Items of Interest - April 15, 2006
THIS YEAR'S HOME SALES ARE FORECAST TO BE THIRD HIGHEST: They should generally level out and remain at historically high levels, according to the National Association of Realtors (NAR). Says David Lereah, NAR's chief economist: "Economic growth and job creation are providing a favorable backdrop for the housing market, but rising interest rates have an offsetting effect. Home sales will move up and down somewhat over the remainder of the year but stay at a high plateau, meaning this will be the third strongest year on record." He expects the 30-year fixed-rate mortgage to rise to 6.9 percent by the end of the year. Existing-home sales are projected to drop 6.0 percent to 6.65 million this year, while new-home sales are likely fall 10.9 percent to 1.14 million. Lereah forecasts housing starts to be 2.00 million in 2006, 3.2 percent below the total starts last year. The national median existing-home price for all housing types is likely to increase 6.4 percent this year to $221,700, and the median new-home price is expected to rise 2.3 percent to $242,700, according to the economist.
MARK YOUR CALENDARS FOR THIS SPECIAL EVENT: It's the prestigious juried Smithsonian Craft Show, of which our own Alix Myerson is this year's chairwoman. Featuring 120 artists and their wearable art, basketry, glass and ceramics, among numerous other media, the show has netted some $7 million over 24 years to improve the Smithsonian's family of 18 museums and nine research facilities, plus libraries and numerous outreach affiliates. It begins with a preview night gala April 19 and runs days and evenings through April 23. Aside from the gala, two highlights are the raffle of a $15,000 original celadon porcelain by Cliff Lee ($5 per ticket) and an online auction, which opens April 16. For details, do check out smithsoniancraftshow.org or call Alix at 202-537-6000.
REPORTS FINDS DISCRIMINATION IN REAL ESTATE: The National Fair Housing Alliance contends that racially-motivated steering and unequal treatment of African-American and Latino home seekers are commonplace practices by some realty agents, according to Realty Times. The nonprofit fair housing group says it conducted "paired sales tests" in 12 metropolitan areas between early 2003 and mid-2005. In each foray, the teams were assigned similar information about housing needs, financial qualifications and employment history. In every instance, "the African-American or Latino teams were slightly more qualified than the white teams" in terms of income, down payment availability, outstanding debt loads and length of employment tenure. A total of 145 paired tests were completed for the study in 73 sales offices in metropolitan New York, D.C., Chicago, Atlanta, Austin, Birmingham, Philadelphia, Pittsburgh, San Antonio, Dayton and Detroit. According to the report, "almost 20 percent of the time, African American and Latino testers were refused appointments or offered very limited service" in comparison with white testers. Whites were shown more homes – an average of eight homes per test, while minority testers were shown five. Finding "blatant" discriminatory behavior, the report said: "In every metropolitan area tested, some agents told testers that they knew it was illegal for them to steer or make comments based on race or national origin, but the agents in question then went on deliberately to steer or make illegal comments." The study also added that minority home seekers were more likely than whites to be required to bring pre-approval letters from lenders before agents would show them homes; minority testers more frequently were told to do their own additional searches for homes; white testers were offered far more financial incentives such as closing cost reductions or lower mortgage fees compared with minority buyers; steering frequently made "use of schools as a proxy" for the racial or ethnic composition of neighborhoods – "instead of making blatant comments about the racial composition of neighborhoods, many real estate agents told whites to avoid certain areas because of the schools."
PAINT THE TOWN(HOME) GREEN: Homeowners are giving a new look to paints that either promise fewer fumes and toxins or have been recycled from leftover paint cans, the Wall Street Journal observes. Though so-called eco-friendly paints have long had a rap as inferior to the old-fashioned stuff – for tepid colors, uneven consistency and questionable durability – makers are rolling out what they say are improved versions. Ingredients include everything from reformulated chemicals to doughnut powder and yogurt. Yummy! The category is a bright spot in the $20 billion a year paint business, which has seen slowing growth lately. Standard paint contains solvents called volatile organic compounds, or VOCs, that help give it consistency and texture when wet. The new paints are more expensive – on average, $3 more a gallon, according to manufacturers. It's the paints from Anna Sova Luxury Organics that include yogurt protein, doughnut powder and bamboo fibers among its ingredients; it costs up to $69 a gallon. "We don't recommend eating it," says a spokeswoman, "but you could."
