Items of Interest - March 18, 2006
NAR SINGS 'LOOK FOR THE SILVER LINING': A lower level of home sales now expected this year will create a more level playing field for buyers and sellers on the heels of a five-year sellers' market, according to the National Association of Realtors. In a revised forecast, Chief Economist David Lereah, commented: "The cooling from overheated sales conditions in recent months is helping to bring inventory levels up to the point where buyers have more choices than they've seen in the last five years. Annual price appreciation is still running at double-digit rates, but the cause of those sharp increases is going away. As the market readjusts, price appreciation should return to more normal rates of growth this year." He projects the national median existing-home price for all housing types to rise 5.8 percent in 2006 to $220,300 and the median new-home price, by 5.4 percent to $250,200. Existing-home sales are expected to fall 5.7 percent to 6.67 million in 2006 from the record 7.08 million last year. At the same time, new-home sales are forecast to decline 7.7 percent to 1.18 million from a record 1.28 million in 2005. Still, each sector would be at the third highest year following the tallies for 2005 and 2004.
HERE COMES THE CRUNCH: About one-quarter of all outstanding mortgages are adjustable rate mortgages that will reset in 2006 or 2007, according to the research firm of Moody's Economy.com. The Wall Street Journal reports in Realtor magazine that, for many American households, the reset will be a rude financial shock. First American Real Estate Solutions, a unit of title insurer First American Corp., projects that about one in eight households with adjustable-rate mortgages that originated in 2004 and 2005 will default on those loans. Others are more optimistic. Resets will "eat into discretionary spending" for many Americans, says Joshua Shapiro, chief U.S. economist at MFR Inc., an economic consulting firm in New York. He expects consumer spending to slow in the months ahead but says the job market remains strong enough to keep most people out of serious trouble.
EXPERIENCE CAN BE THE BEST, AND MOST EXPENSIVE, TEACHER: For the last few years, real estate transactions over the Internet - where buyers need never set eyes on the property they purchase - have become increasingly common, the New York Times observes. On eBay and dozens of other Web sites, sales involving tens of thousands of dollars can occur entirely online. EBay, for example, may have more than 1,800 residential properties listed on any given day - from multimillion-dollar vacation houses in Florida to thousand-dollar fixer-uppers in the rural Midwest. But now, with plenty of buyers eager to get in on the real estate boom, such online sites have become perfect places for unscrupulous sellers who have bought dilapidated houses at, say, foreclosure auctions, to resell, or flip, them quickly for inflated prices. Many of the deals sound too good to be true, but the gullible, to put it charitably, are lured by nice photos and a belief that online transactions on big Web sites are generally safe. Online flipping is happening in economically distressed cities in New York, Ohio, Michigan and Pennsylvania. The practice, local government leaders say, is destabilizing already weakened urban neighborhoods by displacing legitimate investment. Buffalo has been particularly hard hit by online flipping, as the city's persistent population decline and high foreclosure rates have created a glut of some 20,000 vacant houses. "Ninety-nine percent of these online ads have some kind of fraud or lies," said Tracy Krug, a building inspector in Buffalo. "They paint a nice rosy picture: 'on a bus line, near a nice market.' They don't tell you you're going to be across the street from a crack house." On the warpath is Sam Hoyt, a Democratic state assemblyman and co-chairman of the Buffalo mayor's task force on real estate flipping, who has asked eBay to inform sellers that they must comply with New York State disclosure laws and require a copy of written sales contracts. Responds eBay spokesman Hani Durzy: "The people responsible for house flipping are the people selling these houses and the people buying them sight unseen. How these sellers and buyers are connecting is not as important as the fact that the buyers are not doing the proper due diligence when buying a property."
HOUSING STARTS FALL OFF: Following the warmest January on record that helped spur a 16 percent jump in new-home construction, the housing market showed signs of cooling in February, with total housing starts down 7.9 percent for the month to a seasonally adjusted annual rate of 2.12 million, according to the National Association of Home Builders (NAHB). Single-family home construction dipped 2.3 percent to 1.8 million units. Multifamily starts fell 30.4 percent to 320,000 units after posting an unsustainably high level of 460,000 units in January. "So far this year, housing starts have received a boost from unusually mild winter weather, even in February, and we expect to see these numbers move further down in the months ahead," said NAHB Chief Economist David Seiders. "Indicators that measure housing demand - home sales, applications for home mortgages and our own survey of single-family builders - show that the cooling process has begun. Furthermore, single-family permits, which are less affected by weather than single-family starts, have been trailing down gradually from their highs last fall." As Seiders put it, "Last year's record-level of housing starts and double-digit price appreciation were unsustainable, and encouraged many investors and speculators to enter the market. With demand slowing, we expect to see price appreciation also falling back into the single-digit range, and that will discourage short-term speculators from jumping into the market."
YOUR 'MOUTH OF CHI' SPEAKS VOLUMES: Sellers with a belief in feng shui should pay special attention to the front door, says Realtor magazine. It is considered the "mouth of chi," the "life force" of all things. Abundance, blessings, opportunities and good fortune are said to enter through the front door. It's also the first impression have of how well the sellers have taken care of the rest of the property. So, it is a good idea to be certain the area around the front door is swept clean and free of cobwebs and clutter. Make sure all lighting is straight and properly hung as well. Also, owners of single-family homes should consider lighting the path to the front door to create an inviting atmosphere.
