Housing Inventory Surges In March Across the U.S.

The number of residential properties for sale spiked sharply in 18 metro areas, with Los Angeles posting the biggest jump. The rise may reflect sellers' expectations that it will take longer to sell a house than it did during the real-estate boom.
By: James R. Hagerty: The Wall Street Journal Online
A sharp increase in homes offered for sale last month suggests that home shoppers will find plenty of choices this spring.

The number of homes listed for sale in 18 major U.S. metropolitan areas at the end of March increased 6.5% from a month earlier, according to data compiled by ZipRealty Inc., a national real-estate brokerage firm in Emeryville, Calif. The data cover listings of single-family homes, condominiums and town houses on local multiple-listing services.

Over the past 22 years, home inventories nationwide have increased an average of 1.7% in March from February, according to Credit Suisse Group. Supplies typically rise modestly in March as sellers pursue the many families with children who seek new homes in the spring, so they can move during summer vacations.

The big rise in the latest month may reflect sellers' expectations that it will take much longer to find buyers than it did during the housing boom of the first half of this decade, said Patrick Lashinsky, president of ZipRealty. Rather than waiting for April or May, he said, many people planning to move this summer put their homes up for sale in March. He added that many sellers are being cautious, waiting to sell their old homes before committing to buy new ones.

ZipRealty recorded the biggest increases in the metro areas of Los Angeles (12.8%), San Francisco (12.2%) and Washington, D.C. (9.4%). Miami, where a glut of unsold condos has been weighing on the market, showed a modest rise of 1.8% in the supply of all types of homes in March from a month before. But the Miami inventory was up 61% from a year earlier. For all 18 metro areas, the inventory at the end of March was up 35% from a year earlier.

Large inventories have caused prices to level off or fall modestly in much of the country over the past year or so. The recent surge in defaults on subprime mortgages - loans to people with blemished credit records - has prompted lenders to tighten credit standards. That tightening is expected to put downward pressure on home prices by removing many potential buyers from the market.
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Home Sellers Should Run From These Buyer Types

Some shoppers are more trouble than they're worth. Avoid ones who fall into these three categories to avoid wasting time and energy.
By: Marshall Loeb: The Wall Street Journal Onlne
Are you selling your home? Then you should know what - or whom - you're dealing with, advises Michael Corbett, the author of "Find It, Fix It, Flip It!" and the new "Ready, Set, Sold!" guide to selling a home.

Most buyers fall into one of three categories, he says. You'll find buyers searching for a dream home, buyers looking for a great home at a fair price and buyers scouring for the next bargain.

The dream-home searchers will probably pay full price if they find the place they want. The great-home shoppers aren't going to offer full price but will be especially willing to negotiate. The bargain hunters? They thrive on finding the best price and may be looking for a fixer-upper.

If your house is priced correctly and is in good shape, you probably won't encounter the bargain hunter. But you will find three types of buyers among dream-home and great-home shoppers that aren't going to serve your bottom line. These are the buyers you want to avoid, warns Corbett:

    • The Zero-Percent Down Buyer. If your home is setting a selling-price high mark
      for comparable homes "a mortgage company might find it challenging to appraise
      your house for buyers with little or no money down," writes Corbett. "You'll
      have to put your house back on the market again when your buyer's mortgage
      request falls through."

    • The Bully Buyer. Nobody likes a bully and chances are you're not going to like
      this type of buyer either. You will be inundated with a list of things that
      are wrong with house - all while presenting an offer. The inspection process?
      It will be a nightmare. If you detect a bully, move on. "This bully approach
      is a prelude to endless negotiations, and his or her trying to obtain
      concessions by nitpicking on the disclosure and the inspection."

    • The Sight-Unseen Buyer. You may get an offer from someone who has only seen
      photos of your house. But that can signal a trick up the sleeve. No one is
      going to buy a house without seeing it - this buyer just wants to tie up your
      house to take it off the market and make a decision later.

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Fix-It Projects to Speed The Sale of Your House

Completing these home improvements will help your property move faster, even in an uncertain housing market.
By: Amy Hoak: The Wall Street Journal Online
The interior walls are neutral. The clutter is a distant memory. A shower door has been replaced and even the design of the bedspread has been factored in. The Green family's Chicago home also got a professional inspection and appraisal to limit any surprises down the road, said Dan Green. Now it is ready for sale.

"We're paving the road to make the closing process much smoother," Green said.

He has even created a blog, partly as a marketing tool for his Lincoln Park neighborhood home. See the blog.

For some sellers, a little extra work can mean not only a difference in how smoothly the sale goes or how much they can ask for their home but also if they get to the closing table at all in an uncertain market.

"Talk to Realtors and they will tell you anything you do cosmetically to increase curb appeal is going to help the resale value," said Sal Alfano, editor of Remodeling magazine.

In addition, many home buyers stretch economically to get into a home, said David Lupberger, home-improvement expert for ServiceMagic.com, an online company that connects homeowners with screened home-service professionals. If a home has number of projects that will need to be addressed in the near future, a buyer might decide to pass it over.

"The last thing you want is a list of projects that has to be taken care of," Lupberger said.

Here's the bright spot: Many improvements that have an impact on selling a home aren't very expensive at all, said Jim Gillespie, president and CEO of Coldwell Banker. And some tasks, such as giving rooms a fresh coat of paint, quickly pay off.

Those planning on adding a "for sale" sign to the front lawn this spring might want to consider these five areas while creating their to-do list.

1. First impressions count

It's wise to make a good impression from the moment a potential buyer pulls up to the house, experts say. First glimpses of the home will include the home's exterior, the shrubbery, the gutters and the front door.

Peeling trim could be a kiss of death. Paint the exterior of the home in an odd color and you could lose their attention before they come inside. Don't underestimate the importance of good lawn care, either.

"A lawn that looks good on the outside gives the impression that someone cares about that home," said Trey Rogers, professor of turfgrass management at Michigan State University and author of "Lawn Geek," a book of tips on how to maintain a lawn.

