,300 last year at this time.

San Diego, the country's second-priciest housing market, also showed a small increase. The average there was $568,100, up about 2.1% from $556,200. And the average of housing sold in No. 3 Los Angeles rose 8.9%, from $517,800 to $563,700.

The fourth and fifth most expensive places also sported gains. In New York, the average grew price 5%, from $468,700 to $492,300. And in Washington, D.C., the average price rose 9%, from $448,200 to $489,000.

At the other end of the price spectrum, prices fell in four of the five least-expensive places among the nation's 32 largest metro areas. Only the fifth-least expensive spot, San Antonio, registered a gain.

The bottom five are Dallas at $181,500, down 1.9% from $185,000; Detroit at $182,200, off 9.8% from $202,100; Indianapolis at $183,600, down 5.4% from $194,000; Kansas City at $188,000, off 1% from $189,900; and San Antonio at $189,100, up 7.6% from $175,800.
Read more!

What to Do in a Market That Is Headed for a Falloff

Rising mortgage rates and selloffs by skittish real-estate investors have helped depress housing prices. But there's another factor that many miss: the relationship between home prices and incomes.
By: Matthew Heimer: The Wall Street Journal Online
After hurtling along for years, the nationwide real-estate boom has come to a screeching halt. In 2005, home prices in the U.S. rose more than 12%; this year, the National Association of Realtors expects appreciation to reach just 1.9% - the lowest gain since 1992.

Rising mortgage rates and selloffs by skittish real-estate investors have helped depress housing prices in many metropolitan areas. But there's another factor that many observers miss: the relationship between home prices and incomes.

When the cost of housing in a given area grows far faster than local wages and salaries, the pool of potential buyers shrinks, and prices are much more likely to sink.

For the past five years, SmartMoney magazine has worked with Ingo Winzer, president of the consulting firm Local Market Monitor, evaluating home-sale prices against local income to determine whether a given market is overvalued, undervalued or fairly valued. Mr. Winzer relies on more than 15 years of housing and income statistics to find out where prices are headed.

According to Mr. Winzer, any market that's more than 30% overvalued is due for a correction. In the fall of 2003, only eight markets on the list of 152 fit that description; on this year's list, 37 did. Sure enough, price decreases are beginning to pop up in many of the markets that have shown up year after year as the most overvalued - especially in Florida and California.

What to do if you're in a falling market? Obviously, that's a promising climate for a bargain-hunting buyer. A savvy real-estate agent can help you craft a bid that's low enough to save you money, but realistic enough to be accepted. When one of Frank Borges LLosa's clients finds an appealing home, the Northern Virginia broker searches the history of the selling agent - data not available to consumers - on the local multiple listing service. If the agent frequently sells below the asking price, Mr. LLosa knows he can be aggressive.

Listing archives can also help buyers figure out the right bidding range. Ask your agent to comb the MLS for "pending sales," deals that are in contract but haven't yet closed, to get an up-to-date sense of price ranges in your market.

In an ideal world, you wouldn't sell a house at all while prices were falling. But if you must, experts agree that it's best to act quickly, before prices slide further.

Often, that means gritting your teeth and offering the best price to get potential buyers in the door. Here again, getting your agent to tap pending-sales data can pay off. Pay attention to the pricing per square foot for homes similar to yours, and set your asking price at the bottom of, or even below, that range.

South Florida broker Mike Morgan recommends that his clients take 1% to 3% off the price every week until they get an offer.

Another way to motivate a potential buyer: Motivate his broker. In a typical sale, a commission of 6% is split evenly between the buyer's and seller's agents. But you can ask that a higher percentage go to the buyer's agent, or even offer extra money out of your own pocket, so that she'll steer customers your way.

David Lereah, chief economist of the National Association of Realtors, expects that nationwide prices will bounce back in 2007.

He adds that one-third of the country is primed for growth - a claim that Mr. Winzer's research supports. And if you don't have to sell your home, the short-term turmoil underscores the point that it seldom makes sense to obsess over your home's value the way you'd obsess over, say, your Google shares. Better to sit back, enjoy your mortgage-interest tax deduction, and wait for better days.
Read more!

Numerous ways that home sales fall apart

To save time and money, probe buyer before accepting offer
By: Dian Hymer: Inman News
Recently, a Los Angeles home seller thought his sale was a sure thing. Mere days later, his house was back on the market. What went wrong? The buyer didn't qualify for financing.

In most cases, this sort of fallout can be avoided. One positive byproduct of the recent fast seller's market is that lenders are prepared to preapprove buyers for financing in a day or two. It doesn't make sense for either the buyer or seller to enter into a transaction that the buyer can't complete financially.

To avoid disappointment, buyers should find out for sure what they can afford before making an offer. Buyers are in a better bargaining position with the seller if they can accompany their offer with a bona fide preapproval letter.

HOUSE HUNTING TIP: There's a big difference between prequalification and preapproval. A prequalification letter merely states that the buyer might be qualified for a mortgage if the credit report and pertinent financial documentation pans out. A preapproval letter from a lender is a letter that says the buyer is approved for a mortgage subject to a ratified purchase contract, a property appraisal and an acceptable preliminary title report.

Sellers who receive a preapproval letter from a mortgage broker rather than from the lender who will make the loan should ask for permission to call the mortgage broker to find out if there's any reason at all why the buyer's loan shouldn't be approved. Your listing agent can make the call for you.

Every once in a while, someone who's not actively looking to buy a home walks into an open house and decides to buy the property. Sellers who receive an offer from an enthusiastic buyer who hasn't had the time to be preapproved should issue a counteroffer that includes a provision for the buyer to be preapproved by acceptance.

If you give the buyer a day or two to accept the counteroffer, he should be able to provide a preapproval letter in that time frame. Or, if not, within the time frame it takes to negotiate the contract.

Some deals fall apart because the buyers discover something about the house or the neighborhood that makes them rethink their decision. It's best for sellers to get all the news about property and neighborhood conditions - especially if it's bad news - out in the open upfront. This lessens the chance that the deal will fall apart.

Buyers appreciate a complete disclosure package on a property, including presale inspections reports, so that they can make an informed decision about whether to buy the property. Sellers, however, often fear that the bad news will dissuade buyers or that inspections cost too much.

A failed transaction costs time, and sometimes money. Also, a property that goes back on the market can carry a stigma. It's far better to deal with issues upfront.

Another reason deals fall apart is "buyer's remorse." That is, a buyer has second thoughts about going through with the purchase soon after the sellers accept his/her offer. Sellers should find out as much as they can about a buyer before accepting an offer.

For instance, why are they buying? Have they outgrown their present home? Have they been transferred into the area? How long have they been looking? Have they made offers on other houses? Why weren't their offers successful? Did they back out of other deals?

THE CLOSING: As tempting as it might be to accept an offer and be done with the marketing process, it does little good if you're back on the market shortly after acceptance. It takes committed buyers and sellers to close a real estate transaction.

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.
Read more!

Frustrated Sterling Could Abandon

Donald Sterling is considering killing the homeless center he wants to build in Skid Row.
By: DANIEL MILLER: Los Angeles Business Journal Online
Donald Sterling is considering killing the homeless center he wants to build in Skid Row, saying his proposal has gotten the cold shoulder.

“I want to help the homeless, but I need political support,” said Sterling, who declined to comment further.

He could cancel his plans for the homeless center as early as this week.

Sterling, owner of the Los Angeles Clippers and a local real estate mogul, had planned to purchase a warehouse property at 600 Wall St. for about $12 million and then pour an additional $50 million into the property to build a center that would provide services to the homeless and other residents in and near Skid Row.

Sterling announced the proposed center with several advertisements in the Los Angeles Times earlier this year. But rather than hearing the warm applause of a grateful city, all he’s heard is the sound of silence.

In fact, a Los Angeles Times story in June dubbed the proposed homeless center a “mysterious plan.”

“What is mysterious about someone wanting to do something beneficial for the community?” said Bradley Luster, Sterling’s real estate agent and friend.

“Mr. Sterling is very frustrated with the various political factions that are treating him unfairly publicly,” Luster said.

The Mayor’s office declined to comment for this story.

Some downtown real estate experts have said privately that they understand the city government is not interested in a permanent resources center that could attract more homeless to the area or entrench the homeless already there.

However, Los Angeles City Councilwoman Jan Perry said she is interested in such a center.

“We always need people to consider where the gap is in services,” said Perry, who represents the area that includes the proposed center’s site. “Anytime someone acquires a large piece of property and puts it to use for the surrounding community, I’d consider it a good thing.”