GO AHEAD, LIVE DANGEROUSLY, BUY A REALLY NEW PLANT: Nursery experts interviewed by the Washington Post are recommending a new variety of coral bells called Caramel, tall bearded irises that now repeat bloom in the fall, coneflowers in yellow, orange or nearly pink, even edible Oriental persimmons, some of which grow to only 10 feet. Two new varieties of crape myrtles that bloom in mid-to late summer in white or red are available at specialty nurseries and at the National Arboretum's upcoming garden fair.
BUT MAYBE NOT IF YOU'RE A BOOMER: AARP observes that the gardening craze has hit a rough patch. Nursery sales have been slowing significantly over the last three years, and experts attribute part of the change to the aching backs and knees of those folks born between 1946 and 1964. See, they are, in fact, becoming their parents.
AND IN STILL MORE GARDENING NEWS: The Washington Daffodil Society will display more than 2,000 show-quality varieties this weekend at Brookside Gardens in Wheaton. More info for this free event: brooksidegardens.org.
OH THAT RASCAL GEORGE: He did sleep around, didn't he? One house where he may have done so is a 1733 stone dwelling in Doylestown, Pa., where certainly he dined and maybe he spent a few nights – unless he used a tent pitched on the property, according to the Wall Street Journal. With three bedrooms, two baths, original doors and window trim, exposed-beam ceilings and a four-car garage (presumably not original), the house on 2.24 acres was purchased for $425,000 in 1999 and since has had a reported $650,000 in renovations. It has failed to sell in the past for $1.78 million, so now it's up for auction. For details, do give a shout to Sheldon Good & Co. Auctions NorthEast, 212-213-9770.
YOU MAY BE ABLE TO FIX IT UP AT A DISCOUNT: Retailers are using special credit card deals to encourage home owners to spend money on spring fix-up projects, according to Reuters in Realtor magazine. For example, Citibank is currently offering some credit card customers 5 percent cash back on purchases made at home improvement and furnishing stores. J.P. Morgan Chase and Reader's Digest Association have launched a card that gives holders three points for each dollar spent on home improvement items and one point for other purchases. Once a consumer accumulates 2,500 points, he or she gets a $25 gift card to use at home-goods and electronics retailers. Lowe's is offering a special project card with a six-month, interest-free grace period and a $35,000 cap on the balance, so buyers with otherwise limited credit can fix up their homes.
RETRO IS IN, AGAIN: So proclaims the Wall Street Journal, which says a house's architectural style has become a significant factor in the property's value -- particularly if it is a midcentury modern (or "MCM") home. This style is characterized by strong horizontal lines, large open spaces, plenty of windows and skylights, and flat or low-pitched roofs, according to MileHiModern.com, a site that posts real-estate listings of homes with the style. Real-estate professionals in metropolitan areas such as Denver, Los Angeles, Chicago and Phoenix say properties with modern design are highly sought after and sell for more, reports The Denver Post. In one south Denver neighborhood, residences in one Frank Lloyd Wright-inspired subdivision have increased 27 percent in price in a year's period, whereas more traditional houses on adjacent blocks have appreciated 10 percent in the same period, the Post says.
MORTGAGE LOAN VOLUME DROPS: For the week ended April 7, it fell by 5.5 percent on a seasonally adjusted basis from one week earlier, reports the Mortgage Bankers Association. On an unadjusted basis, the decrease was 5.1 percent and was off 14.7 percent compared with the same week a year earlier. Seasonally-adjusted, purchase applications went down by 4.7 percent from the previous week, and refinancings declined by 6.6 percent. The refinance share of mortgage activity decreased to 36.0 percent of total applications from 36.6 percent the week before, and the adjustable-rate mortgage (ARM) share inched up to 28.6 percent of total applications from 28.5 percent the previous week.
