Items of Interest - February 11, 2006
THERE WAS NO BIG DRIFT IN NEW-HOME SALES LAST YEAR: They even topped record sales in 2004 by more than 6 percent, the Commerce Department reported. Total new single-family home sales for 2005 established a new record of 1.282 million, up 6.6 percent from the previous annual record. For December alone, new-home sales hit a seasonally adjusted annual rate of 1.269 million units, up 2.9 percent from November's pace of 1.233 million units, but volume was off 6.6 percent from October. "While new-home sales have been quite strong throughout 2005, we see a cooling of the market to a healthy and more sustainable pace in the months ahead, as substantiated by recent surveys of our builders," commented Chief Economist David Seiders of the National Association of Home Builders. "For 2006, we expect to see a 6-7 percent drop in sales, but certainly no reason for alarm. This would make 2006 the second or third best year in housing history." Inventory was 516,000 at the end of the year, a 4.9 months' supply at the December sales pace. Of that total, for-sale units that were not yet started represented 21 percent. Units still under construction were 57 percent of the inventory, and completed homes for sale were 22 percent of the total. "As they generally have done throughout 2005, builders have maintained a healthy balance between supply and demand," Seiders said.
TAX TIP: Who gets the mortgage interest deduction? It doesn't matter what other names are on the deed. As long as your name is on the document, you can take advantage of the deduction to the extent you make the monthly payments. In other words, if two individuals own a property jointly but only one pays the mortgage, the one who ponies up gets to deduct the interest portion.
BUILDERS JUST DON'T LIKE SURPRISES: Why do builders insist that buyers use one of their "preferred" lenders? Why can't borrowers just go anywhere they want to and get a home loan without feeling as if they're being "forced" to take the builder's loan? These are fair questions, and David Read of Realty Times supplies the answer: For the control. If there's a problem with a loan, the builder will know about it. And either take steps to correct the problem or quickly find a new buyer. Interest on construction loans accrues daily. If a deal falls out, that builder is forced to pay additional interest, so it's critical for a builder to count on a closing. No surprises. Some builders like to make more money on each transaction through loan fees and origination charges. Still others like to be able to know on a moment's notice how their closings are going. Or any combination thereof. No surprises, true. No shame either.
PREDICTOR OF REAL ESTATE MARKET DIPS AGAIN: Pending home sales continued to decline in December but are expected to recover in the months ahead, according to the National Association of Realtors (NAR). The Pending Home Sales Index, based on contracts signed in December, was down 3 percent to a level of 116.4 from 1 November, and it is 5.5 percent below December 2004. The index has trended steadily down from a record index of 129.2 last August. (An index of 100 is equal to the average level of contract activity during 2001.) "Changes in the overall direction of the housing market are akin to a large ship making course corrections – it takes some time for the driving factors to materialize as a change in the sales level," commented NAR Chief Economist David Lereah. "In many recent transactions we're looking at a delayed effect of mortgage interest rates that peaked in November but are now lower than expected." Even with an upturn in sales, he expects the housing market to stay below last year's record. "We're going through a period of adjustment," Lereah said. "As home sellers recognize a return to more normal rates of price growth, some that have been holding out for higher prices will be more willing to negotiate terms that are acceptable to buyers but still provide them a solid return on their investment."
IT'S NOT TOO LATE TO PRUNE THOSE GANGLY ROSE BUSHES: Before growth begins again, reduce roses to about waist height, the Washington Post "Green Scene" suggests. Cut them to about knee height, removing blackened or dead stems and leaving the healthiest four or five green stems; they should be about finger thickness.
AND STOP WORRYING ABOUT THAT WARM WEATHER: Magnolias, most Japanese cherries, azaleas and hydrangeas, among many, are still too far from flowering for the current weather to jeopardize their blossoms, according to a comforting reminder from Adrian Higgins in the Washington Post. In any case, there's isn't much to do about the weather and its effects.
WILL IT HAPPEN HERE: As the market for high-end condos levels off, more and more people may find themselves with contracts to buy condos that will never be built, reports the New York Times. In Las Vegas alone, developers have canceled at least five buildings in the last year. Dozens of other buildings, in which units have been sold, may never break ground, said Brian Gordon, a principal at Applied Analysis, a Las Vegas consulting firm. Gordon said there are 97 condo projects in the works in greater Las Vegas, representing more than 52,000 units. "I don't think anyone would expect that all these projects will move forward," he added, predicting that fewer than half of them would be built in the next five years. The pitfalls for condo buyers may be particularly deep in and around Las Vegas, where construction prices have been skyrocketing. Gordon said that some of his clients who are developers have reported a 30 percent increase in the cost of labor and materials in the last year alone. That means developers who pre-sell apartments may find construction costs wiping out profits even before they break ground.
