The Riskiest Housing Markets: A Drop in Home Prices Forecast

Boston and San Diego are among the areas poised for declines in home values, a study says. They have a more than 50% chance of a fall in prices during the next two years.
By: Janet Morrissey: The Wall Street Journal
Home prices in some of the nation's largest markets are poised for a fall, according to a study that says homes are overvalued in many cities.

The PMI U.S. Market Risk Index report, released yesterday, named Boston, San Diego, Long Island, N.Y., Santa Ana, Calif., and Oakland, Calif., as the markets facing the biggest risk of a price correction. The index showed these markets have a more than 50% chance of experiencing price declines during the next two years. New York City ranked 14th, with a 33% chance.

Nationwide, there is a 21.8% chance that overall house prices across the 50 largest housing markets will see prices fall, up from 21.3% in the previous quarter. The markets with the lowest risk of a correction are Cincinnati, Memphis, Tenn., Indianapolis and Pittsburgh, where the risk is less than 6%.

"We believe that over the medium to long term, prices will move into better alignment with local economic factors, in particular income," Mark Milner, chief risk officer with PMI Mortgage Insurance Co., a unit of PMI Group Inc., said in the report.

PMI calculated its Risk Index by tracking and comparing home-price appreciation, labor markets, employment levels, affordability and the percentage of monthly income that a mortgage takes up in each market. The Risk Index estimates the chances of a price correction of any size in the next two years.

The Valuation Index, which the firm just introduced, is based on home-price appreciation, the cost of a 30-year fixed-rate mortgage and the public demand for housing in each market. This index offers a snapshot of how much a home is overpriced or undervalued in each market at this moment.

The markets facing the biggest potential correction are Los Angeles, Sacramento and Riverside, Calif., where prices are estimated to be overvalued by 33.7%, 31.3% and 30.7% respectively, the report said. New York City's prices are 16.3% overvalued, according to PMI.

About half of the 50 markets are overvalued by 10% or more, the report said. Only 11 markets are undervalued.

Marco van Akkeren, an economist with PMI Mortgage Insurance, said affordability has weakened during the past several quarters as home-price increases didn't reflect market fundamentals. The firm releases its Market Risk report quarterly.

Email your comments to rjeditor@dowjones.com.
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Can vacation home qualify for a tax-deferred exchange?

Rules differ for investment properties
By: Robert J. Bruss: Inman News
DEAR BOB: I recently attended a real estate seminar conducted by an attorney. She said that even vacation-homeowners who have never rented their second homes can qualify for an Internal Revenue Code 1031 tax-deferred exchange of such property because they held it as an investment property in expectation of an increase in market value. Do you agree? How can I substantiate this position? – Joe P.

DEAR JOE: No, I don't agree with my fellow attorney. Ask if she has any Tax Court decisions or other basis to support her opinion. I will be very surprised if she has any credible support for her position.

Rental property and even vacant land can qualify for IRC 1031 tax-deferred exchanges. The reason is they are clearly held for investment or use in a trade or business, as required by IRC 1031. But a personal use vacation or second home doesn't fit into that tax category. For more details, please consult your tax adviser.

CAN FOUR VACANT LOTS BE TRADED FOR A PERSONAL RESIDENCE?

DEAR BOB: I own four vacant unimproved residential lots, which I purchased as an investment about a year ago. I will be moving and buying a home within the next two months. Can I roll the capital gains from the sale of my lots into the purchase of a new home without paying capital gains tax on my profit? – Lance M.

DEAR LANCE: Yes, but the house acquired must be used as a rental property. After a year or so of rental use, you can then convert it to your personal residence without owing any tax. Please consult your tax adviser for full details.

DON'T TRY SELLING APARTMENT BUILDING ALONE

DEAR BOB: I want to sell my apartment building. But I don't know how to write an attractive ad or what publications I should use. Any suggestions? – Henry S.

DEAR HENRY: Writing a newspaper classified ad to sell your apartment building is just the first of many problems to anticipate in selling your building alone.

Suppose you obtain an interested buyer. How will you prepare a binding purchase contract? How will you know the fair market value of your building?

My best suggestion is you list your apartment building with a professional real estate agent who specializes in selling property like yours. The sales commission will be worth the expense to have the property properly marketed with all the details correctly handled so you receive top dollar for your property. Selling an apartment building is definitely not a do-it-yourself job.

The new Robert Bruss special report, "24 Key Questions Answered: Living Trust Secrets Reveal How to Avoid Probate Costs and Delays," is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com. Questions for this column are welcome at either address.
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Pricing home to sell in a changing real estate market

Sellers face more competition than last year
By: Dian Hymer: Inman News
The number of home sales in July was the third highest ever recorded, according to the National Association of Realtors. But anecdotal evidence suggests that the market is changing. In some areas of the Midwest, home sales have slowed considerably. In California, home sales remain brisk, but the market is cooler than it was in early spring.

