City Planning Gets Feminine Touch

What do women want? Urban planners are starting to take gender-specific needs into account when revising building codes, zoning rules, and growth plans.
By: Haya El Nasser: REALTOR® Magazine
Urban planners increasingly are taking gender into consideration when they revise building codes, zoning rules, and growth plans, considering that women account for more than 50 percent of the urban population nationwide. Additionally, women account for 60 percent of seniors living in urban locales; and many of them live alone.

The University of Pennsylvania recently held a forum where planners, health officials, researchers, and lawmakers to discuss gender-specific needs in growth planning.

For example, women who want to leave their homes to exercise sometimes find sidewalks that are in disrepair and high crime rates that pose a challenge. Many women also report difficulty in navigating stairs with groceries and, if they have small children, strollers.

In response, planners are considering sidewalk repairs, longer pedestrian crosswalk signals, and homes without stairs. Safe walking and biking trails, as well as enhanced security near public transportation, also have been deemed important.
Read more!

How Green Remodeling Pays Off

Find out six ways home owners can make their homes more green-friendly to lower utility bills and attract buyers.
By: Susan Thurston: REALTOR® Magazine
Green remodeling can pay off — not only in lowered utility bills, but also in buyer appeal when the property is sold.

Here are some green things to consider.

    • Site selection. Prefer infill development instead of a new subdivision in a
      far-flung new suburb that gobbles wetlands and displaces animals.
    • Energy-efficient products. Choose Energy Star appliances, double-paned
      windows, low-flush toilets, and compact fluorescent light bulbs.
    • Spray foam insulation. Seal the home with insulation that doesn’t let the heat
      or cooled air leak out.
    • Sustainable wood flooring. Select flooring certified by Forest Stewardship
      Council, which protects forests by managing the amount of wood harvested
      annually.
    • Locally made products. Buy products made less than 250 miles away to reduce
      transportation costs. Granite, for instance, is generally imported from afar.
    • Nontoxic paint. Use paint that is low in volatile organic compounds (VOCs) —
      chemicals that evaporate into the atmosphere. Look for Green Seal certified
      brands.

Read more!

Why Buying Now Can Be a Smart Move

Although much of the housing market is in a slump, this is still a good time for most to buy a home.
RISMEDIA
Even though many economists are predicting further drops in home values in most areas, today is still an excellent time for most of us to buy a home. The direction of area home values won’t make much difference to homeowners who will both buy and sell in the same area, and other important factors very much favor buying a home now.

Most move up buyers buy their next home in the same area. Whether overall home values in that area are going down, up, or holding their own, other homes in the area will be similarly impacted. Current local home values and any future changes in those home values, whether negative or positive, will therefore have the same effect on a home they might buy as they will have on their current home when they sell it. For that reason the direction of housing values in any given area is of small consequence relative to other factors for those homeowners, who should not let declining values get in the way of buying their next home.

If you are a prospective first time buyer in one of the few appreciating markets, buying sooner rather than later certainly makes sense. Similarly, if you live in an area where home values are falling and plan to relocate to another area where prices are rising, that is a good reason to buy and sell (or sell and buy) as soon as you can, before the gap widens further.

Holding off on a home purchase due to current market conditions may make sense in some cases only for a much smaller group - prospective first time buyers who live in an area where further home price declines are likely. The same is true for those living in the relatively few areas where homes are appreciating and who plan to relocate to other parts of the country where home prices are still falling. Unfortunately some homeowners now owe more money on their mortgage than their home is worth because of dropping home values. They may be unable to afford to sell at this time regardless of local market conditions unless they have sufficient savings to make up the difference.

There are several reasons that today is a particularly good time to buy a home for most of us. The selection is as great as it will ever be, mortgage rates are still relatively low by historical standards, and costs of any desired remodeling/upgrades are a lot less because of the downturn in new home construction and the resulting glut of building supplies.

With inventories of homes for sale at all time highs in many places, there’s a much greater chance that you’ll be able to find a home that’s ideally suited for your needs. That’s a very big plus because homeowners spend an average of nearly a decade in their home before they sell it. The shortage of inventory and high home prices that existed up until 2005 forced many buyers to make many compromises on home features at that time. No doubt many of them wish that some of the nicer homes for sale in their neighborhood today had been available at that time. Today’s home buyers will have to make far fewer, if any compromises, and many will be able to pay less for a home that’s much better suited to their needs.

If today’s home buyers decide to make some upgrades and improvements to their next home they can usually do it for substantially less than it would have cost several years ago. The rate of new home construction has dropped precipitously, and prices of many building materials have dropped substantially as a result. Prices for oriented strand board, which is used for exterior wall sheathing, roof sheathing and subfloors, is down 40% from late 2005, according to the National Association of Home Builders. Lumber used for framing floor and roof joints retreated 24%, in cost according to NAHB. Drywall prices are down 35% from late last year, according to United States Gypsum Company.

Construction labor costs are down as well, as many home builders have decided to become remodeling contractors until the market for new homes improves. The remodeling market has also slowed down somewhat. With many home builders recently reinventing themselves as remodeling contractors, price competition in that market is very intense today. Only a few years ago you were lucky if half the contractors returned your call, and a few actually showed up and subsequently gave you a proposal. That has changed dramatically.

“When we remodeled our kitchen and bathrooms several months ago every contractor we called showed up, and their bids were very competitive,” said American Homeowners Foundation President Bruce Hahn. “Many of them were ready to start immediately, and none of them balked when we told them we wanted them to sign a comprehensive contract specifying all of the details of the project,” he added. (Note: Judging from the continuing number of complaints regarding remodeling contractors, the competition has yet to drive incompetent and/or dishonest contractors out of the business.

Lastly, mortgage rates are still competitive by historical standards. Although lenders have become more particular about who they will lend to, and the gap between mortgage interest rates for those with excellent credit and those with marginal credit histories has widened, mortgages with 30 year fixed rates are still affordable for a majority of home buyers. If you are looking down the reset barrel of an adjustable rate mortgage on your current home, you will also be able to resolve that problem and avoid the higher mortgage reset interest rate with a fixed rate loan on your next home.

The bottom line: Trying to employ market timing in real estate entails many of the same risks as attempting market timing in the stock market, as many real estate flippers who flocked to the market in the middle of this decade learned the hard way. Despite all the current doom and gloom in the housing market, it’s still a great time for most of us to buy a home!

Courtesy of the American Homeowners Foundation and the American Homeowners Grassroots Alliance, www.AmericanHomeowners.org “
Read more!

Four Reasons the Holidays are a Prime Time to Sell a Home

Serious home buyers are always ready to make a purchase when they find the right home at a good price.
RISMEDIA
That’s why the holiday season is just as a good a time as any to sell a home-in fact, it can be a great time.

“Timing is everything when it comes to selling a home,” said Diane Turton, broker of record at Diane Turton, Realtors. “We explain to our customers that the process is simple - the right home buyer comes along, sees your house, says ‘I love the home’ and makes an immediate offer.”

Home sellers need to seize the opportunity by preparing their home, so that it is ready to show a buyer at anytime. Here are four good reasons to either put a home on the market right now during the holiday or keep it on the market if it already is listed with a real estate firm.

1. Homes look their best during the holidays - Right now, many homes look more inviting than at any other time of the year. Holiday decorations and the clean look of homes, without clutter, make properties look more inviting inside and out. Live evergreens and scents of the season remind buyers of the warmth they are looking for in their new home.

2. Less competition - Most home sellers believe the holidays are too distracting to sell or buy or home so they take their house off the market. Less competition, in fact, makes it a good idea to do just the opposite because your home is more likely to be seen.

3. More serious buyers - Buyers shopping for a new home at this time of year are ready to act, and these are the kinds of buyers a seller truly wants to attract. Like everyone else, homebuyers have a long list of things to do during the holidays. If they are making time to visit homes in December and early January, it is quite clear they are ready to make an offer.

4. Strong connection between home and holidays - There’s no better time for buyers to see themselves in a new home. It’s the holidays and for many homebuyers the season inspires images of friends, family and home. According to Turton, the reality is that people buy homes in December and even during the week between Christmas and New Year’s Day.
Read more!

Fed to Unveil Mortgage Protection Plan

The Fed is expected today to propose new subprime mortgage lending rules, including one that could prevent lenders from penalizing borrowers who pay their loans off early.
By: Jeannine Aversa: REALTOR® Magazine Online
The Federal Reserve is introducing its new mortgage protection plan today to help bailout struggling borrowers.

The rules it’s proposing are particularly aimed at protecting those who might find subprime loans their only alternative because of low income or poor credit.

The Fed proposes these regulations:

    • Barring or restricting lenders from penalizing subprime borrowers who pay
      their loans off early.

    • Forcing lenders to make sure that borrowers, especially subprime ones, set
      aside money to pay for taxes and insurance.

    • Barring or limiting loans that do not require proof of a borrower's income.

    • Setting new standards for how lenders determine a borrower's ability to repay
      a home loan.

The plan, if ultimately adopted, offers Federal Reserve Chairman Ben Bernanke, who took over the helm in February 2006, an important opportunity to put his imprint on the Fed's regulatory powers.
Read more!

Senate Passes FHA Reform Bill

The U.S. Senate voted Friday to approve a bill that would give borrowers a safer alternative to riskier mortgage products and provide some relief to home owners facing foreclosure.
REALTOR® Magazine Online
The FHA Modernization Act of 2007, passed Friday by the U.S. Senate, would give borrowers a safer alternative to riskier mortgage products while also helping many home owners who may be facing foreclosure, according to the NATIONAL ASSOCIATION OF REALTORS®.

“A reformed FHA is positioned to help home owners who face unaffordable mortgage payments as a result of resetting adjustable subprime loans and help bring stability to local markets and economies,” says NAR President Richard (Dick) Gaylord.