WITH SUCH ENERGY SAVINGS, YOU COULD BUY NEW T-SHIRTS: While the average price of a laptop computer dropped 23 percent in just one year and big-screen television prices have been falling at an average rate of 30 percent a year, the average price of a dishwasher rose 10 percent in the last decade, reports the New York Times. Market analysts at the NPD Group calculate that the average price of a washing machine went up 16 percent in the last two years. Take Whirlpool's Duet, the country's top-selling front-loaded washing machine. It is one of the more energy-efficient machines, using about 227 kilowatt hours of electricity a year. You can find one at Sears or other appliance stores for about $1,400, and it would cost about $78 a year to operate compared with $161 a year for Whirlpool's $549 Ultimate Care top-loader, according to a downloadable calculator on the Department of Energy Web site (energystar.gov/index.cfm?fuseaction=find_a_product.) But because the Duet costs so much to buy, the total cost of the front loader over seven years is $1,946, or $269 more than the Whirlpool classic top loader. Yet it makes economic sense to buy the more expensive machine because a dollar today is more valuable than a dollar in seven years. Theoretically, you should be willing to pay $318 more for something that saves you $546 over seven years. Consider two conventional-looking top loaders from the same manufacturer. One of Whirlpool's lowest-priced Energy Star-rated machines is a $479 3.2-cubic-foot capacity top loader. A less energy-efficient machine of the same size goes for $449. Over the next seven years, the total cost of the energy-efficient machine will be $1,256 compared with $1,450 for the seemingly cheaper machine, a real savings of $194. Though NPD estimates that 35 percent of refrigerators and washers carry the Energy Star rating, which means they use even less energy than the average machine on the market, it said 85 percent of dishwashers won the designation. GE alone sells 365 models of consumer and commercial refrigerators, dishwashers and washing machines that carry the rating.
TAX TIP: Although the law is nine years old, many taxpayers are confused about the exclusion from a capital gains tax when selling a principal residence. In fact, home sellers are permitted to exclude $250,000 in gain if single and $500,000 if married; they must have lived their home for any two of the preceding five years. The exclusion can be claimed many times, but not more often than every two years. What's a principal residence? According to the charming folks at the IRS, the following indicators are telling: Place of employment; mailing address for bills and correspondence; address, as listed on federal and state tax returns, driver's license, car registration and voter-registration card; bank used and its location; memberships in recreational clubs and religious organizations; and location of family members' main home.
CONSUMERS PUT THE BRAKES ON HOME EQUITY LOANS: Consumers are backing away from home equity credit lines as interest rates rise and the housing market slows, according to the Wall Street Journal in Realtor magazine. From 2002 to 2005, home equity credit lines from commercial banks grew at an annual rate of 30-40 percent. But since last August, Federal Reserve data show that the growth rate has plateaued, rising just 5 percent. Economists differ on how much a pullback in home-equity borrowing will hurt U.S. economic growth. Some believe it will depress growth in consumer spending by as much as one-third. Others think it won't make a significant difference because people will find other ways to pay for what they want.
TO SELL WELL, STAGE WELL: Staging a home well as both savvy sellers and buyers know, is likely to boost the price, notes the Christian Science Monitor in Realtor magazine. Peggy Selinger-Eaton, who has recently published a book and DVD on the subject, suggests that homeowners remove clutter except for a few wisely chosen accessories (candles, fresh flowers, crystal). She believes bedrooms should have beds and, lacking them, they can be fashioned from an inflatable mattress and some boxes. To maximize light, Selinger-Eaton advises sellers to raise window blinds and remove screens from windows to let in as much natural light as possible. Other of her none-too-original recommendations: modernize fixtures, replacing boring or tarnished one, trading in old lampshades for new ones, and replacing sink and tub fixtures with modern, shiny ones; deep-six shabby furniture, even if it means buying cheap-chic replacements at Target, for example; and create life (no, not that way) but by setting the table, leaving on the big-screen TV and playing background music.
AGENCIES ADOPT NEW CREDIT SCORING SYSTEM: The nation's three consumer credit reporting companies - Equifax, Experian and TransUnion - have jointly announced the introduction of a new credit score designed to simplify and enhance the credit process for both consumers and credit grantors. In their announcement, the companies said the new "VantageScore" is a direct result of market demand for a more consistent and objective approach to credit scoring methodology across all three national credit reporting companies. It is said to leverage the collective experience of the industry's leading experts on credit data, scoring and analytics. Under the new scoring system, credit score variance between credit reporting companies will be attributed to data differences within each of the three consumer credit files and not to the structure of the scoring model or data interpretation. "By combining cutting-edge, patent-pending analytic techniques with a highly intuitive scale for scoring, VantageScore will provide consumers and businesses with a highly predictive, consistent score that is easy to understand and apply." VantageScore uses score ranges from 501 to 990. Although the new mathematical formula used to come up with the score is intended to reduce the variation, the Washington Post notes that there will still be differences because each company collects data differently. Since some accounts may be listed at one bureau but not the other, a consumer may still get different scores from each firm. "It doesn't address the larger issue of how accurate are the files," Gail Hillebrand, a senior attorney with Consumers Union told the Post. VantageScore represents an attempt by the credit bureaus "to develop a better mousetrap, to put more money in their pocket and prevent more from going out of it," to rival FICO, said Greg McBride, senior financial analyst for Bankrate, whose Web site Bankrate.com aggregates financial rate information. Ron Totaro, vice president of Fair Isaac's Global Scoring Solutions, said the 17-year-old FICO score is "pretty ingrained and encoded in computer systems" of lenders, which will make it hard for financial institutions to switch. "It's very difficult to come up with a better mousetrap," he added.
