Items of Interest - October 6, 2006

FED CHIEF SAYS THE CORRECTION IS SUBSTANTIAL: Federal Reserve Chairman Ben S. Bernanke said in a speech that the U.S. housing market was in a "substantial correction." It will lop about a percentage point off economic growth in the second half and would restrain the expansion next year, reports Bloomberg News in the New York Times. "How far will the correction go?" Bernanke asked himself, according to the Washington Post. "It's very difficult to tell, is the honest answer," the chairman responded. He added that the decline in residential housing construction is one of the "major drags that is causing the economy to slow." But Bernanke gave several reasons to expect the housing market to level off and eventually bounce back, including low unemployment, rising incomes and low mortgage rates. Although sales of previously owned homes fell in August, some analysts also saw signs that the market might be stabilizing, noting increases that month in both new-home sales and pending sales, in which contracts have been signed but the deals have not yet closed.

WILL AUGUST PROVE TO BE THE LOWEST MONTH: Pending home sales have increased, showing that the housing market continues to stabilize, according to the National Association of Realtors (NAR). NAR's Pending Home Sales Index, based on contracts signed in August, rose 4.3 percent from July, but it is 14.1 percent lower than August 2005. Commented David Lereah, the trade association's chief economist: "Our sense is that home sales may have reached a low in August. The Pending Home Sales Index shows home sales should be fairly stable over the next two months, although a minor decline is possible." He added that fewer listings on the market suggests that "we should be able to draw down the inventory supply early next year to the point where home prices will rise, but at a slower pace than historic norms."

ONE INCENTIVE FOR SELLERS IS TO OFFER A MORTGAGE: As a sales incentive, home sellers with a lot of equity often agree to carry back a first or second mortgage for their buyers, notes the Washington Post. Of course, the buyer should make a reasonable down payment, such as 10 percent of the sales price, and the seller should check the buyer's credit report and credit score. For the seller, security for the buyer's promissory note will be either a first or second mortgage recorded against the title. If the buyer defaults and fails to pay the secured mortgage payments or fails to pay the property taxes or fire insurance premium, then foreclosure can begin. The average foreclosure time is four to six months. At the foreclosure auction, the highest bidder gets the title to the property and the mortgage balance is paid in full. If no bidders show up at the foreclosure auction, the sellers gets back the property title, making it possible to sell the property once again.

SALES SLIDE OF EXISTING HOMES AS INVENTORY SOARS: Total existing-home sales - including single-family, townhomes, condominiums and co-ops - slipped 0.5 percent in August from July. Sales were 12.6 percent lower than in August 2005, which was the second highest on record, according to the National Association of Realtors (NAR). The national median existing-home price for all housing types was $225,000 in August, down 1.7 percent from August 2005, but still considerably higher than in previous years. "After a stronger-than-expected drop in July, the fairly even sales numbers in August tell us the market is at a more sustainable pace," spun NAR Chief Economist David Lereah. "It keeps us on track to see the third highest sales year on record, but we do expect an adjustment in home prices to last several months as we work through a build-up in the inventory of homes on the market." He added that the drop was the "price correction" the NAR has been expecting. "With sales stabilizing, we should go back to positive price growth early next year," Lereah said. Total housing inventory levels rose 1.5 percent at the end of August to 3.92 million existing homes available for sale, representing a 7.5-month supply at the current sales pace - the highest supply since April 1993. Single-family home sales held at a seasonally adjusted annual rate of 5.51 million in August, unchanged from July, but volume was 12.3 percent lower than in the previous August. The median existing single-family home price was $225,700 in August, down 1.7 percent from a year ago. Existing condominium and cooperative housing sales fell 3.5 percent, 14.5 percent below August 2005. The median existing condo price was $223,200 in August, down 2.4 percent from a year earlier.

A SLOWDOWN IS ACKNOWLEDGED, BUT NOT A BUST: In its second quarterly report of 2006, the UCLA Anderson Forecast anticipates a slowdown in real estate across the United States and in California. Forecast Director Edward Leamer does not expect real estate prices to fall significantly. In his view, sales volume is what typically drops, and drops more precipitously than prices, as the price cycle lags behind the volume cycle. The number of homes sold will drop as owners decline to sell in a weak housing market. Prices, however, should hold. The real decline in the housing market, Leamer says, will come in "residential investment," which includes construction of new homes, repair and remodeling, and brokerage commissions on the sale of new and existing homes. The data put recent headlines about home price declines into perspective, said Charles Jolly, president of the San Diego Association of Realtors and a Realtor for more than 30 years. Reports that focus on recent losses are "comparing everything to last year," Jolly maintained. He said he's seen his share of ups and downs in the market; the current state of affairs is just another part of a cycle. He gave an example of a particular San Diego property that sold in 2000 for $345,000 and would have sold for $745,000 in 2005. Today, it would probably sell for less than $700,000, he said.

MOODY'S ECONOMIST OFFERS GRIM FORECAST: Painting one of the darkest scenarios to date of the future of the U.S. market, Moody's Economy.com said in a new report that home price declines in 2007 would approach 20 percent in some areas, where the word "crash" could replace "soft landing," according to Realty Times. The research firm said the median sales price for an existing home will decline in 2007 by only 3.6 percent, which would be the first full-year decline in home prices since the 1930s' Great Depression era. The report said that more than 100 of the nation's 379 metropolitan areas, accounting for nearly half the nation's single-family housing stock, reveal a significant probability of experiencing price declines by the fall of 2007. "The highest probability of price declines is in metro areas throughout California and in and around New York City," Eoncomy.com said. "Probabilities are nearly as high in the rest of the Northeast Corridor, many Florida metro areas, and in sundry areas in the Midwest and Mountain West," the authors state. Economy.com said the findings are based on measures of housing market imbalances that have historically led changes in house prices - housing affordability (or the lack thereof), non-housing related employment growth, the physical supply and demand balance, and a measure of house price over-valuation/under-valuation. "New and existing home sales and single family housing construction are sliding, inventories of unsold homes are surging to new record highs, and house prices are falling in an increasing number of areas," the report said. "Housing's problems began just over a year ago when activity peaked but have increased substantially in recent months. The bright optimism of home buyers, builders and lenders has abruptly devolved into increasingly dark pessimism."

RETIREES PREFER NOT THE WARMTH OF SUN, BUT OF FAMILY: For years, the search for a new home in retirement has been tied to weather and leisure, observes the Wall Street Journal. States such as Arizona and Florida captured the lion's share of transplants, with good reason: They offer a warm climate, lots of sunshine and plenty of golf, tennis and water sports. But today, while weather and leisure remain important, retirees are telling builders, developers and researchers that they are looking primarily for what a community where they can make friends and connections quickly, whether it's a small town or a walkable neighborhood in a big city. A close second and third on the priority lists: a home that's near grandchildren, and a setting where one can indulge a post-work passion, such as a second career, a newly adopted sport or even, for a growing number of people, farming.

OR NOT: According to a study commissioned by publisher Hanley Wood, more than a third of Baby Boomers say their adult children and their own parents are not a consideration in creating their dream homes. Sixty-three percent said enjoying their home after age 60 is a priority above or equal to spending time with the grandchildren, and just 35 percent said they'd relocate to be closer to family and loved ones. "The generation has always been considered selfish," said Frank Anton, chief executive officer of Hanley Wood, a media and information company for the housing and construction industry. "This survey would indicate maybe they're more selfish than anyone knows." Many respondents have a list of dream amenities: Homes that are cozy and comfortable, yet airy and spacious; homes without stairs, but with room for a Stairmaster; living spaces that are energy efficient, but deluxe. They don't want single-age communities, instead looking for opportunities to stay active. "They're saying 'Look, I did my thing. I raised my kids, I was nice to them, I put them through college, I went to their soccer games. Now I want to do my own thing,'" Anton said. The study included 2,000 homeowners between the ages of 50 and 60 with annual household incomes of $100,000 or more. Only about one in five respondents who participated in the study said they would prefer to stay in their current home as it stands today. Thirty-five percent said they would prefer to buy a different or new home to get what they want, while 17 percent were ready to design or build a new home to meet their needs and desires. Fifteen percent were cost-conscious remodelers who plan on upgrading their current home; 12 percent said they planned to purchase a second home. The study also found that these "leading edge" boomers don't seem to be moving en masse toward urban areas, as some have perceived. Of those surveyed, 81 percent said they would rather live in the suburbs or a rural area. For the occasions that their grandchildren do visit, 58 percent said they want their house to be fun for kids, and 52 percent are interested in design features that make the home safe for children.

MORTGAGE RATES FLATTEN OUT: The 30-year fixed-rate mortgage (FRM) averaged 6.30 percent for the week, barely down from last week's 6.31 percent, according to Freddie Mac. Last year at this time, it was 5.98 percent. This is the lowest the 30-year FRM has been since the week of last March 2, when it averaged 6.24 percent. The 15-year FRM this week was unchanged at 5.98 percent. A year ago, it averaged 5.54 percent, the lowest the 15-year FRM has been since the week ending March 23, when it was 5.97 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were unchanged at 6.00 percent this week. One year earlier, the average was 5.48 percent – again, the lowest the five-year ARM has been since the week ending March 23, when it was 5.96 percent. One-year Treasury-indexed ARMs averaged 5.46 percent, down 5.47 percent last week and up from 4.77 percent last year. The one-year ARM has not been lower since the week ending March 23, when it was 5.41 percent. "Mortgage rates fell to a six-month low this past week, and, not surprisingly, home refinancing rose 18 percent last week, accounting for almost half of all mortgage applications," said Frank Nothaft, Freddie Mac vice president and chief economist. "This is due both to the recent decline in mortgage rates and to homeowners who are refinancing ARMs rather than waiting for them to reset in the future when rates may be higher."

THIS WINTER'S HEATING COSTS ARE HEADING DOWN: The price of natural gas has dropped 47 percent since this time last year, and the wholesale price of home heating oil is down 20 percent, reports the Christian Science Monitor in Realtor magazine. If prices don't rise for some unpredictable reason, and if the winter is not unusually cold, homeowners could save as much as $250 compared with last year, some energy analysts estimate. "This is the equivalent of a major tax cut - almost the same as right after 9/11 when the government sent checks to everybody," says Dennis Jacobe, chief economist for the Gallup Organization in Washington. Still, many variables affect whether consumers see any savings, industry representatives warn. "You can't just take prices today or the past week and assume customers will save 40 or 50 percent," says Paul Wilkinson of the American Gas Association in Washington. "We know for the first six months of the year, prices were actually higher than they were for first six months of last year."

COULD THIS BE THE ANSWER TO YOUR PRAYERS: St. Martin Monastery and most of its 560 acres on the outskirts of Rapid City, S.D., is for sale, according to the Rapid City Journal in Realtor magazine. St. Martin was built in 1962 as a monastery and Catholic boarding school, when St. Martin's Academy outgrew the Sturgis convent, which was founded in 1889 by five Swiss nuns. The Rapid City campus included a student dormitory, classrooms, and the monastery's signature stone-and-wood chapel with its soaring roofline. Proposals are due by Nov. 7, so get thee there ASAP. A new building on grounds not included in the sale will house the 33 remaining nuns, whose average age is 73. The current owners are hoping for a buyer who will continue the Benedictines' 117-year history of service to the area. But Sandra Runde, a Rapid City commercial real estate practitioner, believes finding a buyer to use the property as a school or religious facility will be difficult. "It's just about impossible," she says.

AGASSI AND GRAF ARE IN LOVE WITH REAL ESTATE: A company set up by Andre and his wife Steffi has partnered with privately owned Exclusive Resorts, a time-share company headed by AOL co-founder Steve Case, to develop "luxury resort communities," according to the Washington Post. "As I begin the next chapter of my life, I am looking for ways to pursue a career in business, specifically in real estate," Agassi, 36, said in a statement. He indicated that Agassi Graf Development LLC and Exclusive Resorts would co-develop luxury resort communities in the United States and overseas which would have Agassi/Graf tennis and fitness facilities as their central amenities. He will become a senior advisor to the company. Earlier this month Agassi and Graf unveiled plans to develop a luxury mountain project, Fairmont Tamarack, in Donnelly, Idaho, in conjunction with Miami-based Bayview Financial.