NAR has long supported FHA modernization legislation that would increase loan limits, reduce or eliminate the statutory 3 percent minimum cash down payment, and give FHA increased flexibility and the ability to streamline certain programs, in addition to strengthening the loss mitigation program.

In addition, the increase in FHA mortgage loan limits would help first-time home buyers, minority buyers, and people who do not qualify for conventional mortgages, according to NAR. Increased loan limits would also help people living in high-cost areas; current FHA limits make the program unusable in these areas, Gaylord says.

Gaylord says that FHA has made mortgage insurance widely available to individuals regardless of race, ethnicity or social status during periods of prosperity and economic depression. The FHA program makes it possible for higher risk yet creditworthy borrowers to obtain prime financing.

The House had passed its own FHA bill Sept. 18. House leaders now will have to decide whether to clear the more limited Senate legislation or insist on a conference to reconcile the competing versions.
Read more!

Agents want a little loyalty

Some agents say the free rides are over. They're embracing the idea of a buyer's pledge of allegiance.
By: Ann Brenoff: Los Angeles Times
VETERAN home sellers usually don't flinch when a realty agent pushes a sheath of papers in front of them to sign when they list their houses. The agent, after all, will be bearing the upfront expense of advertising, printing up mailers, holding open houses and arranging showings - and who would do all that without a signed listing contract guaranteeing a commission if they sell the house?

But what about buyers? They get a free ride.

Buyers can drop in unannounced to virtually any realty office, and an agent working that day will drive them around, showing them what's for sale. There's nothing to stop those buyers from turning around and making an offer on one of those houses through, say, their sister-in-law who just got her real estate license. The agent who spent half a day with them likely won't get so much as a thank-you note.

That, gradually, is changing.

Twenty-one years ago, John Rygiol, owner of Seal Beach-based John J. Rygiol & Associates, turned the tables: He stopped representing sellers altogether and began asking would-be buyers to sign loyalty agreements, documents stating that in exchange for his time and services in finding them a home, they will make all offers through him or pay him a commission anyway. Today, 10% of California Assn. of Realtors members use buyer loyalty contracts.

The effect on buyers is twofold: They are represented by an agent who won't try to steer them toward his or her listings, and they've signed a contract wedding them to one agent for a fixed period of time.

Agents with listings have a financial incentive to push those listings, Rygiol says. If the client buys a home the agent has listed, the agent would pocket the full commission.

"I have no listings. I'll show you everything that is out there and I will only be working with you," Rygiol said. His business now has six offices and eight agents in Southern California. Statewide, there are 17 exclusive buyer brokerages and 54 exclusive buyer's agents.

California has a strong dual-agency disclosure policy, which requires agents to tell their buyer clients if they or another agent in the same firm represent the seller. The problem is, it is often disclosed only at the point when a buyer is making a written offer.

Rygiol client Ed Novitsky, a first-time home buyer, likes knowing that "John just works for me." Novitsky, his wife and daughter, 2, are renting in Torrance while looking for a home to buy in the South Bay. He is shopping in the mid-$600,000s range.

Novitsky, who calls himself a skeptic, may seem an unlikely type to sign a loyalty agreement. He said he is someone who needed to understand the home-buying and financing process himself and was unwilling to blindly trust someone else to protect his interests in what he called "the biggest purchase" of his life.

He personally called about 15 mortgage lenders directly and got pre-qualified. He then interviewed about a dozen realty agents and, frankly, he recalled, wasn't always impressed.

But when he came upon Rygiol, the idea of having an exclusive buyer's agent "just made sense." "When I called John, right away I liked what he said to me: 'Let's meet and see if we think we can work together.' "

He wasn't bothered by Rygiol's request that he sign an exclusive six-month contract. "It's fair," Novitsky said. "If he puts in the time and does his job, why wouldn't he be entitled to compensation?"

Novitsky is part of a small but growing minority in this regard. For many California buyers, the idea of being asked to sign a loyalty agreement before an agent opens his car door is a novel concept.

Buyer loyalty contracts are commonplace in other states - and are most prevalent along the East Coast and in the Midwest - but Colleen Badagliacco, president of the California Assn. of Realtors, acknowledges they haven't caught on as widely in the Golden State. CAR offers its members sample contracts, and Badagliacco encourages their use. The contract that Rygiol uses states that if the buyer winds up making an offer within six months on a house that he showed them (not just drove by but toured the interior), he is entitled to the commission.

Most contracts are for a fixed period of time - a weekend if an out-of-state buyer is coming in to look or two weeks if it's someone local. But the obligation to pay the agent a commission extends for six months if the home being bought is one seen during the initial showing period.

In other states, exclusive buyer agents may take it one step further: Before they agree to spend their weekends driving buyers around, they not only want it in writing that the buyers will make their offer through them, but they also charge a retainer of $250 to $500. In almost all cases, the retainer is deducted from an eventual commission when and if a deal is finalized, but even if it isn't, the agent keeps the fee.

Buyer's agents in California don't charge a retainer (or advance fee, as the state Department of Real Estate calls it) because of the stringent and cumbersome rules governing how this money must be handled. CAR guidelines also discourage it. Many agents mistakenly believe the practice is illegal; although it isn't, failure to comply with the state regulations can carry criminal penalties.

To some extent, said Paul L. Campbell of Dream Drafters Real Estate in Everett, Wash., the retainer is proof of sincerity and a measure of a buyer's seriousness. He charges a $250 retainer, refundable at closing.

And there appears to be wiggle room. In some cases, repeat clients aren't charged a retainer nor are the buyers whom those clients recommend. If a buyer is unhappy, some agents say they just cut him or her loose.

But, for Rygiol anyway, "it's never come to that."
Read more!

Fed Cuts Key Rate a Quarter Point to 4.25 Percent

Federal funds and prime rates are now at their lowest levels in nearly two years.
By: Jeannine Aversa: REALTOR® Magazine Online
The Federal Reserve dropped the federal funds rate by one-quarter point Tuesday to 4.25 percent. The rate reduction is the third this year.

The Fed also lowered its lending rates to banks by one-quarter-percentage point to 4.75 percent. That was the fourth cut to the discount rate since mid-August.

Both the funds rate and the prime rate are now at their lowest levels in nearly two years. The Fed hopes the cuts will stimulate economic growth, but Wall Street investors had hoped for more and the market responded by falling 300 points on Tuesday.

"Economic growth is slowing, reflecting the intensification of the housing correction and some softening in business and consumer spending. Moreover, strains in financial markets have increased in recent weeks," the Fed said in a statement explaining its decision to cut rates again.
Read more!

Report: lenders agree to five-year freeze on ARM loans

Official announcement expected Thursday
Inman News
A coalition of lenders, loan servicers and investors have reportedly agreed to a plan that would freeze interest rates on some subprime mortgage loans for five years.

Borrowers with loans made between Jan. 1, 2005, through July 30 of this year who face interest rate resets between Jan. 1, 2008, and July 31, 2010, would be eligible for interest rate freeze, the Associated Press reported, citing unnamed sources including Congressional aides.

An official announcement of the plan's details is scheduled for Thursday, AP reported.

Treasury Secretary Henry Paulson said Monday the plan would help homeowners who are current on their payments but cannot afford a higher adjusted rate (see Inman News story).

Debate over the plan has centered around the length of any interest rate freeze, AP reported, with federal regulators pushing for a seven-year freeze, and the industry holding out for a one- to two-year reprieve.
Read more!

Bill Would Help Home Owners at Brink of Foreclosure

U.S. Sen. Dick Durbin (D-Ill.) is pushing for a bill that would allow bankruptcy judges to change the terms of a mortgage for owners at risk of losing their home.
By: Dennis Conrad: REALTOR® Magazine Online
U.S. Sen. Dick Durbin (D-Ill.) is pushing for a bill that would allow bankruptcy judges to change the terms of a mortgage on the primary residence of owners at risk of foreclosure or bankruptcy.

Judges would be able to lower an adjustable interest rate to a lower, fixed rate. They already have the power to do this for car loans and a number of other debts.

Durbin says his bill could help an estimated 600,000 families at risk of losing their homes because of rising adjustable mortgage rates.

"A strategic change in the bankruptcy code will provide home owners facing foreclosure a degree of financial stability – even when the market cannot," Durbin said.

Supporters of Durbin's bill include senior citizens, bankruptcy attorneys, the AFL-CIO, and the NAACP. The American Bankers Association and home builders are among opponents.

Floyd Stoner, a leading lobbyist for bankers, says bankruptcy judges lack expertise to predetermine a loan's size, value, and length.
Read more!

Rate Freeze Proposal to Offer Borrower Bailout

The Bush administration and banking industry are nearing an agreement on a proposal that would temporarily lock in the teaser rates of subprime borrowers at risk for default.
By: Robert Schroeder: REALTOR® Magazine Online
The Bush administration, mortgage service companies, and investors are nearing an agreement on a strategy to help offer relief to borrowers with subprime mortgages, says Treasury Secretary Henry Paulson.

Speaking at a housing conference organized by the Office of Thrift Supervision, Paulson said he wanted to “develop a set of standards” for modifying subprime loans that the industry could use to speed up decisions on the hundreds of thousands of borrowers at risk of losing their homes. The proposal, he says, would temporarily freeze the teaser rates for certain qualified borrowers.

In an interview late Monday on Bloomberg TV, Paulson said that the downturn in the housing market is "the biggest challenge to our economy," but the Treasury's plan to help out subprime borrowers doesn't include spending taxpayer money on funding or subsidies for either the industry or home owners.

Supporters of a congressional mortgage reform bill criticized the Bush administration’s plan, saying it will remove the incentive to enact their bill, which would provide lasting reform.