His advice is "keep it green and keep it cut." Mow the lawn about three inches high at least twice a week when a home is on the market; two inches if the home is in a Southern state. The more it is mowed, the denser it will become. And get on a fertilization program, starting at the beginning of the season, he said.

Bypass store-bought sod and instead borrow some grass from an inconspicuous place elsewhere on the lawn if there are small spots that need to be filled in, Rogers said. The grasses will match better if they come from the same lawn.

Early birds selling at the tail end of winter should keep the sidewalks shoveled if there is snow on the ground.

2. Neutralize and declutter

When it comes to preparing a home's interior, any real-estate professional or stager worth their paycheck will advise a client to make a move to more neutral colors in a home.

"People can't visualize beyond what they see," Gillespie said. Neutral colors, including beige and ivory, can also have an added advantage of making a room appear larger -- an effect that Dan Green noticed right away when he repainted his bedroom walls.

Removing a home's clutter is also extremely important in getting potential buyers to imagine their family living in the home, Gillespie added.

Beyond that, do some basic spring cleaning: Shampoo the carpets, rebuff hardwood floors and oil any wood cabinetry, Lupberger said.

3. Consider replacement projects

Sellers might also consider having a home inspection done prior to listing the home as a way to detect any overdue replacement projects, Gillespie said. A seller has the option of either fixing the problem or giving the buyer a discount to account for the needed repairs, but Gillespie is an advocate for making the necessary repairs before selling.

Home buyers recognize the value of a house that doesn't need major repairs, Alfano said.

"The house is probably not going to move, or you're not going to get all the value out it, if the new buyer knows they're going to have to replace the roof sometime soon," he said.

In fact, according to the 2006 "Cost vs. Value" report from "Remodeling" magazine, a roof replacement for a midrange home had an average cost of $14,276, and returned $10,553, or 73% at resale. A vinyl siding replacement had an average cost of $9,134, and returned $7,963, or 87% at resale, according to the report.

A wood window replacement in a midrange home had a national average cost of $11,040, and $9,416, or 85%, was recouped at resale. A vinyl window replacement had an average cost of $10,160 and returned $8,500, or 83%, at resale. See the full report.

4. Kitchens and bathrooms rule

It's no secret that buyers tend to be awed by updated kitchens and bathrooms.

"If the last time it was remodeled was in 1980, that's going to be points against versus another house that was upgraded even five years ago with sort of a modern look," Alfano said. "It's hard to go wrong with a kitchen or bath remodel unless you get a little too edgy with the design or the materials you use."

That said, a seller with less than a couple years to spend in a house probably isn't going to do a complete remodel of either room. Sellers should decide where these rooms need the most improvement, and then zero in on how much they want to spend, Lupberger said.

If kitchen cabinets are structurally fine but their exteriors are outdated, it might be worth it to reface them, Lupberger said. If counters are old, maybe replacing them will add new life to the room. In the bathroom, there are companies that will come in and resurface chipped and damaged bathtubs, he said.

5. Warranty coverage and documentation

Sellers can provide some extra peace of mind to buyers by purchasing a home warranty on their home that will cover such things as heating and plumbing should the buyer run into problems after closing. The coverage is getting a bit more popular nowadays, Gillespie said. Warranties can be bought from companies including American Home Shield and AON.

"Little things like that ... you need that today to set the property apart with all the competition out there," Gillespie said.

Gillespie also recommends displaying the age of the water heater and furnace; if either one is on the older side, have it inspected for proof that it works correctly.

And if replacement projects have been done in the past few years, dig out the documentation to prove it, Alfano said. Also, explain if any of the improvements have produced a cost savings in terms of energy usage.

"You never really could (miss), but it wasn't on the tip of everybody's tongue. Now, it's in the news all the time," Alfano said.
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Shopping Shuffle

Skyrocketing commercial rents are redrawing the map of L.A.’s trendiest shopping spots.
By: EMILY BRYSON YORK, ANNE RILEY-KATZ: Los Angeles Business Journal Online
For years, L.A.’s retail hotspots have been known to shoppers around the globe.

West Hollywood’s Robertson Boulevard was the edgy home of young designers. Homey Melrose Place was an antique mecca. And Larchmont was what passes for quaint in Los Angeles.

Attention, shoppers: There’s some heavy roadwork going on.

Deep-pocketed corporate interests have been swarming L.A.’s trendy retail neighborhoods, driving commercial rents to double what they were a year ago on Robertson and Melrose Place. The rental land rush has become so intense that several small retailers have sold their leases, sometimes for hundreds of thousands of dollars and usually to big chains.

Jay Luchs, a retail specialist at CB Richard Ellis Group Inc. said this “key money” frenzy is unlike anything he’s seen.

“Robertson Boulevard has become so popular around the country and the world that it’s caught the attention of retailers,” he said. “There are only so many tenants on two blocks and only so many leases coming up, so you do whatever you can to get space.”

The hot portions of the shopping streets are only a few blocks long, so the influx of corporate chain stores is changing the ambience of the neighborhoods. And not everyone’s happy with the changes.

Chan Luu, a well-known clothing and jewelry designer, says that things just aren’t the same near her Robertson Boulevard boutique.

“It became very young, very jean and T-shirt oriented.”

For Luu, whose international label is sold in Neiman Marcus and Bergdorf Goodman, Robertson was losing its refined appeal and so she sold the remainder of her lease to Coach Inc. for about $350,000.

“If you have over a year on your lease, you can get a few hundred thousand dollars,” said Chuck Dembo of Dembo & Associates.

Lisa Kline, who owns men’s, women’s and children’s boutiques on Robertson, said her rent doubled, from $10 to $20 per square foot last year.

She bought a lease a year ago to open a men’s boutique. She paid $100,000, a bargain it turns out.

“I knew it would be a good investment,” she said. “I knew I would make more money with more space, and make back what I spent immediately.”
She didn’t anticipate all the changes, however.

“It’s nice to be a popular area, but when paparazzi are everywhere, there is no parking. And the corporate stores are coming in and driving rents even higher,” she said. “It’s suddenly Madison Avenue.”