Perry said that on Nov. 15 she received an e-mail from Sterling that said he wanted to discuss plans for the proposed center. She said that she planned to respond “affirmatively” to Sterling’s message.

“He’s a very nice person. I am sure we will talk,” Perry said.
No partner

Beyond the apparent lack of political support, Sterling has been unable to find a partner that would operate his center.

“It’s been very difficult getting a non-profit partner that would be capable of putting a deal together,” said Luster, who is president of the Los Angeles-based real estate firm Major Properties.

One obvious candidate to be a partner is the Midnight Mission, which is adjacent to Sterling’s proposed center. Currently, the organization is not involved in Sterling’s plans, but “they might be back on the table,” Luster said.

“They understand the politics to get the deal done,” Luster said. He added that if the deal for the property is completed, Sterling would reach out to the non-profit People Assisting the Homeless about a possible partnership.

Officials with Midnight Mission did not return calls seeking comment.

Luster said that Sterling will meet this week with the owner of the site, Tony Ta, to discuss whether to extend escrow on the property or cancel it.

A 60,000-square-foot warehouse is currently on the property, which is a block long at Wall and Sixth streets. The warehouse is used by an import-export company to distribute toys.

The warehouse would be razed in order to build the center, which would include a medical clinic, community court and a work training center, among other features. The center would not include housing for the homeless.

Sterling supports a variety of causes including the Asthma & Allergy Foundation and the Special Olympics.

Luster said Sterling’s motive for building the center is solely philanthropic, adding that he wanted the homeless center to be “the first step in leaving his legacy.”
Read more!

California: Luxury House Values Climb Slightly

California's luxury home values posted slight gains in Los Angeles, San Diego, and San Francisco in the third quarter.
REALTOR® Magazine Online
California’s luxury home values posted slight gains in Los Angeles, San Diego and San Francisco in the third quarter of 2006, according to the First Republic Prestige Home Index.

The index, which has tracked luxury homes since 1985, found:

Los Angeles values rose 0.6 percent from the second quarter of 2006 to the third quarter and climbed 4.4 percent from a year ago. The average luxury home in Los Angeles is now $2.37 million.

San Diego values increased 1.9 percent from the second quarter of 2006 to the third quarter and gained 5.4 percent from a year ago. The average luxury home in San Diego is now $2.18 million.

San Francisco Bay Area values increased 1.1 percent from the second quarter of 2006 to the third quarter and gained 4.0 percent from a year ago. The average luxury home in San Francisco is now a record $2.96 million.

The modest increases are “due to growing inventory, longer sales time, and greater caution among buyers because of the uncertainty in the market," says Katherine August-deWilde, chief operating officer of First Republic.
Read more!

Relative strength in California housing

Thanks partly to its healthy economy and lack of overbuilding, California's home prices are holding up slightly better than other recently red-hot locales, according to data released Monday.
By: Annette Haddad: latimes.com
The nation's housing slump spread in the third quarter, as prices for resale homes in such places as Phoenix and Florida's eastern coast declined compared with a year earlier, the National Assn. of Realtors said.

Yet most of California's biggest real estate markets, including Los Angeles, the Inland Empire and the San Francisco Bay Area, continued to book year-over-year gains, albeit at a much slower pace, according to the Realtors group.

Among the reasons for California's better performance: Lack of available land and regulatory restrictions have led to a smaller supply of new or under-construction homes competing with resale homes. New homes represent about 15% of the total state housing market.

Also, the California economy is healthy and most people "are keeping up with their mortgage payments," said Leslie Appleton-Young, chief economist for the California Assn. of Realtors, which supplied data for the national Realtors' report.

"The data on the economy is fairly good and we're seeing job growth," which helps bolster demand for housing, she said.

California is a step ahead of other parts of the nation because it was the first region to start experiencing double-digit price gains in 2000 and the first to start tapering off. Price increases have been slowing for more than a year, as have sales.

Now, other locales are following with their own slowdowns, said John Karevoll, chief analyst with La Jolla-based research firm DataQuick Information Systems.

Nationwide, the median price of a resale home fell 1.2% to a seasonally adjusted $224,900 in the July-September period, with about a third of the 148 U.S. markets surveyed posting year-over-year declines, the Realtors said. The median is the price at which half of all homes sold for more, half for less.

In California, three of seven markets depreciated: San Diego, where the median price declined 2.1% to $601,900; Sacramento, which saw prices drop 3.5% to $375,400, and Orange County, where the median dipped 0.8% to $705,000.

San Diego and Sacramento also happen to be among the state's biggest new-home markets. Builders in these areas have been readily discounting their prices, putting pressure on existing-home values.

Overall, Appleton-Young said, the national data "reflect the fact that as you get into fall, there is less upward pressure on prices and less activity in general."

"But we are still seeing firmer prices here," she added.

Sales also haven't fallen as much in California as in some other once-hot markets.

Sales of resale homes here fell 28% in the third quarter versus a year earlier, the Realtors said. By comparison, Arizona sales plunged 36%, Florida's dropped 34% and Nevada's declined 38%. Nationwide, sales are down 12.7% year over year.

One ingredient helping buoy California's real estate market is the relative strength of the $2-million-and-above home market. In the third quarter, luxury home values in California gained at least 4% from a year earlier, according to a survey by San Francisco-based First Republic Bank.

"I'm a little surprised by how well it's holding up," First Republic Chief Operating Officer Katherine August-deWilde said.

*

(INFOBOX BELOW)

Hot and cold markets

Year-over-year home price changes

Third quarter
Metropolitan area 2006
Seattle 14.6%
Riverside-San Bernardino-
Ontario 5.9
Houston 5.3
Los Angeles-Long Beach-
Santa Ana* 5.2
San Francisco 3.8
New York-Long Island 3.6
Atlanta 2.9
Dallas 2.8
Chicago 1.7
Las Vegas 1.6
San Jose 0.0
Denver –0.1
Phoenix –0.6
Orange County* –0.8
San Diego –2.1
Washington, D.C. –2.2
Sacramento –3.5
Boston –4.3
Miami –5.6


*Orange County is also counted as part of the Los Angeles metropolitan area.

Sources: National Assn. of Realtors, California Assn. ofRealtors
Read more!

Sellers still unrealistic about asking prices

Why first purchase offer may be the best
By: Dian Hymer: Inman News
Sellers who aren't happy with the first offer they receive are often inclined to refuse it and wait to see if something better comes along. However, some sellers are finding out the hard way that the first offer was their best offer.

A Piedmont, Calif., homeowner listed his home for sale this summer at a price that he'd hoped would generate multiple offers and a higher price. Not long after the house went on the market, a buyer made an offer for over the list price. However, although it was a good price, the seller wanted even more. So, he issued a counteroffer for an even higher price. The buyer rejected the counteroffer and bought a different property.

The seller then increased his list price to a price he would be willing to accept. The property sat on the market for weeks with no offers. Finally, the seller lowered the price to his original asking price. This action did generate two offers, both for less than the asking price. He accepted the better of the two offers. However, he ended up selling for far less than the amount of his first offer.

A year ago, many sellers listed for an under-market price that resulted in a successful sale for more money. There was a limited inventory of homes for sale and a lot of buyers who were anxious to buy.

Now, buyers have more to choose from and can afford to be discerning. Sellers, on the other hand, need to carefully consider every offer even if they think the price is low.

It's difficult for most sellers to accept an offer for less than they want if the offer is made soon after the listing is marketed. The natural inclination is to think that more exposure will bring buyers who will pay more. This is always possible.

However, serious buyers who've searched for a considerable time usually come forward with an offer as soon as the right property comes along. These buyers tend to know local market values well. They are motivated to buy and will often make their best offer - or close to it - initially.

HOME SELLER TIP: Make sure you carefully evaluate the merits of an offer that is presented soon after your home hits the market. Ask your listing agent to give you feedback about your list price and the local market conditions. How many homes like yours are currently on the market? Have any sold within the last few weeks? How do the list prices of these properties compare to yours? Is there serious interest from any other buyers?

In the above example, the seller's mistake was to expect too much for his house. This is a common mistake sellers make in today's market. Unfortunately, misreading the market costs time and money.

In order to be a successful seller, particularly in the current market, you need to divorce yourself emotionally from your home and look at it objectively. Ask yourself if you would pay the price you're asking a buyer to pay. Try to put yourself in the buyer's shoes.

Another Piedmont homeowner put his home on the market at the end of July. Several similar listings came on the market the same week. The listing agent planned to hold two open houses before the seller listened to offers.

