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Think Small: Getting Started As a Real-Estate Investor

2007-01-23T18:17:00.000-08:00

Think Small: Getting Started As a Real-Estate Investor

By David Crook

The real-estate bubble has burst. Get over it. In areas that saw big home-price run-ups in the first half of the decade, prices are stagnant, or worse. New-home inventories are up; new-home builder stocks are down.

A kind of real-estate weariness has set in. Who's the cocktail-party boor? The guy still talking about making a killing on Miami Beach condos.

Smells like a buying opportunity. Probably not right away, because there's still plenty of froth in the markets that saw the biggest price increases. But soon, you'll see the real-estate investors -- property vultures who buy when prices are low and then ride property manias to their crest -- toeing the market again.

Even in today's uncertain climate, novice real-estate investors can make money, especially in smaller properties that are easy to acquire and manage.

Let's explore some options.

In-Law Units

The most basic form of property investment is a so-called in-law unit or guesthouse on the site of your home itself, sometimes attached to the main house, sometimes not. No one has ever gotten rich renting out such properties, but they can significantly reduce the cost of homeownership. Renting out an in-law unit for $400 a month and using that money every month to pay down principal on a $350,000 30-year mortgage will shave 10 years from the mortgage term and reduce total payments by more than $165,000. And you will be able to write off all your costs on your income taxes -- including depreciation on the unit -- up to your actual rental income.

Weekend or Vacation Homes

Just as with an in-law unit, renting out your weekend house is not a way to get rich. Many of the same numbers that applied to in-law units can be applied to your weekend home, although the tax situation is decidedly different.

First, the IRS gives second-home landlords a very nice little present in that it allows two weeks of tax-free rental income a year. Beyond that, however, the accounting can be irksome. The IRS doesn't want people buying second homes and disguising them as rental properties. It has two criteria to determine whether the property is a second home (bad) or a rental (good). It's a second home if you don't rent it out at all or if you personally use it at least two weeks a year or 10% of the number of days the place is available for rental, whichever is longer.

Single-Family Homes

Throughout much of the country, the market for single-family homes is seriously out of whack. As prices fall and inventories rise, that's changing. But, compared with rents, prices are still quite high, outstripping the ability of such properties to cover their mortgage and operating costs.

Avoid this segment of the market unless you have a chance to buy a property at a 30% or 40% discount from its previous price. Don't think this is out of the question. In the late 1980s and early 1990s, when the government liquidated the real-estate loan portfolios of bankrupt savings-and-loans, speculators picked up properties for just dimes on the dollar.

Managing a house that pays for itself is what it's all about. You can do it in one of two ways: Renting or "flipping." Renting is a "buy-and-hold" strategy, while flipping calls for quick turnarounds of fixer-uppers that can be spruced up and sold quickly.

But in the current environment renting is probably the more prudent path, although it can be very difficult to make a house pay for itself at today's prices. That's because if your house carries an 80% or 90% loan, the renter will have to pay more per month to rent the house than he would to buy it.

Look at it this way: There's a handsome three-bedroom, two-bath house in Tampa, Fla., for sale at an asking price of $199,900. If you bought it with 10% down and a 90% loan at 6%, your monthly payment will be about $1,550 (that's PITI -- principal, interest, taxes and insurance). As a landlord, at a minimum, you'll want to budget at least $200 a month in additional expenses. That puts your break-even point at almost $1,800 a month. That's far more than you can reasonably expect to earn where comparable properties in the same neighborhood can be rented for less than $1,300.

But it turns out that there's a similar house available less than a mile away. This other house is roughly the same size. The difference is this one's being taken over by its lender, and the house has a mortgage loan of $110,000.

A buyer with cash can drive a hard bargain and make out very well. And the worse the market, the better for the buyer. But don't get carried away. If you simply take over an existing 90% or 95% note, you won't make any money. Let the lender foreclose and take over the place. Then lowball the lender.

Multiple Units

A housing market that saw the price of single-family homes skyrocket was not quite so generous to smaller two-family or multifamily properties. Because the universe of home buyers expanded so much in the past 10 years, the universe of renters contracted, and the market for smaller rental properties contracted with them.

In Memphis, where two-bedroom apartments in better neighborhoods rent from $500 up to $800 a month, good two-family properties can still be bought for far less than a one bedroom condo on either of the coasts. Recent prices for 40-year-old two-family homes near the University of Memphis main campus ranged from $70,000 to $110,000. Monthly payments, including insurance and maintenance, on an $88,000 mortgage (20% down on the $110,000 property) come to only about $750 a month. So renting both units at the low end of the market would result in a positive after-tax cash flow of more than $100 a month. Upgrade the units, and you can charge top-of-the-market rents of $800 a month.

Good deals on smaller buildings can be found throughout the country, even in some of the hottest markets. In trendy Pasadena, Calif., where even modest homes can sell for $400 to $600 a square foot, two-, three- or four-unit rental buildings can be bought in the $250 to $350 range.

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Think Small: Getting Started As a Real-Estate Investor

2007-01-23T18:16:00.000-08:00

By David Crook

From The Wall Street Journal Online

A kind of real-estate weariness has set in. Who's the cocktail-party boor? The guy still talking about making a killing on Miami Beach condos.

Even in today's uncertain climate, novice real-estate investors can make money, especially in smaller properties that are easy to acquire and manage.

Let's explore some options.

In-Law Units

Weekend or Vacation Homes

Single-Family Homes

Multiple Units

Home Prices Expected to Rise, Sales to Drop Slightly in 2007

2007-01-23T18:13:00.000-08:00

By Campion Walsh

From 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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D.R. Horton's Net Slides Amid Housing Slump

2006-11-28T07:56:00.000-08:00

By Janet Morrissey

From The Wall Street Journal Online

Home builder D.R. Horton Inc. on Tuesday posted lower profit for its fiscal fourth quarter amid land-related writedowns of $199.2 million, but the results exceeded Wall Street's expectations.

The Fort Worth, Texas, company reported no signs of a rebound in the troubled housing market and offered no outlook for fiscal 2007. Market conditions remain "challenging" in the home-building industry, Donald Horton, the company's chairman, said in a statement. The company's orders fell 25%, which is better than many of its rivals.

Net income sank to $277.7 million, or 88 cents a share, in the three months ended Sept. 30, from $563.8 million, or $1.77 a share, a year earlier. Revenue fell 3.9% to $4.9 billion from $5.1 billion. The most recent quarter's results included a charge of 39 cents a share, related to writedowns on land, land options and land reacquisition costs. Still, the results exceeded Thomson First Call's estimate of 69 cents a share on revenue of $3.93 billion

The land writedowns were D.R. Horton's first. Other builders have been taking charges related to land for the past couple of quarters as deteriorating housing conditions and values have made certain land parcels no longer financially viable to build homes on.

Banc of America analyst Dan Oppenheim expects D.R. Horton to take more land-related writedowns in future quarters. He said D.R. Horton's results were better than expected because home closings held up relatively well and "represented 26 cents a share of upside." In the quarter, closings fell 7.3% to 17,261.

The higher-than-expected closings appeared to indicate that D.R. Horton was slightly more successful than other builders at stemming the tide of cancellations. This was partly offset by the company's gross profit margins, which came in about seven cents a share lighter than expected, he said.

Mr. Oppenheim said he wasn't surprised that the company didn't offer guidance for fiscal 2007, given the uncertain market conditions. "We expect that they will wait as long as possible before providing it due to the lack of visibility," he said. Mr. Oppenheim doesn't hold shares in D.R. Horton, but his firm has had an investment-banking relationship with the company in the past 12 months.

For all of fiscal 2006, earnings fell 16% to $1.23 billion, or $3.90 a share, from $1.47 billion, or $4.62 a share, for fiscal 2005. Revenue grew 8.6% to $15.1 billion from $13.9 billion.

In early trading, shares of D.R. Horton were up $1.31, or 5.9%, at $23.69 on the New York Stock Exchange.

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Declining Affordability Pushes Homes Out of Reach for Some

2006-11-28T07:55:00.000-08:00

By Amy Hoak

From MarketWatch

http://www.realestatejournal.com

Despite low mortgage interest rates, a smaller percentage of first-time home buyers are entering the market, according to an annual profile of buyers and sellers released by the National Association of Realtors on Saturday.

During the year ending in June, 36% of all buyers who purchased a home were first-time buyers, according to the association's annual profile of home buyers and sellers. That's down from 40% a year ago. About 7,500 buyers and sellers were surveyed.

Part of the reason for the declining share of first-time homeowners: Declining affordability for those entering the market after the housing boom of the past couple years bumped up home prices, said David Lereah, the NAR's chief economist, during a news conference held at the Realtors' annual convention here. A greater number of second-home sales also may have contributed to a lower percentage of first-time buyers overall.

"I hope that it's not a trend. I hope that as affordability starts to improve we see more first-time home buyers," he said. "It's critical for the housing sector."

The percentage of single female home buyers, however, inched up in the survey to its highest level on record. Twenty-two percent of all home buyers were female and on their own, up from 21% a year ago and up from 14% in 1995. In comparison, single males accounted for 9% of home buyers, unchanged from last year.

Other statistics helped validate the jobs of the thousands of Realtors at the convention: 80% of home buyers said they used the Internet to search for a home, but 85% relied on a real-estate agent as a source of information about homes for sale. And 36% first learned about the home that they purchased from an agent, versus the 24% who learned about the home that they purchased online. Among those who used the Internet to search for a home, 81% purchased a home using a real-estate agent.

Although real-estate agents were leery of the Internet 10 years ago, fearing it would take away business, 80% of firms now have their own Web sites, Lereah said.

"What the Internet has done for consumers, potential buyers, is provide them with information, give them a comfort level," he said. "But it all comes down to you're making the biggest financial transaction you're ever going to make for 99% of these people -- and they need guidance, they need someone they can trust and who has been through this before."

From the seller's side

Reflecting the beginning of a softening market, sellers had their homes on the market for a median of 6 weeks, according to the report, an increase from the 4-week median reported a year ago. "It makes some sense: We had a boom in 2005, and in this time period, we're coming to a close and beginning to stall," Lereah said.

The typical home sold for 98% of the listing price in this year's report; it sold for 99% of its listing price a year ago. But even in this year's figures, 12% of homes sold for more than its listing price.

Nineteen percent of sellers said that the primary reason for selling their home was because it was too small, while 13% said the neighborhood was less desirable and 10% decided to move so they could be closer to their job. The typical home seller owned their home six years.

Twelve percent of sellers said they sold their home without a real-estate agent, down from 13% a year ago and 20% -- the report's recorded high -- in 1987. Of those who sold their home on their own in this year's survey, 40% said they sold the property to someone they already knew.

Of those who did use an agent, 73% used a full-service agent, 8% used a discount broker and 7% used a minimum-service agent who may have done as little as list the home on the Multiple Listing Service, the survey found.

"Limited and minimal brokerage services cater largely to owners who would prefer to sell on their own but recognize they need some level of professional help," Thomas M. Stevens, president of the National Association of Realtors, said in a news release. "These services generally are a good match for certain consumers, and help to explain a decline in owners selling purely on their own."

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What Blackstone Bet Means For Real-Estate Investors

2006-11-28T07:54:00.000-08:00

By Jennfier S. Forsyth and Janet Morrissey and Ryan Chittum

From The Wall Street Journal Online

With its bold move to buy Equity Office Properties Trust in the largest real-estate deal in history, Blackstone Group is betting that commercial real-estate prices haven't gotten out of hand, despite a big run-up in recent years.

Blackstone's move to convert the publicly traded real-estate investment trust into a privately owned business rippled through the REIT industry, lifting shares of such companies across the board by 3.2% in anticipation of more buyouts and mergers.

Analysts said the Equity Office deal underscores a recent trend in the REIT industry: Publicly traded real-estate companies are fetching much more from private firms than they do from the public stock markets, despite a 29% increase in REIT shares so far this year. It also dispels the theory that some real-estate investment trusts are too big to buy out, said Keven Lindemann, real-estate group director at SNL Financial, a research outfit in Charlottesville, Va. A day after the private-equity firm announced it would buy Chicago-based Equity Office for $20 billion plus $16 billion in debt assumption, Equity Office's largest shareholder, Cohen & Steers, questioned whether the company was worth more. Jim Corl, Cohen & Steers's chief investment officer, said the cost of buying all the properties in the company's portfolio would value it "in the $60 range."

The $48.50 price was 8.5% more than the REIT's closing share price on Friday. The stock jumped 7.7% yesterday to $48.14.

Sam Zell, Equity Office's chairman, said in an interview yesterday that Blackstone's bid was unsolicited. He added that the stock market had "underpriced the value of this company" and that no effort was made to find other bidders. "We got what we considered to be a significant offer at a price that we considered to be very attractive, and responded accordingly," he said.

Matthew Ostrower, an analyst with Morgan Stanley, said the price is high compared with Blackstone's recent acquisitions of Trizec Properties Inc. and CarrAmerica Realty Corp., two other office REITs. Blackstone expects to make net operating income totaling 5.5% of its purchase price for Equity Office in the first year -- the so-called capitalization rate. Trizec had a cap rate of 5.8%, and Carr-America's was 6.7%, meaning those companies came much cheaper.

Despite investors hopes for more bidders, the number of players that could buy a company as large as Equity Office is limited. "We can write a large check that other people can't write," said Frank Cohen, a Blackstone managing director of real estate, at a recent industry conference.

Blackstone is betting that corporate tenants will clamor for more space as the economy continues to expand. That, combined with construction and land costs that remain high, should keep office fundamentals strong. At the end of the third quarter, the nationwide vacancy rate was at its lowest in six years and rental rates had surged this year.

Some analysts questioned whether it was a good time for Blackstone to grab Equity Office, which has total or partial stakes in more than 500 office buildings throughout the country, after already gulping huge bites of two other office companies since July.

"I have tremendous respect for the Blackstone Group," said John Lutzius, president of Green Street Advisors, a Newport Beach, Calif., research and trading company. "But this is yet another large deal, and they have a lot of work ahead of them to rationalize all these properties that they've bought and do what they want to do with them."

Reis Inc., a New York real-estate research firm, also notes that the amount of space companies leased in the third quarter dropped significantly compared with the previous two quarters, while construction of new buildings is increasing nationwide.

If Blackstone follows its pattern after purchasing CarrAmerica, it will likely use many of the properties to borrow money, giving it a higher cash return, and sell off properties in markets where it doesn't intend to concentrate. Publicly traded REITs, which must answer to shareholders, have been reluctant to let their debt levels soar.

Blackstone's office-sector buying spree is in some respects similar to one it went on in the hotel industry from May 2004 to this February. Blackstone bought into that industry's recovery, taking $8 billion of public hotel companies ($15 billion including debt) private and wagering that revenue per available room and occupancy would rise. So far, the investment has paid off. The hotel industry set a record for profitability in 2005 and is expected to do so again each year through 2008, according to projections by PricewaterhouseCoopers.

Morgan Stanley's Mr. Ostrower says despite the trend toward going private, there is still a place for publicly traded REITs, noting that the buyouts have culled some of the weaker performers, including Equity Office.

"One thing that ties all these things together is they've generally involved companies that have very significantly underperformed for multiyear periods," Mr. Ostrower says.

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Economists Say the Worst Of Housing Bust Is Over

2006-11-28T07:53:00.000-08:00

The worst of the housing bust is over, economists said by nearly 2-to-1 in the latest WSJ.com economic forecasting survey. But they still predict that the average selling price of a house will fall next year.

After several years of double-digit percentage increase, housing prices stopped soaring this year. The 49 economists responding to the WSJ.com forecasting survey expect home prices, measured by the government's Office of Federal Housing Enterprise Oversight index, to rise 2.8% this year and to fall by 0.5% next year. That contrasts with a 13.4% increase in 2005.

"We're nearing the end of the slowdown for most markets," said Ethan S. Harris at Lehman Brothers. Prices still have some ways to fall before they'll stabilize, but there are signs that most drastic parts of the downturn - marked by a sharp pullback in demand and new construction - have run their course.

The economists' predictions for home prices next year vary widely, from an increase of 7%, predicted by Kurt Karl and Arun Raha of Swiss Re, to a 10% decline, expected by Maury Harris of UBS. Mr. Harris, for his part, said he expects a large inventory of vacant newly constructed homes to push prices lower in the first half. Construction companies "built much more than were justified because of investor interest," he said.

While 20 economists predicted home prices would rise next year, 24 forecast a decline. Just eight of the economists forecast gains greater than 2.1%, which is their average forecast for consumer-price inflation through mid-2007. The Ofheo index, which is closely watched by economists, has never posted a year-to-year decline.

Richard DeKaser, an economist at National City Corp., a big mortgage provider, said he thinks the worst is over. "We're starting to see inventories topping out and possible declining," he said. Mr. DeKaser forecast a 4.4% increase in prices this year and a 1.8% decline next.

The housing market, of course, doesn't move uniformly across the country; some regions or individual cities often have price changes decidedly above or below the national average.

Mr. Harris of Lehman expects price declines next year to be confined to "bubble" markets, such as those in Florida, California and cities in Nevada and Arizona, where large numbers of investors have artificially inflated prices. "There's no reason for prices to be falling in areas without a bubble," he said. "People are just slowing down purchase decisions."

Allen Sinai, at Decision Economics Inc., believes the worst of the bust is over, but he feels housing remains a big risk to the economy. The housing sector subtracted 1.1 percentage points from third-quarter gross domestic product, according to preliminary numbers from the U.S. Commerce Department.

The economists trimmed their forecasts for fourth-quarter economic growth: Their average estimate puts gross domestic product growth at a 2.3% rate in the fourth quarter, down from the 2.5% rate they forecast in the October survey. They expect growth to remain at that rate through the first half of 2007 and then to accelerate later in the year. On average, the economists predicted growth of 2.8% during the second half 2007. GDP is the broadest measure of economic output.

The housing slowdown is expected to hit consumer spending, but the "consumer won't cave in and drive us into a recession," said Mr. Sinai. Steady interest rates, controlled inflation, stabilizing energy prices and a solid jobs market will support the economy, he said.

Indeed, new data released Monday indicated that weakness in the housing sector is being offset by other areas of the economy. The Conference Board, an industry-backed research group based in New York, said its composite index of leading indicators for October rose by 0.2% to 138.3, in line with expectations. September's reading was revised up to a 0.4% advance. The index is designed to predict activity in the three to six months ahead.

"People say all bubbles end in disaster, but this is a small bubble. Home prices are just about 20% too high. We need to take it seriously, but in the history of bubbles, this will go down as one of the smaller ones," said Lehman's Mr. Harris.

Among other findings in the survey:

Economists expect a relatively happy holiday for retailers, forecasting a 5.1% rise in sales from last year.
Some 57% expect Fed policy to be the biggest factor in the economy and markets over the next year, topping Iraq or the budget and tax legislation.
Just eight of 56 economists expect the Federal Reserve to raise rates beyond the current 5.25% rate before June 2007.
Economists expect just 107,000 new jobs a month over the next year, down from 109,800 forecast in October and 179,400 at the high for this year's surveys, in February.

http://www.realestatejournal.com/

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For More Homeowners, Threat From Lightning Is a Worry

2006-11-28T07:51:00.000-08:00

By M.P. McQueen

From The Wall Street Journal Online

The cost of homeowners' claims for damage due to lightning strikes is soaring because of the burgeoning number of high-end electronic items and appliances in the average home, insurers say.

Hartford Financial Services Group Inc. says that the cost of claims the company paid due to lightning strikes rose 77% between Jan. 2001 and July 2006, even as the number of claims fell in the period by nearly half. Some of the nation's largest insurance companies, including State Farm Insurance Cos. and Nationwide Mutual Insurance Co., also say they're experiencing a similar trend.

Insurers partly attribute the higher losses to the growing number of home-theater systems, plasma and high-definition television sets, game consoles and personal computers in the average American home -- which all can be fried by a surge of voltage in a home's electrical wiring that can occur from a lightning strike. Rising rebuilding costs are also a factor because in the worst instances, lightning torches the house either from overloading appliances or from a direct hit.

A State Farm spokesman says the company believes policyholders are filing fewer claims for lightning damage -- and other losses -- because of fear their rates will go up. But the claims they do file are larger.

Janice Dlatt, of Buffalo Grove, Ill. learned about lightning the hard way. She and her family suffered $10,000 in losses when a lightning strike burned out their hard-wired home-alarm system, heating and air-conditioning system, ceiling fans, TVs, VCRs and phones. "I consider ourselves lucky because my house didn't burn down. It was a small strike with a lot of voltage. It actually hit the flue from the furnace on the roof," she says.

Lightning strikes in the U.S. also cause an average of 6,100 residential fires and $144 million in direct property damage, according to the National Fire Protection Association, a nonprofit code- and standard-setting group.

Homeowner's insurance policies cover damage from electrical storms, less the deductible, but insurers say much of it could be avoided with the proper precautions.

A lightning-protection system can help save your gadgets and your house and in some places, may be a requirement under local building codes. The system, which provides a safe path for electricity to follow and discharge, should be installed by a qualified and licensed electrician and in compliance with local building codes and guidelines of the National Fire Protection Association (NFPA standard 780) and Underwriter's Laboratories, the safety organization. The system includes a lightning rod or air terminals at the top of the house that can be disguised to look like a weather vane and wires to carry the current down to grounding rods at the bottom of the house. Installing such a system costs about $1 to $1.50 per square foot for the average U.S. home.

A whole-home surge arrestor installed near the main circuit-breaker panel or the electric meter helps prevent excess voltage from passing through the house's wiring, damaging electrical equipment and possibly starting a fire. A whole-house arrestor system, which averages from $150 to $500, is also a job for a professional electrician.

As for doing it yourself, surge suppressors that you plug into electrical outlets help prevent excess voltage from damaging specific appliances and equipment. True surge suppressors shouldn't be confused with ordinary power strips that don't offer protection. Surge suppressors cost an average of $12 to $30 in hardware and appliance stores. They should have a label that reads UL standard 1449 and have a suppressor voltage rating, or SVR, of 330 volts. The lower the SVR number, the better the suppressor will be at protecting appliances and electronics.

Suppressors deteriorate with age and after a surge. Some have audible signals or flashing lights to indicate when they have worn out and should be replaced.

"If you are going to pay $2,000 for a new TV, spending $20 for a new surge suppressor is a good investment," says Richard Roux, senior electrical engineer at the NFPA.

A simple solution would be to unplug your devices before electrical storms. And to cut your chances of being shocked yourself during a storm, avoid using electrical appliances, corded phones and plumbing during lightning and thunder, safety experts say. It's safest not to shower, do laundry or wash dishes, either. Electrical storms are most likely to occur during the summer and in the South and Southwest, but occur across the U.S. and throughout the year.

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REITs Are Sitting Pretty in U.K. With Prospect of Takeover Deals

2006-10-26T08:14:00.000-07:00

By Molly Dover

From The Wall Street Journal Online

LONDON -- First it was the booming U.K. commercial-property market. Now the prospect of takeover deals could send the country's property stocks even higher.

The catalyst is the U.K. government's decision to allow the launch of real-estate investment trusts beginning Jan. 1. REITs will give a bevy of tax breaks to companies that adopt the new structure and make it easier for them to buy up other property companies. In the past three months alone, four deals have been announced, and the Dow Jones U.K. Real Estate Index has surged 14%, compared with a 7.6% rise in the FTSE 100 stock index.

While the heady gains mean some property stocks now trade at very high premiums to their portfolios' net asset values, fund managers and analysts are unperturbed. They say property stocks remain attractive because they are already priced to reflect higher net asset values expected when REITs come into effect.

Mike Prew, property analyst at Lehman Brothers, said in a note to clients that NAVs were "depressed by layers of costs which we think will prove inappropriate for the post REIT world." He estimates that NAVs will rise by an average of 8% following conversion. This, combined with the expected sharp increase in values in their property portfolios when they are revalued at the end of the year, should mean those that convert to REITs will trade broadly in line with NAV.

To be sure, the bull market in property stocks could fizzle if U.K. interest rates rise and the global economy slows. The Bank of England is widely expected to raise its key lending rate by a quarter percentage point to 5% early next month. Tim Wheeler, chief executive of industrial-property specialist Brixton, told Dow Jones Newswires that he was concerned individual investors could be jumping into property stocks with unrealistic long-term expectations and without understanding the cyclical nature of the property market. Though property prices have been rising for three years and show no signs of abating, he warned that the rise can't continue indefinitely.

So far, 15 companies have announced their intention to convert to REITs, and many more are expected to follow next year. Unlike the listed property companies of today, REITs will pay no corporation or capital-gains tax as long as they distribute 90% of their income to shareholders as dividends. Purchases of rival firms will also be free of capital-gains taxes, so it is cheaper to acquire properties this way rather than individually.

