A slower U.S. housing market means sellers can no longer bank on having their pick of offers. Suggestions on ways to dress up properties for more curb appeal and to speed up a sale.
By: Rachel Koning Beals: The Wall Street Journal Online
A slower U.S. housing market means sellers can no longer bank on having their pick of offers for properties showing their age and the wear and tear of everyday living. Dressing up, or staging, a home with a thorough cleaning and decorator touches may be vital to luring increasingly fussy buyers.
Sellers work within a range of budgets as they prepare a property for sale, often from a few hundred to a few thousand dollars. Yet many critical fixes don't cost a dime.
"Walk through the house and remove all the clutter," says Rhonda Duffy, an agent for Rainmaker Realty in Atlanta. She reports four houses on the market for every one buyer in her area, plus slower activity in her firm's northern California, Washington D.C., and Florida offices.
"A living room should have a couch and chairs, a table, some plants and maybe a TV, not a 30-year life history," she says. "Clean out the closets and don't forget the garage."
Since similar houses that had routinely sold in weeks over the past few years may now be sitting on the market for several months, sellers are challenged over a longer time to keep their home free of the remnants of hectic family life.
At the least, agents recommend, stage the house for a series of high-quality photos to run on an Internet listing sight - first impressions take on even greater importance these days. Then, keep copies of the photos accessible to would-be buyers as they walk through the house, says Duffy. Toys, piled-up mail and crowded countertops are likely to be forgiven if a buyer can see the home's full potential. Staging for photos can include moving a sofa away from a feature window and editing items on a fireplace mantel.
Personal items that will soon have to make the move to a new place anyway should be boxed up and stored ahead of opening the house to potential buyers. Sellers must try to distance themselves emotionally from the house as soon as the decision is made to list, says Fran Bailey, an agent with Baird & Warner in suburban Chicago. "Yes, the purpose of a home is to support a lifestyle. Now, it has another purpose and that is to sell itself," Bailey says.
Don't rid the home of its lamps, however. Plenty of light, including a small lamp on a kitchen counter, can go a long way to warm the place up. Made beds and emptied garbage cans should become second nature since sellers never know when they may have to show the place on little notice.
The few hundred dollars budgeted for the house sale might be best spent on storage rental or professional clutter removal - out-of-commission appliances for instance - in order to optimize square footage. For smaller homes, space is often a trick of the eye, says Lindsay Peroff, with 1800gotjunk.com, a junk-removal service operating in larger cities.
When to call the pros
Once personal items and extra furniture are out of the way, sellers may want to spend enough to hire professional cleaners, including someone to wash windows inside and out and to shampoo carpets. Pets shouldn't be around for showings and neither should their smell.
"This may seem simple, but you'd be surprised how many people don't do it," says David Henry, an agent with Coldwell Banker in Aptos, Calif., in Santa Cruz County. "Air the place out several hours a day, for several days."
Have pest, septic and mold inspections prior to investing in any upgrade projects, he says. Then, sellers can better prioritize upgrade ideas and budget accordingly.
Sellers hoping to keep their staging expenses lean and their family routine intact might focus on the exterior. Web-based listings may be key to generating early interest, but curb appeal is what's likely to get buyers to the front door.
Get rid of clutter and dead vegetation and add color with some new plantings. When possible, try to pick flowers that will bloom in time for showings, says Duffy. Remove broken and dated lawn features and fences - and, says Duffy, tear out chain-link fences in any condition.
Inside, modest budgets stretch the most if spent on fresh paint, particularly for the entry and main rooms of the house. Cracked windowpanes, leaky faucets and other modest repairs deserve attention.
Agents and decorating professionals said budgets of several thousand dollars might be best used toward exterior panting, new landscaping and kitchen face-lifts.
Value rooms
It's no surprise that kitchens and bathrooms sell a home, so spiffing up these spaces, even for a few dollars, can go a long way toward boosting the asking price and generating interest.
Many people underestimate the low cost and high impact of swapping out cabinet hardware and faucets for updated styles, says Daryl Coley, who co-owns the Tulsa, Okla.-based franchise of national remodeling chain Kitchen Solvers.
He suggests that larger budgets go to countertop upgrades; solid surface materials such as granite, quartz and marble give a high-end feel. Even less-expensive choices, such as a laminate with a beveled front that runs $1,000 to $2,000 depending on footage, can give the overall room a fresher look. Floors should be considered next, he says. Those watching the bottom line might consider long-wearing laminate flooring as an alternative to hardwood or tile.
Gut kitchen renovations or even a few choice updates - refaced cabinets, new floors and countertops -- can typically add $5,000 to $10,000 to the asking price depending on size and quality, says Coley. But sellers must keep in mind that new owners may have different taste; a few staging updates might prove more enticing to buyers than being stuck with an expensive renovation they don't like.
Dressing up
It's likely that a designer free of emotional investment in the property can better dress a home for the widest range of potential buyers. If the budget allows, a professional stager - a growing field of certified and noncertified participants - might ease seller anxiety; many agents, but not all, also consider staging a specialty.
Think twice before assuming you can stage on your own. Chicago designer Philip Popwici was called in to help sell a midrise Chicago apartment, on the market for nearly three months with little interest, that along with several similar two-bedroom, two-bath units in building, was about to have its Lake Michigan views compromised by new construction. Staging introduced to potential buyers the appeal of the apartment exclusive of its view. It sold long before any of the comparable properties, some of which had to be pulled off the market.
Popwici, owner of Rooms Redux, a staging company catering to a clientele of condo and town home owners, helped carve out a dining space in an open floor plan with furniture positioning, essentially adding a room within existing square footage. He recommends hanging a mirror to mimic a window in rooms lacking natural light. He says bathrooms and master bedrooms are a good place to use limited resources. A few touches, like rich window treatments and candles, can make these rooms feel like a retreat for potential buyers.
He too emphasizes a good edit of life's possessions.
Yet, while decluttered homes stand a better chance of selling, that doesn't mean homes should be shown completely empty, the experts say.
Those working under a larger budget might consider trendy and appropriately proportioned rental furniture to fill the main rooms, says Baird & Warner's Bailey.
At the least, says Rainmaker's Duffy, stage small vignettes of tables, lamps and artificial plants to soften corners and add interest. Make sure to provide a chair or two, even inexpensive covered folding chairs and a simple covered table, for any buyer who might need to sit down and weigh her options - like making an offer.
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Saturday, May 20, 2006
Cost-Saving Tips for Fixing Up Your House to Attract Buyers
Friday, May 19, 2006
Price Your Home Right To Help Speed a Sale
With sales slumping and inventories on the rise, experts say getting your property sold depends on pricing it correctly.
