Consumer Confidence Kicks Off High in 2007

U.S. consumer confidence jumps to its highest point since February 2006, which could signal good news for the housing market.
By: Jeannine Aversa: REALTOR® Magazine Online
Consumers are greeting the new year with a lot more confidence than they’ve had in months, which could be good news for the housing market.

The RBC Cash Index, created by the international polling firm Ipsos, showed U.S. consumer confidence at 95.3 in January. That was up from 86.9 in December and was at its highest since February of 2006.

The "expectations" index soared to 83.8 in January from 55 in December. This reading was at its highest in more than two years.

Consumers continue to feel particularly good about the job market. The January reading came in at 126.3, virtually unchanged from December's 126.5, the highest on record.

"A lot of the fears people had about the economy seem to be dissipating — fears about inflation and soaring gas prices. Fears about higher interest rates and the housing bust," says Mark Vitner, an economist at Wachovia Corp.
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Home Prices Expected to Rise, Sales to Drop Slightly in 2007

The number of homes sold will decline less sharply this year than last year, while price appreciation will gain steam. The median sales price for existing homes is predicted to reach $225,300 nationally.
By: Campion Walsh: The Wall Street Journal Online
U.S. home sales will decline less sharply this year than they did last year, while home-price appreciation is expected to gain steam, the National Association of Realtors said.

In its latest forecast, the NAR said sales of existing homes are likely to decline about 1.2% this year to 6.42 million, following a sharp drop last year, while sales of new homes are seen falling about 9.7% to 957,000.

Because the market is starting this year at a relatively low point, even a gradual recovery of sales during the year would mean that annual totals for 2007 are likely to show no substantial improvement, according to NAR Chief Economist David Lereah.

"The good news is that the steady improvement in sales will support price appreciation moving forward," Mr. Lereah says.

The Realtors' group, which is running a $40 million ad campaign designed to encourage consumers to contact their local realtors, expects moderate price increases this year. The group forecasts the median sales price for existing homes to grow 1.5% nationally to $225,300, following last year's estimated 1.1% rise. The national median price for new homes will increase 3% this year to $248,900, according to the NAR, after estimated growth of 0.3% last year.

As builders rein in new projects to support prices, housing starts are expected to drop 16.6% this year to 1.51 million, their lowest level in a decade, the NAR said.

Mortgage Bankers Association chief economist Doug Duncan expects home prices to rise 1% to 2% annually for the next couple of years. But some markets could see price declines of 10% to 20% this year, he says, a shift from the last four to five years, when there were "almost no markets where prices were declining."

Home sales will decline 7% to 8% this year, with most of the decline in the first half, adds Mr. Duncan, who expects the market to bottom out in mid- to late 2007.

Meanwhile, the volume of mortgage applications filed with major U.S. banks rose 16.6% on a seasonally adjusted basis last week, compared with the week before, the MBA reported yesterday.

The number of applications - for both purchases and refinancings - increased 12%, compared with the same period a year earlier. Application volumes, on a seasonally adjusted basis, fell about 14% just before the holidays.

Applications for loans to buy homes stood at the highest level in nearly a year, according to the MBA. Applications to refinance rose about 28% from a year ago.

The average rate for a 30-year fixed-rate loan fell to 6.13% from 6.22% the previous week, which was the highest rate seen in eight weeks. The average rate for a 15-year fixed-rate mortgage dropped to 5.85% from 5.93% the previous week. The rate for a one-year adjustable-rate mortgage, or ARM, averaged 5.79%, down from 5.84% the previous week, the MBA's data showed.
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The Weekend Guide! January 11 - January 14, 2007

The Weekend Guide for January 11 - January 14, 2007.
Full Article:
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National data shows steady home sales will continue

Pending Home Sales Show Steady Trend
CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.)
The decline in pending home sales from year ago levels continues to narrow, a sign that market stabilization will continue in the months ahead, according to a recent report from NAR. The Association's Pending Home Sales Index (PHSI), which gauges home sales activity for upcoming months based on the number of transactions that have signed contracts but are not yet closed, stood at 107.0 in November. A PHSI of 100 or more generally indicates a high level of home sales activity. Over the last five months, year-to-year declines in the PHSI have gradually fallen from 16 percent in July to 11.4 percent in November.

"Because there is a stronger parallel between changes in the index from a year ago and the actual pace of home sales in coming months, the index is pointing toward fairly stable home sales in the near future," said NAR Chief Economist David Lereah. "That is another indicator that home sales likely bottomed-out in September."

The PHSI declined across the nation in November compared with the readings a year ago. On a regional basis, the PHSI was highest in the South, where it declined 8.9 percent to 121.6. In the West, the index fell 15.9 percent to 106.6. The PHSI also declined in the Midwest and Northeast regions, falling to 101.7 and 85.5, respectively.