Buyers acquiring properties through a corporate structure will avoid a 4% tax on property purchases, known in the U.K. as stamp duty. Companies that want to convert to REITs must pay a one-time, 2% charge on the value of their assets.

"There will be consolidation because REITs can trade more efficiently than non-REITs," said Boudewijn van Loen, Amsterdam-based fund manager of the €1.3 billion ($1.6 billion) F&C Real Estate Securities Fund, a Luxembourg-based mutual fund that invests in U.K. property stocks.

Mr. van Loen favors Great Portland Estates PLC, Derwent Valley Holdings PLC and Shaftesbury PLC, which specialize in central London offices and shops, and Hammerson PLC, an office and retail specialist. He expects all to convert to REITs and says the first three are contenders for either being taken over or agreeing to a merger.

Great Portland has already announced it is in discussions to merge with central London rival London Merchant Securities PLC, and analysts suggest Derwent Valley may also consider a merger.

"They have the potential to really profit from growing market rents and demand in the West End market, which has a high barrier to entry," Mr. van Loen said.

Great Portland, Derwent Valley and Shaftesbury all trade at sizable premiums to net asset value, ranging from 22% to 79% over NAV. But Mr. van Loen said the stocks are fairly valued. He said stock prices reflect a recent surge in central London property prices in the past six months that will be reflected in semiannual portfolio valuations as of Dec. 31.

Great Portland stock has gained 11% in the past three months, while Derwent Valley has added 15% and Shaftesbury has climbed 19%. Hammerson has risen 12%. London Merchant has soared 35%.

Other merger targets could be companies that are unlikely to convert to a REIT in their current form because they don't fulfill the conversion criteria, such as no single shareholder owning more than 10% of the company. Mr. Prew identifies CLS Holdings PLC and Daejan Holdings PLC as the most likely candidates. CLS specializes in office property with long leases, while Daejan invests in offices, shops and residential property predominantly in London. CLS has climbed 15% in three months, while Daejan has risen 10%.

Residential investor Grainger Trust PLC, which said in June that it was unlikely to convert, last month received an approach from private property company Regis Group PLC and Merrill Lynch & Co. While the original offer was rejected, the pair, along with private property company William Pears Group, are putting together a second bid for Grainger, whose stock has soared 34% in the past three months.

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Maybe Boomers Aren't So Keen On Second Homes

2006-10-26T08:12:00.000-07:00

By Amy Hoak

Baby boomers may not be as in love with second homes as once thought.

The rate of second-home ownership among 50- to 60-year-olds has remained flat during the 12-year period between 1992 and 2004, according to a report sponsored by Radian Group Inc. and the Research Institute for Housing America of the Mortgage Bankers Association.

Early boomers were no more likely to own a second home than older generations of homeowners. Those who do have a second home are using the residence on a limited basis, too: One-half spend two weeks or less and two-thirds spend four weeks or less per year in their second home, the report found.

About 12% of second-home owners said they intended to sell their main home and eventually use their second home as their primary address -- debunking speculation to the contrary.

The study, "Housing Trends Among Baby Boomers," was conducted by Gary V. Engelhardt and released during the MBA's annual convention Monday in Chicago.

Information for the report was pulled from a variety of sources, including U.S. Census Bureau information and the 2004 Health and Retirement Study, which is funded by the National Institute on Aging.

"There have been relatively few scientific studies on second-home ownership and mortgage activity," Doug Duncan, MBA's chief economist and senior vice president of research and business development, said in a news release. "The report indicates that baby boomers are not acting differently than their parents when it comes to second-home ownership. However, the baby boom cohort is so large, even if they follow typical buying patterns, they will have significant impacts on many local housing markets."

The study found 43 million U.S. households headed by someone age 50 or older owned their main residence and 6.6 million homeowners of that age group owned a second home. Those second homes were often located in well-known vacation areas.

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Hopes rise along with new buildings in Asbury

2006-10-26T08:11:00.000-07:00

Asbury Park Press on 04/13/06

And not all the progress is on beachfront

BY NANCY SHIELDS
COASTAL MONMOUTH BUREAU

ASBURY PARK — Like the rebuilding of a team, the progress the city was making in the first year or so of its comeback was hard to see.

There were still many negative stories, sad happenings. The old way of doing things in Asbury Park fought hard not to let go.

But five years later, officials and residents appear to have stayed the course, and reports of progress — more visible, more measurable — have been mounting.

"This is one of the most positive times we've had in the city, possibly in 30 or 40 years," Mayor Kevin Sanders said earlier this week. "New stores, restaurants, waterfront construction, restored houses throughout the city."

"The apathy is gone from Asbury Park," he said. "Everyone's talking about its appeal. They say Asbury Park is the new gold rush."

Last week, the City Council and its beachfront redeveloper announced a new agreement that requires Asbury Partners to invest $6 million in the next two years to renovate the Fifth Avenue Pavilion and make important exterior renovations to Convention Hall, the Casino and the power plant. Designs for the costly interior renovations of the boardwalk buildings must be completed by September 2007.

Although the City Council had seen progress with the new condominiums now visible on the waterfront, officials were concerned about the lack of investment to get permanent renovations under way on the historic buildings. The city and developer negotiated in February and March and say they now have time lines, financial requirements, penalties for nonperformance and an agreement to stay in close communication as the work progresses.

Leadership lauded

"I can't stress to you enough how important the leadership of the city is right now in making this happen," said Glenn Scotland, a city redevelopment attorney. "This is probably only the second time in my career where we had public officials stand up, take a position and be willing to stick by it under the enormous economic pressure being placed on them by the developer.

"It is such a delicate balance to extract what is the proper equity in a deal and to recognize we want to be strong, treated fairly, but don't want the deal to go away," Scotland said of the negotiations. "And we compliment Asbury Partners on their willingness to go through this. It's very difficult to change a paradigm, especially in the business world . . . They stepped up big time."

Late last week, Metro Homes, the third developer brought in by Asbury Partners and the city to build waterfront condominiums, announced that C-8, the steel skeleton that became a symbol of the failed redevelopment all through the 1990s, will be imploded April 29. A new 224-unit condominium high rise, the Esperanza, is planned for the site.

Some officials and residents are talking about making the long-awaited demolition a celebratory event.

In the midst of the waterfront activity, downtown merchant Clark Mitchell, 37, co-owner of the Be Green vegetarian cafe on Cookman Avenue, said he has some reservations over the pace of redevelopment.

"With all the redevelopment, I think we just have a wait-and-see attitude," Mitchell said. "We don't want to get too excited about it."

"The downtown has problems — a parking problem — but there are a lot of good people putting good businesses here," he said. "All the downtown needs really is more — more businesses."

But for himself, he said he could not be happier with the restaurant he moved from Belmar in 2004.

"I do well here," Mitchell said. "All anyone wants here is progress. If it looks like it's going forward, it doesn't have to have been done yesterday."

Council members, led by Councilman Ed Johnson, are working at the committee level to develop plans to return Springwood Avenue to a commercial and residential thoroughfare and make needed improvements to the city train station on Main Street.

Other city concerns

Redevelopment isn't the only issue in the city.

A second event planned for April 29 is a hope and empowerment rally for city children which will start at 12:30 p.m. at Springwood Avenue and Memorial Drive. A march is planned to a recreation area between the Bangs Avenue School and the Middle School, where a youth talent expo, games and other activities will be held. There will be opportunities for young people to register for summer jobs.

As for the school district, which will see four people elected to its nine-member school board Tuesday, member Frank D'Alessandro, who is not up for re-election this year, believes the district "finally has stability."

"We're building on stability, brick by brick," D'Alessandro said. "Our district has fallen into the depths, and we're trying to lift everyone out. It's taking time. We haven't performed any miracles. But we have a foundation and what we needed more than anything was stability."

And within the Police Department, officers say their department has united under the new leadership of Deputy Chief Mark Kinmon. The officers' Police Athletic League joined the city in starting up a biddy basketball league for 60 third- to fifth-graders and plans to build on that program's success.

Police Inspector Chris Van Buren, the PAL president, said PAL is working on starting up an amateur boxing program for teenagers and young adults and may lease second-floor space in the former YMCA building on Main Street, now owned by REI Group.

"There's a room on the second floor that we're looking at that's perfect for what we want to do," Van Buren said. "The REI group gave us a lease which our attorney is reviewing. We're trying to tighten it up so that if they happen to sell the building, we'll have a leg to stand on. We want to be able to negotiate with the new owner if it happens."

But, Van Buren added, "this program will definitely happen."

Police also are working with a new community group that met last week after a peace rally was held on DeWitt Avenue to try to end gang violence that saw one young man shot to death on DeWitt Avenue in November and a second young man killed almost on the same spot late in March.

"As far as I see right now, because of what's going on — the events organized for youth and biddy basketball and PAL — I think things are turning around for children in Asbury," said Denise Richardson, the mother of seven daughters, who owns a home with her husband, Carl Richardson, on Ridge Avenue and is an administrative clerk in the Monmouth County Health Department. "My 7-year-old was a mascot before and is going to be a cheerleader this year for Pop Warner," she said.

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Manasquan: A hometown feel

2006-10-26T08:09:00.000-07:00

Asbury Park Press 09/14/06

The borough has long been home to people of varying income levels, but that diversity is becoming less apparent as affluent newcomers are knocking down older, smaller homes to make room for much larger ones, Mayor Richard Dunne said.

People who could once afford to own property here might now be priced out of town, he said. "I'm here, so it's OK,'' joked Dunne, who moved to the borough 26 years ago after spending summers in Manasquan since the 1950s. Dunne is 70 years old and has been mayor for three years.

Although the construction of new homes has also increased traffic, the borough has still been able to maintain its small-town charm, said Mary Hennessey, 61, who has owned a home here with her husband John McDill for about nine years.

"There is a lot of building going on so there is more congestion, but it still has that wonderful hometown feeling,'' she said.

Dunne said many of the people moving to Manasquan are couples in their 30s and 40s. They've been attracted by the borough's intimate size … 6,200 residents, according to a 2005 U.S. Census estimate - and its respected public school system, he said.

While many recent home buyers have settled into established neighborhoods dominated by year-round residents west of Watson Creek, others have bought property east of the creek, a section of town traditionally occupied by summer rentals.

More expensive homes means more property tax revenue for the borough, but Dunne said the additional income has been offset by the increasing number of new families with children who attend public school and require tax money to educate.

It may seem that Hispanic immigrants also have moved into the borough - the almost daily gathering of day laborers waiting for work on Main Street might give that impression - but they haven't.

The workers, all men, commute from Asbury Park, Belmar and elsewhere. Some workers said they take the NJ Transit North Jersey Coast Line to the station across the street from the Acme and 7-Eleven parking lots on which they stand.

In regard to the number of people who live in Manasquan, Dunne does not understand why the latest Census estimate cut the population by 109. The borough's population has most likely grown since the last census in 2000, he said.

Still, he figures there is only room for a few hundred more.

"I'd be very surprised if it reached 7,000,'' Dunne said.

-- Nicholas Clunn & Intern Claudia Vargas

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The demographics: affluence, long commutes, rapid growth

2006-10-26T08:04:00.000-07:00

Asbury Park Press 2/09/06

Everyone, it seems, wants to live in Marlboro.

The township's population has grown rapidly in the last several decades. From 1960 to 2000, according to the U.S. census, Marlboro's population has increased by an average of 709 people per year. The most dramatic spike in population occurred between 1980 and 1990, when 10,414 new residents moved in.

Roughly 40,110 people live in Marlboro now, according to the Monmouth County Planning Board.

Marlboro is, statistically, a wealthy municipality. The median income of all New Jersey households was $55,146, according to the 2000 U.S. census; the Monmouth County median was $64,271. The median income of a household in Marlboro, by comparison, was $101,322.

There is a price to be paid for these higher salaries, however. The average commuting time of a worker living in Marlboro is 48 minutes, according to a recent study conducted by the U.S. Census Bureau and Birdsall Engineering.

The study also found that the largest share of Marlboro's work force (39 percent) is employed in the service industry, being involved mostly in professional and scientific services. Nearly 3,000 people, or 15 percent of Marlboro's labor force, work in finance, insurance or real estate.

A criticism often heard at public meetings in Town Hall is that the township's high cost of living prevents many children of Marlboro residents from living there after college. Another hurdle is that there are few apartments and rental properties in Marlboro, just 386 to go around. The vast majority of housing -- 82 percent -- consists of single-family detached homes.

Frank Romito came to Marlboro from New York City in 1978, looking for a "country" setting in which to raise his kids and run a business. He runs the San Remo pizzeria at Route 79 and Tennent Road, an area frequented more by locals who have been in town for years.

"When I moved here, Marlboro was a beautiful town, a good place to raise kids," he said. "People were friendly. Now, everything has changed. It's not a matter of too many people moving in -- it's the businesses, all the strip malls.

"It's still a good place to raise a family, but it's overcrowded," he said. "It's too late to change that. In my opinion, this township, they want to push the old people out and bring in the new -- because they can afford the homes, the taxes."

According to the U.S. census, most of Marlboro, 83 percent, is white. The town's Asian population has grown steadily in the past decade and now constitutes nearly 13 percent of the total population.

Although anecdotal evidence suggests that Marlboro's Jewish population has grown by leaps and bounds in the past 20 years, it's difficult to say with certainty just how large the influx has been.

The last demographic study conducted by the Jewish Federation of Greater Monmouth County in 1997 found that of the county's 70,000 Jews, 60 percent live in the western end of Monmouth County. And according to Howard Gases, the center's executive director, the increase of new Jews into western Monmouth County prompted the federation to build a new office two years ago within the Jewish Community Center of Western Monmouth County, in nearby Manalapan.

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Confidence Builder: Make the Most of Newly-Constructed Homes

2006-10-03T07:50:00.000-07:00

By: Eric Yablonsky

For the aspiring homeowner, there are always some unknowns to navigate. For home-seekers looking to buy a newly-constructed home, they must also contend with fierce competition, as well as the uncertainties of buying a house, in many cases, that doesn’t even exist yet.

Heightened demand has accelerated new construction. Advancing technology has allowed the selection of homes based on virtual tours of the future home’s plans. Such options can help the consumer build their house to their every preference, while making it as accommodating in real life as it is promising on paper.

There are ways to minimize such uncertainties and focus on the new home’s potential rather than potential problems – and these aren’t limited to the structure itself. Many of these common sense preparations are ones in which the services of a real estate sales professional, such as an ERA Real Estate professional, can be a major help and a big relief. At the most basic level, such a professional can help you determine whether it’s the newly-built or the pre-existing home that best suits your search.

Start from scratch. Your agent can help you decide what design options not only fulfill your needs but best fit your budget and your home’s resale value. He or she can also help you to familiarize yourself with the new neighborhood; guide you throughout the construction process; and get you set up with crucial services like moving companies (one of many major tasks a nationally-known business can group in a single program, such as ERA Real Estate’s Select Services).

Check into the builder’s track record. You can do this by visiting other developments they’ve constructed and by speaking with the residents. Also, you may want to contact the Better Business Bureau to learn about their reputation and how long they’ve been in operation.

Know the neighborhood. Visit your local town planning office and look into what will be built nearby in the near future – where there’s some construction growth there may be more, and you’ll want to decide what kinds you wish to live around.

Understand what’s in your contract. Do what you can to protect a favorable mortgage rate from the financial fluctuations that can occur over the course of construction. Get a thorough home inspection. And, obtain the most reliable professionals to help you in these potentially complicated tasks.

Determine if “new is for you.” Despite the shiny, new bells and whistles associated with a new home, you might prefer an existing house. Purchasers of existing homes avoid contributing to suburban sprawl, enjoy the stability of established neighborhoods and infrastructures, and don’t need to worry about today’s fast-paced home construction industry. New home buyers, on the other hand, may be most attracted to the ease of brand-new homes with minimal maintenance concerns and a pre-planned neighborhood structure.

One happy medium an agent might steer you toward is the brand-new home that’s already built. While this may be a rarity in a booming market, your real estate professional can help find one for you that can help eliminate surprises. Not to mention, it will likely fast-forward passed the inconvenience of other unfinished homes still in the construction phase around you.

With the right preparation and advice, the new-home route can lead to ready-made happiness rather than built-in headaches.

Author: Eric Yablonsky is president of ERA Othello Realty in Lakewood NJ and a licensed real estate broker.

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Save More Than Energy: The Cost-Efficient Home

2006-10-03T07:48:00.000-07:00

By: Eric Yablonsky

The energy-efficient home is moving from the horizons of futuristic planners to the agenda of current homeowners.

It’s not so much a matter of newer technologies – though alternate energy sources like solar and geothermal are making considerable inroads in the modern home. It’s more a matter of improvements on very familiar furnishings and appliances. Put simply, these options save by losing less.

It may be well worth it to give your home an efficiency upgrade. First, you’ll want to figure out what needs fixing. To identify problem areas, contact a qualified professional and get an energy audit of your home. Some upgrades are simple and less expensive. For example, one common problem is insulation. The Environmental Protection Agency (EPA) says that proper ceiling insulation alone can reduce your heating bill by as much as 20 percent. Other energy draining can be solved by replacing old fixtures with more modern and efficient models. Windows, doors and skylights equipped with sealed double or triple panes also reduce heating and cooling costs, and are features for which utility companies often offer rebates.

The EPA notes that air leakage from gaps in your home’s structure – holes for plumbing and wiring, for instance – accounts for 25 to 40 percent of the energy a common home uses for heating and cooling. Similar troubles come from inadequately sealed duct joints and otherwise inefficient, older heating and cooling systems. All can be repaired or replaced.

Even conventional systems such as ventilation can release enough heat from your home to cost a fortune in unnecessary bills. Upgrading these systems can pay for itself – and later pay off as an attractive resale value when possible buyers of your home want to benefit from this form of savings.

And when you’re ready to go from finding the problem to fixing it, the government doesn’t just supply the bad news – it provides some solutions, as well. The EPA’s “Energy Star” rating has appeared on numerous products, identifying efficient appliances and other home furnishings that enable vast savings. Energy Star central air conditioners can save 20 percent on cooling bills.

Studies have shown the resale advantages of homes with lower energy costs. Look for such solutions, and buyers will be more likely to look into your home. Your utility bills, Energy Star fact sheets and other documentation can be attractive proof to present to prospective buyers.

In the short term, you can save on some of these improvements even as they enhance your home’s value. In addition to offering expert advice and home-selling solutions, real estate brands such as ERA Real Estate, feature the Select Services^SM network of national and local vendors with leading household products, often at a discount.

Consult a local ERA Real Estate professional on how to navigate the options and opportunities available for the energy-conscious homeowner. Your investment in the future can have many returns right in the present.

Author: Eric Yablonsky is the president of ERA Othello Realty in Lakewood, NJ and a licensed real estate broker.

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ERA Othello Realty is your source for your real estate needs throughout New Jersey. From the shores of Spring Lake NJ to Newark NJ they can handle all your real estate buying and selling needs. For homes for sale in Monmouth, Ocean, Mercer, Burlington, Camden, Middlesex, Passaic and all the other counties in NJ. From Central NJ to Northern NJ to Southern NJ you can count on ERA Othello Realty for New Jersey Real Estate. Look at these Listings of Homes for Sale in NJ. We are the realtors NJ!

Pricing Your Home Gets Trickier As Houses Languish on the Market

2006-10-03T07:45:00.000-07:00

By Ruth Simon

From The Wall Street Journal Online

As the housing market cools, one of the hardest decisions facing home sellers is how to price their properties.

Traditionally, brokers have set listing prices by reviewing how much comparable homes sold for in a neighborhood. Now, with prices edging lower in many places and the number of homes on the market climbing, checking comparable sales is becoming less useful. At the same time, many would-be buyers are sitting on the sidelines, waiting to see how far prices will fall. Bigger inventories of unsold homes also are making it harder for sellers to figure out how to make their house stand out amid the competition.

What it takes to sell a house varies from market to market. Some brokers are telling customers they need to underprice the competition -- even if they think their home is more attractive. Sharon Baum, a senior vice president with the Corcoran Group in New York, recently listed a two-bedroom, two-bathroom apartment for $3.7 million. That was $100,000 less than the asking price for a similar unit five floors below, even though apartments on higher floors typically carry bigger price tags. "As buyers have more choices, you've got to make your apartment stand out," she says.

Sellers are also being told to cut prices aggressively if their house isn't moving -- or risk chasing the market downward. If a home doesn't get any showings in 21 days or gets 10 showings but no offers, Ned Redpath, president and owner of Coldwell Banker Redpath & Co. in Hanover, N.H., often advises the seller to slice the asking price by 10%. "We don't like to see $2,000 or $5,000 price adjustments," he says. "We want to see a real whack" that attracts attention.

Builders of new homes also are tinkering with their pricing formulas to generate sales. Mid-Atlantic Builders in Rockville, Md. is offering to adjust the sales price downward up to 45 days before closing if the price on one of its similar homes declines. Waterford Development Corp. will have homes in its Woodland Pond at Manchester development in New Hampshire reappraised two years after closing. If the price drops, the company says it will write the buyer a check for up to 15% of the original sales price, not including the value of any optional upgrades.

Even in relatively strong markets, brokers are paying closer attention to price trends. Wallace Perry, president of Coldwell Banker United, Realtors, Carolinas region, says he has begun checking multiple-listing service data every week or two instead of once a quarter to see how recent sales compare with deals that closed three and six months ago. "Things can change...very quickly," he says.

The renewed emphasis on pricing represents a dramatic turnabout from the heady days of the housing boom, which peaked in the middle of last year. Bidding wars were common and, in many markets, homeowners simply looked at the last sale and asked for more.

That's all changed. The National Association of Realtors said this week that the median sales price of existing, or previously owned, homes fell 1.7% to $225,000 in August from a year earlier, the first such drop in 11 years. There's now a 7.5-month supply of existing homes on the market, the most since April 1993.

With so many properties vying for attention, sellers are also looking for creative ways to catch the eye of would-be buyers and their brokers. Some sellers are offering to pay closing costs or provide other incentives. When their 3,500-square-foot carriage house in Exton, Pa., failed to sell this spring, the owners dropped the asking price twice, to $449,000 from $479,000, says Beth Koser, an agent with Prudential Fox & Roach, Realtors. When that didn't do the trick, the couple agreed to offer $10,000 toward closing costs to any buyer or agent who attended an open house within a two-day period. The home sold a few weeks later for $430,000. "The incentive created a sense of urgency," says Ms. Koser. Buyers "saw that the seller was willing to negotiate."

Other brokers are using incentives to counter competition from new home builders. In Tampa Bay, Fla., Craig Beggins, president of Century 21 Beggins Enterprises, recently put together a list of 16 incentives homeowners can offer, from paying the mortgage for several months, to outfitting a media room with a big-screen TV, to picking up the cost of day care for some period.

Another approach is a personal plea. Traci Smith, president of Century 21 Smith & Associates in San Antonio, encourages clients to court prospective buyers with a letter explaining the intangibles that make their home and neighborhood so appealing, such as the fact that the kids on the block trick-or-treat at Halloween together. During the height of the housing boom, some brokers were encouraging the same type of personal notes -- but from buyers eager to get their bid accepted.

Some brokers are trying to trigger bidding wars by setting an asking price sure to attract attention. Romeo Aurelio Jr., sales manager for Century 21 Hartford Properties, recently listed a small one-bedroom, one-bath fixer-upper in San Francisco's fashionable Noe Valley neighborhood for $650,000, even though he figured the home would sell for $100,000 above that. "If we priced it at $750,000, it was going to sit," Mr. Aurelio explains. "We marketed it aggressively at $650,000 and it generated 20 offers." The house sold this week for $845,000.

And with more buyers hunting houses online, selling strategies are adapting to the new technology. Michael Gallagher, a financial-services executive, initially listed his four-bedroom house in Shawnee, Kan., at $274,500. When the listing expired, Mr. Gallagher's new broker suggested that he boost the price to $275,000. Within weeks, the home sold for $271,000, $36,000 more than the best previous offer.

The explanation? Buyers who use the Internet typically search in increments of $5,000 or $25,000, says Kerwin Holloway, a managing broker with Reece & Nichols, a unit of Berkshire Hathaway Inc., which handled the sale. At the higher price, Mr. Gallagher's home was likely to turn up in more searches. It also looked like a bargain to someone whose search started at $275,000. At the lower price, it was one of the most expensive homes priced between $250,000 and $275,000. Until recently, brokers had taken their cues from retailers, pricing a home at $199,500 because it seemed like a better deal than one priced at $200,000.

A property that's not priced properly can languish on the market and get shopworn, says Dan Elsea, president of brokerage services at Real Estate One in the Detroit area. A four-bedroom house in Troy, Mich., has been sitting on the market for 10 months, even though the price has been cut to $349,900 from $394,900, Mr. Elsea says. By contrast, a similar home in the same market sold this month for $360,000, just 23 days after it came to market priced more appropriately at $369,000, he says.

