Items of Interest - February 18, 2006
FED CHAIRMAN IS NOT UNDULY WORRIED ABOUT HOUSING: In his first congressional testimony since succeeding Alan Greenspan, Ben S. Bernanke was pretty upbeat about housing, according to the New York Times. "Some cooling of the housing market is to be expected and would not be inconsistent with continued solid growth," he said.
THOUGH TRENDING DOWN, HOMES SALES ARE STILL HIGH: Total existing-home sales, including single-family and condo, were at the third-highest pace on record in the fourth quarter of 2005, reports the National Association of Realtors (NAR). In addition, 24 states showed increases in sales activity over the same period in 2004. The latest report on total existing-home sales shows that the seasonally adjusted annual rate was 6.90 million units in the fourth quarter nationwide, up 0.3 percent from the 6.88 million-unit level in the fourth quarter of 2004 but 4.7 percent below the record pace of 7.24 million units in the third quarter of last year. The second-highest sales rate was 7.22 million in the second quarter of 2005. For some reason, the strongest performance was in Arkansas, where the fourth-quarter resale pace jumped 29.8 percent compared with the fourth quarter of 2004. Twenty-three states and the District of Columbia posted declines, although 39 states set records for all of 2005. Complete data was not available for three states. Commented David Lereah, NAR's chief economist: "Mortgage interest rates were at the highest level since the third quarter of 2003. At the same time, we've seen strong double-digit appreciation in home prices, so a modest slowing from record sales was to be expected. The good news is that home sales are being sustained at historically high levels."
DON'T SELL HOME WITHOUT ONE, SOME THINK: Whether it is truth or superstition doesn't matter; the fact is that statues of St. Joseph are hot commodities for worried home owners hoping to sell their houses quickly, according to Realtor magazine. Roman Inc., a Chicago-based company, has produced St. Joseph home-sale kits since 1996. Complete with a statue and a prayer card, the kit consistently ranks among its top-selling products. Since the tradition was featured in The New York Times a few months ago, interest has increased. Roman currently sells three different styles of St. Joseph kits, including one translated into Spanish, says Judith Zapf, marketing communications manager for Roman. Zapf says real estate professionals who buy the statues for their clients are among the company's best customers. The instructions tell home owners to bury St. Joseph in the front yard, standing on his head and facing away from the house - the direction they want to go. If it is a condo, Roman suggests burial in a flowerpot. The saint's job is to expedite the sale. After the home sells, the instructions urge successful sellers to dig up the saint and put him in a place of honor in their new home. Some believe an order of European religious sisters in the Middle Ages first buried a St. Joseph medal and asked the saint to help them acquire land for a convent.
THEY DON'T CALL IT THE 'BIG APPLE' FOR NOTHIN': One of Manhattan's most-talked-about properties, the former home of the financially distressed Bob Guccione, Penthouse founding publisher, at 14-16 East 67th Street, is on the market, the New York Observer reports. Whether it gets anywhere near the $99 million asking price is another story. After running into financial trouble, Guccione was forced to sell the limestone mansion in 2003; however, he was permitted to stay and just recently moved out. Now, Laurus Fund, the building's current owner, is ready to find a wealthy buyer for the Upper East Side palace. So in the era of the $50 million–plus townhouse, it could be expected to have a comparable price tag. That's "comparable." Each potential bidder of the 48-foot-wide Beaux-Arts mansion has to be prescreened. Serious buyers will be given a tour of the massive property next month and will have to present their bid in a sealed envelope. Then, in April, the envelopes will be opened and the highest bidder can purchase the mansion. So, get going!
PRICES ARE GROWING MORE SLOWLY: Numerous metropolitan areas showed double-digit annual home price appreciation in the fourth quarter, although the overall pace of growth has cooled slightly, according to the latest survey by the National Association of Realtors. With respect to condos in metro areas, annual price appreciation was mostly in the double-digit range. The association's fourth-quarter metro area single-family home price report, which covers 145 metropolitan statistical areas, shows a record 72 areas with double-digit annual increases in median existing single-family home prices and only six areas posting price declines. The previous record for areas showing double-digit price appreciation was 69 metros in the third quarter of 2004. The national median existing single-family home price was $213,000 in the fourth quarter, up 13.6 percent from a year earlier, when the median price was $187,500. In the third quarter of 2005, the annual rate of home-price appreciation was 14.7 percent. David Lereah, NAR's chief economist, sees it this way: "Although home sales have eased, the tremendous momentum in price appreciation was sustained in the fourth quarter because tight inventories still favored sellers. The good news is that the supply of homes on the market has been trending up and we are entering a period of a more normal balance in supply and demand." As for condominium prices in 51 metro areas, the fourth quarter median for existing apartments was $228,200, 12.3 percent higher than a year ago. In all, 27 areas showed double-digit annual gains in the median condo price; there were seven areas with declines. "The national condo price is higher than the median single-family home price because there is a high concentration of condos in the most expensive metropolitan areas," Lereah said. "The data show that within a given area, the typical single-family home costs more than the median condo price."
BUT THERE IS A DIFFERENCE BETWEEN FINE AND LOBBY ART: A growing number of condominium developers are investing in fine art to attract buyers, displaying it in their buildings and using it in their marketing materials, notes Investor's Business Daily in Realtor magazine. In Marina del Rey, Colony Capital spent $1.5 million on art from the 1960s and 1970s for the 450-unit Azzurra. Paintings from Andy Warhol, Roy Lichtenstein, Robert Rauschenberg and actor Dennis Hopper, among others, were hung in the lobby, the penthouse, and hallways. Tom Harrison of Colony Capital claims the units - priced from $550,000 to $4.5 million - have been selling at seven times faster than the norm for such ultra-luxury housing. In Hollywood, Fla., Cornerstone Premier Communities commissioned art for its 214-unit development after conducting a competition that nine local artists entered. "The $50,000 we ended up spending on art was a positioning statement that defined our development and cemented our relationship with the city," says Richard Lamondin, president of Cornerstone. "Art can have a profound impact on a development's image."