THE THEATER, MUSEUMS, RESTAURANTS, WHO CARES: Many new retirees don't seem to: They are eschewing traditional havens such as Florida and Arizona (where real estate prices have gone through the roof, the author fails to mention) in favor of small communities with good health care and moderately priced housing, says William Frey, a Brookings Institution demographer, according to U.S. News & World Report in Realtor magazine. He has studied U.S. Census Bureau data from 2000 to 2004 to identify small-town communities with the greatest growth rate of people older than 55. And, in order of the most popular first, the answer is: Gillette, Wyo.; Silverthorne, Colo.; Juneau, Alaska; Edwards, Colo.; Jackson, Wyo.; Bozeman, Mont.; St. Marys, Ga.; Rock Springs, Wyo.; Taos, N.M. Evanston, Wyo. But what do those retirees have to talk about after they move there?
FORECLOSURES UP SINCE A YEAR AGO, BUT DOWN SINCE JANUARY: The number of new foreclosed residential properties available for sale nationwide increased 9 percent from February 2005 to February 2006, according to data released by foreclosure.com, says Inman News, while the total number dropped 7 percent from January. February marks the second consecutive month of declining new foreclosures in the United States. Some 88,093 foreclosed residential properties were available for sale in the United States in February, of which 21,402 were new foreclosures - a 10.8 percent drop from the prior month. "Foreclosure inventory numbers in February are often low, partially because legal filings in December usually drop off around the holidays and reduce foreclosures in January and February," said Brad Geisen, president and CEO of Foreclosure.com. "The year-to-year comparison, however, tells a different story. If new foreclosures in 2006 continue to track 9 percent higher than in 2005, the country will reach higher inventory levels than it has in recent years." While most areas of the country experienced a decrease in new and active foreclosure listings, inventory increased in parts of the West. In California, which has historically had few foreclosures, there was a 150 percent increase in the number of new foreclosure listings in February compared with January.
SOME RULES ARE NOT MADE TO BE BROKEN: If they are in an apartment building or community with a homeowners association (HOA), Realty Times columnist Richard Thompson suggests that it's up to the manager to process complaints. However, it's up to the Board to adopt policies and procedures so the manager knows how to respond. If those policies are in place, the manager simply executes them (the policies, not the rule violators). Neither the Board nor manager should automatically accept a complaint. If this is a first time complaint about a neighbor, the complainer should be required first to take the matter directly to that neighbor both in person and in writing, rather than expect the HOA to do the dirty work. That way, the manager knows that reasonable action was taken to resolve the issue before it was presented for resolution to the HOA. If this complainant follows that advice, the manager then should accept the complaint in writing with precise details including the time and events together with copies of correspondence between the neighbors. That way, the manager knows that the complainer took personal action to resolve the issue. If the complainer is not willing to put the matter in writing to both the offender and the manager, the manager can assume it's not important enough for the HOA to deal with. Of course, there can be extenuating circumstances such as an aggressive or violent neighbor. The manager can make the judgment whether to intercede or not. And carefully.
BUILDERS CONFIDENCE REMAINS AT A LOW LEVEL: A one-point decline in the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for March indicates that housing demand and sales are gradually returning to a sustainable pace that is" right in line with our forecasts," boasts the National Association of Home Builders (NAHB). Noting that the confidence gauge has remained within a narrow two-point range for four consecutive months following a retreat from its peak in mid-2005, NAHB Chief Economist David Seiders attributed March's slight downshift to eroding affordability conditions as well as a gradual withdrawal of investor demand income areas. "Rising interest rates and high rates of home-price appreciation have raised the bar for homeownership to beyond what some families can reach," he commented. "Meanwhile, a retreat of short-term investors from certain markets is helping restore equilibrium between supply and demand." March's HMI, at 55, represented a one-point decline from February's downwardly revised 56 reading, which followed two consecutive months at 57. There was slight erosion of the index's three components in the latest report, with single-point declines in the gauges for current single-family sales and traffic of prospective buyers and a two-point decline in sales expectations for the next six months. Both the current and expected sales components remained well in the positive range, at 60 and 62, respectively.
OWNING SUCH A HOME IS A MIRACULOUS ACHIEVEMENT: Smokey Robinson and his wife Frances have put theirs on the market for $10.5 million in the gated community of Chatsworth in Los Angeles, according to the Los Angeles Times in the CRS Residential Specialist magazine. Well, it does have seven bedrooms, six and a half baths, three family rooms, three kitchen, 10 fireplaces, a wine cellar, gym and sauna in its 9,000 square feet. Occupying 2.5 acres, the place also has a pool, spa, waterfall, detached guesthouse and outdoor living room. The couple will live in their Las Vegas home until they build a smaller one in Chatsworth. If he gets his price, there doubtless will be no tear tracks on ol' Smokey's cheeks.
LOAN APPLICATION VOLUME IS LITTLE CHANGED FROM LAST WEEK: For the week ended March 10, it decreased 0.2 percent on a seasonally adjusted basis from one week earlier, says the Mortgage Bankers Association. On an unadjusted basis, volume went up 0.2 percent, but it was down 20.4 percent versus the same week one year earlier. Seasonally-adjusted, purchase applications increased by 1.0 percent from the previous week as refinancings were off by 1.9 percent. The refinance share of mortgage activity declined to 37.7 percent of total applications from 38.5 percent the previous week, and the adjustable-rate mortgage (ARM) share rose to 28.8 percent.