Joining Luu in the exodus is the apparel boutique Harari, which sold out to Intermix. Retail apparel chains Fresh, True Religion, Tory Burch and American Apparel are among the chains that have moved into what was once a boutique haven for L.A.’s up-and-coming designers.

Melrose Place

A comparable transformation is occurring on Melrose Place, a four-block area between La Cienega Boulevard and Melrose Avenue. The newcomers are selling $5,000 couture, rather than $500 cut-off jeans.

High-end outlets Carolina Herrerra, Tracy Feith, Marni, Oscar de la Renta and Chloe have all opened recently, with similarly upscale Theory, Helmut Lang, Moss Gallery and Lambertson & Truex still to come.

These new arrivals would seem a perfect fit on Rodeo Drive, but Dembo, a Rodeo Drive Committee member, points out that the rent on Melrose, at $15 to $20 per square foot, is about half the price of the $30 to $40 rents on Rodeo.

“Some see Melrose as a new frontier,” he said. “And that’s the thing about fashion – you want to be fashionable.”

As on Robertson Boulevard, these elite brands are buying up leases.

Diesel SPA bought the lease of antiques dealer Mayfair Gallery and BCBG Max Azria Group Inc. bought out Wilshire Fireplace.

For Wilshire Fireplace owner Richard DiGiorgio, part of the motivation for selling his lease was the arrival of the designer brands. He said that changed the character of the corridor, which was once dominated by antique dealers and other home furnishing outlets.

He said he talked to Marc Jacobs and Diane Von Furstenberg, but the price wasn’t right. DiGiorgio finally accepted an offer of several hundred thousand dollars from Nasa Property Management, which has leased the space to BCBG.

“Once Marc Jacobs came in, it started,” said DiGiorgio, who moved his shop to Wilshire Boulevard. “They opened and did all the marketing and drove up rents, so people were trying to ride their coattails. Those New York places have deep pockets, so the writing was on the wall.”

Abbot’s New Habits

“People said I was crazy five years ago when I signed on the dotted line for $2.50 a square foot,” said Jason Stroh, owner of Stroh’s Gourmet Market on Venice’s Abbot Kinney. “Now you can’t get in here for less than $5 a foot.”

Five years ago, Abbot Kinney was known as street with some hip furniture stores, high merchant turnover and gang violence just around the corner.

“The street always had an incredible amount of potential,” said Hans Rockenwagner, a well-known chef who opened his first restaurant on Abbot Kinney in 1985. He opened Three Square Bakery, a restaurant that offers outdoor service and $8 sandwiches, in January.

“I think it turned the corner about five years ago and now it has become a destination,” he said.

While Rockenwagner’s prices initially raised eyebrows, Stroh said that the chef’s grand opening has increased foot traffic and boosted his sales. The high prices have spread, too.

Abbot Kinney’s Stronghold sells $300 jeans and the nearby eCookie boutique offers $500 dresses.

For the merchants and locals, however, the big news on the street these days is the imminent arrival of its first chain store. Yogurt outlet Pinkberry Inc. quietly negotiated a lease in a new mixed-use building in the center of the strip.

“When people complain to me about a chain coming to Abbot Kinney, I say ‘Just wait,’” Stroh said.

Golden Goosed?

In formerly laid-back Larchmont Village, near the tony Hancock Park residential enclave, the exit of several longtime retail fixtures has mobilized residents.

Larchmont Boulevard rents have doubled, to between $6 and $8 a square foot. Cottage Antiques and Village Footwear have lost their longtime leases in the past year and 15-year-old La Luna Ristorante is battling to hang on.

Owners Robertino Giovannelli and Theresa Kim recently filed suit to block eviction proceedings, claiming that Omada Hospitality, a restaurant group, paid $100,000 in key money for the space and will pay around $6 a square foot in rent. That’s considerably higher than what La Luna pays, according to attorney Joseph Fishbach.
Attorneys for the landlord and Omada Hospitality did not return calls seeking comment on the dispute.

Former state Assemblyman Wally Knox, a member of the Committee to Save Larchmont, said the locals were trying to preserve the character of the neighborhood.

“It’s very clear that some of the landlords want to turn it into a regional fashion mall, and they are making a tremendous mistake in their relationship with the area homeowners, who have long supported the area and made it what it is,” Knox said.

“They are killing the goose that laid the golden egg.”
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Prenup's strange effect on home ownership

Husband's true intentions questioned
By: Ilyce R. Glink: Inman News
Q: My husband and I are residents of Nevada and have been married for 18 years.

I signed a prenuptial agreement two days prior to marriage stating that I am not to own property during our marriage unless agreed to by my husband. One year after our marriage, I was added to the deed of a Nevada home he purchased just after we were married.

Now, 18 years later, I thought we were purchasing a second home in California. But my husband is now telling me that only he can be on the deed because of multiple-state property issues we have until we sell the home in Nevada. He had the contract written up that my part is "assigned." I have no idea who "assigned" is unless it is a trust that is being set up in both of our names.

I am wondering if my husband is telling me the truth. Is there a reason that I cannot be on the deed at this time? Do I need to wait until we sell our Nevada home?

My intuition is telling me that he is putting the house in his name to protect himself. While he may later put it into the trust (which would benefit me if he should die first), he may not and may be protecting himself now in case of a divorce settlement.

We have been happily married for more than 18 years and I can't see why he would not trust or put my name on the title to this property after I have been his wife and worked with him in his business for 10 years without taking any salary.

In other words, I have trusted him to include me in his financial purchases. Have I been a fool for all these years? My heart is bleeding.

A: Your letter is quite troubling on a number of fronts.

First, I don't know if you're a fool for love, but I can't understand why a woman smart enough to work with her husband in his business for free for a decade would allow herself to be shunted aside in the issue of combined personal finances.

Your prenup sounds horrendous. Did you have an attorney look at it? It may not even be enforceable. Why would you agree to let your husband dictate what you can and cannot own inside a marriage?