IS SOLAR HEATING SUCH A COOL IDEA: For tax years 2006 and 2007, homeowners can get a federal tax credit equal to 30 percent of the cost of buying and installing solar photovoltaic paneling or a solar thermal water heater, up to $2,000 per upgrade, notes the Wall Street Journal. But that $2,000 tax savings won't shave much off the sky-high price tag of installing solar panels. A system of photovoltaic panels that convert solar radiation into a home's electricity often costs about $8,000 per kilowatt before incentives. That's a total investment of anywhere from $16,000 to $64,000, considering that most homes need between a two- and an eight-kilowatt system to replace most or all of their electricity needs. (The higher end of the range may include homes that use electricity to power their heating systems.) Even with the new federal credit, it often takes 20 or more years to recoup the initial investment through energy-bill savings. The credit makes a bigger dent for people buying a solar thermal water heater, which uses a special solar panel to heat a home's water supply. These usually cost about $7,000, so the $2,000 credit shaves about 30 percent off the price. (The federal tax credit can't be used if the solar water heater is primarily being used to heat a swimming pool or hot tub.) To get an idea of how long it might take you to break even, check out "My Solar Estimator" at FindSolar.com online. Homeowners can also usually get a free analysis done by a local installer, but be sure to double-check the assumptions used.
THE FHA LOOSENS UP: The Federal Housing Administration is continuing to make major strides in its effort to make government-insured financing more relevant - and more competitive with conventional funding, observes Realty Times. In recent weeks, the agency toned down its rules about mandatory repairs. Then, it upped the ante on its new "quick fix" renovation loan program. And now, it is no longer dictating to home buyers what closing costs they can and cannot pay. Under a major change that took effect Jan. 27, lenders may now collect from borrowers any "customary and reasonable costs" that are part of the settlement process. FHA Commissioner Brian Montgomery says the move is intended to "align (the agency's) business process with industry practice." Says he: "FHA believes that by no longer prescribing borrower's paid closing costs, a significant impediment to the use of its programs has been eliminated."
HERE COMES THE TAX MAN: Another year of skyrocketing property values will allow at least two Northern Virginia communities to increase spending on schools, public safety and other government services while reducing their real estate tax rates, reports the Washington Post. Alexandria and Loudoun County officials have introduced spending proposals for the coming fiscal year that would sharply increase real estate tax bills even as tax rates head lower. In Alexandria, property owners would pay an average of 10.6 percent more in taxes, and those in Loudoun County would see bills rise 24 percent. Both budget proposals face hearings, debate and possible changes before their final approval in the spring. In Alexandria, where City Manager James K. Hartmann presented a $503.5 million spending plan for the fiscal year beginning July 1, real estate assessments rose an average of 19.5 percent. The average homeowner would pay $427 more in residential property taxes, even with a tax rate reduction of 6.8 cents - from 91.5 cents to 84.7 cents per $100 of assessed value. In Loudoun, average tax bills would rise even more steeply than in Alexandria: $1,000, according to a proposal presented by County Administrator Kirby M. Bowers. The $1.13 billion operating budget for schools and government would increase spending by about 16 percent over this year while lowering the property tax rate by 7 cents, to 97 cents per $100 of assessed value.
SMALL THINGS CAN MAKE A DIFFERENCE FOR AGING RELATIVES: When an aging parent or relative is moving into your home, you can improve his or her life by heeding suggestions published recently by the National Alliance for Caregiving and AARP, says RealEstateJournal.com. Among the ideas: Choose paint colors that are warm and bright; use levered handles on doors and windows to make them easier to open therefore and safer; to reduce the possibility of falls, install handicap-accessible, low thresholds between rooms. And get rid of loose rugs and other obstacles that might lead an older person to trip; create space to accommodate medical equipment so it is handy but out of the way; make sure there are smoke and carbon dioxide alarms in the room; and ascertain that there is good lighting particularly on the way into the home and in the bathroom. You knew that, right?
THE LIVES OF THE RICH AND FAMOUS AND THE UNINFORMED: The J. Paul Getty Trust in Los Angeles spent $3.5 million on a new home for its now beleaguered museum director, only to discover that mold contamination makes it uninhabitable, according to the Associated Press in Realtor magazine. The trust purchased the 70-year-old, 4,900-SF house near UCLA last October. The purchasers relied on a 2004 report saying the house was mold free. However, a damp spot was more recently discovered, leading inspectors to open up the walls. There, they the found extensive mold. Getty board Chairman John Biggs says the trust is "desperately" trying to get its money back, and officials have consulted attorneys about a possible lawsuit. No wonder.