THE AUCTIONEER BUSINESS IS BOOMING: The National Auctioneers Association reports that it's raking in the dough from residential properties, reports the Boston Globe in Realtor magazine. In 2005, association members auctioned off $14.2 billion worth of residential property in live auctions, a 24 percent increase over 2003 sales. The growing surplus of homes on the market is expected to encourage more owners to give auctions a try. Maine-based J.J. Manning, which typically holds one-house auctions, says this month it held its first auction of properties owned by multiple owners since the early 1990s downturn. The firm plans more this year. Sheldon Good & Co., a national auctioneer in Chicago, also reports doing more auctions, including more on behalf of developers selling the unsold units in large hotel-condo projects, particularly in resort areas. "We think there's a very high likelihood that trend is going to rise based on overbuilding in Boston, New York, Chicago, Houston, Orlando and Jacksonville," said Steve Good, chief executive. "The slowdown is just beginning."
GO ON A TEAR: You can securely dispose of up to five boxes of personal papers professionally at no charge on Saturday, March 18, 8-11 a.m., at the Washington Convention Center, 11th and H street NW, thanks to Mercantile Potomac Bank, WRC Channel 4 and Shred-It. Info: 202-626-9100.
IS THIS A RACE THAT NO ONE WINS: Flagler County in Florida, situated along the Atlantic Coast between Daytona Beach and Jacksonville, was the fastest-growing county for the second year in a row, with a 10.7 percent population increase from July 1, 2004, to July 1, 2005, according to estimates released by the U.S. Census Bureau. Flagler, with 76,410 residents, also led the nation with a 53 percent population increase since Census 2000. According to the estimates, all but one of the top-10 fastest-growing counties between 2004 and 2005 are located in either the South or the West. Among them were three Virginia counties - Loudoun in eighth place, following by King George and Caroline.
IF YOU HAVE AN ARM, IT'S WISE TO KNOW ITS REACH: Many Americans are confused about the terms of their adjustable-rate home mortgages and underestimate the amount by which their loan payments could jump, according to a new study by Federal Reserve Board economists, reports the Wall Street Journal. The study found that about 35 percent of people with adjustable-rate mortgages didn't know how much the rate could increase at one time, and 41 percent weren't sure of the maximum rate they could face. About 28 percent didn't know which index of interest rates would be used to determine their adjustments; many others gave incorrect answers, such as the consumer price index or "the going rate." The economists based their study on surveys of consumers and lenders by the Fed and the U.S. Census Bureau, plus other data on loans and home prices. They found that many consumers believed their interest rate could increase by a maximum of fewer than five percentage points over the life of the loan, while lenders reported that bigger jumps often were possible. High-income borrowers are better informed, the study says. For those with annual incomes above $150,000, only 13 percent were unaware of the maximum amount by which their rate could increase at one time. For those with incomes below $50,000, 40 percent didn't know what the cap was on those increases.
RISE IN MORTGAGE RATES FINALLY STALLS: The 30-year fixed-rate mortgage (FRM) averaged 6.34 percent for the week, down from last week's average of 6.37 percent and up from last year's 5.95 percent. The average for the 15-year FRM this week was 5.98 percent; it was below 6.00 percent a week ago and above 5.47 a year ago. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.93 percent versus 6.03 percent last week and 5.31 percent in 2005. One-year Treasury-indexed ARMs were 5.37 percent this week, down from last week when it averaged 5.45 percent. At this time last year, the one-year ARM was 4.20 percent. "Financial markets, hedging against the potential build up in inflation, pushed mortgage rates higher last week," said Frank Nothaft, Freddie Mac vice president and chief economist. "However, market indicators this week seemed to point to less of a threat of inflation, and that allowed rates to drift a little lower. Housing starts fell in February as expected, but were still stronger than had been forecast, while January figures were revised upward. This is a good sign that housing activity, although slowing from record levels set in the past few years, will continue to remain healthy this year."
AMERICANS ARE DREAMING OF A DIFFERENT SORT OF HOME: A two-bedroom condo in the city is pushing aside the four-bedroom colonial in the suburbs as the traditional American dream home, says the New York Times in Realtor magazine. Some of the biggest names in home building are selling more city condos than suburban single-family houses. For instance, five years ago, condos were 5 percent of K. Hovnanian Homes' business; today they are 30 percent. WCI Communities says condos are 40 percent of its business in Florida. And in California, Pulte Homes, the nation's second largest homebuilder, finds condos have become fully half of its sales. ''The suburbs are overbuilt, crowded and continuing to spread, and the commutes are getting longer,'' says John K. McIlwain, a senior resident fellow for housing at the Urban Land Institute, a nonprofit research group. Meanwhile, he notes that ''cities are actually much cleaner, healthier and better run than they were 20 years ago.'' Some argue that the demand for condos is short term, fed by young buyers who will shun city living once they have a family. But others point to baby boomers as the 800-pound gorilla that continues to drive demand. ''Those of us who are 60 are thinking of cashing out, moving into the Ritz tower and getting our meals brought to us,'' says Karl Case, a professor of economics at Wellesley College. The home builders ''are looking at the numbers and seeing what's fairly obvious. It doesn't strike me as crazy," he adds.