IN MOSCOW (NOT IDAHO), REAL ESTATE PRICES SOAR MORE : The region's housing shortage continues to send real estate prices skyrocketing, rising at a rate of 2.5 percent a week, according to an Izvestia report cited by the New York Times.
HIS CREDIBILITY IS GOLD PLATED: "We don't see a bubble," says Samuel Lieber, who directly manages or helps oversee some $3 billion of assets through nine mutual funds, including chart-topping Alpine U.S. Real Estate Equity, Alpine International Real Estate and Alpine Realty Income & Growth. In an interview with Barron's in the Wall Street Journal, the portfolio manager says that he won't retract his horns unless the job market tanks and he sees little chance of that happening soon. Eschewing pricey real-estate investment trusts for the most part, Lieber has guided the U.S. fund to an annualized 29 percent return in the past five years, through April 4, beating 99 percent of his rivals, according to Morningstar. His International offering was up 26 percent over five years, while Realty Income, managed by Robert Gadsden, is up 23 percent for that span. "Historically, home prices just don't go down nationwide unless we are in a significant recession," Lieber opines. "The last time home prices fell nationwide was in 1990. It's employment that really counts. The underlying fundamentals of real estate are still very positive. Job creation and household formation drive housing." Optimistic about rates, the fund manager adds: "An 8 percent mortgage rate would be a problem. My guess is that the Fed will stop short of crippling the housing market. They simply want to slow it down. We've seen a number of [housing] cycles globally, and this one is not that different. We've just gone through a 14-year up cycle for housing, and prices were up because of supply-demand considerations. But, fundamentally, we'll get to a point where, all of a sudden, the market will say: 'The Fed is basically done. They will go from a tightening mode to neutral.' When that happens, the bond market will do well, and housing will start to take off again. That is going to happen, in all likelihood, within the next nine months."
THROUGH A GLASS CLEANLY: No one who has filthy windows reads this newsletter, but perhaps a friend would benefit from knowing that elbow grease and a sponge are a good start. Use warm water and ammonia or white vinegar and a squeegee, spot-clean with a baking soda-and-water paste, avoid cleaning windows when they are in direct sunlight, and stick with paper towels, not newspapers, which can stain white frames.
RATES ARE AT HIGHEST LEVEL IN NEARLY FOUR YEARS: The 30-year fixed-rate mortgage (FRM) averaged 6.49 percent for the week, up from last week's 6.43 percent and last year's 5.91 percent, according to Freddie Mac. It has not been higher since the week ended July 12, 2002, when it averaged 6.54 percent. The 15-year FRM this week was 6.14 percent, up from 6.10 percent last week 5.46 percent a year ago. The 15-year FRM has not been higher since the week ending June 13, 2002, when it averaged 6.17 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were 6.13 percent this week in comparison with last week's 6.11 percent 5.31 percent in 2005. One-year Treasury-indexed ARMs averaged 5.61 percent, up from 5.57 percent. At this time last year, they were 4.30 percent. "Mortgage rates continued to creep up following the unexpected drop in March's unemployment rate. That drop indicated there may be some upward pressure on wages in the near future, which could lead to a rise in inflation," said Frank Nothaft, Freddie Mac vice president and chief economist. "And the threat of a higher rate of inflation, as we all know, invariably leads to higher mortgage rates. With that said, Freddie Mac's outlook for 30-year mortgage rates for 2006 continues to expect that rates will fluctuate somewhere between 6.25 percent 6.75 percent over the course of the year."