RISING INTEREST RATES MAY NOT CAUSE AN ARMS DISASTER: Losses of $110 billion from the 7.7 million adjustable-rate mortgage loans made since 2004 will not have a significant effect on the economy as the loans adjust and payments go up, says a new study. The losses will total an enormous sum that, in any case, amounts to under 1 percent of the home loans sold since 2004, according to Christopher Cagan, author of "Mortgage Payment Reset," a study by First American Real Estate Solutions, says Inman News. As adjustable-rate mortgages reach their adjustment date and payments jump, many have predicted problems if borrowers can't keep up with the higher payments. Economy.com, an independent research provider, says the overall delinquency rate for mortgage loans "is pretty much a straight upward path in delinquency between now and the end of 2007," according to Celia Chen, its director of housing economics. "It's unpleasant, but it will not break the economy or the real estate market," said Cagan, who studied valuations and mortgage debt for more than 26 million residences in a valuation database across 558 counties in 36 states and the District of Columbia, representing more than 60 percent of the nation's population. This is because loan losses will be spread out over the next four to six years, as not all distressed borrowers will find themselves in trouble at the same time, added Cagan, an analyst with First American. Cagan conceded that loan delinquencies will go up and that there will be four times more foreclosures than now. "That we know," the analyst declared. But, because the delinquencies will be a "time release" over the next four to five years, the economy will be able to weather the problems, Cagan said.
APPLICATIONS SLIDE FOR MORTGAGES: Volume decreased by 7.3 percent on a seasonally adjusted basis for the week ended Feb. 10 from one week earlier, according to the Mortgage Bankers Association. Unadjusted, it was off 4.4 percent compared with the previous week and 21.7 percent compared with the same week one year earlier. Seasonally-adjusted, purchase applications dropped by 7.9 percent from the previous week – falling to a two-year low - and refinancings sank by 6.5 percent. The refinance share of mortgage activity decreased to 41.2 percent of total applications from 42.1 percent the previous week, while the adjustable-rate mortgage (ARM) share went to 29.6 percent of from 29.8 percent.
SNOW DAMAGE TO TREES AND SHRUBS CAN BE MINIMIZED: Shattered branches should be cleaned up, the Washington Post advises its readers. A clean cut will remove unsightly shards and promote rapid healing of shorn limbs. A broken stem should be cut back to the nearest main branch or trunk - not cut to a stub. In removing the branch, leave the slight swelling at its base. This is the branch collar, where the wound will heal and close with time. Trees that have lost their central leader should be cut to just above the nearest lateral branch. You can then tie a splint to the cut trunk and try bending the lateral branch skyward, tying it to the splint with biodegradable twine (not nylon or wire, which will cut into the branch tissue). This branch will become the new leader. Once it matures and grows vertically on its own, the splint can be removed, usually after one or two growing seasons. With shrubs, the gaps formed by the removal of broken branches should fill in after two or three growing seasons.
BUILDERS' CONFIDENCE IS UNCHANGED: Suggesting more stable, or possibly stagnant, conditions in the nation's single-family housing market, home builder confidence remained unchanged in February from levels gauged in each of the past two months, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). February marks the third consecutive month in which the HMI has held at 57, and the second consecutive month in which there has been no change posted in the index component that gauges current single-family home sales. "This is definitely a good sign that the housing market is stabilizing," observed Chief Economist David Seiders of the National Association of Home Builders (NAHB). "The HMI fell significantly during the second half of 2005 as eroding affordability conditions affected home sales and builder sentiment, and the recent stabilization is consistent with the orderly cooling-down process that NAHB has been forecasting." For February's HMI, the component gauging builders' perceptions of current market conditions was unchanged from January at a still-favorable 62. But the component gauging sales expectations for the next six months and the component gauging traffic of prospective buyers each declined one point, to 65 and 40, respectively.
IF YOU COMMUTE, YOU ALREADY KNOW THIS: The region's freeway system has become significantly more crowded over the past three years, according to a major new aerial traffic study by the National Capital Region Transportation Planning Board (TPB). From 2002 to 2005, the first hour of evening rush hour (4:30-5:30 p.m.) experienced the greatest increase in lane miles of congestion – 64 percent. The study declared a tie for the worst traffic chokepoint in the region between evening rush hour on the inner loop of the Beltway from I-270 to Connecticut Avenue and the evening rush hour approach to D.C. on I-395. At these locations, commuters averaged a mere 5-10 mph on a regular basis. Some locations in the outer suburbs such as westbound I-66 from Lee Highway to Sudley Road and Southbound I-95 from Dumfries Boulevard to Russell Road experienced the most significant changes between 2002 and 2005; both spots doubled in congestion.
HOUSING STARTS REACH 33-YEAR HIGH: The Commerce Department said new home construction soared 14.5 percent last month to the highest level in nearly 33 years as groundbreaking on new single-family houses hit a record. "The January surge in housing starts was mainly weather-related," said Chief Economist David Seiders of the National Association of Home Builders. "Market fundamentals suggest that this pace of activity will be hard to sustain, and NAHB's survey of single-family builders points toward some cooling down in coming months, largely because of eroding affordability conditions." Quoted by the Washington Post, Patrick Fearon, senior economist at A.G. Edwards in St. Louis added, "It looks like warm weather had a big impact so the big jump in January housing starts can be attributed to that. However, the moderating trend in housing really is still in place." January housing starts climbed to a 2.276 million unit annual rate - faster than Wall Street economists' forecasts of a 2.0 million unit pace. December housing starts were revised up to a 1.988 million unit pace from an originally reported 1.933 million unit rate. January's increase was the largest monthly percentage gain since March 1994, when starts rose 17.0 percent. New construction of single-family homes increased 12.8 percent to a record 1.819 million unit pace in January, while multifamily housing starts surged 21.9 percent to a 457,000 unit pace. Multifamily housing starts increased by 21.9 percent for the month to a seasonally adjusted pace of 457,000 units, 9.1 percent more than the pace of a year ago. "Our surveys of multifamily builders show that the rental market is firming up to some degree, with declining vacancies and rising rents," said Seiders.