By: Marshall Loeb: The Wall Street Journal Online
One tool sellers can fall back on when the market is shifting is a home appraisal.
You can have an appraisal done before you contact a broker or if you're just curious what your home would be worth. They cost, on average, from $250 to $400 for a single-family home, slightly more for multiple-family dwellings.
An appraiser will physically inspect your house for shoddy workmanship or needed repairs, measure its dimensions and takes notes on the floor plan, utilities and other factors that affect pricing.
He or she should also look at three or four "comps" - comparable homes in your neighborhood that have sold within the past six months - and analyze how homes currently on the market are faring, says William J. Doka, owner and president of Erickson Appraisal Company in Fair Lawn, NJ.
That's a more comprehensive assessment of market conditions than the free comparative market analysis, or CMA, that a broker will give you, says Doka.
He cautions that brokers want to earn your listing and can be tempted to paint an overly rosy picture of how your home will sell while appraisers, although sometimes subject to similar pressure from mortgage brokers, strive to be objective.
The results of the appraisal will be presented to you in a report that can run from five pages, for a simple summary that suits most lenders and homeowners, to 50 pages or more for a "narrative" that banks might demand before financing the purchase of a multimillion-dollar home.
Homes are typically listed for sale at a price several percent above the appraised value.
Predictably, most of Doka's business comes from lenders, who typically require an outside appraisal before making a loan. But homeowners are also hiring him before contacting a broker. He charges from $350 to $400 to appraise a single-family home.
Some things to remember when looking for an appraiser: • Make sure the appraiser is licensed by your state.
• Ask how long the business has been around, what professional education the
appraiser has had and what organizations - like the Appraisal Institute or the
American Society of Appraisers - the appraiser belongs to.
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Thursday, May 18, 2006
The Weekend Guide! May 18 - May 21, 2006
The Weekend Guide for May 18 - May 21, 2006.
Full Article:
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Survey Shows How Sellers Spend Their Money
A new study by the Home Improvement Research Institute shows how money is being spent to get a house ready for sale.
By: Al Heavens: Realty Times
We've got a couple of weeks left in National Remodeling Month, so it seems appropriate and timely that we check into this year's home improvement trends.
For that, we turn to a study funded by the National Hardware Show and conducted in March by the Home Improvement Research Institute of Tampa, Fla.
The study, which involved 1,200 new and existing homebuyers, and was released last week at the Hardware Show in Las Vegas, found that almost 50 percent of those selling houses work on projects to get them ready for sale.
This jibes with findings of a study conducted by the institute two years ago, according to its managing director, Fred Miller.
The vast majority of work - 61 percent of it - is being done before the property goes on the market, and an increasing amount of it in the 30 days before it is listed.
Still, 12 percent of the work is being done after an offer has been made, twice that of the 2004 survey and probably reflecting the slowing market and the accommodations real estate agents suggest sellers should make to buyers.
Almost 25 percent of this work involves replacing flooring, although Miller said the data don't suggest the reasoning - whether more upscale hardwoods or ceramic or quarry tile are replacing vinyl.
Painting accounts for 22 percent of the work done to get the house ready for market. Most real estate agents suggest painting as a relatively inexpensive way to freshen up rooms.
Electrical work and landscaping are each at 9 percent, and exterior structural changes - windows and siding - accounted for 12 percent.
"Most people who responded to the survey said these projects improve the value of their houses," Miller said.
Why spend the money at the last minute?
Almost one-third of those responding to the survey replied, "To make a good impression." Curb appeal sells almost 50 percent of houses generally, according to survey after survey by the National Association of Realtors, but in a slowing market, your house has to look better than the five others for sale on your street to get someone out of the car and up to your front door.
The renewed importance of curb appeal likely accounts for the increase in landscaping work (5 percent in 2004), since, together with painting, it's a relatively inexpensive way to spruce up a home's exterior.
Most suggestions for change came from real estate agents (78 percent), although Miller emphasized that data for this category came from "a small base." Almost 15 percent of the sample said that the work was recommended in the home inspection report.
Fewer sellers in 2006 than 2004 made the changes "to make the houses look more modern," perhaps an indication that a lot of existing-home buyers either like original touches or prefer making changes themselves.
About the same percentage (22 in 2006 versus 24 in 2004) spent money to repair unsightly areas, while 17 percent did it to "fix something not working," 8 percent to pass inspection and 7 percent to neutralize decor.
In a slowing market in which people are concerned about selling quickly with a chance of selling for more, fixing things and passing inspection are becoming more important considerations.
While the male head of the household leads in initiating projects for getting the house ready for sale, Miller said that there has been an increase in joint decisions on these projects since 2004.
Miller said there had been a slight shift from sellers doing the work themselves to using a professional between 2004 and 2006.
He said the possible reason for the shift has less to do with the unwillingness of homeowners to do their own work and more with getting it done quickly so the house can get on the market faster and ahead of the competition.
Only 53 percent of sellers were doing the work themselves in 2006, compared with 59 percent in 2004, according to the study.
Use of professionals increased to 43 percent in 2006 from 37 percent in 2004. A small percentage (3 percent in 2006, 4 percent in 2004) did these projects jointly.
The 2006 study was conducted between Feb. 28 and April 2, and the sample was doubled from the one in 2004, with 597 respondents buying new houses and 600 buying existing ones, Miller said.
All interviews were conducted by telephone, and all of those interviewed had purchased a house within the last year, Miller said.
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Wednesday, May 17, 2006
Growth of Median Home Prices Slowing
Southern California homeowners, say goodbye to your good friend: Double-digit price appreciation.
By: Annette Haddad: LA Times
For the first time in 4½ years, the region's median home price rose less than 10% year over year, data released today showed. It was the most dramatic sign yet that the Southland's housing market is coming to the end of its long-running boom.
In April, the median price for the six-county region was $485,000, a 9% gain over April 2005, but virtually flat from March's median of $486,000.
What's more, sales in April declined 21.3% from a year ago and were down 16% from the previous month, according to DataQuick Information Systems, a La Jolla-based research firm.
It was the fifth straight month of declines, but at 24,748 transactions closed, the number was still above the average for the past two-decades.
The housing market "is moving in the direction we thought it would," said John Karevoll, DataQuick's chief analyst. "It's all part of a normal end game of the cycle."
But identifying what the next phase may bring could be tricky. These days, Southern California's housing market is defined by three undisputable facts: Slowing sales, flattening prices and a sharp increase in the number of homes for sale.
What's more, about a third of homes on the market have had their asking prices reduced at least once, listing data provided by ZipRealty showed.
