Markets Where a Flipper Can Make a Buck

Forbes magazine calculated whether a market is ripe for flipping by using data from Moody's Economy.com. Seattle and San Francisco top the list.
By: Matt Woolsey: REALTOR® Magazine Online
Flipping went out of fashion last year, leaving thousands of flippers in trouble in many areas, but an analysis by Forbes magazine shows that there are markets all over the country where investors can still turn a profit if they pick their properties wisely.

Forbes calculated whether a market is ripe for flipping by using data from Moody's Economy.com to calculate a market's rate of sales against inventory, and to determine supply and demand. Then it looked at current and new-home construction numbers through the end of 2008, based on data from the National Association of Home Builders; the magazine sought out markets where planned new home construction is low.

Then Forbes used price appreciation data from the NATIONAL ASSOCIATION OF REALTORS® to get a sense of short-term market direction. Finally, it examined Moody's figures on investor share. The higher the share of investors, the more sellers outweigh buyers, which is bad news in a bearish market.

The results identified the following markets as the best candidates for flipping. Here are the best markets, along with the price in each market that would make a home a candidate for a quick turnover.

1. Seattle, $385,000
2. San Francisco, $759,000
3. Raleigh, N.C., $225,000
4. Houston, $150,000
5. Austin, Texas, $175,000
6. San Antonio, $150,000
7. Boston, $389,000
8. Los Angeles, $590,000
9. New York, $489,000
10. Portland, Ore., $295,000
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Mortgage rates fall again this week

Consumer attitudes toward housing, economy impact market
Inman News
Long-term mortgage rates slid further this week on cooler July home sales and waning consumer confidence, Freddie Mac and Bankrate.com reported today.

In Freddie Mac's survey, the 30-year fixed-rate mortgage dropped to an average 6.45 percent from last week's 6.52 percent, and the 15-year fixed was down to 6.12 percent from 6.18 percent. Points, which are fees lenders charge for loan processing expressed as a percent of the loan, averaged 0.5 on the 30- and 15-year loans.

The story was a bit different for adjustable-rate mortgages (ARMs), however, on which rates this week rose by about "a quarter of a percent," Freddie Mac Vice President and Chief Economist Frank Nothaft said in a statement.

The average rate on the five-year Treasury-indexed hybrid ARM inched up to 6.35 percent from last week's 6.34 percent, while the one-year hybrid ARM climbed to 5.84 percent from 5.6 percent, according to Freddie Mac. Points on these loans averaged 0.6 and 0.8, respectively.

"The increase in ARM rates is consistent with movement of the yields on short-term Treasury securities, which have exhibited higher volatility recently due to market uncertainties," Nothaft said.

In Bankrate.com's survey, fixed mortgage rates fell sharply this week, with the average conforming 30-year fixed mortgage rate falling to 6.43 percent -- its lowest level since May 23. Discount and origination points on the 30-year loans averaged 0.32.

The average 15-year fixed-rate mortgage popular for refinancing slid to 6.13 percent, Bankrate.com reported. Unfortunately for mortgage shoppers in higher-cost housing markets, the average rate for a jumbo 30-year fixed rate was unchanged at 7.4 percent. Adjustable-rate mortgages were mixed, with rates on hybrid ARMs like the 5/1 ARM backpedaling to 6.53 percent and the average one-year ARM inching higher to 6.2 percent.

According to Bankrate.com, conforming fixed mortgage rates dropped notably this week on news of more weakness in the housing market and a decline in consumer confidence. The initial interest rates for hybrid ARMs such as the 3/1, 5/1, 7/1 and 10/1 ARMs also declined, but remain higher than those of fixed-rate loans. It was a different story on jumbo mortgage loans, where rates remained unchanged and further increased the penalty for borrowers taking loans greater than $417,000. The spread between the average conforming and jumbo fixed rates has exploded from 0.28 percentage point to 0.97 percentage point in the past five weeks.