IS ZILLOW A SIX-LETTER WORD: "When I saw a demo of the Zillow.com real estate service last month, it struck me as so obvious I wondered why no one had done it before," Washington Post columnist Leslie Walker discloses. "Then when Zillow launched on the Web last week, I realized why. Offering automated property valuations via the Internet turns out to be much harder than it seems - especially if you expect them to be accurate. But after running extensive tests on this ambitious national real estate service, I found it to be so inaccurate that it's not useful. It's hard to quibble with the company's goal - "free, instant valuations and data for 60,000,000+ homes." You type in any address, and in most cases Zillow will spit out a free estimate of the property's market value. But appraisers questioned whether consumers will have any idea how off-base Zillow's free valuations can be. 'What scares me is the consumer who goes out there and makes a decision based on that data,' said Richard Powers, president of the Appraisal Institute, the nation's largest appraiser association with 21,000 members. 'Consumers really have no way to judge the accuracy of the estimate - that really is the problem.' Powers said his board members have had mixed results on tests they've been running since Zillow's public beta test went live. 'In some areas, we found the results were fairly accurate to the value of the home. In others, we found results that were at least 40 percent wrong.' Zillow president and co-founder Lloyd Frink said the free, advertising-supported site doesn't aim to replace home appraisers or real estate agents. 'It is meant as something to help buyers and sellers start a conversation.' . . . Trouble is, because Zillow is loaded with dirty data in some places and missing key factoids in others, its Zestimates often miss the mark -- sometimes so widely that I fear that anyone trying to buy or sell a home could get burned by relying on Zillow. In my own random tests of dozens of local properties, I found about half of the estimates to be sharply off - more than 10 percent off the actual recent sales price or what someone knowledgeable about the property deemed its market value to be. Many were off by 20 percent or more. . . I don't recommend making it a trusted bookmark."
STAND IN LINE, SAVOR SAMPLES, STOCK UP: Now marketed as the Treasure Hunt, the formerly one-day winter sample sale at the Washington Design Center has been expanded from one day to two Feb. 18-19. Shoppers accompanied by a designer can attend Feb. 17 too. Roughly one-third of the center's 65 showrooms are said to be participating, with some items marked down as much as 70 percent. There will be more merchandise than in past years because some showrooms are bringing in sofas, rugs, lighting and dining tables from their factories. Bargain hunters have been known to start lining up at least an hour early at the Center, 300 D St. SW. Hours Saturday are 9 a.m.-5 p.m. and Sunday, 11 a.m.-to 5 p.m. Admission is free. More info: merchandisemart.com.
FORECLOSURES ARE RISING: The number of foreclosures last year rose to 234,278 in the fourth quarter from 188,122 during the first quarter, leading to a surge of 24.5 percent for all of 2005, according to foreclosure monitor RealtyTrac in Realty Times. Foreclosures rose 300 percent in Washington, D.C., although still relatively low at 155; nearly 200 percent in Massachusetts, to 1,843; 188 percent in Connecticut. to 4,202; 170 percent in Michigan, to 11,937; 151 percent in Virginia, to 956; and 117 percent in Maryland, to 1,448. More than 14 percent of new foreclosures in the country occurred in Florida, according to the survey, which includes properties in all three phases of foreclosure. "With interest rates rising and an apparent slowing of property valuations in most markets, we'll be watching closely to see if there's a material effect on the number of foreclosures in 2006," said RealtyTrac CEO James Saccacio.
MORTGAGE RATES ATTAIN TWO-YEAR HIGH: The 30-year fixed-rate mortgage (FRM) averaged 6.28 percent for the week ended Feb. 16, 2006, up from last week's 6.24 percent and last year's 5.62 percent, according to Freddie Mac. The average for the 15-year FRM this week was 5.91 percent in comparison with 5.83 percent last week. A year ago, it averaged 5.14 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were 5.95 percent this week, up from 5.89 percent the previous week and 5.05 percent one year earlier. One-year Treasury-indexed ARMs averaged 5.36 percent, up from last week's 5.34 percent.
SOME CONDO SPECULATORS ARE PAYING A PRICE: Before the Clarendon 1021 condominium was built in Arlington, 3,600 prospective buyers stood in line just for the chance to book reservations to bid on the apartments, according to the New York Times. Now, less than a year after the building opened, speculators in this and other buildings are putting dozens of units on the market at the same time, causing asking prices and profits to slip. Of 23 investors who sold since Clarendon 1021 opened last summer, the three most recent sellers actually lost money. As more speculators look to cash out in recently hot condo markets around the country, some economists say they could put even more downward pressure on prices in those buildings where for-sale listings are swelling. In Miami, at the Jade Residences at Brickell Bay, more than 20 percent of the building's 352 units are on the market. In San Diego, about a third of the 96 units in the Alicante, a condominium that opened last fall, are listed for sale and sellers are already starting to cut asking prices. And in Donald Trump's luxury condos at 120 Riverside Boulevard in Manhattan, owners of more than one-fifth of the building's 250 units are currently marketing their apartments. Still, a sell-off in speculative condos is unlikely to start a widespread housing crash, because condos were more overbuilt than single-family homes during the recent boom, said Joseph Gyourko, professor of real estate and finance at the Wharton School of the University of Pennsylvania. But weakness in the condo market, he said, "is a consistent indicator that the great boom has really ended." This is not the first time that condo markets have been influenced by investors. In the late 1980's, developers converted thousands of condo units in the Northeast and many of them were bought by speculators, said Karl E. Case, an economist at Wellesley College. Many of those investors, he said, ended up losing money when they sold in the early 1990's. "It was ugly," he said.