The experts call it a market in transition. It's not the same red-hot sellers' market of the last three years, but it's also not a buffet of bargains for buyers either.
"No one's in a panic mode," said Patrick Lashinsky, senior vice president of ZipRealty, an Emeryville-based brokerage with offices in Southern California.
"It's kind of like a pendulum swinging," he said. "Sometimes it swings back a little too much, but right now it's swinging away from sellers and more toward buyers."
Median prices reached new records in three counties: Los Angeles, up 13.6% year over year to $508,000; Orange, up 9% to $628,000; and San Diego, up 4.3% to $505,000, DataQuick said.
The median in Riverside County rose 9.4% to $409,000. It gained 18.4%, to $360,000, in San Bernardino, and rose 10.4% to $584,000 in Ventura County.
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Vegas Buyers Sue Developers After Condo Projects Cancelled
In this hot housing market, buyers claim they were kept out of condominium deals by companies behind two developments that were halted after deposits were accepted from potential homeowners.
By: Dan Ackman: The Wall Street Journal Online
With housing price growth slowing, home sales declining and interest rates and inventories of unsold homes rising, one might think buyers would be itching to exit condominium contracts any way possible. But in Las Vegas, a hot spot of the housing boom that has only recently started to show signs of cooling, some buyers are suing to stay in.
In one lawsuit, would-be condo buyers are suing the developers of the Vegas Icon condominium project - affiliates of the New York-based Related Companies - which announced plans to build and then cancelled the project. In another, filed by the same group of lawyers and settled last week, the plaintiffs had entered into reservation agreements, which involved putting some money down, to buy units in a project called Vegas Grand, just off the Las Vegas Strip, at specified prices. But the developers, Del American, based in Altamonte Springs, Fla., cancelled the reservations.
The plaintiffs allege the Vegas Grand developers needed pre-sales to obtain financing for the 880-unit project. In late 2003, they sold so-called reservations and then sent the buyers letters congratulating them on their new home purchases and urging them to tell their friends to buy as well. In April 2004, say lawyers for the plaintiffs, the developers issued a press release announcing they had "sold" 740 units and that sales were continuing at a brisk pace.
But in May 2005, the developers said they were canceling the reservations in order to get out of ballooning construction costs. David Oliver, lead lawyer for Del American, says condo reservations are generally cancelable by either party. But because Nevada has no intermediate appellate court, the issue has not been settled there as it has been elsewhere. Because there's no intermediate appeals court, "there is very little law on just about anything," he says. "It's the Wild, Wild West and it's not a good place to be a condo developer."
A settlement in the lawsuit was finalized on Friday, according to Thomas Foley, one of the plaintiffs' lawyers. The developers have agreed to pay the plaintiffs 2.5% of the sale price on each of the 880 units.
In the Related case, the condo buyers were geared up to buy units in the Icon Towers on the Las Vegas strip. These plaintiffs say they signed contracts to buy actual units (as opposed to reservations). But in January, the developer informed them that it was canceling the project and offered to refund their deposits. The plaintiffs allege that the land on which the towers would have been built, along with the related zoning variances, could be transferred to other developers, and that Related is seeking a buyer to do just that. The plaintiffs' implication: that Related could make more money by selling the land to other developers than it could by adhering to its contracts.
Lawyers for the Vegas Icon buyers say that their contracts are binding even if the project is not built. They say any substitute developer would be well-served dealing with their clients who remain eager to close a deal.
"If the new developer buys the property, builds it out, the class members should get to buy the units," Mr. Foley says, adding that his clients should also be able to collect damages from Related. Related and their lawyers declined to comment for this article.
The Legal Players:
The plaintiffs in both cases are represented by Craig Anderson of the Las Vegas firm Marquis & Aurbach; George West III of Las Vegas; Donahoo & Associates of Santa Ana, Calif.; and Foley Bezek Behle & Curtis, a class action firm from Santa Barbara, Calif.
Related is represented by Hilarie Bass, the national chair of the litigation department at Greenberg Traurig. Del American is represented by David Oliver, a partner in Greenberg Traurig's Orlando office.
The Vegas Grand case was assigned to U.S. District Judge James Mahan and then reassigned to newly appointed U.S. District Judge Brian Sandoval. The Vegas Icon case has been assigned to Judge Mahan.
State v. Federal:
Cases like these historically were litigated in state court. But because of the Class Action Fairness Act of 2005, putative class actions alleging damages of more than $5 million can either be filed in federal court or may be removed from state court to federal court by the defendants.
The Vegas Grand case was originally filed in a Nevada state court but was later removed. There remain a group of 35 individual actions in state court that have not been settled, Mr. Oliver says. The Icon Towers case was filed initially in federal court in Nevada.
Possible Resolution:
The Vegas Icon suit seems as though it, too, could be settled along the lines of the Vegas Grand case. The plaintiffs could buy if the project gets built, or seek damages from Related, or some combination of the two. But whether the plaintiffs will still want to buy luxury condos in Las Vegas six months or two years down the road remains, well, anyone's bet.
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Tuesday, May 16, 2006
NAR: First Quarter State Existing-Home Sales Ease
Existing-home sales, including single-family and condo, remained historically high in the first quarter but have experienced a downtrend since hitting a record in the third quarter of last year.
NAR: REALTOR® Magazine Online
Even so, 26 states showed increases in sales activity from a year ago, according to the National Association of Realtors®.
The latest report on total existing-home sales shows that the seasonally adjusted annual rate* was 6.80 million units in the first quarter, down 2.1 percent from the 6.94 million-unit level in the first quarter of 2005.
The biggest increase was in New Mexico, where existing-home sales rose 26.2 percent from the first quarter of 2005. Louisiana’s first-quarter resale pace rose 22.9 percent from a year earlier, while Montana experienced the third strongest gain, up 17.5 percent. Six other states recorded double-digit sales increases from a year ago. Twenty-one states and the District of Columbia experienced declines. Complete data for three states was not available.
David Lereah, NAR’s chief economist, said rising interest rates have dampened sales. “A steady rise in mortgage interest rates has slowed home sales in higher cost areas, yet job growth in some moderately priced markets is boosting sales in other areas,” he said. “The net effect is a modest decline in home sales for the nation as a whole, but sales remain historically strong and are providing a solid underlying base for the overall economy.”
View Quarterly Data
According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was 6.24 percent in the first quarter, up from 6.22 percent in the fourth quarter; it was 5.76 percent in the first quarter of 2005.