A stabilization trend in the housing market is likely to continue, according to the latest reading on pending home sales published by the National Association of Realtors®.

The Pending Home Sales Index,* based on contracts signed in November, eased by 0.5 percent to 107.0 from an upwardly revised reading of 107.5 in October, and is 11.4 percent lower than November 2005. The decline from year-ago levels has been steadily narrowing since July, which was 16.0 percent lower than the same month in 2005.

David Lereah, NAR’s chief economist, said the narrowing from year-ago levels is a significant factor. “Because there is a stronger parallel between changes in the index from a year ago and the actual pace of home sales in coming months, the index is pointing toward fairly stable home sales in the near future,” he said. “That is another indicator that home sales likely bottomed-out in September.”

The index is derived from pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed; pending sales typically are finalized within one or two months of signing.

An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined and the first of five consecutive record years for existing-home sales. There is a closer relationship between annual changes in the index and actual market performance than with month-to-month comparisons.

“Although some monthly declines are possible, when we look at the forecast for existing-home sales in 2007 on a quarterly basis, we see gradual improvement over the course of the year,” Lereah said. “That will support future price appreciation as inventories are drawn down.”

Regionally, the PHSI in the Midwest rose 4.8 percent in November to 101.7 but was 11.6 percent below a year ago. The index in the South slipped 1.1 percent to 121.6 and was 8.9 percent below November 2005. The index in the West declined 2.6 percent to 106.6 and was 15.9 percent lower than a year earlier. In the Northeast, the index was down 2.8 percent in November to 85.5 and was 9.6 percent below November 2005.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.


* The Pending Home Sales Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 parallels the level of closed existing-home sales in the following two months. There is a closer parallel between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than there is with month-to-month comparisons.

The forecast will be revised January 10, and existing-home sales for December will be released January 25. The next Pending Home Sale for December will be released January 25. The next Pending Home Sales Index will be on February 1.
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Property Owners OK East Hollywood BID

Property owners in East Hollywood voted on Tuesday to support the creation of a Business Improvement District.
By: DANIEL MILLER: Los Angeles Business Journal Online
The owners represent most of the square footage within the district. The vote took place at L.A. City Hall and sends the matter to the full council for a vote Wednesday.

The proposed district, which includes 85 property owners, needed the support of stakeholders representing 51 percent of the square footage in the area to move forward. The Hollywood Chamber of Commerce, which will assist the BID, expects the council to approve the district, paving the way for Mayor Antonio Villaraigosa to sign off on it.

“This gives us a chance to pull stakeholders together so they are talking and we can deal with issues that are important over there,” said chamber President Leron Gubler. The BID will have an annual budget of $89,000 and will mostly address maintenance issues in the area. The goal is to address the area’s “general run down appearance,” Gubler said.

The BID will provide services to the area between Vermont Avenue and Edgemont Street in East Hollywood. Major facilities in the area, including the Braille Institute and the Kaiser Permanente Hospital, support the BID.

Pending final approvals, the BID will be formed in the spring. There are three other Hollywood BIDs.
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TV, Radio Ads Urge Consumers to Call a REALTOR®

The $40 million campaign kicks off on Jan. 15 and explains how REALTORS® can help buyers and sellers navigate today's real estate market.
REALTOR® Magazine Online
A new $40 million television and radio campaign that explains the opportunities, challenges, and advantages of buying and selling a home in today’s market will kick off on Jan. 15.

The commercials are the latest installment in the association's long-running Public Awareness Campaign. They stress that all real estate markets are local, and urge consumers who are thinking about buying or selling to contact a REALTOR® to learn about the conditions in their community.

“Many media reports about trends and developments in the housing market are on a national level and don’t capture what’s happening in individual communities across the country,” NAR President Pat Vredevoogd Combs said at a press conference on Tuesday. “As local real estate market conditions continue to evolve, savvy consumers rely on the guidance of real estate professionals who are immersed in the industry.”

When Experience Matters

The new advertising initiative, “Every market’s different, call a REALTOR® today,” explains the value of REALTORS®’ experience and insight into their local markets.

With a national median appreciation rate of more than 50 percent over the past six years, followed by a slowdown in sales in some markets, buyers may be worried about the timing of their investment. With more homes on the market, however, many buyers have increased negotiating power. A REALTOR® can help them structure the best deal.

On the flip side, sellers need help positioning their home in a competitive marketplace and in attracting and engaging serious buyers.

“Home ownership is a safe, secure way to build long-term wealth,” Combs said. “Buyers and sellers have different concerns as their local markets change, but our REALTOR® members handle hundreds, if not thousands, of real estate transactions over the course of their careers and can counsel and guide consumers through the process.”