However, several days after the first open house, an offer was written. The buyers were the very first people to look at the house. The seller had been hoping for multiple offers and a higher price. But, he accepted the buyers' asking-price offer. The deal closed in 30 days.

THE CLOSING: The other listings that came on the market at the same time in the above example sold one to two months later only after price reductions.

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.
Read more!

Economists Say the Worst Of Housing Bust Is Over

The real-estate market is nearing the end of the slowdown, experts said by nearly 2-to-1 in a WSJ.com survey. But they have wildly different views on where home prices are heading.
The Wall Street Journal Online
The worst of the housing bust is over, economists said by nearly 2-to-1 in the latest WSJ.com economic forecasting survey. But they still predict that the average selling price of a house will fall next year.

After several years of double-digit percentage increase, housing prices stopped soaring this year. The 49 economists responding to the WSJ.com forecasting survey expect home prices, measured by the government's Office of Federal Housing Enterprise Oversight index, to rise 2.8% this year and to fall by 0.5% next year. That contrasts with a 13.4% increase in 2005.

"We're nearing the end of the slowdown for most markets," said Ethan S. Harris at Lehman Brothers. Prices still have some ways to fall before they'll stabilize, but there are signs that most drastic parts of the downturn - marked by a sharp pullback in demand and new construction - have run their course.

The economists' predictions for home prices next year vary widely, from an increase of 7%, predicted by Kurt Karl and Arun Raha of Swiss Re, to a 10% decline, expected by Maury Harris of UBS. Mr. Harris, for his part, said he expects a large inventory of vacant newly constructed homes to push prices lower in the first half. Construction companies "built much more than were justified because of investor interest," he said.

While 20 economists predicted home prices would rise next year, 24 forecast a decline. Just eight of the economists forecast gains greater than 2.1%, which is their average forecast for consumer-price inflation through mid-2007. The Ofheo index, which is closely watched by economists, has never posted a year-to-year decline.

Richard DeKaser, an economist at National City Corp., a big mortgage provider, said he thinks the worst is over. "We're starting to see inventories topping out and possible declining," he said. Mr. DeKaser forecast a 4.4% increase in prices this year and a 1.8% decline next.

The housing market, of course, doesn't move uniformly across the country; some regions or individual cities often have price changes decidedly above or below the national average.

Mr. Harris of Lehman expects price declines next year to be confined to "bubble" markets, such as those in Florida, California and cities in Nevada and Arizona, where large numbers of investors have artificially inflated prices. "There's no reason for prices to be falling in areas without a bubble," he said. "People are just slowing down purchase decisions."

Allen Sinai, at Decision Economics Inc., believes the worst of the bust is over, but he feels housing remains a big risk to the economy. The housing sector subtracted 1.1 percentage points from third-quarter gross domestic product, according to preliminary numbers from the U.S. Commerce Department.

The economists trimmed their forecasts for fourth-quarter economic growth: Their average estimate puts gross domestic product growth at a 2.3% rate in the fourth quarter, down from the 2.5% rate they forecast in the October survey. They expect growth to remain at that rate through the first half of 2007 and then to accelerate later in the year. On average, the economists predicted growth of 2.8% during the second half 2007. GDP is the broadest measure of economic output.

The housing slowdown is expected to hit consumer spending, but the "consumer won't cave in and drive us into a recession," said Mr. Sinai. Steady interest rates, controlled inflation, stabilizing energy prices and a solid jobs market will support the economy, he said.

Indeed, new data released Monday indicated that weakness in the housing sector is being offset by other areas of the economy. The Conference Board, an industry-backed research group based in New York, said its composite index of leading indicators for October rose by 0.2% to 138.3, in line with expectations. September's reading was revised up to a 0.4% advance. The index is designed to predict activity in the three to six months ahead.

"People say all bubbles end in disaster, but this is a small bubble. Home prices are just about 20% too high. We need to take it seriously, but in the history of bubbles, this will go down as one of the smaller ones," said Lehman's Mr. Harris.

Among other findings in the survey:

    • Economists expect a relatively happy holiday for retailers, forecasting a 5.1%
      rise in sales from last year.

    • Some 57% expect Fed policy to be the biggest factor in the economy and markets
      over the next year, topping Iraq or the budget and tax legislation.

    • Just eight of 56 economists expect the Federal Reserve to raise rates beyond
      the current 5.25% rate before June 2007.

    • Economists expect just 107,000 new jobs a month over the next year, down from
      109,800 forecast in October and 179,400 at the high for this year's surveys,
      in February.

Read more!

Positive Picture for Buyers in Third Quarter

NAR Chief Economist David Lereah says market conditions are nearly the opposite of a year ago. "Buyers now have choices and sellers are more willing to negotiate."
REALTOR® Magazine Online
Conditions for buyers improved during the third quarter, as home prices declined in many metropolitan areas, sales activity slowed, and inventory increased, according to the latest quarterly survey by the NATIONAL ASSOCIATION OF REALTORS®.

Total state existing-home sales, including single-family homes and condos, were at a seasonally adjusted annual rate of 6.27 million units in the third quarter, down 12.7 percent from a 7.18 million-unit pace in the third quarter of 2005. Even with the overall decline, 10 states showed increases in sales activity from a year ago.

Among 148 metropolitan statistical areas included in the report, 102 areas had price gains, including 21 metros with double-digit annual increases, and 45 areas experienced price declines; one was unchanged.

David Lereah, NAR’s chief economist, says market conditions are nearly the opposite of a year ago. “Last year we had a record sales market and historically tight supplies of homes with buyers bidding over the asking price,” he says. “With the market in full transition, buyers now have choices and sellers are more willing to negotiate. Under these circumstances it’s no surprise that overall home prices are slightly below a year ago.”

He says the trend will likely continue into the months ahead, although there’s expected to be modest price appreciation in most of the country in 2007.

The national median existing single-family home price was $224,900 in the third quarter, down 1.2 percent from a year earlier when the median price was $227,600. The median is a typical market price where half of the homes sold for more and half sold for less.

Good News for Buyers

The market transition is good news for home buyers, says NAR’s new president, Pat Vredevoogd Combs.

“With the supply of homes at the highest level in over a decade and historically low mortgage interest rates, it’s become a great time to buy a home,” says Combs, vice president of Coldwell Banker AJS Schmidt in Grand Rapids. “This window of opportunity will continue into the new year, but inventories are starting to decline and sellers will be less willing to negotiate when conditions begin to balance in most areas around early spring.”

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was 6.56 percent in the third quarter, down from 6.60 percent in the second quarter; the rate was 5.76 percent in the third quarter of 2005. Last week, Freddie Mac reported the 30-year fixed rate was down to 6.24 percent.

Biggest Sales, Price Increases

The biggest total sales increase was in North Carolina, where existing-home sales rose 9.7 percent from the third quarter of 2005. In Texas, the third-quarter resale pace rose 8.6 percent from a year earlier, while Montana experienced the third strongest gain, up 6.4 percent.

The largest single-family home price increase was in the Salem, Ore., area, where the third quarter price of $228,000 was 24.7 percent higher than a year ago. Next was Elmira, N.Y., at $93,600, up 21.4 percent from the third quarter of 2005. The Salt Lake City area, with a third quarter median price of $216,300, increased 19.2 percent in the last year.

Median third-quarter metro area single-family prices ranged from a very affordable $86,000 in both Decatur, Ill., and the Youngstown-Warren-Boardman area of Ohio and Pennsylvania, to nearly nine times that amount in the San Francisco-Oakland-Fremont area where the median price was $749,400.

The second most expensive area was the San Jose-Sunnyvale-Santa Clara area of California, at $747,400, followed by the Anaheim-Santa Ana-Irvine area (Orange Co., Calif.), at $705,000.

In addition to Elmira, N.Y., other affordable markets include South Bend-Mishawaka, Ind., with a third-quarter median price of $96,000, and the Cumberland area of Maryland and West Virginia at $100,900.

Condo Prices Down Slightly

In the condo sector, metro area condominium and cooperative prices – covering changes in 57 markets – show the national median existing condo price was $222,900 in the third quarter, down 2.1 percent from the same period in 2005. Thirty-one metros showed annual increases in the median condo price, including eight areas with double-digit gains; 27 metros had price declines.

The strongest condo price gains were in the Knoxville, Tenn., area, where the third quarter price of $155,700 rose 29.0 percent from a year ago. In Wichita, Kan., the median condo price of $130,300 rose 25.5 percent from the third quarter of 2005, while Albuquerque, N.M., at $153,300, increased 21.0 percent.