NAR President Thomas M. Stevens from Vienna, Va., said the sales pattern is expected to level out. “We project home sales may soften a little further before picking up in the fourth quarter, but we’re not looking for any significant changes in the market moving forward,” said Stevens, senior vice president of NRT Inc. “This should provide stability in the market so that buyers and sellers will be on a fairly level playing field in most of the country.”
Regionally, the strongest performance was in the South, which reported an increase of 2.3 percent to an existing-home sales pace of 2.71 million units in the first quarter in comparison with a year ago. After Louisiana, the strongest increase in the South was in Mississippi, up 17.3 percent from the first quarter of 2005; resales in North Carolina rose 17.0 percent; Arkansas and Tennessee also posted double-digit sales increases.
In the Midwest, existing-home sales rose 1.1 percent to a 1.56 million-unit annual sales level from the first quarter of 2005. Indiana led the region, up 10.4 percent from a year earlier, followed by Iowa, up 9.0 percent, and Ohio, with an increase of 6.2 percent.
The Northeast recorded an existing-home sales pace of 1.12 million units in the first quarter, down 2.9 percent from a year earlier. Sales activity in Maine rose 4.6 percent from the first quarter of 2005, Rhode Island increased 2.0 percent and New York sales declined 2.2 percent.
In the West, the existing-home sales level of 1.41 million units was 12.4 percent below the first quarter of 2005. After New Mexico and Montana, the best performance the region was in Utah where existing-home sales rose 12.7 percent from a year earlier; Hawaii sales increased 6.3 percent while Alaska rose 5.9 percent.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.
# # #
* The seasonally adjusted annual rate for a particular quarter represents what the total number of actual sales for a year would be if the relative sales pace for that quarter was maintained for four consecutive quarters. Total home sales include single family, townhomes, condominiums and co-operative housing. NAR began tracking the state sales series in 1981.
Minor revisions have been made to quarterly seasonally adjusted annual sales rates for 1999 through 2005. Each May, NAR Research incorporates a review of seasonal activity factors and fine-tunes historic data based on the most recent findings. Normally, revisions are for the past three years, but these revisions include some adjustments back to the benchmark year of 1999.
Seasonally adjusted rates are used in reporting quarterly data to factor out seasonal variations in resale activity. For example, sales volume normally is higher in the summer and relatively light in winter, primarily because of differences in the weather and household buying patterns.
Tables of state resale rates, percent changes and some historic data are available at the site below under Research – click on Existing-Home Sales, then State Existing-Home Sales.
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Home Prices Cool But Appreciation Remains Strong
Metro Home Prices Begin to Cool but Appreciation Remains Strong
NAR: REALTOR® Magazine Online
The growth in single-family home prices continued to cool in the first quarter, but many metropolitan areas are still showing double-digit annual gains, according to the latest survey by National Association of Realtors®. At the same time, metro area condo price appreciation has generally cooled to normal levels.
The association’s first-quarter metro area single-family home price report, covering changes in 149 metropolitan statistical areas,* shows 60 areas with double-digit annual increases and 16 metros experiencing price declines.
The national median existing single-family home price was $217,900 in the first quarter, up 10.3 percent from a year earlier when the median price was $197,600. The median is a typical market price where half of the homes sold for more and half sold for less. In the fourth quarter of 2005, the annual rate of home-price appreciation was 13.6 percent.
David Lereah, NAR’s chief economist, said the market is responding to the improvements in inventory. “With the supply of homes picking up very nicely in many areas of the country, pressure is coming off of home prices,” he said. “By the time we report second quarter data, I expect most areas will be returning to normal rates of price growth in the single-digit range. Consumers generally can expect normal price appreciation for the foreseeable future, providing solid returns over time.”
Metro area condominium and cooperative prices, covering changes in 56 markets, show the national median existing condo price was $224,100 in the first quarter, up 5.2 percent from a year earlier. Twenty-seven metros showed double-digit annual gains in the median condo price, and five areas had declines.
NAR President Thomas M. Stevens said inventories have picked up more strongly in the condo sector. “Although we continue to have areas of hot growth, we’re finding more broadly balanced conditions across the country in the condo market,” said Stevens, senior vice president of NRT Inc.
“Condos have good fundamentals given the demographics of buyers, with baby boomers focused on the high end and their kids on more affordable units. However, in a handful of areas where there may be an oversupply, prices may level-out, so the longer your time horizon the better your investment,” Stevens said.
The national condo price is higher than the median single-family home price because there is a high concentration of condos in the most expensive metropolitan areas. Within a given area, the typical single-family home costs more than the median condo price.
The largest single-family home price increase was in the Phoenix-Mesa-Scottsdale area of Arizona, where the first quarter price of $268,300 rose 38.4 percent from a year ago. Next was Orlando, Fla., at $260,500, up 34.0 percent from the first quarter of 2005. Gainesville, Fla., with a first quarter median price of $210,100, increased 31.9 percent in the last year.
Median first-quarter metro area single-family prices ranged from $52,500 in Danville, Ill., to 14 times that amount in the San Jose-Sunnyvale-Santa Clara area of California, where the median price was $746,800. The second most expensive area was the San Francisco-Oakland-Fremont area at $720,400, followed by the Anaheim-Santa Ana-Irvine area (Orange Co., Calif.), at $712,600.
Other low-cost markets include, Decatur, Ill., the second least-costly metro, at $80,000, and the Youngstown-Warren-Boardman area of Ohio and Pennsylvania, with a first-quarter typical resale home price of $81,100.
In the condo sector, the strongest gains were in the Phoenix-Mesa-Scottsdale area, where the first quarter price of $179,600 rose 38.0 percent from a year ago. In the Honolulu area, the median condo price of $309,000 rose 34.9 percent from the first quarter of 2005, while Miami-Fort Lauderdale-Miami Beach, at $221,500, increased 31.4 percent. The condo price series will be expanded in the future as more data becomes available.
Metro area median existing condo prices ranged from $97,400 in Bismark, N.D., to $615,300 in San Francisco-Oakland-Fremont. The second most expensive reported condo market was Los Angeles-Long Beach-Santa Ana, at $404,600, followed by the San Diego-Carlsbad-San Marcos area of California at $382,200.
Other low cost condo markets include Greensboro-High Point, N.C., at $108,000, and Dallas-Fort Worth-Arlington, at $112,800.
Regionally, the strongest increase in the median existing single-family home price was in the West, where the price rose 12.0 percent to $344,000 during the first quarter. After Phoenix-Mesa-Scottsdale, the strongest increase in the West was in Spokane, Wash., at $172,100, up 26.3 percent, followed by Eugene-Springfield, Ore., at $223,600, up 25.3 percent from the first quarter of 2005, and the Tucson area, at $248,600, up 24.9 percent.