Meanwhile, earlier Monday, Boston Fed Bank President Eric Rosengren said research at the Boston Fed suggests that the foreclosure crisis in subprime mortgages will get worse before it gets better.

He urged community banks and states to focus on the 87 percent of subprime loans that are not seriously delinquent and where action may avoid future problems.
Read more!

Bernanke hints another rate cut may be needed

Fed boss says housing, credit troubles creating ‘headwinds’ for consumer .
MSNBC.com
Federal Reserve Chairman Ben Bernanke on Thursday hinted that another interest rate cut may be needed to bolster the economy. The worsening credit crunch, a deepening housing slump and rising energy prices probably will create some “headwinds for the consumer in the months ahead,” he said.

Bernanke said he expects consumer spending will continue to grow and suggested the country can withstand the current problems without falling into a recession. But he indicated that consumers could turn more cautious as they try to cope with all the stresses.

The odds have grown that the country could enter a recession. A sharp cutback in consumer spending could send the economy into a tailspin. Against this backdrop, Fed policymakers will need to be “exceptionally alert and flexible,” Bernanke said.

That comment probably will be viewed as a sign the Fed may lower interest rates when it meets on Dec. 11, its last session of the year.

“Bernanke is leaning in the direction of a rate cut,” said Brian Bethune, economist at Global Insight.

Twice this year the central bank has trimmed rates to keep the housing collapse and credit crunch from throwing the economy into a recession. Those cuts came in September and late October.

In the October meeting, Bernanke and his Fed colleagues signaled that further cuts might not be needed. Since then, however, financial markets have endured more turmoil. The housing slump has deepened, consumer confidence has plummeted and consumer spending “has been on the soft side,” Bernanke said in a speech Thursday night to business people in Charlotte, N.C.

A copy of his remarks was made available in Washington.

The economic outlook has been “importantly affected over the past month by renewed turbulence in financial markets, which has partially reversed the improvement that occurred in September and October,” Bernanke said. “These developments have resulted in a further tightening in financial conditions, which has the potential to impose additional restraint on activity in housing markets and in other credit-sensitive sectors,” he said.

Bernanke spoke hours after the White House lowered its economic growth projection for 2008 due to the deteriorating housing market. The White House also raised its estimate for unemployment next year, but said inflation should moderate.

The Commerce Department reported that the economy grew at a 4.9 percent rate from July through September, the fastest pace in four years. The impressive performance, though, was not expected to carry into the final three months of the year, when analysts expect growth of 1.5 percent or less.

Just a day before Bernanke’s speech, the Fed’s No. 2 official suggested the central bank may be inclined to slice rates again because of Wall Street’s turbulence and the worsening problems in housing and in credit markets. Donald Kohn’s remarks sent the market soaring, with the Dow Jones industrial average gaining more than 300 points.

Bernanke echoed some of the same concerns. Kohn had said policymakers must remain “nimble” and he spoke of the need for “flexible and pragmatic policymaking.”

Some analysts believed the similarity in tone and language of the Fed’s top two officials was deliberate.

It appears they are trying “to send a message to financial markets that a rate cut could be in the offing” at the Dec. 11 meeting, said Richard Yamarone, economist at Argus Research. “When you have the top two people at the Fed reading from the same script, that is in itself a signal.”

Bernanke, like Kohn, is keenly interested in how all the economic stresses will affect consumers.

“I expect household income and spending to continue to grow, but the combination of higher gas prices, the weak housing market, tighter credit conditions and declines in stock prices seem likely to create some headwinds for the consumer in the months ahead,” Bernanke said in his speech.

In his remarks, Bernanke said rising gasoline and heating oil prices as well as higher food costs have the potential to raise inflation. He said that is something the Fed also is watching.

At the October meeting, the Fed said the risk of higher inflation was roughly in balance with the risk of slower economic growth. Bernanke said Thursday that Fed policymakers “will have to judge whether the outlook for the economy or the balance of risks has shifted materially.”

Analysts said the Fed’s next move on interest rates probably will be cinched by the outcome of next week’s employment report. If the report shows a weaker employment climate, that could seal a rate cut, economists said. A sturdy labor market that has meant income gains and jobs has served as a shock absorber for consumers. Those positive forces have helped to offset the negative ones from weaker home value and harder-to-obtain credit.

The November employment report, released by the government next week, is expected to show the unemployment rate climbing to 4.8 percent, from 4.7 percent, as new job-creation slows.

Bernanke is facing his biggest challenge since taking over at the Fed in February 2006. Some analysts have questioned whether he waited too long to cut key interest rates and whether he has acted aggressively enough in reacting to the nation’s economic problems.
Read more!

Rate cut hopes fuel Wall Street as Dow up 331 points

The Dow Jones industrial average notched its biggest percentage gain in four and a half years on Wednesday, after comments by the vice chairman of the Federal Reserve raised expectations for an interest rate cut in December.
By: Ellis Mnyandu: Reuters.com
And a sharp drop in oil prices for a second day eased worries that high energy costs might squeeze consumers going into the holiday season. The Dow and the S&P 500 jumped more than 2 percent, and the Nasdaq surged more than 3 percent.

Banks, insurers and other financials led the rally after Fed Vice Chairman Donald Kohn said renewed financial market turmoil could slow the economy more abruptly than previously thought. He said policy-makers must be "flexible and pragmatic."

"The implication from Kohn's comments is that the Fed now recognizes that market conditions have changed over the last month ... and that the Fed will be approaching the December 11 meeting with an open mind and will do what is necessary to keep the economy stabilized," said Philip Orlando, senior portfolio manager at Federated Global Investment manager.

The Dow Jones industrial average was up 331.01 points, or 2.55 percent, at 13,289.45. The Standard & Poor's 500 Index was up 40.79 points, or 2.86 percent, at 1,469.02. The Nasdaq Composite Index was up 82.11 points, or 3.18 percent, at 2,662.91.

The Fed's next policy-setting meeting is scheduled for December 11.

CITI JUMPS, OIL WORRY EBBS

Shares of Citigroup Inc, which helped kick off the rebound on Tuesday after getting a capital injection from the Gulf Arab emirate of Abu Dhabi, were the second biggest contributor to the S&P's advance. Shares of insurer American International Group Inc led financial stocks on the Dow.

The S&P financial index rose 5.04 percent, the biggest one-day advance since October 2002.

In addition to expectations of a rate cut, a drop of more than $3 in crude oil prices bolstered shares of consumer-oriented companies such as retailers and big manufacturers, including diversified manufacturer General Electric, which was the S&P 500's top advancer.

Oil prices fell as supply concerns eased, after having surged close to $100 a barrel on Monday and heightening worries about the impact of higher energy costs on businesses and on consumers during the holiday shopping season.

Among banks, shares of Citigroup, the No. 1 U.S. bank, shares jumped 6.7 percent to $32.29, while those of Bank of America Corp, the No. 2 U.S. bank, surged 4.5 percent to $44.85.

Shares of AIG, the world's largest insurer by market value, finished up 5.9 percent at $57.72.

FREDDIE MAC, WELLS FARGO

The rally also helped boost shares of two financial companies that had released downbeat news late on Tuesday.

Freddie Mac, the second-biggest provider of money for U.S. home loans, said late on Tuesday it would cut its dividend and sell preferred shares to build up capital.

Freddie Mac shares surged 14.3 percent to $29.42 on Wednesday as the preferred stock sale signaled it could access capital even in turbulent markets. Nevertheless, its shares still finished near multi-year lows.

Wells Fargo & Co, whose stock fell in after-hours trading on Tuesday as it announced a $1.4 billion charge in the fourth quarter for mortgage losses, finished up 3 percent at $30.72 on Wednesday.

GE GAINS, RETAILERS SHINE

Among big manufacturers, GE shares gained 2.7 percent to $38.46, while those of Caterpillar Inc, whose products include earth-moving equipment, rose 3.4 percent to $71.19.

Shares of discounter Wal-Mart Stores Inc were among the biggest gainers in the retail sector, finishing up 3.1 percent at $47.23.

Technology shares also advanced, with International Business Machines Corp leading the Dow's advance with a gain of 3.4 percent to $107.37. On the Nasdaq, shares of Apple Inc led gainers to end up 3.1 percent at $180.22 as the company's iPhone debuted in France.

The Federal Reserve's Beige Book, which provides an anecdotal description of economic conditions, added to expectations for an interest rate cut.

The report said economic growth slowed in October and the first half of November as fallout from the housing slump took its toll.

On the New York Mercantile Exchange, January crude settled at $90.62, down $3.80, or 4 percent, after trading from $90.33 to $95.22.

Trading was moderate on the New York Stock Exchange, with about 1.76 billion shares changing hands, below last year's estimated daily average of 1.84 billion. On Nasdaq, about 2.47 billion shares changed hands, above last year's daily average of 2.02 billion.

Advancing stocks outpaced decliners by a ratio of about 7 to 1 on the NYSE and by more than 7 to 2 on the Nasdaq.

(Editing by Leslie Adler)
Read more!

Fed's Kohn hints at December rate cut

The Federal Reserve's second in command on Wednesday signaled a readiness to cut interest rates again, acknowledging that financial market turmoil could slow the U.S. economy and the central bank must be flexible.
By: Tamawa Kadoya: Reuters.com
"Uncertainties about the economic outlook are unusually high right now," Fed Vice Chairman Donald Kohn told the Council on Foreign Relations in New York. "These uncertainties require flexible and pragmatic policy-making - nimble is the adjective I used a few weeks ago."

U.S. banks have written off billions of dollars in recent weeks due to losses in the subprime credit market, provoking fresh turmoil in financial markets that had only just recovered from the extreme jitters set off by credit fears in August.