Expands on Print Media Campaign

The television and radio ads that will begin running on Jan. 15 and Jan. 29, respectively, expand on a print media campaign that NAR launched in October 2006. That campaign was titled: “It’s a Great Time to Buy or Sell a Home.”

Now in its 10th year, the NAR Public Awareness Campaign has helped millions of consumers realize the value of using a REALTOR® to help them buy or sell real estate. And according to annual tracking research, the commercials are making a big impact. The percentage of consumers surveyed who are more likely to hire a REALTOR® than a real estate agent who is not a REALTOR® has risen from 51 percent in 1999 (the first year of the survey) to 64 percent in 2006.

The 2007 campaign includes two themes:

    • “Good Time to Buy” highlights favorable conditions for home buyers and
      explains how a REALTOR® can help buyers make smart decisions in their local
      marketplace.

    • “Know How to Sell” explains how REALTORS® can help sellers position their
      homes in a competitive marketplace to attract and engage serious buyers.

Ads Run Through November

This year marks the most extensive outreach effort since the Public Awareness Campaign began. Ads will be broadcast nationwide from January through November and will air more than 8,750 times on national TV and radio outlets and more than 25,000 times on local radio stations through a national buy.

Print, billboard, bus shelter, and poster ads are available to local and state associations to use in their own outreach efforts, and REALTORS® can download Web banners for their own Web sites.

“In some parts of the country, it may be the best time to buy a home since 2001,” Combs said. “But real estate is cyclical. Home buyers should act before their window of opportunity closes, and sellers need to think about how to prepare and market their home effectively.”
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What to Know Before Buying a Fixer-Upper

Consider location, price, and the huge amount of time and effort involved when buying a home that needs big improvements.
By: Kathy Haight: REALTOR® Magazine Online
A home in need of repair can be a good deal, especially if buyers are able to do some of the repairs themselves.

Here are three major things to think about when considering a home in need of lots of improvements:

• Location, location location. Is the lot well located with good topography? Will the improvements you propose make it worth as much as — not a lot more — than other homes in the neighborhood?

• How much? Calculate what the home would sell for if it were in great shape. Subtract the cost of repairs, then take off another 10 to 15 percent for unexpected problems. If you can’t get the property for that, then it's probably a bad deal.

• Prepare for the mess. Get ready for renovations to take longer than expected. Know that your life will be disrupted if you can’t afford to live somewhere else while the work is being completed.

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Shopping for a Home In a Buyer's Market

How to make the most of a 'window of opportunity' in 2007 to take advantage of lower mortgage interest rates and seller flexibility. Learn these five rules for house hunting amid declining prices.
By: Marshall Loeb: Wall Street Journal Online
It's no secret that the housing market finally, after a long while, belongs to the buyer. Home sales and prices sagged in 2006, and 2007 is not expected to be too different. According to David Lereah, chief economist for the National Association of Realtors, buyers have a "window of opportunity" in 2007 to take advantage of lower mortgage interest rates and seller flexibility.

Colby Sambrotto, COO of ForSaleByOwner.com, a no-commission real estate marketplace, offers these rules for shopping for a new home in a buyer's market:

• Don't limit yourself. While you should look for homes that are listed with real estate agents, don't discount properties that are for sale by owner. They make up about 25% of the market, and you may be able to find a good deal with one of them thanks to a lack of agent commission and fees.

• Hold onto a property for a while. Now is not the time to buy a condo or home to flip quickly for a profit. Make sure you buy a property at a good value - you're more likely to have a good sale in the future.

• Take your time. There's no need to rush in this market, so don't worry about putting in the highest bid or writing a check the minute you like a place. Research the neighborhood to find out if the asking price is consistent with other homes in the area.

• Ask for incentives. To sell their homes, owners may be willing to throw in extras such as appliances, work sheds, drapes or even patio furniture for the asking price. Try negotiating some extras.

• Shop around for a mortgage. To get the best deal available, ask for as many quotes as you can. If you get a pre-approved mortgage, you'll have even more leverage at the negotiation table.
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Proposed Bill Would Keep Banks Out of Real Estate

On its first day in session, the 110th Congress introduced the Community Choice in Real Estate Act, which would keep banks from controlling all aspects of real estate transactions.
REALTOR® Magazine Online
Pat Vredevoogd Combs, president of the NATIONAL ASSOCIATION OF REALTORS®, hailed the 110th Congress for quickly moving forward with key legislation that NAR believes will ensure that the real estate industry remains competitive.

H.R. 111, the Community Choice in Real Estate Act, was introduced Thursday in the House by its sponsors Congressmen Paul Kanjorski (D- Pa.) and Ken Calvert (R-Calif.). Fifty cosponsors were added on the first day of Congress.