Metro area median existing condo prices in the third quarter ranged from $108,200 in Rochester, N.Y., to $600,600 in the San Francisco-Oakland-Fremont area. The second most expensive reported condo market was Los Angeles-Long Beach-Santa Ana, at $384,500, followed by the San Diego-Carlsbad-San Marcos area of California at $361,100.

Other affordable condo markets include Bismarck, N.D., at $109,000, and Greensboro-High Point, N.C., at $113,000.

Regional Sales Data

Regionally, total existing-home sales in the South were at an annual rate of 2.52 million units in the third quarter, down 7.8 percent from a year ago. After the gains in North Carolina and Texas, the next strongest increase in the South was in Louisiana, up 4.5 percent from the third quarter of 2005, while resales in Arkansas rose 4.3 percent; four other Southern states also posted sales gains.

The median existing single-family home price in the South was $187,300 in the third quarter, which is 0.1 percent below a year earlier.

The strongest increase in the South was in the Virginia Beach-Norfolk-Newport News area, where the median price of $243,800 was 16.9 percent above the third quarter of 2005. Next was Gainesville, Fla., at $215,200, up 15.9 percent from a year ago, followed by the Gulfport-Biloxi area of Mississippi, with a 15.7 percent gain to $154,400.

In the Midwest, total existing-home sales declined 11.8 percent to a 1.42 million-unit annual level compared with the third quarter of 2005. The strongest performance in the region was in South Dakota, where sales rose 3.1 percent from a year ago.

The median existing single-family home price in the Midwest was $170,500 in the third quarter, down 2.6 percent from a year earlier. The strongest metro price increase in the region was in the Wichita, Kan., area, where the median price of $127,900 was 15.0 percent higher than the third quarter of 2005. Next was Bismarck, N.D., at $140,400, up 7.4 percent, and Kankakee-Bradley, Ill., at $138,400, up 6.1 percent in the last year.

The Northeast saw an existing-home sales pace of 1.05 million units in the third quarter, which was 12.5 percent below a year ago. The median Northeastern resale single-family home price was $276,000 in the third quarter, which is 4.8 percent below the same period in 2005.

After Elmira, N.Y., the strongest price increase in the Northeast was in Atlantic City, N.J., with a median price of $277,200, up 12.0 percent from the third quarter of last year, followed by Binghamton, N.Y., with a median price of $107,400, up 10.0 percent.

In the West, the existing-home sales pace of 1.29 million units was 21.5 percent lower than the third quarter of 2005. The best performance the region was in Montana where existing-home sales rose 6.4 percent from a year earlier.

The median existing single-family home price in the West slipped 0.9 percent to $349,000 during the third quarter. After Salem, Ore., and Salt Lake City, the strongest increase in the West was in the Seattle-Tacoma-Bellevue area of Washington, at $372,400, up 14.6 percent from third quarter of 2005, followed by Spokane, Wash., at $191,100, up 14.1 percent, and Farmington, N.M., at $176,200, up 12.9 percent from a year ago.
Read more!

Condo Conversion Limits Won’t Dent L.A.’s Pricey Rents

L.A. apartment rents are already high, but experts say they may go higher.
By: DANIEL MILLER: Los Angeles Business Journal Online
Expect L.A.’s already pricey apartment rents to keep rising despite the vote by the City Council last week to enforce an ordinance limiting condominium conversions.

The law will make it harder for landlords to turn apartment buildings into condominium complexes, but real estate experts say the effect on the tight rental market will be negligible.

Los Angeles County has the most expensive rental market in the Western United States, with average asking rents hitting $1,595 in the third quarter, up 8.4 percent from a year ago, according to figures provided by Grubb & Ellis Co.

And the overriding factors driving up those rents have not changed: an extremely expensive housing market that makes it hard even for middle-class renters to become homeowners. That keeps renters in their units, while new apartment construction has been unable to keep up with rental demand driven by a local economy that is creating jobs.

“I don’t see the rental market tapering,” said Harold Greenberg, chairman of the government relations committee for the Apartment Association of Greater Los Angeles. “You are not building the units.”

That’s not to say that the law will not have some effect. Housing activists estimate 12,000 rent-controlled apartment units have been converted into condominiums or torn down to make way for new construction in the last five years, with the pace accelerating since 2005.

Moreover, there is evidence that the swooning housing market may cause landlords to pull back any plans to convert their buildings; some newly constructed condominiums downtown and elsewhere in the county are being rented for a lack of buyers.

However, the city and county still have one of the tightest rental markets in the country, with demand far outpacing supply. A recent report by Marcus & Millichap Real Estate Investment Brokerage Co. noted that vacancy in the county is expected to be a low 3 percent by year’s end.

That has emboldened landlords to raise rents when they can.

“You put a for-rent sign up in West L.A. and it is good as gone,” said landlord Robert Roth, who owns two two-bedroom apartments in Westwood that rent for about $3,500 a month.

“I have been able to raise rents and I am pretty sure I could raise them higher than what I am currently renting them for. I am pondering doing that,” he said.

While L.A’s rent control ordinance limits increases to 4 percent annually in buildings constructed prior to 1978, that cap comes off when a unit changes hands. There are no controls on newer construction. Moreover, many other cities in the county have no controls at all.

Broken dreams

Roth is not alone. Sylvia Brakha, a landlord who rents a two-bedroom, two-bath apartment near Pico and La Cienega boulevards for $2,000, said she plans to raise the rent by about $500 when the unit becomes vacant – even though she worries that expensive rentals are making it nearly impossible for renters to save enough to own a home. (In October, the median price of a home in L.A. County was $545,000.)

“To buy a home you have to have a minimum of $100,000 or $200,000,” said Brakha, who owns three rental properties citywide. “How many people can save that kind of money?”

Lane Schwartz, a regional manager for Marcus & Millichap, which deals in multifamily properties, said the problem is particularly acute in West Los Angeles.

The Westside is a pricey area and percentage increases there result in rents going up faster than elsewhere, Schwartz said.

The Grubb & Ellis figures do not provide data for the entire West Los Angeles area, but in Brentwood, for example, a two-bedroom, one-bathroom unit goes for $2,200. And even in rent-controlled Santa Monica the average asking price of a two-bedroom, one-bathroom unit was up 19 percent in the third quarter to $1,667. Again price gains are possible because landlords can raise rent significantly in between tenants.

“It’s just supply and demand, I guess,” said Keith Ellison, an investment banking analyst who lives in Westwood with two other people in a two-bedroom apartment that costs $2,650 a month. “It’s not discouraging. It is what it is.”

The rise in rents did stir up housing activists to force a vote on the condominium conversion enforcement issue but it is unclear how much more the activists could do to limit rental rates.

Efforts to expand rent control around the county have not been successful in the past.

Moreover, the conversion ordinance the City Council decided to support was not enforced by the city for good reason. The City Attorney’s Office believes it may conflict with a state law regarding landlords’ right to convert their units. In addition, the law does not prohibit conversions, but only gives the city the right to refuse them if a building’s vacancy rate drops below 5 percent.

Larry Gross, executive director of the Coalition for Economic Survival, said that the City Council’s vote last week will help to preserve the existing rental stock, but he also worries that high rents are keeping the middle class out of the ownership market.

“The middle class American dream is being blown to pieces by this housing market,” said Gross. “It’s unlikely they will ever be able to own a home in Los Angeles.”

Mitigating trends

Of course, one of the reasons rents are so high, is that there is a steady supply of tenants who find ways to afford them, even if it means using up a greater share of disposable income.

“I’m sure there are people who can’t afford apartments,” said Roth, also the spokesman for BidRent.com, an online marketplace for rental properties. “I haven’t encountered them. I only get calls from people who are interested.”

Tenants also can find more affordable units when they move away from high-demand areas. Even in Encino, one of the pricier rental markets in the San Fernando Valley, the average asking rent for a one-bedroom one-bathroom apartment was up 25 percent in the last year to $1,368, but that’s still $500 cheaper than Brentwood.

Then there is the issue of a potential oversupply of newly constructed condominium units that developers are deciding to rent instead of sell.

In September, for example, Lincoln Property Co. cancelled its plans to sell units at a condo development called Mozaic in downtown Los Angeles. But with each apartment featuring granite countertops, stainless steel appliances, hardwood floors and vaulted ceilings, penny pinchers need not apply.

Studios start at $1,500 and two bedrooms are $2,500 and up.
Read more!