Just six weeks ago, the average 30-year fixed mortgage rate was 6.82 percent, according to Bankrate.com, meaning that a $200,000 loan would have carried a monthly payment of $1,307. Now that the average conforming 30-year fixed rate is 6.43 percent, the same $200,000 loan carries a monthly payment of $1,255.

The following is a sampling of Bankrate.com's average 30-year-mortgage interest rates this week in some U.S. metropolitan areas:

New York - 6.42 percent with 0.15 point

Los Angeles - 6.53 percent with 0.5 point

Chicago - 6.43 percent with 0.07 point

San Francisco - 6.39 percent with 0.52 point

Philadelphia - 6.45 percent with 0.26 point

Detroit - 6.45 percent with 0.01 point

Boston - 6.49 percent with 0.15 point

Houston - 6.35 percent with 0.6 point

Dallas - 6.37 percent with 0.47 point

Washington, D.C. - 6.43 percent with 0.51 point
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Not everyone's fit to be a landlord

Homeowner on fixed income learns downside
By: Ilyce R. Glink: Inman News
Q: I dread being a landlord. I am a 68-year-old disabled veteran and have moved into another home. I have had to rent out my other home because I couldn't sell it.

One of the tenants wants to break the lease because she and the other female tenant cannot get along.

I am also on a fixed income and do not want to have to hire an attorney. Do you have any suggestions for me?

A: You're a perfect example of someone who should not be a landlord. It appears you don't have the temperament or financial wherewithal to handle the problems associated with renting property. Unfortunately, you were forced into being a landlord because you couldn't sell your house.

Make it a goal to get the property sold as quickly a possible. For now, tell your tenant she is legally liable for the rent and that you will pursue her legally if she skips out. If she's unhappy, have her find a replacement tenant.

I'm sorry that you don't want to hire an attorney, but you're experiencing a fairly common landlord experience. Please seek legal advice. You may also want to check out any of the excellent books on being a landlord from Nolo Press. You should also check the terms of your lease. Many leases allow you to recover your attorneys' fees should your tenant default under the lease.

Q: All I have ever wanted is a small piece of property -- as little as a half an acre with a shack -- in the northern mountains of North Carolina.

Is there any way I can buy without a down payment? I had $4,000 saved as a down payment, but I've had to use it on family medical bills. I am saving again for this purpose, but it is so slow.

A: Unless you're a veteran (with access to a VA loan), it's difficult to get a zero-down-payment loan right now. In fact, home buyers with cash for a down payment are having trouble finding mortgage lenders who want to close on their properties at a fair interest rate.

You'll have an easier time of it if you even have 3 percent of the purchase price, which can entirely be a gift from someone else (if you have someone with means willing to gift you the cash). Then, you can qualify for an FHA loan (find out more at www.fha.gov.)

I'm not saying you can't get a loan with zero down, but you may pay a higher interest rate or more in fees. Start shopping around with loan lenders and see what they say you can afford. The key thing is to not get yourself into a situation where you can't afford what you own. Bankruptcy is expensive and will trash your credit.

Q: When I applied for a loan the lender took advantage of me. I paid $7,000 to lower the interest rate to 5.25 percent, but he printed the mortgage documents to show that the rate is actually 5.75 percent. What can I do after closing?

A: You should have caught this at the closing and refused to close until the proper paperwork came in.

If you have this deal in writing, you can go back to the lender and show them that they made a mistake. Otherwise, you can complain to the department that regulates mortgage lenders in your state.

Q: I am excited about the fact that my house is going to be paid off in three more years. Do I need to make any changes to my home insurance policy because the house is paid off? What about changing my will?

A: Congratulations on closing in on your pay-off day. The answer to your question is "no." You don't have to change anything to your insurance policy or will (provided that you have a valid will).

If you haven't done it recently, you may want to update your insurance policy now to reflect the higher cost of rebuilding your property if a disaster happens. Call your insurance company and ask them to come out and reassess your property for rebuilding costs.