LAWSUITS RELATED TO REAL ESTATE ARE DECLINING: Reported legal actions were 37 percent lower in 2003-2004 than in the previous two-year period in states tracked by the National Association of Realtors (NAR), says Realtor magazine. Comparing 2003-2004 cases with the previous two years, the NAR's "Scan" research disclosed that that brokers or sales agents were found liable in 28 percent of the cases analyzed. Cases involving property management were once again the most frequent area of liability. Legal issues such as breach of contract, breach of fiduciary duty, and property disclosure were the major areas of liability for residential practitioners.
WORDS TO THE WISE MIGHT BE SUFFICIENT: The yearning for a smooth transition from the surging market is seen in the increasingly frequent use in the last six months of the phrase "soft landing," observes the New York Times. "Soft landing is everyone's big hope," said Paul Payack, president of the Global Language Monitor languagemonitor.com, which analyzes language trends and their impact on politics, culture and business. Payack calculated the popularity of some 36 buzzwords chosen by the Times. He used his Predictive Quantities Indicator, or P.Q.I., an algorithm that tracks words and phrases in the media and on the Internet in relation to frequency, contextual usage and appearance in global media. It is a weighted index that takes into account year-to-year increases and acceleration in the last several months. "Soft landing" and "pause" occupied first and second place respectively, while the more ominous sounding "housing bubble" ranked seventh. "'Pause' is another one of these hopeful things," Payack said. These days, realtors frequently find themselves massaging market buzzwords, or the "macro" language of real estate, to make it more palatable. At the same time the forward-thinking ones are also busily tweaking the "micro" language of real estate - the language used to describe properties - to make it more alluring and meaningful. (See "remarks" in listings.) The new micro lexicon that is emerging borrows from the art and fashion worlds and in which nearly every word implies affluence, exclusivity and limitlessness. The reigning buzzword of the micro language today is "lifestyle." And where "lifestyle" is uttered, "amenities," "name architect" and "spa-bath" tend to follow. The word "designer," as in "designer kitchen," is no longer a sufficient indicator of status. "Everything's a designer kitchen now," a New York City broker commented. "You'd better say what designer."
THE COURTS ARE BEARING DOWN ON LENDERS: Three federal appeals courts have now held that a lender could violate the Real Estate Settlement Procedures Act (RESPA) by charging consumers higher fees for a service than it paid a third-party company when the lender provided no additional service, notes Realtor magazine. Examples would be tax service, loan servicing or flood certificate fees. In the latest case, the lender charged the borrower $85 for tax services but paid the provider only $20. The ruling considered a HUD policy statement that prohibited both markups and overcharges under RESPA and the RESPA statute, which didn't require a court to consider whether a lender's fees for services it performed were reasonable or too high. If you're looking for an explanation of the court's distinctions, you won't find it here.
FOREIGN INVESTORS ARE HOT FOR THE U.S.: Even though the U.S. is regarded far and away as being the most stable and secure country for real estate investments and as having the best capital appreciation, the investors will spread their dollars more globally in 2006, according to the results of a survey by the Association of Foreign Investors in Real Estate (AFIRE). London has handily reclaimed its spot as foreign investors' number one global city, beating D.C. - the second-ranked city - by six percentage points. London held first place in 2001 when the question was first asked, but since then, has held second place behind Washington. Among foreign investors' top five U.S. cities, San Diego, for the first time has earned a spot, taking fifth place. Investors' choices for America's top three cities have remained consistent since 2002, with New York and Los Angeles behind Washington. Over the last three years the gap between D.C. and New York has been narrowing. Survey respondents said that the percentage of their 2006 global investment plans allocated for U.S. properties will drop to 47 percent from 55 percent in 2005. Respondents identified Western Europe and the U.K. as additional key markets for their real estate dollars. While the US has long held the number one spot, never has the percentage been as high as now: 60.7 percent of respondents selected the US as the most stable and secure country for their real estate dollars.
YOU CAN BE A GOOD SCOUT: The American Red Cross says there are six basics you should stock for your home in the case of an emergency: Water, food, first-aid supplies, clothing and bedding, tools and emergency supplies, and special items for medical conditions. Keep the items that you would most likely need during an evacuation in an easy-to carry container, such as a large covered trash container, camping backpack or duffle bag. For a comprehensive list of what should be included in your kit, do visit redcross.org/services/prepare/0,1082,0_91_,00.html.