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For Newark, Revival May Owe A Lot to Location and Affordability

2006-10-03T07:43:00.000-07:00

By Maura Webber Sadovi

From The Wall Street Journal Online

Newark has largely defied the old real-estate maxim of "location, location, location." The largest city by population in the country's most densely populated state, Newark is home to one of the world's busiest airports and a short train ride from the global financial capital of Manhattan.

Yet in recent decades, much of the city hasn't realized the potential its geography affords.

Newark, which began as an industrial port city, evolved in the first half of the twentieth century into a commercial hub with a strong insurance sector; Prudential Financial Inc. still has its headquarters in the city. It boasted cosmopolitan retail offerings on Broad Street, and world-class architecture, as well as the Frederick Law Olmsted-designed Branch Brook Park.

But perhaps more than some other older industrial cities, Newark fell into a decline that many say was accelerated by the race riots of 1967. There are some healthy corridors of real estate, such as the Ironbound neighborhood and the high-end office buildings near the Penn Station train hub, an area that commands pricier asking rents than the northern New Jersey average. But vacant lots still dot the city, and the commercial real-estate market has struggled to make a broad-based recovery from the crime and urban blight of recent decades. White flight to the suburbs helped shrink the city's population by about one-quarter to 273,546 in 2000 from 1960, and last year 22% of Newark's families were still living below the poverty level, more than double the national average, according to the U.S. Census Bureau and the 2005 American Community Survey.

Some say the picture may be changing, thanks in part to the city's affordability in comparison to the glitzier Big Apple, a national trend toward urban living and an increasing roster of large capital projects. All have helped to attract about 7,000 new residents since 2000, reversing a decades-long slide and increasing the confidence of a handful of real-estate investors. "When I first started teaching, I focused on the reasons why a truly great and dynamic and heterogeneous city could be unraveled so quickly," says Rutgers University History Professor Clement Alexander Price. "Over the last five years the focus has been what went wrong and why the city now seems to be recovering."

Many trace the beginning of the resurgence to the opening of the New Jersey Performing Arts Center in 1997. More recently, construction has begun on a new hockey arena for the New Jersey Devils, and this summer the city has enjoyed something of a redevelopment trifecta. A new light-rail system that links Newark's two train stations began operating; a developer completed conversion of a 1930s office building and began marketing 319 units billed as the city's first luxury rental apartments in about four decades; and Newark got its first new mayor in about 20 years in Cory Booker, a Yale University-trained lawyer.

Developers hope the administration's new blood will capitalize on Newark's existing assets. Stefan Pryor, who had been president of the Lower Manhattan Development Corp., which assisted in planning the rebuilding of Ground Zero, started work last week as Newark's first deputy mayor for economic development. He says the new administration will work to update the city's plans for development and zoning to foster a more cohesive approach.

A number of investors have moved ahead with their plans despite the city's challenges -- which sometimes include leery lenders concerned about financing the first developments of their kind in Newark for some time. In 1999, Cogswell Realty Group paid $2.2 million for the 1930s office tower at 1180 Raymond Blvd. which overlooks Military Park and is a short walk to Newark Penn Station, says Cogswell Chief Executive Arthur Stern. It took about six years to put together financing that allowed his company to proceed with transforming the building into a high-end rental complex with a doorman, health club and bowling alley.

Since opening this summer the building has rented about 65 units. Mr. Stern, who expects to have the building occupied by next summer, is confident that the building and the city are poised to realize their potential. "It's increasingly become very difficult to find an affordable place to live in New York City and for a lot of these people, Newark's the answer," says Mr. Stern. "Newark fell further down and is taking a while to come back but, because of its location, our view is it can't miss."

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In Some Cities, the Price Is Right For Downtown Office Space

2006-10-03T07:42:00.000-07:00

By Jennifer S. Forsyth

From The Wall Street Journal Online

In some cities, call it the downtown premium. In others, it is the downtown discount.

Office tenants in cities ranging from New York to Los Angeles are willing to pay more in rent to be located in the central business districts, or CBDs, according to a new study by Richards Barry Joyce & Partners LLC. But a CBD location can be a bargain in other cities such as St. Louis and Detroit, where suburban offices command higher rates.

The Boston commercial real-estate firm identified 10 cities in North America where the rents in the central business districts are notably higher than their suburban counterparts. Several common denominators generally make these cities desirable to companies, says Brendan Carroll, research director for Richards Barry Joyce. "These are all areas that evoke prestige and provide superior high-quality public transit, are generally considered safe and all seem to contain inviting, pedestrian-friendly public spaces."

Bob Richards, president of Richards Barry Joyce, says the study gives investors who are priced out of markets such as New York and Washington, D.C., a sense of other downtowns that have similar cachet with tenants. His firm aggregated rental-rate data from several real-estate organizations as of the second quarter of 2006, looking at the top-quality or Class A buildings in 37 cities with a concentrated urban core of at least 10 million square feet, excluding cities with tiny suburban markets.

It is no surprise landlords in midtown Manhattan -- one of the world's most expensive commercial areas -- can command a sizable premium. More surprising is that downtown Los Angeles can get rents about 15% higher than those in the suburbs. Dan O'Neil, a Los Angeles-based principal with tenant-representation firm Staubach Co., says downtown has become more desirable for companies since the completion of the metro rail system (with its downtown hub), the Staples Center sports arena and significant residential options, as well as the city's commitment to add cultural amenities such as the Grand Avenue project, a $1.8 billion entertainment venue conceived as a new city center. Downtown Los Angeles, Mr. O'Neil said, "has gone from being an 8-to-6, work-only environment to more of a 24-hour, cultural environment."

Mr. O'Neil cautions that landlords are holding back some big blocks of space in hopes of signing blockbuster leases, and that is pushing rates higher on smaller spaces. If those large tenants don't materialize, the landlords will be forced to carve up those blocks into smaller chunks and drop rents. If that happens, the premiums downtown Los Angeles gets over some of its suburban submarkets could dissolve.

Cities with more sluggish markets, such as Detroit and St. Louis, could be expected to have lower downtown rents. They are joined by at least one city that doesn't fit the mold: Phoenix. Its downtown has rental rates 12% lower on average than its suburban neighbors, even though it is a fast-expanding area where jobs in office-using industries such as financial services are on pace to increase 5.3% in 2006, according to Moody's Economy.com.

Phoenix's dependency on autos for commuting is one reason. Suburban office buildings can get higher rental rates because they often offer more parking, says Jeff Hartland, senior vice president for Grubb & Ellis/BRE Commercial LLC in Phoenix. He predicts the city's central business district discount may fade since space has tightened substantially in the Downtown South area, particularly with Arizona State University's expansion there.

A low vacancy rate wasn't necessarily a predictor of higher downtown rental rates. Chicago's downtown -- the combined Central Loop, East Loop, West Loop, North Michigan Avenue and River North submarkets -- has a vacancy rate of about 16%, according to several data sources. Yet downtown rents are 41% higher than their suburban counterparts, a reflection of the central core's desirability with tenants.

Conversely, in Charlotte, N.C., the downtown has one of the nation's lowest vacancy rates at 5%, but commands no substantial premium to its suburban markets. That reflects in part the fact that two suburban markets, Interstate 485 South and SouthPark, both with high-quality space, get rents nearly as high as those in downtown, says Melanie Sizemore, a partner with Carolinas Real Data, a Charlotte real-estate market research firm.

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Key Indicators to Examine When Measuring the Housing Slowdown

2006-09-28T08:37:00.001-07:00

From The Wall Street Journal Online

With the housing market clearly sagging, economists and investors are watching a variety of gauges to get a handle on the severity of the contraction.

Last week, the Commerce Department reported that construction starts on new homes dropped 6% in August from July, to an annualized 1.665 million. That "housing starts" figure was about 5% lower than forecast and 20% lower than the year earlier 2.075 million. The month-over-month decline was the sixth one this year and put housing starts at the lowest level in more than three years.

The government estimates housing starts by surveying a sample of people who have applied for building permits. In places where permits aren't required, the process includes driving around looking for new-home construction.

Other gauges track new-home sales, existing-home sales, median house prices and the inventory of unsold homes.

New-home sales for August will be released by the Commerce Department Wednesday, and are expected to be down about 17% from a year ago. July's sales were down 21.6% from a year earlier, to an annualized 1.072 million homes sold.

New-home sales figures reflect market trends more quickly than do existing-home statistics. That's because new homes are counted as sold when the contract is signed, and existing homes are counted as sold only when the deal closes, which may be 30 to 60 days later.

Existing-home sales data, coming Monday from the National Association of Realtors, are expected to be down about 13% from August 2005. The annualized rate of 6.33 million existing homes sold in July represented an 11.2% decrease from last year.

The median sales price of existing homes, which is a good indicator of the market's momentum, was $230,000 in July, up 0.9% from the July 2005 price of $228,000, according to the Realtors group. That's smaller than the double-digit year-over-year gains posted in 2005.

Some parts of the country, including the Northeast, the Midwest and the West, are reporting falling home prices. The Realtors association has said the national median house price may fall in coming months, although any decline is expected to be limited. August numbers will be announced with the existing-home sales figures Monday.

Meanwhile, there's been a spike in the number of existing homes for sale. The Realtors group says 3.86 million homes were on the market last month, up from 2.76 million a year earlier. In addition to reflecting a diminished appetite on the part of buyers, that growing inventory may reflect the unwillingness of sellers to lower their asking prices enough to tempt buyers. With more houses for sale, buyers have less incentive to bid up prices, and home builders have fewer reasons to start construction on more units.

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Defying Trend, Some Homeowners Work to Make More of Less Space

2006-09-28T08:37:00.000-07:00

By Rachel Koning Beals

From MarketWatch

Sure, he's been heard to grumble about the home's lone bathroom, shared between two adults and three kids.

But residential designer Eric Hughes has few regrets about prioritizing detail, organization and high-end materials over sheer space in the update of his own 1950s ranch in Grand Rapids, Mich. Hughes and his wife chose quality and intimacy over a big expansion of their 1,300-square-foot home -- 900 on the main floor and another 400 in a finished basement that holds his professional office and a playroom -- that they bought four years ago.

Hughes, owner of Image Design, is a self-described disciple of architect Sarah Susanka and her "Not So Big House" book and lecture series. While the Not So Big philosophy applies specifically to housing design, it is part of a broader movement in society that attracts those who prefer to "think outside the box."

For many smaller-living advocates, it's all about thinking green. They're going for less land use and more energy savings, at times with so-called microhomes that often contain less than 1,000 square feet of living space. Others, like Hughes, are after the practicality of a modest footprint in an established neighborhood and the cheaper living expenses that typically come with it.

"In a lot of cases, houses are not fitting the way people live anyway. People feel isolated from each other. We're all only so big, and human scale is so important," said architect Marc Vassallo. "We won't find such a shock upon shifting to a smaller house if we admit we need one good space to watch TV...not three."

Susanka likes to say that it's not even always about living small, rather about living "right-sized."

"At first it was about cost savings. I was leaving a big design firm to start my own business," Hughes says. "Now, I'm a big advocate of quality over quantity, making smart decisions. A client survey I've conducted shows some 80% never use their Jacuzzi tubs after the first month. I say, don't design your house around selling it. Maybe what you really wanted was a great shower."

Twice as much house

For now, the statistics show that Susanka's brethren still form the minority. Figures from the National Association of Home Builders and the Census Bureau indicate square footage has more than doubled from the era in which the Hughes home was built, even as families in general are getting smaller. In 2005, the average floor area in a newly constructed home hit an all-time high at 2,434 square feet. Thirty years ago, the average was 1,645 square feet.

Despite this new high-water mark, some in the building industry focus on the fact that square-footage growth may be stabilizing; last year's figure is close to the 2004 average of 2,349 square feet.

Other stats make a similar case. In a recent poll of some 7,700 of its members by home-improvement reference service Angie's List, 47% said they live in a home under 2,000 square feet, while just 7% said their home is more than 4,000 square feet. Some 63% in the Angie's List survey consider their home just the right size.

There are those for whom living in a large "McMansion" is still the best route. They wouldn't dream of trading in multiple-stall garages, two-story foyers, and thousands of square feet. To this group, higher costs in cleaning, maintenance, utilities and taxes are worth it.

But since a home is likely the single largest investment most U.S. families will make, many new homeowners may not even have their own needs and likes in mind when they build or buy.

"There's a preoccupation with resale and the building industry doesn't usually help matters," Raleigh, N.C.-based Susanka said. "We're building rooms that made sense 100 years ago. But do you really need a family room and a living room?"

Scott Ervin and colleagues at St. Paul, Minn.-based Alchemy Architects have a different idea about building. They sell a series of modular, prefabricated homes and offices known as the weeHouse. Launched in 2003 with a cabin built in Pepin, Wis., the line is recognized for its signature rectangular form, flat roof and glass walls.

"Our clients tend to have a sophisticated design sense; they span the range between those who can afford any house they want and those just hoping to be able to own their own home," Ervin said. What they are all intrigued with, he said is "the idea that a limited kit of parts can actually increase the creativity and exploration of how a building fits on its site, not limit it."

Susanka says she's seen a shift in the Not So Big movement since her first book hit eight years ago. Motivation for building smaller then was often driven not only by a certain design esthetic but also by limited budgets and so was typically reserved for those just entering the housing market or for empty nesters downsizing from the family home.

Susanka says she's now writing for an audience that spans the economic spectrum and a range of ages; empty nesters make up about 25% of her current audience. And, she advises clients to consider roughly the same budget they'd have allotted for a bigger house, instead spending more on the details.

The Not So Big philosophy typically calls for building about one-third less in square footage than homeowners think they need. But the plans and models in Susanka's portfolio, found at www.notsobig.com, can range from $120 to $400 per square foot in construction costs. See Susanka's site

Susanka stresses the importance of discussing costs with a builder or architect regardless of a home's size. She says this may take on greater importance if building under the Not So Big mindset because a builder and a homeowner may not be on the same page, particularly if expanding on typical and widely used builder specifications. There may be hidden costs in a Not So Big home's many details, she says.

Yet it's just those details that make a smaller home live much larger. And details in the Not So Big world start long before home accessories and furniture are put in place. Often that means thinking beyond the builder's standard offerings in room arrangement, particularly placement of interior walls and in the plans for circulation spaces such as hallways, or rather, a lack of hallways.

Susanka says much impact can be gained in adding more dimension to a room. She does this by delineating space with arches, partial walls and with color and lighting changes. Graduating ceiling heights or separating rooms by pushing the traffic flow up or down a few steps between rooms can also make a difference. Often a third dimension comes in the smallest of touches -- a display niche at the end of a hallway, a row of cabinets carved out of the wall that holds a staircase. Repetition of elements, using the same shapes for instance, can go far to tie a whole house together and bring order.

Susanka also champions using the often-forgotten spaces: maximizing dormers with not just a window seat but a seat with a fold-out bed, turning a stair landing into a library with floor-to-ceiling shelves.

New nests

How a home relates to its setting also factors in the Not So Big philosophy. For some homeowners, an established neighborhood, usually featuring narrower lots and smaller existing homes, but often found near shopping districts and other amenities, means they don't have to sacrifice a comfortable and rewarding lifestyle by living in a smaller space, say the experts.

Condo developers also have this in mind as they're creating and reinventing space for the growing group of empty nesters and baby boomers now considering their housing options, says David Tufts, CEO of Coldwell Banker's The Condo Store.

This group may want to let go of space but not quality. Whether in a condo, townhouse or single-family dwelling, this demographic is after smart and carefree living, but they also want interior choices. And for the most part, they're getting them, Tufts says.

Tufts, based in Atlanta, says he's seeing traditional moldings, uniform high ceilings and other elements in condo buildings giving way to streamlined design and more use of glass and partial walls, a trend he believes allows occupants more flexibility in using smaller footprints.

Increasingly popular in smaller condo design is use of "swing" rooms, he says. That is, fewer rooms designated with a sole purpose -- bedroom, for instance -- but instead given more than one purpose, such as a combination den and guest room. Increasingly tech-savvy boomers and retirees want their units wired throughout, allowing for a floating office, of sorts, rather than having one room for this purpose. On-site storage, if not in-unit storage, is no longer a perk but a requirement, he says.

"It's a conscientious decision, a trade-off. Giving up space for lifestyle and time," Tufts said.

Susanka is also betting on an evolution from thinking about Not So Big as design to thinking about lifestyle. Her latest book, The Not So Big Life, is due out in May. "My books have been about living in three dimensions. This brings in the fourth dimension. And that's time," she said.

http://www.realestatejournal.com/

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New-Home Sales Rose in August Defying Wall Street Expectations

2006-09-28T08:36:00.000-07:00

By Jeff Bater

From The Wall Street Journal Online

New-home sales unexpectedly climbed during August, breaking a string of three declines as the median price for a house compared to a year earlier was lower.

Meanwhile, demand for durable goods unexpectedly fell during August in a fairly broad-based decline, and an indicator of business equipment investment dipped.

Sales of single-family homes increased by 4.1% to a seasonally adjusted annual rate of 1.050 million, the Commerce Department said Wednesday. July sales fell 7.5% to 1.009 million, revised from a previously estimated 4.3% decline to 1.072 million. Sales dropped 0.9% in June and 1.8% in May. Demand was flat in April.

Wall Street expected slightly lower sales in August. The median estimate of 25 economists surveyed by Dow Jones Newswires was a 2.5% decline to a 1.045 million annual rate.

Sales might get a boost from easing home prices. The average price of a new home decreased to $304,400 in August, down from a revised $314,200 in July -- yet above $295,000 in August 2005, according to Commerce. The median price rose to $237,000 from a revised $236,200 in July; the price in August 2005, however, was higher, at $240,100.

Year-to-year, sales were down 17.4% since August 2005 as the housing market softens. The National Association of Realtors reported Monday sales of previously owned homes fell a fifth month in a row during August even as the median price sank year-over-year for the first time since April 1995.

Financing costs are higher than a year ago. The average rate on a 30-year mortgage in August was 6.52%, which, while below July's 6.76%, was above August 2005's 5.82%.

Declining prices can make homeowners feel less wealthy and chill their spending on goods and services -- worrisome for the economy. On the other hand, falling prices can help the housing market by making homes more affordable and reducing the rising tide of unsold homes.

There were an estimated 568,000 homes for sale at the end of August, the Commerce data Wednesday showed. That represented a 6.6 months' supply at the current sales rate. An estimated 570,000 homes were for sale at the end of July, a 7.0 months' inventory. The August 2005 supply was 4.6. Growing supply gives buyers the power to wait for an acceptable price, analysts say.

By region, new-home sales in August rose 11.1% in the South, 12.2% in the Midwest and 21.7% in the Northeast. Sales fell 17.7% in the West. Based on figures unadjusted for seasonal factors, an estimated 91,000 homes were actually sold last month in the U.S., up from 85,000 in July.

Durable Goods Weakness

Durable-goods orders decreased by 0.5% last month to a seasonally adjusted $209.75 billion, the Commerce Department said Wednesday. Durables had gone down by 2.7% in July, revised from a previously estimated 2.5% drop. The last back-to-back decline occurred in April and May 2004, when orders fell 3.3% and 0.9%.

A key barometer of business equipment spending -- orders for nondefense capital goods excluding aircraft -- decreased by 0.3%, after rising 0.9% in July. Shipments for nondefense capital goods excluding aircraft increased by 0.3%, after climbing by 1.6% in July; the shipments are used in calculating gross domestic product.

The 0.5% drop in overall durable goods orders surprised Wall Street. The median estimate of 27 economists surveyed by Dow Jones Newswires had durables up by 0.5% during August.

A report earlier in the month indicated slowing growth in the manufacturing sector. The Institute for Supply Management said its index of manufacturing activity moved to 54.5 in August from 54.7 in July. And another report showed mid-Atlantic region manufacturing unexpectedly dipping into negative territory during September; the Federal Reserve Bank of Philadelphia reported a -0.4 reading of its business conditions index. Economists had expected 15.0. August saw 18.5 on the gauge.

Durable goods orders would have fallen further in August if not for a boost from the transportation sector. Commerce reported transportation orders increased 3.7% in August, after falling 9.5% in July. Orders for commercial planes dropped 21.9%, while military aircraft orders increased 9.8%. Motor vehicles and parts rose by 4.4% last month.

Orders for all durables except transportation goods declined 2.0%, after flattening in July. Demand increased 2.6% for fabricated metals but fell 9.2% for electrical equipment, 2.1% for machinery, 4.7% for computers and electronics, and 2.1% for primary metals. The drop in electrical equipment was the largest since 11.7% in January 2002.

Capital goods orders fell by 2.4% last month a second time in a row. Non-defense capital goods -- items meant to last 10 years or longer -- fell 3.5%. Defense-related capital goods orders increased by 6.1%.

Orders for everything except defense goods decreased 0.8% last month, after going 2.2% lower in July.

Durable-goods inventories of manufacturers increased 0.2% last month. Unfilled orders climbed by 0.4%, and shipments increased 1.9%.

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For Newark, Revival May Owe A Lot to Location and Affordability

2006-09-28T08:35:00.000-07:00

By Maura Webber Sadovi

From The Wall Street Journal Online

Yet in recent decades, much of the city hasn't realized the potential its geography affords.

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Cooling Home Market Spurs Interest in Foreclosure Sales

2006-09-28T08:34:00.000-07:00

By Ruth Simon

From The Wall Street Journal Online

Rising interest rates and a cooling housing market are whetting the appetite of real-estate bargain hunters and fueling interest in Web sites that list homes in, or near, foreclosure.

Economists expect delinquencies and foreclosures to increase from today's historically low levels. Nationwide, the percentage of home loans on which payments were past due fell to 4.41% on a seasonally adjusted basis in the first quarter, after rising to 4.70% in the fourth quarter of 2005, according to the Mortgage Bankers Association.

A variety of Web sites have sprung up to cater to home buyers and investors looking to purchase properties in or nearing foreclosure. They include RealtyTrac.com, which ranked seventh among real-estate Web sites in terms of unique visitors in May, according to comScore Media Metrix, a unit of comScore Networks Inc. Foreclosure.com, another popular offering, not only runs its own Web site, but also says it supplies data to more than 200 other Web sites.

You can browse the Web sites at no charge, but getting complete access requires a weekly or monthly fee, typically $40 to $50 a month. The federal government operates its own site, www.homesales.gov, that is free and provides information about foreclosed properties being sold by the Federal Housing Administration, the Veterans Administration and the U.S. Department of Agriculture.

To see how these Web sites work, we checked the government site and three for-profit alternatives, RealtyTrac.com, Foreclosure.com and Foreclosures.com, for listings in one neighborhood near Atlanta. We also looked at the information each Web site provides and talked to real-estate brokers who specialize in foreclosed properties.

We learned that novices should approach the foreclosure process -- and the Web sites that sell foreclosure listings -- with care. Finding a good buy on a foreclosed house requires hard work and can carry significant risks. Critics say that Web sites selling foreclosure listings often contain outdated information or listings on houses that aren't ready for sale; some try to direct would-be buyers to partners with whom they have a financial relationship or to seminars and other products.

"We run into a lot of problems with foreclosure Web sites because a lot of the houses can't be sold" because various legal requirements haven't yet been met or the lender hasn't readied the property for sale, says David Benham, owner of Benham Real Estate Group in Charlotte, N.C., which sells foreclosed homes on behalf of lenders.

Keeping the foreclosure listings up-to-date "is always an issue," says Brad Geisen, chief executive of Foreclosure.com. "Not every owner in foreclosure is going to want to sell their home," he adds. In the early stages, "it is a distress situation that is a possible opportunity." Alexis McGee, president of Foreclosures.com, says her site was created to "accommodate investors." The foreclosure listings "are not listed like [multiple listing service] listings," she adds. "We don't check to see if it's sold."

Investors aren't the only ones who look at foreclosure Web sites. RealtyTrac says about 20% of its subscribers say they are first-time home buyers. The company estimates that another 20% are looking for their next home or for a second home.

The federal government maintains its own inventory of the properties it owns, while for-profit Web sites gather much of their data from public records such as the county recorder, the tax assessor and the county courthouse.

The rules vary from state to state. Typically, properties first appear in the commercial databases when the lender files a foreclosure action with the local court. At this point, the borrower still has options, including working out a payment plan with the lender and selling the property to pay off the debt.

If the problem isn't resolved, the house is put up for auction. Buying at auction can be risky, in part because buyers typically must have cash in hand, can't back out of the sale, have little or no information about the interior of the house and no guarantee that the title to the property is clear.

If the property doesn't change hands at auction, the lender typically turns it over to a real-estate broker specializing in the sale of bank-owned properties, who cleans up the yard and makes repairs before putting the house back on the market. Properties are typically priced "at or just below market value," says Cindy Simpson, a vice president with Harry Norman, Realtors in Atlanta.