You should have adequate insurance for your home whether or not you have a mortgage on the home. A lender may require you to carry insurance, but it's prudent practice to carry insurance and to make sure that you have enough insurance and the right kind of insurance for your home. You really should reevaluate your needs every couple of years.
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Housing Woes Strike Hard in Southland

Shares in local companies continued to get hit as uncertainty swirled on Wall Street Tuesday as more disappointing housing numbers hit companies in the ailing real estate market.
By: By ALLEN P. ROBERTS Jr.: Los Angeles Business Journal Online
The Business Journal’s index of 200 public companies in Los Angeles lost 2.1 percent for the week so far, with 135 of the companies losing ground.

Of those taking the hardest blows, Fremont General Corp. led the way, dropping 21 percent this week to $4.05. The Santa Monica-based mortgage lender was hurt by grim housing numbers released Monday coupled with a cut to the company’s credit rating Tuesday by Moody's Investors Service. The credit service cut Fremont’s rating to Caa2 from B3, citing “low capital levels.”

Shares in Calabasas-based homebuilder Ryland Crop. have dropped 11 percent so far this week, as have its Los Angeles-based competitor KB Home, which has lost 9 percent as costs for unsold homes mount and sales continue to slide.

Shares in the nation’s largest mortgage lender, Countrywide Financial Corp., have also lost more than 7.5 percent this week to $19.42 as have shares in Santa Monica-based Anworth Mortgage Asset Corp., which dropped 5 percent to $4.98. Pasadena-based IndyMac Bancorp also slid 4.4 percent to $22.94.

Even the world’s largest real estate broker, El Segundo-based CB Richard Ellis Group, dropped 4.2 percent for the week along as did Public Storage Inc., which dropped 4.4 percent.

Adding to the fray was Standard & Poor's announcement Tuesday that U.S. home prices fell 3.2 percent during the second quarter; the largest drop in more than 20 years – offering little evidence the struggling housing market is near recovery.
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Dream Teams That Shape L.A.'s Skyline

Los Angeles was long considered an architectural wasteland. But the city’s reputation has changed thanks to a series of major projects.
By: DANIEL MILLER: Los Angeles Business Journal Online
Los Angeles was known in the past as something of an architectural desert.

While great and controversial buildings were put up in Chicago and New York and other great cities of the world, L.A. had to be satisfied with few architectural gems along with a modest collection of historical buildings, some of which met the wrecking ball.

But all that’s changed. The opening of the Getty Center 10 years ago, co-designed by Pritzker Prize-award winning architect Richard Meier, ushered in a new era for Los Angeles, drawing pedigree architects from around the world who committed to designing high-end and equally high-minded buildings.

The Getty was followed by the massive, built-for-the-ages Cathedral of Our Lady of the Angels, designed by Spanish architect Rafael Moneo. A short time later there was Walt Disney Concert Hall, designed by local phenom Frank Gehry, arguably the most celebrated architect in the world today. Indeed, a spate of other breathtaking architectural wonders have popped up in the last 10 years. If anything, with forthcoming projects such as the Red Building at the Pacific Design Center, the Broad Contemporary Art Museum and ultra high end condo projects such as the Century, the trend has picked up.

Suddenly L.A. is becoming known as a welcoming home for daring architects.

But these great architects don’t exist in a vacuum – they must draw on the abilities of builders, engineers, landscape artists and the like. They all have not just the experience but the talent to handle the complex task of realizing masterpieces.

With all that in mind, the Business Journal has compiled a group of 10 notable architectural projects from the last decade –commercial and public buildings – that capture the essence of the city’s new design spirit.

What follows are profiles of people who were key in building those notable structures. These are the go-to people when an architectural gem is to be built in Los Angeles. And there’s a fair number of them.