It's still a great time to sell provided you have realistic expectations. Interest rates are low, which means that buyers can afford to pay more than they would if rates were to rise significantly.

Here's what home sellers should consider if the market shifts from a strong seller's market to a more sensible balanced market.

You will probably face more competition than you would have if you sold last spring. Other homeowners also think now is a good time to cash in on the phenomenal appreciation that has occurred over the past few years.

This doesn't mean it's not a good time to sell. But it does mean that you might not sell with multiple offers, so don't count on extreme overbidding. It could also take longer to sell. You might face more negotiation.

Until recently, many sellers in the San Francisco Bay Area exposed their homes to the market for a week or two before entertaining offers. This was done to generate multiple offers, which often resulted in higher sale prices. When the inventory of homes for sale is very low, this can be a very productive strategy.

Lately some sellers who waited to hear offers ended up with none on the designated offer date. In most cases, this was due to over-pricing. The listings that are still attracting multiple offers are those that are priced competitively. With all the talk about home prices being over-inflated, it's easy to understand why buyers would have no interest in making offers on overpriced listings.

Sellers who overprice their homes have two options: They can either play the waiting came, or they can reduce their asking price to a level that attracts buyers' interest. It's risky to wait. If the market slows further, you could have to make a much larger price reduction.

Think big when you consider discounting your price. A reduction of less than 5 percent of the purchase price is not likely to have much effect. If you're going to lower your price to ensure a sale, make a meaningful price reduction.

You might reconsider your offer strategy midstream. At the end of July, sellers in the Oakland Hills in Oakland, Calif., put their home on the market. They initially planned to have two public open houses before hearing offers. Two people expressed interest in the property several days after the listing showed up on the Multiple Listing Service. The sellers changed their game plan and decided to hear offers early. They received two offers and accepted one from well-qualified buyers who offered a good price. Sometimes it pays to be flexible.

When the inventory of homes for sale increases, buyers have the luxury of being more discriminating. They will also tend to be less forgiving on inspection issues. During a hot seller's market, buyers often agree to purchase listings in their "as is" condition regarding such things as wood pest damage. So if you have the time, you might consider making some repairs before putting your home on the market.

THE CLOSING: Don't waste your time testing the market at an unrealistic price. This market is for serious sellers. There are plenty of serious buyers for listings that are priced for sale at current market value.

Dian Hymer is author of "House Hunting, The Take-Along Workbook for Home Buyers" and "Starting Out, The Complete Home Buyer's Guide," Chronicle Books.
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Homebuying Varies for Hispanic Households

By: Andrea Lehman: REALTOR® Magazine Online
Hispanics accounted for 13.7 percent of two- to four-unit residential owners in 2001, data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development show.

The high rate of Hispanics in the multifamily market can be attributed to the fact that they value real estate over other assets and generally live with relatives. The report also indicates that Hispanics made up only 7 percent of owners of other property types--mainly due to lower incomes, lack of knowledge about the mortgage process, and the young age of most of the Hispanic population.

Additionally, the study finds that 26.7 percent of Hispanics who own single-family homes do not have mortgages. In contrast, 33.9 percent of non-Hispanic homeowners are mortgage-free.
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SoCal real estate sales, prices up since last year

Median prices up 32.8 percent in one county over September 2004 stats
Inman News
Southern California home sales were up 6 percent from September 2004 to September 2005, and median prices were up 16.1 percent in that time, DataQuick Information Systems reported today.

DataQuick, a real estate research and information company, reported that 31,740 new and resale homes were sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 7.4 percent from 34,292 in August, and up 6 percent from 29,942 for September last year.

"A decline from August to September is normal for the season. Last month's sales count made for the third-strongest September in DataQuick's statistics, which go back to 1988," the company announced. Sales totaled 32,813 two years ago, and in September 1988 sales totaled 34,653. The low for that month was in 1992 with 12,838 sales.

"There seems to be a bit of a gap between perception and reality right now. What's happening is that appreciation in more affordable markets is stronger than in the high-profile move-up and prestige markets. This is a natural part of a normal real estate cycle because trends in lower-cost markets tend to lag trends in more expensive markets," said Marshall Prentice, DataQuick president.

The median price paid for a Southern California home was $475,000 last month. That was down 0.2 percent from $476,000 in August, and up 16.1 percent from $409,000 for September 2004.