LATEST TREASURY NOTE RATE WILL AFFECT BORROWERS: The 10-year Treasury note, which crossed the 5 percent threshold this week for the first time since June 2002, serves as a touchstone for a variety of borrowers, from consumers to corporations and governments, observes the New York Times. But it is most closely tied to mortgages and is likely to play a role in slowing home price increases and curbing the home-buying frenzy in many parts of the country. "Where you are going to feel the pain the most is on the housing market," said Brian J. Carlin, a vice president at J.P. Morgan Private Bank. Carlin estimated that recent homebuyers with adjustable rate mortgages could experience a jump in interest rates of 3-4 percentage points in the next two years, as the typical 3 percent introductory rate is adjusted higher in annual increments. For a family with a $400,000 mortgage, that could translate into an increase of as much as $1,000 in monthly interest payments. Mortgage delinquencies have already started climbing, although they remain at relatively low levels. In the fourth quarter of last year, 4.7 percent of all home mortgages were delinquent, up from 4.4 percent in the third quarter, according to the Mortgage Bankers Association of America. A delinquent loan is one in which monthly payments are past due for 60 days or more. The Mortgage Bankers Association estimates that the burden of higher interest costs would fall on about 7 percent to 8 percent of all homeowners. The rest have either paid off their mortgages or face no immediate increase because they took out fixed-rate mortgages or refinanced their earlier loans to mortgages that hold rates steady for 5-10 years.
MARK YOUR CALENDARS FOR THIS SPECIAL EVENT: It's the prestigious juried Smithsonian Craft Show, of which our own Alix Myerson is this year's chairwoman. Featuring 120 artists and their wearable art, basketry, glass and ceramics, among numerous other media, the show has netted some $7 million over 24 years to improve the Smithsonian's family of 18 museums and nine research facilities, plus libraries and numerous outreach affiliates. It begins with a preview night gala April 19 and runs days and evenings through April 23. Aside from the gala, two highlights are the raffle of a $15,000 original celadon porcelain by Cliff Lee ($5 per ticket) and an online auction, which opens April 16. For details, do check out smithsoniancraftshow.org or call Alix at 202-537-6000.
REPORTS FINDS DISCRIMINATION IN REAL ESTATE: The National Fair Housing Alliance contends that racially-motivated steering and unequal treatment of African-American and Latino home seekers are commonplace practices by some realty agents, according to Realty Times. The nonprofit fair housing group says it conducted "paired sales tests" in 12 metropolitan areas between early 2003 and mid-2005. In each foray, the teams were assigned similar information about housing needs, financial qualifications and employment history. In every instance, "the African-American or Latino teams were slightly more qualified than the white teams" in terms of income, down payment availability, outstanding debt loads and length of employment tenure. A total of 145 paired tests were completed for the study in 73 sales offices in metropolitan New York, D.C., Chicago, Atlanta, Austin, Birmingham, Philadelphia, Pittsburgh, San Antonio, Dayton and Detroit. According to the report, "almost 20 percent of the time, African American and Latino testers were refused appointments or offered very limited service" in comparison with white testers. Whites were shown more homes – an average of eight homes per test, while minority testers were shown five. Finding "blatant" discriminatory behavior, the report said: "In every metropolitan area tested, some agents told testers that they knew it was illegal for them to steer or make comments based on race or national origin, but the agents in question then went on deliberately to steer or make illegal comments." The study also added that minority home seekers were more likely than whites to be required to bring pre-approval letters from lenders before agents would show them homes; minority testers more frequently were told to do their own additional searches for homes; white testers were offered far more financial incentives such as closing cost reductions or lower mortgage fees compared with minority buyers; steering frequently made "use of schools as a proxy" for the racial or ethnic composition of neighborhoods – "instead of making blatant comments about the racial composition of neighborhoods, many real estate agents told whites to avoid certain areas because of the schools."
PAINT THE TOWN(HOME) GREEN: Homeowners are giving a new look to paints that either promise fewer fumes and toxins or have been recycled from leftover paint cans, the Wall Street Journal observes. Though so-called eco-friendly paints have long had a rap as inferior to the old-fashioned stuff – for tepid colors, uneven consistency and questionable durability – makers are rolling out what they say are improved versions. Ingredients include everything from reformulated chemicals to doughnut powder and yogurt. Yummy! The category is a bright spot in the $20 billion a year paint business, which has seen slowing growth lately. Standard paint contains solvents called volatile organic compounds, or VOCs, that help give it consistency and texture when wet. The new paints are more expensive – on average, $3 more a gallon, according to manufacturers. It's the paints from Anna Sova Luxury Organics that include yogurt protein, doughnut powder and bamboo fibers among its ingredients; it costs up to $69 a gallon. "We don't recommend eating it," says a spokeswoman, "but you could."