DO YOU HAVE THE TIME . . . FOR THESE CLOCKS: For example, Henry Segerman's new desk clock doesn't have any numbers on it, reports the Wall Street Journal. He has to add up the number of flickering red, green and blue lights to calculate the time. "It takes me at least five seconds to work it out," says Segerman, a math graduate student in Palo Alto, Calif. The best thing about the $50 clock: It gives him a "quick mental break from whatever" he's doing. Breaking away from numbers, a handful of clockmakers are pushing timepieces that present the hours of the day in unusual ways. Can You Imagine, a gadget manufacturer, recently introduced the $40 Dreamtime, a pyramid-shaped timepiece with no numbers that chimes out the time when touched. The Discovery Channel Store has a numberless clock, too, a $30 version that depicts the time in blips of blue or red lights; its sales rose 50 percent last year, according to the retailer. "I've never had anyone not be able to learn it quickly," says Lyle Morris, the creator of the blipping timepieces at the Discovery Channel Store. His clocks feature six columns of lights, for hours, minutes and seconds; each light is assigned a numerical value - 1, 2, 4 or 8. To tell the time, users have to add up each column. "There's a learning curve, depending on how quick you can multiply," says Morris. "It's just good exercise for your brain." That approach goes only so far with consumers like Tray Dunaway. The medical consultant in Camden, S.C., bought a numberless clock on the Web site ThinkGeek last year. Though he liked the model enough to buy 250 more to give to clients as gifts, the clock has its limits. "Basically what I do is look at the clock, glance at my watch, then state the time," he confesses.
MORTGAGE VOLUME DECLINES: For the week ended Jan. 27, it fell by 5.1 percent on a seasonally adjusted basis from one week earlier, according to the Mortgage Bankers Association. On an unadjusted basis, the volume went up by 9.1 percent compared with the previous week but down 12.1 percent compared with the same week one year earlier. Purchase mortgages decreased by 8.0 percent from the previous week, and refinancings slipped by 1.5 percent. The refinance share of mortgage activity grew to 43.0 percent of total applications from 42.8 percent the previous week, while the adjustable-rate mortgage (ARM) share edged up to 30.5 percent from 29.5 percent week.
WHOSE HOUSE IS IT ANYWAY: Don Weigel, executive vice president of LandAmerica, one of the largest U.S. title companies says in Realtor magazine that issues surrounding the true ownership of property tend to center on the following: claims of creditors against property owners; marital rights of a spouse who is not legally divorced; false information about the true owner of the property; deeds by persons supposedly single but secretly married; birth or adoption of children after the date of a will bequeathing the property; deeds delivered after the death or without the consent of the true owner; and undisclosed or missing heirs who have a claim on the property.
HOMES ON THE RANGE: A decade or so after big names in entertainment, sports and business turned the rugged ranch into a real-estate fashion statement, many of them are packing up the wagon trains and pulling back out, notes the Wall Street Journal. Actor Rick Schroder is offering nearly 15,000 acres of ranch land in Colorado for $29 million. Val Kilmer just listed his 1,800 acres in New Mexico for $18 million. Leon Hirsch, former chairman of U.S. Surgical, is selling his 17,000-acre Montana spread for $21.9 million (cows included). On the cozier side, singer Carole King's 128-acre Idaho property just went on the market for $19 million. One reason: They're hoping to cash out after years of gains in real-estate, according to John Frome, a ranch appraiser in Afton, Wyo. Also, for some who've made their second or third home on the range, ranch life has turned out to be anything but simple. Yearly maintenance costs can run $150,000 and up. And the remoteness and roughing-it that once seemed so alluring can get tiresome. (Don't even think of going next door to borrow a cup of sugar.) There are indications that now ranch properties have been backing up on the market. Schroder's southwestern-Colorado ranch has been sitting on the market for 15 months, while Hirsch's Montana ranch has gone unsold for more than a year. Spreads owned by tennis's Martina Navratilova and novelist Warren Adler both found buyers late last year, after more than four years on the market apiece. Meanwhile, Harris "Whit" Hudson, the former co-owner of baseball's Florida Marlins, has been trying to sell his 60,000 acres in Colorado for two years - first for $25 million, then for $20 million, and now he's planning to part with the property at auction. Going once, going never.
FIRM SAYS A SMALLER PROPORTION OF INCOME GOES TO HOUSING: Is the nation really facing a housing affordability crisis? Newsday asks in Realtor magazine. According to Moody's Economy.com, the opposite is true: Houses have become more affordable over the last decade because of low interest rates, rising incomes and an increased supply of housing. The percentage of income needed to cover mortgage payments in the United States has declined, on average, from about 30 percent in 1982 to about 22 percent in 2005, Economy.com reports. Nationwide, only a few areas are really unaffordable. Those include California coastal areas, Chicago, Boston, and metropolitan New York. In these areas, the percentage of income required to buy a house exceeds 40 percent, Economy.com figures.