Year-over-year changes in the median price ranged from 3.8 percent in San Diego County to 32.8 percent in San Bernardino County. The median in both counties hit a new peak. Sales were down 4.7 percent in San Diego County from September 2004 to September 2005 but up in the other Southern California counties included in the announcement. Sales were up the most – 13.6 percent – in Orange County from September 2004 to September 2005.

DataQuick, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates, monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

The typical monthly mortgage payment that Southland buyers committed themselves to paying was $2,098 last month, down from $2,123 for the previous month and up from $1,809 for September a year ago. Adjusted for inflation, current payments are slightly below their peak in the spring of 1989.

Indicators of market distress are still largely absent, DataQuick also reported, with low foreclosure activity. "Down payment sizes are stable, as are flipping rates and non-owner occupied buying activity," the company announced.
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Real estate's October report card

Guest perspective: Some markets show signs of cooling
By: John Burns: Inman News
The housing market cooled slightly this month. Newspaper accounts accurately reported rising listings in New York, Washington, D.C., Florida and California, yet listings in those markets still remain low by historical standards. Consumer confidence plunged, as it always does after a major international disaster (Hurricane Katrina). Rumors of slowing new-home sales in California and Florida permeated the industry, yet our phone calls to local sales offices, real estate agents and market consultants found that sales and traffic had only slightly slowed.

Is this the beginning of the gradual slowdown forecast by most analysts? It could be, but this type of slowing has occurred at least twice per year over the last five years, so it is too soon to declare a trend.

To help stay on top of market conditions, we added a new leading indicator from the National Association of Realtors to our U.S. Housing Market Statistics. The NAR's Pending Home Sales Index, which is leading because it is based on the number of sales contracts signed, shows that the number of sales contracts written has flattened over the four months ending in August (latest available data), which means existing-home sales should flatten or decline over the coming months. Given the level of activity, this supports the thesis of a gradual slowdown.




Our grading system of the economy and the housing market is a "bell curve" model, with statistics at an all-time high receiving an "A," statistics near the long-term average receiving a "C," and the worst times ever receiving an "F." In this grading system, it is OK to be a "C" student.

Here is our current report card:

Economic Growth: C

The economy performed at its average pace, as retail sales declined from a six-year high the previous month. Employers have added 2.2 million new jobs over the last year, which is a growth rate of 1.7 percent. Initial indications of employment losses from Hurricane Katrina were more optimistic than originally feared. Inflation remained flat at 2.1 percent, which is still well below its historical average of 4.2 percent.

Leading Indicators: C

The leading indicator index is up 0.7 percent on an annualized basis over the last six months. The spread between the 10-year Treasury index and the Federal Funds rate continues to narrow, reaching 0.55 percent, its lowest value since April 2001. The four stock market indices we track (Dow Jones, S&P 500, NASDAQ and Wilshire 500) each returned less than 1 percent during September, while the S&P Super Homebuilding Index fell 3 percent. With more confidence in the outlook for stock investments in all sectors, we believe that some of the money invested in real estate over the last five years will be transferred to stock investments, making less capital available to the industry.

Mortgage Rates: B+

Despite an increase in both fixed rates and adjustable rates in September, the spread between the two continued to narrow for the sixth consecutive month, to 123 basis points. The average fixed mortgage rate was 5.91 percent, and the one-year adjustable mortgage rate was 4.68 percent at month's end. The percentage of loans with an adjustable rate stood at 29 percent at month's end.

Consumer Behavior: C

Consumer confidence fell nearly 20 points in September to 86.6, its lowest value in nearly two years. Hurricane Katrina, rising gas prices and concern about the job outlook contributed to the decline. The Present Situation Index and six-month Expectations Index also both fell in September, following an increase in August. With the horrible earthquake in Pakistan, we doubt that consumer confidence will rebound significantly this month.

Existing-Home Market: A

The existing-home market is performing at near-record levels. The NAR Median Home Price continued to climb, reaching $220,000. Annual sales volume increased to 7.3 million sales per year in August, with increases in the Northeast, West and Midwest and a slight decline in the South. The inventory of existing homes rose to 4.7 months, the most since November 2003. The number of mortgage applications to purchase a home remained high.

New-Home Market: B

Annualized new-home sales in August decreased to 1.24 million units, following a record level in July, and the median new-home price rose to $220,300. The Housing Market Index fell to 65 in September, its third month of decline, but still a solid indicator.

Housing Supply: B-

Annualized housing starts slid to just over 2 million units in August. Starts decreased 8.4 percent in the Midwest, 8.1 percent in the West and 8 percent in the Northeast, and increased 4.8 percent in the South. Single-family permits declined 1.3 percent to 1.67 million units. Housing starts is a very volatile statistic, as weather or other factors can make a significant impact.