In the Midwest, the first-quarter median existing single-family home price of $158,800 rose 6.7 percent from a year earlier. The strongest metro increase in the Midwest was in Waterloo-Cedar Falls, Iowa, where the median price of $109,700 was 26.8 percent higher than the first quarter of 2005. Next was Decatur, Ill., up 14.3 percent, and Cedar Rapids, Iowa, at $134,600, up 13.4 percent in the last year.
In the Northeast, the median resale single-family home price during the first quarter was $285,200, up 6.6 percent from a year ago. The strongest increase in the region was in Elmira, N.Y., at $88,500, up 18.8 percent from the first quarter of 2005, followed by Trenton-Ewing, N.J., with a median price of $264,900, up 17.5 percent, and Atlantic City, N.J., at $251,700, up 15.8 percent.
In the South, the median existing single-family home price was $179,700 in the first quarter, up 6.6 percent from a year earlier. After the Orlando and Gainesville areas of Florida, the strongest increase in the South was in Ocala, Fla., at $159,800, up 30.8 percent from the first quarter of 2005. Next was the Virginia Beach-Norfolk-Newport News area of Virginia and North Carolina, where the first quarter median price of $221,100 was 27.1 percent higher than a year ago, and Deltona-Daytona Beach-Ormond Beach area of Florida, at $212,600, up 25.4 percent.
View Charts.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.
# # #
*Areas are generally metropolitan statistical areas as defined by the U.S. Office of Management and Budget. A list of counties included in MSA definitions is available at: http://www.census.gov/population/estimates/metro-city/0312msa.txt
National and regional quarterly prices have been revised back through 1989; the only revision to the metro price series is the normal annual revision for 2005 with revised fourth quarter data. The fixed reporting sample of representative multiple listing services for national and regional data has been updated to reflect geographic changes over time. In addition, regional weights have been updated and aligned to the 2000 Census, but changes in price patterns are consistent with previously reported data.
Regional median home prices include rural areas and samples of many smaller metros that are not included in this report; the regional percentage changes do not necessarily parallel changes in the larger metro areas. The only valid comparisons for median prices are with the same period a year earlier due to seasonality in buying patterns. Quarter-to-quarter comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.
NAR began publication of metropolitan area median single-family home prices in 1982; the metro area condo price series was launched earlier this year when fourth quarter 2005 data was reported.
Because there is a concentration of condos in high-cost metro areas, the national median condo price is higher than the median single-family price. In a given market area, condos typically cost less than single-family homes. As the reporting sample expands in the future, additional area will be included in the condo price report.
Tables of metropolitan area median prices, percent changes and some historic data are available at the site below – under Research, click on Existing Home Sales, then Metropolitan Area Prices.
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Monday, May 15, 2006
Pricey homes and lots of 'em
Fewer sales mean more houses to choose from. Buyers have gained breathing room, if not a lot of great deals.
By: Darrell Satzman: LA Times
Guy and Karen Vidal are experiencing something new as they try to sell the small Craftsman house they own on Apex Avenue in Silver Lake.
Since listing it at $699,000 two months ago, they've reduced the price twice — first to $679,000 and then to $659,000 a couple of weeks later.
After buying, restoring and selling 20 distressed homes over the last five years in Silver Lake and Echo Park — and making at least a small profit on each one — the former entertainment industry workers feel the real estate market shifting beneath their feet.
"We specialize in restoring places to their original glory: old Craftsman, bungalows and Spanish houses," Karen Vidal said. "When you walk in the door, we make it look like it's 1925."
The problem for the Vidals is that after several years of frenzied bidding, buyers are also determined to turn back the clock.
Although most neighborhoods in Southern California saw home prices increase by double-digit percentages in the first quarter of this year compared to the first quarter of last year, some experts point to another key indicator — fewer sales — as evidence that the sellers' market of the last five years is coming to a close.
"This is a time when buyers have time to shop and compare and can make a thoughtful purchase," said Roni Telmosse, branch manager of Coldwell Banker Carlsbad in San Diego County. "It's not like a year ago, when buyers were walking around with a check in their pocket and writing offers on the hood of their car."
All told, there were 69,499 single-family homes sold in the first three months of the year in Los Angeles, Orange, Riverside, San Bernardino, Ventura and San Diego counties, according to DataQuick Information Systems — a decline of more than 8% from the same period a year earlier.
Riverside was the only county to show an uptick in sales activity — 6.6% — in the first quarter, while San Diego had 17% fewer sales; Ventura, 16%; Orange, 15%; Los Angeles, 10%; and San Bernardino, 3%, according to DataQuick.
Call it a correction, a flattening or a return to common sense, but as inventory creeps up and the number of sales diminishes, many believe the end of soaring prices in Southern California is nigh.
"Buyers don't have that panicked feeling: 'If I don't buy before the post goes up, I'll get into multiple offers and lose out,' " said Ron Tornell, manager of the Thousand Oaks office of Prudential California Real Estate.
In his area, Tornell said, there were roughly 900 houses and condominiums on the market at the beginning of May — up about 25% from last year but still well below the 20-year average of about 1,500 homes. During the depressed market in the mid- 1990s, there were about 2,500 homes for sale in the area, Tornell said.
"What we're seeing is a more balanced market," he added, "one that doesn't favor the seller or the buyer."
San Diego County had the lowest increase on a price-per-square-foot basis — 7.2% — of any of the six Southern California counties at the end of the first quarter of 2006, compared with the same quarter of 2005.
Although most buyers are focused on specific neighborhoods and follow median sales prices more closely than the price-per-square-foot measurement, real estate agents and industry analysts say the latter number offers the most reliable snapshot of how a market is performing over a wide area. By this same measure, San Bernardino County home prices were up the most, at 27.7%. Los Angeles County was up 23.1%.
Homes are also clearly lingering longer on the market. According to the California Assn. of Realtors, Southern California had a six-month supply of homes for sale in January, more than twice the number in January 2005. In February, the supply increased to more than seven months, again twice as much as a year earlier.
Even if interest rates stay relatively low, Southern California is entering a period of slower sales and flat prices that could last five years or more, believes Christopher Thornberg, senior economist for the UCLA Anderson Forecast. The forecast has been predicting a leveling off of prices for several years now; so far, it has not come to pass. But to Thornberg, the fact that fewer people can afford homes is an indication that prices will flatten. In Los Angeles County at the end of 2005, according to the California Assn. of Realtors, the percentage of households able to afford a median-priced home was just 12%, down from 17% at the end of 2004.