SURVEY FINDS OPTIMISM ABOUT REAL ESTATE APPRECIATION: According to consumer survey by RBC Capital Markets Consumer Survey, nearly half of all homeowners still expect at least 5 percent annual increases in their home values over the next few years - down from almost 60 percent last year. The national survey of 1,003 Americans also revealed that 25 per cent of homeowners have already paid off their mortgage. "While real estate expectations are lower than they were last year, consumers still seem optimistic despite what we are seeing in the marketplace," said Scot Ciccarelli, managing director and equity research analysts for RBC Capital Markets. "Declining real estate values could eventually impact consumer spending as people don't feel as wealthy as they used to and become less likely to borrow against the equity they have built up in their homes."

NEW-HOME SALES SURPRISE FORECASTERS: Sales of new single-family homes rose 4.1 percent in August to a seasonally adjusted annual rate of 1.050 million units, following substantial downward revisions to the sales rate for the previous three months, according to figures released by the U.S. Commerce Department. The preliminary sales pace was down 17.4 percent from a year ago. "The bounce-back in new home sales certainly is a welcome development, although the reported increase was from a downward-revised July level that was the lowest reading since March 2003," said Chief Economist David Seiders of National Association of Home Builders (NAHB). "Many builders still have large inventories of unsold homes, and we expect to see aggressive use of sales incentives over the balance of the year." But the New York Times quoted Chief Economist Stuart Hoffman of PNC Financial as terming the increase a "dead-cat bounce." The inventory of new homes for sale decreased slightly to 568,000 units at the end of August, a 6.6 months' supply at the current sales pace. The median length of time that completed homes for sale were on the market was 3.6 months, the same as the two previous months and down from 3.7 months a year earlier.

HUGE MORTGAGE FRAUD CASE IS REPORTED: Federal and state authorities are investigating allegations of an elaborate mortgage fraud involving about 100 people living in or near the small factory town of Martinsville, Va., who say they unwittingly took out loans to buy houses at inflated prices in Indiana, the Wall Street Journal reports. The borrowers, who include truck drivers, factory workers, a pastor and a hair stylist, say they were duped by acquaintances into signing stacks of documents and didn't know they were applying for loans. Instead, they thought they were joining a risk-free "investment group." Now, many of the loans are in default, the borrowers' credit ratings are in ruins, and lenders are pursuing the organizers of the purported investment group in court. Companies stuck with the defaulting loans include Countrywide Financial, the nation's largest home lender, and Argent Mortgage, another big lender. A lawsuit filed by Countrywide accuses the organizers of acquiring homes and then fraudulently selling them for a quick profit to the Virginia borrowers. Representatives of the borrowers put the total value of loans involved at about $80 million, making it one of the largest mortgage-fraud cases ever. Mortgage fraud, involving loans obtained by providing false information, has mushroomed in recent years as lenders have pushed for speedier loan approvals in an effort to remain competitive and milk maximum profits from the now-fading housing boom. The Federal Bureau of Investigation reported that mortgage fraud led to losses of $1 billion in 2005, up from $429 million a year earlier. And attracted by the ability to obtain large sums quickly, some criminal gangs involved in drug dealing and other street crimes have branched out into mortgage fraud, says Chip Burrus, assistant director of the FBI's criminal investigative division. "It's more profitable and less risky," he says.

HERE'S ONE SMART IDEA: Structured wiring is becoming the trendiest new feature in apartments and single-family homes, observes Realty Times. Coaxial TV cable (RG-6), Category 5E voice and data lines, distributed radio, remote camera security are wired throughout a home into multi-outlet boxes called in the trade, home network centers. The beauty of the system is that it allows one point of origin for connecting all the computers in a home to DSL. With the addition of a control panel, you can pre-set furnace and air-conditioning, lighting to auto-off/on, deliver audio room-by-room, and raise and lower window shades, all by programming your control center. Some systems also allow you to call your home telephone and enter prompts remotely. Structured wiring can be added to an existing home or specified to a new one. The system costs roughly $1,500 in new construction and double in a retro fit.

HOME CONSTRUCTION, RENOVATION OUTPACE INFLATION: Home building and remodeling costs are accelerating faster than overall consumer and business inflation, according to a report by the Associated General Contractors of America, says Dow Jones Business News in Realtor magazine. Boosted by higher metals, concrete and fuel prices, construction prices overall jumped 8.8 percent in August from the same month a year ago. Home construction gained 8 percent, according to the contractors group. "Contractors have been experiencing significant increases in the costs of construction materials and, in some instances, shortages," says Stephen Sandherr, chief executive of the contractors group. "The trend we're seeing is that the inflation rate for material prices is likely to continue to be greater than the Consumer Price Index or the Producer Price Index." During the next six to 12 months, the group expects diesel, plastics and gypsum costs to decline from year-ago, while prices for materials such as asphalt and copper to remain "elevated but not stratospheric."

IN TERMS OF RISING VALUE, THE BIG APPLE IS NOT THE BIGGEST: The real median home value in San Diego jumped from $249,000 to $567,000 between 2000 and 2005, the largest increase in the nation among big cities. Across the country, real median home values soared 32 percent, according to new 2005 American Community Survey data released by the U.S. Census Bureau. Among the nation's largest cities, some of the highest percent increases in real median home values between 2000 and 2005 were found in San Diego (127.2 percent), Los Angeles (110.2) and New York (79.1). Real median selected monthly owner costs for owners with mortgages have increased 5.0 percent nationally between 2000 and 2005. Though not statistically different from each other, some of the highest increases among the largest cities in real median monthly owner costs were found in Detroit (24.1 percent), Chicago (21.7) and San Francisco (19.6). Decreases of about 10 percent in real median homeownership costs were found in some of the smaller cities such as Bryan, Texas, and Greenville, N.C. Additionally, the real median cost of renting a home increased nationally by 6.7 percent from 2000 to 2005. Some of the highest real median rent percentage increases among the large cities were found in San Diego (27.2 percent), Detroit (22.5) and Los Angeles (15.9).

PERHAPS REAL ESTATE BELONGS IN A RETIREMENT PORTFOLIO: According to financial planners and real-estate analysts, most retirement portfolios should include some real estate, the Wall Street Journal reports. That's because land and property are "loosely correlated to the stock market," says Seth Pearson, a certified financial planner in the backwater of Dennis, Mass. In other words, the value of real estate tends to rise when stocks are going down. At the same time, though, real estate should be a relatively small part of most nest eggs, no more than 20 percent of your overall portfolio, Pearson advises. And investors with dreams today of making a killing in residential and commercial property need to lower their expectations - sharply. "You can't figure on returns being what they have been, or you'll be very disappointed," says Christopher Cordaro, a financial planner in Chatham, N.J.

MORTGAGE APPLICATIONS RISE SHARPLY, ESPECIALLY REFIS: For the week ended Sept. 29, loan volume soared 11.9 percent on a seasonally adjusted basis from one week earlier, according to the Mortgage Bankers Association (MBA). On an unadjusted basis, the increase was 11.5 percent compared with the previous week and was down 10.9 percent compared with the same week one year earlier. "Refinance applications continue to increase as mortgage rates have declined to their lowest levels since the beginning of the year," observed Mike Fratantoni, MBA's senior director for single family research and economics. Seasonally-adjusted, refinancings went up by 17.5 percent compared with the previous week, while purchase applications grew by 7.6 percent. The refinance share of mortgage activity increased to 46.7 percent of total applications from 44.3 percent the previous week - the highest that the refinance share has been since February 2005. The adjustable-rate mortgage (ARM) share of activity rose to 27 percent from 26.4 percent.

TENANTS ARE AMONG BIDDERS FOR STUYVESANT TOWN: A group aligned with tenants of Stuyvesant Town and Peter Cooper Village submitted a $4.5 billion bid to buy the 110 apartment buildings overlooking the East River in the hope of retaining the complexes as middle-income housing, reports the New York Times. Their offer was neither the highest nor the lowest in one of the biggest real estate auctions of all time. Metropolitan Life, the company that built Peter Cooper Village and Stuyvesant Town in 1947 for returning veterans, got roughly a dozen offers by its Thursday deadline, ranging from $4.3 billion to slightly more than $5 billion, according to real estate executives. The rare opportunity to own 80 acres of prime property in Manhattan and 12,232 apartments has drawn national attention and bids from some of the biggest developers and residential developers in the country, as well as banks and foreign investors. Bidders include Related Companies, the Lefrak Organization and Apollo Real Estate Advisors.

PAULSON MOVES FROM WALL STREET TO MASS AVENUE HEIGHTS: Treasury Secretary Henry Paulson, whose job may well end in two years, is the buyer of a home offered for $4.5 million and once owned by former Sen. Jon Corzine, now governor of New Jersey, says the Washington Post. The four-bedroom house in the Massachusetts Heights neighborhood not far from the vice presidential residence has been on the market for many months and has frequently changed hands. Nestled on a woody hillside, gorgeously decorated and boasting a heated swimming pool, the house affords privacy, views and an antique stone fountain.

D.C. Metro Market Update - The supply is finally shrinking as sales slide

The District

Condos and co-ops

Although the number of new listings grew by 19.1 percent in August, inventory continued a downward trend that began in June. Still, there were 208.4 percent more apartments on the market at the end of the month than the year earlier, with by far the biggest proportion of the 1,474 condos and co-ops offered at prices below $600,000. Of the 474 put on the market during the month, nearly half – 234 – were listed between $200,000 and $400,000.

Sales activity declined 2.5 percent, to 316, compared with the previous August. All of the decrease in ratified contracts was for apartments between $300,000 and $800,000. The month’s sales were lower than every month since February but higher than the winter. Year-to-date volume was off 12.6 percent in most price ranges. Exceptions were at $150,000-200,000 and between $800,000 and $1 million.

The market absorbed a shabby 18 percent of the available condos and co-ops, a situation reflected by falling prices. The average sale was $406,086, and the median was $357,500. By contrast, last year’s average was $426,576 and the median, $375,000. Yet, August prices were higher than the 2004 figures - $364,460 on average and a median of $325,000.

Single-family homes

New listings dropped 6 percent below the previous August, to 516 versus 549. As a result, supply edged down after remaining on essentially a plateau since April. The only substantial growth in homes added to the market was in the $700,000-800,000 and $1.25 million-$1.5 million ranges. The inventory of unsold properties reached 1,330 by the end of the month, 93.9 percent more than August of 2005. Except for an insignificant decline below $150,000, every level posted gains no lower than 22.5 percent ($1.5 million or more) and no higher than 132.7 percent ($300,000-400,000).

The volume of sales in August was lower than in any month since December, plunging 24.9 percent from one year earlier, from 417 to 313 signed contracts. Only between $1 million and $1.5 million did sales activity rise; it went from 12 to 18 properties under contract. For the year to date, volume slipped by 19.1 percent, with the biggest declines at levels below $200,000, at which price points there were 81 sales as opposed to 252 in 2005.

The absorption rate was only 19 percent, yet prices of single-family homes continue to climb. The average has gone from $628,179 last year to $653,444 in 2006, and the median, from $489,000 to $500,000.

Montgomery County

Condos and co-ops

The supply of new listings went up 6.3 percent in August, most of them below $400,000; the bulk, 319 of 459 put on the market, was between $200,000 and $400,000. At the end of the month, inventory stood at almost the same level as it did in July and July, and the summer’s amount was higher than in the whole previous year. There were 1,030 condos and co-ops lingering on the market, 151.8 percent more than on Aug. 31, 2005. Increases were in the triple digits between $150,000 and $900,000 with the notable exception of $800,000-900,000, where 13 apartments awaiting buyers represented a 1,200 percent gain. Above $1.5 million, the four homes still on the market accounted for a 300 percent increase.

New sales fell 19.9 percent below the August 2005 activity. Of 254 ratified contracts, 120 were at the $200,000-300,000 level, but volume there was 20 percent smaller than in the previous August. Monthly volume hasn’t been so low since January. As for the year to date, sales were off 16.7 percent, dipping to 2,219 from 2,663. Between $900,000 and $1 million, seven sales so far this year represented a 250 percent rise.

Of the 1,284 apartments offered for sale during the month, 20 percent found buyers. Even with an absorption rate of one out of five, prices edged up. The average in August was $313,644 from $306,544 last year, and the median was $285,000 from $275,000.