John Burns is the founder of Real Estate Consulting in Irvine, Calif., which monitors changes in real estate market conditions and provides consulting services, including strategic planning, market research and financial analysis.
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RealEstate.com Survey Polls Home Sellers and Real Estate Agents

Survey reveals key factors to consider when selling a home
RISMedia
Selling a home can be an overwhelming experience for any homeowner, whether it’s your first time or tenth time. In a recent survey, both home sellers and real estate agents provided information that sheds light on the many important factors that should be considered to successfully sell a home.

The survey, commissioned by RealEstate.com, asked 500 recent home sellers and 100 licensed, practicing real estate agents about the variety of critical elements involved in selling a home.

So what did successful home sellers have to report? The majority (65 percent) said that hiring a real estate agent to facilitate the sale is the best way to get the process off to a good start.

Pricing their homes was of major importance to sellers when they prepared to sell, and 51 percent of sellers and 64 percent of real estate agents agreed that setting an asking price at 5 to 10 percent above what the seller would actually accept is a good range to follow when putting a house on the market.

Despite recent reports of housing booms and hot markets with inflated prices, 37 percent of sellers surveyed reported selling their homes at the list price, and more than half of the overall respondents reported selling at or below $250,000 (57 percent).

Other key findings include:

• The length of time needed to sell a home varied between sellers and real estate agents. Thirty-three percent of sellers reported that their homes sold within the first two weeks of putting it on the market, with another 27 percent citing homes selling within the first month. On the other hand, 41 percent of real estate agents suggest budgeting 2-3 months from the time you put your home on the market to selling it.

• Sellers and real estate agents agree that the local school system is the most important factor that buyers consider when choosing a home (48 percent sellers, 40 percent real estate agents).

“Selling a home can be an anxious and intense time for homeowners - and there aren’t nearly as many resources available to today’s home sellers as there are to homebuyers,” said Holly Slaughter, brand manager and consumer experience expert at RealEstate.com. “Sellers who look to real estate agents for expertise about specific markets, tips and advice often know the key steps to address that many often overlook, giving them the leg up they need to stand out and sell their homes.”

In addition to maximizing the timing and pricing for a sale, there are a number of other details that sellers should consider before posting the ‘For Sale’ sign out front. Additional survey findings revealed:

• Fifty-five percent of real estate agents felt that having a comprehensive comparative market analysis (CMA) done is a very smart thing to do before selling a home.
• Real estate agents and sellers report the kitchen is the room that prospective home buyers care most about (59 percent sellers, 37 percent real estate agents).
• Fifty percent of sellers and 38 percent of real estate agents said ‘cleaning everything’ is the most important factor for a seller to consider when getting a house ready for a showing.
• Home sellers and real estate agents agree that enhancing the lawn/landscape is the top priority for getting the exterior of a home ready to sell (51 percent sellers, 40 percent real estate agents).
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Time to prepare for those high winter energy bills

Checklist for homeowners
By: Paul Bianchina: Inman News
It happens every year. Summer turns to fall and we're never ready for the change - and neither are our homes. The coming winter seems to be promising higher fuel costs across the nation, so this year it's really going to pay to grab a weekend and concentrate your efforts on ways to keep your house warmer and your utility bills more affordable. Here's a checklist to help you get started.

• Check the heating system: A heating system tune-up is always in order this time of year. This should include changing the filter in your furnace; having your ducts cleaned; checking and possibly increasing insulation over ductwork running through the attic or crawlspace; clearing debris and overhanging shrubbery from around outdoor heat pump equipment; and having faulty or inefficient thermostats repaired or replaced.

• Check insulation levels: Out of sight, out of mind is something that typically applies to insulation, to make it a point to check your insulation levels and improve them wherever you can. Attic insulation should be R-38 – about 12 to 14 inches of blown fiberglass – and can be easily added to by an insulation contractor if needed. Many house do not have any underfloor insulation, so you want to upgrade that area to R-19 to R-25 by installing fiberglass batts between the floor joists.

• Stop the drafts: A drafty house is not only uncomfortable to live in, it also wastes money. Check all exterior doors, including the one between the house and the garage. Look for daylight between the door and the frame, and especially between the bottom of the door and sill. Replace or adjust any weather-stripping that is damaged, worn, or not making a tight seal. Check the weather-stripping on windows as well, and contact a glass company if you need help with replacement. Now is also the time to freshen up caulking around doors, windows, plumbing penetrations, and anywhere else that heat-robbing drafts can make their way in.

• Close foundation vents: If you have opened your foundation vents for the summer to allow accumulated moisture to escape, now's the time to close them up again.