NAR will work toward the bill’s passage with Reps. Kanjorski and Calvert, who helped garner bipartisan support for it.

NAR has repeatedly stressed to Congress its long-standing support for keeping banks as impartial providers of credit and not permitting them to control all aspects of real estate transactions. Putting real estate brokerage into the hands of banks would leave consumers with fewer choices and higher costs, NAR says.

"REALTORS® provide extensive personal attention to consumers during the lengthy process of buying a home," Combs says. "It would be difficult for banks to provide that type of counsel because of conflicts with their other business objectives.”

What the Bill Would Do

Enactment of H.R. 111 would keep real estate brokerage and management clearly defined as commercial activities and not financial matters, ensuring that the separation of banking and commerce continues as mandated by the Gramm-Leach-Bliley Act.

“Without passage of this legislation, we are concerned that national bank conglomerates will continue their attempts to enter into the real estate industry, putting both competition and the nation’s economic health at risk,” Combs says.

“The U.S. economy depends on a strong real estate market and a healthy banking industry," she adds. However, attempts by the Federal Reserve and Treasury to redefine real estate as a financial activity would have harmful effects resulting in less competition, higher costs for consumers, and give competitive advantages to the banks.”
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It pays to own rental real estate

Many enjoy great tax benefits, market-value appreciation
By: Robert J. Bruss: Inman News
On a recent flight from San Francisco to Chicago, I sat next to a talkative businesswoman. After we exchanged pleasantries and she learned I invest in and write about real estate, she asked, "What type of real estate should my husband and I invest in?"

Rather than give a direct answer, I replied, "Well, do you have any realty investments now?" Just our townhouse, she replied. "Has that been a good investment?" I asked.

She said they bought it about four years ago and since then it has more than doubled in market value. I responded that was extraordinary, but it can happen for well-located homes.

Then I asked her, "How much of a cash down payment did you make?" She replied, "Ten percent down. We got one of those PMI (private mortgage insurance) mortgages for 90 percent financing." Next, she launched into a rant about what a ripoff her $124 per month PMI premium is.

After I politely explained how she could cancel the PMI with an on-time payment record for at least 24 months by asking the lender to cancel the PMI based on a new appraisal, she was very grateful. "Why didn't the lender tell me?" she asked.

Then I tactfully redirected the conversation to make two points: (1) She and her husband wisely bought for 10 percent down, and (2) They are profiting from the benefits of leverage by controlling the entire property-value increase with just a small cash investment.

IF ONE HOME IS GOOD, WOULDN'T TWO BE BETTER? During the conversation, my seatmate said she and her husband want to buy a larger house. I congratulated her on that wise decision, especially in the current "buyer's market" in most cities.

Then she asked if they should keep or sell the townhouse when they buy a larger home. Since she mentioned the townhouse is located in a good neighborhood and there seems to be strong rental demand, I suggested keeping the townhouse as a rental.

When my new friend asked about losing the $500,000 principal-residence home-sale tax exemption for a married couple filing jointly (up to $250,000 for a single homeowner), I explained the townhouse can be rented as long as 36 months before losing this benefit of Internal Revenue Code 121.

"That's presuming you and your husband owned and occupied it at least 24 of the last 60 months before the home sale," I reminded my seatmate. If the townhouse continues to go up in value over the 36 months after you move out, I continued, then you get to enjoy even more tax-free market-value appreciation up to $500,000.

Then I asked, "If one home is good, wouldn't two be better?" She got the point real fast. Next, I briefly explained the tax advantages of keeping the townhouse as a rental property for a few years before deciding to keep or sell it.

I explained the benefits of the noncash depreciation tax deduction for rental property, but I don't think I did a very good job. Saving tax dollars didn't seem to interest her.

PROS AND CONS OF OWNING RENTAL HOUSES. Although there are many tax advantages of owning rental houses, especially tax-free income deductions up to $25,000 if you earn less than $100,000 annual adjusted gross income, there are a few possible disadvantages.

The primary negative to owning rental houses is called "tenants and toilets." By carefully selecting quality tenants who are likely to pay the rent on time (based on their credit report and FICO score), the management problem can be minimized. Good-quality house renters often stay many years.

Another possible negative is maintenance. Periodically, house components need repair or replacement. Rental-house owners should have access to quick cash for an emergency, such as a roof replacement. A home equity credit line is the best source because it costs nothing (except a $50 annual fee) until it is used by writing a check.

PROFESSIONAL PROPERTY MANAGEMENT ISN'T CHEAP. Although owner management of rental houses is recommended to save costs if the property is located within an hour's drive, sometimes landlords either don't want to or are unable to manage their rental houses.