I think you need to speak to the family attorney and accountant (or better yet, hire your own) and ask for a full explanation of all financial matters. Do you ask questions before signing your name to your tax return? Do you even see a tax return?

I'm not an attorney and I don't know what kinds of financial shenanigans your husband has created to hide assets inside your marriage, if any. He may, in fact, be looking out for you, but you won't know that unless you understand what he is doing, what he and you own, and what is your (and your family's) true financial picture.

But as far as I know, there are no laws prohibiting you from owning property in other states or owning multiple properties at the same time. Plenty of folks do it every day.

You've got a lot of work to do here to unravel all of these explanations. I hope when you get to the bottom of it you like what you hear. But if not, it's always better to know now.

Q: We have a problem and we hope you can help us. Our son and daughter-in-law have been married for a little less than two years. To enable them to qualify for their house, we co-signed the note. They have been making the payments so far. We're trying to see if they qualify for a loan assumption, which would allow us to remove our names from the mortgage.

What happens if they don't qualify to take over the mortgage, or if they decide to "bail" on the payments in the future? What are our rights and obligations?

A: From what you've told me, you don't have a whole lot of options. Your son and his wife would need to refinance the loan in their names alone. Only in very rare circumstances and only with a local bank that keeps the loan in-house (as opposed to selling it on the secondary market) have I heard of a loan assumption. A loan assumption, as you call it, would allow your son and daughter-in-law to be the only borrowers under the loan, with you and your spouse being removed from the loan.

In any case, it sounds as if refinancing isn't an option right now. You're going to have to wait until they are stronger financially and then ask them to refinance the loan into their own names.

The time for you and your husband to have thought about whether your son and daughter-in-law were good bets financially was before you signed on the dotted line, not now. Now, as when you took out the loan, the lender believes that you will step up and pay the mortgage if your son and daughter-in-law "bail." In fact, you are legally obligated to do just that. If you don't, your entire credit history and score are at risk.

You need to have a conversation with your son about this situation to ease your mind, if nothing else. Then, you need to make plans for what you and your husband will do if the worst should happen.

I'm hoping your kids step up and work it out, but you don't even want to know how many letters I get each week from parents whose children have "bailed," leaving them holding the bag just as they reach their "golden years."
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Toughest decisions a home seller will face

When to fix, where to price?
By: Ilyce R. Glink: Inman News
Nearly everyone I know has little things in their house that they live with that may have originally bothered them, but no longer do, including dangling light bulbs and wires, squeaky doors and floors, dirty air filters in the furnace or air blowers, a broken humidifier system, ripped screens, chipped door stops, sticky or off-kilter kitchen cabinet doors, and messy landscaping.

The list goes on and on. When you live with these issues day in and day out, after a while they fade in importance. But when you sell your home, these are the details that can derail an offer.

A prospective buyer will walk around your house looking for reasons not to buy your house. Any one of the items I've just listed, or a thousand others, can turn off a buyer to your house - for good. These "liabilities" are items the buyer thinks he or she will be stuck fixing or replacing during the first couple of years they live in your home. No one wants to think about replacing an air-conditioning system five minutes after the closing (even if you offer a home warranty).

A prospective buyer who is willing to tackle these projects will subtract the cost of putting your home into impeccable shape and will probably tack on something extra for the mental pain and anguish it will take to get the job done. They do it logically, because they know the costs, or intuitively, thinking, "This house seems older and more run down and it'll probably need $20,000 to $30,000 to put it into shape."

And that's how you end up with less money for your house. After all, why haven't you done these things yourself? Because sometimes they're a pain in the neck and you'd rather be doing anything else. The same is true for anyone who will buy your home.

To get the most money for your home, you should make it shine. Fix the broken items, repaint the interior, clean the carpet, "stage" your rooms, and clear out the closets and countertops.

If you're not willing to do that work, you can sell in "as-is" condition, but then you'll have to accept a hit in the price. How much of a hit? To sell, especially in a slower market, you'll have to price your property in a way that it more than counters the negative of its condition. In other words, you'll have to price it somewhere below the actual costs of getting it into top condition.

If your property is worth only the value of the land on which it sits, you're living in what's known as a "teardown." If that's the case, then there's no amount of cash you should put in your property, because you may never get a dime back on that investment.

Once you figure out how the condition of your home compares to other homes that are for sale in your neighborhood, and you decide whether you're willing to fix it up for sale, you can turn your attention to pricing your property.

Start by visiting other homes in the neighborhood that are for sale that are about the size, age and condition of your home. Be sure to pick up a copy of the listing sheet for each property.

Next, visit homes that are in better and worse condition than your house, as well as a few that are teardowns, if there are any in your area. In some parts of the country, neighborhoods have become areas in which old or older homes are purchased and torn down to put up larger new homes. In other neighborhoods, people still value the existing homes and improve those homes or add on to them. Write down on the listing sheets what is better or worse about each property's condition. Pay attention to the amenities the property has and how they compare to your property.

When you get home, put the listing sheets in a row on your kitchen countertop or dining room table. Sort them by price, and then resort them by condition. Think about how your home (and its listing sheet) would fit into the lineup.

If the condition of your property is somewhat more on the "teardown" side, look at all of the similar teardowns and where they're priced. Compare lot size and location (the only differentiators) and price your home competitively - that is, price it so that everyone who is looking for a teardown in your neighborhood is compelled to see your property because it is priced so attractively.

If your home is more of an "as is" condition, then follow the same procedure to compare your property to similar homes in the area. And if your home is in blue-ribbon, like-new condition, compare it to those properties on the market, and price accordingly.

If you can't see your home for what it truly is, just like you can no longer see the broken windows or ripped screens, ask an unbiased friend, relative or even your agent to give you his or her honest opinion.

The time to take a brutally honest look at your house is just before you price it to sell.
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Pending Home Sales Edge Up Despite Subprime Market Woes

A gauge of sales trends for previously owned homes rose 0.7% in February, according to the National Association of Realtors - showing limited effects from the bad weather in February and a decline in subprime lending.
By: Jeff Bater: The Wall Street Journal Online
A gauge of sales trends for previously owned homes rose in February, though it remained well off year-earlier levels.