A Profitable Investment: California Real Estate

Most California sellers nearly doubled their investments in five years. In San Bernardino County alone, sellers made a median 130 percent profit.
The San Diego Union-Tribune: REALTOR® Magazine Online
Most California home sellers nearly doubled their investments in five years, according to title insurer First American Real Estate Solutions of Santa Ana in comparing sales prices.

In Los Angeles, the margin was 105 percent, going from a $254,000 purchase to $520,000 sale over 51 months.

San Diego sellers made a median 91 percent profit on their homes, having bought them typically 63 months ago for $269,000 and selling them for $512,500 — a $243,500 gain.

Sellers in San Bernardino County paid $156,500 and the properties rose to $360,000, yielding a 130 percent profit over a 45-month median time between purchase and sale.

Orange County sellers enjoyed a median 116 percent profit, going from $284,750 to $616,250 over 62 months.
Read more!

Best time of the year to be a home buyer

Holiday season is the greatest gift for home shopping
By: Robert J. Bruss: Inman News
During the slow home sales holiday season between Thanksgiving and New Year's Day, even extending through Super Bowl Sunday in many communities, few people think of buying a house or condominium. However, if you want to purchase a home and can drag yourself away from holiday festivities, this is the absolute best time of the entire year to be a home buyer.

Why is that, you ask? The answer has two parts: (a) only serious motivated sellers have their houses and condominiums listed for sale during this slowest season of the year for home sales, and (b) competition from other prospective home buyers is at its lowest now so your purchase offer will be extremely welcome and seriously considered by a motivated home seller.

There is an additional reason 2006 year-end is an especially good time to be a home buyer. That reason is it is a "buyer's market" in most cities, meaning there are more homes listed for sale today than there are qualified buyers in the market so sellers (and their listing agents) are extremely anxious.

It's a great time to be a home buyer. But not such a good time to be a home seller.

BEFORE SHOPPING FOR A HOME, SHOP FOR A MORTGAGE. However, before rushing out to buy a house or condo, smart home buyers first get approved in writing for a home mortgage. This is a slow time of year for mortgage lenders so they welcome your loan application.

Although mortgage brokers can arrange mortgage pre-approvals, the letter or certificate must come from an actual lender, such as a bank or mortgage banker. Most home mortgage pre-approvals are valid for 60 to 90 days.

Don't even consider a mortgage "pre-qualification," which means only, "We looked at your loan application and you appear to qualify but we haven't actually verified your credit and income." In other words, a mortgage pre-qualification is worthless.

However, home buyers should understand a lender's mortgage pre-approval is subject to (a) the lender's appraisal of the home you decide to buy, and (b) reverification of your credit and income (don't apply for additional credit or go out and buy a new car before you complete your home purchase).

WORK WITH AN EXPERIENCED BUYER'S AGENT. After obtaining a written mortgage pre-approval from a lender, the next step to buying a home during this best time of the year to purchase is to work with an experienced buyer's agent who understands the market in the vicinity where you want to buy.

Ask friends, relatives and business associates for recommendations of buyer's agents. Although any licensed agent can be your buyer's agent, many agents prefer to list homes for sale rather than working with home buyers who are often "time wasters."

A buyer's agent costs nothing extra. The reason is the listing agent of the house or condo you purchase will split the sales commission with your buyer's agent. Only in the rare event you buy a "for sale by owner" (FSBO) home and the seller refuses to compensate your buyer's agent would you owe any sales commission.

EXPECT YOUR BUYER'S AGENT TO PREPARE A "CMA" BEFORE MAKING YOUR PURCHASE OFFER. When you find "the house" or "the condo" you want to buy, before making a purchase offer ask your buyer's agent to prepare a written CMA (comparative market analysis). This CMA is the same form the listing agent prepared for the seller when the house or condo was listed for sale.

However, your CMA will be up to date, whereas the seller's CMA might be several months old. The CMA shows (a) recent sales prices of comparable nearby residences within the last few months (never older than six months); (b) current asking prices of similar neighborhood homes now on the market for sale; and (c) asking prices of recently expired comparable listings (usually overpriced).

As a savvy home buyer, you probably will have inspected many of the homes on your CMA. With the help of your buyer's agent, you can use the CMA information to arrive at a fair purchase-price offer.

Many buyer's agents recommend making a purchase offer based on a per-square-foot basis. For example, if nearby homes of comparable quality construction recently sold for $150 per square foot, you might want to make your purchase offer based on $150 per square foot.

Be sure to attach a reasonable good faith deposit check to your purchase offer. If you are making an especially low offer far under the seller's asking price, a substantial deposit accompanying your offer will often convince the seller you are a serious buyer.

You can be sure your buyer's agent will use the CMA prepared for your use to show to the home seller and the listing agent to justify your purchase offer as being reasonable.

However, if the seller doesn't accept your purchase offer, a luxury of buying during this slow season is there are few other home buyers in the market. The result is you usually need not be in a rush to respond to a counteroffer or make a new purchase offer.

Waiting a few days to respond, presuming you still want to buy the residence, will often make the seller think, "That was a pretty good offer. Maybe I should have accepted it."

KEEP YOUR PURCHASE OFFER SIMPLE. As experienced buyer's agents will tell you, it's best to keep your purchase offer as simple as possible. "A confused mind usually says no" is a very true motto. For this reason, it is best to include only a few contingency clauses in your purchase offer. Typical contingencies are:

1. LENDER'S APPRAISAL CONTINGENCY. Presuming you need a mortgage to finance your purchase, be sure to include a mortgage lender's appraisal contingency clause in the purchase offer. If the home doesn't appraise for at least the amount of your purchase offer that was accepted by the seller, then you don't have to complete the purchase and can get your good faith deposit fully refunded.

2. PROFESSIONAL HOME INSPECTION CONTINGENCY. Smart buyers make their home-purchase offers contingent on their approval of a professional home inspector's report to be obtained by the buyer after the seller accepts the purchase offer.

The cost is usually around $300. Buyers should always accompany their inspector for the two- to three-hour inspection because it is a good way to become familiar with the home and to discuss any unexpected material defects that are discovered.

A good source of experienced professional home inspectors is to hire a member of the American Society of Home Inspectors (ASHI). To find local ASHI inspectors, go to www.ashi.org or phone 1-800-743-2744.

If the professional inspection report reveals serious undisclosed home defects, as the buyer you can (a) cancel the purchase and obtain refund of your good faith deposit, (b) reopen negotiations with the seller to obtain a repair credit, or (c) if the seller refuses to renegotiate, go ahead with the purchase anyway (presuming you badly want the home).

3. SALE OF YOUR CURRENT HOME CONTINGENCY. During the last few years of a home "seller's market" in most cities, this contingency fell out of favor with home sellers and real estate agents. But during a buyer's market where any purchase offer is very welcome, many home sellers will accept a purchase offer that is contingent on the buyer's sale of their current home.

However, to be fair to the seller, most sellers will insist on keeping their homes listed on the market for sale while the buyer tries to sell his/her current home. In addition, most realty agents suggest a 48-hour or 72-hour contingency-release clause. That means if another buyer produces an offer acceptable to the seller, the first buyer then has 48 or 72 hours to remove his/her contingency clause for sale of their current residence.

SUMMARY: The season between Thanksgiving and New Year's Day, even extending to Super Bowl Sunday in many communities, is the slowest time of the year for home sales so it is an especially good time to be a home buyer.
Read more!

Technology gains ground in home transactions

Survey: Most home sellers choose full-service brokerage
Inman News
Technology is dominating many aspects of the real estate transaction process, but the most important factors are purely human, according to an industry survey of home buyers and sellers.

Most sellers prefer full-service brokerage, where brokers handle all aspects of the transaction process from listing to closing, according the survey, which found that 83 percent of sellers use full-service brokerage, 9 percent use limited services and 8 percent use minimal service, such as simply listing a property on a MLS.

The study, released by the National Association of Realtors, was based on a mailed questionnaire and asked buyers and sellers about preferences and habits in real estate transactions.

NAR 2006 President Thomas M. Stevens from Vienna, Va., said historic comparisons are not available, but that limited and minimal services were a relatively small market share in the past and the question was not part of previous surveys. "Anecdotally, there’s been a modest rise in recent years, and in all probability a somewhat higher level of sellers used full-service brokerage through the early part of this decade," said Stevens, senior vice president of NRT Inc.

"Our sense is that professionals will continue to experiment with business models and that the lion’s share of consumers will continue to opt for full-service brokerage, but there’s room for all ethical business practices in this industry," he said.