IT'S NOT ONLY THE CAR THAT'S GETTING POLISHED: Aiming for the high-end homeowner with a glut of stuff, garage specialists around the country are urging customers to invest in storage space as refined as the rest of their home, the Wall Street Journal says. Ranging up to 500 square feet, the spaces are typically created along garage walls, often with weatherproof cabinetry in woods like maple and birch. In some cases, cabinets are hung on slat walls, or storage platforms are installed above the cars. Garage Envy, a three-year-old garage-storage company in Pasadena, Calif., offers features such as retractable benches ($650 apiece) and marble flooring and granite tops for work tables for $35 per square foot. Business has been so good the firm just opened branches in northern California, Arizona and Oregon. In Houston, a typical custom job by Advantage Garage Cabinets is about $2,700, or double the amount a year ago. In all, there are about 500 custom garage shops across the country, up from about 50 in 2001, according to Peachtree Consulting Group, an Atlanta firm that tracks garage storage, of all things. There are downsides. Even pricey cabinets can fill up fast or get messy. And when some homeowners don't return items back to the storage spaces, their garage can easily revert to its previous state. Kevin Maley paid $8,000 for 68 feet of custom garage cabinets, so the Houston oil-equipment executive's Christmas lights and dog kennels are all neatly stored - but he's got a surplus of empty shelves, just in case more space is needed later. "I love my cars," he says. "And it would be a shame to keep them in a shabby garage." How do you spell "conspicuous consumption?"
RESIDENTIAL CONSTRUCTION SPENDING GOES UP: It was at a seasonally adjusted annual rate of $648.9 billion in December, 1.0 percent above the revised November estimate of $642.6 billion, according to the U.S. Commerce Department. Residential construction in 2005 was $626.1 billion, 11.1 percent above the 2004 figure of $563.4 billion
IF YOU WORK AT HOME, YOU MAY HAVE TOO LITTLE INSURANCE: Home owners' insurance policies may not be adequate coverage for home-based businesses, says the Wall Street Journal. Home owners' policies provide only $2,500 in coverage for on-premises business equipment and $250 for off-premises equipment, according to Madelyn Flannagan of Independent Insurance Agents and Brokers (IIAB). Yet almost 60 percent of home-based businesses rely only on their home owners' insurance, according to a 2004 survey by International Communications Research on behalf of the IIAB. Moreover, most home owners' policies do not provide coverage at all for business-related liabilities, making it sensible for home-business owners to purchase additional or separate coverage. Businesses with little equipment and space and no in-home deliveries or visitors might want to consider adding an endorsement to their home owners' policy, purchasing a separate liability policy if necessary. Crafts and accounting businesses and others with minimal risk exposure should look at in-home business-owners policies, which merge home and business coverage into a single policy. Finally, businesses that conduct on- and off-premise activities with high liability risk should opt for a business-owners package policy, which offers liability, property, loss of income, and injury coverage. Separate product-liability, workmanship-liability, and commercial auto coverage also might be necessary.
A COZY LITTLE PLACE IN THE CITY: For more than a decade, McMansions have been a fixture on the American landscape. Now apartments are being supersized, too, according to the New York Times. For example, on Fisher Island, near Miami, a condo developer is offering penthouses of 20,000 square feet, more than eight times the size of the average single-family house. In a Las Vegas suburb, a custom-home builder is developing high-rise condos topped by 16,000-square-foot apartments. And in New York, some luxury pads now on the market measure over 10,000 square feet, gargantuan by Manhattan standards. With hedge fund managers raking in record profits and Wall Street bonuses surging, the wealthiest buyers are purchasing these palatial apartments for a simple reason: Because they can. "Home is an expression of self," opined Setha M. Low, a professor of environmental psychology at the City University of New York Graduate Center. "And the more of it, the bigger you are." And the bigger they are. . . Have they considered a ranch instead? (See Homes on the Range above.)
MORTGAGE RATES INCH UP: The 30-year fixed-rate mortgage (FRM) averaged 6.23 percent for the week, up from last week's average of 6.12 percent and 5.63 last year at this time, according to Freddie Mac. The 15-year FRM this week was 5.81 percent, compared with 5.70 percent last week and 5.14 percent last year. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.87 percent this week, up from last week's 5.75 percent and 5.00 percent 12 months earlier. One-year Treasury-indexed ARMs were 5.33 percent this week, up from 5.20 percent last week. At this time last year, it averaged 4.23 percent. "Declines in worker productivity coupled with accelerating labor costs increase the threat of inflation down the road. Inflationary pressure generated by these two factors pushes long-term mortgage rates upward, which is why we have seen rates rise these last two weeks," said Frank Nothaft, Freddie Mac vice president and chief economist. "Mortgage rates will surely fluctuate in the weeks and months ahead, but the trend now is for higher rates over the long run."
STOCK UP: At the Washington Home & Garden Show, you'll find 700 booths and gardens with ideas for decorating, remodeling, furnishing and landscaping at the Washington Convention Center Feb. 9-12. Admission is $10 and less for kids. If you're under 5 and reading this newsletter instead of playing with your toys, you can get in free. For more info, visit wshingtonhomeandgardenshow.com.