The National Association of Realtors' index for pending sales of existing homes increased at a seasonally adjusted annual rate of 0.7% to 109.3 in February from January's 108.5, the industry group said Tuesday. Its index, based on signed contracts for used homes, was 8.5% below the level of February 2006.

"If it wasn't for the unusually bad weather in February, we'd be seeing a better performance in pending-home sales," NAR chief economist David Lereah said. "We also may be seeing some fallout from a decline in subprime lending, but a slight improvement in the more volatile month-to-month index is encouraging - the data suggests an underlying stabilization is taking place in the housing market, but it will take another month or two to clarify."

Mr. Lereah added, "Problems in the subprime mortgage market will become more apparent over time, and they will modestly depress the overall level of improvement in existing-home sales we expect as the year progresses."

By region, the index showed a 1.3% decline in the Northeast in February from January - and an 8.2% decrease since February 2006. The index increased 2.9% in the Midwest - but was down 9.7% in the 12-month span. The South saw a 4.5% rise - and an 8.0% decline in the past year. The index for the West fell by 6.0% - and was 8.2% lower since February 2006.

The NAR's pending home sales index was designed to help gauge which way the housing market is going in the future. It is based on pending sales of existing homes, including single-family homes and condominiums. A home sale is pending when the contract has been signed but the transaction hasn't closed. Pending sales typically close within one or two months of signing.

Existing-home sales unexpectedly climbed in February, rising to a 6.69 million annual rate, the NAR said. Weather was seen as a factor, and subprime mortgage woes could reduce some demand down the road. Inventories of homes rose 5.9% in February to 3.75 million available for sale.
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Can't Pay Your Taxes? Ask the IRS for Help

If you can't pay your income taxes, don't panic.
By: Joyce M. Rosenberg: REALTOR® Magazine Online
Asking the IRS for a payment plan can be the cheapest and least painful solution, say many tax experts.

The IRS will agree to an installment payment plan as long as you don’t owe more than $10,000, if you’ve filed your returns on time, and if you've paid all taxes due during the last five years. You cannot have entered into a previous installment agreement during that time, and you must pay what you owe within three years.

If you owe more than $10,000, you still can request an installment agreement, but you’ll have to submit more financial information and get approval from an IRS district office. Expect to late payment penalties and interest, as well as an administrative fee of up to $105.
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Values drop, so can taxes

Your home is worth less, but there's a bit of a silver lining: Your property bill may fall.
By: Gayle Pollard-Terry: latimes.com
Home prices are dropping in parts of Southern California and, for owners who bought at the market's peak, that could translate to lower property tax bills.

Because property taxes are based on 1% of the sales price of a home, a dip in the market can shave more than a few dollars off the assessed value of a house and the biannual payment — the second of which must be paid by April 10 to avoid penalties.

Reductions are permitted by Proposition 8 — an amendment to tax-limiting Proposition 13 — that allows county assessors to reduce property taxes when market values fall. To get one, homeowners must be able to show their residence is worth less than its purchase price.

Gregory J. Smith, assessor, recorder and county clerk for San Diego County, offers an example: You bought a house in 2005 for $400,000 and today its price would be $325,000 — a $75,000 reduction. The tax reduction would be 1% or about $750, Smith said. San Diego County is leading the six-county Southern California region in property value declines. The median price of all homes, which includes new and existing single-family residences, town houses and condos, fell by 5.9% from $510,000 to $480,000 from February 2006 to February 2007, according to DataQuick Information Systems, a La Jolla-based research firm. As a result, Smith's office expects an increase this year in the number of requests for lower bills.

So far, Orange County Assessor Webster J. Guillory has seen few requests for reviews this year. "Less than 10," he said. In February, Orange County posted its first year-over-year median price decline in two decades. Despite the drop, 0.4%, from $622,250 to $620,000, the median price remained the highest in Southern California.

Homeowners must pay their full property tax bills when due to avoid penalties, even when requests for lower assessments are pending.

Ventura County posted a year-over-year drop of 3.5%, sending the median from $605,000 to $584,000. Because values are going down, the county's assessor, Dan Goodwin, said he isn't waiting for homeowners to ask for reductions.

"We've already begun identifying … where there is a potential need for a reduction in assessment," Goodwin said.

Homeowners who bought from the second half of 2005 through 2006 "deserve to have their values reviewed," he said, adding, "condos as a general rule are showing more need for this kind of adjustment."

He estimates 20,000 to 25,000 Ventura County homeowners will be informed of reductions when value notices go out in July, without having to apply.

Whether a countywide median zips up or down, when it comes to a property tax bill, the numbers that matter most to any homeowner are the recent sales prices of the similar houses in the area. A downward trend gives homeowners the comps, or comparables, which are available from realty agents and many assessors' websites, that they need to prove a decline that warrants lower taxes.

In Los Angeles County, the median price increased by 7.8% from $490,000 to $528,000 in the same year-over-year time period, according to DataQuick. But a rise in a county median, the amount at which half of all houses cost more and half cost less, can mask a loss of value for an individual house.

*

Making your case

As of March 24, 2006, there were 256 filings for reductions, said Jim Hosking, director of assessor's operations in L.A. County. As of the same date in 2007, the office had received 323.

Homeowners who believe they are due a reduction can get a Proposition 8 form online, by mail or from their county assessor's office.

Although those applications are accepted all year in L.A. County, the filing period varies elsewhere. In San Diego County, the request must be made between now and the end of May. In most other counties, the deadline is May 15, with decisions rendered within a month or two.

A homeowner who misses the local deadline or cannot work out a satisfactory agreement with the county assessor's office can file an application with an independent Assessment Appeals Board. The filing period for most counties runs from July 2 through Nov. 30.

In most counties, homeowners make their case before board members. In L.A. County they typically go before hearing officers. It can be a lengthy process.