Single-family homes

There was a 1 percent decline in new listings from August to August, with pluses and minuses spread across the market. The biggest gain was 89.3 percent, from 28 to 53, in homes offered at $1.25 million-$1.5 million. For the first time in a year, supply inched down from July’s peak. The number of properties still seeking buyers at the end of the month was 3,815, which was 119.6 percent more than at the same time last year. Growth in inventory ranged from 39.4 percent, to 251, for homes offered above $1.5 million to as high as 194.7 percent, to 828, for those at $400,000-500,000.

August sales volume was nearly even with that of June and July, but it was 22.3 percent below August 2005, falling from 1,155 to 898. Activity was down in every price range but $900,000-1 million (up 16.7 percent) and above $1.5 million (up 47.4 percent). Year-to-date volume also was lower by 22.3 percent, recording 7,438 sales in August versus 9,578 at the same time last year. The greatest declines were registered for houses listed under $400,000, and the only increases were for those above $1 million; sales at the high end totaled 439 this year and 403 in 2005.

The market absorbed just 19 percent of all homes that were active during the month, and prices stood higher than they were last year. The average has moved from $563,491 to $601,402, and the median, from $465,000 to $490,000.

Alexandria

Condos and co-ops

The number of new listings took a 9.8 percent dive beneath last August’s 2005. Of the 185 put on the market, 139 were priced between $200,000 and $400,000. But there was an 8.8 percent increase at $200,000-300,000 and an 11 percent decrease between $300,000 and $400,000. From 12-month highs in May and June, the trend line started to turn down and continued in that direction, albeit modestly, in August. At month’s end, there remained 594 unsold apartments, 154.9 percent more than in 2005. Predictably, the biggest categories were the two levels between $200,000 and $400,000, which accounted for 418 of those condos and co-ops. Each level had more than triple the number of apartments than at the same time last year.

Sales slid by 12.6 percent, to 111 from 127; the losses in signed contracts occurred above $200,000, except for the $400,000-500,000 level, which gained 35.7 percent, to 19. Notwithstanding, the month had more sales than any month since April. Year-to-date volume plunged 28.3 percent more or less across the board, although sales activity was at least twice the previous year’s between $700,000 and $900,000, reaching 24 in comparison with 11 in 2005.

The absorption rate was, to put it charitably, an unremarkable 16 percent, and prices are beginning to level off. The average is $354,629, up from $343,872 last year and $273,560 in 2004; the median is $320,000, up from $311,000 in 2005 and $245,000 the previous year.

Single-family homes

New listings shrank 9.7 percent below the amount in August 2005, with virtually every price level posting declines. The notable departure was at $400,000-500,000, which rose 54.5 percent to 34. Supply went down for the first time since December, though it was higher than in the winter. The number of listings active at the end of the month was double that of the year before, reaching 446. There were triple-digit increases ranging from 140 percent ($300,000-400,000) and 226.7 percent ($500,000-600,000). At $400,000-500,000, the increase was 171.4 percent, and the three levels accounted for 198 of the unsold properties.

Sales activity fell 13.4 percent behind August of 2005, thanks to decreases at every single level but $600,000-700,000, which was up 166.7 percent, to 8. The month’s volume of ratified contracts was greater than July’s but below every other month since February. For the year to date, sales were down 19.9 percent, mostly in the double digits at every price point. The modest exceptions were at $900,000-$1 million, which went up 11.8 percent to 38, and at $1 million-1.25 million, up 4.2 percent to 25.

The market absorbed just 18 percent of available homes, and prices remain slightly higher than they were last year. From $666,068 last year, they have grown to $680,398 on average; the median has inched up to $603,000 from $599,999.

What it all means

There is no denying that the market has made a clear adjustment. Declining inventory is now established as a trend and sales have begun to show gathering strength in general. It seems obvious that sellers are starting to appreciate the existence of a new reality and that buyers are beginning to respond.

When it comes to buyers, the industry has lately referred to them as being on the sidelines. It’s true: They are nervous about getting into the market too fast, before, they surmise, that mythical "bubble" bursts and prices plunge. With respect to stocks and bonds, that approach is called "market timing," and the professionals all say the strategy just doesn’t work. Buyers need to bear that wisdom in mind. They are well advised to remember that interest rates will remain unusually low only for the time being. And they would do well to consider that any investment in real estate always bears fruit over a span of four or five years.

Depending on the individual’s situation - how long sellers have owned their properties, how much "profit" they could realize even now, and how much risk buyers are willing to assume that higher monthly payments won’t buy them lower housing value - this may well be the ideal time to act. The transition to a new market is not complete, but the direction is apparent.

Out & About - Around town with Aelita

Aelita Brolis, who views property all the time, recently found much worth seeing in Foggy Bottom and points elsewhere. Her impressions follow.

• A gorgeous one bedroom condo in Foggy Bottom. Listed at $459,900 and only 14 days on the market, this is a unique gem that seems decently priced. It is 700 square feet, full of light and great angles everywhere. Everything is updated with granite and stainless. The ceilings are high. The one bathroom has two entrances. The parking spot – which is worth about $60,000 in that area – is HUGE and separately deeded. What a bonus! Residents are also allowed to build storage units on their parking spot if they so chose in this pet-friendly building. The condo fee is about $385, and that includes all the regulars plus cable TV and front desk service. The only utilities you have to pay are electric and phone. Wow.
  
• A Foggy Bottom cooperative building I have been in more times than I can count, always looking for something decent but rarely finding it, well, for at least the right price. The location - a few blocks from the metro, the new Trader Joe's, GW, etc. is the best thing this 465-square-foot efficiency has going for it after 22 days on the market. It is listed at $195,000, and its monthly fee is $487/month. There is a rooftop pool and taxes are included, as are utilities, and you have a 24-hour desk. The unit is a rectangle. Its kitchen is outdated, the carpet is okay, but the plaster blistering off the walls does not do much for me. For the rather modest monthly fees and its fabulous location, if this rectangle was updated, I think someone could be quite happy there for the current asking price.
  
• A spectacular townhouse in Foggy Bottom. Words can not appropriately describe this piece of craftsmanship. It has beautiful bamboo floors, bright light pouring in every window. Everything is brand new – from stainless to granite to cherry cabinets to cutting-edge electronics wiring throughout the main level. This historic home - built in 1900 - now has new walls, floors, roof, skylights, and plumbing and electrical systems. You want to move in the moment you walk in. Unfortunately, the kicker is that this is a 2-bedroom/1.5-bath home for $819,900 and has only street parking. You would have to LOVE Foggy Bottom and work just a block or two away to buy this townhouse. After 83 days on the market, many might agree with me.
  
• An okay row home in Capitol Hill. The property thankfully is not too far from Lincoln Park, but $540,000 for a "nice" two bedroom plus den home with one bathroom and one powder room seems a bit optimistic in this market. The first floor feels a little dark. The larger bedroom is separated from the much smaller bedroom by the den/family room on the second floor. The good news is that all appliances are less than three years old and there is garage parking. A little back patio also exists but needs some love if you ever want to sit outside. I rate it a C+. It has been on the market for merely two weeks – so it is hard to tell – but I think a couple of $10,000's need to be knocked off the asking price for a quicker sale.
  
• A stunning renovation in Columbia Heights and only two blocks from the Metro. This 3-bedroom/2.5-bath home is listed at $849,900 and has been on the market for two weeks. The beautiful architectural details have been meticulously restored – gorgeous inlaid floors, fireplace mantels, bay windows with their original glass, among other features. From the foyer, the sunny living room is off to the left and the reception hall lies ahead. From there, the inviting dining room could well accommodate a large dinner party' it flows into the state-of-the-art kitchen - everything from maple cabinets to Jenn-Air and Bosch appliances. Need I say more? Gorgeous. The three updated bedrooms still have the old school charm of a lovely 1900 Victorian but the bathrooms look perfectly and tastefully updated for the 2006 buyer. There is also parking for two cars, a deep front garden, a quiet rear deck and garden. Some one or ones will be very happy here.
  
• A 1-bedroom/1-bath apartment in Cathedral Heights. It has been on the market since mid-May, and the sellers are still asking for $325,000. The space is quite nice, with 840 square feet with which to work. The windows face - after a little bit of grass - a thickness of trees – hence giving the unit a quiet and serene feel. The unit boasts a huge closet and is clean – just itching for a buyer. The coop fee with taxes included is almost $1,000/month. Those coop fees – so often such a drawback.
  
• A single-family, detached home that I selfishly went to see in Brookland. As it is almost the exact replica of my own home, I wanted to see how someone else has decorated virtually the same space. Well, I am jealous. They done good. Listed at $519,000 and only four blocks to the Brookland Metro, restaurants and other neighborhood amenities, this cute bungalow brings out the charm of 1925, when it was built, and is beautifully complimented by all its 2002 renovations. Its curb appeal is what first draws you onto the welcoming porch. From there you have hardwood floors throughout the house, high ceilings, tons of light and loads of character. Upstairs are three bedrooms and one bath. The main level has a lovely living room, separate dining room, chef's kitchen and powder room. The lower level has been converted a fully finished basement with many window in its utility room, spacious family room and a little nook of a fourth bedroom and full bath. The back yard is completely fenced in. Its gardens just need one weekend with a green thumb and then would be perfect. Although I hope this seller does get his asking price, I think $489,000 might be a little more realistic. It has, though, been on the market only seven days.

Items of Interest - September 23, 2006

COSTLY LOANS HAVE GAINED IN POPULARITY: In another indication of increasing consumer debt, a new federal report has found that the percentage of borrowers who turned to high-cost loans to buy or refinance their houses rose last year, reports the Washington Post. Such loans accounted for 26.2 percent of mortgages in 2005, up from 15.5 percent in 2004, an increase of nearly 70 percent, according to home-loan data. In 1994, only 5 percent of borrowers had high-cost loans. Federal regulators define high-cost loans as those with interest rates 3 percentage points higher than a benchmark rate for first mortgages and 5 percentage points higher for second mortgages. There is wide racial and ethnic disparity in who gets such loans, according to the numbers. About half of blacks and Hispanics received high-price mortgages, compared with less than a fifth of whites. In 2005, 54.7 percent of blacks got higher-price loans, up from 32.4 percent in 2004. The increase was even sharper among Hispanics, of whom 46.1 percent got high-cost loans, up from 20.3 percent in 2004. In 2005, 17.2 percent of whites got such loans, compared with 8.7 percent the previous year. Part of the explanation for the 2005 increase, according to the Federal Reserve, which released an analysis of the statistics, is that the 2004 numbers were understated because of interest rate aberrations. About 57 percent more buyers in 2005 than in 2004 took out two mortgages to buy houses, according to the new federal statistics. Such an arrangement, known as a piggyback loan, allows smaller down payments without requiring mortgage insurance. The second mortgage is usually at a higher rate than the first. The increase in costly mortgages is partly because more people are getting loans, even if they have bad credit and would not have qualified in the past. "Although affording many consumers greater access to credit, this growth also has led to concerns about the appropriateness of loan term and lending practices and the potential for unequal treatment of borrowers," officials of the Federal Financial Institutions Examination Council, the group that released the data, stated.

AND THE MORTGAGE INDUSTRY IS PRESSED TO REFORM: At a Senate Banking Committee hearing, legislators and consumer advocates prodded federal banking regulators to move more quickly to put restrictions on non-traditional mortgage lending, because, they said, the new kinds of mortgages may place borrowers and lenders at financial risk, reports the Washington Post. "It seems to me there's been a race to the bottom" in lending standards, said Sen. Jim Bunning (R-Ky.). He said that consumers don't seem to understand the new products, and that if real estate values continue to fall, the market "pullback" could become "a prelude to a crash." Added Sen. Charles E. Schumer (D- N.Y.), "There's a plethora of new products that are destroying the lives of a whole lot of people. These were intended for rich, sophisticated buyers but they have been sold to the least sophisticated and most vulnerable." The lending industry has defended non-traditional loans as a key reason that homeownership has reached a near-record high despite steep home prices. They say the loans can be tailored to meet individual needs, rather than the one-size-fits-all loans of past decades.

MORTGAGE RATES CONTINUE TO SLIDE: The 30-year fixed-rate mortgage (FRM) averaged 6.40 percent for the week, down from last week's 6.43 percent, according to Freddie Mac. Last year at this time, the 30-year FRM averaged 5.80 percent. The 15-year FRM this week was 6.06 percent compared with 6.11 percent last week and 5.37 percent last year. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.08 percent, down from last week's 6.10 percent. It was 5.31 percent in 2005. One-year Treasury-indexed ARMs were 5.54 percent this week versus 5.60 percent last week. At this time last year, it averaged 4.48 percent. "A slowing housing market and signs that inflation is leveling off have helped to lower mortgage rates lately and keep them more affordable," said Frank Nothaft, Freddie Mac vice president and chief economist. "For example, housing starts dropped to a three-year low in August and the Producer Price Index (PPI) fell below market expectations. Going forward, the economy is expected to expand at a somewhat slower rate than it did in the first half of the year. This should continue to keep inflation in check, and therefore, mortgage rates low."