The federal government's Web site, www.homesales.gov, has the smallest number of listings because it covers only government-owned properties in the final stage of the foreclosure process. Buyers can search by city and by the size of the house they are looking for. For homes sold by the Department of Housing and Urban Development, listings include a photograph of the house and a detailed report on the property and its condition. HUD says it gives priority to people who want to live in the homes. The federal Web site also includes details about buying a foreclosed home from the government and links to more general information about home buying. For the most part, the site was easy to navigate.

The for-profit Web sites cast a wider net; they begin collecting information when a notice of default is filed. Buyers can search by location and by specific criteria, such as the size of the house and the price range. Unlike the government site, there's no photo and no detailed information about the home's condition. Each of the three sites offers a free seven-day trial; to take advantage of the trial, users generally must provide the sites with their credit-card information. Foreclosure.com charges $9.95 a week for an online subscription, Foreclosures.com charges $49.95 a month and RealtyTrac has a $39.95 monthly fee.

The for-profit Web sites all talk about the large number of properties they feature. Foreclosures.com and Foreclosure.com each say that they have more than 1.2 million listings; RealtyTrac says it has "over 500,000 properties -- updated daily." All three say they update their information regularly.

But even some companies acknowledge that some of the information they offer is out of date. "The most common complaint is either the property is not on the market yet or the property is already gone," says Rick Sharga, a vice president of RealtyTrac Inc. "If there are 1,000 properties in an area you are interested in, there are probably 100 that represent something of a buying opportunity. You might be able to get in touch with 10 of the homeowners and maybe make an offer on one or two."

Figuring out which site has the most accurate information would require checking out hundreds of thousands of listings. But our spot check easily turned up information that was outdated. On Foreclosure.com and Foreclosures.com, for instance, we found a three-bedroom, one-bath home priced at $101,900. Ms. Simpson, the Atlanta broker, told us the house had been under contract for 30 to 45 days.

Then there was the three-bedroom, one-bath home that has been on the market for several months. Foreclosure.com was the only one of the three sites to correctly report that the price had been cut to $145,900. RealtyTrac.com pegged the property's value at roughly $204,000, while Foreclosures.com valued it at $264,000. The Web sites say that such numbers are estimates of market value and aren't a replacement for a formal appraisal.

Foreclosure.com was the only one of the three sites to provide the name of the broker handling the sale of bank-owned properties and contact information for the broker. RealtyTrac, meanwhile, suggested we use a "local specialist" who pays the company a flat fee to be a featured agent for a particular area.

Customers who sign up for the free seven-day trial at RealtyTrac.com automatically have their email address sent to a broker, unless they opt-out. We received an email from our "personal Realtor" within hours of signing up for the service. RealtyTrac also provides links to lenders, credit-score providers, movers and other businesses that pay to advertise on the site.

The other two Web sites also had additional products to sell. Foreclosure.com listings include a link to HomeSmart.com, which pays a fee to be featured on the Web site and sells reports that detail home-purchase risks and estimate property values. The Foreclosures.com site included offers for teleconference calls, home seminars, Web seminars and personal-coaching sessions.

We found some useful information about the foreclosure process on the Web sites, such as the information about state foreclosure laws. But the content on these sites is often mixed with promotional materials.

-- Hannah Kate Kinnersley contributed to this article.

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Rising Foreclosure Rates Point To a Normalizing Home Market

2006-09-28T08:33:00.000-07:00

By Danielle Reed

From The Wall Street Journal Online

As home-price appreciation has tapered off and mortgage rates have risen, foreclosures have started to pick up, with the Midwest region hit hardest.

The rate of foreclosure -- the process by which banks can ultimately take back the properties that secure mortgages -- is a key indicator that real-estate analysts and investors use as a signal of market distress.

In the past several years, foreclosures across the U.S. have been hovering around historically low levels, as home prices have risen nearly 50% in five years. This appreciation enabled borrowers to sell their homes relatively easily to resolve mortgage difficulties.

Now, a survey of the latest data confirms, that is starting to change, with an uptick across the U.S. in foreclosure rates and mortgage delinquencies (or late mortgage payments). But even the new higher rates of foreclosure and delinquencies are still low in historic terms.

Nationally, the number of mortgage loans that entered some stage of foreclosure rose to 117,259 in February, up 68% from the same month a year earlier, according to Irvine, Calif., online foreclosure-data service RealtyTrac.

Delinquencies are up as well. Data provider LoanPerformance, a subsidiary of First American Real Estate Solutions, reported that 3% of the most vulnerable loans -- those made to borrowers with less than a stellar credit history -- were 90 days delinquent in February. That is up from 2.84% in February 2005. Meanwhile, 90-day delinquencies for loans made to borrowers with better credit were up to 0.76% in February, from 0.67% a year earlier.

The rise in delinquencies isn't surprising, according to Doug Duncan, the Mortgage Bankers Association chief economist. In its own quarterly survey, for the fourth quarter of 2005, the association showed a 0.26 percentage point uptick in the rate of mortgage delinquencies as well as a 0.01 percentage point increase in the foreclosure rate from the third quarter.

The MBA has "been expecting an uptick in delinquencies due to a number of factors," Mr. Duncan said in the release, including greater prevalence of riskier adjustable-rate and subprime mortgages, as well as higher interest rates and energy costs.

Digging a little further into the data shows that three states in the Midwest consistently have among the highest rates of loan foreclosures and delinquencies: Indiana, Ohio and Michigan.

The reasons behind the higher rates of foreclosures and delinquencies vary somewhat, but there are two primary drivers, said Lou Barnes, a partner with mortgage banking firm Boulder West Financial Services in Boulder, Colo.

One is family economic distress, often related to job loss or divorce. Another is a slowing pace of home-price gains. And what the states hit hardest by mortgage foreclosures have in common is relatively low home-price appreciation (compared with the national average) over the past few years, typically combined with below-trend job growth.

In Ohio, 3.22% of loans were in foreclosure at the end of the fourth quarter, according to MBA data. The national level was 0.99%. Indiana had 2.75% of loans in foreclosure, and Michigan 1.75%. The entire "East North Central" region of the country, which includes Indiana, Ohio, Michigan, Illinois and Wisconsin, had 2.05% of its loans in foreclosure, the highest regional level in the nation, according to the MBA.

Still, even with the increase in foreclosures and delinquencies, the numbers are generally not alarming to economists, as they are rising from historically low levels. The market is simply returning to more typical levels, this line of thinking goes.

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Buyer Agents Vs Seller Agents: What's The Difference And Should I Care?

2006-09-18T08:04:00.000-07:00

By Matthew McDonough

Are you unsure of what type of real estate agent to use when you are selling your home and/or buying a new home? Understanding the function of a real estate agent and what their relationship to you as a seller or buyer is tremendously important. For a first time home buyer or seller you should be aware of some facts, and clear out the cobwebs of confusion on the responsibilities and duties of a real estate agent.

Real estate agents, depending on the state in which you live, may only be allowed to act only as a seller’s or buyer’s agent. In many instances however a real estate agent may take on a dual role of representing both the seller and buyer. This type of agent is known as a dual agent. In other words they have a duty to sell the home for the best possible price for the seller, and at the same time are committed to get the best asking price for a buyer. This can be a somewhat upsetting for many people, but the best defense is being in the know about the legal and moral responsibilities associated with a real estate agent’s dual agency representation, and how you can feel positive about working with them.

In most states real estate agents are legally required to state which party they are working for. Most of the time real estate agents work for the individuals that are selling a home. Make sure to ask, if you are unclear so to alleviate any nervousness on your part. Always presume that any real estate agent is working for a firm that represents both a seller and a buyer, and if you are a buyer, make sure to keep to yourself any information that may affect any deals that are offered for your purchase of a house. Buyer’s agents have a loyalty only to the buyer. This is established by a signing of a contractual agreement between both the agent and the buyer. The buyer should be aware that agents are held to a legal and moral obligation to not reveal any personal facts not only to the home seller, but to the real estate agent. Material disclosure is allowable though about the property, such as any known pest infestations, or problems with the structure itself. A dual agency for a real estate agent is usually understood for them if they represent a buyer; make sure to check into the real estate agent’s status for your own serenity. Nonetheless, contract protection is afforded for anyone that is interested in purchasing a property through an agent that represents a seller’s interest by signing a contract to represent both.

If you are selling your home and you will be searching to buy a home in the same area you need to expect a reasonable amount of service from the real estate agent that represents you. The agent’s goal should be to fully represent your best interests. Your agent needs to clearly inform you if they will require you to sign an exclusive contract. This legally binding contract will require you to work with that agent only. You should always search around for an agent that will allow you to have other realtors working on your behalf to locate a new home for you. All agents should work diligently to help you sell your home by providing comparisons studies of the properties in your area, to handle any inspections or appraisals, and to work with your mortgage lender and in the loan application process. He or she should be more than willing to consider and respect your wishes when scheduling an open house for either other agents or for the general public. Agents should always be courteous about appointment times to meet with you, and should always leave a cell phone in case of unexpected issues surrounding the sale of your home. Your buyer’s agent should clearly explain all aspects of the contract to you. Issues such as contract compensation and their exact fees for selling your home, along with other important details such as how long you must list your home with them should be covered in a written contract. Never take their word for it. Get everything in writing. Be careful, verbal contracts, maybe legally binding.

Buying or selling a home should be a pleasant experience. Selling and buying is a serious decision that can influence your financial and emotional well being for years to come – consequences of how informed you are will be long lasting, many years after you have left the bargaining table.

Matthew McDonough is a real estate investor and a former real estate agent in New York. He owns property throughout the USA. He wants to share is knowledge and operates the website Inside Real Estate Info

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Unbeatable Return On Investments

2006-09-18T07:58:00.000-07:00

By Paul Pratt

You must be able to obtain suitable financing on the property for it to be a good deal. The type of financing available, specifically to you, can make the property more or less desirable. What may be a good deal for someone else may be a bad deal for you.

This is usually determined by the type of financing that you are able to obtain to purchase the property. Do not accept financing that is so expensive that it will produce a negative cash flow just because it is the only financing that you can qualify for. If you can afford the negative cash flow and are sure that you will be able to qualify for a more reasonable loan that will allow the property to produce a positive cash flow in the near future, the purchase may not be such a bad idea.

The main point is, if you cannot hold on to the property with financial comfort, whether or not it would be a great deal for someone else who can obtain better financing, it is not a good deal for you.

The type of financing you are able to obtain will also affect your ROI, or return on investment. The ROI determines the rate of return an investor will earn on the amount he was required to put down in order to obtain the property. This rate is calculated by dividing the property's annual net income by the investor's down payment.

For example, if a property's net income is $4,000 per year and the investor puts down $2,000 to acquire the property, then his ROI is 200 percent, ($4,000 / $2000 = 200). If he did not have to come in with a down payment in order to acquire the property, then the return on his investment is infinite. You cannot get this type of return by placing $2,000 into a savings account at your bank! The investment that offers the highest ROI without significant risk is the best place an investor can put his money. The higher your ROI, the greater your positive cash flow.

In real estate, there are two types of ROIs:

Simple ROI: This is when the ROI is determined by taking into consideration the annual cash flow that the property produces without taking into consideration the property's appreciation, average annual rent increase, and principal payments being paid from the tenants' rents.

Complex ROI: This ROI does include a property's appreciation, rent increase and principal payments, as well as the property's annual cash flow. To find this, you add the dollar amount of the average annual appreciation, average annual rent increase and average annual principal payments into the net income before dividing the property's annual net income by the investor's down payment. The average annual appreciation and rent increase depends on the area. You can find out what these averages are through the area demographics often found on the Internet, in local real estate offices and at property management companies.

Once you have these percentages, multiply the appreciation rate by the purchase price of the property to determine the property's amount of annual appreciation; then multiply the rent increase percentage by the property's gross annual rents to determine the amount of annual rent increase. To determine the average annual principal payments, just divide the entire loan amount by the number of years it will take before the loan is paid off. Now you are ready to calculate the Complex ROI.

For example, if the property's annual net income is $4,000, its average annual appreciation is another $4,000, the average annual rent increase is $320 and the average annual principal being paid off is $3,333 then the ROI is $11,653 ($4,000 + $4,000 + $320 + $3,333) divided by $2,000 (the down payment) = 582.6 percent per year. Wow! This is the most accurate determination of an investor's return on investment.

About the Author:
Paul Pratt teaches simple steps to achieve unprecedented real estate wealth, making every situation profitable. His successes include a college drop-out, MBA graduate, waiter, and a stay-at-home mom. Live your dream at MYreiTEAM.com

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A Closer Look at Gated Communities in the USA

2006-09-18T07:55:00.000-07:00

by Natalie Aranda

Beautiful and luxurious gated communities often resemble small towns, complete with shops, security, and environmental services. The majority of people in the United States see gated communities as a lavish lifestyle with spas, saunas, and private restaurants, but there're actually many affordable homes in gated communities across the states.

Regardless of where you live in the United States, there are gated communities in every part of the country. According to recent surveys, over eight million people live in such gated homes. From Arizona gated communities to George gated communities, these places are extremely popular for older couples who no longer have children to watch. They all seem to flock to convenient living, especially since all of the luxuries are right at their fingertips.

One of the most popular gated communities in the U.S. is located in Arizona. Built against the hot sun and beautiful backdrop, residents are able to escape and enjoy the important aspect of life. The majority of people enjoy Verrado, which is a popular Arizona gated community. With golf courses, parks, and health clubs all looking over the water, it is no wonder that residents are dying to get in. Prices generally range from $100,000 to half a million dollars.

Other hot spots in the United States are Florida gated communities. No matter where you live, chances are you have craved visiting such a warm area. A beloved gated community in the infamous tourist destination is Stone Creek Ranch. Here you can enjoy the lakeside homes with an astonishing view. If you are lucky enough to get into this area with an abundance of environmental service, you will feel as if you went to Heaven. Each home is equipped with a large amount of land, surrounded by water, and in the middle of a beautiful forest. It is simply a breathtaking sight to see if you are able to visit.

What most people realize about gated communities is that the most popular ones are always in warm climates. Georgia gated communities and California gated communities are all the rage, even though they are on separate parts of the U.S. Even though each area brings something different to the table, people love vacationing or even living in the warm weather. If you add the luxury of gated communities with the environmental services and convenient places near by, you can realize why people do not want to leave these hideouts.

Gated communities may seem like a place for only the upper class to enjoy, but not all of them are millions of dollars. No matter where you live, gated communities thrive in every single area. Whether it is a Georgia gated community or simply a California gated community, all of these places are seen as peaceful getaways. With spas, security, and personal assistance around the clock, it is no surprise why these luxurious homes are becoming more and more popular.

About the Author

Natalie Aranda writes on home and family.

http://www.goarticles.com/index.html

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How to Beat the Bursting Housing Bubble

2006-09-18T07:53:00.000-07:00

by Timothy K. Clark

Many say that the housing bubble has burst and it's very difficult for people to sell their homes. Housing sales have decreased dramatically the past few months, and housing prices are falling all across the country. Many homeowners are still holding on to unrealistic expectations and many would-be buyers are making ludicrous lowball offers, so the market is basically at a stalemate. As inventories jump, prices will have to plummet. Many don't expect it to get better until at least 2008.

Last year and part of this year, home prices skyrocketed to ridiculous levels. And now, no one wants to be the last person to have paid way too much to buy a house.

If you own your house and waited too long to sell, I've got a few tips to help get your home off your back:

1 - Start with your Real Estate Agent - Make sure your current agent has a ton of experience. Used to be you could hire any agent, with only 2 months on the job, and the house would sell before her or she pounded the "For Sale" sign into the ground. No more. Get someone with experience, name recognition in the community, and superior sales skills.

2 - A Proactive Agent - Get an agent that will truly "pound the pavement" for your listing. You need a proactive agent that will be out there, moving and grooving on your property. Many of the newbie agents that got into the biz over the last two years will be in "career change" mode in the next few months. The real agents who know how to work will be the ones who survive this cycle. Find one who will work for you!

3 - Know an Agent's Quality - A great agent will guarantee his or her service in writing. A bad one would run for the hills from a guarantee. A great agent will not make you sign a long term listing agreement. A bad agent will freak out if you won't sign a fat contract. If it's not working out, you need to be able to cut the cord.

4 - All the World's a Stage! - I got an email from a House Stager the other day (her business is called "ReFluff Your Stuff" in Georgia - I love that name!), about listing her business on our main site, so I thought I'd do some research. Hire a stager to go through your house and make your house sellable. Many people wrongly think staging is too expensive. Not true. It's about being creative, not spending money. It's actually possible to sell your home "as is" (and not stage) and lose money.

5 - Realistic Pricing Plans - You're not going to get the big profit you thought you would. Plan accordingly for a much more stingy market. Let your agent do the research on the right price for your home, in your neighborhood. I would recommend not leaving your house on the market too long (and expect some really low lowball offers.) If you've already moved and cannot sell, consider renting the house out at a reasonable rate to help provide some relief.

6 - Self Staging - You're a Do-It-Yourselfer, huh? Okay. Know this - any wild and crazy decorations, furniture, fixtures, colors, and designs in your house will turn off the average John Q. Public homebuyer. You might have the most clever and eclectic taste on the planet. Your artsy friends think your house is "to die for!" But dark, rich colors on the walls and ultra-modern furniture can turn off today's picky buyer.

- To save money, make sure you have Curb Appeal: manicure the front lawn, add some colorful flowers, paint the shutters, trim bushes, paint the front door a nice neutral color, brush falling leaves off the roof, etc. Lay down sod if the summer beat up your grass. Add a new doormat.

- Is any room in your house red? Blue? Bright green? School bus yellow? Paint it. Creams, whites, pale yellows, coffees, and light earthy greens. With white trim around the doors. Use an eggshell paint to keep off fingerprints and make it easy to clean before an Open House.

- Declutter. Remove those piles of books, magazines, and newspapers. Less is always more. Remove anything and everything knick-knacky. Take out all your family photos. They want to picture themselves living there. Again, less is more. Makes the house look and feel bigger.

- Check under your 70's orange shag rug and pray someone put hardwood floors there. Pull it up, rent a buffer (or hire someone to simply re-finish the floor), and you've got an inexpensive way to add home value.

- Turn cluttered kid's rooms into a guest bedroom. Not everyone has or likes kids. It could turn them off to see a pink bedroom with ponies and stuffed animals.

- Steam clean the carpets. Remove pets to the Mother-in-Law's house (you might be used to the odors, but...) if you have them. Use new fresh towels, candles, and flowers during an Open House.

- Replace blinds. Keep curtains open during showings - natural light sells.

- Make sure the house has "feature cards" in every major room (sell features, such as 'air conditioning', 'new water heater', 'finished basement') for showings.

- Get rid of dirty clothes, trash in waste baskets, mail on counters, make it look like no one lives there. Or a photo layout in "Metropolitan Homes.

Good luck in selling your house!

About the Author

Timothy K. Clark is the Director of Marketing for the valuable website ConstructionDeal.com (http://www.constructiondeal.com) which specializes in fulfilling all the construction needs of homeowners and contractors. We match project owners with contractors for residential and commercial improvement, repair, or remodeling work.

http://www.goarticles.com/index.html

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Selling Your House Quickly

2006-09-18T07:51:00.000-07:00

by John Mac

Selling your house is one of the most stressful activities you will have to undertake during your lifetime. With approximately 1 in 3 house sales falling through at some stage before contracts have been exchanged it can make for an extremely frustrating & time consuming period. The average time period to sell your house from first putting it on the market to exchanging contracts is 4-6 months. Can you afford to wait this long, will you loose the chance to move into the house of your dreams.

Many people have unrealistic aspirations when it comes to selling their house, they often want a quick sale for a high price, unfortunately these two factors do not sit well together. In todays slowing market unless you are extremely lucky in order to secure a quick sale you will invariably need to lower your price. How much you are willing to lower your price may determine how quickly you sell your house.

If you are in no rush then you should be able to obtain the market value, or somewhere near, for your house. On average houses sell for 93% of their asking price.

There are several steps you could take to make your home more attractive to potential buyers such as re-decorating, tidying the garden, offering to leave carpets & curtains or certain white goods such as Fridge/freezer or washing machine. Some of these things you could do yourself others you may have to pay for. Simply re-painting walls & woodwork in your house may make it a lot more attractive, the smell of new paint may just do the trick. Does the outside of your house look tired, first impressions are of vital importance, simply adding a fresh layer of paint to the outside walls and getting someone to make your garden look like it has always been well looked after will give viewers of your property a great first impression.

Picking an estate agent is also a key factor in selling your house, don't just go with the one that gives you the highest valuation for your house - this may be an unreasonable price which will not attract potential buyers. Do your homework & try and find out who the best estate agent in your area is, talk to other people try and find those who have recent experience of selling their houses, they may point you in the direction of a good local estate agent who will have plenty of potential buyers for your property.

However if you need to sell your house fast then your best course of action may be to sell to a property trader who will be a cash buyer able to do a deal very quickly. You will have to be willing to accept a "trade price" for your house but you should expect a good property trader to complete exchange of contracts in about 4-5 weeks. They will generally pay all the legal fees for you plus you will have no estate agent fees meaning that you will keep all the money left over from your sale less any outstanding mortgage.

About the Author

John Mac is Author & Owner of quickcash4yourhouse.co.uk a website including information about how to get quick cash 4 your house.

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How Low Will Home Prices Go? A Reporter Goes House Shopping

2006-09-18T07:43:00.000-07:00

By Terri Cullen

From The Wall Street Journal Online

My younger sister Melissa and her husband Joe are ready to move.

Today the couple live in an apartment in New Jersey just across the Hudson River from Manhattan. At 33, Melissa's had it with city life, tired of dragging bags of groceries up steep flights of stairs, frustrating hunts for a parking space and worrying about having her new car stolen or broken into.

And they know what they want: a three-bedroom, single-family home near us in Monmouth County, N.J. Melissa wants to move closer so our families can spend more time together. Joe lived in the area as a child, and he's eager to return.

But our neck of the woods has seen some of the steepest home-price increases in the nation over the last several years. In the second quarter of 2006, the median price for a single-family home in our region was $393,600, more than double the median of $188,200 in 2000, according to the National Association of Realtors.

Those price increases have reflected fierce competition, something my sister knows all too well. Last summer Melissa and Joe found the perfect place -- a roomy home near us on a fair-sized lot for a hair under $250,000. (Roomy was key -- standing 6 foot 5 plus, Joe's a guy who needs space.) After making an offer, they thought the house was theirs, only to see it snatched out from under them at the last minute by a counteroffer for $10,000 more. That was too much for my sister; deeply disappointed, she and Joe stopped looking. Still, they did keep an eye on real-estate sites, hoping for signs of a letup in the insanity.

Recently she's seen reasons for hope: Far more homes were showing up in their price range, and others she'd seen a year ago were being relisted at reduced asking prices. Melissa decided it was time to look around again, and last weekend she asked me to come along on a tour of open houses in her price range. My sister had a list of homes she'd found online, but I suggested we tour as many open houses as we could to get a feel for the market.

What we saw was bleak news for sellers in our region, but good news for buyers like Melissa and Joe: block after block of open-house signs. In fact, we were hard-pressed to find a street that didn't have at least one home for sale -- and many had more than one. What's more, most of the 20 or so homes we visited were vacant -- a sign that homeowners have moved on and are motivated to sell, or that speculators are looking to unload properties before prices go any lower. (Asked why one home was vacant, one agent said frankly: "This was a 'flip' that flopped.")

Though some of the agents we encountered continued to promote their "charming" homes as "a steal," a surprising number were more candid. "The owner way overpriced this home," said one. "I bet if you offered $30,000 less they'd jump at it." We believed her, because she was running the open house as a favor for another agent.

Another sign of a turning market: We saw very similar houses with prices all over the map -- ranging from the low $200,000s to $270,000. That's evidence that sellers aren't sure what houses are worth these days, with some reluctant to accept that market dynamics have changed.

"They look at home-price comparisons from a year ago when there was far more demand than supply," says Pat Lashinsky, senior vice president of Emeryville, Calif., real-estate firm ZipRealty. Now that there's excess supply, he says, sellers need to be more willing to negotiate.

One agent on our tour encouraged Melissa to look at homes "in the $270s or $280s" -- well out of her price range -- and make lowball offers. Think that wouldn't work? We encountered a husband and wife going the "for sale by owner" route, with an asking price of $315,000. While his wife pointed out the home's features to my sister, the husband gave me a wink and whispered, "Don't let that $315 scare you, we're extremely negotiable."

After our exhausting open-house blitz, Melissa asked for my thoughts. Though I'm too young to have experienced the 1980s real-estate market implosion, something told me that things are going to get a lot worse for sellers before they get better. To get an expert's take, I asked Robert J. Shiller, a Yale economics professor, for his insight on where the East Coast real-estate market may be headed.