It can take up to a year from the time the application is received to the hearing, said Kathy Bones, who supervises the processing of applications in L.A. County. Homeowners are asked to bring three examples of "like-for-like" properties — those that are comparable to their own that recently sold for a lower price. A representative from the assessor's office also presents evidence.

If either side disagrees with the decision of the hearing officer, another hearing can be requested before the full board. After the board makes a decision, either side can appeal to Superior Court, although Hosking of the L.A. County office said the assessor rarely proceeds in that manner, and neither do most taxpayers.

For those who do, the court doesn't determine whether the taxes should be cut, he explained, but it can remand the case back to the appeals board for another hearing. Few cases get to that point.

It sounds complicated, but local assessors and their representatives provide a great deal of information on county websites or over the phone. They also indicate that homeowners need not hire a service for assistance with a form or appeal in exchange for a big portion of the tax savings.

*


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gayle.pollard-terry@latimes.com



*

(INFOBOX BELOW)

More info

Los Angeles County

(213) 974-3211, assessor.lacounty.gov, http://www.lacountypropertytax.com

San Diego County

(858) 505-6262, http://www.sdarcc.com

Orange County

(714) 834-2941, http://www.ocgov.com/assessor , http://www.ttc.ocgov.com

Ventura County

(805) 654-2181,

assessor.countyofventura.org, http://www.ventura.org/taxcollector

San Bernardino County

(909) 387-8308, http://www.mytaxcollector.com , http://www.co.san-bernardino.ca.us/assessor/

Riverside County

(951) 955-6200, riverside.ca.ezgov.com/, http://www.treasurer-tax.co.riverside.ca.us/
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After Financing the Housing Boom, Wall Street Shuts Off the Spigot

New Century's collapse illustrates how the residential real-estate market was fueled through generous credit. Now that the flow of cash has been stopped, more than two dozen subprime lenders have been forced to close shop.
By: Gregory Zuckerman: The Wall Street Journal Online
On a March 6 conference call, New Century Financial Corp. Chief Executive Brad Morrice seemed hopeful.

Increased defaults were hammering loans the company had made to less-creditworthy home buyers, and its lenders were preparing to declare it in default. But Mr. Morrice told bankers from Citigroup Inc., Goldman Sachs Group Inc. and its nine other Wall Street lenders that he had a plan to secure new financing so he could keep his mortgage business going. He just needed a little time.

Hours later, the bankers began formally terminating lending agreements that had provided $8 billion to New Century - pushing the nation's second-largest mortgage lender to risky "subprime" borrowers (behind HSBC Holdings PLC's HSBC Finance Corp.) to the brink of bankruptcy.

By extending generous credit to subprime lenders, Wall Street firms financed the borrowing binge that helped fuel the housing boom. Those firms now are turning off the money spigot. They see more borrowers having trouble paying off those mortgages in a slowing economy, which has made investors less willing to pour money into the sector.

More than two dozen subprime mortgage lenders have closed shop, and there is concern that the defaults could spread to other types of risky loans and to less-risky mortgages, exacerbating the housing market's slowdown and possibly weighing on the economy. Accredited Home Lenders Holding Co., a subprime lender, recently was forced to sell $2.7 billion of loans at a big discount to meet lenders' demands for more collateral.

Worries about defaults in slightly less-risky mortgages also have hit shares of companies that specialize in them, including Impac Mortgage Holdings Inc., where loans with overdue payments more than doubled last year, and IndyMac Bancorp Inc.

Subprime lenders sell many of their loans to Wall Street banks, which package them into securities to be sold to bond investors. The appetite for these bonds grew when interest rates were falling and investors wanted high-yield alternatives. The riskier the customer, the higher the interest rate, so subprime bonds were in demand.

Though banks make money lending to subprime companies, packaging the bonds produces hefty fees - an estimated $2.3 billion last year, up from about $500 million five years ago, according to Thomson Financial data. Fees for other services added to the windfall.

No Money Down

New Century, which declined to comment for this article, was one of Wall Street's biggest subprime customers. Founded in 1995, the Irvine, Calif., company had mortgages totaling almost $60 billion last year, up from $6 billion five years ago on the strength of no-money-down loans and other edgy products. Mr. Morrice, one of the company's founders, became CEO last July.

Before things fell apart recently, Wall Street's relationship with subprime lenders was close. New Century executives spoke at conferences hosted by Wall Street firms, including a Morgan Stanley gathering in New York City last June.

An early sign of a chill in that relationship came when subprime lender Ownit Mortgage Solutions Inc. defaulted on its credit line in mid-November. J.P. Morgan Chase & Co. gave the company a month to come up with additional capital, and Merrill Lynch & Co. demanded that Ownit buy back poorly performing loans. Ownit declared bankruptcy within weeks.

By early December, subprime-bond investors were getting nervous. By one measure, the cost of insuring against default on some of the bonds jumped 50% in a week as demand for such protection spiked. The price of New Century's mortgages was dropping on Wall Street.

At a January industry conference in Las Vegas, New Century executives tried to calm investors. They "stressed that they're making better loans now," a person who met them says. "They were reassuring everyone."

In February, New Century mortgages that had been worth $8 billion fell by more than $300 million within days, someone familiar with the matter says. The result: More lenders demanded additional collateral, also called margin, from New Century, including Goldman and Credit Suisse, people familiar with the matter say. Banks also invoked terms allowing them to demand that the company buy back loans if borrowers failed to make payments.

The company's cash was dwindling quickly. Adding to the company's woes were revelations about accounting problems, plans to restate 2006 earnings and post a fourth-quarter loss, and a Securities and Exchange Commission inquiry.

New Century was running out of options. It was unable to get new financing and in violation of its existing lending agreements, in part because it was low on cash. So the company convened the March 6 conference call with its 11 lenders. Mr. Morrice, the CEO, was joined on the call by New Century board member David Einhorn, who runs Greenlight Capital, a New York hedge fund that owned 6% of the company's stock, which by then had fallen 70% in two weeks.