THOUGH TRENDING DOWN, HOMES SALES ARE STILL HIGH: Total existing-home sales, including single-family and condo, were at the third-highest pace on record in the fourth quarter of 2005, reports the National Association of Realtors (NAR). In addition, 24 states showed increases in sales activity over the same period in 2004. The latest report on total existing-home sales shows that the seasonally adjusted annual rate was 6.90 million units in the fourth quarter nationwide, up 0.3 percent from the 6.88 million-unit level in the fourth quarter of 2004 but 4.7 percent below the record pace of 7.24 million units in the third quarter of last year. The second-highest sales rate was 7.22 million in the second quarter of 2005. For some reason, the strongest performance was in Arkansas, where the fourth-quarter resale pace jumped 29.8 percent compared with the fourth quarter of 2004. Twenty-three states and the District of Columbia posted declines, although 39 states set records for all of 2005. Complete data was not available for three states. Commented David Lereah, NAR's chief economist: "Mortgage interest rates were at the highest level since the third quarter of 2003. At the same time, we've seen strong double-digit appreciation in home prices, so a modest slowing from record sales was to be expected. The good news is that home sales are being sustained at historically high levels."
DON'T SELL HOME WITHOUT ONE, SOME THINK: Whether it is truth or superstition doesn't matter; the fact is that statues of St. Joseph are hot commodities for worried home owners hoping to sell their houses quickly, according to Realtor magazine. Roman Inc., a Chicago-based company, has produced St. Joseph home-sale kits since 1996. Complete with a statue and a prayer card, the kit consistently ranks among its top-selling products. Since the tradition was featured in The New York Times a few months ago, interest has increased. Roman currently sells three different styles of St. Joseph kits, including one translated into Spanish, says Judith Zapf, marketing communications manager for Roman. Zapf says real estate professionals who buy the statues for their clients are among the company's best customers. The instructions tell home owners to bury St. Joseph in the front yard, standing on his head and facing away from the house - the direction they want to go. If it is a condo, Roman suggests burial in a flowerpot. The saint's job is to expedite the sale. After the home sells, the instructions urge successful sellers to dig up the saint and put him in a place of honor in their new home. Some believe an order of European religious sisters in the Middle Ages first buried a St. Joseph medal and asked the saint to help them acquire land for a convent.
THEY DON'T CALL IT THE 'BIG APPLE' FOR NOTHIN': One of Manhattan's most-talked-about properties, the former home of the financially distressed Bob Guccione, Penthouse founding publisher, at 14-16 East 67th Street, is on the market, the New York Observer reports. Whether it gets anywhere near the $99 million asking price is another story. After running into financial trouble, Guccione was forced to sell the limestone mansion in 2003; however, he was permitted to stay and just recently moved out. Now, Laurus Fund, the building's current owner, is ready to find a wealthy buyer for the Upper East Side palace. So in the era of the $50 million–plus townhouse, it could be expected to have a comparable price tag. That's "comparable." Each potential bidder of the 48-foot-wide Beaux-Arts mansion has to be prescreened. Serious buyers will be given a tour of the massive property next month and will have to present their bid in a sealed envelope. Then, in April, the envelopes will be opened and the highest bidder can purchase the mansion. So, get going!
PRICES ARE GROWING MORE SLOWLY: Numerous metropolitan areas showed double-digit annual home price appreciation in the fourth quarter, although the overall pace of growth has cooled slightly, according to the latest survey by the National Association of Realtors. With respect to condos in metro areas, annual price appreciation was mostly in the double-digit range. The association's fourth-quarter metro area single-family home price report, which covers 145 metropolitan statistical areas, shows a record 72 areas with double-digit annual increases in median existing single-family home prices and only six areas posting price declines. The previous record for areas showing double-digit price appreciation was 69 metros in the third quarter of 2004. The national median existing single-family home price was $213,000 in the fourth quarter, up 13.6 percent from a year earlier, when the median price was $187,500. In the third quarter of 2005, the annual rate of home-price appreciation was 14.7 percent. David Lereah, NAR's chief economist, sees it this way: "Although home sales have eased, the tremendous momentum in price appreciation was sustained in the fourth quarter because tight inventories still favored sellers. The good news is that the supply of homes on the market has been trending up and we are entering a period of a more normal balance in supply and demand." As for condominium prices in 51 metro areas, the fourth quarter median for existing apartments was $228,200, 12.3 percent higher than a year ago. In all, 27 areas showed double-digit annual gains in the median condo price; there were seven areas with declines. "The national condo price is higher than the median single-family home price because there is a high concentration of condos in the most expensive metropolitan areas," Lereah said. "The data show that within a given area, the typical single-family home costs more than the median condo price."
BUT THERE IS A DIFFERENCE BETWEEN FINE AND LOBBY ART: A growing number of condominium developers are investing in fine art to attract buyers, displaying it in their buildings and using it in their marketing materials, notes Investor's Business Daily in Realtor magazine. In Marina del Rey, Colony Capital spent $1.5 million on art from the 1960s and 1970s for the 450-unit Azzurra. Paintings from Andy Warhol, Roy Lichtenstein, Robert Rauschenberg and actor Dennis Hopper, among others, were hung in the lobby, the penthouse, and hallways. Tom Harrison of Colony Capital claims the units - priced from $550,000 to $4.5 million - have been selling at seven times faster than the norm for such ultra-luxury housing. In Hollywood, Fla., Cornerstone Premier Communities commissioned art for its 214-unit development after conducting a competition that nine local artists entered. "The $50,000 we ended up spending on art was a positioning statement that defined our development and cemented our relationship with the city," says Richard Lamondin, president of Cornerstone. "Art can have a profound impact on a development's image."