Additional findings show consumer satisfaction with the level of brokerage service varies, with 71 percent of sellers being very satisfied with their full-service experience and another 24 percent somewhat satisfied. Limited services also received high marks with 76 percent being generally satisfied; however, 50 percent of sellers using minimal service were dissatisfied with their experience.

The survey also found a downtrend in the number of for-sale-by-owner transactions, falling from 13 percent of market share in 2005 to 12 percent today. "When you factor out the properties that were not placed on the open market, the actual number of FSBOs is only 7 percent - the rest are simply unrepresented sellers in private transactions," Stevens said. NAR began tracking the FSBO market in 1981; the record high was 20 percent in 1987.

The median home price for sellers who use an agent is 31.9 percent higher than a home sold directly by an owner; $247,000 versus $187,200, according to the NAR survey. However, unassisted sellers in this survey, unlike agent-assisted sellers, were more likely to be in a small town or rural area, and their income was 7.2 percent lower than sellers using agents - suggesting their homes may be worth less than the typical home sold by an agent.

The most difficult tasks reported by FSBOs are preparing the home for sale, understanding and performing the paperwork, and selling within the desired time frame.

To find a real estate agent, the survey shows the most important factor for both buyers and sellers is word-of-mouth recommendation. The most important criteria in choosing an agent are reputation and trustworthiness.

The typical home buyer is 41 years old, earned $71,800 and purchased a home costing $214,000 that was 1,815 square feet in size, according to the survey. They searched eight weeks and visited nine homes before making a decision.

Sixty-one percent of buyers are married couples, a record 22 percent are single women, 9 percent single men, 7 percent unmarried couples and 1 percent other. Eleven percent were born outside of the United States.

Three-quarters purchased a detached single-family home, 9 percent a townhouse or rowhouse, 11 percent a condo and 5 percent some other kind of housing; 78 percent of respondents purchased an existing home and 22 percent a new home. The median distance from the previous residence was 13 miles, and 55 percent of all homes purchased were located in a suburb or subdivision.

The biggest factors influencing neighborhood choice are quality of the neighborhood, convenience to job and convenience to family and friends. Other factors with high responses include neighborhood design, convenience to shopping and quality of the school district.

The number of first-time buyers dropped to 36 percent of respondents, compared with 40 percent in the previous three annual surveys. The median age of a first-time buyer is 32, a fairly consistent finding since 1981, with a median income of $58,300. They purchased a home costing $165,000 and plan to stay in that home for six years. The median downpayment by first-time buyers was 2 percent, but 45 percent purchased with no money down. Of first-time buyers who made a downpayment, 22 percent received a gift from a friend or relative, usually their parents.

The typical repeat buyer is 47 years old, earned $81,900, purchased a home costing $249,000 and plans to stay in that home for 9 years. They made a median downpayment of 16 percent, but 11 percent paid cash for their property. Of those making downpayments, 62 used the equity from their previous home.

Buyers used a wide array of resources in searching for a home: 85 percent used a real estate agent, 80 percent the Internet (up from 77 percent in 2005), 63 percent yard signs, 55 percent print or newspaper ads and 47 percent attended open houses. Smaller categories include a home book or magazine, home builders, television, billboards and relocation companies.

When asked where they first learned about the home purchased, 36 percent of buyers identified a real estate agent; 24 percent the Internet; 15 percent from yard signs; 8 percent from a friend, neighbor or relative; 8 percent home builders; 5 percent a print or newspaper ad; 3 percent directly from the seller; and 1 percent a home book or magazine.

Eighty-one percent of home buyers who used the Internet to search for a home purchased through a real estate agent, in contrast with 63 percent of non-Internet users who were more likely to purchase directly from a builder or from an owner they knew in advance of the transaction.

Local metropolitan multiple listing service (MLS) Web sites were the most popular Internet resource, used by 53 percent of buyers, followed by Realtor.com, 52 percent; real estate company sites, 41 percent; real estate agent Web sites, 40 percent; local newspaper sites, 14 percent and real estate magazine Web sites, 6 percent; other categories were smaller.

In order of priority, home buyers want agents to help find the right house, negotiate the terms of the sale, determine what comparable homes were selling for, help with price negotiations, help with paperwork, help determine how much they could afford and help with finding and arranging financing. Three-quarters of buyers use only one agent in the search process.

When asked about the benefits provided by an agent, 55 percent of buyers said agents helped them understand the process, 40 percent said their agent pointed out unnoticed features or faults with the property, 37 percent indicated the agent improved their knowledge of the area, 36 percent said agents negotiated better contract terms, 35 percent reported a shortened search process and 29 percent said their agent negotiated a better price.

Of buyers who use an agent, 64 percent choose a buyer’s representative. Eighty-five percent of all buyers said they were likely to use the agent again or recommend to others, and almost all buyers were satisfied with their agent’s honesty and integrity, with 83 percent being very satisfied.

The median age of a home seller is 46, with an income of $83,800. Seventy-two percent are married couples, had been in their home for six years and moved a median distance of 17 miles. Their home was on the market for six weeks, up from four weeks in the 2005 survey. Ninety percent of sellers were satisfied with the selling process.

Forty-four percent of sellers chose agents based on a referral by a friend, neighbor or relative, and 30 percent used their agent previously; 69 percent of sellers contacted only one agent. Reputation and trustworthiness are the most important factors in choosing an agent; 82 percent said they were likely to use the same agent again or recommend to others.

NAR mailed an eight-page questionnaire in August 2006 to a national sample of 129,500 home buyers and sellers who purchased their homes between July 2005 and June 2006, according to county records. It generated 7,548 usable responses; the response rate was 6.3 percent. All information is characteristic of the 12-month period ending in June 2006 with the exception of income data, which are for 2005.
Read more!

Southern California home prices hold as sales continue to slow

Southern California home prices remained in a holding pattern last month while sales continued to decline, albeit at a slower pace, data released today showed.
By: Annette Haddad: latimes.com
The median price of all types of homes sold in October was $484,000, which was the same as in September, and 2.3% higher than a year ago, La Jolla-based research firm DataQuick Information Systems reported.

Meanwhile, sales in the six-county region fell 22.4% to 22,117, DataQuick said. It was the worst showing for an October in a decade, but the rate of decline was the slowest since July.

For much of this year, potential buyers have been hanging back, waiting to see if prices will decline. The result has been fewer sales and an upsurge in supply as more homes sit unsold for longer periods and new listings continue to come on the market.

What's more, homeowners who would like to move up or downsize are reluctant to put their homes up for sale, fearing they may not get the price they want.

"Buyers are taking their time, trying to wait out the uncertainty in a market that is rebalancing itself," said DataQuick President Marshall Prentice.

One region economists have been watching closely is San Diego County, where California's housing boom was launched six years ago and where it first started to fade. But in October, San Diego's home prices recovered some ground, rising nearly 2% to $485,000, compared to the month before. It was the first increase since March. Nonetheless, when compared to a year ago, the rate of appreciation in San Diego declined 5.5%, DataQuick said.

Southern California home-price gains have been decelerating for the last year. Year-over-year increases have been in the single digits for seven months and are expected to turn negative by the end of this year or early next year, DataQuick analysts said.

Indeed, the rate of the slowdown is starting to spread beyond San Diego. In Ventura County, home prices dipped 2.3% to $582,000. Sales fell 19.6% to 940.

In Orange County, the region's priciest market, the median price rose 3.1% to $625,000, which was the same median a month ago. Sales declined 24.9% to 2,715.

The Inland Empire counties of Riverside and San Bernardino, where prices were still rising by double-digits as recently as this spring, also showed marked slowing. In October, the median in Riverside rose 4.9% to $410,000, but was off its peak of $423,000 reached in September. Sales fell 24.2%.

San Bernardino's median price edged up 2.3% to $362,000 year over year, but was flat with the median price set last December. Sales declined 21.3%.

On Monday, DataQuick reported that Los Angeles County's median price rose 4.5% to $514,000 as sales dropped 21.8%.
Read more!

Google Base gathers more real estate listings

Windermere makes for-sale properties available to search engine
Inman News
Windermere Real Estate is the latest regional brokerage company to make property listings available to consumers searching Google Base for real estate.

The company announced it provide continuous feeds of all its listings to the Google Base classified listing service. Windermere has 330 offices and 8,400 associates with listings in Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, Utah, Wyoming and Washington.

"Where your customers are is where you need to be," said Geoff Wood, CEO of Windermere. "And when people search for information today, they search with Google."

Google last week unveiled a new site for real estate companies interested in including their property listings in the Google Base service. The search company is trying to make it easier for brokers, agents and other real estate professionals to have their listings included in property searches. The new site categorizes users as brokers, agents, MLSs and IDX vendors. (IDX stands for Internet data exchange, a method by which brokers share listings online.)