RESEARCH FIRM SEES SOFT LANDING FOR CONDOS: The condo conversion market is largely played out for this housing cycle, suggest Delta Associates. "Due to strong structural fundamentals, we are likely to experience a soft landing in most major metro markets but less gentle in others, the firm's new report predicts. "However, we do not foresee a national burst as some observers are predicting. Among its reasons are continued high levels of job growth and housing demand over the next several years, continued low interest rates and mortgage liquidity, the appeal of condos as relatively affordable, greater acceptance of urban and "new urbanist" living, and the failure to emerge of better investment options than real estate. "We think cities to watch include Las Vegas, Miami and Phoenix," the report said. "On the other hand, we would be more confident of a soft landing in Washington, Boston and Los Angeles. At the same time, Houston-based market research firm MetroStudy was quoted in the Washington Post expressing concern about the level of construction planned or under way especially in Arlington and Fairfax counties. "There is a very significant problem" of overbuilding and the potential for projects to go bust, said MetroStudy's Kenneth Wenhold.
TAX TIP: Who gets the mortgage interest deduction? It doesn't matter what other names are on the deed. As long as your name is on the document, you can take advantage of the deduction to the extent you make the monthly payments. In other words, if two individuals own a property jointly but only one pays the mortgage, the one who ponies up gets to deduct the interest portion.
BUILDERS JUST DON'T LIKE SURPRISES: Why do builders insist that buyers use one of their "preferred" lenders? Why can't borrowers just go anywhere they want to and get a home loan without feeling as if they're being "forced" to take the builder's loan? These are fair questions, and David Read of Realty Times supplies the answer: For the control. If there's a problem with a loan, the builder will know about it. And either take steps to correct the problem or quickly find a new buyer. Interest on construction loans accrues daily. If a deal falls out, that builder is forced to pay additional interest, so it's critical for a builder to count on a closing. No surprises. Some builders like to make more money on each transaction through loan fees and origination charges. Still others like to be able to know on a moment's notice how their closings are going. Or any combination thereof. No surprises, true. No shame either.
PREDICTOR OF REAL ESTATE MARKET DIPS AGAIN: Pending home sales continued to decline in December but are expected to recover in the months ahead, according to the National Association of Realtors (NAR). The Pending Home Sales Index, based on contracts signed in December, was down 3 percent to a level of 116.4 from 1 November, and it is 5.5 percent below December 2004. The index has trended steadily down from a record index of 129.2 last August. (An index of 100 is equal to the average level of contract activity during 2001.) "Changes in the overall direction of the housing market are akin to a large ship making course corrections – it takes some time for the driving factors to materialize as a change in the sales level," commented NAR Chief Economist David Lereah. "In many recent transactions we're looking at a delayed effect of mortgage interest rates that peaked in November but are now lower than expected." Even with an upturn in sales, he expects the housing market to stay below last year's record. "We're going through a period of adjustment," Lereah said. "As home sellers recognize a return to more normal rates of price growth, some that have been holding out for higher prices will be more willing to negotiate terms that are acceptable to buyers but still provide them a solid return on their investment."
IT'S NOT TOO LATE TO PRUNE THOSE GANGLY ROSE BUSHES: Before growth begins again, reduce roses to about waist height, the Washington Post "Green Scene" suggests. Cut them to about knee height, removing blackened or dead stems and leaving the healthiest four or five green stems; they should be about finger thickness.
AND STOP WORRYING ABOUT THAT WARM WEATHER: Magnolias, most Japanese cherries, azaleas and hydrangeas, among many, are still too far from flowering for the current weather to jeopardize their blossoms, according to a comforting reminder from Adrian Higgins in the Washington Post. In any case, there's isn't much to do about the weather and its effects.
WILL IT HAPPEN HERE: As the market for high-end condos levels off, more and more people may find themselves with contracts to buy condos that will never be built, reports the New York Times. In Las Vegas alone, developers have canceled at least five buildings in the last year. Dozens of other buildings, in which units have been sold, may never break ground, said Brian Gordon, a principal at Applied Analysis, a Las Vegas consulting firm. Gordon said there are 97 condo projects in the works in greater Las Vegas, representing more than 52,000 units. "I don't think anyone would expect that all these projects will move forward," he added, predicting that fewer than half of them would be built in the next five years. The pitfalls for condo buyers may be particularly deep in and around Las Vegas, where construction prices have been skyrocketing. Gordon said that some of his clients who are developers have reported a 30 percent increase in the cost of labor and materials in the last year alone. That means developers who pre-sell apartments may find construction costs wiping out profits even before they break ground.
LAWSUITS RELATED TO REAL ESTATE ARE DECLINING: Reported legal actions were 37 percent lower in 2003-2004 than in the previous two-year period in states tracked by the National Association of Realtors (NAR), says Realtor magazine. Comparing 2003-2004 cases with the previous two years, the NAR's "Scan" research disclosed that that brokers or sales agents were found liable in 28 percent of the cases analyzed. Cases involving property management were once again the most frequent area of liability. Legal issues such as breach of contract, breach of fiduciary duty, and property disclosure were the major areas of liability for residential practitioners.