Kohn sent Wall Street stocks soaring, with the Dow Jones industrial average (.DJI: Quote, Profile, Research) advancing over 300 points as investors read his remarks as a strong hint of another quarter point cut at the next Fed rate-setting meeting on December 11.

Kohn's sober assessment also coincided with a separate Fed report underlining the drag being exerted on the wider U.S. economy by the weak housing sector.

The Beige Book, based on reports from the 12 regional Federal Reserve branches, noted that seven Fed districts had reported a slower pace of growth, while conditions in the remaining five districts were modest or mixed.

"The national economy continued to expand during the survey period of October through mid-November but at a reduced pace," the Fed said.

Kohn explicitly nodded to the deterioration since the Fed last met to discuss policy, on October 30-31. At that meeting it lowered rates by a quarter point to 4.5 percent, but said the risks to growth and inflation were roughly balanced.

Since then investors have grown alarmed by weak economic data, opening a clear divergence between market expectations for future rate cuts and the impression created by the Fed in October that its easing campaign was finished.

Kohn helped to close that gap by acknowledging the recent drying up of liquidity, as banks hoard cash to offset further possible credit-related losses, had caught him off guard and was a cause for concern.

"I have to admit that, speaking for myself ... the degree of deterioration that has happened over the last couple of weeks was not something that I personally anticipated," he said in response to questions after his speech.

"Financial institutions became more cautious, and I think this process is one that we are going to have to take a look at when we meet in a couple of weeks," Kohn said, adding the central bank was looking at "lots" of different ways to supply liquidity to the markets.

His remarks contrasted sharply with comments from other members of the Fed's interest rate-setting committee, including a speech by Dallas Fed Bank President Richard Fisher that explicitly spelled out there was a split among policy-makers regarding the risks between inflation and growth.

"There are people at the (Federal Open Market Committee) table, myself included, that are very concerned about inflationary pressure. I don't think we're done in terms of getting it to where we want it to get," he told a community forum hosted by the Dallas Fed in Amarillo, Texas.

Fisher's words followed warnings from two other regional Fed bank presidents on Tuesday.

Chicago Fed chief Charles Evans said the stance of monetary policy was consistent with the Fed's objectives of steady growth and low inflation. Philadelphia Fed President Charles Plosser said that rate cuts risked inflation and could even slow the return of financial stability.

The difference between the tone of Kohn's comments and the others was spotted immediately.

"It sounded nothing like anything we've heard since the last meeting from other FOMC members," said Laurence Meyer, a former Fed governor attending the same event with Kohn. "It's not a surprise because the only FOMC members that can change the message are the vice chairman and the chairman."

(Additional reporting by Mark Felsenthal, Alister Bull, Tim Ahmann and Glenn Somerville in Washington and Ed Stoddard in Amarillo; Writing by Alister Bull; Editing by Neil Stempleman)
Read more!

New York Tycoons Making Play in L.A.

The LeFrak family of New York is expanding its 100-year-old Big Apple property business – all the way to Los Angeles’ Westside.
By: DANIEL MILLER: Los Angeles Business Journal Online
They are two figures that speak volumes about New York City real estate barons the LeFraks: 34 million square feet and 100 years.

The first is the size of their portfolio – easily twice that of Donald Trump’s – and the second, the length of time the family historically has held on to its assets.

One other thing: The family is heading west and plans to elbow its way into the Los Angeles market with at least 1 million square feet of real estate.

“That’s for starters, and we are going to continue to do it over a long period of time and our whole timeline is about 100 years,” said Jamie LeFrak, who at 34 is managing director of LeFrak Organization Inc. and the fourth generation in the family business. “That’s when we will reconsider.”

The LeFraks made a splash this year by paying top dollar for two expensive local assets, marking a shift away from the brick, working-class apartment and office buildings the family built its reputation on in New York and New Jersey.

In August the family purchased an office building in Hollywood for $50 million and in June it paid $80 million for the tallest office building in Beverly Hills. And they did it in a fashion consistent with how they built their East Coast real estate empire: paying cash.

Now, the family has its eyes on other assets in its Westside target area. That could well include residential properties in addition to commercial real estate.

But they are entering the local market at a time of uncertainty. Commercial builders are having difficulty obtaining credit to build new projects, and the residential rental market is in limbo, with the for-sale side whacked by the subprime meltdown that began earlier this year. Sky high valuations even in the commercial sector are likely heading down.

Still, local real estate players watching the action aren’t prepared to place any bets against the LeFraks.

“You have a lineage and a bloodline that has been in real estate for north of a century,” said Bob Safai of Madison Partners, who represented the seller, Broadstone Hollywood LLC, in the transaction for the 175,000-square-foot tower at 7060 Hollywood Blvd. “Their horizon is generational. You are talking 100 years and a multi, multi billion dollar family with assets all over New York City who are now expanding to the West Coast. There are only a handful of people in the country like that.”

Post 9/11

The family business is run by Richard LeFrak and his sons Jamie and Harrison, 35. Richard LeFrak, 62, is the son of the late Samuel J. LeFrak, the flashy tycoon who led the family business for decades after taking over from his father, Harry LeFrak, the founder of the 106-year-old business.

Locally, Jamie LeFrak has the best institutional knowledge of the L.A. marketplace because he worked here for two years in the late 1990s for commercial real estate company Trizec Properties Inc., now part of Brookfield Properties Corp., before joining the family business.

But that doesn’t mean he was the one trying to sell his father and brother on the L.A. market. In fact, it was Sept. 11 that prompted the family to consider investing here, Jamie LeFrak said.
“(It) made us take a pause and say, ‘Boy we should really consider having a business platform outside of one place.’ There were many years of debate, discussion and exploration, probably many years in which we should have been buying things instead of talking about it,” he said. “We went to a lot of places and had a lot of ideas but in the end L.A. turned out to be the best and not because I had spent time here.”

The family, which also plans to get into the London market, but has no holdings there yet, chose Los Angeles over cities like Boston, Miami, Chicago and San Francisco after deciding the Westside had the strongest long-term real estate market.

“Los Angeles is the best other market for real estate besides New York; you just have to understand the geography and the way land lays out here,” said Jamie LeFrak, who has impeccable academic credentials, attending Princeton as an undergraduate, followed up by a masters in civil engineering from M.I.T.

“West L.A. has a tremendous clustering of wealth and the wealth chooses to locate itself in these naturally determined locations, the beach and the hills. The most valuable properties are always the ones most proximate to the hills or the beach.”

Of course, acquiring prime Westside properties is not easy, given the strong demand for it, even if it sometimes can seem overpriced. But as the family continues to look at more properties, it likely will come across sellers who appreciate the LeFraks’ ability to do cash deals.

“They do what they say and say what they do,” said Safai, who noted the cash purchase of the Hollywood building. “I think they have the capacity to do what some other buyers in a fragmented market can’t do.”

Carl Muhlstein, executive vice president at Cushman & Wakefield Inc., said he’s shown the family properties, and he’s noticed that sellers seem to understand that the LeFraks aren’t just window shopping.

“I think they might have been off the radar screen but several years ago the family started making a lot of trips out west and started shopping,” said Muhlstein, who brokers the sales of large commercial real estate transactions. “They are definitely known now.”

Top dollar

The two local assets the company currently owns are certainly flashy affairs.

The LeFraks bought the Beverly Hills office building at 9701 Wilshire Blvd. in the city’s “Golden Triangle” from Kennedy-Wilson Inc. on a so-called 1031 exchange, in which they got a tax deferral on the sale of a residential property in New York City.

The 12-story, 111,165-square-foot building is 100 percent occupied and the LeFraks keep a small, modest office there that Jamie LeFrak uses on his twice-monthly visits to the city. The deal for the building, where City National Bank is the marquee tenant, broke down to a high $720 per foot.

“Most people would say it was expensive,” acknowledged Jamie LeFrak, adding the family has a “special affinity” for Beverly Hills.
The company doesn’t plan to do much with the building, other than lease out about 20,000 square feet – a considerable and rare vacancy for Beverly Hills – when it comes online next year. The asking rental rate will be somewhere in the $5 per foot per month range.

But at the company’s Hollywood property, big changes are planned to take advantage of the community’s resurgence and lack of office space. Since purchasing that 12-story, 175,000-square-foot tower, the LeFraks have set out to reposition the vacant property, which the previous owner had originally planned to convert into a condominium tower.

The LeFraks plan to upgrade the façade of the drab building, and will revamp all of the building’s systems. The final demolition of the building’s interior is underway, with office tenants moving in possibly by the end of 2008.

“It’s like building a brand new building except you already have the superstructure, but the superstructure isn’t up to seismic code so we have to improve that, too,” said Jamie LeFrak.

The building will be marketed to entertainment and technology tenants, and it will include ground floor retail space and a “signature restaurant.” Local firm Nadel Architects Inc. is handling the remodel.

“Everybody came back to Hollywood or wants to come back to Hollywood,” Jamie LeFrak said. “There is a sentiment in the entertainment industry that says, ‘We want to come back.’ We are attracting a lot of entertainment tenants.”

Moving forward

Locally, the missing piece for the company is residential, the bread and butter of the Lefrak Organization’s business. The family’s most famous development is LeFrak City, a gigantic Queens residential project that includes 20 18-story buildings. The 1959 project includes 2 million square feet of retail space and is home to about 15,000 people in 5,000 apartments.

Clearly, the LeFraks won’t be able to build a similar project – or something even half the size – on the Westside.

“In the city of Los Angeles and Los Angeles County there are no very large tracts of land that would accept a large high-rise, high density multifamily residential project,” said Mark Tarczynski, a senior vice president at CB Richard Ellis Group Inc., who specializes in brokering large land deals for residential development. “They are here a little late, unless they want to do it out in Ontario and I know that’s not going to happen.”