Property listings uploaded to Google Base also appear in a general Google search.

Two additional brokerage companies last month announced content partnerships with Google to provide property listings and agent information to the search-engine company. Columbus, Ohio-based Real Living, with nearly 4,000 agents in 12 states, and Prudential California/Nevada/Texas Realty, which has about 5,000 agents in 139 offices, separately announced that they would make property listings available to Google Base.
Read more!

Boom or Bust: Will Metro Areas Bounce Back?

Over the past three decades, about 40 percent of housing busts in big metro areas have eventually been followed by strong recoveries.
BusinessWeek: REALTOR® Magazine Online
If you own a home in a metropolitan area affected by the current boom-bust cycle, should you sell or sit tight?

BusinessWeek analyzed boom-bust patterns and concluded that over the past three decades about 40 percent of housing busts in big metro areas have eventually been followed by strong recoveries.

In an additional 15 percent of markets, prices adjusted for inflation barely got back to their previous peaks after 15 years. In the remaining 45 percent or so of markets, prices adjusted for inflation were still down a decade-and-a-half after their pre-bust peaks.

The disparity between winners and losers was striking: Among the winning markets, the average inflation-adjusted gain after 15 years was 43 percent, while among the losers the average inflation-adjusted loss was 19 percent.

A key difference between winners and losers is the difficulty of building new houses. The cities with the tightest housing usually boom again after a bust. But in places where the supply of housing is more flexible, price cycle corrections are usually mild.

There’s only a wrenching change when demand sharply decreases, usually because of employment-related issues. The only real potential losers, according to this theory, appear to be those places like Miami, Phoenix, and Las Vegas, where demand has been driven largely by speculators.
Read more!

Friends don't let friends buy out home equity

Buyers face foreclosure after $8,700 lien is discovered
By: Robert J. Bruss: Inman News
DEAR BOB: A former friend recently went through a divorce and his finances are a mess. To help him out, we offered to buy out his condo equity of about $21,000 for cash. He gave us a quitclaim deed, which we recorded. We bought "subject to" its existing mortgage. However, he "forgot" to tell us the condo homeowner's association has an $8,700 special assessment lien against the condo. When I confronted him, he said he was sorry but he had forgotten about the lien, which the association now threatens to foreclose on us. He doesn't have any money to pay us the $8,700. Do we have any recourse? -Nancy T.

DEAR NANCY: If you don't pay the $8,700 condo assessment lien before the association forecloses, you could lose the condo. Yes, your friend is liable to you for the $8,700, but, if he can't afford to pay you, suing him to obtain a judgment might not be worth the hassle.

Your situation shows the importance, especially when buying real estate from a friend or relative, to always obtain an owner's title insurance policy. If you had done so, the owner's title policy would have revealed that recorded $8,700 homeowner's association lien and you could have deducted the $8,700 from the $21,000 cash you paid to your former friend.

$800 MONTHLY NEGATIVE CASH FLOW CAN BE PAINFUL

DEAR BOB: After a recent divorce, I purchased a townhouse. Since my girlfriend and I are considering getting a bigger place, I am thinking about renting the townhouse because, if I sell it now, I would have to pay about $30,000 to get out of the house. Based on nearby comparable rentals, if I rent the townhouse I will lose about $800 per month (difference between the mortgage payment and rental income). I'm hoping that by losing $9,600 per year for one or two years, the local market will appreciate and make the eventual townhouse sale less painful. Am I required to depreciate the townhouse on Schedule E of my income tax returns? As I will have an "unclaimed" excess mortgage interest deduction (the monthly rent won't cover the mortgage interest), can I claim the remainder of the mortgage interest on my Schedule A itemized deductions? -Cory F.

DEAR CORY: I hope you are a very wealthy man who can afford $800 monthly negative cash flow. Please consult your personal tax adviser because you are acting under several erroneous tax considerations.

The first one is depreciation must be deducted for a rental property even if that depreciation deduction doesn't save you any income tax and provides no immediate tax benefit. You must depreciate the townhouse (but not the value of the underlying land) at a 27.5-year, straight-line rate.

The second one is unused rental property mortgage interest is only deductible on Schedule E of your tax return. The unused portion cannot be deducted as a personal itemized interest deduction on Schedule A of your tax returns.

If your rental townhouse shows a tax loss, as it surely will, presuming you are not a "real estate professional" such as a full-time sales agent entitled to unlimited passive activity loss deductions, you can deduct up to $25,000 tax loss per year against your ordinary income if your AGI (adjusted gross income) is below $100,000.

The good news is any undeducted loss from your rental townhouse can be "suspended" to save for use in future tax years or when you sell the property at a profit. Frankly, if I were in your situation I would stay in the townhouse and forget about renting it. If your girlfriend insists on a bigger home, maybe she's not right for you.

THE KEY REASON A HOUSE HASN'T SOLD SINCE APRIL

DEAR BOB: My wife and I have had our house on the market since April but have had no offers yet. We've been competitively priced and are going to take the house off the market for the holidays. After New Year's, we are thinking of putting it back on the market ourselves without a listing agent. Then we can afford to sell for less without a sales commission. We understand we will lose the benefit of the multiple listing service (MLS), but it hasn't helped much so far. What happens if we do that and the buyer has an agent? -Frank G.

DEAR FRANK: Presuming your house has been listed for sale since April with a successful sales agent in your vicinity, the key reason it hasn't sold is probably because it is overpriced.

Just in case you are not aware, most areas are in a "buyer's market," meaning there are many more homes for sale than there are qualified buyers actively looking.

Taking your home off the market during the holidays is a good idea. You don't sound very motivated to sell, and your house is a "tired listing," so give it a rest for a while.

If you couldn't sell your home with an agent, what makes you think you could sell it without one? Should a prospective buyer who has a buyer's agent decide to buy, you will be asked to pay half of a sales commission to that agent, typically 3 percent of the gross sales price.

I do not recommend you try to sell your home alone in this buyer's market without a listing agent. More details are in my special report, "How to Sell Your House or Condo for Top Dollar in a Buyer's Market," available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant internet delivery at www.BobBruss.com. Questions for this column are welcome at either address.
Read more!

The Weekend Guide! November 16 - November 19, 2006

The Weekend Guide for November 16 - November 19, 2006.
Full Article:
Read more!

Make money in any real estate market

New book names cities most susceptible to home-price declines
By: Robert J. Bruss: Inman News
Whether you are a homeowner, buyer, seller, investor or real estate agent, you can profit from studying "Bubbles, Booms, and Busts: Make Money in Any Real Estate Market" by Blanche Evans. This extremely well-researched and up-to-date book reveals the signals of a rising, falling or neutral local market for home sales prices.

Evans, the editor of online Web site www.RealtyTimes.com, has thoroughly researched the national home sales market and interviewed dozens of respected economists and others to report on what is likely to happen to local home-sale prices for houses and condos.

She takes a long-term view of the market for home sales, using population-growth statistics and other facts (not opinions), to maintain a sound perspective on the outlook for home sales.

"Home prices usually track a point or two ahead of inflation," Evans notes. "Except for local economic shocks, like the collapse or exit of a major employer, home prices nationwide have not gone down since the Great Depression," she reminds readers.

Although a few segments of the book seem irrelevant to home sales, such as brief sections on excessive CEO compensation and severance packages, most of the book stays focused on the housing market. Evans reminds readers that local economic shocks can cause real estate busts, such as the oil price surge and plunge in the late 1970s in the "oil patch" of Texas, Oklahoma, Louisiana, Colorado, Wyoming and Alaska. But those home-sale markets recovered after about 10 years, she notes.

"The obvious conclusion is that economic distress causes housing busts - not prior real estate booms. However, the longer and higher home prices rise, the more likely they are to escape the surly bonds of reason," Evans warns. Then she focuses on the current housing glut, such as too many new houses and condos for a slowing market in many cities.

The book presents statistics in understandable "chunks," usually in the form of easy-to-understand graphs, such as number of single-family homes on the market and months supply of single-family homes available for sale. "Month-to-month swings in starts and permits data may not be meaningful," Evans opines. "It is far better to look for trends to establish themselves over a period of several months," she adds.

This is a thinking-person's book. But it is not pie-in-the-sky theory or a get-rich-quick guide. Instead, it reports the facts and suggests how buyers and sellers should cope with them for maximum personal benefits. There are also valuable suggestions on how home sellers can profit even if their local market is in a slump.