WORDS TO THE WISE MIGHT BE SUFFICIENT: The yearning for a smooth transition from the surging market is seen in the increasingly frequent use in the last six months of the phrase "soft landing," observes the New York Times. "Soft landing is everyone's big hope," said Paul Payack, president of the Global Language Monitor languagemonitor.com, which analyzes language trends and their impact on politics, culture and business. Payack calculated the popularity of some 36 buzzwords chosen by the Times. He used his Predictive Quantities Indicator, or P.Q.I., an algorithm that tracks words and phrases in the media and on the Internet in relation to frequency, contextual usage and appearance in global media. It is a weighted index that takes into account year-to-year increases and acceleration in the last several months. "Soft landing" and "pause" occupied first and second place respectively, while the more ominous sounding "housing bubble" ranked seventh. "'Pause' is another one of these hopeful things," Payack said. These days, realtors frequently find themselves massaging market buzzwords, or the "macro" language of real estate, to make it more palatable. At the same time the forward-thinking ones are also busily tweaking the "micro" language of real estate - the language used to describe properties - to make it more alluring and meaningful. (See "remarks" in listings.) The new micro lexicon that is emerging borrows from the art and fashion worlds and in which nearly every word implies affluence, exclusivity and limitlessness. The reigning buzzword of the micro language today is "lifestyle." And where "lifestyle" is uttered, "amenities," "name architect" and "spa-bath" tend to follow. The word "designer," as in "designer kitchen," is no longer a sufficient indicator of status. "Everything's a designer kitchen now," a New York City broker commented. "You'd better say what designer."
THE COURTS ARE BEARING DOWN ON LENDERS: Three federal appeals courts have now held that a lender could violate the Real Estate Settlement Procedures Act (RESPA) by charging consumers higher fees for a service than it paid a third-party company when the lender provided no additional service, notes Realtor magazine. Examples would be tax service, loan servicing or flood certificate fees. In the latest case, the lender charged the borrower $85 for tax services but paid the provider only $20. The ruling considered a HUD policy statement that prohibited both markups and overcharges under RESPA and the RESPA statute, which didn't require a court to consider whether a lender's fees for services it performed were reasonable or too high. If you're looking for an explanation of the court's distinctions, you won't find it here.
FOREIGN INVESTORS ARE HOT FOR THE U.S.: Even though the U.S. is regarded far and away as being the most stable and secure country for real estate investments and as having the best capital appreciation, the investors will spread their dollars more globally in 2006, according to the results of a survey by the Association of Foreign Investors in Real Estate (AFIRE). London has handily reclaimed its spot as foreign investors' number one global city, beating D.C. - the second-ranked city - by six percentage points. London held first place in 2001 when the question was first asked, but since then, has held second place behind Washington. Among foreign investors' top five U.S. cities, San Diego, for the first time has earned a spot, taking fifth place. Investors' choices for America's top three cities have remained consistent since 2002, with New York and Los Angeles behind Washington. Over the last three years the gap between D.C. and New York has been narrowing. Survey respondents said that the percentage of their 2006 global investment plans allocated for U.S. properties will drop to 47 percent from 55 percent in 2005. Respondents identified Western Europe and the U.K. as additional key markets for their real estate dollars. While the US has long held the number one spot, never has the percentage been as high as now: 60.7 percent of respondents selected the US as the most stable and secure country for their real estate dollars.
YOU CAN BE A GOOD SCOUT: The American Red Cross says there are six basics you should stock for your home in the case of an emergency: Water, food, first-aid supplies, clothing and bedding, tools and emergency supplies, and special items for medical conditions. Keep the items that you would most likely need during an evacuation in an easy-to carry container, such as a large covered trash container, camping backpack or duffle bag. For a comprehensive list of what should be included in your kit, do visit redcross.org/services/prepare/0,1082,0_91_,00.html.
DO YOU HAVE THE TIME . . . FOR THESE CLOCKS: For example, Henry Segerman's new desk clock doesn't have any numbers on it, reports the Wall Street Journal. He has to add up the number of flickering red, green and blue lights to calculate the time. "It takes me at least five seconds to work it out," says Segerman, a math graduate student in Palo Alto, Calif. The best thing about the $50 clock: It gives him a "quick mental break from whatever" he's doing. Breaking away from numbers, a handful of clockmakers are pushing timepieces that present the hours of the day in unusual ways. Can You Imagine, a gadget manufacturer, recently introduced the $40 Dreamtime, a pyramid-shaped timepiece with no numbers that chimes out the time when touched. The Discovery Channel Store has a numberless clock, too, a $30 version that depicts the time in blips of blue or red lights; its sales rose 50 percent last year, according to the retailer. "I've never had anyone not be able to learn it quickly," says Lyle Morris, the creator of the blipping timepieces at the Discovery Channel Store. His clocks feature six columns of lights, for hours, minutes and seconds; each light is assigned a numerical value - 1, 2, 4 or 8. To tell the time, users have to add up each column. "There's a learning curve, depending on how quick you can multiply," says Morris. "It's just good exercise for your brain." That approach goes only so far with consumers like Tray Dunaway. The medical consultant in Camden, S.C., bought a numberless clock on the Web site ThinkGeek last year. Though he liked the model enough to buy 250 more to give to clients as gifts, the clock has its limits. "Basically what I do is look at the clock, glance at my watch, then state the time," he confesses.