“There is such a creative business community here that is looking to do something,” said Douglas Hanson, design principal at DeStefano and Partners Ltd. “With all of the different cultures here and the ambitions of people who are willing to explore new ideas, it is pretty refreshing here as opposed to older cities.”

Linda Dishman, executive director of the Los Angeles Conservancy, also believes the city’s star is rising as an architectural center.

“The pedigree building concept is relatively new,” Dishman said. “I think rock star architect is a good description.”

Checkered history

Of course, great, or at least, notable architecture existed in Los Angeles long before the massive Getty Center opened in 1997. Indeed, the original Getty Villa, a replica of a Roman country estate, was something of a phenomenon when it opened in Malibu in 1974.

Ten years before that, pioneering L.A. architect Welton Becket designed the Dorothy Chandler Pavilion and the space-age LAX “Theme Building,” the striking spider-like structure that houses a restaurant, now closed for renovation.
And in 1920s and 1930s there was the father-son architectural team of John Parkinson and Donald B. Parkinson, remembered for iconic buildings such as Los Angeles Memorial Coliseum, Los Angeles City Hall, Bullocks Wilshire and Union Station.

But those buildings, still on the scene today, failed to budge L.A.’s reputation as a place of so-so commercial architecture with a willingness to forget its past.

The 1960s was dominated by the construction of a cavalcade of International Style commercial buildings that dot main thoroughfares such as Wilshire Boulevard. Today, ironically, many of these structures are still functional office buildings; functioning less well is their reputation.

“We’ve gone through waves where we’ve gone through changing preferences and styles,” said Ken Bernstein, manager of the city’s Office of Historic Resources. “It is always very difficult to have the appropriate sense of perspective about the most recent past and that has been the case in every era.”

More so than its commercial buildings, Los Angeles has been known for its landmark residential projects and the architects who made them possible. Luminaries such as Richard Neutra, Rudolf Schindler and Frank Lloyd Wright came here to design and build some of their most enduring works, many of which still stand today.

“The tradition of the émigré architect looking to Los Angeles as a source of creativity to develop new cutting edge architecture is apparent,” Bernstein said. “We have a decades-long tradition of architectural innovation.”

That tradition of innovation was boosted by the current movement toward pedigree or rock star architecture, which mirrored an international trend that also began in 1997 with the opening of the Guggenheim Museum Bilbao in Spain.

Hanson, of DeStefano and Partners, was the project architect for the Guggenheim in Bilbao. He recognizes that the museum – which was designed by Gehry and created a worldwide stir – has played a role in changing the international architecture scene.

“It changed Bilbao from a sleepy little shipbuilding town to a world destination,” said Hanson, who is designing the Concerto condo towers downtown. “It was the first building I had been involved in that had that kind of impact.”

Locally, there are several projects – chiefly Meier’s Getty Center and Gehry’s Walt Disney Concert Hall – that have had a similarly catalytic effect.

Though the Getty Center has a commanding presence atop a Brentwood hilltop, many of the current landmark commercial projects and those of the last century are located in or near downtown Los Angeles – a place that Hanson said is tailor-made for leading architecture because it is at the nexus of transportation services and other infrastructure.

“It has got the diversity of businesses and it is a bit of a frontier for the creative class and business people, and they are all coming together,” Hanson said. “That is what L.A. needs.”
Read more!

Swap Street

High-rent mercados may give way to chains that will pay much less
By: SARAH FILUS: Los Angeles Business Journal Online
As the buildings above Broadway’s mercados turn into luxury condos, residents may want national chain coffee chops and book stores.

Property owners along South Broadway in the Historic District downtown are facing a conundrum: what to do with the ground floor retail space?

For years the mercados between Second and Eighth streets have been known as a primary Hispanic shopping destination. Particularly on weekends, they bustle with thousands of shoppers, who buy jewelry, food, T-shirts and knick-knacks. Business is so good, in fact, that merchants there pay rents as high as $10 per square foot per month – about the same as rents along the famous Third Street Promenade in Santa Monica.