The sort of turnaround in the market predicted by Thornberg would make it easier for the Vidals to compete for the distressed properties they make their living restoring — but it leaves them in a bind with the Apex house, which they purchased in January for $525,000.
The people they bought it from acquired the house in October for $400,000 — turning a quick profit of $125,000 before agents' fees and taxes.
Guy Vidal says they spent more than $60,000 to restore the Craftsman to near its original 1911 condition, with such enhancements as copper plumbing and updated electrical wiring.
Even though the house is just a bit over 1,000 feet, the Vidals' agent, Lyn Bradford of Prudential California Jon Aaroe Division, believes it would have sold quickly a year ago.
"People are taking their time; there's a lot of fence-sitting going on," Bradford said. "There's no doubt the market feels flat."
"As soon as we bought it," Guy Vidal said, "the market changed."
Another recent buyer who has seen the market change is Matthew Zevin, an attorney who lives with his wife, Kimberly, and their two children in San Diego's Carmel Valley neighborhood.
The Zevins began looking for a larger house with a bigger yard and a pool in the same neighborhood last spring. At the time, prices were soaring and most listings in the area were being snapped up in a few weeks.
Sometime last fall, however, Zevin noticed a pronounced slowing. "It was drastic," he said. "There was suddenly a lot more inventory, and with more inventory, prices started dropping."
The Zevins paid $1.5 million in November for a 3,800-square-foot house. Coincidentally, they had bid $100,000 more for this same house in July. The sellers had rejected that offer, which was contingent on the sale of the Zevins' home.
"If we were buying it today," Zevin said, "we'd pay even less."
Some San Diego County communities actually registered a decline in prices in the first quarter of 2006, compared with the same period in 2005, a rarity in Southern California, where the six-county median was up nearly 18%. Among communities with 50 or more sales in the quarter, prices for East San Diego, ZIP Code 92105, were down 6.8% on a price-per-square-foot basis; El Cajon 92020 was down 4.6%; and Rancho Bernardo 92127 was down 2.7%.
By comparison, the lowest-performing ZIP Code in Los Angeles County was 91390 in Santa Clarita, which was still up 7.7% for the same period, according to DataQuick.
Among the best-performing neighborhoods in all of Southern California during the first quarter were Twentynine Palms 92277 in San Bernardino County, up 55.7%; August F. Haw 90061 in Los Angeles County, up 48.6%; and Coachella 92236 in Riverside County, up 40.3%.
Realtor Bob Deville is co-owner of Windemere Coachella Valley, which has a dozen real estate offices in Riverside County. His area, which includes Palm Springs and Rancho Mirage and is dominated by retirement and resort communities, is picking up after a slow stretch late last year and early this year, he said.
"Prices won't keep going up at the clip they had," Deville said, "but we still feel like we're going to have a good year."
Hector Castañeda, branch manager for Century 21 Real Estate in San Bernardino, said he thinks many parts of that city may be hitting their price ceiling. But, he added, a changing market is not necessarily bad.
"We're used to breaking records every year," Castañeda said. "So when you talk about a slowdown, it's all relative."
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Darrell Satzman is a Los Angeles-based freelance writer. Reach him at satzman@ earthlink.net.
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Leaders of the pack
Here are the places where home prices have risen the most, percentage-wise, in six Southern California counties, for the first quarter of 2006, compared with the first quarter of 2005.
Place and ZIP Code Price change
Los Angeles County
LA/August F. Haw 90061 48.6%
LA/Watts 90002 43.6
LA/August F. Haw 90059 41.5
LA 90011 40.4
El Monte 91732 40.0
Orange County
Anaheim Hills 92807 25.5
Anaheim 92805 25.0
Fullerton 92833 24.8
San Clemente 92672 24.0
Fullerton 92831 23.8
Riverside County
Coachella 92236 40.3
Hemet 92344 29.9
Wildomar 92395 28.8
Norco 92860 28.7
Riverside 92501 27.9
San Bernardino County
Twentynine Palms 92277 55.7
Barstow 92311 48.8
Joshua Tree 92252 43.6
San Bernardino 92411 38.9
San Bernardino 92410 37.3
San Diego County
Paradise Hills 92139 16.5
National City 91950 12.3
Fallbrook 92028 10.4
Escondido 92026 10.3
La Mesa 91941 10.3
Ventura County
Oxnard 93035 31.1
Ventura 93001 26.7
Camarillo 93010 19.4
Oxnard 93030 18.4
Simi Valley 93063 17.4
Note: Based on the median price per square foot for ZIP Codes with 50 or more sales for the quarter.
Source: DataQuick Information Systems
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Sunday, May 14, 2006
Benefits, Risks of the Half-Century Mortgage Loan
Some buyers who can't afford a standard 30-year mortgage, and aren't comfortable with a 40-year mortgage either, are finding a 50-year loan to be an attractive option. But there are risks.
By: Noelle Knox and Mindy Fetterman: REALTOR® Magazine Online
While many banks offer the 40-year product — which accounts for 5 percent of loans — 50-year mortgages are harder to find, according to LoanPerformance, a real estate data firm. So far, only a few small lenders have rolled out the five-decades-long mortgages.
Statewide Bancorp in Rancho Cucamonga, Calif., has had about 220 applications since March when it began offering the 50-year term. The loans are luring cash-strapped buyers who are having a hard time coping with soaring home prices. Although 50-year mortgages come with lower monthly payments, but borrowers build equity very slowly and risk owing more than the home is worth.
Also, because rates on the loans are adjustable, monthly payments could rise over time. Still, observers say, the 50-year mortgages are less risky than interest-only or option mortgages.
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Top 10 mistakes of DIYers
From skimping on supplies to using the wrong paint, here are the top home-remodeling gaffes - and how to avoid them.
By: Pat Curry: Bankrate.com
The standard rule with do-it-yourself projects is that the projects will take twice as much time and three times as much money as you thought they would - or maybe it's three times as long and twice as much money.
Either way, the reason for that is the same. DIYers make mistakes. Lots of them. The good news is that you can learn a lot from mistakes. For example, whatever it was that my husband did to make all the outlets in the kitchen blow at the same time - don't do that again. The bad news is that mistakes always wind up making your home-improvement project more expensive and more time-consuming than you want it to be.
With that as a given, Bankrate.com asked home-improvement experts for their lists of the top DIY goofs, with advice on how to avoid repeating the errors in the future.