"We don't know exactly what's going to happen because we've just experienced the biggest housing boom this country has ever seen," he says. In addition to homeowners struggling to sell existing homes, construction is at near-record levels: The last time this much inventory entered the market was 1950, when builders were building suburban homes for soldiers returning from war, he says.

Prof. Shiller suggests that the Japanese housing bust may provide a precedent. Home prices there remained depressed for a decade before the market recovered. He says: "The real question is, 'Is this the beginning of a major period of decline as we saw in Japan, or will we see a kind of sharp and sudden correction?' "

Despite evidence of a cooling real-estate market, Melissa and Joe decided they weren't quite ready to wade back in: They'll take the market's temperature again in the spring.

That settled, my sister wanted to know what I thought they could reasonably afford. When they began looking, Melissa believed homes around $250,000 to $260,000 were in their price range, based on the going mortgage rates. But as rates have marched steadily higher, the maximum they can afford to borrow has become a bit of a moving target. To pinpoint how much they could afford, I told Melissa to plug in the numbers on our home-affordability calculator; after doing so, she estimated the most they could afford was a $230,000 loan, assuming they put $20,000 down.

Affordability has long been a problem for first-time home buyers who are strapped for cash. Mortgage payments are taking a bigger bite out of household incomes: The median monthly payment as a percentage of income was 24.3% in July 2006, up from 20.5% in 2000. And now double-digit jumps in home prices in some areas of the country -- like ours -- are even squeezing households with higher-than average income.

In 1992, when he was 25, Gerry bought a three-bedroom house on a 50 foot by 100 foot lot for $134,000. The home was located in one of the coastal towns Melissa and Joe have been looking at. Money was tight for a few years, but he managed the monthly payments with no problems. Today, comparable homes are listed in the same neighborhood in the $400,000 range, three times as much. But Melissa and Joe's household income is less than double what ours was back then. Home-price inflation had clearly outpaced incomes.

To get into pricier homes, many homebuyers have turned to adjustable-rate mortgages, which offer low upfront interest rates that fluctuate over time. But as these loans begin to reset, rising interest rates have begun to take a toll on family finances, as this article notes.

For this reason, I've urged my sister to avoid ARMs, even though there's a possibility she and Joe might want to upgrade to a nicer home within seven years -- the average length of time before homeowners either sell their homes or refinance their mortgages. A 30-year fixed-rate mortgage averaged 6.53% statewide in New Jersey for the week ending Sept. 8, according to HSH Financial Publishers. Compare that to 5.48% for a one-year ARM.

True, an ARM would allow Melissa and Joe to get more home for the money: Using this calculator, Melissa used the terms of two mortgages she's comparing and found her monthly mortgage payment would be $1,458 with the fixed-rate loan, and just $1,303 with a one-year ARM if rates remained where they are. But that's a big if: If rates hit the 12% cap, she'd be looking at a monthly nut of $3,252. The thought of a sudden mortgage-payment increase of even a few hundred dollars makes my sister queasy, so she agreed the fixed-rate loan is a better fit.

I also urged her to tune out mortgage brokers who tell her she can afford a much more expensive home by using exotic loans such as interest-only mortgages or option ARMs, which let you choose how much your monthly payment will be. These loans leave the homeowner at risk of being "upside down" on their loans, where the mortgage is greater than the value of the home. If forced to sell, they could be in serious trouble.

Finally, since Melissa and Joe have decided to wait to see how market conditions unfold, I suggested they begin "paying" her mortgage now so their first payment won't come as such a shock to the system. Their current rent is roughly $700 (yes, a spacious apartment can still be had near New York City for less than a grand a month).

So, back to the math: If their monthly mortgage payments are likely to be in the $1,500-a-month range, Melissa and Joe should start using the difference ($800 a month) from their disposable income to either pay down debt or save for a larger down-payment. That will help when the time comes for them to hop off the fence and become first-time homeowners.

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Mortgages That Offer Relief From Soaring Utility Bills

2006-08-01T13:07:00.000-07:00

By Stephanie I. Cohen
From Marketwatch

As home energy bills soar, government agencies and private lenders are offering homeowners thousands of dollars in financing to seal off drafty windows and purchase energy-saving appliances.

These long-term, low-interest mortgages and loans are aimed at efficiency-minded homeowners who want to cut their utility bills. Borrowers can often arrange 30-year loan periods and interest rates below 10%.

Home buyers that find the perfect house with ancient heating and cooling systems and 20-year old appliances can add an additional $35,000 to their mortgage to improve the energy efficiency of the property using a Federal Housing Authority program.

While the program is aimed at allowing home buyers to tackle a broad array of home improvement projects, such as adding a new roof and replacing the plumbing, the funds can be used to upgrade a heating or air conditioning system, add insulation, weatherize doors and windows and purchase high-efficiency appliances, according to the agency.

The Federal Housing Authority's Streamline K loan program was unveiled in April, 2005 and offers a 30-year mortgage with a fixed or adjustable interest rate set at current market rates. It is a new take on an older FHA loan program that homeowners often found too cumbersome to complete. Check the HUD Web site for more information.

The average loan for the updated program is between $18,000 and $20,000. A couple hundred loans have been administered since the program launched last year but FHA sees interest among lenders ramping up.

The program offers a way to "bring today's energy technology to yesterday's houses," said Doris Ikle, president of CMC Energy Services, in Bethesda, Md. CMC performs audits and energy upgrades for residential customers. Ikle said she has received calls from consumers interested in the new FHA program.

"When people are buying a house particularly if it is an older house...they want at this point to reduce their bills," Ikle said. Yet buyers often have no money left for improvements once they close on a mortgage, she added.

Slowdown should aid idea

The process for receiving funds still adds several steps to a home closing, which can make sellers resistant. Once a bid on a home is accepted it can take 60 days to complete the FHA process and reach closing, so finding a patient seller is helpful.

But a softening housing market is likely to boost the program's prospects. In the absence of bidding wars and with houses sitting on the market longer, sellers -- especially those whose houses may not be up to modern standards -- may be more willing to entertain less traditional offers.

Homeowners must have a professional home energy auditor do an inspection to pinpoint improvements, find a FHA-approved lender (there are about 2,500 in the U.S., although not all participate in this program) and receive contractor estimates.

FHA also offers smaller "energy efficient" mortgages that let homeowners purchase or refinance a home and tuck the cost of efficiency upgrades into a mortgage. Borrowers can add between $4,000 and $8,000 to a 30- or 15-year mortgage to pay for energy improvements. See more about the program.

The upside is that a borrower does not have to make a down payment on the additional financing. In order to have improvements approved a homeowner must show that the value of the energy saved over the life of the upgrade is more than the total cost of the upgrade.

Energy-efficient mortgages aren't exactly new. In 1992 Congress authorized the creation of an energy-efficient mortgage program. FHA insured 26,600 in fiscal year 2003.

But Ikle thinks interest in home energy efficiency is growing. "I think people are really taking the environmental crisis to heart and energy prices have helped too," she said.

State programs

As states plug energy efficiency to help ease residents' energy-bill woes, private unsecured loans offer homeowners focused on the thermostat another financing option with a little less bureaucracy.

Pennsylvania homeowners short on cash can buy energy-efficient heating and cooling systems, ceiling fans, or doors using a low-interest loan from AFC First Financial Corp. in Allentown.

In January, Pennsylvania officials gave $20 million to the Keystone Home Energy Loan Program. AFC, which spearheads the program and has been marketing energy loans since 1999, offers a 10-year loan with a 7.99% interest rate to help finance the purchase of energy-efficient appliances and systems. The interest rate drops to 5.99% for qualified borrowers with low income levels. Read more about the program.

These loans are for consumers who need between $1,000 and $10,000 for home energy upgrades. Peter Krajsa, president of AFC, calls this range of investment the "finance twilight zone" for many homeowners -- an amount often too big to put on a credit card and too small for an equity line of credit. AFC began offering energy loans back in 1999.

These fixed, low-interest loans provide more palatable financing than standard credit-card interest rates, Krajsa said. The company has a 70% approval rating for the loans and has issued $2.5 million in loans through the Keystone program over the past seven months.

Maryland officials grappling with a reported 72% increase for homes served by Baltimore Gas & Electric have contacted AFC to inquire about starting a similar program, Krajsa said.

For homeowners outside of Pennsylvania, AFC offers energy improvement loans in nearly a dozen other states through a Fannie Mae program, although the interest rates on these loans are typically between 10% and 13%. AFC completes about 500 energy loans a month, Krajsa said.

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The Benefits of Buying a Home In a Cooling Real-Estate Market

2006-08-01T13:04:00.000-07:00

By Amy Hoak
From Marketwatch

Residential real estate, a shining star of the national economy that seemed unflappable over the past couple of years, has hit a speed bump.

Nationally, home price appreciation is slowing down from the rapid pace experienced by many markets over the past few years. Mortgage interest rates are on their way up. Is this any time to be thinking about investing in a home? Of course it is -- if you're buying it for a place to live, not as a speculative investment, and can afford to take the leap.

"Owning a home is still financially not a bad deal, as long as you have the income to support the cost of homeownership," said Jim Gaines, research economist for the Real Estate Center at Texas A&M University. Another caveat: "You better figure on living there five or six years to make any kind of profit on the thing."

Investors who hope to profit quickly on home sales, known as property flippers, for the most part have come and gone from the market, said Raymond Sierka Jr., vice president and regional sales manager with Harris Private Bank.

At the height of the real estate boom, people would buy houses before they were built at preconstruction rates only to sell the homes for a profit a short time later, often before construction was even complete. Speculators in some markets could often sell the property for a 20% to 30% yield, he said.

A normalized real estate landscape boots out those speculators, said Anthony Hsieh, president of online lender LendingTree.com. "It's just too risky to speculate now," he said.

People now are "buying for the right reasons," said Diana Bull, a Realtor in Santa Barbara, Calif., and a regional vice president for the National Association of Realtors. Sellers no longer hold all the cards, she said, which is creating a more balanced market.

Below are several benefits of home shopping in a cooling real estate market -- the silver lining to news predicting the residential real estate party is over.

More selection

In a growing number of local markets, buyers have more time to think about a home before they make a decision on whether to purchase it. Last year, that often wasn't a likely luxury.

"Once you as a potential buyer found a house that met your needs, you had to jump on it right away," said Frank Nothaft, chief economist for Freddie Mac. "One thing that we're seeing nowadays -- compared to six or 12 months ago -- is many markets where homes are staying on the market longer."

Home sales are expected to decline in 2006, yet the year should finish as the third strongest on record, according to a midyear report given by Nothaft earlier this month. With fewer sales, more housing inventory is sitting on the market.

It's a change of pace for agents who not long ago didn't have many properties to show their clients, said David Drinkwater a Realtor in Scituate, Mass., and regional vice president for the National Association of Realtors.

"Two or three years ago, there was a great deal of reacting in the marketplace because we had a smaller inventory pool to work with," Drinkwater said. That's not to say that a well-priced property won't move quickly in this environment, he said, but buyers need to educate themselves so they can recognize a housing gem when they see it.

More room to negotiate

Current conditions in many markets also afford consumers a better opportunity to negotiate.

"This market is forcing everybody to slow down and take their time," Bull said. In that time, buyers have more of a say at the bargaining table.

In fact, getting a fair deal is even more of a priority for homeowners who can no longer bank on high appreciation rates to save them if they pay too much, Drinkwater said. If you slightly overpaid in a bidding war at the height of the real estate boom, high appreciation rates helped correct the error, he said. In many markets there is now no such safety net.

Average home value appreciation nationwide should be around 7% for the year, and is predicted to slow even further to 6.2% in 2007, according to Freddie Mac. Local markets vary, however, and even as some markets are cooling, others are still on an upward climb.

Even if you, as a buyer, have the benefit of being more of a haggler than you could have been last year, still remember to look for a place that meets your needs and your budget, Nothaft said. Do the calculations and lay the groundwork before your house hunt ever begins.

Interest rates are still relatively low

It's easy to get caught up in the upward scooting of mortgage interest rates. But take the northward movement with a grain of salt.

Some people act like "Chicken Little" and feel as if the sky is falling when interest rates go up a quarter of a point, said Gaines of the Real Estate Center in Texas. Instead, keep it in perspective.

Interest rates are still way below what they were five or six years ago, Gaines said. Even if the 30-year hits 7% by the end of the year, investors should keep in mind the double-digit rates of yesteryear.

The annual average for a 30-year fixed-rate mortgage was 16.63% in 1981, and worked its way down to 9.25% in 1991, according to Freddie Mac records. Homeowners may not get rates quite as low as what they could secure in 2004, when the annual average for the 30-year fixed was 5.84%. But relatively speaking, it's still a deal.

A home is still a good investment

If you're in it for the long haul -- that is, buying a home with the intention to live in it for years -- a home is still a decent investment.

Consider this piece of information from the National Association of Realtors: Since record keeping began in 1968, the national median home price has risen every year. In a balanced market, home values typically rise at the general rate of inflation plus 1.5 percentage points. That's to say nothing of the tax benefits that come with owning your own home.

A look at the volatility of the stock market also proves the benefits of real estate as an investment, said Sierka, of Harris. "The downside of real estate is better than the downside on just about anything else," he said.

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Slowing Sales Foretell Weakening Despite Rise in Mall Rents

2006-08-01T13:03:00.000-07:00

By Ryan Chittum

From The Wall Street Journal Online

Rents at shopping malls rose in the second quarter at their fastest clip in nearly three years, and strip malls posted solid increases as vacancies decreased in both sectors, a survey shows.

But weakening second-quarter retail sales have damped growth and could slow it further in later quarters as economic pressures squeeze consumers. For the second straight quarter, absorption -- the net change in occupied space -- showed signs of weakness. Tenants absorbed 4.9 million square feet in the period, up from 3.3 million in the first quarter, but well below the two-year average of about seven million square feet per quarter.

Retail sales moderated due to a variety of pressures, from high energy prices to rising interest rates and a slowdown in the once-booming housing market.

Strip malls benefited from a lull in new centers opening. While 4.8 million square feet of new space opened in the quarter, space of 10.8 million feet is set to come on line in the fourth quarter.

"New construction this year particularly is back-loaded to the end of the year," said Lloyd Lynford, chief executive of Reis. "Investors would do well to be monitoring impact of that construction," particularly in markets like San Bernardino/Riverside, Calif., where 1.7 million square feet of new strip-mall space has opened so far this year -- a huge amount considering 8.6 million square feet has opened in the rest of the country during the same period.

Still, strip-mall rents rose 0.9% to $18.65 a square foot from the first quarter. Shopping-mall rents rose 1% to $38.89 a square foot, the survey showed -- the biggest quarterly rise in nearly three years.

Retail real estate has performed well in the past five years compared to apartments, offices and industrial, which were hit hard by the recession. While the other commercial real-estate sectors are improving sharply, retail has less upside now since it didn't decline like the others during the downturn.

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Five Tips for Getting Your Home Appraised Before Selling

2006-08-01T13:01:00.000-07:00

By Amy Hoak

From Marketwatch

CHICAGO -- Price your home incorrectly and it could mean a long stay on the market, a final selling price lower than what the house is worth or both.

That's why some homeowners are electing to pay $300 to $400 for an appraisal before putting their homes on the market, said Alan Hummel, past president of the Appraisal Institute and chief appraiser for St. Paul, Minn.-based Forsythe Appraisals LLC.

Presale consultations at the firm rose in the first quarter, he said, as the residential real estate market started to cool in many areas of the country and inventory increased.

Although real estate agents often do their own market analysis to price a property -- and many times do a decent job -- the appraiser can come in with an independent, unbiased opinion to make sure the price is right, Hummel said. In fact, if a property isn't getting any serious lookers, an agent might even encourage his or her client to invest in the service for a second pricing opinion, he added.

The greater attention to precise pricing is a change from a couple of years ago, when a house could be listed at a lofty price just to see how much it would fetch, he said. "Now you've got to be competitive and you have to know that the offers coming in are reasonable."

Also, if a property spends too much time on the market, the price it will be able to command often decreases, he said, as some buyers will question the reasons for the property's inability to sell.

Through the Eyes of a Buyer

An appraisal will look at the home from a visual standpoint, taking into account considerations from the proximity to schools to cracking or flaking paint, Hummel said.

"We're trying to react the way a typical purchaser would," he said.

The appraisal also will analyze the health of the local real estate market, giving homeowners more personalized expectations for selling their home -- a feature especially important with the plethora of national news stories generalizing the real estate market, Hummel pointed out.

Appraisers can also use a cost approach, which will determine the price tag on a new home built to the same specifications of the existing home, Hummel said. The comparison can be helpful for newer houses hitting the market because it lets sellers know what their home is competing with on the new-construction front.

Looking Back to Move Ahead

It also might not be a bad idea to dig through the file cabinet for the appraisal report you paid for when you first bought your home, said Michael H. Evans, president of Evans Appraisal Service Inc. in Chico, Calif., and a fellow of the American Society of Appraisers.

Few spend time reviewing the paperwork at the time it is completed, when people are primarily interested in securing the home and buying the house, he said. "They don't go back and review that paperwork unless there's a significant issue that needs to be addressed."

Doing so, however, can remind homeowners of flaws found the first time around, and sellers might want to address curable problems before hitting the market.

What should you know about home appraisals? Listed below are five nuggets of appraisal insight, courtesy of the American Society of Appraisers:

What the appraisal report includes: Your appraisal -- which could range in length from two or three pages to more than a hundred, depending on its scope -- will include details about the house, a description of the neighborhood and side-by-side comparisons of similar properties. It will also contain an evaluation of the area's real estate market, notations of major problems with the property that will affect its value and an estimate of the expected time it will take to sell the property.
How an appraisal report is developed: Appraisals are opinions of value, and residential real estate appraisals compare your home with similar homes that have sold. Remember, an appraisal is not the same as a home inspection. Inspections look for physical imperfections in the home, making sure it is structurally sound and so forth.
How to get a copy of your appraisal: You paid for an appraisal when you bought your house. If you didn't request a copy of the appraisal at the time, you can request it from your lender -- it's your right under federal law.
What to look for in the report before you sell: Focus on items that had a negative adjustment -- they might be a good checklist for elements to update or remodel. Examples of issues that could cause a negative adjustment: less than the typical number of baths for the house's size, outdated kitchens and baths, or a one-car garage or no garage in a neighborhood where two- and three-car garages are standard.
Why an appraisal before your home hits the market might be wise: The fresh appraisal will help accurately price the home and ensure it will eventually appraise for your asking price at the time of the sale. Sellers are sometimes shocked when their house appraises below the asking price, which could cause a deal to fall through or for the seller to be forced to reduce the home's price.

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Ohio's High Court Says City Can't Take Property

2006-08-01T13:00:00.000-07:00

From the Associated Press

COLUMBUS, Ohio -- The Ohio Supreme Court ruled unanimously on Wednesday that economic development isn't a sufficient reason under the state constitution to justify taking homes, putting a halt to a $125 million project of offices, shops and restaurants in a Cincinnati suburb that officials said would create jobs and add tax revenue.

The case was the first challenge of property rights laws to reach a state high court since the U.S. Supreme Court last summer allowed municipalities to seize homes for use by a private developer.

"For the individual property owner, the appropriation is not simply the seizure of a house," Justice Maureen O'Connor wrote in a case that pitted the city of Norwood against two couples trying to save their homes. "It is the taking of a home -- the place where ancestors toiled, where families were raised, where memories were made."

Property rights' advocates, business groups and backers of city planning were watching the Ohio case because of the precedent it could set. The ruling comes a year after the U.S. Supreme Court ruled 5-4 in a case from New London, Conn., that cities can take land for shopping malls or other private development.

Norwood wanted to use its power of eminent domain -- the authority to buy and take private property for public projects such as highways -- to seize properties holding out against private development in an area considered to be deteriorating.

In the ruling, Justice O'Connor said cities may consider economic benefits but that courts deciding such cases in the future must "apply heightened scrutiny" to assure private citizens' property rights.

Targeting property because it is in a deteriorating area also is unconstitutional because the term is too vague and requires speculation, the court found.

Justice O'Connor wrote that the court attempted in its decision to balance "two competing interests of great import in American democracy: the individual's rights in the possession and security of property, and the sovereign's power to take private property for the benefit of the community."

Dana Berliner, an attorney for the Arlington, Va.-based Institute for Justice that represented property owners in the case, said Wednesday's decision will have ramifications in high courts and legislatures across the country.

"This case is really part of a trend throughout the country of states responding to and rejecting the U.S. Supreme Court's Kelo decision last year," she said. "There are now 28 states that have taken legislative steps to protect owners more after that decision, and this case is the next movement in that trend, and I believe now not only legislatures but other courts are going to begin rejecting that terrible decision."

After the U.S. Supreme Court decision, Ohio declared a moratorium that prevents local governments from seizing unblighted private property for use by private developers until 2007. A legislative task force is expected to go ahead with reforms when it meets Aug. 31.

"I anticipate that many of our recommendations, combined with today's Supreme Court decision, will ensure that Ohio sends a strong message to its citizens that their private property rights are secure," said state Sen. Tim Grendell, chairman of the state's Eminent Domain Task Force.

Norwood Mayor Tom Williams defended the plan and said he still believes the project was lawful.

"I believed that we did that right thing then, I believe we did the right thing now," he said.

Tim Burke, a lawyer hired by Norwood, called the decision a significant disappointment and said it will halt progress on the planned development. He said the city likely will not appeal.

"Norwood, every step of the way, followed the law as it existed," Mr. Burke said.

Development interests in other areas -- particularly Cleveland's Flats development along Lake Erie -- signaled their intentions to proceed with plans that involve similar seizures.

"The Flats case is fundamentally different from the Norwood case and as such, we do not believe today's ruling will impact the outcome of our legal actions," the Port Authority and The Wolstein Group said in a joint statement.

Ms. Berliner called Norwood emblematic of development trends across the country.

"This was a perfect example of what is going on all over the country: a perfectly nice, working class neighborhood with no tax delinquencies, no falling down buildings, a nice neighborhood of homes and businesses, that a developer thought could be much more profitable as an upscale shopping and high-end housing center," she said.

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Home Builders Turn to Discounts, Promotions As Inventories Rise

2006-08-01T12:56:00.000-07:00

By Janet Morrissey
From The Wall Street Journal Online

As the nation's home builders struggle with big inventories, a surge in cancellations and a pullback in demand, many are aggressively offering discounts in high-profile promotion campaigns aimed at getting a dwindling number of home buyers into their sales centers.

How far will they go? Lennar Corp. placed a two-page advertisement in Florida's Orlando Sentinel earlier this month, announcing it would be giving away a home in the Orlando area next month to one home buyer who visits its sales community and enters the drawing.

"Turn the key, and the home is free," the ad read. Javier Santana, a Lennar salesman at one of the Orlando sales centers, said a drawing will take place Aug. 5, where 110 visitors will be given keys, and one will open the door to the free house.

Lennar isn't alone. Creative and even high-risk incentives have become the norm, not the exception, for many builders, especially in Florida. Part of the problem is that builders continue to put new homes into an oversupplied market, says JMP Securities analyst Alex Barron.

Mr. Barron predicts fundamentals will get worse before they get better, as the "flippers" -- or speculative investors -- will eventually be forced to slash prices below home builders' to sell their homes. "Six months ago, I thought this might last only two or three quarters, but now I think sales will continue to go down in 2007," Mr. Barron says.

In the same Orlando newspaper in which Lennar ran its advertisement, a slew of other home builders placed ads, each trying to outbid the other. Meritage Homes Corp. offered home buyers the chance to purchase a home with no money down with its ad: "Zero, Zip, Nada. No matter how you say it, it still means no money down." Levitt Corp., meanwhile, offered to help buyers who need to sell their existing home before purchasing a new one. Its ad promised a "guaranteed buyout program for your present home."

Several builders, including Technical Olympic USA Inc.'s Engle Homes and Lennar, offered "guaranteed pricing," where a home's price would be reduced if pricing has changed by the time the home closes. This incentive is aimed at jittery buyers who are reluctant to sign a contract while pricing is so volatile.

Lennar offered to pay a buyer's mortgage for the first six months, while closely held Prestige Builders Partners of Miami Lakes, Fla., raised the ante by promising, "Your first-year mortgage is on us."

Mr. Barron, who recently returned from a tour of the Florida housing market, says certain builders are slashing prices so much that it is making it difficult for rival builders to compete. He cites the South Fork community near Tampa, where Hovnanian Enterprises Inc. was selling homes in the low-$300,000 range while Lennar, 500 feet away, had slashed its prices for homes of a similar size to about $230,000.

Mr. Barron says he was particularly surprised by Lennar's steep cuts, given that the South Fork subdivision is currently under construction. In the past, many builders said that they were offering incentives only on select homes to finish off the sale of a particular subdivision and that they weren't building speculative homes. In South Fork, however, Lennar is just starting to build out the community. And many of the homes are being built on spec -- without a buyer. "They shouldn't be putting up supply when demand is going down," Mr. Barron says.