But as the long-underused space above the mercados is being adapted into higher-end residential, the same landlords feel pressure to bring in national coffee shops, book stores and the like to cater to the professional class that’s moving in.

Problem is, the national chains are not willing to pay those high prices because their sales per square foot are not as high as the mercados. Also, the chains aren’t sure that the downtown renaissance is mature enough for their arrival.

“The difference between what we get from the mercados versus what we will get from a national chain will be hard to take,” said Greg Martin, the U.S. representative of a triad of real estate companies called Begonia Development, Mideb, and 5th Street Funding, owned by Australian interests. “But if the right tenant comes along – Borders, Starbucks, Trader Joe’s – we would certainly rent them space.”

The Australian firms have held property along Broadway for more than 20 years and now manage more than 500,000 square feet in the area. They expect to open their first round of apartments within the next four months in a historic building, the interior units of which overlook an arcade that has long been an indoor mercado mall.

The 143 upscale apartments are expected to rent for $2 to $2.50 per square foot per month, comparable to other upscale areas around Los Angeles.

Residents – who will most likely be similar to the average renter downtown, 25 to 35 years old and about half making more than $150,000 a year – can either get to their apartment by walking through the bustling mall or by using a separate door.

When the apartments open, the merchants below will be required to move their merchandise into their stores and out of a central hallway. In the place of the merchandise, Martin will put kiosks down the center hallway that will serve both the residents and the shops and shoppers.

Some seem resigned to the lower rents they’ll get from the retail space.

Developer Fred Afari, for example is advertising lower retail rents on the first floor of his building under construction at Broadway and Eighth. The idea is to attract recognizable name brands.

“The retail rents are high along Broadway because of the high Hispanic traffic that moves through,” said Afari. “We feel we have to give some kind of lower rents to get national tenants. We are looking to accommodate the people on the upper floors and to promote the whole neighborhood.”

He signed a contract with Bakersfield-based Kelly’s Coffee and Fudge Factory, a chain with about 35 locations around Southern California, to open a shop on the ground floor of his building when it’s completed at the end of the year. And he’s looking for more tenants. A dry cleaner, market, and small restaurant are some of his top priorities.

He is willing to rent retail space for between $1.75 and $2.50 per square foot per month – a deep discount for the area.

Mercado moves

Some Mercado tenants said they think that national chains like Starbucks will revitalize the area. Others disagreed.

“No one that buys here sleeps here,” said Jim Meh, the owner of Discount Jewelry Plaza, a small jewelry store along Broadway near Eighth Street. He kept his store in Afari’s building until construction started about a year ago, he said. “One hundred percent of my customers are Spanish-speaking. They don’t pay $2 for Starbucks coffee; they go pay 50 cents to buy coffee and add water.”

Either way, more developers are expected to take this step, said Carol Schatz, president and chief executive of the Central City Association of Los Angeles.

“There are many, many buildings that are physically currently under development. It will be very interesting to watch,” she said. “As people start moving into a neighborhood, they have needs that need to be met. Everyone wanted to see a grocery store downtown. They want more places to grab coffee.”

Within the next year as construction projects are completed, up to 5,000 residents could move into the new apartments in the historic core along Broadway and on Spring and Main streets nearby, said J. Russell Brown, the president of the Downtown L.A. Neighborhood Council and the executive director of the Historic Downtown BID.

The transformation of Broadway certainly signals a continuing decline in the fortunes of mercados. Merchants and landlords said that business at the mercados has been falling off for years.

“Every day it goes down, down,” said Carlos Tejada, a merchant who pays $7,000 a month to rent a storefront for his men’s apparel shop along Broadway. “I’m not making any money. Never have I seen stores closed like this along Broadway.”

Tejada said he may have to close by next year.