D.C. COUNCIL COMMITTEE VOTES TO OVERHAUL RENT CONTROL: Its action would change the current "rent ceiling" approach to one calculated more in relation to comparable market values, the Washington Post reports. Rental increases for vacant units would be kept below market rate by a formula based on the highest comparable unit in the building. But the maximum increase for an existing tenant would be 10 percent. Covering about 100,000 units, the rent control law exempts federally funded public housing, buildings constructed after 1975 and apartments owned by landlords who have no more than four apartments.
HERE COMES THE CRUNCH: About one-quarter of all outstanding mortgages are adjustable rate mortgages that will reset in 2006 or 2007, according to the research firm of Moody's Economy.com. The Wall Street Journal reports in Realtor magazine that, for many American households, the reset will be a rude financial shock. First American Real Estate Solutions, a unit of title insurer First American Corp., projects that about one in eight households with adjustable-rate mortgages that originated in 2004 and 2005 will default on those loans. Others are more optimistic. Resets will "eat into discretionary spending" for many Americans, says Joshua Shapiro, chief U.S. economist at MFR Inc., an economic consulting firm in New York. He expects consumer spending to slow in the months ahead but says the job market remains strong enough to keep most people out of serious trouble.
EXPERIENCE CAN BE THE BEST, AND MOST EXPENSIVE, TEACHER: For the last few years, real estate transactions over the Internet - where buyers need never set eyes on the property they purchase - have become increasingly common, the New York Times observes. On eBay and dozens of other Web sites, sales involving tens of thousands of dollars can occur entirely online. EBay, for example, may have more than 1,800 residential properties listed on any given day - from multimillion-dollar vacation houses in Florida to thousand-dollar fixer-uppers in the rural Midwest. But now, with plenty of buyers eager to get in on the real estate boom, such online sites have become perfect places for unscrupulous sellers who have bought dilapidated houses at, say, foreclosure auctions, to resell, or flip, them quickly for inflated prices. Many of the deals sound too good to be true, but the gullible, to put it charitably, are lured by nice photos and a belief that online transactions on big Web sites are generally safe. Online flipping is happening in economically distressed cities in New York, Ohio, Michigan and Pennsylvania. The practice, local government leaders say, is destabilizing already weakened urban neighborhoods by displacing legitimate investment. Buffalo has been particularly hard hit by online flipping, as the city's persistent population decline and high foreclosure rates have created a glut of some 20,000 vacant houses. "Ninety-nine percent of these online ads have some kind of fraud or lies," said Tracy Krug, a building inspector in Buffalo. "They paint a nice rosy picture: 'on a bus line, near a nice market.' They don't tell you you're going to be across the street from a crack house." On the warpath is Sam Hoyt, a Democratic state assemblyman and co-chairman of the Buffalo mayor's task force on real estate flipping, who has asked eBay to inform sellers that they must comply with New York State disclosure laws and require a copy of written sales contracts. Responds eBay spokesman Hani Durzy: "The people responsible for house flipping are the people selling these houses and the people buying them sight unseen. How these sellers and buyers are connecting is not as important as the fact that the buyers are not doing the proper due diligence when buying a property."
HOUSING STARTS FALL OFF: Following the warmest January on record that helped spur a 16 percent jump in new-home construction, the housing market showed signs of cooling in February, with total housing starts down 7.9 percent for the month to a seasonally adjusted annual rate of 2.12 million, according to the National Association of Home Builders (NAHB). Single-family home construction dipped 2.3 percent to 1.8 million units. Multifamily starts fell 30.4 percent to 320,000 units after posting an unsustainably high level of 460,000 units in January. "So far this year, housing starts have received a boost from unusually mild winter weather, even in February, and we expect to see these numbers move further down in the months ahead," said NAHB Chief Economist David Seiders. "Indicators that measure housing demand - home sales, applications for home mortgages and our own survey of single-family builders - show that the cooling process has begun. Furthermore, single-family permits, which are less affected by weather than single-family starts, have been trailing down gradually from their highs last fall." As Seiders put it, "Last year's record-level of housing starts and double-digit price appreciation were unsustainable, and encouraged many investors and speculators to enter the market. With demand slowing, we expect to see price appreciation also falling back into the single-digit range, and that will discourage short-term speculators from jumping into the market."
YOUR 'MOUTH OF CHI' SPEAKS VOLUMES: Sellers with a belief in feng shui should pay special attention to the front door, says Realtor magazine. It is considered the "mouth of chi," the "life force" of all things. Abundance, blessings, opportunities and good fortune are said to enter through the front door. It's also the first impression have of how well the sellers have taken care of the rest of the property. So, it is a good idea to be certain the area around the front door is swept clean and free of cobwebs and clutter. Make sure all lighting is straight and properly hung as well. Also, owners of single-family homes should consider lighting the path to the front door to create an inviting atmosphere.