GO AHEAD, LIVE DANGEROUSLY, BUY A REALLY NEW PLANT: Nursery experts interviewed by the Washington Post are recommending a new variety of coral bells called Caramel, tall bearded irises that now repeat bloom in the fall, coneflowers in yellow, orange or nearly pink, even edible Oriental persimmons, some of which grow to only 10 feet. Two new varieties of crape myrtles that bloom in mid-to late summer in white or red are available at specialty nurseries and at the National Arboretum's upcoming garden fair.
BUT MAYBE NOT IF YOU'RE A BOOMER: AARP observes that the gardening craze has hit a rough patch. Nursery sales have been slowing significantly over the last three years, and experts attribute part of the change to the aching backs and knees of those folks born between 1946 and 1964. See, they are, in fact, becoming their parents.
AND IN STILL MORE GARDENING NEWS: The Washington Daffodil Society will display more than 2,000 show-quality varieties this weekend at Brookside Gardens in Wheaton. More info for this free event: brooksidegardens.org.
OH THAT RASCAL GEORGE: He did sleep around, didn't he? One house where he may have done so is a 1733 stone dwelling in Doylestown, Pa., where certainly he dined and maybe he spent a few nights – unless he used a tent pitched on the property, according to the Wall Street Journal. With three bedrooms, two baths, original doors and window trim, exposed-beam ceilings and a four-car garage (presumably not original), the house on 2.24 acres was purchased for $425,000 in 1999 and since has had a reported $650,000 in renovations. It has failed to sell in the past for $1.78 million, so now it's up for auction. For details, do give a shout to Sheldon Good & Co. Auctions NorthEast, 212-213-9770.
YOU MAY BE ABLE TO FIX IT UP AT A DISCOUNT: Retailers are using special credit card deals to encourage home owners to spend money on spring fix-up projects, according to Reuters in Realtor magazine. For example, Citibank is currently offering some credit card customers 5 percent cash back on purchases made at home improvement and furnishing stores. J.P. Morgan Chase and Reader's Digest Association have launched a card that gives holders three points for each dollar spent on home improvement items and one point for other purchases. Once a consumer accumulates 2,500 points, he or she gets a $25 gift card to use at home-goods and electronics retailers. Lowe's is offering a special project card with a six-month, interest-free grace period and a $35,000 cap on the balance, so buyers with otherwise limited credit can fix up their homes.
RETRO IS IN, AGAIN: So proclaims the Wall Street Journal, which says a house's architectural style has become a significant factor in the property's value -- particularly if it is a midcentury modern (or "MCM") home. This style is characterized by strong horizontal lines, large open spaces, plenty of windows and skylights, and flat or low-pitched roofs, according to MileHiModern.com, a site that posts real-estate listings of homes with the style. Real-estate professionals in metropolitan areas such as Denver, Los Angeles, Chicago and Phoenix say properties with modern design are highly sought after and sell for more, reports The Denver Post. In one south Denver neighborhood, residences in one Frank Lloyd Wright-inspired subdivision have increased 27 percent in price in a year's period, whereas more traditional houses on adjacent blocks have appreciated 10 percent in the same period, the Post says.
MORTGAGE LOAN VOLUME DROPS: For the week ended April 7, it fell by 5.5 percent on a seasonally adjusted basis from one week earlier, reports the Mortgage Bankers Association. On an unadjusted basis, the decrease was 5.1 percent and was off 14.7 percent compared with the same week a year earlier. Seasonally-adjusted, purchase applications went down by 4.7 percent from the previous week, and refinancings declined by 6.6 percent. The refinance share of mortgage activity decreased to 36.0 percent of total applications from 36.6 percent the week before, and the adjustable-rate mortgage (ARM) share inched up to 28.6 percent of total applications from 28.5 percent the previous week.