Hovnanian Treasurer Kevin Hake says the company's sales managers are always monitoring the competition and making adjustments depending on market conditions. While he said he couldn't comment on South Fork in particular, he says the company has been under competitive pressure to offer incentives in Florida. Executives from Lennar declined to comment.

The price cuts and incentives aren't unique to Florida. There are signs and ads for significant discounts in other previously hot markets such as Phoenix; Washington, D.C., and California. Some builders, such as Centex Corp., had been offering 12-hour sales at some of its sales centers in California, where buyers would be offered as much as $100,000 off the price of a multimillion-dollar home if they purchase a home during the sale hours.

There are also signs that home builders continue to sell homes to speculative investors, even though many say they aren't.

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Fund Flows Into Home Builders Are Slow but Remain Positive

2006-06-20T09:12:00.000-07:00

By Janet Morrissey
From Dow Jones Newswires

Investor concerns about a possible crash in the homebuilding sector have been escalating in the past couple of months as industry fundamentals have been deteriorating at a faster clip than expected. However, the investor jitters have not shut down interest in the group as fund flows into the sector remained positive in May, although investors favored some homebuilding names over others.

A Birinyi Associates Inc. report, commissioned by UBS Associates, found general investor sentiment toward builders cooled in May from April, with investors carefully cherry-picking the homebuilding stocks they wanted to build positions in at this point in the cycle.

Fund flows increased into five homebuilding names -Centex Corp. (CTX), Meritage Homes Corp. (MTH), Standard Pacific Corp. (SPF), Pulte Homes Inc. (PHM), and WCI Communities (WCI) - in May. However, money flows significantly slowed in others, with the biggest drops appearing in D.R. Horton Inc. (DHI), Ryland Group Inc. (RYL) and KB Home (KBH). Despite the slowdown, fund flows didn't turn negative, indicating investors were not pulling out of the stocks.

"Of the 15 homebuilders we monitor, Birinyi found that money flows were positive into five in April and neutral among the remaining 10," said UBS analyst Margaret Whelan. "None of the companies had negative flows," she emphasized.

Whelan said the fund flow data is a good barometer for gauging near-term investor sentiment and psychology toward the group.

"Homebuilder investors know that the cycle in psychology has as big an influence on the stocks as that of any economic cycle," said Whelan.

Although there has been much talk of a housing bubble and homebuilders have been reporting a sharp drop in orders in the last two quarters, investors don't believe the sector is heading for a crash - at least not yet.

"Otherwise, they'd be selling" and fund flows would be negative, said Whelan. "The reality is that actions speak louder than words."

The fact that many of the fund flows were neutral - meaning there were as many buyers as sellers in the stock - indicates much of the institutional money is sitting on the sidelines waiting. "When institutional money is coming into the group, then the flows are positive," Whelan said.

Homebuilding stocks fell about 32% in the first five months of the year, marking the steepest drop in five years, the report said. The last time the group saw a sharper falloff was in 1999, when homebuilding stocks declined 45% over 292 days.

"I think that overall the valuations are so low that it's making people more interested," Whelan said.

Homebuilding stocks were off across the board Monday, with shares of Beazer Homes USA Inc. (BZH) off 3.4% to $45.72, KB Home off 3.2% to $43.32, Lennar Corp. (LEN) down 3% to $43.77, M.D.C. Holdings Inc. (MDC) down 3.6% to $50.97 and M/I Homes Inc. (MHO) down 3.6% to $31.36.

Meritage stock was off 4.5% to $47.90, Pulte Homes was down 3.1% to $27.38, Ryland was down 3.9% to $41.64, Standard Pacific was lower by 4.5% to $24.85, Levitt Corp. (LEV) was down 4.2% to $14.53 and Toll Brothers Inc. (TOL) was down 3.6% to $26.16.

http://www.realestatejournal.com/commercial/

Your Real Estate Marketing Plan

2006-06-20T09:00:00.000-07:00

by Jim Bruce

A real estate marketing plan needs to take all facets of the realty business into account. This means marketing to real estate sellers as well as buyers. The real estate strategy also needs to utilize both online and offline methods of advertising.

Realtor advertising needs to show a good return on your advertising investment. It should be tracked to see if you are gaining positive results for each dollar spent. By researching your advertising methods and tracking the results, you can find the best methods that work in your local real estate market.

The main thrust of your marketing endeavors should be to gain leads, follow them up quickly, and turn your prospects into clients by meeting with them face-to-face. All along this marketing process, you should be aiming to gain the trust and loyalty of the real estate lead. Thus turning them into your client and making them a loyal, lifetime customer.

Your realtor marketing plan should be an offensive game plan. Direct response marketing is best for this type of endeavor. Direct response marketing is meant to illicit a yes or no response from your potential lead. It then gives them a means to contact you if the answer is yes, giving you the opportunity to supply them with the information they desire and capture the lead's contact information for further follow-up.

Both online and offline techniques can be used to accomplish this objective. An integration of online and offline rounds out your marketing offensive. In this modern day, both are equally important and give the lead their choice of means to contact you.

Key to the success of your marketing strategy is "baiting" the potential client with pertinent information that they are seeking. Online you can capture your leads by supplying them with information on buying or selling their house, finding the value of their property, or giving them a report on what to do to prepare their property for sale. This is supplied in downloadable form after they give you their contact information.

Offline, the same information can be supplied or information on a house they have seen in an ad or after driving by and obtaining a phone number from you house sign. Through a realtor hotline number they can access the desired information after calling and giving a special phone extension number that is specific to their request. You phone hotline should have the ability to capture the lead's phone number and name so that you can do an immediate follow-up call to sell the lead on your abilities and tell them what you can do for their real estate quest.

Prompt follow-up is one of the most important keys to your real estate success. Most people don't expect prompt, personal service and this sets the mood for developing a relationship with the lead. Developing a personal relationship with your prospects brings confidence in your abilities to help them and a lifetime commitment to you as their realtor.

You should develop scripts that bring confidence to you as a real estate agent. These should be aimed at the prospect's desires and needs and how you can help them obtain their desires, whether selling or buying housing. Communication is key and should always answer that big Homer Simpson question that he asks in every episode that the lead is also asking: "What's in it for Me?"

Your advertising should not be the traditional "here I am" and "I'm such a great real estate agent" ads that so many realtors use. If the ads are of this type, you prospects will be asking the two other Homer Simpson questions: "So What?" and "Who Cares?" before they turn to another realtor that can focus on their needs.

Everything in your real estate marketing plan should be centered around the prospect. You must build confidence that you can aid them with their wants and desires. You have to show them that you can do this quickly and with the least amount of hassle on their part. The process has to be simple and easy for them to accomplish.

Show the lead that you are the real estate agent to allow them their dream by being the go-between that can same them time and money while getting the job done. Keep communications open at all steps along the real estate process, from meeting the client to closing the deal, and inform them of the progress towards their goal continuously.

The biggest complaint clients have with realtors is that they get the client to sign an agreement and then are not heard of until a deal is in the making. You want to keep in touch no matter what the progress is and inform your client that progress IS being made and this is what YOU ARE DOING FOR THEM.

A well thought out real estate marketing plan should take into account this and much more. It takes effort on your part but this effort will pay dividends. The real estate agent should continually brainstorm new means of advancing their business and bring these into their strategy if they prove themselves to work.

In the end, you will find that your business expands, profits go up, and your customers will remain loyal for a lifetime.

About the Author

Jim Bruce is a direct response marketer that helps real estate agents and brokers make the best of their marketing efforts to gain more leads and expand their real estate business. More information on real estate marketing can be found at: http://www.realtormarketinginfo.com

Record-Breaking Housing Boom May Be Nearing a Close

2006-06-20T08:56:00.000-07:00

By Amy Hoak
From Marketwatch

The recent housing boom is the biggest the United States has ever seen, but its underlying reasons may have been psychological, economist Robert J. Shiller said on Friday. New data also suggest the market might be at the end of a cycle, he added.

The only time since 1890 that compares to the recent residential real estate market is just after World War II, the Yale University professor said during a presentation on U.S. home prices, held at Standard & Poor's in New York and broadcast to journalists on the Web.

"After World War II, the soldiers came back and they wanted houses and started the baby boom. And when you had babies, you wanted houses with at least two bedrooms -- and that wasn't so common back then. They went on a buying spree and it pushed home prices up," he said.

The recent boom, however, doesn't have the same fundamental variables causing prices to soar, he said, adding that variation in such things as building costs, population and interest rates doesn't adequately explain the reason for the housing boom.

"I don't see why home prices should be shooting up that strongly," Shiller said, adding that speculation may have played a role. "It's a sign of concern."

Shiller was co-author of "Irrational Exuberance," a book that chronicled the stock-market bubble of the late 1990s. He also co-developed the S&P/Case Shiller Home Price Indices, designed to measure the average change in U.S. home prices. The indexes are based on 10 cities -- Boston, Miami, New York, San Diego, San Francisco, Washington, D.C., Chicago, Denver, Las Vegas and Los Angeles -- and are now the basis of new futures and options trading at the Chicago Mercantile Exchange.

Within that index, Shiller has noticed a short-term trend of cooling home prices that could signal an end to the cycle of steep appreciation increases. Investing in the index could help homeowners hedge against price fluctuations in their homes, he said.

Shiller said he is not allowed to invest in home price index futures.

During a question-and-answer session, he said that the stabilization of home prices could also have some effect on consumers' means of gaining equity. Low interest rates inspired people to refinance their homes, and the increasing value of their houses allowed them to pad their pockets with spending money; consumers will now have to turn to other means for financing, including credit, he said.

In the future, insurance companies may offer policies to shield consumers from lowering home prices, thanks to the futures now available, said David Blitzer, managing director and chairman of the Index Committee at Standard & Poor's, who also participated in the presentation. He identified the housing market as a continued stable investment.

"If you want volatility, go to the stock market," he said. "If you have any doubts of that, take a look at it over the past six weeks."

http://www.realestatejournal.com/

Consumers Get Caught in War Between Real-Estate Brokers

2006-06-20T08:55:00.000-07:00

By James R. Hagerty
From The Wall Street Journal Online

In the fight between traditional real-estate brokers and their discount rivals, some consumers are getting caught in the crossfire.

With house prices surging in recent years, a number of people are seeking ways to cut commission costs, which are based on a percentage of a home's selling price. More home buyers are turning to discount brokers that offer to rebate a portion of the commission if you are willing to do much of the work in finding a home. And sellers are hiring discounters who, for a flat fee of a few hundred dollars, will include your home in a multiple-listing service, a database on houses for sale used by agents.

About 11% of home sellers last year used "alternative" brokers (ones offering flat fees or other forms of discounting), up from less than 2% in 2002, according to surveys by Real Trends, a publishing and consulting firm.

The competition from discounters has prompted some traditional brokers to use a variety of tactics to fight back, and this can end up hurting consumers. The controversy will get a public airing Monday when the Consumer Federation of America, a nonprofit research and advocacy group, releases a report on "how the real estate brokerage industry functions as a price-setting cartel."

The stakes are high. People selling homes typically pay commissions of 4% to 6% of the price, which is split between brokers representing the buyer and seller. Residential real-estate sales generate more than $60 billion a year in commissions. Full-service brokers say that in exchange for the commissions they provide expertise and an array of services that help consumers navigate the housing market.

For consumers, the clash among brokers underlines a need to be wary. Buyers hoping to get a cash rebate from the commission earned by their agent need to be aware that they might meet resistance from agents representing sellers. They should check whether there are any conditions attached to the rebate offer and make clear when viewing homes that they are represented by an agent. And sellers using flat-fee listing services sometimes find that agents for buyers shun their homes.

Most real-estate agents are ethical, says Albert Hepp, the owner of BuySelf Realty, Bloomington, Minn., who helped create a new national association of brokers that charge home sellers a flat fee for a limited range of services. But some full-service brokers step out of line, putting their interests ahead of consumers, he says, adding: "The best analogy I can use is a high-school classroom when the teacher walks out of the room."

One area likely to stir up more disputes involves the discount firms that offer rebates to buyers. The practice got a boost this year with the launch of two ambitious companies, BuySide Realty Inc. and Redfin Corp., which are promoting this concept heavily as they try to build national brands. Both encourage buyers to do part of the work in finding a home; they don't offer the free car rides from house to house provided by most traditional agents.

Andrew Calloway, a financial analyst in St. Louis, decided to use BuySide because that firm rebates 75% of the commissions it receives to the buyer. He recently agreed to pay $200,000 for a three-bedroom home in Glen Carbon, Ill. He expected a rebate of $4,500.

But Mr. Calloway says Karen Malench, an agent for Coldwell Banker Brown who represents the sellers, tried to dissuade him from using BuySide. He says she offered a rebate of $2,000 to him if he dropped BuySide and used her firm instead. He declined and went ahead last month with his offer through BuySide. Then he learned that Coldwell plans to refuse to give BuySide a share of the commission on the ground that Coldwell, not BuySide, showed Mr. Calloway and his fiancee, Rebecca Collins, the house and made the deal happen. If BuySide doesn't get a slice of the commission, it isn't obligated to pay a rebate to Mr. Calloway.

"The thing that really upsets me is that the listing agent smiles to your face and puts a knife in your back," says Mr. Calloway.

Ms. Malench, the listing agent, declined to comment. Gerry Schuetzenhofer, president of Coldwell Banker Brown, a franchisee of the national Coldwell brand, says that Ms. Malench denies having offered him $2,000 to drop BuySide. Mr. Schuetzenhofer says Mr. Calloway and his fiancee didn't make clear that they were working with another broker when they first viewed the home. Mr. Calloway says he did make that clear.

Joseph Fox, BuySide's chief executive, says this is the first time his young company has encountered such a commission dispute. He says he is trying to work out a solution with Mr. Schuetzenhofer. The latter says Mr. Fox tried "to intimidate me into accepting his demands. I don't believe he would have done that if he was on sound footing." Mr. Fox retorts: "He'd rather think about his pocketbook and not the best interests of the client." One option for the parties is to seek mediation or arbitration through a local arm of the National Association of Realtors, a trade group.

BuySide currently has operations in California, Florida, Illinois and Georgia. The company plans to cover 39 states by the end of 2008.

Cem Sibay, a business-development manager at an Internet company in Seattle, sought a rebate through Redfin. Mr. Sibay says he and his fiancee, Tam Pham, arranged to see a condo about six months ago. The agent representing the seller, Ron Waxman of Coldwell Banker Bain, was initially friendly and helpful, Mr. Sibay says. But Mr. Sibay says Mr. Waxman's attitude changed when Mr. Sibay mentioned that he planned to use Redfin as his agent. Mr. Sibay says Mr. Waxman then refused to show the condo to the couple again and said he would advise his client not to consider any offer they made.

Mr. Sibay and Ms. Pham gave up on the idea of bidding for the condo.

When reached for comment Wednesday, Mr. Waxman said, "I don't remember that at all." He said he stopped working as an agent last year; then, a few minutes later, Mr. Waxman acknowledged that he was still working as an agent and declined to comment further.

Bill Riss, the owner of Coldwell Banker Bain, says his agents sometimes "push back" against discounters like Redfin because they believe such firms don't do their share of the work. But he adds that his firm's policy is to work with any member of the local multiple-listing service, including Redfin.

Mr. Sibay kept working with Redfin and last month agreed to buy a different home in Seattle. He expects to receive a rebate of about $10,000 when the transaction is completed.

Glenn Kelman, chief executive officer of Redfin, says resistance from traditional agents will abate as his company completes more deals and becomes more established in the market. The company began operating in Seattle in February, recently opened up offices in the San Francisco Bay Area, and plans to expand to San Diego and Los Angeles and perhaps Washington and Boston by year end. In what Mr. Kelman calls a "charm offensive," Redfin recently began sending $100 gift cards to the listing agents when a Redfin buyer completes a purchase. "We need to turn these agents around one at a time," he says.

Discounters representing sellers also are meeting resistance. Jeff Kermath, who owns Amerisell Realty, a flat-fee broker in Saline, Mich., says one of the multiple-listing services he works with, Realcomp II Ltd., in the Detroit area, discriminates against firms offering discounts for limited service. For instance, Realcomp, owned by local Realtor groups, doesn't send limited-service listings to popular home-search sites like Realtor.com. And the default search setting for agents using Realcomp excludes limited-service listings, meaning fewer potential buyers hear of them.

Mortgage REITs Lose Curb Appeal As the Housing Market Slows

2006-06-20T08:51:00.000-07:00

By Christine Haughney
From The Wall Street Journal Online

Two years ago, mortgage companies were rushing to restructure themselves to become real estate investment trusts, hoping to benefit from investors' strong appetite for anything related to the housing market. But now, some REIT executives -- and investors -- are having second thoughts.

"Being a mortgage REIT isn't as great as it seemed at first," says Tara Innes, a managing director at credit-rating company Fitch Ratings Ltd. "Over the last year, the promise of being a residential-mortgage REIT evaporated."

REITs are securities that allow investors to own shares in companies that manage different aspects of the real-estate market and pay out 90% of their earnings to investors as dividends. According to the National Association of Real Estate Investment Trusts, overall total returns for REITs peaked at 38.5% in 2003 and eased to 8.29% in 2005. As of May 31, REIT returns were 7.42%.

Returns for equity REITs -- companies that own office buildings and shopping malls -- were similar to the overall averages. But total returns on residential-mortgage REITs have been more volatile: They were up 42.73% in 2003 and posted a negative 25.95% in 2005. As of May 31, they were up 9.23%.

Last year's dismal performance partly explains the recent flurry of companies announcing changes. Last month, Accredited Home Lenders agreed to acquire Los Angeles-based REIT Aames Investment for $340 million. Aames, a subprime lender, has been in red ink for the past two quarters, with a first-quarter loss of $13.5 million, or 22 cents a share. In April, Irvine, Calif.-based ECC Capital Corp. said it was advised by its bankers to consider, among other things, converting away from its REIT status so it can retain more of its earnings to turn around the company. ECC specializes in "nonconforming" borrowers who have weak credit or don't have the collateral or documentation required by conventional mortgage lenders. ECC Capital reported a net loss of $6.4 million, or six cents per diluted share, for the three months ended March 31.

Mortgage companies began converting to REITs in 2004, hoping to follow in the footsteps of equity REITs, which at the time were Wall Street darlings. Mortgage-bank earnings were high and stock prices were surging. By converting to REITs, the mortgage banks expected their stock prices to rise further, in part because REITs are taxed at a much lower level -- as much as 35% less -- than corporations. That meant more money could go back to investors.

Initially, the conversions seemed to work. "You have residential-mortgage real estate becoming a favored asset class," says Brian Harris, a senior credit officer for Moody's Investor Service. "All of that contributed to good performance for the sector." Total returns for residential-mortgage REITs were 24.91% in 2004, the year that most of the conversions took place.

By 2005, conditions quickly turned. First, the housing market started to slow and the volume of new mortgage-loan originations weakened. At the same time, the Federal Reserve pushed short-term interest rates higher, prompting mortgage companies to pay more to borrow money to make new mortgages. Moreover, concerns about a housing slowdown reduced investor appetite for mortgage securities. That meant mortgage companies weren't able to make as much money for their mortgages when they tried to package them and sell them off as securities on Wall Street. For example, revenue margins on subprime loans have narrowed to about 2.5 percentage points from about 3.5 to 4 percentage points a year ago, says Edwin Groshans, a senior mortgage analyst with equity research and investment-banking firm Fox-Pitt, Kelton. Margins on prime mortgages grew even thinner.

Some analysts believe conditions in the industry will worsen before they improve. The Mortgage Bankers Association predicts that mortgage originations will drop 14% this year. "There's so much competition out there and the volumes have shrunk. So it's becoming very price competitive. That's reducing profitability," says Mr. Groshans. "As your business becomes less profitable, your weaker players fall out of bed."

While slowing home sales are hurting all types of mortgage companies, residential-mortgage REITs find that their tax status limits how quickly they can respond to changing market conditions because REITs can't preserve much of their income. If they give up their REIT status, the companies can retain more of their earnings and experiment with additional methods of raising revenue beyond originating mortgages, says Mike Fratantoni, a senior economist with the Mortgage Bankers Association.

"There are some companies that decided that 'Yes, the REIT structure is not working for us,' " says Mr. Fratantoni. "If you become a thrift or a bank, you have greater flexibility, more opportunities and greater liquidity."

To be sure, analysts say that some mortgage REITs will be able to weather a rocky market and perform well over time. Followers of mortgage REITs say their success depends on keeping down the costs of creating mortgages. That means curbing expenses like technology, compensation for sales representatives and running retail operations. "Depending on their business models, for some companies, it's working very well and they're happy with it," says Fitch's Ms. Innes.

Accredited Home Lenders Chief Executive Jim Konrath says he considered converting to a REIT in 2004, but had some concerns. Among them: how the structure would help him achieve the value he wanted for the company's stock price, how exactly the REIT would be taxed for originating loans and how willing Wall Street would be over time to provide his company more capital to grow. "There were a lot of unanswered questions," says Mr. Konrath.

Homeowners Love Cul-de-Sacs, Planners Say They're Perils

2006-06-05T13:53:00.000-07:00

By Amir Efrati
From The Wall Street Journal Online

One of the most popular features of suburbia is under attack.

For many families, cul-de-sac living represents the epitome of suburban bliss: a traffic-free play zone for children, a ready roster of neighbors with extra gas for the lawnmower and a communal gathering space for sharing gin and tonics. But thanks to a growing chorus of critics, ranging from city planners and traffic engineers to snowplow drivers, hundreds of local governments from San Luis Obispo, Calif., to Charlotte, N.C., have passed zoning ordinances to limit cul-de-sacs or even ban them in the future.

In Oregon, about 90% of the state's 241 cities have changed their laws to limit cul-de-sacs, while 40 small municipalities outside Philadelphia have adopted restrictions or bans. Even when they're not trying to stamp them out, some towns are keeping a close eye on how cul-de-sacs are being built. Earlier this year, the city of Pekin, Ill., established new rules to make cul-de-sacs more maneuverable for service vehicles like fire trucks and school buses.

While homes on cul-de-sacs are still being built in large numbers and continue to fetch premiums from buyers who prefer them, the opposition has only been growing. The most common complaint: traffic. Because most of the roads in a neighborhood of cul-de-sacs are dead ends, some traffic experts say the only way to navigate around the neighborhood is to take peripheral roads that are already cluttered with traffic. And because most cul-de-sacs aren't connected by sidewalks, the only way for people who live there to run errands is to get in their cars and join the traffic.

In Charlotte, where the suburbs have emerged as a leading cul-de-sac battleground, a recent study by transportation planners found that almost all of the city's heavily congested intersections were located near residential developments from the 1960s, '70s and '80s, which are filled with cul-de-sac neighborhoods. The biggest traffic problems aren't in the old central cities these days, says Orlando, Fla.-based traffic engineer Walter Kulash, "but rather in the suburban periphery."

Land-use planners trace the origin of the American version of the cul-de-sac, which means "bottom of the bag" in French, to a development in Radburn, N.J., in 1929. Land planner Ed Tombari of the National Association of Home Builders says the design became popular during the housing boom after World War II, when many families turned away from the congested grids of central cities to live on quiet cul-de-sacs with lawns and winding roads more reminiscent of the countryside. To ensure privacy, developers limited the number of roads leading in.

According to the Census Bureau, the population of American suburbs grew 12% from 1980 to 2000, while the total population in center cities grew by just 1%. Likewise, from 1997 to 2003, the total percentage of American housing units located in the suburbs rose to 62 million, an increase of about 9%. The influx of homes in the suburbs, and the traffic they bring, has become the chief concern of planners across the nation, many of whom are struggling to mitigate the impact of car culture.

To some of them, cul-de-sacs have come to represent a failed experiment that has produced more isolation and more traffic by forcing people into their cars. David Schrank, a transportation researcher with the Texas Transportation Institute at Texas A&M University, says the old "peak hour" of traffic in many suburbs has been replaced by a longer "peak period." As new developments spring up, he says, "sometimes the transport network isn't in place to support them."

In some growing suburbs, "cul-de-sac" is becoming a dirty word. At a meeting in April with the planning commission in Northfield, Minn., a suburb of Minneapolis that has adopted rules preventing the use of cul-de-sacs, developer Lynn Giovannelli of Miles Development says she was "blindsided" by a chorus of objections about a single cul-de-sac she was including in plans for part of a new subdivision called Rosewood. "The land parcel was a funky shape, and I told them the only way to do anything with it is to do a cul-de-sac," she says. One commissioner told her to put in a park instead. "Preposterous," she says. "I was rolling my eyes."