Chapter topics include "The Current Housing Bubble - Cause and Effect"; "Who's Buying and Who's Selling"; "Why and Where Do People Buy Homes"; "Busts - Where, Why, and When"; "The Bust to Come"; "After the Boom, Bubble, and Bust"; and "Make the Current Market Conditions Work for You."

Does the author predict a real estate "bust"? No. But she warns there will be slowing in many home sales markets, depending on local economic conditions. She even names the cities where, based on statistics, home-value declines are most likely to occur.

The timing for publication of this great book couldn't have been better. It answers typical questions about whether this is the right time to buy, sell, or hold residential real estate. On my scale of one to 10, this well-researched new book rates an off-the-chart 12.

"Bubbles, Booms, and Busts: Make Money in Any Real Estate Market," By Blanche Evans (McGraw-Hill, New York), 2006, $16.95, 167 pages; Available in stock or by special order at local bookstores, public libraries, and www.Amazon.com.
Read more!

Housing Market Show Signs Of Making a Recovery

The number of homes offered for sale in 18 major metro areas declined 1.2% in October from September - a positive signal for the overall housing market.
By Lauren Baier Kim: The Wall Street Journal Online
Plus, prices rise in Los Angeles; Baltimore, Md., sees the weakest housing market in six years, homeowners aren't selling in Nantucket, Mass.; and more in a weekly roundup of real-estate news on the Web.

Here's a look at what's new in real-estate markets across the U.S. from around the Web. (Some links may require registration or subscriptions.)

Home Inventories Fall in October

U.S. home inventories dipped slightly (1.2%) in October from September, a sign that the housing market is making a positive adjustment, according to an article by The Wall Street Journal Online. However, the number of homes for sale is still significantly higher than year-earlier levels, the article says. Use an interactive tool to track home inventories in 15 U.S. cities. Areas seeing the biggest drops in the number of homes offered for sale include Sacramento, San Diego and the San Francisco Bay region, the article says.

Recovery for Los Angeles Market?

The median home price in California's Los Angeles County rose 4.5% in October from a year ago to $514,000, a sign that the local real-estate market may be stabilizing, according to an article by the Los Angeles Times. That rise in appreciation is greater than the 3% year-over-year increase seen in September, the article says. However, home sales continued to drop, falling 21.8% in October from October 2005's levels, the paper says. However, that decrease was less than the 28% year-over-year decrease seen in September, the Times says.

Albuquerque Is a Buyer's Market

The housing market in Albuquerque, N.M., may be tipped against sellers at the moment - in September, the number of existing homes on the market - 4,695 - was more than double a year earlier, says The Albuquerque Tribune. However, home prices continue to rise, the newspaper says. The median home price in the city rose 34% between 2003 and the second quarter of this year, from $138,400 to $185,400 - a gain much lower that the type of gains seen in places in the Northeast and on the coasts during the same time period, the paper says. These more moderate price increases may be why the area hasn't seen big dips in housing prices, the Tribune says.

Buyers have the edge in Albuquerque, N.M., where home inventories in September were more than double a year-earlier's levels.

Sales Are Down in Nantucket

The number of homes sold in Nantucket, Mass., dropped 42% (from 173 to 102) in the third quarter from third quarter 2005 levels, says an article by The Inquirer and Mirror. However, the median price rose from the same period the year before to $1.6 million, the article says. Current home asking prices on the island range from $495,000 for a townhouse in Madaket to $23 million for the estate of ex-Tyco chief Dennis Kozlowski, the paper says. Despite the slowdown, homes are selling within 6% of their listing price, and real-estate agents are advising their clients that if they don't need to sell, they should hold off placing their homes for sale until the market heats up again, the article says.

Homeowners Delay Selling in Twin Cities

After seeing five years of percentage gains in the double digits for housing prices, the Minneapolis-St. Paul, real-estate market is showing signs of slowing, says the Star Tribune. As a result, some homeowners are opting not to put their properties up for sale, which was reflected in October's dip in the number of new listings, the paper says. That month, listings were down 4.4%, closed sales fell 19.6% and the median sales price dropped 1% to $228,000, the paper says. Because many potential sellers are waiting out the market, local real-estate prices shouldn't drop significantly in the next few months, sources quoted by the Star Tribune say.

Baltimore Experiences Weakest Market in Six Years

This autumn, the Baltimore housing market experienced its weakest October since 2000, with the number of homes sold down more than 22% from a year earlier, the Baltimore Sun says. For the fifth month in a row, the area experienced an increase in home prices that was under 10%, the newspaper says, with the average sale price in Baltimore and five surrounding counties rising by just 3.15% to $307,190. Potential buyers are holding off on making a purchase in the hopes of seeing lower home prices and mortgage rates, the paper says. A local economist quoted by the Sun says he doesn't expect a turnaround in the local market until the middle of next year.
Read more!

Census Data Show Minority-Ownership Gap Persists

Three-fourths of white households owned homes in 2005, compared with 46 percent of African-American households and 48 percent of Hispanic households.
The Associated Press: REALTOR® Magazine Online
Home ownership is at an all-time high in the United States, but racial gaps are still broad, according to 2005 U.S. Census Bureau data released today.

Three-fourths of white households owned homes in 2005, compared with 46 percent of African-American households and 48 percent of Hispanic households, the American Community Survey data show.

Experts point to home ownership as part of the answer to the persistent racial disparities in the United States.

Home ownership creates wealth, which enables families to live in good neighborhoods with good schools. It also helps families finance college, which leads to better-paying jobs, perpetuating the cycle, says Lance Freeman, assistant professor of urban planning at Columbia University and author of There Goes the 'Hood.

Home ownership grew among white middle-class families after World War II when access to credit and government programs made buying houses affordable. African-American families were largely left out because of discrimination, and the effects are still being felt today, Freeman says.
Read more!

Survey: Consumers confident home prices will rise

Housing market outlook brighter by mid-2007
Inman News
Americans remain highly confident about the nation's housing prospects, with more than four out of five homeowners expecting the value of their home to appreciate over the next five years and nearly seven out of 10 calling it their most valuable investment, according to results from a new nationwide survey.

"The poll clearly debunks the more sensational media reports speculating on the demise of the housing market," said David Pressly, president of the National Association of Home Builders (NAHB) and a home builder from Statesville, N.C. "It is interesting to note that other polls conducted by major news organizations have come up with similar results, indicating that despite the current housing market downturn Americans resoundingly believe that buying a home is the best investment they can ever make."

The survey of 2,000 households, including more than 1,750 registered voters, was conducted by RT Strategies between Oct. 26-29.

The polling found that 81 percent of homeowners believe that the value of their homes will rise over the next five years. Only 13 percent felt their home would fall in value, while 4 percent expected no change and 3 percent were unsure.

In addition, 69 percent of the respondents listed their home as their most valuable investment. By contrast, this was followed by 401(k) and other retirement accounts, with just 11 percent of those polled citing this as their top investment.

Looking ahead, NAHB said the housing market is poised for solid and sustained growth in the future.

"We are in the midst of an inevitable adjustment following the housing boom of 2004-2005 when housing market activity soared to unsustainable levels," said NAHB Chief Economist David Seiders. "Housing demand should stabilize in short order, and the downward adjustment to housing production should run its course by mid-2007. The market that emerges from this correction will display good balance between supply and demand, and move to a healthy and sustainable trend based on solid underlying fundamentals."
Read more!

Mayor to Announced Workforce Housing Deal

Mayor Antonio Villaraigosa will announce Tuesday morning a public-private partnership to create middle-income housing developments in the Los Angeles area, the Mayor’s office said in a release Monday night.
By: ALLEN P. ROBERTS Jr.: Los Angeles Business Journal Online
Mayor Villaraigosa will join executives from L.A.'s largest public pension funds – L.A. City Employees Retirement System; L.A. County Employee Retirement Association; L.A. Department of Fire and Police Pensions - to announce the commitment of $65 million to the Genesis Workforce Housing Fund II, a private equity real estate fund managed by Phoenix Realty Group.

The press conference will be held at Puerta del Sol, a workforce housing community that is represents the type of development to be funded with the pension investments, at 11 a.m. Phoenix Realty Group financed Puerta del Sol through the first private equity real estate fund solely targeting workforce housing development in Los Angeles.

Investments will target housing affordable to L.A.'s middle-income workforce, including teachers, firefighters and nurses, the Mayor's office said.

The Genesis II fund's projects will be built by private developers and are expected to provide 2,250 units of housing to the market over the next four years.
Read more!