The street took an initial hit in the ’90s when the MTA Red Line was built through the area, preventing easy travel along Broadway’s sidewalks, said Anne Peaks, vice president of Yellin Co., which owns the Grand Central Market, Homer Laughlin Building, and the Million Dollar Theater along Broadway. Business on the street never completely recovered, she said. Foot traffic lightened more when Angel’s Flight railway – which carried people from Bunker Hill to the Broadway area – closed in 2001 after a crash.

The Spanish-speaking population also gained a greater variety of places to shop. “The population has dispersed in a lot of ways,” Peaks said. “People can go to Wal-Mart and Sam’s Club and to the suburbs where they can get similar prices.”

Huntington Park and South Central are popular destinations for Hispanic shoppers looking for a more organized and upscale shopping experience, Brown said.

The companies Martin works for own real estate in Huntington Park that looks similar to the space on Broadway. “The people in Huntington Park used to ask us for space along Broadway. Now the people on Broadway want a spot in Huntington Park,” said Martin.

Upscale mercados?

Brown predicts that the slowdown in the mercados could help in the revitalization of Broadway.

“As the flea market atmosphere transitions, you will see more upscale dining and shopping experience,” he said. “There will always be a place for the Latino community, but right now there is not much more than a Tijuana-like shopping experience.”

Joseph Hellen, who leads the U.S. operations for the Australian firms, says he would like to see the block entirely converted to an upscale shopping mall akin to the Third Street Promenade or the Grove, but with more entertainment venues. He has been in talks with other developers in the area including Michael Delijani, who owns a number of the historic theaters along Broadway.

“Everything moves slow because there are a lot of restrictions because the buildings are historic,” said Hellen. When he first arrived on the scene, he wanted to knock down 75 percent of the district and build a mall from scratch, but he realizes the process will take a long time.

What’s more, many of the mercados could adapt and even thrive if the area goes more upscale.

For example, earlier this year he was involved in opening a Rite Aid at Fifth and Broadway, and the swap businesses were moved to new locations nearby. One bakery opened an upscale version.

“We brought the merchants in and told them we were going to upgrade the retail,” said Hellen. “They said, ‘if the area is going to improve, our business is going to improve.’

“If upscale is where the market is going, they will respond accordingly.”
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California Tries to Find Cure for Mortgage Woes

After listening to more than a dozen economists, lenders, consumer advocates, and regulators testify, California lawmakers say they still have no magic answers for solving California’s troubled mortgage market.
By: Marc Lifshe: The Los Angeles Times
"Legislative efforts to intervene in the market are not the answer," says state Sen. Michael Machado (D-Linden), chairman of the Senate Banking, Finance and Insurance Committee. "They can cause befuddlement at best."

Machado is pushing two bills through the state legislature that would make modest changes in how lenders offer low-interest, adjustable-rate mortgages to borrowers who can't afford payments on traditional, fixed-rate loans.

One bill would put federal loan-affordability guidelines into state law, and the second would boost the number of state examiners responding to consumer complaints of unethical lending practices.
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Women Call Shots When House Hunting

U.S. women control or influence $7 trillion in consumer spending annually and make 85 percent of all purchase decisions, according to marketing experts.
By: Diane Wedner: The Los Angeles Times
Single women accounted for 22 percent of all home purchases made between July 2005 and June 2006.

What do women want when they are house hunting?

Women respond best to a holistic approach when buying a house, says Richard Peterson, a psychiatrist who specializes in investment psychology. “They handle global impressions better” than men.

Men's ability to make multifaceted decisions, on the other hand, is diminished when they have to rely on "more than three to four factors," imaging studies of the brain show, Peterson says. For example, when men shop – an activity that requires dealing with an array of facts and feelings – stress hormones increase and focus dwindles.

Here are some things that work and don’t work when a woman is the customer.

    • Stimulate the senses. Men like quick factoids an bullet points, but this
      approach is the antithesis of a woman’s preference for seeing, touching and
      talking. Instead, try videos, testimonials, livability surveys, and
      newsletters detailing community activities.