While the plan was ultimately approved, it wasn't unanimous. "We might be prejudiced," says Jim Herreid, one of two commissioners who voted against the plan. "But we just don't like cul-de-sacs because they restrict the ability to get around town easily."

For all the criticism aimed at them, cul-de-sacs do seem to have one last defender: the free market. Real-estate brokers say that despite the recent opposition by policy makers, homes on cul-de-sacs still tend to sell faster than other homes -- and often command a comfortable premium. Ralph Spargo, the vice president of product development for Standard Pacific Homes in Irvine, Calif., says his company charges as much as 5% more for a home located on one. (For a house that sells for the April 2006 national median price of $223,000, that works out to about $11,000).

Rochelle Johnson, a 38-year-old real-estate agent from Lakeville, Minn., who grew up on a cul-de-sac, says she doesn't worry about the "isolation" -- she welcomes it. From her home on a cul-de-sac in a development called Wyldwood Oaks, Mrs. Johnson says the minimal amount of traffic gives her the peace of mind to allow her two children to play soccer in the street. "I don't know why somebody wouldn't want to live on a cul-de-sac," she says.

While suburban planners aren't trying to retrofit existing cul-de-sacs, they are making a concerted effort to make sure that new developments don't repeat some of their perceived faults. In cities like Boulder, Colo., and San Antonio, where suburban-style development is still taking place within city limits, new regulations have narrowed street widths in some new developments to make them easier to cross by foot. In a host of cities in Oregon, including Portland, lawmakers have shortened the acceptable length of street blocks to about 500 feet, down from 800 to 1,000. And in Rock Hill, S.C., which changed its rules in March, developers who build cul-de-sacs are required to cut pedestrian paths through their bulb-like tips to connect them to other sidewalks and allow people to walk through neighborhoods unimpeded.

By reducing cul-de-sac construction, developers say, local governments are depriving them of one of the most popular -- and lucrative -- housing types at a time when the housing market is slowing down in many regions. In Ames, Iowa, developer Chuck Winkleblack of Hunziker & Associates says new regulations on cul-de-sacs there have reduced choices for buyers. In the 1980s, when his company built a neighborhood called Northridge, there were 23 cul-de-sacs in the 410-home community. By contrast, Northridge Heights, a project set to be completed in 2009, calls for 350 single-family homes and 150 townhouses and apartments with only two cul-de-sacs. "I had to beg and plead to get those in," says Mr. Winkleblack.

Trade-Offs

Although the campaign against cul-de-sacs continues, lawmakers are making some concessions. As a trade-off for limiting them, cities like Nashville, Tenn., are letting developers put more homes, including townhouses and apartments, on less land. And in some places, measures being planned to increase traffic flow have been beaten back. In late 2004, when residents of two upscale subdivisions in York County, S.C. -- Eppington and Knight's Bridge, with homes in the $500,000 to $600,000 range -- got wind of a plan to connect them, by roads, to a proposed development called The Reserve, which had lower-priced homes, residents of the wealthy areas pressured the county council to nix the proposal.

In the meantime, Beth Bowlds, a speech pathologist and mother of three living on a cul-de-sac in McKay's Mill -- a subdivision in the Nashville suburb of Franklin -- says she understands the traffic issues cul-de-sacs can create and why the local planners have taken steps to limit them. Yet when she and her husband were shopping for a home two years ago, she was immediately drawn to the cul-de-sac anyhow. "It's nice having your little corner that's not as public."

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Popular Trusts May Shield Profits Made During Housing Boom

2006-06-05T13:45:00.000-07:00

By Rachel Emma Silverman
From The Wall Street Journal Online

The soaring real-estate prices of the past few years are helping to feed the popularity of a complex tax-savings technique called a "private annuity trust."

The strategy is being promoted as a way for investors to defer hefty capital-gains taxes on the sale of highly appreciated assets -- especially real estate -- and save on estate taxes, while also generating a stream of income.

The trusts are being widely marketed not just by tax lawyers and accountants, but also by investment advisers and insurance agents -- who may also stand to gain big fees by managing trust investments -- and real-estate brokers, who hope that the strategy might help clinch property sales and attract listings.

In a private annuity trust, you essentially exchange appreciated assets for fixed annuity payments, which spreads out your capital-gains taxes over many years. The transactions are being pitched to everyone from owners of a primary or secondary residence that has risen dramatically in value to owners of numerous investment properties. The trusts are just one of a number of strategies that people are using in an attempt to trim taxes amid the fevered real-estate market of recent years.

The growing popularity of private annuity trusts, however, has sparked heated debate among tax advisers, with skeptics saying that some arrangements might be too aggressive under allowable tax rules and might not generate all the tax benefits some promoters claim. Some tax lawyers have published articles or created Web sites criticizing the trusts, with titles such as "Private Annuity Trusts: The Numbers Don't Support the Hype."

Moreover, the Internal Revenue Service has been scrutinizing a growing number of private annuity trust transactions, and though it has not banned the practice, the agency says it has seen numerous cases that it feels do not pass muster.

Proponents of private annuity trusts, for their part, say the transaction, when done correctly, is a perfectly acceptable tax-savings technique that can defer capital-gains taxes for years and minimize estate taxes. "If you evaluate it and set it up right and then operate it appropriately, a private annuity trust can be a great tool to use for estate transfer, asset preservation and tax deferral," says Curt Wyatt, a Palm Desert, Calif., trust adviser, who manages nearly $800 million in private annuity trust assets, business generated over the past three years.

Wendy Phillips, a Landers, Calif., real-estate investor, set up a private annuity trust after attending a seminar on capital-gains strategies at an apartment-owners' trade show. Ms. Phillips faced capital-gains taxes of some $900,000 on the sale of several rental properties near Palm Springs, and wanted to avoid paying those taxes upfront. "It seemed like a lot out of our pockets at one time," says Ms. Phillips, who will turn 62 years old this month. She and her husband chose to defer the private annuity payments until they reach age 70, which means they can delay the tax hit for several years.

The National Association of Financial and Estate Planning, or NAFEP, a big provider of private annuity trusts, says that business has doubled every year since 2003 and is continuing to grow this year. The strategy is "becoming more mainstream and more people and attorneys are becoming more comfortable with it," says Roy Barker, director of operations at NAFEP, which is based in Salt Lake City.

Private annuity trusts can cost anywhere from about $3,000 to well over $10,000 to set up, plus additional administration and investment fees that can run upwards of 1% of trust assets. Because of these costs, Mr. Barker says the strategy makes the most sense for people who have at least $200,000 of capital gains to defer, as well as people who might be subject to the estate tax. (The current federal estate-tax exemption is $2 million per person or $4 million per married couple.)

Private annuity trusts are complicated, involving lots of convoluted steps and tax rules. In a typical arrangement, you sell appreciated assets -- residential or commercial real estate, artwork, securities, even closely held businesses -- to a trust, in exchange for a series of fixed annuity payments that last for the rest of your life. The trust then goes ahead and sells the appreciated asset to an end buyer. The cash proceeds are invested by the trust, and are used to fund your annuity payments.

By selling the property in exchange for an annuity, you avoid paying the upfront capital gains that you would have owed if you had simply sold the asset outright. Instead, you are taxed on the annuity payments when they come out of the trust, which spreads out the taxes over a longer period of time. What's more, you can defer receiving the annuity payments for years, thereby further postponing your tax payments.

The strategy also has estate-planning benefits. When you die, the annuity payments stop and whatever is left over in the trust is considered out of your estate and isn't subject to estate taxes. The annuity payments you receive during your lifetime are considered part of your estate unless you spend down the money.

Be aware, however, that the strategy is on the IRS's radar screen. The agency doesn't like arrangements in which sellers continue to control trust assets or properties that were purportedly sold. The IRS is also concerned that, before the trust is even set up, a buyer has already contractually agreed to take the property. In that case, the government could ultimately view the trust as an improper shelter, set up chiefly to avoid immediate capital-gains taxes rather than providing real economic substance.

The annuity is termed a "private annuity" because it is a special payment contract between you and the trust, as opposed to a commercial annuity issued by an insurance company. The amount of the annuity payments stays fixed over your lifetime and is determined by a formula that's set by the IRS, based on factors that include your age, the property's sale price and an IRS-determined interest rate. The older you are -- or the longer you defer the annuity -- the bigger the payments will be.

Jeff Reed, a Lake Forest, Calif., investment adviser, says he regularly gives seminars to hundreds of real-estate investors and brokers about private annuity trusts and other tax-efficient ways to sell property. Private annuity trusts, in his experience, "are one of the fastest-growing exit strategies." The National Private Annuity Trust, another private annuity company, says the number of trusts it manages has more than doubled from last year, while the National Association for Private Annuity Trusts, or NAPAT, based in Irvine, Calif., says that it has also grown more than 100% a year over the past three years. "It has just exploded," says NAPAT president Kevin McBarron.

One reason for the boom: sellers wishing to cash out of real estate in hot markets, such as Southern California, while locking in big profits. Even though federal long-term capital-gains taxes are at a low 15% rate for most assets, many sellers are reluctant to pay a tax upfront when they can instead defer it for years. In addition to private annuity trusts, firms are marketing a host of other strategies to defer taxes on real-estate sales, including 1031 exchanges and a new installment-payment technique called a structured sale.

Critics -- and even some promoters -- say that the private annuity trust strategy has downsides and isn't for everyone. "Contrary to the claims of promoters, it is a very risky transaction and in any event it will likely cause you to pay more tax than had you not done the transaction in the first place," says Atlanta tax lawyer Kevin McGrath, who recently wrote an article critical of the tactic in the tax journal "Tax Notes."

For one, a private annuity trust doesn't eliminate capital-gains taxes; it just defers them. On each annuity payment, you'll owe taxes on both capital gains as well as ordinary income, which is taxed at a higher rate. And if you outlive your life expectancy, all of the annuity payments beyond that point will be taxed at ordinary income rates, according to tax rules. Also, the trust itself has to pay taxes on its earnings over the years, depending on how the assets inside it are invested.

Another caveat: Because these trusts are irrevocable, once you sell your property, you don't have any direct control over how the proceeds are invested. Instead, a separate trustee manages the assets. You also can't simply invade the trust to get more money beyond the annuity payments.

If you get pitched a private annuity trust, it's smart to have an independent lawyer and tax adviser carefully study the transaction to make sure that it passes legal muster, and to model projections on whether the arrangement works for you, depending on your age and income needs.

Hoping the Sizzle Will Sell The Steak in Condo Slowdown

2006-06-05T13:44:00.000-07:00

By Christine Haughney
From The Wall Street Journal Online

At a party in Fort Lauderdale last month, guests in clingy cocktail dresses grooved on stage with singer Wyclef Jean and even tried to pull off his black-and-baby-pink striped tie.

A week later, in Las Vegas, party-goers attended a reception hosted by actress Pamela Anderson, who was surrounded by a small army of models dressed in black bikinis, white hard hats, tool belts and yellow "Do Not Cross" construction tape.

Last Tuesday night, a half dozen invited guests attended an exclusive Manhattan screening of "The Devil Wears Prada" with the movie's star, actress Meryl Streep, among others, before attending a dinner and charity auction of clothing worn in the movie.

The latest dispatches from the Hollywood glamour circuit? No, it's real-estate developers wooing real-estate brokers and potential buyers of high-end condominiums.

The growing glut of expensive condos is pushing high-performing real-estate brokers and deep-pocketed potential buyers onto the "A" list. By supplying them with coveted party invitations and celebrity access, developers hope to reduce the backlog of high-priced luxury condominiums before rival developers can flood the slowing sales market with even more new properties. Developers are going all-out -- with celebrities, showgirls, circus performers and fireworks displays worthy of the Fourth of July. Sales incentives ranging from alligator-leather-covered notepads in Manhattan to $10,000 diamond-encrusted cuff links in Fort Lauderdale are dangled before guests.

"Sometimes it does feel larger than life," says Debra Kavaler, a sales director at New York's Corcoran Sunshine Marketing Group and a guest at many of these parties. "Sometimes the world just stops in front of you at these parties and you think, 'This is something I plan on telling my kids about.' "

In Fort Lauderdale, Las Vegas and Manhattan, an estimated 167,600 luxury units are due to hit the market in coming months. In Las Vegas, where 62,600 new condo units are planned, there's greater pressure because projects often are larger and developers can't get construction financing to build without selling a certain number of units in advance. Three condo projects already have been canceled and a half dozen are being re-evaluated in light of slowing sales.

Getting brokers to attend parties is also challenging in a city of star-studded casino stage shows. Last year the Icon Las Vegas condo development -- a joint venture of East Coast real-estate tycoons Stephen M. Ross and Jorge Perez -- hosted a party on the planned condominium site that featured white tigers, fire-eaters and chocolate fountains. It wasn't enough. That project died, too.

"No matter how elaborate the party -- if behind the scenes they haven't nailed down their construction costs -- the odds of it going forward are very low," says attendee Bruce Hiatt, a broker and owner of Luxury Realty Group Inc., in Las Vegas.

Getting Jaded

Brokers who have been through the vicissitudes of the real-estate cycle say they've never been catered to quite like this before. But they are already getting a bit jaded.

"Unless [the parties] are really unique, people won't go to them. You have to have something remarkable," says Seth Semilof, a Miami lifestyle magazine publisher, former broker and regular at spectacular condo parties. He finds that the success of the parties depends heavily on the nuances of each market. "New York people wear suits and ties. In Miami, it's beautiful girls in bikinis," he says.

Mr. Semilof says that while most of the parties he attends feature models, lobster and champagne, his most memorable experience at any party involved meeting Donald Trump. The developer posed with him for a photograph, high-fived him and joked that he was "hired."

"He gave me his business card and said, 'Look, you have an open line of communication.' "

In all three markets, party budgets are going wild. Some event planners working for South Florida developers say their clients have tripled their spending as condo sales have begun to slow in recent months.

Developers say the parties are a bargain considering the prices of the condos, and they generate far better returns than dropping the prices of units does. For a May 11 Manhattan bash near Union Square, developer Gary Barnett spent about $30,000 to promote 39 lofts that start at $2.2 million apiece. In March, he spent $500,000 on a concert attended by 800 brokers and featuring the singer Seal. Several weeks later, he sponsored the "Thank You for Smoking" movie premiere and dinner for 500. Two brokers received a year's use of a chauffeur-driven $108,000 Maserati Quattroporte. Others got shopping trips to Paris for selling the most condominiums in the 550-unit Orion project just west of Times Square.

Senada Adzem says that spending $250,000 on the four-hour party in Fort Lauderdale featuring Mr. Jean has helped her sell five out of 30 condo-hotel units for about $1,200 a square foot in Fort Lauderdale's new Trump International Hotel.

Mojitos and Ceviche

Her party started with champagne Mojito cocktails and ceviche and sushi served on white China embossed with the Trump logo. Male brokers who sell more than three apartments were promised 1.5-carat diamond cuff links. The incentives for female brokers were diamond encrusted dove-shaped pins.

"I wanted to raise some eyebrows," says Ms. Adzem, marketing director for New York firm Bayrock Group, which is co-developing the project with Donald Trump.

As a guest at the Las Vegas party including Ms. Anderson, Mr. Hiatt was escorted by models in black evening gowns to a three-story penthouse. In the penthouse, he spotted "American Idol" host Ryan Seacrest and actor Mickey Rourke with one of his Chihuahuas. Mr. Hiatt explained that star sighting often was more important in Las Vegas than receiving a gift bag of the sort often given out in South Florida or New York. "Vegas is less about the bling and the Maseratis and more about the fun," he says.

In the three weeks following, the Tower negotiated 15 sales contracts for apartments priced at roughly $750,000 apiece. Mr. Hiatt, whose firm previously had sold a half-dozen apartments in Panorama's larger four-tower complex, adds the party also better educated him about the complex's latest units. "We did have a business reason to go," he says. "I was really anxious to see that penthouse."

Dual Roles

But the parties' purposes aren't always immediately clear. The Las Vegas bash doubled as a sales celebration for the Panorama Tower and a fundraiser of $500,000 for People for the Ethical Treatment of Animals, one of Ms. Anderson's causes. Paul Scaringe, vice president of sales for Panorama Towers, says that Ms. Anderson attended the event because she had purchased an apartment in the complex and because the event benefited her cause. A spokeswoman for Ms. Anderson said that she is out of the country and not available to comment. Developers say that the celebrities weren't paid to attend the event.

The May 23 "Devil Wears Prada" screening cost Starwood Hotels & Resorts Worldwide Inc. about $20,000 to promote 16 condominium hotel units it is selling at Manhattan's St. Regis Hotel. Fernanda Forman, Starwood's director of marketing for the St. Regis and Luxury Collection, stresses that these fêtes for brokers energize sales. "Can they make or break a project? No. Can they sell out a project faster? Yes," she says.

In some cases, celebrities who attend these events don't seem to know that their presence is helping to sell condos. In Manhattan on May 11, brokers sampled sushi with "X-Men" star Hugh Jackman along with 300 other Hollywood executives and starlets at the Union Square exhibit of photographs taken by "X-Men" director Brett Ratner. Mr. Jackman said that he had come to support his friend and director of the series latest installment "The Last Stand" that was released Friday. Mr. Jackman, who says he himself is looking for an apartment to buy, grinned when told that the evening also was intended to entertain real-estate brokers. "Look at me -- how naive I am," the actor told a reporter. "Maybe the developer will give me a 10% discount."

Second-Home Housing Glut; Real-Estate Bubble Losing Air

2006-06-05T13:39:00.000-07:00

By Robin Goldwyn Blumenthal
From Barron's

It would seem to have it all: four bedrooms, a guest house, a pool and a rock waterfall. But the vacation home in Naples, Fla., hasn't been drawing much interest from buyers, so the seller recently threw in that most modern of amenities: the $1 million price cut. That's brought the asking price down a full 25%. "If you want to sell, you've got to go back to '04 prices," says Chip Harris of Coldwell Banker Previews International, which is handling the property.

The market for second homes could use a second wind. After a long string of double-digit annual price increases, a number of second-home meccas across the country are suddenly suffering from plunging sales volume and burgeoning inventories of unsold homes. Result: Naples-style discounting is starting to spread. It hit the town of Pocasset, on Massachusetts' Cape Cod, just as retired executive Jack Reen was trying to sell his four-acre, six-bedroom beachfront home. He cut the price several times, for a total of 42% off the listing price, before striking a deal at $3.95 million. Reen takes a philosophical view of the experience, noting that the original price was set at the top of the market. "Calling the tops and bottoms is impossible," he says.

Though the official figures on sales prices have yet to reflect the current round of cuts, interviews with real- estate pros and others strongly suggest that the averages are deteriorating in a number of key markets. Just look at green and hilly Litchfield, Conn., about a two-hour drive from New York City. It was a magnet for Wall Streeters during the past five years, and prices climbed accordingly. But in the past 10 months, prices in the lower end of Litchfield's market -- homes of $300,000 to $600,000 -- are down 12%-14%, and volume is falling at the next level up, says Stephen Drezen of the local Portfolio Properties Group.

It's all a big change from the seemingly endless rises in prices. For more than a decade, baby boomers have been flocking to the second-homes market and lifting prices, just as they'd earlier lifted the market for primary residences. The market barreled ahead during the past few years, and the demographics -- 75 million boomers -- still bode well for long-term growth. But first, the market has some correcting to tend to.

While pundits debate when the bubble might burst in the primary-housing market, the air already is whooshing out of parts of the second-homes market. Naples, on the sun-drenched edge of the Gulf of Mexico in Southwest Florida, is perhaps the most striking example.

Vacationers long have been attracted to Naples' proximity to water, the Everglades and shopping at the likes of Saks Fifth Avenue. Last year alone, buyers bid up the area's median price by 30%, to $482,400. Charles Ashby, president of Naples' VIP Realtors, recalls that one of his sales associates was able to go down to a local bar and sell 26 units in a nearby Fort Myers high-rise the first night contracts were being accepted.

Today, about the most visible activity in that area is the 400 or so daily additions on the multiple listing service -- and price reductions by the dozens. In the 35 years that Ashby has been in the business, this is the first downturn he's seen, even counting recessions. "The mule died," he says.

With mortgage rates rising and home-price appreciation slowing or vanishing, buyers in Naples have pulled back in a big way. The area's sales of homes costing less than $1 million declined 45% in unit volume in the first four months of this year. More expensive homes fared somewhat better, falling 34%. But pressures at the higher end clearly are mounting. All along the pricey Gulf shore, builders still are tearing down old ranch houses and replacing them with two-story mansions, pushing the market toward a classic glut.

The Naples experience is being repeated, to one degree or another, in a variety of other vacation hot spots -- from Palm Desert, Calif., to Phoenix, Ariz., to Ocean City, N.J. Phoenix in recent years has been overrun by property flippers from California, says Mike Messenger, president of Russ Lyon Realty in Scottsdale. But unit sales now are down by 40%-42%, and the city's inventory of unsold homes has shot up more than five-fold, to 39,000.

Likewise, the number of homes for sale on the Multiple Listings Service for the Falmouth area of Cape Cod is up about 65% from a year ago, says Lynette Helms of the local Real Estate Associates. With numbers like that, more price cuts can't be far behind. In fact, the Cape Cod town of Barnstable is among the first of the second-home meccas to show a decline in median prices in the figures tallied by the National Association of Realtors. The price was down 1% in the first quarter, to $385,000.
It's true that the total second-homes market nationwide has managed to keep posting gains over the past two years. Some 3.34 million second homes were sold in 2005, up 16% from 2004, according to the realty trade group. The median price of a vacation home was up 7.4%, to $204,100, and prices have continued to rise in many markets.

But the Realtors' chief economist, David Lereah, expects the volume of second-home sales to decline at least somewhat this year. And there's every reason to think that some markets could be hit hard.

For starters, many second homes have been sold not to serious vacationers but to speculative investors hoping to cash on the national real-estate craze. How else to explain why six out of 10 second-home owners surveyed by the Realtors group own two or more homes in addition to their main residences?

The danger is that if enough of those investors decide the market has peaked, they could trigger a selling frenzy throughout the second-homes market. That, in turn, could add to the pressures in the main housing market. After all, second homes now account for a full 40% of all homes sold in America.

Statistics compiled for Barron's by The Local Market Monitor, a Wellesley, Mass.-based consulting firm, show just how big a role can be played by investors. In Myrtle Beach, S.C., long a favorite vacation and retirement destination, investors owned a full 58% of properties in 2004, the last year with available data. Though Florida communities accounted for eight of the top 10 investor-owned hot spots, Wilmington, N.C., clocked in at 38%, Las Vegas at 26%, and Honolulu at 23%. The normal level is closer to 14%. (See table nearby.)

Says Ingo Winzer, president of The Local Market Monitor: "This makes me very worried because it implies that the price increases have been driven more by speculators than by people who are going to hold onto these properties, and indicates to me that there's a speculative boom."

The price runups of the past several years are reason enough for concern. A report from Cleveland-based National City, a top banking and mortgage concern, points to serious overvaluation in a number of second-home hot spots in Florida, California and elsewhere.

Tucson, Prescott and Phoenix in Arizona are estimated to be as much as 52% overvalued based on income levels, population densities and historical prices. Also high on the list: Bend, Ore., and New Jersey's Ocean City and Atlantic City, where homes are deemed overvalued by 50% and 60%, respectively.

Behind all this is a fervor eerily reminiscent of the late 1990s on Wall Street. Some 65% of second-home owners surveyed by the National Association of Realtors said they considered their second homes better investments than stocks, and 29% said they planned to buy additional properties within two years. An eye-popping 64% of investors with four or more properties planned to buy another property within two years.

But those high rollers could lose their nerve quickly if prices continue to weaken.

"People don't believe in the laws of supply and demand anymore," says Alan Skrainka, chief market strategist at Edward Jones. "We're not saying it's a bubble, but we're saying prices are overstated and will likely correct 20% to 25% over four or five years."

He rejects a notion advanced by housing bulls that shore communities in Florida and California will be protected because of the limited supply of coastline. "Japanese real estate and land prices went down for 15 years and Japan is an island," Skrainka says.

Southern Florida has shaped up as the epicenter of the looming glut. In Palm Beach County, inventories of unsold homes have more than tripled in the past three years, to more than 25,000. Some brokers in South Florida are reporting a quadrupling of inventories over the past year. In what some see as a sign of the times, Coldwell Banker Residential Real Estate recently closed four of its 31 offices in the Palm Beach region; the company calls it an anticipated consolidation.

There's little doubt, however, that the market is starting to run out of buyers.

"The homeowner that absolutely has to sell will take a hit," says Paul Boomsma, executive vice president of Chicago-based Luxury Portfolio Fine Property, a unit of Leading Real Estate Cos. of the World. The problems are worsened, he points out, by the continued acceleration of development in overheated areas.