MORTGAGE VOLUME DECLINES: For the week ended Jan. 27, it fell by 5.1 percent on a seasonally adjusted basis from one week earlier, according to the Mortgage Bankers Association. On an unadjusted basis, the volume went up by 9.1 percent compared with the previous week but down 12.1 percent compared with the same week one year earlier. Purchase mortgages decreased by 8.0 percent from the previous week, and refinancings slipped by 1.5 percent. The refinance share of mortgage activity grew to 43.0 percent of total applications from 42.8 percent the previous week, while the adjustable-rate mortgage (ARM) share edged up to 30.5 percent from 29.5 percent week.
WHOSE HOUSE IS IT ANYWAY: Don Weigel, executive vice president of LandAmerica, one of the largest U.S. title companies says in Realtor magazine that issues surrounding the true ownership of property tend to center on the following: claims of creditors against property owners; marital rights of a spouse who is not legally divorced; false information about the true owner of the property; deeds by persons supposedly single but secretly married; birth or adoption of children after the date of a will bequeathing the property; deeds delivered after the death or without the consent of the true owner; and undisclosed or missing heirs who have a claim on the property.
HOMES ON THE RANGE: A decade or so after big names in entertainment, sports and business turned the rugged ranch into a real-estate fashion statement, many of them are packing up the wagon trains and pulling back out, notes the Wall Street Journal. Actor Rick Schroder is offering nearly 15,000 acres of ranch land in Colorado for $29 million. Val Kilmer just listed his 1,800 acres in New Mexico for $18 million. Leon Hirsch, former chairman of U.S. Surgical, is selling his 17,000-acre Montana spread for $21.9 million (cows included). On the cozier side, singer Carole King's 128-acre Idaho property just went on the market for $19 million. One reason: They're hoping to cash out after years of gains in real-estate, according to John Frome, a ranch appraiser in Afton, Wyo. Also, for some who've made their second or third home on the range, ranch life has turned out to be anything but simple. Yearly maintenance costs can run $150,000 and up. And the remoteness and roughing-it that once seemed so alluring can get tiresome. (Don't even think of going next door to borrow a cup of sugar.) There are indications that now ranch properties have been backing up on the market. Schroder's southwestern-Colorado ranch has been sitting on the market for 15 months, while Hirsch's Montana ranch has gone unsold for more than a year. Spreads owned by tennis's Martina Navratilova and novelist Warren Adler both found buyers late last year, after more than four years on the market apiece. Meanwhile, Harris "Whit" Hudson, the former co-owner of baseball's Florida Marlins, has been trying to sell his 60,000 acres in Colorado for two years - first for $25 million, then for $20 million, and now he's planning to part with the property at auction. Going once, going never.
FIRM SAYS A SMALLER PROPORTION OF INCOME GOES TO HOUSING: Is the nation really facing a housing affordability crisis? Newsday asks in Realtor magazine. According to Moody's Economy.com, the opposite is true: Houses have become more affordable over the last decade because of low interest rates, rising incomes and an increased supply of housing. The percentage of income needed to cover mortgage payments in the United States has declined, on average, from about 30 percent in 1982 to about 22 percent in 2005, Economy.com reports. Nationwide, only a few areas are really unaffordable. Those include California coastal areas, Chicago, Boston, and metropolitan New York. In these areas, the percentage of income required to buy a house exceeds 40 percent, Economy.com figures.
IT'S NOT ONLY THE CAR THAT'S GETTING POLISHED: Aiming for the high-end homeowner with a glut of stuff, garage specialists around the country are urging customers to invest in storage space as refined as the rest of their home, the Wall Street Journal says. Ranging up to 500 square feet, the spaces are typically created along garage walls, often with weatherproof cabinetry in woods like maple and birch. In some cases, cabinets are hung on slat walls, or storage platforms are installed above the cars. Garage Envy, a three-year-old garage-storage company in Pasadena, Calif., offers features such as retractable benches ($650 apiece) and marble flooring and granite tops for work tables for $35 per square foot. Business has been so good the firm just opened branches in northern California, Arizona and Oregon. In Houston, a typical custom job by Advantage Garage Cabinets is about $2,700, or double the amount a year ago. In all, there are about 500 custom garage shops across the country, up from about 50 in 2001, according to Peachtree Consulting Group, an Atlanta firm that tracks garage storage, of all things. There are downsides. Even pricey cabinets can fill up fast or get messy. And when some homeowners don't return items back to the storage spaces, their garage can easily revert to its previous state. Kevin Maley paid $8,000 for 68 feet of custom garage cabinets, so the Houston oil-equipment executive's Christmas lights and dog kennels are all neatly stored - but he's got a surplus of empty shelves, just in case more space is needed later. "I love my cars," he says. "And it would be a shame to keep them in a shabby garage." How do you spell "conspicuous consumption?"