BRITISH BANK SEES SOFT LANDING FOR HOUSING: An economic report by the American Express Bank concludes that a crash in U.S. house prices and an economic recession are unlikely, though the housing market "is particularly weak," says Inman News. "U.S. house prices will probably be flat or down for awhile, although price falls in former hotspots will be compensated by continuing catch-up in other regions," according to the "Economics for Investment" report by the bank, an international subsidiary of American Express. "The authors acknowledge that weakness in the U.S. housing market and a moderate economic slowdown does make the risk of a U.S. recession greater in 2007 but argue that a 'soft landing' is the most likely outcome," the report says. "Moreover, any signs of a harder-than-needed landing will likely be offset by lower interest rates and bond yields." The report notes that the run-up in house prices was "significantly smaller" in the United States than it was in the United Kingdom and Australia. A cause for concern, according to the report, is the slump in the construction of new homes: U.S. housing starts are down 10-15 percent and building permits are down 20 percent, and they fell the same amount after the market peaked in Australia. Adjustable-rate mortgages do pose "particular concern" in the United States real estate market because "short-term rates have risen far more in the U.S. than in the other countries and continued to rise after housing peaked last year," the report says, adding that interest rates are still relatively low compared with historical levels and "the majority of mortgages outstanding are still at long-term fixed rates."

HIS GUITAR IS NOT INCLUDED: Nick Hexum, the lead singer for the band 311, is asking $10 million for a private island in the Florida Keys that he bought for $2.8 million three years ago, reports the Wall Street Journal. Yes, three years ago. The roughly six-acre island lies a half mile off Summerland Key, about midway between Marathon and Key West. A 3,500-square-foot house features three en-suite bedrooms, a third-floor great room with a 300-gallon aquarium, and a crow's nest balcony on the roof where young Nick says he likes to play guitar. The island also has a pool, barbecue deck, cement pier and its own propane-powered generator. Previous owner Cris Lesick says the lights stayed on even during Hurricane George in 1998, when most of the area lost power. Hexum, whose rock/alternative/reggae band 311 had two platinum-selling albums in the 1990s, renamed the island Melody Key from Money Key, and says he spent several million dollars renovating it, only to have to redo much of the work after the home and island were damaged during last year's hurricanes. The singer, who has written several songs on the island, says he has too high a percentage of his assets tied up in the property, which he acknowledges is "mortgaged to the hilt." Nonetheless, he maintains that he won't accept an offer under $10 million. "Do not waste my time with $9,999,999," he proclaims. Right!

IS WASHINGTON'S POWER CENTER ON THE MOVE: Those who have been denouncing elitist "Georgetown dinner parties" all these years may not have noticed that a new elite has taken over - and it lives across the river, in McLean, Va., according to the Washington Post, which quotes the cover story in the newest New Republic. "So long Georgetown, McLean is the new home of America's ruling class," the magazine says. Over the past decade, McLean, formerly a sleepy little burg, has been overrun by hordes of Republican pols, pundits and lobbyists. McLean has become "the psychic center of the Washington Republican establishment," writes Michael Crowley. "It is packed with the people who impeached Bill Clinton, elected George W. Bush, launched the Iraq war, and have now learned to make millions from their association with government." McLean's 40,000 residents include GOP bigwigs such as Newt Gingrich, Scooter Libby, Colin Powell, Andrew Card, Liz Cheney, Bill Kristol, Clarence Thomas, Antonin Scalia - and scads of obscure Republicans who were Hill staffers in the Gingrich revolution. The average house there sells for $905,000, so don't expect much in the way of garage sales. "The migration of power from Georgetown to McLean represents the shift in American politics in microcosm," Crowley writes. "The Northeastern liberal elite drawn to the urbane sophistication of Georgetown has receded. In its place has risen a new conservative striver class . . . that has set itself up as landed gentry across the Potomac in McLean."

BUYING AND SELLING PROPERTY IN D.C.IS ABOUT TO COST MORE: Starting Oct. 1, the transfer and recordation tax will change in DC for all properties priced at $400,000 and above and closing after that date. Buyer and seller each have to pay 1.45 percent of the sales price at closing. For sales below $400,000, the transfer and recordation tax remains at 1.1 percent.

THE LEHMANS' FIFTH AVENUE HOME IS GOING ON THE MARKET: The longtime cooperative apartment of the late Lee Anz Lehman, widow of investment banker and philanthropist Robert Lehman, is about to go on the market for more than $30 million, reports the New York Times. The six-bedroom apartment measures more than 6,000 square feet and takes up the entire ninth floor of 2 East 67th St., a 1928 apartment building designed by Rosario Candela. It is one of the few Fifth Avenue apartments to retain most of its original floor plan and detailing, including 12-foot ceilings, five fireplaces, and a dining room, library and living room that overlook Central Park. Ms. Lehman, who died in June, bought the co-op in 1978 following the death of her husband, who ran Lehman Brothers for more than 40 years. The Metropolitan Museum of Art's Lehman Wing, which houses Mr. Lehman's nearly 3,000-work art collection, is visible from the apartment's living room. "It was a way of maintaining that bond [with her husband]," Ms. Lehman's grandson, Christopher Daniels, says of the apartment's view.

FORECLOSURES ARE ON THE RISE NATIONALLY, OR NOT: Property foreclosures nationwide increased 24 percent in August from the previous month and 53 percent from a year ago, marking the highest rate so far this year, according to a foreclosure service, says Inman News. A total of 115,292 properties entered some stage of foreclosure during the month, according to a report from RealtyTrac. The report also shows a national foreclosure rate of one new foreclosure filing for every 1,003 U.S. households, the second-highest monthly foreclosure rate reported year to date. This report is much bleaker than statistics reported by the Mortgage Bankers Association (MBA). In a survey of more than 42.5 million loans nationwide, homeowners appeared to be keeping up with their mortgage payments. MBA's survey found that foreclosures nationwide are stable. The percentage of home loans in the process of foreclosure nationwide at the end the second quarter was 0.99 percent, up 1 basis point from the last quarter, but down 1 basis point from the same quarter last year. Foreclosure.com also weighed in with its own statistics, says the Wall Street Journal. According to the company, which tracks foreclosures nationwide, new residential foreclosures fell by 6.7 percent in August from July to 26,255 nationwide. The company's figures, however, show that foreclosures are up 7.3 percent compared with August 2005. The divergent results can be explained by the way foreclosed properties are counted. RealtyTrac data includes properties in the early stages of a foreclosure proceeding, even before the bank actually owns those properties. About 60 percent of these get remedied or the properties are sold before they get to the auction stage, said Rick Sharga, vice president of marketing for RealtyTrac. If you've read this much, forget it.

IT'S ALL ABOUT YOU: Under the provisions of federal consumer law, if you want to obtain a free credit report from one or all of the big three credit reporting companies, all you have to do is visit AnnualCreditReport.com.

BLACK IS THE NEW BLACK: After years of favoring pale woods, bleached floors and taupe color schemes, furniture and decor companies are getting back to black as well as brown and grey, says the Wall Street Journal. The new interior hues come as the fashion industry is making its own shift toward somber shades, but some homeowners credit another influence: At a time of economic and political uncertainty, they say, darker colors reflect the mood and help to create a comforting retreat. Home decorators are embracing the new look, putting black-flocked wallpaper in the bedroom, deep-bronze faucets in the bathroom and shiny brown countertops in the kitchen. Kraftmaid has just introduced Venica, a line of black kitchen cabinetry, and Hunter Douglas has rolled out new window shades in colors such as Fossil, Granite and Henna. Pottery Barn's new ebony and mahogany furniture collection includes $1,600 wine bars, $800 bookcases and $700 pedestal tables, while Storehouse has introduced its "smoky charcoal" dining room, where everything from buffets to side chairs is done up in dusky hues. The look has even trickled down to sinks and faucets. Kohler is now selling sinks for the kitchen in "black black" and for the bath in "igneous black." Moen says sales of its Glacier white kitchen bar and sink faucets dropped 20 percent in 2005 from the year before and bright polished brass was down 75 percent, while dark oil-rubbed bronze finishes more than tripled and wrought-iron finishes were up 18 percent. The company released a new pewter faucet last month, which it showcases on its Web site in a black sink. Time to redecorate, trend spotters? Again!

BUYERS OF NEW HOMES SAYS TWO BUILDERS ARE TOPS: They are Pulte Homes and Centex Homes, which led the rankings in J.D. Power and Associates' annual New-Home Builder Customer Satisfaction Study, says Realtor magazine. The study includes satisfaction ratings of builders in 34 of the largest U.S. home-building markets. Pulte, including its Del Webb and DiVosta brands, ranks highest in 14 of the markets and Centex, in 13 markets. The study is based on responses from 60,927 buyers of newly built single-family homes who provided feedback after living in their homes from four to 18 months, on average.

BOARDWALK IS GONE, SO HOW ABOUT TIMES SQUARE: Monopoly is getting revamped for the 21st century, notes Business Week. Seventy-one years after the hugely popular board game made its debut, its familiar Atlantic City boardwalk, railroads, currency and old-fashioned die-cast tokens are making room for Times Square, airplane, and enough tie-ins with big popular brands to make even the most brazen Hollywood producer green with envy. If Monopoly constitutes a reflection of contemporary U.S. culture, here's the world we now live in. Most of the game's famous tokens are reemerging as branded products. They include a Toyota Prius, a New Balance sneaker, McDonald's French Fries, a Motorola RAZR, and a Starbucks coffee mug. The three nonbranded tokens are a laptop computer, an airplane, and a Labradoodle. Among other changes on the board: The old powerful railroads become the nation's busiest airports. Prices have gone up, too: It'll cost $4 million to buy Times Square, opposed to $400 for the old Atlantic City boardwalk.

YOURS CAN BE THE GRASS THAT'S GREENER: The lowest you should mow any cool-season turf is 2 1/2 inches, Washington Post columnist Joel M. Lerner advises homeowners. Growth of healthy lawn and germination of grass seed are most important when you remove thatch and aerate. Mowing higher retains more leaf surface on existing turf, which also shades the seed, holding moisture and helping with germination. Water lightly every other day to keep seed moist. A deep watering once a week will get established lawn growing quickly during this cool season. Plant a named, compact, turf-type tall fescue. There are disease-resistant and drought-tolerant varieties. Plant a blend of three varieties, based on the theory that even if one is lost the other two will succeed. Over-seed at a rate of three to four pounds per 1,000 square feet.

NEW YORK CITY EYES HOME-IMPROVEMENT CONTRACTORS: The Department of Consumer Affairs has filed complaints against 135 of them who are unlicensed, reports the New York Times. But the contractors can have their fines lowered if they obtain the required license and resolve all outstanding customer disputes. Punishment can include $100 fines for each day of unlicensed activity and seizure of vehicle and tools. To get a license, a contractor must have a background check, pass a written exam on knowledge of business law and contracts, and post a bond or pay into the Home Improvement Contractor Trust Fund. "Every year, home-improvement contracting complaints are at the top of our list of complaints," said Commissioner Jonathan Mintz of the Department of Consumer Affaires.

AT LEAST THE EARTH REMAINS ROUND: Eager to squeeze in more square-footage - and increase property values - while adhering to community height restrictions, a growing number of builders and homeowners are building homes with flat roofs, observes the Wall Street Journal. But these box-like structures and their party-friendly roof decks are sparking a backlash among neighbors who think the houses are homely, detracting from neighborhood character and blocking views and sunlight. Now, a number of communities are slapping new rules on builders that require sloping roofs. Communities everywhere from Delaware to Washington are addressing roof pitch. The trend is being driven in part by people seeking the best return on their investment amid soaring property values in recent years. It also demonstrates how zoning restrictions communities passed in recent years have backfired. In response to runaway development, many municipalities tried to prevent oversized homes on small lots. But in some cases, the unintended result was flat-roofed, boxy homes seen as out of character with surrounding styles. By using a flat roof, builders can sometimes squeeze in a second or third floor, adding square footage while staying under neighborhood height restrictions.