• Check fireplace safety and efficiency: Many people depend on their fireplace or woodstove for supplemental heat, and you want to make sure it's working as well as possible. For conventional fireplaces, give some serious though to installing air-tight glass doors to improve efficiency and reduce drafts. If you already have doors, check and replace the door seals as needed, and adjust door latches and hinges. Now is also a good time to have the chimney cleaned and checked for problems, and to check spark arrestor caps.

• Check firewood supplies: To get the maximum heat value from your firewood, it needs to be dry. Take the time now to stack your wood on an elevated platform – old pallets work well – and to make sure that the wood is covered and protected from the elements.

• Pay attention to indoor safety: If you have a gas fireplace, range, water heater, or other appliance that uses propane or natural gas, the possibility of carbon monoxide poisoning from a malfunctioning appliance increases substantially as we close our homes up for the winter. Fall is the ideal time to install a carbon monoxide detector, which are available from many home centers and retailers of heating system supplies. This is also a great time to have your utility company or heating contractor inspect flues, fittings, and other components of your systems for potential problems.

• Check smoke detectors: Now is the time we start spending a lot more time indoors, and it's the ideal reminder that we need to check smoke detectors. Take the time right now to check the operation of detectors, and to change the batteries. If you have an older house with a limited number of smoke detectors, you also need to install additional detectors outside each bedroom.

• Check the roof: Examine roofing shingles and flashings, and repair or replace them as needed. A roof that leaks not only has the potential to cause significant structural damage, it also wets insulation, which causes a drop in the insulation's ability to resist heat loss.

Remodeling and repair questions? E-mail Paul at paul2887@direcway.com.
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Can hot market lessen real estate agent's value?

Do-it-yourself sellers learn the hard way
By: Tom Kelly: Inman News
The value of a real estate agent is constantly discussed – especially in select neighborhoods where prices seem to be going up every day. While consumers constantly seem to complain about commissions – even reduced – those persons attempting to sell their home by themselves overwhelming say they would seek professional help the next time.

While I've not agreed with some of the practices demonstrated by real estate salespersons and even some members of the National Association of Realtors (not every salesperson is a Realtor), I believe the basic service they offer often saves, rather than costs, the average homeowner money. The big money picture is rarely viewed from the end of the transaction. Instead, the home-sale deal often begins with, "Well, I have to pay the Realtor 6 percent off the top…''

Reasons vary why 80 percent of all people who attempt to sell their home without a professional agent would never do so again. Two good examples surfaced in the past month, yet few people will probably spend time thinking about these examples and other criteria before placing a for-sale sign in the yard.

The first situation had everything to do with personality and very little with product. A very edgy, elderly man absolutely had his mind made up that he was going to avoid paying a real estate commission at all costs. It ended up costing him dearly because his home was his only real, yet considerable, asset and he couldn't get along with anyone who wanted to buy it.

Remember, most of the time, buyers want to pay as little as possible for your home. They will highlight only the negatives when arriving at their offered price. Some complaints may be true, but a seller cannot afford to constantly be upset especially if the anger constantly agitates the buyer. Sooner, rather than later, the potential buyer will simply walk away from the deal and look for another home. Why hang in there and tussle an angry seller if there is an easier buy down the street or in the same neighborhood?

It turned out that the man, Richard, actually netted thousands less without an agent. That's because an agent would not have taken the nitpicking personally, knowing that it came with the territory. Genuine glitches are common, yet the pride factory can be significantly curtailed, and often eliminated, by letting the agent play the target for negative exchanges. Richard, who had completed most of a major remodel to his own tastes and needs, was astounded when potential buyers even considered turning his workshop into an additional bedroom.

But the deal breaker, as it usually is with a for-sale-by-owner home, was asking price. Richard was absolutely convinced that his custom remodel had added to the value of the home. The extensive work actually moved the house out of the norm for the neighborhood. In addition, friends a few blocks over in a more desirable neighborhood had sold their flawless home for a huge gain, influencing Richard's price. When Richard had set his price at an unrealistic level, it eliminated a large group of buyers who could not afford the anticipated payments that come with a fatter mortgage.

The second example involved five children attempting to sell a vacant lot held in the estate of their father. In a capsule, they did not know if the lot was "buildable" and ended up in a lawsuit when they could not deliver. A professional agent probably would have done the research and saved both sides a lot of money and anxiety.

For decades, health authorities have approved subdivisions based on standards deemed reasonable at the time. Those standards include adequate water supplies, height restrictions and house "footprints." Many lots in those subdivisions have been sold and resold in good faith as legal building sites.

Now some state health authorities have ruled that numerous developments, under newly adopted criteria, are at maximum water and sewer capacity even while some lots remain vacant. Many of the affected water systems have never experienced shortages. Without water service, vacant lots could be rendered unbuildable and their market value could disappear.