    • Patience is key. Women like to return multiple times to a property they are
      considering. Each visit brings a new set of questions.

    • Enthusiasm sells. Women like to be excited about the property.

    • Spousal approval goes one way. If she likes it, chances are he’ll like it, but the opposite isn’t necessarily true.

Read more!

Home loan apps jump in latest survey

Lower interest rates finally pique borrowers' interest
Inman News
Overall mortgage application volume picked up last week after several weeks of slowing, thanks to another drop in interest rates, the Mortgage Bankers Association reported today.

The market composite index, which measures total home loan application volume, gained 8.1 percent on a seasonally adjusted basis from the previous week. The greatest increase occurred in the index that tracks refinancings, which climbed 9.1 percent, followed by the purchase index, which grew 7.4 percent.

The refinance share of mortgage activity is now up to 39.9 percent of total applications, and the adjustable-rate mortgage (ARM) share has reached 22.5 percent, according to MBA.

Borrowing costs on long-term loans fell for the fourth straight week, with the average contract interest rate on 30-year fixed-rate mortgages sinking to 6.41 percent from 6.5 percent, the rate on 15-year fixed-rate loans dipping to 6.16 percent from 6.2 percent, and the average rate on one-year ARMs tumbling to 5.69 percent from 5.73 percent.

Points, or loan-processing fees expressed as a percent of the total loan amount, averaged 1.62 on the 30-year loans, 1.18 on the 15-year, and 1.09 on one-year ARMs. These points include the origination fee and are based on loan-to-value ratios of 80 percent.

The Mortgage Bankers Association survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.
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Near-Term Home Sales to Hold in Modest Range

Modest upturn could be in the cards at the end of the year.
NAR: REALTOR® Magazine Online
The housing market will probably hold close to present levels in the months ahead, NAR says.

Lawrence Yun, NAR senior economist, said he isn’t looking for any notable changes in sales activity. “Existing-home sales should be relatively stable over the next few months, holding in a modest range, with some pent-up demand growing from buyers who’ve been on the sidelines,” he said. “Mortgage disruptions will hold back sales over the short term, but long-term fundamentals are favorable. A modest upturn is projected for existing-home sales toward the end of the year, with broader improvement to include the new-home market by the middle of 2008.”

Existing-home sales are forecast at 6.04 million in 2007 and 6.38 million next year, below the 6.48 million recorded in 2006. New-home sales are expected to total 852,000 this year and 848,000 in 2008, down from 1.05 million in 2006. Housing starts, including multifamily units, are likely to total 1.43 million in 2007 and 1.40 million next year, below the 1.80 million units started in 2006.

“With the population growing, the demand for homes isn’t going away – it’s just being delayed,” Yun said. “More buyers, and cutbacks in new construction, will eventually draw down the inventory levels and support future price appreciation, but general gains will be modest next year. Serious buyers today have a long-term view of housing as an investment – speculators have left the market.”

Existing-home prices should ease by 1.2 percent to a median of $219,300 in 2007 before rising 2.0 percent next year to $223,600. The median new-home price will probably fall 2.3 percent to $240,800 in 2007, and then rise 2.3 percent next year to $246,300.
The 30-year fixed-rate mortgage is forecast to average 6.7 percent in the fourth quarter and then ease to the 6.5 percent range next year.

Growth in the U.S. gross domestic product (GDP) is projected to be 1.9 percent this year, down from a 2.9 percent growth rate in 2006; GDP is expected to grow 2.8 percent next year.
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Trade Group Lowers Forecast For Existing-Home-Sales

The National Association of Realtors decreased its forecast for 2007, but said the market wasn't likely to suffer any further sharp downturns.
By: Benton Ives-Halperin and Jeff Bater: The Wall Street Journal Online
Meanwhile, U.S. wholesalers saw their inventories increase during June at a rate higher than expected, while sales rose even faster, the government reported Wednesday.