The experts are: • Ed Del Grande, host of the DIY Network's "Warehouse Warriors" show, as well as
1. Not taking out the required permits. This is a big issue with both Del Grande and Manfredini. Considered a bother at best by many DIYers, permits actually serve a greater purpose than just raising money for the government. "People in permitting offices aren't evil," says Manfredini. "They're there to make sure the job is done right and you don't hurt yourself." Plus, for some jobs, such as putting in a wood stove, you need proof of the permit or your insurance carrier won't cover it. Not sure if your job requires a permit? Del Grande says that the rule of thumb is that you need one for anything larger than painting and wallpapering. It doesn't hurt to call the building department and ask.
other shows and building specials on the network. A master plumber, pipe
fitter and fire-sprinkler fitter, Del Grande has more than 20 years of
construction experience.
• Lou Manfredini, the official Ace Hardware "Helpful Hardware Man." (You didn't
think it was John Madden, did you?) The home-improvement expert for
NBC's "Today" show, the Chicago-based contractor also answers questions from
DIYers on the Ace Hardware Web site.
• C.J. Iannuzzi, owner of 3SQFT, a design-build company in Miami Beach, Fla.,
and home-improvement contractor to the stars, including Madonna, Rosie
O'Donnell, Gloria Estefan and Ricky Martin.
• Barbara Kavovit, owner of Barbara K Enterprises. A New York City-based veteran
of the construction industry, she now makes and markets DIY tools especially
designed for women.
2. Starting a job without the necessary tools and supplies. Nothing slows down a job more than not having all the materials you need. Manfredini says that the reason the pros can do what they do is that they buy quality tools. "There's always a bargain bin," he says. "It's not a wise investment. You lose time and money."
3. Inadequate preparation of the job site. If you do a small addition, suppliers will be delivering materials. You don't want them out of order or exposed to the weather while you are working, Del Grande says. Beware: They could be stolen if they're not properly stored. (If you have a septic tank, make sure you know where it is. If a supplier delivering materials in a heavy truck drives over it, you could be looking at a cracked tank. Yuck.)
4. Skimping on materials. Kavovit says she often sees DIYers use 1/4-inch drywall for building walls. You need to use at least 5/8-inch; 3/4-inch works well for a good sound barrier. The same rule applies to plywood for subfloors. Go with 3/4-inch. It creates a much stronger floor, especially if you're installing wood floors over them.
5. Using the wrong paint. One of the biggest DIY projects around, painting can make a place look great. Manfredini says flat paint should only be used for ceilings. Interior paints should have at least an eggshell or satin finish so you can scrub it. On outdoor decks, "sun and rain tear the heck out of the wood," he says. Clear sealers don't block the UV rays, and they peel. Use a linseed-oil-based stain; it drives the pigment into the wood and preserves it.
6. Improper preparation of walls for painting. A good, quality paint job is 90% preparation, Manfredini says. Clean the walls, sand them and patch any holes before you paint. Iannuzzi recommends a coat of primer or stain blocker if you're trying to cover over oil-based paint, stains or peeling paint, or if you're painting a lighter color over a darker color.
7. Unsafe job conditions. Nothing diminishes your return on investment like a trip to the emergency room. Wear safety goggles when using power tools or working with drywall or wood, wear hard hats when you're working under other people on scaffolding, and open some windows when you're painting or staining, or stripping old finishes off of floors or walls, Del Grande says. Iannuzzi cautions against wearing loose, hanging clothing, especially when using power tools. Wear gloves when carrying wood, metal and rock, or when hammering, and wear a nail or tool pouch to prevent damage to your floors and more important, the feet of people and pets.
8. Inaccuracy. Iannuzzi lives by the rule: Measure twice, cut once. It's so important for things like building walls, hanging drywall or cutting baseboards, counter tops or pipe. If you're going to err, err on the side of too long. You can always make something shorter; you can't make it longer. Spackle can cover up to a 1/8-inch seam, Iannuzzi says; if it's a 1/4 of an inch, the seam will pop the spackle and show.
9. Working beyond your limits. Everybody has them. Del Grande won't work on a roof; yours might be plumbing or electrical work. Don't stand on the top steps of ladders, and don't try to work beyond your reach. Ladder accidents send more than 164,000 people to the emergency room every year, according to the U.S. Consumer Product Safety Commission.
10. Failure to get a clue. You don't want to start to learn how to do a project on your own house. If you have a friend who is a contractor or an experienced DIYer, offer your assistance on one of his projects so you can learn. No one will turn away free labor. If you need to remove a supporting wall, have an engineer look at it to see what kind of beam you need to replace it. "If you have a saw in your hand and have a question about what you're doing," Del Grande says, "stop. Follow that little voice in your head."
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Saturday, May 13, 2006
First-time Buyers: Is Now the Time to Buy?
As rates - and prices - continue to rise, is now the time to buy? For many first times homebuyers this is the ultimate financial question.
By: Carla L. Davis: Realty Times
Should you buy a house? As a first time homebuyer this can be one of the biggest decisions you've ever faced.
Many of the stories in the news media would have you believe that buying a home right now would be too much of a gamble. They use scary figures about rapidly rising mortgage rates. And still others make most of us feel as though homeownership is something far out of our affordability.
The truth is - all of these issues are partial truths. The economy could go belly up and thousands could lose equity in their homes or be stuck with a home that won't sell. Mortgage rates are going to rise -- a simple lesson in economic history proves that. And yes, you probably can't afford some of the homes on the market right now, with the average home price above $200,000 in most of the country, especially if have large amounts of student or personal loans.
But homeownership is a feasible option.
There are simply several questions you need to start asking yourself.
How much debt do you have? Before you can take on a huge financial responsibility that a home is - you need to pay down, or off, debts you have. Consider consolidating loans and getting rid of credit cards. Perhaps most importantly, you need to make sure that as you reduce debt, you increase your credit score. For more information, please contact a credit consultant.
Where will you be living in two to five years? If you are planning on being in an area for a short amount of time (less than 2 years), then renting may be a more financially feasible option for you. Buying (and selling) a home comes with fees and costs associated with closing the deal. Your house may not build enough equity in just 2 years for you to justify paying those fees twice. And if your home does appreciate in value quickly, if you live in the residence for under two years, you will probably not be eligible for a capital gains tax exemption.
What is the market like in your area? Are prices in your area rising quickly? Has the market gone into a slump? An economically sound region can expect prices to continue to rise, while prices may stall in an area experiencing hardship. For information on your area, contact a local professional and check out Realty Times' Market Conditions reports.
After these issues, most people are faced with two options. They can rent or they can buy.
Ginne Mae, who works closely with the Federal Housing Administration (FHA), another great source for information, - offers an online calculator that gives a decent idea as to how buying and renting compare costwise.
For demonstration purposes – let's say your rent is $940 a month – the national average at this time.