Mr. Morrice informed the bankers that New Century's available cash had dropped to $40 million, down from the $100 million he had reported to some of the bankers a day earlier and from $350 million at year end, a participant on the call said.

The CEO told the bankers he was working with Mr. Einhorn and Bear Stearns Cos., another Wall Street firm, on a plan to stabilize the company's operations. The banks were holding New Century mortgages as collateral for $8.5 billion worth of loans. Under the plan, the banks would return those collateral mortgages to New Century so it could cobble them together into new bonds that would be sold to raise money.

The proceeds would allow the company to repay the 11 lenders and continue generating new mortgages.

Mr. Einhorn told the bankers that his firm would consider buying the riskiest of the new bonds, which otherwise might have few takers given the sinking subprime market. The Bear Stearns bankers expressed hope that they could make the plan work.

Shocked Bankers

The bankers listened without indicating whether they'd help. In private meetings after hanging up, some expressed shock at New Century's precarious state, given its depleted cash supply. "That told us the situation was more dire than we thought," says a banker on the call.

That night, Citigroup moved forward with a decision to declare New Century in default. Others followed. The next day, Mr. Einhorn resigned from New Century's board. Though Morgan Stanley agreed to a $265 million loan, it demanded as collateral a loan portfolio worth even more, and reversed course a few days later and cut off additional financing.

On March 12, New Century announced that it couldn't pay its creditors and that all lenders had halted financing. The New York Stock Exchange suspended trading in New Century shares as a filing for protection from creditors in federal bankruptcy court started to seem inevitable. (The stock now trades on the Pink Sheets at $1.11 a share, down from the 52-week high of $51.97.)

The woes of New Century and others in the subprime industry aren't necessarily bad news for Wall Street. Some firms are shopping for battered mortgage lenders' bargain-priced assets.

"What we're seeing [is] a good opportunity for us around the subprime space," Lehman Brothers Chief Financial Officer Christopher O'Meara said March 14. Goldman and Bear Stearns executives also have expressed interest in finding subprime opportunities amid the wreckage.

Morgan Stanley, which had loaned $2.3 billion to such companies, says its subprime business was a "significant contributor" to robust first-quarter profits. The firm made some good trades betting that subprime woes would deepen, hedging their exposure to the market, and had collateral to back up money it loaned to now-struggling subprime companies, people familiar with the matter say. Even New Century's expected bankruptcy filing presents an opportunity: Lazard Ltd. has been hired as a restructuring adviser to the company.

"Shed no tears for the titans of Wall Street," Kathleen Shanley, an analyst at bond-research firm Gimme Credit, wrote in a report. Its title: "Never Bet Against the House."

Wall Street's Exposure

Wall Street isn't yet free of risk from the mess. If it drags down the economy or weighs too much on the housing market, the banks will feel pain like everybody else. The firms also could see losses if the value of mortgages they accepted as collateral falls too far or if their risk-hedging strategies weren't up to snuff.

And burned investors and borrowers could sue the Wall Street banks, arguing that they shouldn't have allowed things to get out of hand. A lawsuit seeking class-action status, filed on March 19 in federal court in California, includes Morgan Stanley and Bear Stearns as defendants, alleging that they included false statements in documents describing New Century's plans to sell new preferred shares of itself to the public.

Morgan Stanley declined to comment on the suit. Bear Stearns didn't respond to requests for comment.


- Randall Smith contributed to this article.
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Study: U.S. Prices Return to Normal

After years of overvalued markets, a new study shows buying a home is getting more affordable and prices are adjusting back to normal levels.
By: Camilla McLaughlin: REALTOR® Magazine Online
“A market returning to normal” is the way Global Insight, a privately held global information company, describes the current housing market, based on the most recent U.S. Housing Valuation Analysis.

The Housing Valuation Analysis — a joint effort by Global Insight and National City Corp. — examines the top 317 U.S. real estate markets using data from the Office of Federal Housing Enterprise Oversight. Taking into consideration differences in population density, household incomes, and interest rates, the analysis determines what home prices should be and how much current prices deviate from that norm.

A Closer Look

“Nearly all markets posted a decline in the level of overvaluation, which signals that the overall housing market is beginning to trend back to more normal price growth,” says Jeannine Cataldi, senior economist and manager of Global Insights Real Estate Service.

The number of markets identified as overvalued decreased to 57 from 60 metro markets in the fourth quarter of 2006. Texas had the highest concentration of undervalued markets with Dallas and College Station-Bryan tying for lowest in the nation.

Although the greatest incidence of overvaluation remains in pockets along the Atlantic and Pacific coasts, corrections are under way in some markets as prices and appreciation rates decline. Approximately 15 percent of the nation’s single-family housing stock experienced price declines in the fourth quarter.

The report finds that New England no longer appears to be “significantly overvalued,” while Orange County, Calif., Tucson, Ariz., Reno and Carson City, N.V., and Kingston, N.Y., fell below the “threshold denoting extreme overvaluation.” Even though these markets are still considered “significantly overvalued,” the report points out that slowing rates of appreciation reflect “a gradual movement toward historical price trends.”

Nationally, according to OFHEO data, prices advanced by 1.8 percent — metrics the report says are more upbeat than those reported by the Commerce Department, which showed an increase of 1.6 percent in median transaction prices. It's also more than the NATIONAL ASSOCIATION OF REALTORS®, which showed a decrease in median prices of 2.8 percent. "Median transaction prices tend to overstate price strength during buoyant markets and understate price strength during soft markets,” according to the OFHEO.
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34% of Homeowners Don’t Know the Type of Mortgage They Have

Bankrate, Inc. released a new Bankrate.com poll which found that more than three in 10 homeowners (34%) do not know what type of mortgage they own.
RISMedia
Furthermore, 28% of those surveyed worry about how they will afford their payments. The national poll reveals the confusion and anxiety that homeowners are experiencing today.

Another notable finding is that 34% of homeowners with adjustable rate mortgages (ARM) do not know what they will do when their loan readjusts. Given that homeowners could be looking at an increase of several hundred dollars each month, this is a staggering statistic.