When that happens, there are professional property management firms available. Before hiring such a firm, investors should obtain client references and check out the firm extremely carefully.

Most professional property management firms charge fees of 10 percent to 15 percent of the gross rental income for houses. They often charge additional fees for supervising repairs and for renting vacancies. The best firms provide monthly computer printouts to owners showing rent collections and expense payments, along with a monthly check to the owner.

ARE APARTMENTS GOOD INVESTMENTS? My airline seatmate had one more important question: "Wouldn't apartments be a better investment since my husband and I travel a lot?"

Then I explained large apartment buildings can be good investments because the landlord can usually hire an on-site resident manager to collect the rents and manage the property. But I quickly added, "Then your job is to manage the manager."

My personal experience has been apartment buildings ... (1) usually don't appreciate in market value as fast as single-family houses and (2) problems with apartment buildings are usually big problems, such as malfunction of a key component or the need for an expensive repair, such as a new roof.

Also, if the local apartment rental market is soft, with too many vacancies, that severely hurts the rental cash flow.

Apartment buildings and commercial properties are valued depending on their capitalization or "cap rate," which depends on the net operating income. However, single-family rental-house market values depend on recent sales prices of comparable nearby houses rather than rental income and expenses.

BONUS ADVANTAGE OF RENTAL HOUSES. An extra advantage of investing in rental houses or any other type of real estate investment or business property (but not your personal residence) is it can be exchanged - tax-deferred - for other investment or business real estate of equal or greater cost and equity.

Internal Revenue Code 1031 makes it possible to pyramid realty investments from a small rental property into investment property worth far more, without the erosion of capital gains tax. Full details on this and other tax benefits are available from your tax adviser.
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Fixers: Fools rush in

Those who want to buy neglected homes cheap and renovate should do the math first.
Check your math before buying on the cheap with dreams of renovation, experts advise.
By: Marnell Jameson: latimes.com
"Many people buy the house, then find the contractor. They should do the reverse."
— Andy Heller, author and real estate renovation guru.

MARRY in haste. Repent at your leisure. That old saw could apply just as well to buying a fixer.

Before you fall in love and rush to buy and renovate a rundown old house that has a certain charm, take some time to get to know it better. A little due diligence, experts say, can save a lot of heartbreak — and serious money.

Todd Hays is a serial fixer.

The 45-year-old publicist just sold his 12th renovation project and is working on his 13th.

"I do it because I love to do it," he says, standing in his newest acquisition, an 80-year-old home in Pasadena. "I would do it even if I didn't make money doing it, though I don't want to lose money." Mostly, he says, he has made a profit — sometimes more than others.

For him, the decision whether to buy a fixer or walk away from it comes down to his heart and math. "I need to know I'm going to love the house when it's done and that to do what I want will make financial sense."

Hays lives in all his projects while fixing them, and saves money by doing much of the work himself.

But certain flaws in a prospective home, even one that he loves, will kill the deal. For Hays, deal breakers include expensive but essential upgrades that won't show, such as foundation, extensive plumbing or electrical work.

He avoids expensive projects to undo previous upgrades. For instance, he decided against buying an old Craftsman whose owners had stuccoed over wood siding.

Hays also steers clear of homes in danger of sliding down hillsides, and would think twice about buying a home that has been in a fire or flood.

"But the real deal breaker comes down to a home being overpriced for the amount of work it needs," he says. To make sure the property pencils out, Hays makes a detailed list — down to specific types of doors and hardware — of what all the improvements he has in mind would cost. Then he adds 10%. "People who have never done this should add 20%. There are always surprises."

He then tracks every dollar he puts into the home renovation on his computer. "I know — to the penny — what I paid, what I invested and what I net."

Andy Heller, 44, co-author of "Buy Even Lower: The Regular People's Guide to Real Estate Riches," agrees that those new to renovation should proceed with caution. He recommends buyers get good appraisals and inspections up front and be prepared to walk away from certain flaws.

Fifteen years ago, when he and his partner, Scott Frank, started buying homes to renovate and sell, they walked away from houses with significant structural problems, foundation issues or excessive termite damage. "These homes aren't for amateurs."

Heller, who lives in Atlanta and gives seminars across the country on this subject, says, "Any offer you make should be contingent on inspection and walk-through."

When Heller and Frank walk through a home for sale, they calculate what repairs it will need and make an offer based on what they see. While in escrow, they get a professional inspection. If, after going through the home carefully, they find more that needs repair, they go back to the seller and ask for a discount based on the additional work.

"We always leave ourselves an opportunity to reopen the negotiation," Heller says. For them, a decision to buy comes down to one word: margin. "We don't care if the electrical is shot, so long as we've assessed it, built that into our offer and gotten an appropriate discount."