In this case, the kids did little, if any, research. None of them checked with local districts to see if the lot was buildable or if any structure could be remodeled. A thorough investigation would have clarified any view corridors, height limitations and setbacks.

Most of the time, a good real estate agent is going to be worth every cent of the agreed-upon commission for the average home seller. A hot market doesn't usually change that.

Tom Kelly's new book "The New Reverse Mortgage Formula" (John Wiley & Sons, New York) is available in local bookstores and libraries. Tom can be reached at news@tomkelly.com.
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Best way to renovate bathroom floor

Homeowner raises stink over stench
By: Bill & Kevin Burnett: Inman News
Q: I live in a 1938 cottage that my father remodeled in the late 1970s. He made the unfortunate choice of slapping carpet down over the existing bathroom tile and subfloor.

The subfloor is exposed because Dad moved the locations of the toilet, tub and sink. I want to get the smelly, moldy, disgusting carpet out of there, but I'm not sure what to replace it with. Here's why: Dad put the molded sink top onto the body of our old hi-fi cabinet, then caulked the sink top to the wall. He fitted the hi-fi cabinet over what I think is a wooden platform (covered with carpet, of course!), so I can't get to the flooring underneath it.

I'm not ready to change the sink and cabinet because I'm on a tight budget. I would like a tile floor, and I'm wondering if I should just buy enough extra tile to put it down in that corner when I finally can afford to change the sink cabinet, and tile to the edges of the cabinet for now. Or would it be better and less permanent for me to put down vinyl or something else? I've never tiled before, but I enjoy that kind of stuff and I'm game to learn. Am I being too ambitious?

A: Get rid of the rug. We're surprised that it's survived since the '70s. Tastes change and what your dad thought was a luxurious solution to a cold bathroom floor has become a breeding ground for mold, mildew and the odors they cause.

You can – and should – have exactly what you want. A new tile floor in the bath should be well within your reach – especially if you are willing to do it yourself.

Tile is an excellent choice. It lasts almost forever, it's water repellant, it looks great and – best of all – it's affordable. As an added bonus for the do-it-yourselfer, the learning curve is not steep and mistakes – yes, you'll make one or two – are easily fixed.

As far as we're concerned, vinyl is not an option. Vinyl flooring does not last in bathrooms. Water seeps between the seams, saturates the underlayment and ruins the floor. A case in point is Kevin's experience. On a tight budget when building his house 10 years ago, he installed vinyl flooring in his upstairs bathrooms. Both have failed. Now he's looking at remodeling two bathrooms. Tile is his flooring choice.

You can certainly apply tile right up to the base of the existing hi-fi cabinet, although we'd encourage you to find the money to do the whole job at one time. When you change out the hi-fi cabinet for a new sink base or a pedestal sink, you'll probably need to remove a few pieces. Because tile can vary in color and texture with different batches, make sure you buy enough to do the entire job. It's always a good idea to have a couple of extra pieces around anyway, in case you need to make repairs.

Although some folks say you can tile right over the existing tile, we'd advise against it in your case. You have voids where your dad moved the fixtures. Filling in the spaces with mortar or another material and tiling over them risks new tile failure at the joints.

Once all the old flooring is up and you have a flat subfloor, apply backer board to the floor. Backer board comes in two types, concrete and composite. Our experience is with concrete backer board sold under the brand names of Wonderboard and Durock.

Installation is with screws every 6 inches to 8 inches at the edges and in the field. Tape the joints of the backer board with fiberglass tape and apply thin-set mortar. After the joints dry for several hours, you're ready to tile. Set the tile using the same thin-set mortar you used to tape the backer board seams. Choose the color of the thin-set to correspond with the color of the tile grout – gray mortar for darker grout, white mortar for white grout.

You'll need a notched trowel to apply the mortar, a tile cutter to cut the tile and possibly a tile saw to make intricate cuts. If you miss a cut or make some other kind of mistake, remove the tile and replace it. As the tiles are placed, place a 2-by-4 board on top of the tile and tap it with a rubber mallet to make sure it's uniform. Not too hard, though. Bill has ruined more than one piece of tile by becoming a little too rambunctious.

After the mortar dries overnight, it's time to grout. Mix the grout to the consistency of toothpaste with either water or a latex additive. We recommend the additive. Then press the grout into the joints with a rubberized grout trowel, making sure to fill the joints. Scrape off the excess grout and clean the surface of the tile with a wet sponge. You'll have to go over it several times to get a clean surface. Finally, go over the surface with a dry terrycloth towel to remove any residue. That's it.