Tarczynski said that the only local multifamily development that might compare to the LeFraks’ holdings in New York is Miracle Mile’s Park La Brea project, which includes 4,000 apartments and sits on 160 acres. It’s not on the market, but it’s the kind of project the LeFraks would love to do.

“I hope we can find something in that scale. For us that would be awesome to find something big like that,” said Jamie LeFrak.

For now, the family is staying away from downtown Los Angeles – where lots of high-density, vertical apartment and condominium buildings are being constructed – because it wants to focus solely on West Los Angeles.
And the market, for all its strength, will need the full attention of the family. Though the LeFraks certainly have cash on hand, business here could still be impacted by the unrest that clouds the real estate market. Since August, the commercial market has been unsteady, with whispers slowly spreading of projects losing funding as banks deal with the subprime collapse.

But Los Angeles’ relative disassociation with the financial services firms of New York City could make it an attractive alternative to doing business in the company’s home base. While layoffs in the financial services industry could result in a depression in New York real estate values, that wouldn’t be the case here, where the entertainment business is the biggest game in town, or so the family thinks.

“The fact that the financial services firms might have a bad week has nothing to do with whether people in Thailand watched the dubbed version of ‘Shrek’ today,” said Jamie LeFrak. “It’s rewarding in terms of the decision we made. It makes us feel good knowing that while New York at the moment is seeing uneasiness with what is going on in the financial services sector, here I don’t think they are running out of computer programmers to make the next video game.”
Read more!

Pocket condo complexes catch on with young professionals

Urban style, low dues draw young buyers to nonsprawling condo complexes.
By: Jonathan Diamond: latimes.com
JONATHAN ZEPP is the rare Hollywood executive who gets to walk to work in the morning.

Zepp, executive director of business and legal affairs at Paramount Pictures' Digital Entertainment division, and his wife, Lucy, an account supervisor for a PR agency, closed on their condominium in a new 10-unit project on North Bronson Avenue in July. They were drawn not only by its proximity to the Paramount Pictures lot on Melrose Avenue but also by its open design and the intimacy offered by a smaller development.

The Zepps, both 30, are among a group of buyers whose first-home purchase is in the increasing stock of small condominium projects, mostly new developments taking the place of older duplexes or single-family homes cropping up in dense urban neighborhoods.

Much of the activity is taking place in Hollywood and West Hollywood, though projects are being built in Culver City, Venice, Century City and other pockets throughout the region. And although units in these smaller condo projects are generally priced higher on a per-square-foot basis than those in apartment-style buildings, the appeal for many first-time home buyers is the ability to buy into a new, more intimate urban development as well as the lower homeowners association dues.

There are no hard data on how rapidly the number of small condo complexes has grown - firms that track the real estate market generally cut off their research at 10 or 20 units. But there is some evidence of the growing trend. For example, Vigen Onany & Associates Inc., a La Crescenta real estate consulting firm that has put together budgets for homeowners associations at hundreds of condominium projects, claims to handle roughly 50% of that market and has done budgets for more than 1,200 small projects since 2000. That year, the firm said, it put together association budgets for 160 developments of 10 units or fewer in Southern California. Last year, that number reached 650, up from 400 a year earlier. It has since backed off to just 350 projects so far this year.

Although buyers cite location, design and lower monthly costs as primary factors in choosing smaller condo developments over single-family homes or units in high-rises, as entry-level housing goes, many of these projects are pricey. Yet enough buyers are willing to pay the higher initial cost for visually interesting designs to support this market.

"People don't want cookie-cutter," said Richard Papalian, president of Papalian Capital Partners in Pacific Palisades, which is developing projects of four, 10 and 12 units in the Miracle Mile and West Hollywood.

"When you start to have a large open space and contemporary feel, it's more expensive to build," he said. "It's not, 'How many bedrooms and baths can I cram into so many square feet?' "

The Zepps paid "in the mid- to high-$800,000" range, roughly $460 per square foot, for their 1,850-square-foot unit in the building developed by Hollywood-based Urban Environments.

By comparison, DataQuick Information Services, which tracks residential real estate trends, reported a median price per square foot of $367 for a condo in Los Angeles County in October. There is no independent tracking of sales in projects of 10 units and fewer.

One offset to the higher per-square-foot price can be lower homeowners association dues. Because smaller projects generally don't have pools, gyms or full-time front-desk or maintenance staff, monthly dues to cover taxes, insurance, water and gardening bills can be one-third of those at a larger complex.

"One appeal is dues of $150 a month," said Tony Myers, an agent at Re/Max All Cities-Brentwood, who has sold condos in small developments. "Some people like to keep the . . . dues low and have special assessments" when a capital expenditure is needed, he said.

'Compatible personalities'

Like larger condo projects, smaller developments are governed by a set of covenants, conditions and restrictions that define how monthly dues are applied. The homeowners association is also responsible for levying special assessments for large capital expenditures, and conflicts can arise among neighbors over their application. In a project of half a dozen or fewer units, those issues could be magnified.

Michael Papale, a vice president of sales and business development at Exponential Interactive, bought one of four units in a Venice complex as his primary residence and owns another condo in a 20-unit building run by a property management firm. The owners in the smaller property have a greater say in how things are handled, he said. "It gives us more decision-making power."

The potential for conflict with neighbors was something Zepp, a lawyer, took into consideration when he and his wife started looking at smaller projects.

"We decided that this was so unique in design and layout that it attracted a certain kind of people," he said, "that there would probably be a lot of compatible personalities."

Indeed, having like-minded neighbors was just one of the factors the Zepps looked at as part of the decision to make their first home purchase in an urban, 10-unit complex with poured-concrete floors and 19-foot ceilings.

The overwhelming majority of buyers are young professionals, both couples and individuals, developers say. Although a handful of empty-nesters have bought into them, the complexes are unlikely to appeal to families with young children.

"Usually, the buyer is 25 to 40 years old, mostly single with no children," said Lydia Simon, an agent with Coldwell Banker Westside and Malibu who deals exclusively in condo sales.

The appeal, she said, goes beyond the ability to buy a town-home-style project in an urban environment for less than the cost of a comparably sized single-family home.

"People like being part of a new project," she said. These projects, most newly built, come with new appliances, a one-year builder's warranty and, often, a design that has more open space and is flexible enough to cater to individual tastes.

"Buyers are looking for something where they can express themselves, to put their personality onto the projects," said Lawrence Scarpa, a principal at Pugh + Scarpa Architects in Santa Monica. In designing smaller complexes, his firm attempts to create as flexible a space as possible. "We treat it as large a light-filled [space] as possible, sparse and neutral so someone can come in and envision what they think the space ought to be."

Live-work concept

That was part of the appeal for Nick Stabile, a 37-year-old actor and producer who last year bought a 1,300-square-foot live/work condo on North Highland Avenue for just under $1 million. The property was developed by L.A.-based Universal Live Work, which is now in construction on two similar projects a few blocks east on Larchmont Boulevard.

Stabile uses the unit, one of four in the building, primarily as a home for his Bella Vita Entertainment production company. When he and his wife work late, they opt to spend the night at the Hollywood condo rather than head back to their Malibu home.

"We chose it because of the unique setup - work-live," he said. "Downstairs is work, just a really nice, comfortable environment with big windows and lots of light. It doesn't feel like an office."

For Zepp, a New York transplant who rented an apartment near 3rd Street and Fairfax Avenue for three years before buying, the home on North Bronson Avenue should salve any lingering longing for the East Coast, where he also walked to work.

"Just like old times," he said.
Read more!

Realtors become own media to sustain market optimism

Part 2 of 2: Negative news scares off clients
By: Bernice Ross: Inman News
Are we going to let the negativity in the media continue to create irrational fears in our clients? Or are we going to fight back and tell the truth about all the good things that are happening in today's real estate market?

There are more than 1 million Realtors in the United States and approximately 2 million people who hold real estate licenses. What can we do to counteract the flood of negative press?

1. Stage a frontal attack

Whenever you read or hear a piece of news that uses a percentage, remember there are two ways to view that percentage. Take these two examples:

Negative Media: Twenty-five percent of the subprime mortgages in the U.S. are not performing.
Positive Realtor Response: Subprime mortgages represent 25 percent of all mortgages in the U.S. Of these, 75 percent are performing. This means that only 6.25 percent of the total loans are NOT performing (25 percent of total loans that are subprime) X (25 percent not performing) = 6.25 percent.

Negative Media: Prices are down in 15 states.
Positive Realtor Response: Prices are stable or increasing in 35 states.

I find examples like these daily. Take the negative example and make it positive. To do this with percentages, simply subtract the negative percentage from 100 percent. Using the example above, if prices are down in 15 states, the percentage of states with a decrease is 30 percent. To find the percentage where property values are flat or unchanging, subtract 100 percent minus 30 percent. In the example above, prices are stable or are increasing in 70 percent of the states.

Once you calculate this number, share it in your blog, in your marketing materials, and talk about it at every possible opportunity. Not only will you help stem the tide of negative news, but you will also attract more clients.

2. Go Long Term, Not Short Term

There's no doubt that many areas are experiencing a slowing market. We have been doing business in a paradise of exceptionally low interest rates, easy lending, amazingly high demand, and a flood of money created by the strong economy and lower tax rates. These factors lead to unprecedented numbers of sales as well as extraordinary appreciation in some areas.

For example, my father died in 1998 when his house in Los Angeles was worth $168,000. According to the comparable sales data, it was worth $600,000 at the beginning of 2007. Based upon current sales data, it's currently worth about $575,000. Thus, the value is down $25,000 from Jan. 1, 2007. Here's how the negative media would spin this versus the more accurate long-term assessment of the situation:

Negative Media: "Owners Face Massive Losses As Values Plunge By Over 4 Percent In Just 10 Months."
Positive Realtor Response: "Property Values Soar 300 Percent Over The Last Nine Years."