ENOUGH ALREADY: The number of real estate agents with active licenses now stands at an all-time high in the Washington area, says the Washington Post. More than 100,000 licensed real estate agents are working in Maryland, Virginia and the District, almost doubled since 2002. In the past year, an additional 4,000 real estate agents have gotten licensed in Virginia alone. But if history repeats itself, there is reason to believe that some agents will drop out soon. For instance, when the real estate business boomed in the mid-1980s, the number of agents in Maryland jumped, rising to 45,342 in 1987 from 33,642 in 1986, up 35 percent in one year, and then rose again in 1989 to 51,997 agents. Agents trailed out of the business during the slump of the mid-1990s, and by 2001, there were 28,856 active agents in the state. Now, however, there are 54,037 agents working in Maryland, an all-time high.

'KIDS' DO THE DARNDEST THINGS: Consumers in their 20s are more likely to become home owners at a younger age than their baby boomer parents, notes Realtor magazine. They're not necessarily waiting for marriage, or even a long-term relationship, before buying a home. The percentage of first-time home buyers under age 25 has been increasing in response to historically low interest rates and continued confidence in the long-term housing market, from 11 percent in 2001 to 14 percent in 2005, according to the 2005 Profile of Home Buyers and Sellers by the National Association of Realtors (NAR), which publishes the magazine. While married couples are still the norm, they represent a smaller share of the home buying public than they did just 10 years ago, from 70 percent of home buyers in 1995 to 61 percent today, says the NAR. During that same time, the proportion of single women buying homes has increased, from 14 percent in 1995 to 21 percent today.

BUILDERS' MOOD SINKS TO 15-YEAR LOW: Reflecting increasing builder concerns about conditions in the market for new single-family homes, the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) declined for an eighth consecutive month to a level of 30 in September. In August, index was 33 reading in August, and the latest reading was at the lowest level since February of 1991. Any number over 50 indicates that more builders view sales conditions as good than poor. "Builders are adopting an increasingly cautious attitude in their near-term outlook for new-home sales," said Chief Economist David Seiders of the National Association of Home Builders (NAHB). "They're experiencing falling sales, rising sales cancellations and increasing inventories of unsold units. And although many builders are offering substantial incentives to bolster sales and limit cancellations, many potential buyers now are waiting on the sidelines to see how the market shakes out before proceeding with a home purchase." Saying the nation was "in the midst of an anticipated adjustment period," he added that the NAHB is forecasting the numbers flattening out around the middle of next year and gradually moving back up towards trend in 2008. "In fact, the housing market that emerges from this correction will have better balance between supply and demand and will be able to ride on excellent underlying fundamentals for years to come," Seiders declared.

AND HERE'S THE PROOF: Total housing starts dropped 6.0 percent in August to a seasonally adjusted annual rate of 1.665 million units, according to the Commerce Department. The pace of new-home construction was down 19.8 percent from 2005, which was a record-breaking year. In addition, issuance of total building permits decreased 2.3 percent - 21.9 percent below the rate of a year ago. Single-family permit issuance was down 3.5 percent on a national basis, and multifamily permit issuance was up 1.1 percent - 11.2 percent below August 2005. Builders slowed the pace of single-family home construction by 5.9 percent, a 20.6 percent drop from a year earlier.

TIGHT NEW YORK RENTAL MARKET SPURS CHANGE IN CONDO MARKET: A cooling condo market and a dwindling number of available rental properties are prompting developers and owners of newly built apartments to rent out their units, says the Real Deal monthly magazine. In the burgeoning rental market in which demand exceeds supply, condo buyers are finding a good source of income in renting their apartments. And the competition for those apartments has become tight. Still, rental income in most cases is not yet covering the expenditures required to own a condo. Many developers have converted rentals to condos, then found it is more profitable to rent them out once again. Some developers are selling enough of the building to pay off the financing, then renting out the remaining units.

SHE'S A HOT DESIGNER. . . AND RIGHT ON TARGET: You'll find Victoria Hagan's stylish designs in the homes of late-night talk showman Conan O'Brien and Revlon chairman Ron Perelman, says the Washington Post. And now, they're just past the scrapbooking aisle at Target. The New York decorator is the latest label to land at Target, with a cheap-but-chic line of $7.99 vases and $179.99 buff-colored nesting tables, among other items. Known for her architectural interiors that blend periods, materials and finishes, Hagan, 45, says, "I believe in the mix. This collection . . . shows it's nice to be able to find beautifully designed things that are affordable."

BUILDERS ARE PULLING OUT THE STOPS: Faced with falling sales, some builders are helping would-be buyers spruce up their current home by bringing in professionals who advise them on what furniture to get rid of and tell them whether they should rip off the wallpaper, reports the Wall Street Journal. Others are offering to make payments on the buyer's old mortgage (or the new one) in an effort to close the deal. There is also renewed interest in so-called buyback programs: The builder, or a broker, agrees to buy your current home, for a preset price, if it turns out that you can't sell it. The offers are coming both from local builders and national firms. For instance, Pulte Homes Inc. recently started pairing its customers with professional "stagers" who sweep in and do things like remove window coverings and touch up the paint, and covering up to $2,000 of the cost of the service. The program is available in about a dozen markets, including Detroit, Indianapolis, Sacramento, Calif., Tampa, Fla., and Washington, D.C. For builders, the housing downturn has translated into slower sales and higher cancellation rates among prospective buyers who get cold feet. This month, Beazer Homes USA said that in July and August, orders fell 49 percent from the previous year's levels, and cancellations climbed to 50 percent from 26 percent in the same period in 2005. KB Homes said this month that orders for new homes fell 43 percent in its fiscal third quarter. The kinds of help builders are offering vary from market to market, and even from project to project. The best deals are typically offered on homes that are already completed, or near completion.

SLOWDOWN SEEN ON THE JERSEY SHORE: The housing market in New Jersey's coastal Monmouth and Ocean counties is slowing, but the bottom is not falling out, according to an article by the Asbury Park Press, notes the Wall Street Journal. The number of houses for sale has risen dramatically and real-estate agents are seeing "pages and pages of price reductions," the newspaper reports. However, some local real-estate professionals describe the market as "stable." Says one agent, "Prices may not be accelerating, but I do not see drastic reductions in prices at all." According to the article, 6,884 homes remained unsold in Monmouth County in the second quarter of this year, an increase of 57 percent from the second quarter of 2005. In Ocean County, there was an increase of 68 percent to 6,728 unsold properties, the article says.

AT THIS PRICE, IT BETTER LAST: Pantone is escalating the paint wars – the ones without foreign correspondents - with the introduction of its first retail paint line selling for what comes out to an astonishing $133 a gallon, notes the Washington Post. Pantone, which provides color systems for a variety of industries, is hardly a household name in the consumer world. But within the design community, the company is known for professional color standards and assuring color accuracy and consistency in graphic, auto, fashion and interior design businesses. While most American paints sell for $19 to $45 a gallon, Pantone's Dutch-made 2.5-liter Euro gallon (a smaller can than the American gallon) made by manufacturer Fine Paints of Europe costs $85 to $95. A fan deck of 3,000 colors is $165. Pantone touts the durability of its "filler-free" product, saying a proper Pantone paint job could last 12 to 15 years. Let's hope. Lisa Herbert, executive vice president of Pantone, says the paints are aimed at the high-end homeowner. Duh. "They are for someone who really wants high quality. The finish is very luxurious. It would take six coats of an American paint to achieve the brilliance and saturation of Pantone paint."

LOWER INTEREST RATES BOOST REFINANCINGS: For the week ended Sept. 15, mortgage loan application volume went up 2 percent on a seasonally adjusted basis from one week earlier, according to the Mortgage Bankers Association. On an unadjusted basis, the increase was 12.3 percent, but the volume was down 22.5 percent compared with the same week one year earlier. The previous week was shortened by the Labor Day holiday. Seasonally-adjusted, purchase applications decreased by 3 percent from the prior week, and refinancings rose by 9.5 percent. The refinance share of mortgage activity grew to 43.7 percent of total applications from 40.3 percent the previous week, and the adjustable-rate mortgage (ARM) share swelled to 27 percent of total applications from 25.5.

HE'S JUMPING INTO THE REAL ESTATE WITH BOTH FEET: Basketball star Shaquille O'Neal has started a real estate development company that already has bought more than $50 million in properties, according to Bloomberg News in Realtor magazine. The properties are primarily in California, Florida, New Jersey and Texas. The new company, O'Neal Group, will be based in Miami, where O'Neal plays for the Miami Heat basketball team. O'Neal Group's first development project will be Metropolitan Miami, also known as the Met, which will have 1,100 residential units, including the 866-foot Met 3, the tallest residential tower south of New York, as well as an office tower, a hotel and the area's first Whole Foods Market store. O'Neal plans to open a 24-Hour Fitness/Shaq Ultra Sport gym at the Met. "I've been in real estate now for 10 to 12 years," O'Neal told Bloomberg News in a telephone interview. "This right here furthers my interest and lets people know I'm in the game and in the game for good."

CUT IN D.C. PROPERTY TAX IS PLANNED: District homeowners will receive a tax break in less than two weeks based on a law approved by the D.C. Council last year, reports the Washington Post. The real estate tax rate will fall Oct. 1 to 88 cents, from 92 cents, per $100 assessed value, said Natwar M. Gandhi, the D.C. chief financial officer. The decrease is the result of a law that automatically lowers the property tax rate if tax revenue surpasses projections. For a property owner with a house worth $400,000, the savings will be $160 for the year, said Martin Skolnik, director of real property tax administration. But the tax rate reduction also means that the city will not collect more than $17 million that it would have amassed under the old rate.

THINK TANK SAYS TAX BURDEN IS LOWER FOR D.C. RESIDENTS: The D.C. Fiscal Policy Institute, a think tank that analyzes city tax and budget issues, has released a study showing that middle-income District residents earning $50,000 to $150,000 annually are paying lower taxes than do their neighbors in the Maryland suburbs and in most communities in Northern Virginia, reports the Washington Post. The conclusion is based on a study of income, property and vehicle taxes - levies that directly affect households, said Ed Lazere, the Institute's executive director. He added that the result contradicts the popular belief that D.C. residents pay more taxes than their suburban peers do. Comparing married couples with two children and earning $100,000 annually, the study found that District families pay an average of $4,619 in income and property taxes a year, families in Prince George's County pay $6,509 and those in Fairfax County pay $5,883.

2nd Quarter Report

Don't expect a rebound any time soon

Writing in the 2nd Quarter Economic and Market Watch Report, the Metropolitan Regional Information Systems, which operates the Multiple Listing Service, economists portrayed themselves as generally upbeat about the housing market even though sales slumped and prices flattened in and around Washington.

Both supply and demand contributed to changes in the market, said Ken Fears. With respect to demand, lack of affordability dampened enthusiasm, he suggested. "Compounding this problem and exacerbating the slowdown in demand is a belief that housing fundamentals are shaky and the rapid rise in prices witnessed over the last decade necessitates a sharp decline in prices," the economist wrote. As for supply, the number of homes put on the market each month rose sharply over the last five years to meet the then-robust demand, which was driving up home prices at record rates. "But as demand diminished, the large monthly supply from builders, renovators, flippers and homeowners just looking to 'move up' has outpaced the market's ability to absorb it," Fears continued. He said many sellers placed their properties on the market earlier than they normally would have.

"Generally speaking, sales have slowed and prices have flattened," the economist observed, "but demand remains at historically strong levels" nationally. "Looking at inventory relative to the pace of sales, "the month's supply of homes or the number of months that it would take to exhaust the current month's supply has only returned to a neutral position," Fears said. In other words, "the current month's supply of homes does not favor buyers or sellers," though it has just moved in the direction of a "true" buyers' market.

He noted that many builders are scaling back and speculators are abandoning the market, causing a reduction in supply over the long term. "Furthermore," Fears said, "the rise in new inventory witnessed this spring will not be matched in the future as much of the inventory that would have come to the market over the next year came early." He said further that "rents are on the march," encouraging many would-be sellers to take their properties off the sales market.

The economist predicted that "as those fence-sitting buyers realize that a plunge in housing prices will not occur, they will succumb to the realization that housing is still an excellent long-term investment." In his view, "natural factors" will help offset the supply and demand issues that created a bulge in inventory. "As a result, the market will reach a plateau later this year with historically strong sales that will allow for robust revenues for real estate practitioners in the coming years," Fears contended.