RESIDENTIAL CONSTRUCTION SPENDING GOES UP: It was at a seasonally adjusted annual rate of $648.9 billion in December, 1.0 percent above the revised November estimate of $642.6 billion, according to the U.S. Commerce Department. Residential construction in 2005 was $626.1 billion, 11.1 percent above the 2004 figure of $563.4 billion
IF YOU WORK AT HOME, YOU MAY HAVE TOO LITTLE INSURANCE: Home owners' insurance policies may not be adequate coverage for home-based businesses, says the Wall Street Journal. Home owners' policies provide only $2,500 in coverage for on-premises business equipment and $250 for off-premises equipment, according to Madelyn Flannagan of Independent Insurance Agents and Brokers (IIAB). Yet almost 60 percent of home-based businesses rely only on their home owners' insurance, according to a 2004 survey by International Communications Research on behalf of the IIAB. Moreover, most home owners' policies do not provide coverage at all for business-related liabilities, making it sensible for home-business owners to purchase additional or separate coverage. Businesses with little equipment and space and no in-home deliveries or visitors might want to consider adding an endorsement to their home owners' policy, purchasing a separate liability policy if necessary. Crafts and accounting businesses and others with minimal risk exposure should look at in-home business-owners policies, which merge home and business coverage into a single policy. Finally, businesses that conduct on- and off-premise activities with high liability risk should opt for a business-owners package policy, which offers liability, property, loss of income, and injury coverage. Separate product-liability, workmanship-liability, and commercial auto coverage also might be necessary.
A COZY LITTLE PLACE IN THE CITY: For more than a decade, McMansions have been a fixture on the American landscape. Now apartments are being supersized, too, according to the New York Times. For example, on Fisher Island, near Miami, a condo developer is offering penthouses of 20,000 square feet, more than eight times the size of the average single-family house. In a Las Vegas suburb, a custom-home builder is developing high-rise condos topped by 16,000-square-foot apartments. And in New York, some luxury pads now on the market measure over 10,000 square feet, gargantuan by Manhattan standards. With hedge fund managers raking in record profits and Wall Street bonuses surging, the wealthiest buyers are purchasing these palatial apartments for a simple reason: Because they can. "Home is an expression of self," opined Setha M. Low, a professor of environmental psychology at the City University of New York Graduate Center. "And the more of it, the bigger you are." And the bigger they are. . . Have they considered a ranch instead? (See Homes on the Range above.)
MORTGAGE RATES INCH UP: The 30-year fixed-rate mortgage (FRM) averaged 6.23 percent for the week, up from last week's average of 6.12 percent and 5.63 last year at this time, according to Freddie Mac. The 15-year FRM this week was 5.81 percent, compared with 5.70 percent last week and 5.14 percent last year. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.87 percent this week, up from last week's 5.75 percent and 5.00 percent 12 months earlier. One-year Treasury-indexed ARMs were 5.33 percent this week, up from 5.20 percent last week. At this time last year, it averaged 4.23 percent. "Declines in worker productivity coupled with accelerating labor costs increase the threat of inflation down the road. Inflationary pressure generated by these two factors pushes long-term mortgage rates upward, which is why we have seen rates rise these last two weeks," said Frank Nothaft, Freddie Mac vice president and chief economist. "Mortgage rates will surely fluctuate in the weeks and months ahead, but the trend now is for higher rates over the long run."
STOCK UP: At the Washington Home & Garden Show, you'll find 700 booths and gardens with ideas for decorating, remodeling, furnishing and landscaping at the Washington Convention Center Feb. 9-12. Admission is $10 and less for kids. If you're under 5 and reading this newsletter instead of playing with your toys, you can get in free. For more info, visit wshingtonhomeandgardenshow.com.
RESEARCH FIRM SEES SOFT LANDING FOR CONDOS: The condo conversion market is largely played out for this housing cycle, suggest Delta Associates. "Due to strong structural fundamentals, we are likely to experience a soft landing in most major metro markets but less gentle in others, the firm's new report predicts. "However, we do not foresee a national burst as some observers are predicting. Among its reasons are continued high levels of job growth and housing demand over the next several years, continued low interest rates and mortgage liquidity, the appeal of condos as relatively affordable, greater acceptance of urban and "new urbanist" living, and the failure to emerge of better investment options than real estate. "We think cities to watch include Las Vegas, Miami and Phoenix," the report said. "On the other hand, we would be more confident of a soft landing in Washington, Boston and Los Angeles. At the same time, Houston-based market research firm MetroStudy was quoted in the Washington Post expressing concern about the level of construction planned or under way especially in Arlington and Fairfax counties. "There is a very significant problem" of overbuilding and the potential for projects to go bust, said MetroStudy's Kenneth Wenhold.
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