In its latest forecast for the real estate market, NAR on Wednesday projected that existing home sales will fall 6.8% this year to 6.04 million, compared with its previous forecast of a 5.6% decline.

The outlook for new home sales continues to worsen. The NAR said new home sales are likely to fall 19.0% to 852,000, compared with the prior forecast of a 17.7% drop.

Lawrence Yun, NAR's senior economist, said the market was likely to be relatively stable going forward, suggesting that the worst drops in activity are behind the housing sector.

"Existing-home sales should be relatively stable over the next few months, holding in a modest range, with some pent-up demand growing from buyers who've been on the sidelines," Mr. Yun said in a statement.

Mr. Yun continued to forecast a relatively mild upturn in housing activity towards the end of this year and going into 2008.

"A modest upturn is projected for existing-home sales toward the end of the year, with broader improvement to include the new-home market by the middle of 2008," he said.

NAR said existing home sales will rise to 6.38 million in 2008, still well below the record 6.48 million sold in 2006. New home sales, on the other hand, are likely to stay depressed through next year, at a level of 848,000 in 2008, down from previous forecasts for 878,000.

Mr. Yun said the housing recession has helped trim some of the speculative fat from the marketplace. "Serious buyers today have a long-term view of housing as an investment - speculators have left the market," he said.

The national median existing-home price is forecast to slip 1.2% to $219,300 this year, and then rise 2.0% in 2008. The median new-home price is expected to fall 2.3% this year to $240,800, and then rise 2.3% next year.

Inventories Increase

Wholesale inventories rose by 0.5% to a seasonally adjusted $398.49 billion, after climbing at the same, unrevised rate during May, the Commerce Department said.

The 0.5% increase in June inventories exceeded Wall Street analyst expectations for a 0.4% advance.

Sales of U.S. wholesalers rose by 0.6% in June to a seasonally adjusted $359.45 billion after surging an unrevised 1.3% in May.

The amount of goods on hand relative to sales didn't budge. The inventory-to-sales ratio measures how many months it would take for a firm to deplete its current inventory. The ratio held steady at 1.11 in June.

On a year-to-year basis, sales were 8.1% higher, while inventories rose 6.3% since June 2006.

Wholesalers' inventories of durable goods - meant to last three or more years - remained flat in June, after increasing 0.4% in May. Automotive stocks increased 1.3% after rising 1.2% in May; year over year, auto inventories were down 2.7% from June 2006. Inventories of metals increased 0.5%.

Durable goods sales rose 0.7%, after going down 0.4% in May. Auto sales decreased 0.2% but electrical sales rose 1.0% and computer equipment surged 5.4%.

Nondurable goods inventories increased 1.2% in June. Petroleum stockpiles rose 2.2%. June nondurable goods sales increased by 0.5%. Clothing sales rose 2.8%.
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Foreclosures Are Up, but Bargains Hard to Find

Selling prices for problem homes are tracking closely to market.
By: Lori Weisberg: REALTOR® Magazine Online
Real estate professionals specializing in foreclosures in California and elsewhere say business is brisk, but nowhere near what it was during the housing downturn in the 1990s. And bargains are hard to find.

During the second quarter of this year, foreclosures were nearly 10 percent of all resales, compared with just 1.7 percent a year earlier. But that's still off the peak of nearly 15 percent seen twice during the mid-1990s, according to DataQuick Information Services, which has been tracking real estate transactions since 1988.

DataQuick's analysis of recent sales found no pattern of foreclosure properties regularly selling for less than comparable homes.

"There may be some deals out there, but I'm not sure they're as many or as good as the perception," DataQuick analyst John Karevoll says.

A year ago, there was a much higher percentage of distressed properties selling at significant discounts, says Christopher Cagan, director of research and analytics for First American CoreLogic, a real estate information company. But things have changed as foreclosures have increased. “In general, the discounts right now are modest,” he says.
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