To determine the size of a discount, Heller suggests that a buyer have a contractor estimate how much the repair or upgrade would cost, then present that to the seller as the basis for asking to purchase at a lower price.

Heller and Frank rely on experts providing good estimates before finalizing their purchases. "Many people buy the house, then find the contractor," Heller says. "They should do the reverse."

Before closing, the pair recommend buyers walk through the house with a reliable contractor and obtain a detailed estimate of what it would cost to make it what they want.

People often get in over their heads for three reasons, Heller says: They don't properly assess the necessary repairs before they buy. They don't have a good inspector and good contractors. Or they don't have the money to do the needed repairs.

Still, even if a buyer does everything right, the market is the wild card. For this reason, Heller says, homeowners need an exit strategy. Options for owners who can't cash out when they want to include remaining in the home longer, renting the house or selling it on a lease-option.

The Southern California real estate market has primarily allowed Hays to ride the wave of appreciation and realize a nice profit. But back in the early '90s, while he waited for the market to come back, he lived for seven years in a house that he'd intended to live in for only two. As it was, he made only about $5,000 on the house.

He did a little better the last time around. A home he bought in January 2003 in Studio City for $600,000 recently sold. He invested about $80,000 in the home and will net more than a $300,000 profit for the upgrades after factoring in appreciation.

If he'd used a contractor instead of doing much of the work himself, he estimates he would have paid an additional $40,000 for improvements, but he would have still come out ahead.

He bought his current home project, a 2,300-square-foot house built in 1926, in September for $700,000 — $159,000 below the initial asking price. He's working to restore the Pasadena home's original Spanish style, which previous owners weren't always faithful to. For starters, he removed the hollow-core doors and put in shaker doors he found at Lowe's that resembled those that were in the original house.

Today, after renovating more than 100 houses in a decade and a half, Heller and Frank like what turns other buyers off. "We love the ugly and awful. We have bought homes on busy streets, under power lines, on steep, sliding slopes and near railroad tracks," Heller says. "We won't walk away from any house if the price is right."

Even though money is important, it's not always the most important factor. Frank overpaid for the home he now lives in and knew he was overpaying when he bought nine years ago. But it's the house his wife wanted.

"Did I overpay?" he asks. "Yes. Did it make my life better? Yes. There is a value to having a happy wife."

*
Marnell Jameson is a nationally syndicated home design columnist. You can reach her at http://www.marnijameson.com .
*
(INFOBOX BELOW)

Look long and hard

Bruce Irving, former producer of "This Old House," worked on 33 renovations during his 17 years with the show. The renovation consultant offers this advice when buying a fixer:

Appraise the neighborhood. Obtain the price range of recently sold houses. You want to know how much you could safely invest and not price yourself out of the neighborhood.

Visit the building department. Find out what is allowed — and what's not. Investigate every regulatory body that may have a say in the remodel.

Get an inspection. Inspectors don't want to be deal breakers, but most will tell you what's wrong if you listen. If there is a little water damage, suspect a lot. Owners may "go to great lengths to try to hide it," Irving says.

Beware of environmental hazards. Lead, asbestos and mold are all common in older homes. Either avoid these problems entirely, or factor in what it will cost to abate them.

Make two lists: What needs to be done. What you want done. Must-haves in a house include hot and cold running water, heat, no leaks. On the wish list may be a new kitchen, updated baths, a few walls moved. Seek realistic, detailed bids.

Don't over-improve. Before you put in a tricked-out kitchen, look around the neighborhood and see what's comparable. If a gourmet kitchen is important to you, put it in. Just know that if it's a lot nicer than any kitchen around, you risk not getting a full return on that investment.

Couples should test their remodeling compatibility. If you're going to do this with your mate, first tackle something small, such as installing a mailbox or a closet system, before taking on something major.

Time it right. Don't start a renovation if you already have your plate full with other responsibilities demanding your time and attention. Remodeling is stressful.

Don't underestimate what it takes. The biggest mistake most people make is grossly underestimating the time, energy and money they will need to invest.
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Meltdown Was More of a Mixed Bag

Even though 2006 was a flat year for the L.A. County housing market overall, data released last week shows that some areas did well while others took hard hits.
By: DANIEL MILLER & DAVID NUSBAUM: Los Angeles Business Journal Online
Despite flat market, some cities saw home sales skyrocket in 2006.

Even though 2006 was a flat-to-down year overall for the housing market in Los Angeles County, a review of full-year data released last week shows that many affordable areas enjoyed a banner year.

But many of the expensive areas got rocked.