WITH SUCH ENERGY SAVINGS, YOU COULD BUY NEW T-SHIRTS: While the average price of a laptop computer dropped 23 percent in just one year and big-screen television prices have been falling at an average rate of 30 percent a year, the average price of a dishwasher rose 10 percent in the last decade, reports the New York Times. Market analysts at the NPD Group calculate that the average price of a washing machine went up 16 percent in the last two years. Take Whirlpool's Duet, the country's top-selling front-loaded washing machine. It is one of the more energy-efficient machines, using about 227 kilowatt hours of electricity a year. You can find one at Sears or other appliance stores for about $1,400, and it would cost about $78 a year to operate compared with $161 a year for Whirlpool's $549 Ultimate Care top-loader, according to a downloadable calculator on the Department of Energy Web site (energystar.gov/index.cfm?fuseaction=find_a_product.) But because the Duet costs so much to buy, the total cost of the front loader over seven years is $1,946, or $269 more than the Whirlpool classic top loader. Yet it makes economic sense to buy the more expensive machine because a dollar today is more valuable than a dollar in seven years. Theoretically, you should be willing to pay $318 more for something that saves you $546 over seven years. Consider two conventional-looking top loaders from the same manufacturer. One of Whirlpool's lowest-priced Energy Star-rated machines is a $479 3.2-cubic-foot capacity top loader. A less energy-efficient machine of the same size goes for $449. Over the next seven years, the total cost of the energy-efficient machine will be $1,256 compared with $1,450 for the seemingly cheaper machine, a real savings of $194. Though NPD estimates that 35 percent of refrigerators and washers carry the Energy Star rating, which means they use even less energy than the average machine on the market, it said 85 percent of dishwashers won the designation. GE alone sells 365 models of consumer and commercial refrigerators, dishwashers and washing machines that carry the rating.
TAX TIP: Although the law is nine years old, many taxpayers are confused about the exclusion from a capital gains tax when selling a principal residence. In fact, home sellers are permitted to exclude $250,000 in gain if single and $500,000 if married; they must have lived their home for any two of the preceding five years. The exclusion can be claimed many times, but not more often than every two years. What's a principal residence? According to the charming folks at the IRS, the following indicators are telling: Place of employment; mailing address for bills and correspondence; address, as listed on federal and state tax returns, driver's license, car registration and voter-registration card; bank used and its location; memberships in recreational clubs and religious organizations; and location of family members' main home.
CONSUMERS PUT THE BRAKES ON HOME EQUITY LOANS: Consumers are backing away from home equity credit lines as interest rates rise and the housing market slows, according to the Wall Street Journal in Realtor magazine. From 2002 to 2005, home equity credit lines from commercial banks grew at an annual rate of 30-40 percent. But since last August, Federal Reserve data show that the growth rate has plateaued, rising just 5 percent. Economists differ on how much a pullback in home-equity borrowing will hurt U.S. economic growth. Some believe it will depress growth in consumer spending by as much as one-third. Others think it won't make a significant difference because people will find other ways to pay for what they want.
TO SELL WELL, STAGE WELL: Staging a home well as both savvy sellers and buyers know, is likely to boost the price, notes the Christian Science Monitor in Realtor magazine. Peggy Selinger-Eaton, who has recently published a book and DVD on the subject, suggests that homeowners remove clutter except for a few wisely chosen accessories (candles, fresh flowers, crystal). She believes bedrooms should have beds and, lacking them, they can be fashioned from an inflatable mattress and some boxes. To maximize light, Selinger-Eaton advises sellers to raise window blinds and remove screens from windows to let in as much natural light as possible. Other of her none-too-original recommendations: modernize fixtures, replacing boring or tarnished one, trading in old lampshades for new ones, and replacing sink and tub fixtures with modern, shiny ones; deep-six shabby furniture, even if it means buying cheap-chic replacements at Target, for example; and create life (no, not that way) but by setting the table, leaving on the big-screen TV and playing background music.
AGENCIES ADOPT NEW CREDIT SCORING SYSTEM: The nation's three consumer credit reporting companies - Equifax, Experian and TransUnion - have jointly announced the introduction of a new credit score designed to simplify and enhance the credit process for both consumers and credit grantors. In their announcement, the companies said the new "VantageScore" is a direct result of market demand for a more consistent and objective approach to credit scoring methodology across all three national credit reporting companies. It is said to leverage the collective experience of the industry's leading experts on credit data, scoring and analytics. Under the new scoring system, credit score variance between credit reporting companies will be attributed to data differences within each of the three consumer credit files and not to the structure of the scoring model or data interpretation. "By combining cutting-edge, patent-pending analytic techniques with a highly intuitive scale for scoring, VantageScore will provide consumers and businesses with a highly predictive, consistent score that is easy to understand and apply." VantageScore uses score ranges from 501 to 990. Although the new mathematical formula used to come up with the score is intended to reduce the variation, the Washington Post notes that there will still be differences because each company collects data differently. Since some accounts may be listed at one bureau but not the other, a consumer may still get different scores from each firm. "It doesn't address the larger issue of how accurate are the files," Gail Hillebrand, a senior attorney with Consumers Union told the Post. VantageScore represents an attempt by the credit bureaus "to develop a better mousetrap, to put more money in their pocket and prevent more from going out of it," to rival FICO, said Greg McBride, senior financial analyst for Bankrate, whose Web site Bankrate.com aggregates financial rate information. Ron Totaro, vice president of Fair Isaac's Global Scoring Solutions, said the 17-year-old FICO score is "pretty ingrained and encoded in computer systems" of lenders, which will make it hard for financial institutions to switch. "It's very difficult to come up with a better mousetrap," he added.