IS SOLAR HEATING SUCH A COOL IDEA: For tax years 2006 and 2007, homeowners can get a federal tax credit equal to 30 percent of the cost of buying and installing solar photovoltaic paneling or a solar thermal water heater, up to $2,000 per upgrade, notes the Wall Street Journal. But that $2,000 tax savings won't shave much off the sky-high price tag of installing solar panels. A system of photovoltaic panels that convert solar radiation into a home's electricity often costs about $8,000 per kilowatt before incentives. That's a total investment of anywhere from $16,000 to $64,000, considering that most homes need between a two- and an eight-kilowatt system to replace most or all of their electricity needs. (The higher end of the range may include homes that use electricity to power their heating systems.) Even with the new federal credit, it often takes 20 or more years to recoup the initial investment through energy-bill savings. The credit makes a bigger dent for people buying a solar thermal water heater, which uses a special solar panel to heat a home's water supply. These usually cost about $7,000, so the $2,000 credit shaves about 30 percent off the price. (The federal tax credit can't be used if the solar water heater is primarily being used to heat a swimming pool or hot tub.) To get an idea of how long it might take you to break even, check out "My Solar Estimator" at FindSolar.com online. Homeowners can also usually get a free analysis done by a local installer, but be sure to double-check the assumptions used.
THE FHA LOOSENS UP: The Federal Housing Administration is continuing to make major strides in its effort to make government-insured financing more relevant - and more competitive with conventional funding, observes Realty Times. In recent weeks, the agency toned down its rules about mandatory repairs. Then, it upped the ante on its new "quick fix" renovation loan program. And now, it is no longer dictating to home buyers what closing costs they can and cannot pay. Under a major change that took effect Jan. 27, lenders may now collect from borrowers any "customary and reasonable costs" that are part of the settlement process. FHA Commissioner Brian Montgomery says the move is intended to "align (the agency's) business process with industry practice." Says he: "FHA believes that by no longer prescribing borrower's paid closing costs, a significant impediment to the use of its programs has been eliminated."
HERE COMES THE TAX MAN: Another year of skyrocketing property values will allow at least two Northern Virginia communities to increase spending on schools, public safety and other government services while reducing their real estate tax rates, reports the Washington Post. Alexandria and Loudoun County officials have introduced spending proposals for the coming fiscal year that would sharply increase real estate tax bills even as tax rates head lower. In Alexandria, property owners would pay an average of 10.6 percent more in taxes, and those in Loudoun County would see bills rise 24 percent. Both budget proposals face hearings, debate and possible changes before their final approval in the spring. In Alexandria, where City Manager James K. Hartmann presented a $503.5 million spending plan for the fiscal year beginning July 1, real estate assessments rose an average of 19.5 percent. The average homeowner would pay $427 more in residential property taxes, even with a tax rate reduction of 6.8 cents - from 91.5 cents to 84.7 cents per $100 of assessed value. In Loudoun, average tax bills would rise even more steeply than in Alexandria: $1,000, according to a proposal presented by County Administrator Kirby M. Bowers. The $1.13 billion operating budget for schools and government would increase spending by about 16 percent over this year while lowering the property tax rate by 7 cents, to 97 cents per $100 of assessed value.
SMALL THINGS CAN MAKE A DIFFERENCE FOR AGING RELATIVES: When an aging parent or relative is moving into your home, you can improve his or her life by heeding suggestions published recently by the National Alliance for Caregiving and AARP, says RealEstateJournal.com. Among the ideas: Choose paint colors that are warm and bright; use levered handles on doors and windows to make them easier to open therefore and safer; to reduce the possibility of falls, install handicap-accessible, low thresholds between rooms. And get rid of loose rugs and other obstacles that might lead an older person to trip; create space to accommodate medical equipment so it is handy but out of the way; make sure there are smoke and carbon dioxide alarms in the room; and ascertain that there is good lighting particularly on the way into the home and in the bathroom. You knew that, right?
THE LIVES OF THE RICH AND FAMOUS AND THE UNINFORMED: The J. Paul Getty Trust in Los Angeles spent $3.5 million on a new home for its now beleaguered museum director, only to discover that mold contamination makes it uninhabitable, according to the Associated Press in Realtor magazine. The trust purchased the 70-year-old, 4,900-SF house near UCLA last October. The purchasers relied on a 2004 report saying the house was mold free. However, a damp spot was more recently discovered, leading inspectors to open up the walls. There, they the found extensive mold. Getty board Chairman John Biggs says the trust is "desperately" trying to get its money back, and officials have consulted attorneys about a possible lawsuit. No wonder.