Investors hoping to sell luxury condos that they bought over the past couple of years could be in for some special trouble. A recent report by San Francisco-based JMP Securities analyzing the Florida condo market estimated that 25%-40% of the of condo units now for sale in Florida belong to such investors. "Flippers are already listing units for sale in buildings that are near completion this year but are not closed yet," hurting an already weak market, the report says.

Florida condo sales are down 20%-50% year over year in most markets, JMP says. And the report cites estimates of 50,000 new condo units announced for Miami-Dade County alone, adding to the 50,000 either under construction or ready to begin. That compares with the 10,000 total that have been built in the area in the past 10 years.

Some northern parts of Florida are also taking a beating. On a recent drive around Amelia Island, off the coast of Jacksonville, David Hehman of EscapeHomes.com, a resort and second-home marketplace, counted 50 properties for sale on the water or side streets along a three mile stretch.

Beyond Florida, some second markets are holding up well and others clearly aren't.

"It's a very spotty market in all of the U.S.," says Robert Toll, CEO of luxury homebuilder Toll Brothers. In some of the markets where Toll builds golf-course and lake communities, like Palm Springs, Calif., Delaware and southwest Florida, demand has softened. The company, however, has had to offer incentives in only two resort communities out of the 15 it owns. "If you've got the right stuff, people still clamor for it," says the CEO.

Mike Messenger, the Scottsdale, Ariz., broker, sounds considerably more glum. He says this is the first time in 16 years that the lower end of the market -- always the driver for the area -- has weakened. The culprits? Mainly the flippers; Messenger figures investors account for 35% to 40% of the market.

Las Vegas is causing concern, too. It's "a classic example of an overheated market where there's too much proposed and the reality of the absorption isn't such that it could work in the near term," says David Wasserman, head of Wasserman Real Estate Capital, a developer. But Wasserman, who has luxury condominium projects under development in West Palm Beach, Pasadena, Calif., and Boston, figures that soaring construction prices should help to weed out some of the overzealous builders.

Already, several condo projects in Las Vegas have had to be canceled because they failed to presell enough units to get attractive financing, says Hehman of EscapeHomes.com.

On the East Coast, signs of a glut have been turning up all along the coastline of New Jersey. In an effort to move inventory, brokers in the upscale summer resort of Stone Harbor have been sending out postcards to vacation renters, proclaiming a three-bedroom condo to be "the perfect investment opportunity" at just $739,000. That's about what many of the would-be buyers might have paid for their first homes.

"The market is definitely in a correcting phase," says Timothy Richards of Ocean City, N.J., who recently retired as a realty broker and began a second career as a developer. He says buyers are waiting to see what happens with mortgage rates. "Whenever financial markets are in transition, we go into a holding pattern," he adds.

Real-estate pros in the Hamptons area of Long Island are keeping their fingers crossed. John Halsted of Allan Schneider Associates says he has seen some "price adjustments" -- usually around 3% to 5% downward, and usually in the mid-range of the market, of homes priced at $1.5 million to $4 million. He contends that there's still high demand at the super-high end. That belief will be put to the test by one of his firm's current listings, a $75 million spread in Bridgehampton with its own golf course.

Some would-be buyers appear to be sitting out this edgy period in the market and renting homes instead. That's one reason why the rental market in the Hamptons is considered very strong right now. The Halsted firm recently set its own record for a summer rental: $350,000 for a house in Sag Harbor.

Other home buyers, meanwhile, are seeking a measure of stability by venturing away from the traditional hot markets. But plenty of once-tranquil towns already have been discovered. "You're finding that smaller towns that 10 years ago were thought of as off the beaten track now have the rich and famous buying," says John McIlwain, a senior fellow for housing at the Urban Land Institute. He points to Rockland, Maine. "Twenty years ago you wouldn't go there at night because you would have gotten beaten up," he says. "Now, it's in international travel guides."

The tough conditions in the second-home market are no small matter for the people who own the homes. And the so-called mass affluent -- folks with investable assets of $100,000 to $1 million -- will probably take the brunt of any price declines. Spectrem Group, a Chicago-based consulting firm, says this group has more than one-third of its assets tied up in real estate. In general, these home owners are more vulnerable than the ultra-wealthy, both because they can ill afford to wait out a prolonged downturn and their losses can hurt if they're forced to sell into a glut.

All the same, many experts are cheering the current shifts in the markets. They call it an essential correction, a step that must be taken before the second-home market resumes its ascent. "In general this is a very good thing, because it got too far on the speculative side," says broker Ashby in Naples. "It needs to correct. If it didn't, it would burst."

Adds Mike McMurray, a broker with VIP on the Florida islands of Sanibel and Captiva. "It's not that the property is bad, but it's like Google. The value is there, but it may have gotten ahead of itself."

There's certainly hope for the long term. The baby- boom generation continues to amass both inherited and earned wealth. And many a boomer will buy a second home with an eye to eventually retiring to it. With any luck, they will see some nice financial returns. "Vacation homes have turned out to be one of the best housing investments, particularly on the coasts," says McIlwain.

The trouble is, home owners may have to wait quite some time before that happens again.

http://www.realestatejournal.com/

New York commuters hit the road

2006-06-05T13:32:00.000-07:00

By Lauren Baier Kim

Forced out of suburbs like Westchester and Nassau Counties in New York and Bergen County in New Jersey because of high housing prices, workers employed in Manhattan are buying homes farther and farther away from the city, The New York Times reports. Among areas seeing increased buyer interest are southern New Jersey, Philadelphia suburbs and areas north and west of Westchester, the paper says. For instance, commuters who once may have settled in Westchester County, the paper says, are now moving further out to Dutchess County in New York, the article says. The savings in housing costs are fairly considerable -- at the end of 2005, the median price for a single-family house in Westchester was $640,000, whereas it was only $242,500 in Dutchess. The New York Times says there's no statistical evidence that commuters are spreading into southern areas of New Jersey, but one local developer has built six new housing developments in Burlington County alone, the paper says.

http://www.realestatejournal.com/

Build A New House Or Buy An Existing One? Use Your Head And Your Heart.

2006-05-24T10:02:00.001-07:00

by Terry McDermott
I am living in living in the fourth house I have purchased during my 23 years of home ownership. To some that may seem like a lot of houses, to others it may seem like I've just started. The simple fact is we Americans move a lot... 11 or 12 times in a lifetime depending on whom you consult. Chances are you are going to purchase a house during quite a few of those moves and somewhere along the line you may have the opportunity to build a new home.

Should you?

Everyone has fantasized at some point about his or her dream house. You may want closets big enough to live in; a bathroom that doubles as a spa; a kitchen in which you could produce programs for the Food Network But, as in most fantasies, there is usually some epic journey required to achieve the goal. And building your dream house follows that plot line all too closely.

But isn't it the dream that makes the quest worthwhile? Yes, if you can weather the storms and battles along the way. And the determination to keep moving forward is usually a function of a strong will and a big heart. But it helps to use your head before you set off on your personal version of "The Lord of the Rings."

It is likely that you have options when you begin the process of buying a home. There may be existing homes in the area that are affordable and that meet your needs. But there are always things about any property or house that don't exactly meet with your approval. The basement may not be finished or the yard may be too small or the interior décor may have to be entirely redone. It is virtually impossible to buy an existing home without making compromises.

Building new allows you to imagine, design and build the home that accommodates needs and amenities that are important to you... within a budget of course. And that is one thing that must be considered. A new home will be more expensive, on a cost per foot basis, than an existing one. That is due to the cost of land, the price of building materials and labor expense. You might also find that taxes are high as a new area is developed and the municipal authorities factor in the required infrastructure for a growing population and the need for services like education, law enforcement and recreation. You may find yourself subsidizing some of these costs as an area develops.

The ongoing costs associated with an existing house are more predictable. However, there will likely be more maintenance expense than for a new house and energy costs tend to be higher with older properties because newer homes are more energy efficient.

Commuting costs may be an issue. Developers must go further and further out to find enough land to accommodate a new subdivision. That may mean higher costs for commuting to work and to access other businesses and venues that may be closer to the nearest major population center. You should consider this from both a monetary perspective and to determine if you are comfortable with an additional investment of time.

If your new house is built in a subdivision there may be ongoing fees required. In addition, there may be covenants that are designed to protect property values that may apply serious restrictions on your ability to enhance your home and/or your property down the road.

A new home needs new landscaping. This may be included in the price of the home but there will likely be a limit to what is covered under the agreement. To landscape the property in a way that is truly satisfying may require an additional outlay.

Beware of construction delays! Building contractors are notorious for setting deadlines they miss and making promises they can't keep. Make sure you do some thorough research about the builder and his track record before you commit. Weather is always unpredictable and may have an effect but that should be factored in from the start.

A new subdivision can be a hornet's nest of building activity. If you move into your home early in the process be prepared for hammering, sawing, trucks, mud and general chaos for quite a while as the subdivision progresses. This is a lifestyle issue and is a temporary inconvenience. But some have found this level of activity disconcerting and disruptive especially when they are settling into their "dream home" and trying to savor the experience.

If you build new be prepared to stay for a while. With new construction all around you it would be difficult to compete with the rest of the properties available for others who want to build a house from the ground up. You would have to make it worth their while and that usually means a compromise in price.

All this being said (and trust me there is more that could be said) there is nothing quite as satisfying as showcasing the house to family and friends that you designed and built and that reflects your unique vision and personality. If you survive the journey, you will likely have turned your fantasy into reality.

J. Terrence McDermott is administrator and webmaster for House Plans Central at http://www.house-plans-central.com, a site featuring recommendations and resources for those seeking information about house plans and home designs.

How to determine the best real estate markets to invest in?

2006-05-24T10:02:00.000-07:00

by Gurubhakt

Now, let's suppose you are planning to invest in real estate ... you might want to ask yourself two questions -

Where will you invest? And

What sort of property will you buy?

Why ask questions like these? Well, like some wise person said, money is made when buying. It's very important that the buying decision is a very good one ... that decision alone might greatly increase the possibility and amount of profits made.

Also, buying real estate properties at relatively low prices in areas that have very good fundamentals and future prospects is one way to almost guarantee profits.

One way to answer the first question might be to see which are the fastest growing communities ... and then determine why they are the fastest growing communities.

For instance, according to a recent article on netscape.com, Greeley, Colo. is one of the fastest growing communities ... and the possible reason stated for it being one of the fastest? Its relatively inexpensive homes and its proximity to a major metropolitan center.

If Greeley remains at the head of the list of fastest growing communities for another year or two, its "relatively inexpensive homes" might become fairly expensive ... and by that time the people who saw this trend first and bought homes there would have made many a pretty penny :-)

Communities with the fastest rate of population growth can also see very high real estate value appreciations.

And coming to our second question, what sort of property will you buy?

Well, the answer to the first question might determine the possible choices for this ... for the type of property to buy might well depend on where you buy property ...

Location might determine the best type of property to buy ...

For instance, luxury property has a been one of the best performing segments of real estate, but you may not want to buy luxury property as an investment option just about anywhere - maybe if you chose to buy property in Beverly Hills, then luxury real estate would be a great option.

And what if you are buying property in a fast growing community where a large percentage of the new population is single families? Then maybe buying single-family homes would be a good option...

And if a large percentage of the population is retirees, then you might want to determine what types of property people in their golden years prefer.

AUTHOR: Gurubhakt is a writer and web content developer who has written content for several niche sites, and one of the latest is http://www.abeachfronthouse.com that discusses a wide variety of real estate like golfcourse condos, Baja real estate, cottage in PEI, Canada and more.

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Homebuyers Should Steer Clear of White Elephant Properties

2006-05-24T10:01:00.000-07:00

First time homebuyers need to know what type of properties might speak to them but not to the majority of homebuyers when they need to sell. According to industry sources the average homebuyer stays in their first home just shy of six years. Buying a white elephant can be a costly mistake, both in selling price and long market times to find the buyer willing to take a chance on a home that doesn't fit the market.

Features, location and style can create a white elephant property. Mark Nash author of 1001 Tips for Buying and Selling a Home updates homebuyers on what to stay away from when looking for a home. Understanding that all homes are not created equal, Nash outlines what the top elephants are in today's market.

-Homes that back up or look onto cemeteries. Many homebuyers are very cautious about purchasing a home that features a view of a cemetery. Cultural customs and plain old creepiness keep buyers away from homes that overlook headstones and spooky mausoleums.

-Off-beat locations such as busy streets, corner lots, noisy trains and jets will be more difficult to sell to choosy buyers. Buyers want quiet, middle of the block locations away from busy intersections and train tracks, both commuter and freight lines. You might get a discount when you buy for a second rate location, but it's one thing you'll never be able to improve.

-Buy properties that stay in demand. Many smaller homes will fit your budget, but determine if they are in demand by buyers. One bedrooms have a limited audience. Buying a contemporary ( even if it's a steal) in a neighborhood of colonials will be a tough sell.

-Basement bathrooms and bedrooms don't have the same appeal as if they are above grade. Some buyers have security issues as well for garden level condos.

-Tuck under garages. Even though news reports on fires originating in automobiles are low, many homebuyers don't like the idea of sleeping over garages filled with gasoline.

-Mansard roofs. Popular in the the 1970's this roof style is a hard sell with buyers today. Often seen on a second floor of a two story home, the dormer windows protruding from a sloped roof say ugly to homebuyers.

-In-ground swimming pools in northern climates. With the limited season, the amount of space a pool requires in a back yard and the built in maintenance, many buyers won't even look at a home with pool.

-Homes on a crawl space when full basements are the norm. Each area of the country has foundation styles that are the custom. Steer clear of crawl spaces when full stand-up height basements are in over two-thirds of homes. In areas where crawl spaces are the norm, steer clear of slab foundations, many buyers find rooms on slabs are cold in winter months.

-Homes that lack central heating systems. Mortgage lenders and buyers appreciate the utility of central heating. If a home you are interested has a wood or other alternative heat source, factor in adding a central system before you resell.

-Earth-sheltered homes. Popular in the 1980's and very energy efficient, earth homes are not the rage with most home buyers and can be difficult to finance. If you plan to stay a long time, potential resale issues might not be your main concern.

-Homes with knob and tube wiring. Very old homes from the early 1900's had knob and tube electrical wiring. If a home you are interested is entirely or partially wired with knob and tube, check with your homeowners insurance company before you sign on the line.

AUTHOR: Mark Nash's fourth real estate book, "1001 Tips for Buying and Selling a Home" (2005), and working as a real estate broker in Chicago are the foundation for his consumer-centric real estate perspective which has been featured on ABC-TV, CBS The Early Show, Bloomberg TV, CNN-TV, Chicago Sun Times & Tribune, Fidelity Investor’s Weekly, Dow Jones Market Watch, MSNBC.com, The New York Times, Realty Times, Universal Press Syndicate and USA Today.
Article Source: http://EzineArticles.com/?expert=Mark_Nash

Improve Your Credit Score Before Buying a Home

2006-05-24T10:00:00.000-07:00

Author: Roselind Hejl

Several months before you begin to look for a home, you should take steps to get "credit approved" for your loan. Start by making a list of all your existing loans and credit cards, with the company names, account numbers and monthly payment amounts. This will help you to analyze the information shown on your credit report. Include all closed loans and credit cards if these records are available.

1) Get a Financial Check-Up

Make an appointment with a good mortgage lender, and request a full credit approval. As a part of the approval process, your credit report will be ordered. It will include data from the three main credit reporting agencies - Equifax, Experian, and Trans Union. The report will show three credit scores - one from each agency. The interest rate and type of loan available to you is related to your credit score.

The assistance of a mortgage professional to help you to understand your credit report and offer suggestions on how to improve your score is invaluable. For the average person, interpreting a credit report and dealing with errors is a daunting task. Credit reports are filled with frustrating jargon and codes. They are not written for the general public to read. Even more intimidating is the task of communicating with credit agencies to dispute or correct information.

2) Correct Mistakes

Credit reporting agencies often have mistakes in their data. The information in your credit file is input by computers. A computer weighs your data using complicated mathematical formulas to arrive at a credit score.

Nearly everyone has paid bills late for one reason or another. Perhaps a bill was sent to a wrong address, or you have had a dispute with a vendor. It is likely that you have some issues on your report that should be disputed or corrected. Each of the websites of the three main agencies has a dispute resolution page. Feel free to use it.

3) Deal With Real Credit Issues

You may have had serious credit problems at some point in the past. Reviewing this may be emotionally draining, and will bring up the underlying situation that caused the credit problems. Get advice on how long the issues will remain on your report, and how to re- build your credit worthiness.

Or, you may have a persistent habit of overspending. In this case, you should talk with a financial advisor or personal counselor to help you work out of debt, and establish better habits. The National Foundation for Credit Counseling offers low cost assistance for serious credit problems. If you place yourself under their supervision to handle your debts, you will not be able to obtain new credit during the work-out period - which may be years. Before doing that, ask a mortgage lender or financial advisor if there is a way to redeem your credit without their supervision.

4) Check Your Credit File

A law, passed in 2005, requires the three main credit agencies to provide a free credit file disclosure each year. It has been suggested that you could order a file from the first agency in January, one from the second in May and one from the third in September. The central site where your file can be ordered is annual credit report dot com. The purpose of this law seems to be to help people find out if they are a victim of identity theft. This enables you to monitor your file for any new credit that did not come from you.

If you take advantage of the free credit file reports, you should check them for mistakes. Use the credit report that you reviewed with your mortgage lender to compare with the data in your credit file. Keep in mind that the free credit file disclosure is not a credit report. It does not include a credit score.

5) Understand Credit Scores

Less than 620 - Poor

620-680 - Average - You may need to put more cash down on your loan.

680-720 - Good

720 - 800 - Excellent

800-850 - Seldom seen

6) Play by the Rules

The information in your credit file is scored by these factors:

35% - Payment history - Paying bills on time is very important. Today many people use auto draft or pre-written checks through online banking to pay bills. These help to prevent late payments. If you want a good credit score, do not pay late!

30% - The relationship between your available credit versus how much you have used is an important factor in your score. If you are over 50% drawn against your available credit, this will count against you. For this reason, it helps to keep old credit card accounts open, even though you do not use them. They build up the total amount of credit available to you, relative to what you have charged.

15% - The length of credit history on each loan has an effect on your score. A more seasoned loan is scored higher. For this reason it is not a good idea to open credit cards offering low initial rates, then close them after a few months and open new credit cards.

10% - The number of inquiries made on your credit report affects your score. Each time you open a credit card or new loan, your credit information is pulled. Keep these to a minimum. A recent law has made it possible for people shopping for homes or autos to have multiple inquiries, from the same industry (mortgage or auto), done over a 30 day period without penalty. However, to be on the safe side, do not allow your credit report to be pulled unless absolutely necessary.

10% - The types of credit used may hurt your score. Loans from finance companies, signature loans, furniture loans and some retail store loans are considered a poor judgment because of their high rates, and may count against you.

7) Improve Your Credit Score

It is easy and necessary to borrow money. We customarily make everyday purchases using credit cards, and set up loans for homes, cars and other purchases. Your credit score is especially important in the purchase of your home. It will affect the type of loan available, down payment required, and interest rate charged. A low score can cost you thousands of dollars in additional interest over the years. Even insurance companies factor your credit score into their decisions. More than ever, you need a good credit score, or you will pay the price.

Finance providers, rental agencies, car dealers, insurance companies and credit card companies are not going to help you improve your credit score. In fact, they have an economic interest in charging you a higher rate. It is up to you to be proactive about understanding and improving your own credit score. A good time to start is when you begin the mortgage approval process for a home purchase. It is a good habit to have.

Ten Moving Tips

2006-05-24T09:59:00.000-07:00

Author: Steve Gillman

These moving tips may include a few things you hadn't thought of, or things you just need to be reminded of. Forget that safe deposit box, for example, and you may have to drive a long way to get at it. Ten more moving tips follow.

1. Get rid of things. Consider carefully what you need to keep. People spend hundreds of dollars to move things that will undoubtedly be thrown away some day. It's not just a matter of the expense, but the hassle too. Moving time is the best time to get rid of the things you really don't need.

2. Have a yard sale. It's a good way to get rid of those things, and you might even raise enough money to pay for the move.

3. Use lists. You will forget things, especially if you don't have a list or two. Start with a list of things to do before the move. It may include getting school documents transferred, filling out change of address forms, returning borrowed books and movies, transferring prescriptions, getting maps, and arranging utility shut offs and start ups.

4. Make the the moving company reservation a month ahead. You wouldn't want to find out they are booked up on the date you need them.

5. Pack early. It's hard to say how long it will take until you are doing it. Start early to avoid running around looking for boxes at the last moment.

6. Have an "essentials" box. This will have things to make your arrival easier, like toilet paper, paper plates, soap and such. Pack the box where it is easily accessible.

7. Check weather reports. It's no fun arriving in a snowstorm with your coat packed away somewhere. Allow for extra moving time if the weather is going to slow down traffic.

8. Notify family and friends of your new address and phone number(s). Do this before you have the phone shut off.

9. Save your receipts. Save receipts for moving expenses, like gas, hotel rooms, and anything else related to the move. Then ask your accountant or tax preparer if you are eligible for a tax deduction for moving expenses.

10. try to re-establish your routines quickly. It helps to quickly re-establish routines in your new home, so if Friday night is movie night, don't break with tradition. Moving is less traumatic if you have some consistency in daily life. If you are moving with children, this may be one of the more important moving tips.

Author: Steve Gillman has invested in real estate for years. To learn more, get a free real estate investing course, and see a photo of a beautiful house he and his wife bought for $17,500, visit http://www.HousesUnderFiftyThousand.com

Fear of Buying a Home

2006-05-24T09:58:00.000-07:00

Author: Julie Jalone

Buying a home is a major decision. For most of us it is the largest financial transaction we have in our lifetime. Based on those comments it is easy to see why some potential buyers have a hard time pulling the trigger. Some questions they may be asking themselves include, can I afford this, what if I lose my job and can’t make the payments and do I want this responsibility? After writing that, I feel like I should sell my house! But let take a look at the situation because I really don’t think buying a home is risky.

Rather than address some of the many benefits of home ownership such as the potential appreciation, tax benefits and the ability to customize and make it “your place,” I want to address the reasons some individuals do not buy.

Can I afford to buy a home is not a fear it is a question that can be answered very easily at most banks and for sure by mortgage brokers and lenders. Most first time home buyers are pleasantly surprised to learn they can qualify and even more astonished by what price of home they can shop for.

What if I lose my job and can’t make a payment? Why is that so different from, what if I can’t pay my rent? The renter who can’t pay the rent is out on the street looking for another place to live long before homeowner is forced to move. Evicting a delinquent renter can happen in days depending on where you live. Ever try finding another place to rent after you have been evicted for not paying rent? Would you want to rent to that person, especially if they don’t have a job? If you do find a new rental it will require a significant dollar deposit that if you had you would have used to pay the rent at the last place. As you can see this is not a very pretty scenario.

Homeowners have some advantages when it comes to capacity to make payments. Landlords want to evict and get a new renter; lenders do not want to foreclose unless they have no other alternative. Lenders are more apt to work with a borrower who is having temporary financial problems because the foreclosure process is expensive and generally end up with some dollar amount being exposed to loss. Most lenders will not even start the foreclosure process until you are 60 to 90 days delinquent in your payments. In many places around the country and particularly in California where we have experienced rapid appreciation over the past five years, this time given by the lender allows the homeowner to find solutions including selling the home. Often the sale even results in the homeowner making a profit.

Just because I have said the mortgage lenders are willing to work with delinquent borrowers, don’t misread that as it will be a delightful experience and they are happy to “roll over.” It is not a fun experience and is generally a very expensive process but it does protect homeowners by providing time to seek solutions that renters don’t have.

So if buying a house can provide security why don’t we all want to own a house? Do I want the responsibility of being a homeowner? There are some responsibilities and clearly expenses associated with homeownership that renters do not have. As long as individuals understand the risk factors this decision comes down to determining if the extra security and other benefits of owning your own home is worth the added responsibility.
In California over the past few months there is another growing group of individuals who are not buying homes even though they have made decisions they want to be homeowners. The media “Bubble” proponents have many people wondering when the right time to buy is. After five years of record appreciation, will prices fall like some think? If you are buying a home for speculation reasons I think this is a good question and deserves some careful thought. On the other hand if you want to own a home for the security and other benefits this is the time to buy.

Julie Jalone is an experienced professional Realtor serving buyers and sellers of residential real estate in the Greater Sacramento area including Placer, El Dorado, Yolo and Yuba counties. Some of the communities served by Julie include Sacramento, Roseville, Rocklin, Lincoln and Granite Bay. She has been working with a wonderful couple from Iowa who are having a hard time with California prices and are worried about the “bubble.” They really want a home but you can see them struggling with making the decision. It is just going to take more time! To learn more about Julie, take a look at her website, jalone.com, where you will find additional articles, monthly market analysis and her daily blog, ”Keep it Real in Sacramento.”