With the exception of a few states that have experienced massive job losses in the manufacturing sector, most areas have seen a substantial increase in property values. All markets go up and down. The larger and quicker the run-up, the more likely it is that there will be a downturn. Nevertheless, real estate continues to be a fabulous investment, especially when it comes to the difference between owning and renting. At the National Association of Realtors' mid-year meeting in May, Lawrence Yun, the chief economist for NAR, shared the following data from the Federal Reserve: "The median wealth accumulation for renters from 1995 to 2004 was $4,000. The median wealth accumulation of a homeowner was $184,000."

3. Record years are always followed by declines

One of the negative media's favorite ways to tell us negative things about the real estate market is to quote how much sales are down from 2004, 2005 and 2006. We had the lowest interest rates in more than 30 years, which in turn, triggered massive numbers of sales and price appreciation. For example, the $400,000 mortgage on my house in 1986 had payments of $4,220 per month. That same $4,220 today buys a $670,000 mortgage at 6.5 percent. When I started in the business in 1978, interest rates were 9.75 percent for fixed rates. They climbed to 13 percent in late 1979. No one ever envisioned the low rates we have today.

The negative media hammer the fact that the volume of sales is down. In most markets, if you compare the volume of sales today with what it was five or 10 years ago, the sales numbers look quite good. In fact, with the Federal Reserve cutting its target interest rate to 4.5 percent, we can look for an improvement in sales, provided we get the word out to our clients.

Negative Media: "Real Estate Sales Slip 20 Percent From 2006."
Positive Realtor Response: "2007 Real Estate Sales: Fourth Best Performance Since 1997."

We can win the war against the negative media by sharing how much prices have increased over the last 10 years and that the demand for FHA loans is up substantially. Let everyone you talk with know that places all over the country are reporting declines in listing inventories. In fact, some are still reporting multiple offers.

We need to ban together to get the positive news out there. Write letters to the editor, post the news on your blog, use it in your marketing materials, and talk about the good news to everyone you know. Realtors are a positive force for good in this country - let's harness our energies to jointly respond to the attacks on our industry and to renew the hope and optimism of the homeowners in this country.

Bernice Ross, national speaker and CEO of Realestatecoach.com, is the author of "Waging War on Real Estate's Discounters" and "Who's the Best Person to Sell My House?" Both are availableonline. She can be reached atbernice@realestatecoach.comor visit her blog at www.LuxuryClues.com.
Read more!

Most Metro Areas See Modest Price Gains

In the third quarter, 93 out of 150 metropolitan areas had increases in median existing single-family home prices, including six areas with double-digit annual gains.
REALTOR® Magazine Online
The vast majority of U.S. metropolitan areas showed rising or stable home prices in the third quarter, with most experiencing modest gains compared with a year earlier, says the latest quarterly survey by the NATIONAL ASSOCIATION OF REALTORS®.

In the third quarter, 93 out of 150 metropolitan statistical areas show increases in median existing single-family home prices from a year earlier, including six areas with double-digit annual gains and another 21 metros showing increases of 6 percent or more. Fifty-four areas had price declines, and three were unchanged. Regionally, prices rose in both the Northeast and Midwest, as did the national condo price.

Lawrence Yun, NAR chief economist, says the data underscores the fact that all real estate is local. “Some metro areas are hot while others are experiencing localized problems,” he said. “The report also shows that home prices in the vast midsection of America, from the Appalachians to the Rockies, are affordable and, perhaps, even undervalued.

Yun says the quarterly metro home price report is the most meaningful long-term series available on price performance because it looks at all of the available transactions in a given area.

Unlike other home price series that are based on county records and mortgage securities, which are collected well after the actual transaction date, NAR’s information comes directly from multiple listing services. The report includes actual market prices rather than just the percentage changes so people can compare housing values around the country, Yun says.

Even with most areas showing improvement, a disruption in higher-priced sales impacted the national median existing single-family home price, which was $220,800 in the third quarter, down 2 percent from the third quarter of 2006 when the median price was $225,300.

The median is a typical market price where half of the homes sold for more and half sold for less.

Gaylord: Know Your Market

NAR President Richard Gaylord says consumers need to understand what’s going on in their own area. “There is no such thing as a national housing market – it doesn’t perform like the equities markets,” he says. “What’s really important for consumers is to make informed decisions based on individual needs, desires, and timelines in a given area. Most people plan to stay in a home for 10 years, and for buyers with a long-term view, housing is an excellent investment.”

Typical sellers purchased their home six years ago, with the median price in the third quarter of 2001 at $159,100. Despite the dip in the national median price over the past year, the median increase in value for home sellers who bought six years ago is 38.8 percent. “Nearly every market is showing positive long-term gains, with a home equity accumulation of $61,700 over the past six years for a typical U.S. home owner,” Gaylord says.

Even in most of the places that are undergoing a large price decline, long-term increases are quite respectable, he says. For example, the Sarasota area of Florida is showing a median rise in home value of $112,000 over the typical holding period, and ranks well above norm for overall gains.”

Biggest Price Gains, Biggest Drops

In the third quarter, the largest single-family home price increase was in Bismarck, N.D., area, where the median price of $161,600 rose 15.1 percent from a year ago. Next was the Salt Lake City area, at $246,700, up 14.1 percent from the third quarter of 2006, followed by Yakima, Wash., where the third quarter median price increased 13.6 percent to $163,200.

Median third-quarter metro area single-family home prices ranged from a very affordable $81,600 in the Youngstown-Warren-Boardman area of Ohio and Pennsylvania, to more than 10 times that amount in the San Jose-Sunnyvale-Santa Clara area of California, where the median price was $852,500.

The second most expensive area was San Francisco-Oakland-Fremont, at $825,400, followed by the Anaheim-Santa Ana-Irvine area (Orange County, Calif.), at $700,700.

Other affordable markets include the Saginaw-Saginaw Township North area of Michigan, with a third-quarter median price of $84,900, and Decatur, Ill., at $85,900.

Condo Market Recap

In the condo sector, metro area condominium and cooperative prices – covering changes in 59 metro areas – show the national median existing condo price was $226,900 in the third quarter, up 2 percent from $222,500 in the third quarter of 2006. Forty-one metros showed annual increases in the median condo price, including six areas with double-digit gains; 18 areas had price declines.

The strongest condo price increases were in Bismarck, N.D., where the third quarter price of $133,300 rose 22.3 percent from a year earlier, followed by the Austin-Round Rock area of Texas, at $171,700, up 19.2 percent, and the Portland-Vancouver-Beaverton area of Oregon and Washington, where the median condo price of $210,200 rose 14.9 percent from the third quarter of 2006.

Metro area median existing-condo prices in the third quarter ranged from $114,000 in the Rochester, N.Y., area, to $663,700 in the San Francisco-Oakland-Fremont area. The second most expensive condo market reported was Los Angeles-Long Beach-Santa Ana, at $388,800, followed by the San Diego-Carlsbad-San Marcos area at $351,900.

Other affordable condo markets include Wichita, Kan., at $117,100 in the third quarter, and the Cincinnati-Middletown area of Ohio, Kentucky and Indiana at $117,500.

Sales Pace: State by State

Total state existing-home sales, including single-family and condo, were at a seasonally adjusted annual rate of 5.42 million units in the third quarter, down 13.7 percent from a 6.29 million-unit pace in the third quarter of 2006. “The housing market correction is clearly focused on transaction volume and not in home prices,” Yun notes.

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was 6.55 percent in the third quarter, up from 6.37 percent in the second quarter; the rate was 6.56 percent in the third quarter of 2006. Last week, Freddie Mac reported the 30-year fixed rate was down to 6.24 percent.

Only two states showed annual gains in existing-home sales from the third quarter of 2006, while complete data for two states were not available. In North Dakota, the level of third-quarter sales rose 2.9 percent from a year ago, while Vermont increased 0.8 percent. “The biggest decline in sales appears to be concentrated in areas that had significant levels of speculative investment, including Nevada, Florida and Arizona,” Yun said.

Regional Price Trends

Northeast: The median existing single-family home price in the Northeast rose 3.2 percent to $286,300 in the third quarter from the same period 2006. Total existing-home sales in the region declined 7.3 percent to an annual pace of 973,000 units in the third quarter from the same period a year ago.

The strongest price increase in the Northeast was in the Binghamton, N.Y., area, at $119,600, up 11.4 percent from the third quarter of last year, followed by Reading, Penn., with a median price of $162,900, up 7.0 percent, and Atlantic City, N.J., at $273,100, up 6.2 percent.

Midwest: The median existing single-family home price increased 0.5 percent to $170,800 in the third quarter from the same period in 2006. Overall, existing-home sales in the Midwest fell 10.8 percent to a 1.27 million-unit annual level in the third quarter compared with a year ago.
After Bismarck, N.D., the strongest metro price increase in the Midwest was in the Green Bay, Wis., area, where the median price of $162,900 was 7.2 percent higher than a year ago. Next was Akron, Ohio, at $124,700, up 6.9 percent from the third quarter of 2006, and Gary-Hammond, Ind., at $144,300, up 6.7 percent.

South: The median existing single-family home price in the South was $180,800 in the third quarter, which is 3.6 percent below a year earlier. Total existing-home sales in the region were at an annual rate of 2.16 million units in the third quarter, down 14.3 percent from the third quarter of 2006.

The strongest price increase in the South was in the Charlotte-Gastonia-Concord area of North Carolina and South Carolina, at $220,100, up 11.0 percent from a year ago, followed by the Beaumont-Port Arthur area of Texas, with a 10.2 percent gain to $129,100, and Corpus Christi, Texas, at $140,500, up 7.6 percent.