There was no housing downturn in Inglewood, for example. The four ZIP codes that make up the city had a combined median house price of $585,000 in December, making it a reasonably affordable area for Los Angeles’ pricey market. In 2006, the number of homes sold in those Inglewood ZIP codes increased a whopping 55 percent. The price of homes increased more than 15 percent.

The same is true in Carson, where sales increased 28 percent and prices increased 9.2 percent.

All those numbers were better than the county as a whole. For 2006, the number of homes sold declined 6.6 percent to 496,512 units. The median price from December to December increased 4.8 percent to $550,000.

But at the same time that many affordable areas were enjoying a good, even great, 2006, several high-end areas hit a very rough patch.

Malibu saw its sales volume plunge 45 percent and prices drop 15 percent. Beverly Hills’ three ZIP codes had a composite sales volume drop of 35 percent and a price drop of 38 percent.

“It’s really a price-driven market and every particular marketplace has its own distinction,” said Betty Graham, president and chief operating officer of Coldwell Banker Residential Brokerage of Greater Los Angeles and Orange County.

The data for the review was provided to the Business Journal by HomeData Corp., a Melville, N.Y. company that tracks housing prices nationwide. (Data for December, including a breakdown by ZIP codes, begins on Page 28.)

Raphael Bostic, economist with the USC Lusk Center for Real Estate, said that in the last 18 months, discretionary sales – largely those done to take advantage of the boom of 2002-2005 and not done out of necessity – “have been taken off of the market.”

As a result, the high-end portion of the market has taken a hit.

“A lot of the housing frenzy just moved people to accelerate their purchases,” Bostic said. “So now that pool of people is smaller than it was before.”

At the same time, affordable homes tended to see prices accelerate as demand for them stayed brisk.

“There is going to be more competition because they are more affordably priced,” said Robert Kleinhenz, deputy chief economist for the California Association of Realtors. “This translates into price appreciation.”
Looking at the data a different way, the Business Journal compared the 30 ZIP codes with the biggest increase in the number of homes sales in 2006 to the 30 that had the sharpest drops.

Comparison Results

The 30 ZIP codes that had the biggest increase were populated mainly with affordable homes. As a group, those 30 ZIP codes had a median price of $500,000 in December, well below the county median of $550,000. That $500,000 price also was up smartly – 11 percent – from the year earlier. These 30 ZIP codes saw a combined 68,124 units sold during 2006 – up 20 percent from the previous year.

At the other end of the spectrum, the 30 ZIP codes that had the biggest decrease in sales activity tended to be in areas with expensive homes. They had a median price of $770,000, above the county median and up only about 3 percent from a year earlier. These areas had a combined 24,276 units sold, down 38 percent from 2005.

Again, the affordable homes performed the best.

Although some areas did well while others did poorly, there was a large, third group: Neighborhoods that more or less stayed fairly close to the country averages.

One statistical oddity: Since April the median price in Los Angeles County stayed constant at or near the $550,000 level, even though there were fewer sales at the upper-end and more sales at the lower end. The reason is that home prices overall increased. That offset the drop in sales at the high end.


The coming year

Could 2007 be more of the same?

Industry professionals say that the market appears to have weathered the brunt of the storm.

“We are looking at a housing market that took its hits mostly last year,” said Kleinhenz.

Several industry experts believe the county market will not experience the sort of house-price collapse the region went through in the early 1990s. Currently, unemployment is historically low, unlike the early 1990s when the region was rocked by the collapse of the local aerospace industry after the Cold War and experienced a serious recession.
By way of comparison, the unsold county inventory in February 1991 stood at 27.9 months; in December 2006 it was at 8.3 months, meaning it would take 8.3 months to sell all the homes on the market at the current pace of sales.

“We might see a little bit more price erosion and decline in sales, but because underlying fundamentals are good I don’t think we are going to have a housing market in a free fall like the early 1990s,” Kleinhenz said.

Syd Leibovitch, president of Los Angeles-based Rodeo Realty, a high-end brokerage, said that because so few people moved last year “there has to be some pent-up demand.”

“I think sales volume is going to be higher than last year,” he said.

According to Bostic, expect more of the same from the “bread and butter, middle of the road properties” and minimal price declines across the board.

Graham said that the American public is resilient when it comes to the real estate game, and is accustomed to watching the market fluctuate.

“The American public mostly understands that (real estate) is a long term investment,” Graham said. “I believe we have pent-up demand right now. I believe they are happy and comforted that the housing market didn’t derail.”

Graham said that her agents are sensing the public’s optimism.