You'll find it more cost-efficient to rent a tile cutter and a tile saw if you need one. Because you're a novice, we'd suggest you attend one of the tile-setting classes offered at Lowe's, Home Depot or some hardware stores and home education centers (sometimes for free). Your job should cost you between $2 and $5 per square foot, depending on the tile you select. A small price, we think, to give your bath a new look.
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Diary of a real estate flipper

Flipper talks to rehab expert Steve Berges
By: Alison Rogers: Inman News
Like most people who work at desks for a living, my husband is slightly suspicious of my new freelance lifestyle. He called me the other day – a day when I was supposed to be looking at houses – and he heard the TV on in the background. "What are you doing, hon?" he asked.

"I'm watching 'Flip This House,'" I replied. "It's research."

Perhaps a result of the 72 straight hours of kidding I had to endure about that, I thought I'd do some nose-to-the-grindstone work: I put down the remote and picked up the telephone.

The nice guy at the other end was Steve Berges, a principal at Real Estate One Symphony Homes, and a builder/rehabber/investor extraordinaire. Steve has been investing and writing about it for 25 years; I had read his "101 Cost Effective Ways to Increase the Value of your Home" (Dearborn) and thought it was one of the best "bang for your buck" books I'd ever read. So I thought I'd ask him what does (and doesn't) work.

The amazing thing? He told me. Here are the highlights:

    • COMPS, COMPS, COMPS: You want to spiff up a house, without overimproving for
      the neighborhood (or the buyer). This is where your neighborhood tours come
      in. "Be consistent with what the market expects," said Steve. "In less
      expensive houses, where there's vinyl flooring in the kitchen and bath in
      comparable houses, you don't want to spend the money on tile and marble. In a
      more expensive house, though, that's what buyers expect." Remember your buyer
      probably has a list of 10 houses, so you want your house to look comparatively
      better than the other nine.

    • BRIGHT AND CHEERY: This is Steve's mantra. Paint the exterior of a house; take
      a navy-blue bedroom and paint it off-white; and install new lighting. "A four-
      bulb fixture that's a foot-and-a-half wide by 4 feet long is $105 at the Home
      Depot," says Steve, "and it floods the kitchen with light." He's talking about
      one of the new fluorescents, which have the advantage of being energy-
      efficient too; in a more up-market kitchen you might think about incandescent
      or halogen task lighting.

    • CURB APPEAL: That buyer with the list of 10 houses? You have to get them to
      stop with yours. That means make your house look inviting by mowing the lawn,
      put in a nice-looking front-door (you don't have to get a $2,500 oak or walnut
      door," Steve says. "For a couple hundred dollars you can have a nice-looking
      front door." You may also want to paint your house – you can even paint vinyl
      siding, though it's tricky. If the house is really dirty, power wash it first –
      it's absolutely worth it -- and then give it a day or two to dry. Paint
      adheres best to a clean surface.

    • THE KITCHEN IS THE HEART OF THE HOUSE: I asked Steve "Kitchen or Bath? – what
      if you have a tired house and can only fix up one?" His response was that the
      family spends more time in the kitchen, so, besides lighting, it might deserve
      new cabinets ($1,500-$7,500) and new flooring. Those '70s houses with the
      purple, peach or turquoise tile? Again, he says that you need to look at other
      homes on the market. "You don't necessarily need to rip out all that stuff, as
      long as it's clean and shows well." If you're going to do just a little to the
      bath, buy it a new floor or a new sink/cabinet combo.

    • MAKE FRIENDS WITH A HANDYMAN: I mentioned the "Flip This House" episode I had
      watched – where the team gets blindsided by termites – and I was surprised
      they hadn't noticed any signs. This reminded Steve that "there's always
      something unexpected" but he suggests one way to limit your surprise quotient
      is to get a buddy who's handy to walk through with you and alert you to signs
      of trouble – pre-inspection. My two cents: I wouldn't even get to the
      inspection stage on a house with water spots or tilty stairs. Buyers can run a
      quick first check for termites by taking a screwdriver and poke at some of the
      wood in the house – near the furnace and hot-water heater are good places to
      start, because bugs like to be warm too.

Great tips: I can't wait to see how they play out in the "real world."
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The Weekend Guide! October 13 - October 16, 2005

The Weekend Guide for October 13 - October 16, 2005.
Full Article:
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Real estate sales on record pace this year

But housing market is expected to slow in 2006
Inman News
Home sales are expected to set a new record this year, but rising interest rates should put a damper on sales in 2006, the National Association of Realtors reported today in its latest housing and economic forecast.