"Clearly, many homeowners are uninformed about their mortgages," said Greg McBride, senior financial analyst at Bankrate.com. "With interest rates stabilizing, it's a very good time to assess whether they should refinance or not. Now may be the time to lock into a mortgage with a fixed rate which remains near historic lows," Mr. McBride added.

Other key findings of the poll include:

Homeowners

* 36 % who now have an Adjustable Rate Mortgage (ARM), plan to refinance
to a fixed-rate loan when their ARM changes.

* 28% of those surveyed worry either regularly or sometimes about how they
will afford their payments next year.

* 57% of homeowners polled have a fixed-rate mortgage

Renters

* 40% consider affordability the biggest obstacle in buying a house

* Just under 12% are concerned their credit rating is not high enough to
purchase a home

* 38% would avoid taking out an ARM when they are ready to purchase a home

The study was conducted by the polling firm GfK Roper via telephone among a nationally representative sample of 1,004 adults, aged 18 or older. The sample was collected March 16-18, 2007, using a Random Digit Dialing Methodology. The data is weighted by age, sex, education, rate and geographic region. The study has a 95% confidence level and a plus or minus 3% margin of error.
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State Housing Agencies Introduce Subprime Bailout Plans

Strapped borrowers could find relief thanks to affordable refi options.
REALTOR® Magazine Online
Several states are looking at ways to bail out subprime borrowers.

The Ohio Housing Finance Agency plans to issue $100 million in taxable bonds on April 2 to refinance about 1,000 loans averaging $100,000 each at a fixed rate of about 6.75 percent.

Maryland, Rhode Island, Massachusetts, and Virginia also have begun to underwrite bailout loans.

Colorado, California, Washington and Wisconsin are considering similar programs, according to Garth Rieman, director of housing advocacy at the National Council of State Housing Agencies.
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Existing-Home Sales Post 'Surprising' Gains

Existing-home sales rose strongly in February reaching the highest level since last April, and follows a healthy gain from January, according to the NATIONAL ASSOCIATION OF REALTORS®.
REALTOR® Magazine Online
Total existing-home sales — including single-family, townhomes, condominiums, and co-ops — rose 3.9 percent to a seasonally adjusted annual rate of 6.69 million units in February from a downwardly revised level of 6.44 million in January. Still, the numbers are 3.6 percent below the 6.94 million-unit pace in February 2006.

Nevertheless, last month’s increase was the biggest monthly rise in three years — sales last rose 3.9 percent in March 2004.

David Lereah, NAR’s chief economist, says the strong gain is a bit of a surprise.

“Some of the rise in home sales may be from mild weather that brought out shoppers in December, but fundamentals have improved in the housing market and buyers see a window now with historically-low mortgage interest rates and competitive pricing by sellers,” he says. “Even so, winter storms last month discouraged shopping, and buyers were chilled with the third coldest February on record. These unusual weather patterns mean home sales that close in March may decline before rebounding later this spring.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.16 percent in the last week, down from an average of 6.29 percent in February. The 30-year fixed rate was 6.22 percent in January, and 6.25 percent in February 2006.

NAR President: Median Home Price Distorted

The national median existing-home price for all housing types was $212,800 in February, down 1.3 percent from February 2006 when the median was $215,700. The median is a typical market price where half of the homes sold for more and half sold for less.

NAR President Pat Vredevoogd Combs says the median home price currently is distorted. “Over the last year, we’ve seen declining sales in many high-cost areas but rising activity in lower cost markets,” she says. “This change in the geographic composition of sales means we aren’t getting apples-to-apples comparisons in median home prices from a year ago.”

Other indices examining sales of the same properties over time, such as the OFHEO House Price Index, have been showing price gains; however, the OFHEO index is limited to conventional financing.

“What’s really happening is probably somewhere in between the different measures, but home prices are soft — a year ago we were still seeing bidding pressures and double-digit price growth,” Combs says. “Overall, home prices should rise slowly this year, and many buyers have an opportunity now that was only a dream during the five-year boom.”

A Closer Peek at Sales

Some other key findings from NAR's latest housing report:

    • Total housing inventory levels rose 5.9 percent at the end of February to 3.75
      million existing homes available for sale. That represents a 6.7-month supply
      at the current sales pace compared with a 6.6-month supply in January. Raw
      inventories peaked last July at 3.86 million, and supplies topped at 7.4
      months in October.

    • Single-family home sales increased 3.7 percent to a seasonally adjusted annual
      rate of 5.88 million in February, from 5.67 million in January. But those
      sales numbers are 3.4 percent below the 6.09 million-unit pace in February
      2006. The median existing single-family home price was $211,100 in February,
      down 1.5 percent from a year ago.

    • Existing condominium and co-op sales jumped 5.3 percent to a seasonally
      adjusted annual rate of 810,000 units in February, from a level of 769,000 in
      January. February sales are 5.2 percent below the 854,000-unit pace in
      February 2006. The median existing condo price was $225,400 in February, up
      0.5 percent from a year earlier.

Regional Snapshot

Here's a closer look by region of existing-home sales in February:

    • Northeast: existing-home sales surged 14.2 percent to a level of 1.21 million
      in February, and are 3.4 percent higher than February 2006. The median
      existing-home price in the Northeast was $265,900, down 1.4 percent from a
      year earlier.

    • Midwest: existing-home sales rose 3.9 percent in February to a level of 1.58
      million, but are 1.9 percent below a year ago. The median price in the Midwest
      was $157,000, down 1.3 percent from February 2006.

    • South: existing-home sales increased 1.6 percent to an annual sales rate of
      2.58 million in February, but are 4.4 percent below February 2006. The median
      price in the South was $175,900, down 2.9 percent from a year ago.

    • West: existing-home sales went unchanged in February, holding at an annual
      pace of 1.32 million. Sales are 9.6 percent lower than a year ago. The median
      price in the West was $337,100, up 2.2 percent from February 2006.

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