West: The median existing single-family home price in the West was $338,100 in the third quarter, down 3.8 percent from a year ago. The existing-home sales pace in the West of 1.01 million units fell 21.5 percent from the third quarter of 2006.

After Salt Lake City and Yakima, the strongest metro price increase in the West was in the San Jose-Sunnyvale-Santa Clara area, which increased 9.4 percent from a year ago, followed by the San Francisco-Oakland-Freemont area, up 8.6 percent from the third quarter of 2006.
Read more!

Real estate hurt by media spin

Part 1 of 2: Negative news scares off clients
By: Bernice Ross: Inman News
(This is Part 1 of a two-part series.)
I am sick and tired of the negative media constantly ranting about how horrible everything is in our business. It's time for our industry to fight back against these psychic vampires who seek to suck every bit of hope and optimism out of us just to build their circulation.

Newspaper headlines and buzzwords abound, such as: "Two million people will lose their homes in foreclosure in the next two years!" "Subprime Fiasco!" and "Mortgage Meltdown."

These are the headlines we hear every day, yet where is the positive news about the real estate market? The answer is, buried in statistics on page 15 of section 3 of your newspaper, provided you can find them at all.

Here's a typical example from USA Today, Oct. 26, 2007, page 1B:

New Home Sales Unexpectedly Rise

New homes sales posted an unexpected increase in September. But analysts were highly skeptical given the credit crunch and predicted further sales declines. The Commerce Department said sales of new homes rose 4.8 percent last month…"

By the way, here's what they didn't report. Sales in the West were up 36.6 percent. The media totally discounted these statistics. What about a different headline: "Great News! Real Estate Sales Surge Despite Biggest Credit Crunch in Decades"?

Here's another example. In Sept. 6, 2007, article entitled, "New Mortgage Foreclosures Set Record," Martin Crutsinger provided the following summary of a speech given by Doug Duncan, the chief economist for the National Mortgage Bankers Association. Here's how it was reported:

"The number of homeowners receiving foreclosure notices hit a record high in the spring, driven up by problems with subprime mortgages. The Mortgage Bankers Association reported Thursday that mortgage-holders starting the foreclosure process in the April-June quarter reached 0.65 percent, marking the third consecutive quarter that this figure has set an all-time high.

"The delinquency rate has risen to 5.12 percent … The worsening performance was driven by two factors - heavy losses in the Midwest states of Ohio, Michigan and Indiana, and the collapse of previously booming housing markets in California, Florida, Nevada and Arizona … Analysts said the problems in the formerly red-hot housing markets of California, Florida, Nevada and Arizona reflected in part speculators walking away from mortgages they can no longer afford."

This article ends with the negative media's favorite theme for scaring their readers and/or listeners: "Two million people will face foreclosure in the next two years."

Here are the numbers that the negative media did NOT report from Duncan's speech:

1. Thirty-five percent of the homes in the U.S. do NOT have a mortgage.

2. Some 94.88 percent of the loans ARE performing.

3. The foreclosure problem in this country is really a story about seven states.

4. The biggest foreclosure problems are in Michigan, Ohio and Indiana. These are manufacturing states that had horrible job losses. Since 2001, Michigan has lost 300,000 jobs. These states would probably have had problems no matter what the market was doing.

5. The other four states -- California, Florida, Nevada and Arizona -- experienced significant overbuilding. Twenty-five percent of the foreclosures in these states are on properties that are held by investors who were speculating.

6. Only 25 percent of all mortgages are subprime, and of these, 75 percent are performing.

7. In the other 43 states, foreclosures have fallen in 2007 from 2006 (data from Michael Clawson, vice president, Central Texas Mortgage).

Furthermore, buyers who are waiting to purchase when the so-called bubble pops in California's major metropolitan areas are going to be sitting on the sidelines, according to the latest data from a state Realtor group.

According to Leslie Appleton Young, chief economist for the California Association of Realtors, the areas being hardest hit in California are the outlying areas where there has been overbuilding. The resale market in California's major markets continues to be strong. In fact, the closer you are to a metropolitan area, the better the sales are. In the million-dollar-plus price range, there has been essentially no change from 2006 to 2007.

There's no question about the fact that there is bad news in some markets. What irks me is that there is also a lot of good news that is either being buried or is not being reported at all.

The question is, "What can NAR, the 50 state associations, and those of us who blog or write for the industry do to combat this trend?" The answer is "plenty."

See Part 2 next week to learn how to win the war against the negative real estate media.

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

Lenders Climb as Mortgage Volume Jumps

Shares in local lenders edged slightly up Wednesday after the Mortgage Bankers Association said mortgage application volume increased 5.5 percent for the week ending Nov. 9.
By: ALLEN P. ROBERTS Jr.: Los Angeles Business Journal Online
Shares in Calabasas-based lender Countrywide Financial Corp. and Pasadena-based IndyMac Bancorp each gained nearly 5 percent in early trading Wednesday after the MBA reported the mortgage application index rose to 707.3, from 670.6 the previous week.

The trade group said refinance volume increased 6.4 percent for the week, while purchase volume jumped 4.8 percent. Refinance volume accounted for 50 percent of total applications. This is the second-straight week the index has risen.

An index value of 100 is equal to the application volume on March 16, 1990, the first week the MBA tracked application volume. A reading of 707.3 means mortgage application activity is 7.07 times as high as it was when the MBA began tracking the data.

The survey is used to provide a snapshot of mortgage lending activity among mortgage bankers, commercial banks and thrifts. It covers about 50 percent of all residential retail mortgage originations each week. The average rate for traditional, 30-year fixed-rate mortgages rose to 6.19 percent from 6.16 percent the previous week.
Read more!

Five Solutions for a Troubled Housing Market

How do you fix a troubled housing market?
By: Matt Woolsey: REALTOR® Magazine Online
Forbes.com asked that question of a broad range of housing experts, including CEOs of real estate firms, real estate practitioners, economists from lending institutions, and research directors at analytics firms. Here are five of their best suggestions.

1. Restore investor faith. "Mortgage fraud, by both borrowers and insiders, must be identified and prosecuted in order for faith to be restored in the market," says Anthony Sanders, professor of real estate finance at Arizona State University.

2. Expand Fannie Mae, Freddie Mac and the Federal Housing Administration loans. "Our local banks and community banks have done a great job providing funding. (FHA) should be there as a supplemental for people who have good credit," says Congressman Lincoln Davis (D-Tenn.)

3. Cut construction and prices. "The market will only hit bottom after builders cut construction and sellers slash prices," says Mark Zandi, chief economist at Moody's Economy.com. "The longer builders and sellers hold on, the longer the market will struggle."

4. Bring back non-agency loans. "The dramatic seizing of the mortgage-credit markets caused the elimination of almost any loan that wasn't backed by Fannie Mae or Freddie Mac," says Bob Walters, chief economist at Quicken Loans. The revival of non-agency loans "will add much-needed mortgage funding to potential home buyers and folks looking to refinance."

5. Buyers and sellers get real. Nelson Gonzalez, senior vice president of Esslinger, Wooten Maxwell, REALTORS® , believes that once buyers realize that they're not going to convince a seller to accept a rock-bottom price, fluidity and activity can return to the market. "There is much pent-up demand," he says, "and buyers have been sitting on their hands for some time now."
Read more!

Motivated folks only

More realty agents are refusing to cater to stubborn sellers and looky-loo buyers.
By Ann Brenoff: latimes.com
ATTENTION, you picky buyers who think you have all the time in the world to house hunt before you ink an offer. (And this goes double for those of you who think that a listing price is just some silly number pulled from the air and that you can offer 30% less.) Listen up: Agents are mad as hell and aren't going to take you anymore.

And sellers - those of you who don't believe that your palace won't fetch what the shack up the street sold for a year ago - you aren't making any agent's short list of whom to call back today.

Here's the realization that some agents and brokers are taking to heart: They have neither the time nor the money to waste on a lot of us.

They are done spending days driving buyers around who want to leisurely ponder whether House A's carpet is the right shade of beige or House B's basketball hoop will leave marks when the sellers take it down. And the real estate profession's once-popular practice of treating listings as a land grab - get as many as you can as quickly as you can because they pretty much sell themselves - has fallen by the wayside. Advertising those listings costs agents money, and payday doesn't come until the sale closes. Do the math: No sale, no payday. And who has thousands to throw away on homes that will never sell at the prices their owners think they are worth?

Walter Sanford - a top-producing realty sales agent for more than 20 years and today a sales-coaching guru - is brutally blunt on the topic.

In a down market like this, he tells agents, dump the buyers and spend your time and budget cultivating more listings of motivated sellers and only motivated sellers. It's a way for agents to avoid financial ruin.

"Buyers take longer to make decisions, they 'nibble' more, and they will actually eradicate your net profit if you continue to work buyers as a major part of your income flow," Sanford says.

He adds: Nothing saps an agent's time and energy or cuts into potential income like showing unmotivated buyers house, after house, after house, and still not making a sale. "So don't do it, is what I tell them."

Them's fightin' words.

Valerie Van De Zilver, broker-owner of the Zilver Realty Group in Tustin, shares the sentiment. If a buyer doesn't commit after being shown available properties, he or she is enrolled in Van De Zilver's automatic e-mail program. Those buyers receive instant messages about new listings on the market, price drops and changes of listing circumstance. This enables buyers to keep current on the sales inventory and ensures they won't miss out on a property they have their sights on. It also means they won't tie up Van De Zilver's time.

"If they see something they like," she says, "they call me." She has dozens of buyers on her e-mail program. "And it's working just fine."

Sanford has a multi-step process to help realty agents separate the serious buyers from the looky-loos. Only he doesn't call them "steps;" he prefers "hoops" -- and he expects buyers to jump through them.