“The bottom did not fall out,” she said. “That is a confidence-building fact.”
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'Tis the season to beware of tax fraud

Who's filing your taxes this year?
By: Ilyce R. Glink: Inman News
Q: I have a friend who files the tax returns for some of my friends and me every year. My friends did not get their tax refunds last year. As it turns out, our accountant friend seems to have given his own address and account number for all of my friends' tax returns to be direct-deposited. Is this identity theft? What is the federal punishment for such an offense?

A: Sounds like your "friend" is no friend. The person who filed your tax returns and stole your money is likely guilty of fraud, which is a much more serious offense (not to suggest that identity theft isn't taken serious). The punishment could include making restitution, paying a fine, and jail time.

Please talk to your attorney or call the IRS. Your friends might also want to check their credit histories and scores to be sure something else unpleasant didn't happen. You can pull a free copy of your credit history each year from each of the three credit-reporting bureaus by going to www.annualcreditreport.com.

And this year, either learn how to file your own taxes (if you make less than $50,000 you can file for free with the IRS and have the funds direct deposited to your own account), or pay a licensed accountant to file them on your behalf.

Q: My two-year adjustable-rate mortgage (ARM) expires in January. My current interest rate is 6.9 percent. Based on today's rates, how much will my payment increase?

A: What kind of loan do you have? Do you have an interest-only loan? Do you have a pay-option ARM? Does your loan convert to a 1-year ARM or will you get another two years before it adjusts for another two-year period, or does your loan convert to a 28-year fixed-rate mortgage? What index is your loan tied to?

Let's assume you have a straightforward ARM where you pay principal and interest. If your ARM has a 1 percent or 2 percent interest-rate cap, then it might rise to 7.9 percent or 8.9 percent. But some interest rates have actually dropped a bit, so it's possible that your loan's interest rate wouldn't go up at all and might in fact drop some.

You might want to call your lender and ask. Then, I'd start shopping around. At press time, Bankrate.com was featuring 5-year ARMs for 5.54 percent, 15-year loans for 5.46 percent, and 30-year loans for 5.69 percent. The best rates require a top credit history and score. Some of these rates include the payment of discount points (one point equals 1 percent of the loan amount), so make sure you call around to get the best rate and the best deal for yourself.

Q: I recently purchased some land with a partner. The land is in my name because I'm financing the deal, but he is a partner because he did all the legwork. We intend to build houses on the land after getting some changes from the local zoning committee.

Here's the problem: While my partner is my friend, his character is somewhat questionable when it comes to money. He has suggested that I quitclaim the property to him so that he can talk to builders more easily without having to get approval from me. If I do this, would I lose all rights to the land? Can I quitclaim the property for a period of time, like two months, and then regain the ownership rights down the line?

It's not likely he'll mess things up, but when it comes to money, people do strange things. By the way, I do travel quite a bit, which is why it isn't that convenient for me to schedule meetings with builders.

A: This deal has trouble written all over this. How can I put it simply: Do not quitclaim the property to your partner. He doesn't need to own the land to talk to builders. You and he are partners no matter who owns the land, right?

And, if you don't trust his judgment with money, I can't see why you'd hand over a huge asset to him.

But clearly this "partnership" hasn't been fully realized. You and he haven't talked through what each person's responsibilities are, and how the deal should be handled. Have you talked about how the profits will be split? Will you be reimbursed for the cash you spend first and then what's left will be shared?

Your friend sounds nervous, and rightly so. You should talk to a real estate attorney who can help you draft up a partnership arrangement with your friend that spells out who owns what, who is entitled to what, and what responsibilities each of you has.

By the way, it's OK to be an investor, but if you're too busy to meet with builders, you're placing a lot of trust in a guy who you say has questionable judgment when it comes to money. No matter where you are in the world, you'd better be ready to spend a lot of time working on the deal and making sure that there are no side deals involved that will siphon off cash.
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NAR’s Pending Home Sales Index Suggests the Housing Market is Stabilizing

Pending sales of existing U.S. homes fell 0.5% in November but held above the low hit in July, suggesting the housing market is stabilizing, a real estate agents' trade association said on Thursday.
RISMedia
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in November, fell to 107.0 from 107.5 in October.

Analysts had been expecting a modest rise in the index. The median forecast of a Reuter's poll of economists was for a November index level of 108.0.

The November level was 11.4% below the year-earlier level, a shorter drop than the 13.2% year-on-year decline posted in October.

The trade association read the smaller decrease from year-ago levels as a sign that the troubled U.S. housing market was stabilizing.

"The index is pointing toward fairly stable home sales in the near future," David Lereah, chief economist for the trade association said in a statement. "That is another indicator that home sales likely bottomed-out in September."

Home sales climbed the two months after September.

The index covers pending sales of existing single-family units, condominiums and co-ops. A home sale is pending when a contract has been signed but the transaction has not closed.

Pending sales typically close within one or two months of contract signing.
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