David Lereah, chief economist of the National Association of Realtors (NAR) also commented on the persistence of unrealistically high prices. "Usually, in the early stages of such a transition, sellers continue to list their properties with large price increases, while buyers no longer have the appetite to bid on the lofty-priced homes," he wrote. "Sellers need to better read the market . . . and list their home at a more reasonable price. Unfortunately, most of these sellers are still not being realistic. As a consequence, their properties are remaining on the market longer with little interest from buyers, costing sellers lost opportunity money. If most sellers in a local market refuse to lower their price expectations, then most listing prices do not change – thus, the market continues to post a positive appreciation rate, but at reduced volume."

In his forecast, Lereah said he believed the current correction in most of the cooling real estate markets will be "short-lived' because "there is an army of households and investors waiting to get back into the housing market." Today's housing correction is unlike previous ones, the NAR official maintained. "There is no recession; no net job losses; and interest rates are not rapidly rising to historically high levels," Lereah said. "Households possess the desire and financial ability to purchase real estate – they are only waiting for the right opportunities to present themselves." Declared the economist: "The existence of pent-up demand will minimize the size of price softening."

Regarding the extensive region covered by the Multiple Listing Service, Senior Research Lawrence Yun noted that home sales were down 17.5 percent in the second quarter and that price acceleration came to a halt from the previous year. "Sales and prices are expected to steadily stabilize only from the latter months of this year," he said. "By 2007, local sales will show 1.5 percent decline. Home prices will be flat."

The District of Columbia

Between the first and second quarters of the year, the average price of properties sold soared from $506,100 to $558,700, even as inventory swelled from 2,652 to 4,296. The number of homes sold rose from 1,605 to 2,239 and the number of days that they stayed on the market actually declined, from 45 to 42.

The highest average price occurred in zip code 20007, reaching $1,043,400, a sum that was 0.6 percent lower than in the same quarter one year earlier. The only remotely close zip code was 20008, which went up 9.7 percent to $872,300. Zip codes posting the lowest prices were 20019 ($248,300); 20020 ($249,000); 20032 ($224,500); and 20055 ($210,000). Still, those zips had price increases ranging from 12.8 percent (20055) to 27.2 percent (20020). Other impressive price changes were in 20024 (up 33 percent) and 20037 (up 30.9 percent). The biggest decliners were in 20004 (down 12.2 percent) and 20010 (down 19.5 percent).

By far the greatest number of homes sold was in 20009, which had 315 of them. Following behind were 20001 (143); 20002 (198); 20007 (181); and 20001 (162). Sales were up significantly from the same quarter last year in 20005 (38.7 percent); 20010 (34.4 percent); 20012 (23.3 percent); 20015 (31 percent); and 20032 (106.9 percent). They plunged in 20001 (32.3 percent); 20002 (34.4 percent); 20003 (42.9 percent); 20004 (45 percent); 20007 (75 percent, to 2 homes sold); and 20036 (41.5 percent).

The most time on the market was spent by properties in 20001 (60 days on average); 20006 (71 days); 20010 (45); 20001 (48); 20017 (54); 20020 (79); and 20024 (45).

The vast majority of zip codes had sales prices that were below asking, as low as 96.1 percent (zip 20037) of the sellers' offering price. But most were at around 98 or 99 percent. Zips with selling prices above asking were 20006 (104.4 percent); 20015 (101.2 percent) and 20032 (100.7 percent).

Montgomery County

The average price of properties sold in the county climbed from $507,400 to $543,600 year to year, despite an increase from 3,980 to 6,637 in the number on the market during the second quarter. The number of homes sold went up too, from 2,774 to 4,026. Properties typically spent only 36 days before going to contract in contrast to 42 days the year before.

Zip code 20854 had the highest average price, $1,163,900, by a healthy margin, and it was 2.13 percent greater than in the second quarter of 20005. Only 20896 approached that amount, but its average was $922,100, 12.1 percent higher than the year earlier. At the low end were zips 20874 ($371,200); 20886 ($339,400); and 20906 ($360,000). That 20874 zip code had 393 homes sold, more than any other. Behind it were 20906 (307) and 20878 (259).

Experiencing the biggest price changes were 20842 (down 22.9 percent on the sale of four homes); 20862 (down 53.1 percent on the sale of just one home); 20866 (up 23 percent); and 20895 (up 14.3 percent).

With the majority of zip codes recording decreases in sales, those that were off more than 20 percent from the same quarter last year were 20841, 20850, 20852, 20853, 20855, 20862, 20871, 20874, 20877, 20878, 20879, 20882, 20895, 20901 and 20905. Gainers included 20842 (33.3 percent); 20886 (10.7 percent); 20896 (66.7 percent); 20903 (27.6 percent); and 20910 (6 percent).

Average days of the market worth noting were, at the low end, 20855 (26); 20862 (10, for one home); 20868 (28); 20896 (22) and 20903 (25). At the opposite extreme were zip codes 20838 (95, for two homes); 20839 (146, for one); 20842 (54); 20860 (60); 20861 (85); 20871 (63); and 20882 (62).

Properties generally sold within 99 percent of the asking price. Among the exceptions were zip 20850, where 176 homes sold for an average of 98.2 percent of the offering price; 20854, were 175 sold for 98.2 percent of asking; and 20912, where the percentage was 100.1 on the sale of 50 homes.

Arlington County

Between the first and second quarters of 2006, prices rose on average from $559,500 to $592,700. With the supply of homes on the market mushrooming from 937 to 1,732, sales failed to keep pace; the number sold went from 616 to 806. Days on the market fell from an average of 42 to 32.

The costliest zip for home buyers was 22207, in which prices went up 11.9 percent from the second quarter of 2005 to $900,800. The next highest was in 22213, attaining $792,000, 46.5 percent more than the year earlier and the zip code with the biggest price change. Zip 22205 was $735,500, just 0.6 percent higher. The most affordable zip code was 22206, with an average price of $398,900, a drop of 2.1 percent. Zip 22203 also registered a decline, 6.9 percent to $407,100.

More homes, 161 of them, found buyers in 22201 than any other. The totals in 22204 were 146 and in 22207, 136. Every zip code had decreases in the homes sold; they ranged from 3 percent in 22201 to 49 percent in 22209. Properties sold most quickly in 22201 (27 days on the market); 22205 (26); and 22206 (26). The longest time on the market was in zips 22209 and 22203, with 41 days. Zips 22202 and 22204 were 40 days on the market.

Sale prices tended to be around 99 or 98 percent of asking prices, but 22202 was 97.6 percent and 22209 was 97.1 percent.

Out and About - Rooms with a view

Certainly, views are often a big selling point. They can add thousands and thousands of dollars to the price. They are worth a premium . . . if the buyer thinks so.

When searching for rooms with a view, though, perhaps it's wise to consider why some folks are indifferent to the exposure. For one thing, even sweeping views of rivers or skylines can be taken for granted over time; in other words, the view can become devalued. Another issue centers on where in the home or apartment the view is best enjoyed. If that spot is a balcony or rooftop, the cold, the sun and insects can significantly reduce the amount of time anyone would want to spend admiring the vistas in summer. In addition, the tradeoff for views from outdoors frequently means reduced space indoors.

How many times can the sight of the Washington Monument or the Empire State Building inspire appreciation of them, the view detractors might ask? How can you fail to be awed by seeing them, the view lovers might respond?

Of course, there are views and there are views. If the view outside your co-op or condo is the walls and windows of other condos and co-ops pressing in, then you may well decide that extra bucks are well spent on a higher floor or different exposure. But if that improved view will cost substantially less than, say, the penthouse, perhaps there is only so high you will want to go – in floors and in price.

Like many issues with real estate, the decision about views could not be more personal. But it's a decision that should be conscious and informed.

Below are some of the properties seen recently in the District of Columbia and New York City.

D.C.

• In Observatory Circle, a one-bedroom apartment currently configured as a 725-sf studio with a huge balcony overlooking fountains, gardens and Virginia beyond. Nicely updated with a wood-burning fireplace that does not convey (because it's a witticism shown on a TV), this condo in a beautifully maintained 1966 building with outdoor pool and numerous other amenities is listed at about the right price of $425,000 with a $556 monthly fee that includes utilities.
  
• A renovated Shaw rowhouse perhaps best viewed as a condo alternative. With three small bedrooms and a single tiny bath on the second floor, this property has a modestly finished kitchen, patio, brick fireplace and a decently finished but low-ceilinged basement with wall-to-wall carpeting. It has been on the market for $679,900 for more than a month, and the price needs to come down.
  
• In Kalorama, a gorgeous but overpriced five-bedroom, three-and-a-half-bath Victorian-style home built in 1910 and remodeled twice since 2000. It features two wood-burning fireplaces, period details, high ceilings, plenty of light, stunning kitchen, a studio with French doors handsomely incorporated into the house end of a detached garage beyond the rear patio, an expansive master suite on the third floor, and a lower-level rental unit that generates $1,300 a month. At $1.799 million, this property has languished on the market since mid-June. And that span says it all.
  
• Still sitting on the market after 170 days in Brookland, a three-bedroom, one-and-a-half bath home must have a price reduction. Listed at $375,000, this property needs just enough love to update and thereby create a warm and cozy home. It would be better listed at $349,000. This 1940s house is full of light, original wood floors, a sunroom and three moderate-size bedrooms. The original garage, now closed in, can easily become a charming family room. Additionally, it would be relatively easy to finish the basement with two bedrooms and a full bath, transforming the place into a five-bedroom, two-and-a-half bath home. But a more realistic price would $349,000.
  
• In Observatory Circle, a bright and sunny two-bedroom, two-bath co-op with a nicely updated kitchen, older bath, carpeted floors and a long balcony with memorable views of the Potomac River and Virginia. Aside from the balcony and its views, the 1,200-sf apartment is rather ordinary. Even at what seems to be the reasonable offering price of $434,995, this unit, for which garage parking is available at $70 a month, has gone unsold for months. One explanation might be the monthly fee: $1,458, which includes the building's underlying mortgage and property taxes.
  
• An ideally situated three-bedroom, one-bath rowhouse that defines "potential" in Brookland in a charming block of local museums, art galleries and the like. Not even a block from the Metro, this home is perched across the street from the one and only Colonel Brooks Tavern – tempting fragrances coming from every direction. The whole house needs to be gutted: There is falling plaster and a sense that either termites could have been busily at work or the damage above was caused simply by leaking water. On the market less than a week, this rock that could be a gem if an investor with vision finds good bones in the property and, in himself or herself, a modicum of patience plus a trove of cash. Listed at $350,000, this 1925 house has potential that would be worth realizing at a price no higher than $300,000.

N.Y.C.

• On the Upper East Side off Third Avenue, a 42nd-floor-condo with dizzying views through floor-to-ceiling windows and from wraparound balconies that give new meaning to the phrase "as far as the eye can see." Never mind the rest of the two-bedroom, two-bath apartment in a building with pool, health club and garage. It's nice enough, but who cares? Understandably, the price is sky high: $1.595 million with a monthly fee of $830 plus $900 in real estate taxes.
  
• Close to Bloomingdale's, a stunningly nondescript 500-sf alcove studio with a depressing interior kitchen, minimal closet space and not one other thing worth mentioning, except the aggressive price of $365,000 with a $707 monthly co-op maintenance fee.
  
• In Brooklyn's Cobble Hill, a three-level Federal-style attached house that all too clearly reveals its ownership by a speculator who invested a bit on substance while opting for transparently slapdash cosmetics. What's under that coat of white paint anyway? Exceptions to mere cosmetics are the new central air conditioning in two zones, new boiler, new hot water heater, smart wiring, speakers throughout and a kitchen with marble countertops and the requisite stainless appliances. If no parking and a lifeless cement rear patio are for the buyer, that person would be well advised to offer significantly less than the reduced asking price of $2.25 million, even taking into account the rental unit in the lower level.
  
• An Upper East Side co-op with two separated bedrooms – one of them converted from the dining area – a marble-tiled bath, a nicely updated galley kitchen that is optimistically described as eat-in because of knee space under a counter, and a 28-foot living room. In a building with renovated hallways and lobby, plus a roof deck with plantings, this 1,000-sf apartment is offered for too much money at $845,000.
  