RISING INTEREST RATES MAY NOT CAUSE AN ARMS DISASTER: Losses of $110 billion from the 7.7 million adjustable-rate mortgage loans made since 2004 will not have a significant effect on the economy as the loans adjust and payments go up, says a new study. The losses will total an enormous sum that, in any case, amounts to under 1 percent of the home loans sold since 2004, according to Christopher Cagan, author of "Mortgage Payment Reset," a study by First American Real Estate Solutions, says Inman News. As adjustable-rate mortgages reach their adjustment date and payments jump, many have predicted problems if borrowers can't keep up with the higher payments. Economy.com, an independent research provider, says the overall delinquency rate for mortgage loans "is pretty much a straight upward path in delinquency between now and the end of 2007," according to Celia Chen, its director of housing economics. "It's unpleasant, but it will not break the economy or the real estate market," said Cagan, who studied valuations and mortgage debt for more than 26 million residences in a valuation database across 558 counties in 36 states and the District of Columbia, representing more than 60 percent of the nation's population. This is because loan losses will be spread out over the next four to six years, as not all distressed borrowers will find themselves in trouble at the same time, added Cagan, an analyst with First American. Cagan conceded that loan delinquencies will go up and that there will be four times more foreclosures than now. "That we know," the analyst declared. But, because the delinquencies will be a "time release" over the next four to five years, the economy will be able to weather the problems, Cagan said.
APPLICATIONS SLIDE FOR MORTGAGES: Volume decreased by 7.3 percent on a seasonally adjusted basis for the week ended Feb. 10 from one week earlier, according to the Mortgage Bankers Association. Unadjusted, it was off 4.4 percent compared with the previous week and 21.7 percent compared with the same week one year earlier. Seasonally-adjusted, purchase applications dropped by 7.9 percent from the previous week – falling to a two-year low - and refinancings sank by 6.5 percent. The refinance share of mortgage activity decreased to 41.2 percent of total applications from 42.1 percent the previous week, while the adjustable-rate mortgage (ARM) share went to 29.6 percent of from 29.8 percent.
SNOW DAMAGE TO TREES AND SHRUBS CAN BE MINIMIZED: Shattered branches should be cleaned up, the Washington Post advises its readers. A clean cut will remove unsightly shards and promote rapid healing of shorn limbs. A broken stem should be cut back to the nearest main branch or trunk - not cut to a stub. In removing the branch, leave the slight swelling at its base. This is the branch collar, where the wound will heal and close with time. Trees that have lost their central leader should be cut to just above the nearest lateral branch. You can then tie a splint to the cut trunk and try bending the lateral branch skyward, tying it to the splint with biodegradable twine (not nylon or wire, which will cut into the branch tissue). This branch will become the new leader. Once it matures and grows vertically on its own, the splint can be removed, usually after one or two growing seasons. With shrubs, the gaps formed by the removal of broken branches should fill in after two or three growing seasons.
BUILDERS' CONFIDENCE IS UNCHANGED: Suggesting more stable, or possibly stagnant, conditions in the nation's single-family housing market, home builder confidence remained unchanged in February from levels gauged in each of the past two months, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). February marks the third consecutive month in which the HMI has held at 57, and the second consecutive month in which there has been no change posted in the index component that gauges current single-family home sales. "This is definitely a good sign that the housing market is stabilizing," observed Chief Economist David Seiders of the National Association of Home Builders (NAHB). "The HMI fell significantly during the second half of 2005 as eroding affordability conditions affected home sales and builder sentiment, and the recent stabilization is consistent with the orderly cooling-down process that NAHB has been forecasting." For February's HMI, the component gauging builders' perceptions of current market conditions was unchanged from January at a still-favorable 62. But the component gauging sales expectations for the next six months and the component gauging traffic of prospective buyers each declined one point, to 65 and 40, respectively.
IF YOU COMMUTE, YOU ALREADY KNOW THIS: The region's freeway system has become significantly more crowded over the past three years, according to a major new aerial traffic study by the National Capital Region Transportation Planning Board (TPB). From 2002 to 2005, the first hour of evening rush hour (4:30-5:30 p.m.) experienced the greatest increase in lane miles of congestion – 64 percent. The study declared a tie for the worst traffic chokepoint in the region between evening rush hour on the inner loop of the Beltway from I-270 to Connecticut Avenue and the evening rush hour approach to D.C. on I-395. At these locations, commuters averaged a mere 5-10 mph on a regular basis. Some locations in the outer suburbs such as westbound I-66 from Lee Highway to Sudley Road and Southbound I-95 from Dumfries Boulevard to Russell Road experienced the most significant changes between 2002 and 2005; both spots doubled in congestion.
HOUSING STARTS REACH 33-YEAR HIGH: The Commerce Department said new home construction soared 14.5 percent last month to the highest level in nearly 33 years as groundbreaking on new single-family houses hit a record. "The January surge in housing starts was mainly weather-related," said Chief Economist David Seiders of the National Association of Home Builders. "Market fundamentals suggest that this pace of activity will be hard to sustain, and NAHB's survey of single-family builders points toward some cooling down in coming months, largely because of eroding affordability conditions." Quoted by the Washington Post, Patrick Fearon, senior economist at A.G. Edwards in St. Louis added, "It looks like warm weather had a big impact so the big jump in January housing starts can be attributed to that. However, the moderating trend in housing really is still in place." January housing starts climbed to a 2.276 million unit annual rate - faster than Wall Street economists' forecasts of a 2.0 million unit pace. December housing starts were revised up to a 1.988 million unit pace from an originally reported 1.933 million unit rate. January's increase was the largest monthly percentage gain since March 1994, when starts rose 17.0 percent. New construction of single-family homes increased 12.8 percent to a record 1.819 million unit pace in January, while multifamily housing starts surged 21.9 percent to a 457,000 unit pace. Multifamily housing starts increased by 21.9 percent for the month to a seasonally adjusted pace of 457,000 units, 9.1 percent more than the pace of a year ago. "Our surveys of multifamily builders show that the rental market is firming up to some degree, with declining vacancies and rising rents," said Seiders.