The first hoop is a 35-question form that begins with a version of "How long have you been looking and why haven't you bought yet?" He builds up to requiring that buyers get pre-qualified for a loan - not pre-approved, which he says is just a meaningless letter from a mortgage broker saying everything looks rosy - but actually pre-qualified with a lender's commitment. If a buyer's credit is in need of repair, Sanford enrolls him or her in a budgeting or credit repair program with his lender. And somewhere along the way, he insists on a loyalty agreement, restricting the buyer from agent-hopping.

Sellers too - at least the unrealistic ones - are getting the same tough-love treatment.

"Sometimes," Van De Zilver says, "I have to tell a client that he just isn't going to be able to meet his price goal in this market and that maybe he should think about holding off on his plans to sell."

Other agents are turning down potential listings if they sense that the seller is inflexible in price.

"You can't waste time with cement-head sellers," is how Sanford, formerly of Long Beach and now based in Kankakee, Ill., puts it.

Sanford advises his disciples to do their best to talk current-market sense into the seller, but should the asking price remain unrealistic, he says, agents should lateral the listing to a newbie agent in the office, politely explaining to the seller that the new agent will have more time to try to help him or her meet those goals. And, he adds, the original agent will get a referral commission in the unlikely event that lightning strikes and the house actually sells.

By his estimates, 30% of experienced agents are walking away from overpriced listings. Florida Realtor Magazine reported that some sales associates said in the last year they've regularly refused one out of three listings because they believed them to be out of the ballpark.

Many agents entered the business during the flush times when listings flew off the shelves, Van De Zilver says, and they functioned pretty much as order takers.

"Now, you really need an agent who knows what it takes to get the home sold," she says. "And if a seller doesn't want to hear it, there isn't much point in taking the listing because it won't sell."

Occasionally, she says, she'll take an overpriced listing anyway because she wants to put out her sign in a particular neighborhood. But by and large, she only deals with realistic sellers.

She recently declined to list a property when the owner wanted to put it on the market at $100,000 more than what he paid for it in January. He had painted the property and made minor cosmetic repairs. "I told him that this was perhaps not the best time to list the house if getting that price was his goal," she says. Another agent took over the listing; it remains unsold.

Lonnie Maples, who has been selling real estate for 29 years in inventory-saturated Riverside, says he too has turned down listings.

Over the summer, he had a listing appointment with a seller whose property had been in the Multiple Listing Service for more than a year. The owner had made several price reductions from it's original $1,095,000, and he was now ready to list at $895,000.

"I knew it wouldn't sell for even that," Maples says. "That house, in this market . . . $750,000 was more like it. I declined the listing because I didn't want to waste my time and money."

Maples says it would have cost him $100 a week just to advertise the listing in the local newspaper. Beyond that, there are fliers to have printed, lock boxes to install, mailings to send out.

"It all adds up to a big zero if the house doesn't sell," Maples says, adding that he would rather "catch the listing" on the second or third round, once it expires from its initial agreement. "Sellers get more realistic then."

Some agents are tempering the touchy situation by compromising. They'll agree to take a listing at the seller's desired price for 10 to 21 days if the seller agrees in advance to drop the price if it doesn't sell in that time frame.

And then there are those who say they never walk away from a potential listing.

Anthony Marguleas, broker with Amalfi Estates in Pacific Palisades, says he and his agents never turn down listings. Period.

The onus, he says, is on the agent to educate the client. "If all the comps show a house is worth $1 million and the seller wants $2 million for it, it's the agent's job to explain to him why that's not possible. We won't give up. We show the seller market analysis, comps of recent sales; we show him what else is currently on the market. It's our job to not let him make a mistake."

As for agents who sideline buyers if the buyers don't want to commit, Marguleas says that behavior is just plain "lazy."

"It's actually more than lazy; it's insulting," he says. "Buying a home is the largest investment of someone's life, and an agent doesn't have the patience or time to show them homes anymore? That's not right."

Marguleas says he's shown some clients more than 100 homes before they've made a successful offer.

"Some buyers look at five houses; others need to see more. That's what we agents do: show them houses."
Read more!

8 Tips for Investors Looking for Next Housing Gem

The Minneapolis-based Real Estate Investors Association, a club for people interested in real estate investments, isn’t discouraged by the state of the housing market.
By: Lynn Underwood: REALTOR® Magazine Online
Its members, who meet to ask questions and share advice, has grown from five to 100 over the last two years, despite the housing slowdown in some corners of the business.

"This is what buying low is all about," says Jason Cramer, a member who has turned his hobby into a career. He recently opened a business that buys and sells distressed properties.

Here’s some advice from club members for potential investors:

    • Buy in a familiar neighborhood, near where you live, work or go to college.
    • Research the area thoroughly, identifying potential properties and other
      business opportunities.
    • Observe trends, costs, vacancies, and potential appreciation.
    • Assess your own skills. If you have to hire out maintenance, costs will hit
      the bottom line.
    • Start small. A single-family home or a duplex is a good beginning. Plan to
      hold it for at least three years.
    • Avoid foreclosed properties. They are complicated to buy and they aren’t a
      guaranteed deal.
    • Be pre-approved for financing. Most investment property loans require at least
      10 percent down.
    • Remember, dealing with people is key, so hold onto your sense of
      humor.

Read more!

Mortgage Tips for a Tight Lending Market

Even home buyers with good credit may have trouble getting a mortgage these days.
By: Brad Reagan: REALTOR® Magazine Online
Here are three tips for home buyers in search of the best deal.

    • Conforming loans win. Keeping the loan below $417,000, the most that Freddie
      Mac and Fannie May will buy, saves big money since the rate on nonconforming
      loans is now a full point higher than for lesser loans. If getting the cash
      together is a challenge, Greg McBride, senior financial analyst with
      Bankrate.com, suggests taking out a small second mortgage or tapping an
      existing line of credit.

    • Don’t rock the boat. "Anything that might disrupt your credit history will be
      seen with a more jaundiced eye," says Keith Gumbinger, a vice president with
      mortgage research firm HSH Associates. He says avoid big credit card purchases
      or, if possible, major life changes.

    • Get multiple approvals. McBride urges borrowers to get advance approval from
      more than one lender, just in case the lender – not the borrower – goes
      under.

Read more!

When Will the Housing Market Finally Hit the Bottom?

The housing market is just getting worse. Home resales tumbled 8% in September to the lowest levels in this decade, prompting the obvious question: When will it all end?
By: Rex Nutting: RealEstateJournal.com
The honest answer is no one knows. Optimists have been saying for more than a year that the worst is behind us, while the pessimists have been saying recovery is still a year, or years, away.

So far, the pessimists have been right about the weakness in the housing market, but their forecast that the collapse in housing would lead to a general economic malaise has, at least so far, failed to pan out. The economy has slowed, but has not fallen into recession, as consumers and investors adjust to a world in which home prices don't automatically rise 5% or 10% a year.

The only thing that's clear now is that the housing market has gotten worse since the spring. The market was in a free fall in September. Sales of existing home fell 8%, while inventories of unsold homes rose to a 10.5-month supply. It could take 320 days for a home to sell. See full story.

Sales of existing single-family homes are down 20% in the past year, the fastest decline in 16 years.

Median prices have dropped 4% in the past year, in part because fewer expensive homes are being sold, but also because the typical home is worth less than it was a year ago.

Homes are only worth what someone is willing to pay for them, and right now, most homes on the market have no buyer in sight. Prices may have to fall much more to bring supply and demand back into balance, economists say.

Builders have almost no confidence. The home builders' index fell to a record low in October (the index dates back to 1985). New construction on single-family homes has plunged 31% in the past year, but still the inventory of new homes on the market, after adjusting for cancellations, is at the highest level since the early 1990s.

As if the fundamental sickness in the housing market weren't enough, a secondary infection has developed. The credit crisis in the mortgage market that erupted in the summer has left huge numbers of potential buyers without any access to mortgages.

The subprime sector has essentially died, with the newly reinvigorated Federal Housing Administration able to replace only a tiny segment of what was once a huge market of home buyers.

The top end of the market was also frozen out, as jumbo loans (those with mortgages above the conforming level of $417,000) became more expensive or completely unavailable.

The jumbo freeze-out devastated sales in pricey areas such as the San Francisco Bay area, where jumbo loans had accounted for about 52% of purchases in August, but just 39% in September.

There's some evidence that the jumbo market is slowly returning, but it's not functioning normally yet.

So where does the market stand now?

"We are seeing the first buds of spring" in the recovery of the jumbo market, said Stephen Stanley, chief economist for RBS Greenwich Capital. "It's a slow, glacial recovery."

Stanley believes home sales will be "really bad" for two or three more months, before the credit markets begin to function more normally. "It won't return to where we were six or 12 months ago."

At that point, the secondary infection would be gone, but the underlying illness would still be there. The market will really begin to recover only after sellers capitulate on prices.

And then home sales might level out, Stanley said, acknowledging that he's one of the more optimistic analysts.

Historically, housing corrections take a long time. After the market softened in the late 1980s, sales fell for five years, then took three more years to return to the peak level. Prices took just as long to recover.

Some analysts say the fundamentals will worsen in coming months. The main problem is that so many adjustable-rate mortgages will reset to a higher interest rate. The typical family with an ARM will see mortgage payments rise by $10,000 a year, according to Andrew Jakabovics of the Center for American Progress, a progressive Washington think tank.

Millions of these home owners will be unable to refinance their current loan and will either have to scrounge to make the payments, or lose their home through a fire sale or foreclosure. That would throw even more supply onto a saturated market.

"The mortgage crisis is neither wholly contained nor likely to abate in the near future," said Jakabovics. "Default and foreclosure loom ever more menacingly as borrowers are unable to find a reasonable payment option and unable to sell their homes."
Read more!