THE THEATER, MUSEUMS, RESTAURANTS, WHO CARES: Many new retirees don't seem to: They are eschewing traditional havens such as Florida and Arizona (where real estate prices have gone through the roof, the author fails to mention) in favor of small communities with good health care and moderately priced housing, says William Frey, a Brookings Institution demographer, according to U.S. News & World Report in Realtor magazine. He has studied U.S. Census Bureau data from 2000 to 2004 to identify small-town communities with the greatest growth rate of people older than 55. And, in order of the most popular first, the answer is: Gillette, Wyo.; Silverthorne, Colo.; Juneau, Alaska; Edwards, Colo.; Jackson, Wyo.; Bozeman, Mont.; St. Marys, Ga.; Rock Springs, Wyo.; Taos, N.M. Evanston, Wyo. But what do those retirees have to talk about after they move there?
FORECLOSURES UP SINCE A YEAR AGO, BUT DOWN SINCE JANUARY: The number of new foreclosed residential properties available for sale nationwide increased 9 percent from February 2005 to February 2006, according to data released by foreclosure.com, says Inman News, while the total number dropped 7 percent from January. February marks the second consecutive month of declining new foreclosures in the United States. Some 88,093 foreclosed residential properties were available for sale in the United States in February, of which 21,402 were new foreclosures - a 10.8 percent drop from the prior month. "Foreclosure inventory numbers in February are often low, partially because legal filings in December usually drop off around the holidays and reduce foreclosures in January and February," said Brad Geisen, president and CEO of Foreclosure.com. "The year-to-year comparison, however, tells a different story. If new foreclosures in 2006 continue to track 9 percent higher than in 2005, the country will reach higher inventory levels than it has in recent years." While most areas of the country experienced a decrease in new and active foreclosure listings, inventory increased in parts of the West. In California, which has historically had few foreclosures, there was a 150 percent increase in the number of new foreclosure listings in February compared with January.
SOME RULES ARE NOT MADE TO BE BROKEN: If they are in an apartment building or community with a homeowners association (HOA), Realty Times columnist Richard Thompson suggests that it's up to the manager to process complaints. However, it's up to the Board to adopt policies and procedures so the manager knows how to respond. If those policies are in place, the manager simply executes them (the policies, not the rule violators). Neither the Board nor manager should automatically accept a complaint. If this is a first time complaint about a neighbor, the complainer should be required first to take the matter directly to that neighbor both in person and in writing, rather than expect the HOA to do the dirty work. That way, the manager knows that reasonable action was taken to resolve the issue before it was presented for resolution to the HOA. If this complainant follows that advice, the manager then should accept the complaint in writing with precise details including the time and events together with copies of correspondence between the neighbors. That way, the manager knows that the complainer took personal action to resolve the issue. If the complainer is not willing to put the matter in writing to both the offender and the manager, the manager can assume it's not important enough for the HOA to deal with. Of course, there can be extenuating circumstances such as an aggressive or violent neighbor. The manager can make the judgment whether to intercede or not. And carefully.
BUILDERS CONFIDENCE REMAINS AT A LOW LEVEL: A one-point decline in the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for March indicates that housing demand and sales are gradually returning to a sustainable pace that is" right in line with our forecasts," boasts the National Association of Home Builders (NAHB). Noting that the confidence gauge has remained within a narrow two-point range for four consecutive months following a retreat from its peak in mid-2005, NAHB Chief Economist David Seiders attributed March's slight downshift to eroding affordability conditions as well as a gradual withdrawal of investor demand income areas. "Rising interest rates and high rates of home-price appreciation have raised the bar for homeownership to beyond what some families can reach," he commented. "Meanwhile, a retreat of short-term investors from certain markets is helping restore equilibrium between supply and demand." March's HMI, at 55, represented a one-point decline from February's downwardly revised 56 reading, which followed two consecutive months at 57. There was slight erosion of the index's three components in the latest report, with single-point declines in the gauges for current single-family sales and traffic of prospective buyers and a two-point decline in sales expectations for the next six months. Both the current and expected sales components remained well in the positive range, at 60 and 62, respectively.
OWNING SUCH A HOME IS A MIRACULOUS ACHIEVEMENT: Smokey Robinson and his wife Frances have put theirs on the market for $10.5 million in the gated community of Chatsworth in Los Angeles, according to the Los Angeles Times in the CRS Residential Specialist magazine. Well, it does have seven bedrooms, six and a half baths, three family rooms, three kitchen, 10 fireplaces, a wine cellar, gym and sauna in its 9,000 square feet. Occupying 2.5 acres, the place also has a pool, spa, waterfall, detached guesthouse and outdoor living room. The couple will live in their Las Vegas home until they build a smaller one in Chatsworth. If he gets his price, there doubtless will be no tear tracks on ol' Smokey's cheeks.
LOAN APPLICATION VOLUME IS LITTLE CHANGED FROM LAST WEEK: For the week ended March 10, it decreased 0.2 percent on a seasonally adjusted basis from one week earlier, says the Mortgage Bankers Association. On an unadjusted basis, volume went up 0.2 percent, but it was down 20.4 percent versus the same week one year earlier. Seasonally-adjusted, purchase applications increased by 1.0 percent from the previous week as refinancings were off by 1.9 percent. The refinance share of mortgage activity declined to 37.7 percent of total applications from 38.5 percent the previous week, and the adjustable-rate mortgage (ARM) share rose to 28.8 percent.