• In Brooklyn's Park Slope, an oddly gut-renovated house with a new modern façade that sticks out like the proverbial sore thumb in a row of brownstones. This sleek 4,000-sf house with a duplex rental unit on the ground floor and basement is the victim of – how to put it? – unusual design decisions. The main floor of the owner's duplex is high on drama with a glorious kitchen boasting Viking appliances and a wine cooler, among other high-end features. Also off the main floor with its soaring ceilings is a deck through a wall of glass windows and doors. But the bedrooms upstairs are too small, lacking little closet space, and the superb spacious bath off the master bedroom is little compensation for that lapse. Still, the offering price of $2.25 million is not out of line for such space and quality finishing.
  
• Around the corner from the 92nd Street Y, a sweet pre-war one-bedroom apartment with four closets, windowed new kitchen (including granite countertops and GE Profile appliances), new bath, original molding, 10-foot ceilings and an eminently practical layout. This 700-sf co-op represents value at $495,000 with a $753 monthly fee, including tax.

Items of Interest - September 9, 2006

REALTOR GROUPS LOWERS SALES AND PRICE PROJECTIONS: Home sales during the rest of the year will be lower than earlier projections as the market works its way through an inventory and price imbalance, according to the National Association of Realtors (NAR). Said David Lereah, NAR's chief economist: "A year ago we had record home sales and tight supply with buyers bidding over the asking price. This year, sales are slowing, homes are plentiful and sellers are negotiating. Under these conditions, we'll probably see prices dip temporarily below year-ago levels as the market works through a build up in housing inventory." He added that the movement represented "a normal pattern during a market correction" but that "home prices should return to positive territory within a few months and annual appreciation will be slower than historic norms." Over time, Lereah said, home prices rise at the rate of inflation plus one-to-two percentage points. "Buyers in most of the country who plan to stay in their home for a normal period of homeownership can pretty well bank on those historic averages, but people who purchased last year with the intent of flipping are likely to get burned," the economist declared. The NAR expects the national median existing-home price for all housing types to grow 2.8 percent this year to $225,900, with the median new-home price rising only 0.2 percent to $241,400 because new-home appreciation is dampened by builders offering incentives to reduce inventory. Existing-home sales are forecast to fall 7.6 percent to 6.54 million in 2006, the third best year after consecutive records in 2004 and 2005. New-home sales should to drop 16.1 percent this year to 1.08 million, the fourth highest on record. Housing starts are projected to decline 9.6 percent to 1.87 million in 2006. According to the NAR, the 30-year fixed-rate mortgage is likely to rise to 6.7 percent in the fourth quarter.

U.S. HOME PRICES CONTINUED TO RISE IN THE SECOND QUARTER: Although the rate of increase fell sharply, prices were 10.06 percent higher than they were one year earlier, according to the Office of Federal Housing Enterprise Oversight (OFHEO). Appreciation for the most recent quarter was 1.17 percent – an annualized rate of 4.68 percent. The quarterly rate reflects a sharp decline of more than one percentage point from the previous quarter and is the lowest rate of appreciation since the fourth quarter of 1999. The decline in the quarterly rate over the past year is the greatest since the beginning, in 1975, of OFHEO's House Price Index. "These data are a strong indication that the housing market is cooling in a very significant way," said OFHEO Director James B. Lockhart. "Indeed, the deceleration appears in almost every region of the country." Possible causes were given as higher interest rates, a drop in speculative activity, and rising inventories of homes. "The very high appreciation rates we've seen in recent years spurred increased construction," OFHEO Chief Economist Patrick Lawler said. "That coupled with slower sales has led to higher inventories, and these inventories will continue to constrain future appreciation rates." Among other of the index's findings: All states show four-quarter appreciation, but five Midwestern and New England states had small price decreases in the second quarter. In the market that includes the District, Northern Virginia and Prince George's, Charles and Calvert counties in Maryland and Jefferson County in West Virginia, the Washington Post noted that home prices increased by 1.79 percent in the second quarter. But the region posted a year-over-year increase of 16 percent because of jumps in prices late last year. In the Montgomery County-Frederick County market, which the agency measures separately, the second quarter saw a home price gain of 1.64 percent over the first quarter and 13 percent over the same period last year.

HOMEBUILDING COSTS ARE UP 8 PERCENT OVER LAST YEAR: It's getting more expensive to build a home, according to research from the Bureau of Labor Statistics and the Associated General Contractors of America, reports Investor's Business Daily in Realtor magazine. The latest data show an 8 percent jump in the cost of building materials costs during the year-over-year period ended in July. Prices for copper and brass surged a whopping 88 percent over the same time span. Costs rose 27 percent for gypsum boards, 20 percent for plastics, 11 percent for cement, and 6 percent for sheet metal siding. According to the Consumer Price Index, housing costs edged up 4 percent for borrowers from July 2005.

INVESTORS ARE GLUM: Their optimism hit an annual low in August, continuing a steady decline since January, according to the latest UBS/Gallup index, says Inman News. The Index of Investor Optimism dropped two points since July, to 53 in August, and it has fallen 40 points since January. The index is based on a monthly survey and had a baseline score of 124 when it was established in October 1996. "One key issue of growing concern to investors is the residential real estate market," UBS said. Approximately 44 percent of respondents rate conditions in the real estate market as "only fair," and 12 percent, as "poor;" that's up from a combined 46 percent in June and July. Some 70 percent of investors believe that conditions in the real estate market are getting worse, up from 63 percent in June, the survey also found. Investor sentiment toward investing in real estate assets nationwide also has also fallen: In August, 50 percent of investors said that now is a good time to invest in real estate related assets nationwide, down from 55 percent in June. "The drop in confidence in the real estate market reflects the economic data for that sector and suggests that investors are feeling the pinch in their local markets," said Anne Briglia, senior fixed income strategist for UBS Wealth Management Research, in a statement.

GOING ONCE, GOING TWICE, GOING FOR A BARGAIN: Auction companies say new-home sales represent a growing part of their business, according to the Wall Street Journal. In Denver, auctioneer Janelle Karas has gotten so many inquiries from builders and developers worried about mounting inventories that she recently changed her business model to specialize in them. In Gadsden, Ala., auctioneer Craig King says he handled 12 auctions of new homes in 2005, and this year he's on pace for about twice that number. Walt Driggers, who runs an auction house in Ocala, Fla., says many of the developers who are now coming to him started the building process more than two years ago when real-estate prices were climbing. This month, his parent company, Tranzon, will try to sell a 5,000-square-foot brick mansion in Lorton, Va. Unlike private homeowners, who may overvalue their homes and are often reluctant to reduce their asking price at auction, small builders and developers tend to be more sophisticated and motivated, auctioneers say, with a clear-eyed understanding of the value of their properties. And because builders make as much as 40 percent gross profit on the homes they sell, they also have more wiggle room when it comes to reducing the price. "A home seller is in a retail position," says Destin, Fla., auctioneer Ben Anderson. "A builder is in a wholesale position." To register for an auction, a buyer must put down a deposit, usually 8-10 percent of the home's estimated value. As with any transaction, caveat emptor: New homes sold at auction are often in out-of-the-way places, with few comparable recent sales. Although sellers must disclose defects, brokers caution buyers to check to make sure the property isn't encumbered by liens, has had proper permitting and inspections, and that all new home warranties apply. And the hammer price isn't necessarily the final price: Some auctioneers take a "buyer's premium" of 5-12 percent.

STUYVESANT TOWN IS ABOUT TO CHANGE NOT ONLY HANDS: Metropolitan Life is putting Stuyvesant Town and Peter Cooper Village - a stretch of 110 apartment buildings along the East River - on the auction block, says the New York Times. The sale of Stuyvesant Town and Peter Cooper Village, shown in 1947, would transform a complex built for World War II veterans. With a target price of nearly $5 billion, the sale would be the biggest deal for a single American property in modern times. It would undoubtedly transform what has been an affordable, leafy redoubt for generations of Manhattan's middle class: teachers and nurses, firefighters and police officers, office clerks and construction workers. MetLife, one of the largest life insurers in North America, said in July that it might sell the two complexes, which it built nearly 60 years ago with government help. It has hired a broker, who started registering bidders last week for the 80-acre property along First Avenue between 14th and 23rd Streets. The deal is likely to lead to profound changes for many of the 25,000 residents of the two complexes, where two-thirds of the apartments have regulated rents at roughly half the market rate. Any new owner paying the equivalent of $450,000 per apartment is going to be eager to create a money-making luxury enclave, real estate executives say. City Councilman Daniel R. Garodnick, who grew up in Stuyvesant Town and Peter Cooper Village, said he is organizing a group of investors who, with the backing of tenants and the Council speaker, will try to buy the two complexes and keep them affordable to the middle class. Under his plan, the investors, likely to include union pension funds and banks, would bid on the properties; the group would ask the Bloomberg administration for assistance, perhaps in the form of financing and tax incentives, to help make the deal work.

WASHINGTON AND NEW YORK SHARE A DUBIOUS DISTINCTION: They top the list of long commutes, according to a U.S. Census survey released yesterday that also showed clogged roads and high gasoline prices are pushing a growing number of people onto mass transit, the Washington Post and New York Times report. New York's reliance on its transit systems explains why the boroughs other than Manhattan perennially top the list of American counties with the longest commutes. The average trip to work for residents of Staten Island, Queens, the Bronx and Brooklyn has hovered above 40 minutes for several years. Last year, Staten Islanders again faced the longest daily slog, a full 42 minutes on average, with average commutes from Queens, the Bronx and Brooklyn just a minute or so less. For Manhattan residents, the typical commute lasted about 31 minutes, still considerably longer than the national average of about 25 minutes. The Washington region's average commute is more than 33 minutes one way, ranking second to the New York area's 34 minutes among large metropolitan regions. In Calvert, Prince William and Stafford counties, however, the average journey to work takes 40 minutes or more, according to the 2005 American Community Survey of households. The Washington area, where 13 percent of workers get to their jobs by bus or rail, ranks behind only New York and San Francisco in use of mass transit. Two-thirds of workers still drive to their jobs alone, but that share appears to have leveled off since 2000 in the D.C. area. A growing number of New Yorkers are deciding that if the trip to work takes more than a half-hour, then someone else can do the driving, a new survey by the Census Bureau shows. In the metropolitan region, which for years has been home to the nation's longest average commute, tens of thousands of workers have stopped driving to their jobs and switched to riding subways, trains, buses and ferries, according to an analysis of the data released this week by demographers at Queens College. More than 2.5 million residents of the region - about 2 of every 7 commuters - regularly rode some form of public transportation to work in 2005, up from about 2.2 million in 2000. The share of commuters driving themselves or riding in private cars fell, a trend that could bode well for America's energy consumption if only it were taking hold nationally.

NOW HERE'S AN INDISPUTABLY STIGMATIZED PROPERTY: The Clutter House, a national historic home with a gory past, is on the market in Holcomb, Kan., reports Realtor magazine. The five-bedroom, three-bathroom house was the scene of a grisly murder in 1959 that became the basis of the nonfiction novel "In Cold Blood," by Truman Capote. The original owner, farmer Herbert Clutter, was found dead, along with his wife and two teenage children one fall morning. Donna and Leonard Mader, the current owners, purchased the two-story house in 1990. The sale is being conducted as a "private auction;" bids will be taken over the phone, and bidders will be notified privately if a higher bid is received.

CONDO DEVELOPERS TAKE AIM AT CHILDREN: The list of amenities at condominiums and housing developments keeps growing, as developers tout fancy gyms, rooftop pools and on-call staff. Not for you - for your children, the Wall Street Journal observes. Developers and builders are spending millions of dollars on elaborate water parks and fake fossil digs and promoting couture romper rooms by name-brand designers. For example, in Lakewood, Colo., the developers of Belmar, a mixed-use downtown community, spent $600,000 on a kidney-shaped ice-skating rink and $200,000 on an interactive water fountain with an 11-ton, six-foot-high granite ball that children can rotate. At One Carnegie Hill on New York City's Upper East Side, a just-completed luxury building where one-bedrooms start at $895,000, the amenities include two play houses on the roof with child-size loft-style furniture. Even Donald Trump is thinking family friendly: His recently announced Trump Hollywood, a 40-story oceanfront glass tower in Hollywood Beach, Fla., where three-bedroom apartments start at $1.5 million, will feature an on-call children's nanny. Gym chain Equinox Fitness is planning a children's wellness program for residential buildings in conjunction with its new owner, Related Cos., the New York-based developer of One Carnegie Hill, according to David Wine, Related's vice chairman. David Rockwell, the award-winning residential and commercial architect who designed that building and its play space, is adding playground design to his practice.