Buying a home that costs $150,000, with 5 percent down ($7,500) could end up saving you $16,618 over the course of 5 years.
And because of appreciation, which one can predict to be at least 6 percent per year, that means over the next five years you'll have a home that's worth around 30 percent more than when you bought it. You'll have the extra money to pay off student loans and other expenses - and build yourself some wonderful credit at the same time.
Now that's a win win.
The idea behind buying is getting a head start on building up your financial future. If you are planning on being in a location for any extended amount of time - two or more years - then you should strongly consider the option of buying. Not only will your home be growing in value, but you'll be saving yourself money on a month to month basis. In the example above -- the mortgage payment would come out to $700 a month. That's over $200 less a month than the average renter pays.
Becoming involved in the real estate market becomes less scary when you educate yourself. There some wonderful benefits to being a homeowner, such as having a more stable lifestyle, enjoying tax benefits, and watching your investment appreciate in value. And while some locations are more high risk, the majority of the U.S. sees fairly predictable prices and rates. Since 1968, according to NAR, homes on a national scale have never lost value and consistently beaten inflation. This is why real estate has always been a more secure investment than stocks. Unfortunately there is not sure way to gauge if it is the time to buy - rather, one must make that decision based on personal factors and finances.
But you don't have to go this alone. The government and many financial institutions know how hard it is for first time buyers to get into a home. That is why there are numerous programs to help out.
For those interested in Rural living, please visit the Rural Development Housing & Community Facilities Programs page.
For minorities wanting to find out more about their options, call toll-free 1-866-7TRUTHS (1-877-ATREVE1 in Spanish), for information from Freddie Mac.
Also take a look at HUD's website, which offers programs for low income, minority, and many other homebuyers.
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Bankrate: 50-Year Mortgage Debuts in California
The Methuselah of mortgages has arrived: the 50-year home loan.
RISMedia
Think of it as a mortgage that has been supersized. Like that other supersizer, McDonald's, the massive mortgage was born in Southern California's San Bernardino County. Statewide Bancorp of Rancho Cucamonga began offering the loan in late March, to California residents.
Advertisements have yielded a lot of phone calls and "quite a few applications," says Alex Diaz Jr., vice president of Statewide.
Half of first-time home buyers are 32 or older, according to the National Association of Realtors. If those buyers get 50-year mortgages and never refinance or make extra payments, they won't pay off their loans until they're well into their 80s.
Would they be crazy to get loans that amortize or pay off the balance over 50 years instead of the standard 30 years? Not at all, Diaz says.
Getting a 50-year loan is a perfectly rational way to avoid an interest-only or payment-option adjustable-rate mortgage, he says.
With an interest-only mortgage, the minimum monthly payment doesn't put any money toward principal. A payment-option ARM goes a step beyond that: In some circumstances, the minimum monthly payment doesn't even cover the interest accrued that month. You make a minimum payment at the beginning of the month, and four weeks later, you owe more than you owed before the payment. This condition is called negative amortization, or "going negative."
Forgive borrowers for thinking that it makes better sense to amortize a loan over 50 years than to get an option ARM or interest-only mortgage.
"Payment-option ARMs and interest-onlies have been so popular, we wanted to come out with a longer-term, fully amortizing loan for people who don't want to go negative," Diaz says.
Regulators and consumers worry that foreclosures will surge in coming years, especially among homeowners who got interest-only and payment-option ARMs. The 50-year loan is a lifeline for them, Diaz says.
"There are two markets for this," he says. "One is if they're looking to purchase a home, because of how expensive housing is, they'll consider this loan. And the other is payment-option ARMs -- borrowers are making minimum payments and they're starting to panic a little bit and look for vehicles to get out of these loans."
About a quarter of new mortgages in California are 40-year loans. This is the next logical step, Diaz believes.
Statewide's 50-year loan is a 5/1 hybrid, meaning that the introductory interest rate lasts five years and then the rate is adjusted annually, moving up and down with the London Interbank Offered Rate, or LIBOR.
Bystanders are dubious of the half-century loan's benefits.
"If you run the amortization out, it basically is an interest-only loan, in all practical terms," says Jason Flurry, a certified financial planner and president of Legacy Partners Financial Group in Woodstock, Ga. "If a person is considering something like that, they're probably trying to squeeze into too much house to begin with."
But just about everyone in California is trying to buy too much house. Of the houses sold in the state in February, half cost more than $535,470. Is a 50-year mortgage really an alternative to an interest-only loan? Yes, but it's not necessarily the best option.
"You're not talking about a significant savings in any event," says Jim Sahnger, mortgage consultant for Palm Beach Financial Network in Sewall's Point, Fla.
A 50-year loan has lower monthly payments, but the total cost is astronomically higher than that of a 30-year mortgage because you're stretching out the payments for two decades longer. It's impossible to guess how much higher because the rate moves up and down annually for the last 45 years of the loan.
But just for grins, let's compare a 30-year fixed-rate loan with a mythical 50-year fixed. For a 30-year loan of $300,000 at 6.5 percent, principal and interest cost $1,896.20 per month. A 50-year loan for the same amount and at the same rate costs $1,691.15 per month in principal and interest.
The 50-year loan costs $205 less per month, but the payments stretch out for 20 years longer and will cost a total of $332,058 more.
An interest-only loan at 6.5 percent would cost $1,625 per month for the first 10 or 15 years, and then the payment would jump.
Sahnger points out that few people live in one house for 30 years and hardly anyone for 50 years. A lot of home buyers move into a house knowing that they will move out within five years. Most of those people are well-suited for lower-rate hybrid adjustable mortgages, Sahnger says.
As for the 50-year mortgage, it's a good attention-getter, Sahnger says: "People are trying to differentiate themselves in the marketplace."
RISMedia welcomes your questions and comments.
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Friday, May 12, 2006
L.A. Reluctant to Give Its Bums the Rush
The Los Angeles City Council this week banned demolition of about 240 flophouses in the city's downtown for at least one year.
By: Andrew Glazer: REALTOR® Magazine Online
The moratorium gives officials time to figure out how to simultaneously encourage gentrification and preserve affordable housing.
The city recently commissioned a study that examined the problem of dwindling housing for skid row denizens, including drug users and prostitutes. The study recommended that the city and county spend $15 billion on preserving single-room accommodations and preventative services.
Not everyone is enamored with the study or the city’s actions. "Preserving units built in the early 1900s to house migrant railroad workers that have no bathrooms or kitchens does not strike us as the best low-income housing policy for the city," says Carol E. Schatz, president and CEO of the Central City Association.
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