THE AUCTIONEER BUSINESS IS BOOMING: The National Auctioneers Association reports that it's raking in the dough from residential properties, reports the Boston Globe in Realtor magazine. In 2005, association members auctioned off $14.2 billion worth of residential property in live auctions, a 24 percent increase over 2003 sales. The growing surplus of homes on the market is expected to encourage more owners to give auctions a try. Maine-based J.J. Manning, which typically holds one-house auctions, says this month it held its first auction of properties owned by multiple owners since the early 1990s downturn. The firm plans more this year. Sheldon Good & Co., a national auctioneer in Chicago, also reports doing more auctions, including more on behalf of developers selling the unsold units in large hotel-condo projects, particularly in resort areas. "We think there's a very high likelihood that trend is going to rise based on overbuilding in Boston, New York, Chicago, Houston, Orlando and Jacksonville," said Steve Good, chief executive. "The slowdown is just beginning."
GO ON A TEAR: You can securely dispose of up to five boxes of personal papers professionally at no charge on Saturday, March 18, 8-11 a.m., at the Washington Convention Center, 11th and H street NW, thanks to Mercantile Potomac Bank, WRC Channel 4 and Shred-It. Info: 202-626-9100.
IS THIS A RACE THAT NO ONE WINS: Flagler County in Florida, situated along the Atlantic Coast between Daytona Beach and Jacksonville, was the fastest-growing county for the second year in a row, with a 10.7 percent population increase from July 1, 2004, to July 1, 2005, according to estimates released by the U.S. Census Bureau. Flagler, with 76,410 residents, also led the nation with a 53 percent population increase since Census 2000. According to the estimates, all but one of the top-10 fastest-growing counties between 2004 and 2005 are located in either the South or the West. Among them were three Virginia counties - Loudoun in eighth place, following by King George and Caroline.
IF YOU HAVE AN ARM, IT'S WISE TO KNOW ITS REACH: Many Americans are confused about the terms of their adjustable-rate home mortgages and underestimate the amount by which their loan payments could jump, according to a new study by Federal Reserve Board economists, reports the Wall Street Journal. The study found that about 35 percent of people with adjustable-rate mortgages didn't know how much the rate could increase at one time, and 41 percent weren't sure of the maximum rate they could face. About 28 percent didn't know which index of interest rates would be used to determine their adjustments; many others gave incorrect answers, such as the consumer price index or "the going rate." The economists based their study on surveys of consumers and lenders by the Fed and the U.S. Census Bureau, plus other data on loans and home prices. They found that many consumers believed their interest rate could increase by a maximum of fewer than five percentage points over the life of the loan, while lenders reported that bigger jumps often were possible. High-income borrowers are better informed, the study says. For those with annual incomes above $150,000, only 13 percent were unaware of the maximum amount by which their rate could increase at one time. For those with incomes below $50,000, 40 percent didn't know what the cap was on those increases.
RISE IN MORTGAGE RATES FINALLY STALLS: The 30-year fixed-rate mortgage (FRM) averaged 6.34 percent for the week, down from last week's average of 6.37 percent and up from last year's 5.95 percent. The average for the 15-year FRM this week was 5.98 percent; it was below 6.00 percent a week ago and above 5.47 a year ago. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.93 percent versus 6.03 percent last week and 5.31 percent in 2005. One-year Treasury-indexed ARMs were 5.37 percent this week, down from last week when it averaged 5.45 percent. At this time last year, the one-year ARM was 4.20 percent. "Financial markets, hedging against the potential build up in inflation, pushed mortgage rates higher last week," said Frank Nothaft, Freddie Mac vice president and chief economist. "However, market indicators this week seemed to point to less of a threat of inflation, and that allowed rates to drift a little lower. Housing starts fell in February as expected, but were still stronger than had been forecast, while January figures were revised upward. This is a good sign that housing activity, although slowing from record levels set in the past few years, will continue to remain healthy this year."
AMERICANS ARE DREAMING OF A DIFFERENT SORT OF HOME: A two-bedroom condo in the city is pushing aside the four-bedroom colonial in the suburbs as the traditional American dream home, says the New York Times in Realtor magazine. Some of the biggest names in home building are selling more city condos than suburban single-family houses. For instance, five years ago, condos were 5 percent of K. Hovnanian Homes' business; today they are 30 percent. WCI Communities says condos are 40 percent of its business in Florida. And in California, Pulte Homes, the nation's second largest homebuilder, finds condos have become fully half of its sales. ''The suburbs are overbuilt, crowded and continuing to spread, and the commutes are getting longer,'' says John K. McIlwain, a senior resident fellow for housing at the Urban Land Institute, a nonprofit research group. Meanwhile, he notes that ''cities are actually much cleaner, healthier and better run than they were 20 years ago.'' Some argue that the demand for condos is short term, fed by young buyers who will shun city living once they have a family. But others point to baby boomers as the 800-pound gorilla that continues to drive demand. ''Those of us who are 60 are thinking of cashing out, moving into the Ritz tower and getting our meals brought to us,'' says Karl Case, a professor of economics at Wellesley College. The home builders ''are looking at the numbers and seeing what's fairly obvious. It doesn't strike me as crazy," he adds.
D.C. COUNCIL COMMITTEE VOTES TO OVERHAUL RENT CONTROL: Its action would change the current "rent ceiling" approach to one calculated more in relation to comparable market values, the Washington Post reports. Rental increases for vacant units would be kept below market rate by a formula based on the highest comparable unit in the building. But the maximum increase for an existing tenant would be 10 percent. Covering about 100,000 units, the rent control law exempts federally funded public housing, buildings constructed after 1975 and apartments owned by landlords who have no more than four apartments.
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