Median existing-home prices are expected to increase 12.5 percent this year to $208,400 while sales grow 4.2 percent, the association reported. "The forecast for home sales has trended up as the year progressed, fueled lately by added demand resulting from the impact of recent hurricanes."

David Lereah, the association's chief economist, said by June it was apparent that homes sales would likely set a new record. "Post-Katrina, our sales projections for this year have moved even higher," Lereah said. "Short-term momentum is very strong, and our Pending Home Sales Index just set a record. In addition to the housing needs of hurricane victims, we may be seeing some 'fence-jumping' from home buyers who are getting into the market before interests rates move higher."

New-home sales are expected to increase 7.1 percent to 1.29 million, and median new-home prices should rise 3.9 percent to $229,700, the association reported.

Total housing starts – single-family and multifamily – should be up 4.5 percent to 2.04 million units this year – the best showing since 1973 – and single-family starts are expected to set a record of 1.7 million.

"Inflationary pressures – driven by higher energy costs – have become a concern, so we anticipate two more hikes in the fed funds rate by the end of the year. In addition, long-term interest rates also are rising at a faster clip," Lereah said. The 30-year fixed-rate mortgage is projected to reach 6.2 percent in the fourth quarter, and trend up to 6.7 percent by the end of next year.

Al Mansell, association president, said some easing in home sales is expected in 2006. "The rise in mortgage interest rates is likely to have a slight breaking action on the housing market, and the upside of that is it would help to bring the market closer to balance between home buyers and sellers," he said. "As a result, there should be a cooling in the rate of price growth – on balance, the overall market should continue to favor sellers with price appreciation remaining above the high end of historic norms. The investment fundamentals for housing remain solid."

In 2006, NAR expects the median existing-home price to grow by 5.2 percent and the median new-home price to rise 7.1 percent. Historic home-price gains are 1.5 percentage points above the rate of inflation, which is seen at 2.6 percent next year.

"Although energy prices are the chief culprit in current inflation concerns, we project oil prices to settle early next year – that would cause inflation to quickly dissipate," Lereah said. The Consumer Price Index is forecast to rise 3.5 percent for all of 2005 before easing early next year.

Inflation-adjusted disposable personal income is expected to grow by 1.4 percent for 2005. The U.S. gross domestic product (GDP) is seen at 3.5 percent for all of 2005, with GDP picking up early next year as hurricane rebuilding accelerates. The unemployment rate is projected to average 5.2 percent for the next three quarters, then decline to 5 percent in the second half of next year.
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The end of multiple offers

Commentary: Home buyers to see a new side of agents (Part 3)
By: Jessica Swesey: Inman News
Editor's note: In this three-part series, we observe some of the latest changes taking place in housing markets – some subtle and some rapid. Read Part 1: Perfect home, perfect staging, imperfect market and Part 2: Housing inventory grows in some major markets.

The housing market is changing faster than Kate Moss' career after the cocaine photo leak.

All the signs are there: no more double parking to get a sneak peek at an open house showing; no more buyers sweating it out to make the best offer among dozens, agreeing to feed the neighborhood squirrels or not to ever under any circumstances remove the old family curtains from the second-floor bedroom – just to get into that house.

The frenzy is over. Agents sit alone on Sundays waiting for a buyer to come and try the dip. Listings are piling up in some markets as buyers realize they're gaining back some leverage.

This is the end of multiple offers as we know it. Gone are the days of desperate buyers paying $60,000 or $80,000 above asking price. Gone are the days of real estate agents shoving them aside on their way to the lucrative listings.

The bidding wars will be a remembrance of things past – like professional women from the 1990s in their bow-tie suits and tennis shoes with pumps in their purses.

We expect to see agents lining up for their copy of a new book on how to be nice to buyers, since they've spent the last 10 years treating them like cattle in a gold mine. We hear Miss Manners is working on the last few chapters right now.

We've also noticed those home stagers sure are busy. That house with the cracked foundation and the kitchen that hasn't been updated since "The Cosby Show" was on prime time isn't going anywhere "as is" in this new market.

The aisles of Home Depot will be filled with 40-somethings looking to sell and move up, rather than the 20-somethings trying to fix up their new little cracker box.

The tides are changing not just in our California neighborhoods. A home shopper in Brooklyn tells us: "One of the houses we went to see last week was listed at $599K. I liked it a lot; it had a beautiful kitchen and lots of original detail. To revisit, I had to submit a bid, which I did for $530K. Went to see it again and decided it wasn't right…to my surprise, we were called two days later to see if we were still interested."

At nearly every open house lately, the Brooklynite said, there were the expectant looks on the faces of the Realtors standing outside their empty parties, waiting for the endless line of anxious prospects ready and willing to buy something they can't afford with money they haven't got.
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