IS ZILLOW A SIX-LETTER WORD: "When I saw a demo of the Zillow.com real estate service last month, it struck me as so obvious I wondered why no one had done it before," Washington Post columnist Leslie Walker discloses. "Then when Zillow launched on the Web last week, I realized why. Offering automated property valuations via the Internet turns out to be much harder than it seems - especially if you expect them to be accurate. But after running extensive tests on this ambitious national real estate service, I found it to be so inaccurate that it's not useful. It's hard to quibble with the company's goal - "free, instant valuations and data for 60,000,000+ homes." You type in any address, and in most cases Zillow will spit out a free estimate of the property's market value. But appraisers questioned whether consumers will have any idea how off-base Zillow's free valuations can be. 'What scares me is the consumer who goes out there and makes a decision based on that data,' said Richard Powers, president of the Appraisal Institute, the nation's largest appraiser association with 21,000 members. 'Consumers really have no way to judge the accuracy of the estimate - that really is the problem.' Powers said his board members have had mixed results on tests they've been running since Zillow's public beta test went live. 'In some areas, we found the results were fairly accurate to the value of the home. In others, we found results that were at least 40 percent wrong.' Zillow president and co-founder Lloyd Frink said the free, advertising-supported site doesn't aim to replace home appraisers or real estate agents. 'It is meant as something to help buyers and sellers start a conversation.' . . . Trouble is, because Zillow is loaded with dirty data in some places and missing key factoids in others, its Zestimates often miss the mark -- sometimes so widely that I fear that anyone trying to buy or sell a home could get burned by relying on Zillow. In my own random tests of dozens of local properties, I found about half of the estimates to be sharply off - more than 10 percent off the actual recent sales price or what someone knowledgeable about the property deemed its market value to be. Many were off by 20 percent or more. . . I don't recommend making it a trusted bookmark."
STAND IN LINE, SAVOR SAMPLES, STOCK UP: Now marketed as the Treasure Hunt, the formerly one-day winter sample sale at the Washington Design Center has been expanded from one day to two Feb. 18-19. Shoppers accompanied by a designer can attend Feb. 17 too. Roughly one-third of the center's 65 showrooms are said to be participating, with some items marked down as much as 70 percent. There will be more merchandise than in past years because some showrooms are bringing in sofas, rugs, lighting and dining tables from their factories. Bargain hunters have been known to start lining up at least an hour early at the Center, 300 D St. SW. Hours Saturday are 9 a.m.-5 p.m. and Sunday, 11 a.m.-to 5 p.m. Admission is free. More info: merchandisemart.com.
FORECLOSURES ARE RISING: The number of foreclosures last year rose to 234,278 in the fourth quarter from 188,122 during the first quarter, leading to a surge of 24.5 percent for all of 2005, according to foreclosure monitor RealtyTrac in Realty Times. Foreclosures rose 300 percent in Washington, D.C., although still relatively low at 155; nearly 200 percent in Massachusetts, to 1,843; 188 percent in Connecticut. to 4,202; 170 percent in Michigan, to 11,937; 151 percent in Virginia, to 956; and 117 percent in Maryland, to 1,448. More than 14 percent of new foreclosures in the country occurred in Florida, according to the survey, which includes properties in all three phases of foreclosure. "With interest rates rising and an apparent slowing of property valuations in most markets, we'll be watching closely to see if there's a material effect on the number of foreclosures in 2006," said RealtyTrac CEO James Saccacio.
MORTGAGE RATES ATTAIN TWO-YEAR HIGH: The 30-year fixed-rate mortgage (FRM) averaged 6.28 percent for the week ended Feb. 16, 2006, up from last week's 6.24 percent and last year's 5.62 percent, according to Freddie Mac. The average for the 15-year FRM this week was 5.91 percent in comparison with 5.83 percent last week. A year ago, it averaged 5.14 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were 5.95 percent this week, up from 5.89 percent the previous week and 5.05 percent one year earlier. One-year Treasury-indexed ARMs averaged 5.36 percent, up from last week's 5.34 percent.
SOME CONDO SPECULATORS ARE PAYING A PRICE: Before the Clarendon 1021 condominium was built in Arlington, 3,600 prospective buyers stood in line just for the chance to book reservations to bid on the apartments, according to the New York Times. Now, less than a year after the building opened, speculators in this and other buildings are putting dozens of units on the market at the same time, causing asking prices and profits to slip. Of 23 investors who sold since Clarendon 1021 opened last summer, the three most recent sellers actually lost money. As more speculators look to cash out in recently hot condo markets around the country, some economists say they could put even more downward pressure on prices in those buildings where for-sale listings are swelling. In Miami, at the Jade Residences at Brickell Bay, more than 20 percent of the building's 352 units are on the market. In San Diego, about a third of the 96 units in the Alicante, a condominium that opened last fall, are listed for sale and sellers are already starting to cut asking prices. And in Donald Trump's luxury condos at 120 Riverside Boulevard in Manhattan, owners of more than one-fifth of the building's 250 units are currently marketing their apartments. Still, a sell-off in speculative condos is unlikely to start a widespread housing crash, because condos were more overbuilt than single-family homes during the recent boom, said Joseph Gyourko, professor of real estate and finance at the Wharton School of the University of Pennsylvania. But weakness in the condo market, he said, "is a consistent indicator that the great boom has really ended." This is not the first time that condo markets have been influenced by investors. In the late 1980's, developers converted thousands of condo units in the Northeast and many of them were bought by speculators, said Karl E. Case, an economist at Wellesley College. Many of those investors, he said, ended up losing money when they sold in the early 1990's. "It was ugly," he said.
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