FOLLOW THE MONEY: The three most prosperous large counties in the United States are in the Washington suburbs, according to newly released census figures, says the Washington Post. They show that the region has the second-highest income and the least poverty of any major metropolitan area in the country. Rapidly growing Loudoun County has emerged as the wealthiest jurisdiction in the nation, with its households last year having a median income of more than $98,000. It is followed by Fairfax and Howard counties, with Montgomery County not far behind. The result is that the Washington area's households rank second in income only to those in San Jose, eclipsing such well-heeled places as San Francisco and the bedroom suburbs of New York. The poverty rate in the Washington region was 7 percent last year - the lowest among the nation's major metropolitan areas, according to the Census Bureau's American Community Survey, a separate set of census figures also just released. That survey shows that the District remains an area of relative poverty among its more affluent suburbs, although its poverty rate is not particularly extreme compared with other large U.S. cities.

INDICATOR OF HOUSING MARKET STRENGTH DECLINES: The Pending Home Sales Index fell to 105.6 in July, a decline of 7 percent from a downwardly revised 113.5 in June and down 16 percent from July 2005, according to the National Association of Realtors (NAR). The index is derived from pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed. An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined, and was the first of five consecutive record years for existing-home sales. "In looking at year-to-year comparisons, the Pending Home Sales Index has been very close in predicting the actual pace of home sales," commented David Lereah, NAR's chief economist. "The index shows existing-home sales should continue to ease after a stronger-than-expected decline in July, but are likely to flatten in the months ahead." He added that there hasn't been a general decline in the housing market against a healthy economic backdrop where jobs are being created, the economy is growing and interest rates are favorable. Added the economist: "Psychological factors are causing some buyers to remain on the sidelines, waiting for prices to stabilize or for more favorable news about the market and the economy. Contributing to this hesitancy is a lot of negative news stories, but in the end we believe that underlying market fundamentals will prevail."

IS IT TIME TO THROW OUT THE TUB WITH BATH WATER: Lately, tub manufacturers have been testing the waters with stand-alone basins, says the Wall Street Journal. The newest designs are larger and more design-oriented than the claw-footed models of Victorian times. Some are hand-hewn in the mold of slippers, boulders or eggs, out of materials including copper, cast iron and concrete. At April's Kitchen/Bath Industry Show in Chicago, Sonoma Cast Stone introduced the $12,500 Ofuro. The 870-pound, bowl-shaped soaker is made from pre-cast stainless concrete, a material that has been used in kitchen countertops. Waterworks of Danbury, Conn., has a total of seven detached tubs; two years ago, it had two. Its new acrylic-based .25 tub, for $8,500, resembles an egg cut in half lengthwise, while the $29,000 Clothilde is made from hand-hammered copper and can accommodate 80 gallons of water. Stone Forest's Natural bathtub is chiseled out of boulders, at about $15,000 each. The maker, based in Santa Fe, N.M., says it features "anomalies" like minor pitting. Still, consumers spent only $7.7 billion redoing their bathrooms last year, according to the U.S. Census Bureau, down from $9.1 billion in 2004. Freestanding tubs are a small but pricey piece of the market. Last year, homeowners spent an average $400 on a new, non-whirlpool tub, according to the Home Improvement Research Institute. There is one challenge with the free-standing things: the installation. Fittings, including a drain and faucet handles, are usually extra, and can cost over $3,000. Interior designer Despina Souhlas recently worked with a client to get a 1,800-pound stone tub into a 1890s row house in Chicago. The homeowner first had to reinforce the wooden joists underneath the tub to hold its weight. Then the tub had to be lifted up to the second floor with a crane, which required six movers. "It was a nightmare," she says. Be careful what you wish for.

YOU PAYS YOUR MONEY AND YOU TAKES NO CHANCES: A luxury home builder in Rockville, Md. has begun resorting to the kind of tactic usually reserved for screaming electronics discounters - the Lowest Price Guarantee. To ease buyers' worries about declining prices, Mid-Atlantic Builders will adjust its sales contract if the price it is charging for one of its houses falls from the time a customer signs an agreement to 45 days before settlement. So, the thinking goes, jittery buyers shelling out $500,000 to more than $1 million for one of the builder's single-family houses can rest assured that they're not sinking money into a depreciating asset. "That's a very real fear," said John J. Lavery, director of sales and marketing for the home builder. While builders and developers have for months been dangling tens of thousands of dollars in incentives to prod hesitant buyers - free upgrades, help with closing costs, plasma screen TVs, vacations, cars - Mid-Atlantic's latest marketing strategy is unusual in that it leaves the most important line in the contract, the selling price, somewhat open-ended. "We know people want to buy because traffic remains very strong," Lavery said. "Yet people aren't making the decision to buy as rapidly as they used to." Mid-Atlantic has not reduced its base home offering price, but it has increased incentives to as much as $55,000. Those will figure into the lowest-price promotion, so if $20,000 in incentives are available one month, and two months later the buyers in the same subdivision are offered $30,000, the earlier buyers will be credited for that extra $10,000.

BROOKLYN'S ATLANTIC YARDS PROJECT WILL BE SCALED DOWN: Facing mounting criticism of its $4.2 billion project in Brooklyn Heights, the developer, Forest City Ratner, plans to reduce the size of the complex by 6-8 percent, eliminating hundreds of apartments from the largest development proposal in the city, according to government officials and executives working with the developer, says the New York Times. Forest City is also considering reducing the height of the project's tallest tower, which is known as Miss Brooklyn, to get it under the height of the borough's tallest building, the nearby Williamsburgh Savings Bank tower, according to real estate executives. The Atlantic Yards project - which includes a Frank Gehry-designed arena for the New Jersey Nets basketball team, more than 6,000 apartments, high-rise towers and a hotel on 22 acres near Downtown Brooklyn - has drawn a torrent of criticism as it nears the end of its public approval process. Critics fear that it would overwhelm the nearby brownstone neighborhoods and clog an already congested area with traffic. City officials say the developer will announce the reduction later this month.

MORTGAGE VOLUME EDGES UP: For the week ended Sept. 1, applications grew by 1.8 percent on a seasonally adjusted basis from one week earlier, according to the Mortgage Bankers Association. On an unadjusted basis, the increase was 0.4 percent compared with the previous week but down 26.1 percent compared with the same week one year earlier. Seasonally-adjusted, purchase applications went up by 3.7 percent from the prior week as refinancings slipped by 0.9 percent. The refinance share of mortgage activity decreased to 41.0 percent of total applications from 41.5 percent the previous week, and the adjustable-rate mortgage (ARM) share fell to 26.2 percent, its lowest level since October 2003.

ONE OF THE BIG TRENDS IN TODAY'S FURNITURE IS SMALL: Sofas are shorter and chairs are armless, notes the Washington Post. Console tables that fit snugly in hallways or behind couches open up to seat eight for dinner. Beds are being shown with headboards but no footboards, or resting atop storage units. Major furniture chains are promoting lines with names such as Small Spaces and Loft 21 to catch the latest home decor wave. In the past year, the home furnishings industry has responded to those in tight quarters, be they young urban pioneers or downsizing suburbanites, says Cheminne Taylor-Smith, editor in chief of InFurniture, a monthly magazine that tracks industry trends. "Baby boomers are almost all becoming empty-nesters, and they look around and say, 'Who needs this space? Who will clean it?' Not only do they have too much furniture, but it's too big to move," Taylor-Smith says. Savvy manufacturers are shrinking sofas, tables, chairs and chests in several styles, she says: contemporary, traditional but with "less carving and sleeker arms," and transitional, which bridges the two.

WASN'T IT DOCTORS AND LAWYERS WHO MADE THE BIG BUCKS: Pop singer Gwen Stefani, the lead singer of the band No Doubt, has bought a Beverly Hills home once owned by actress and singer Jennifer Lopez, reports the Wall Street Journal. Ms. Stefani and her husband, Gavin Rossdale, the former lead singer for the rock band Bush, paid close to the $15.5 million asking price, according to the seller, film producer and businessman Sam Nazarian. The couple had their first child in May. The two-acre property includes the four-bedroom 1998 house, a tennis court, basketball court, pool and screening room. Nazarian, whose SBE Entertainment Group produced the Edward Norton film "Down in the Valley" in 2005 and owns hotels, restaurants and nightclubs in California and other states, bought the house from Ms. Lopez in 2004 for a reported $12.5 million. He said he is selling to move to Hollywood Hills, next door to Leonardo DiCaprio. Whether to BE next door, he doesn't say.

LOUDON COUNTY MOVES TO RESTRICT GROWTH: The supervisors approved a far-reaching plan to restrict home building in the county's rural west, taking the first step toward guiding long-term growth in the region's fastest-growing jurisdiction, reports the Washington Post. The guidelines replace similar rules struck down last year by the state Supreme Court. But the Republican majority on the board opted for a less-restrictive compromise than they had been considering in recent months. They did so against the advice of County Attorney John R. Roberts, who said the changes could imperil the measure if it is challenged in court. About 90 minutes after the vote, the board decided to delay implementation of the plan to address the legal questions raised by the compromise. The soonest the plan could be implemented is late November or early December. If it stands up in court, the measure ultimately could reduce the number of homes that could be built in the west from 37,000 to roughly half that.

HISTORICALLY LOW MORTGAGE RATES EDGE UP: The 30-year fixed-rate mortgage (FRM) averaged 6.47 percent for the week ending, up from last week's average of 6.44 percent 5.71 percent a year ago, according to Freddie Mac. The 15-year FRM this week was 6.16 percent, up from last week, when it averaged 6.14 percent. A year ago, it was 5.30 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were 6.14 percent this week, compared with 6.11 percent last week and 5.24 percent last year. One-year Treasury-indexed ARMs averaged 5.63 percent this week, up from last week's 5.59 percent. At this time last year, the one-year ARM was 4.45 percent. "We expect that mortgage rates will continue to fluctuate as new economic data are released, but still remain in the 6.5-7 percent range for the rest of the year," observed Frank Nothaft, Freddie Mac vice president and chief economist. "Slowly rising mortgage rates are offset in part by a slowdown in house price appreciation. Consequently, higher rates have resulted in houses sitting on the market for longer periods of time, changing the real estate sector into more of a buyer's market from the seller's market of the last few years."

HERE'S HOW TO KEEP THAT GRANITE COUNTER SPARKLING: Apply a penetrating sealer, counsels the Washington Post. It will sink into areas that are still absorbent and merely sit on the surface of any areas that were previously treated. As long as you wipe off any excess before it dries, you should be fine, says Scott Lardner, past president of the Marble Institute of America, a trade group that represents companies that work with many types of natural stone. Maintain the sealer's effectiveness by cleaning the counter with mild soap and water, not a degreaser such as Formula 409 or an ammonia-based cleaner such as Windex. "These won't hurt the stone," Lardner says, "but they will degrade the sealer so you need to reapply it more often." Use only neutral cleaners on sealers; beware of even natural or homemade cleaners such as vinegar or lemon juice, which are acidic, or baking soda, which is alkaline. When you put down a cold glass and notice a water ring on the counter or see dark spots where water drips off your hands near the faucet, it's time to reapply the sealer.

THE HIGH PRICE OF COPPER IS HITTING HOME – LITERALLY: The metal's skyrocketing scrap value is inspiring criminals to hit houses, making off with copper coils in air-conditioning units, copper wires, even the copper pipes used for plumbing, and leaving some perplexed residents without running water, says the Wall Street Journal. Driven by increased world demand for commodities, prices of steel, copper, aluminum and other metals are at historic highs. The price of copper has more than doubled in the past year, at around $3.65 a pound on the Comex division of the New York Mercantile Exchange. The price of copper scrap - which is processed and sold to metal-making firms - has also doubled, with high-grade scrap now fetching around $3 or more per pound at scrap yards and lower-grade scrap, less. Copper isn't the only metal sought by thieves; products made from aluminum and steel are also being targeted, but thefts of copper are especially onerous for homeowners and builders, as the metal is used throughout modern homes, including the inner coil of central air-conditioning units, electrical systems, gutters and water pipes. Another target for thieves is copper piping, which often runs exposed beneath many older homes.