IN MOSCOW (NOT IDAHO), REAL ESTATE PRICES SOAR MORE : The region's housing shortage continues to send real estate prices skyrocketing, rising at a rate of 2.5 percent a week, according to an Izvestia report cited by the New York Times.
HIS CREDIBILITY IS GOLD PLATED: "We don't see a bubble," says Samuel Lieber, who directly manages or helps oversee some $3 billion of assets through nine mutual funds, including chart-topping Alpine U.S. Real Estate Equity, Alpine International Real Estate and Alpine Realty Income & Growth. In an interview with Barron's in the Wall Street Journal, the portfolio manager says that he won't retract his horns unless the job market tanks and he sees little chance of that happening soon. Eschewing pricey real-estate investment trusts for the most part, Lieber has guided the U.S. fund to an annualized 29 percent return in the past five years, through April 4, beating 99 percent of his rivals, according to Morningstar. His International offering was up 26 percent over five years, while Realty Income, managed by Robert Gadsden, is up 23 percent for that span. "Historically, home prices just don't go down nationwide unless we are in a significant recession," Lieber opines. "The last time home prices fell nationwide was in 1990. It's employment that really counts. The underlying fundamentals of real estate are still very positive. Job creation and household formation drive housing." Optimistic about rates, the fund manager adds: "An 8 percent mortgage rate would be a problem. My guess is that the Fed will stop short of crippling the housing market. They simply want to slow it down. We've seen a number of [housing] cycles globally, and this one is not that different. We've just gone through a 14-year up cycle for housing, and prices were up because of supply-demand considerations. But, fundamentally, we'll get to a point where, all of a sudden, the market will say: 'The Fed is basically done. They will go from a tightening mode to neutral.' When that happens, the bond market will do well, and housing will start to take off again. That is going to happen, in all likelihood, within the next nine months."
THROUGH A GLASS CLEANLY: No one who has filthy windows reads this newsletter, but perhaps a friend would benefit from knowing that elbow grease and a sponge are a good start. Use warm water and ammonia or white vinegar and a squeegee, spot-clean with a baking soda-and-water paste, avoid cleaning windows when they are in direct sunlight, and stick with paper towels, not newspapers, which can stain white frames.
RATES ARE AT HIGHEST LEVEL IN NEARLY FOUR YEARS: The 30-year fixed-rate mortgage (FRM) averaged 6.49 percent for the week, up from last week's 6.43 percent and last year's 5.91 percent, according to Freddie Mac. It has not been higher since the week ended July 12, 2002, when it averaged 6.54 percent. The 15-year FRM this week was 6.14 percent, up from 6.10 percent last week 5.46 percent a year ago. The 15-year FRM has not been higher since the week ending June 13, 2002, when it averaged 6.17 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were 6.13 percent this week in comparison with last week's 6.11 percent 5.31 percent in 2005. One-year Treasury-indexed ARMs averaged 5.61 percent, up from 5.57 percent. At this time last year, they were 4.30 percent. "Mortgage rates continued to creep up following the unexpected drop in March's unemployment rate. That drop indicated there may be some upward pressure on wages in the near future, which could lead to a rise in inflation," said Frank Nothaft, Freddie Mac vice president and chief economist. "And the threat of a higher rate of inflation, as we all know, invariably leads to higher mortgage rates. With that said, Freddie Mac's outlook for 30-year mortgage rates for 2006 continues to expect that rates will fluctuate somewhere between 6.25 percent 6.75 percent over the course of the year."
LATEST TREASURY NOTE RATE WILL AFFECT BORROWERS: The 10-year Treasury note, which crossed the 5 percent threshold this week for the first time since June 2002, serves as a touchstone for a variety of borrowers, from consumers to corporations and governments, observes the New York Times. But it is most closely tied to mortgages and is likely to play a role in slowing home price increases and curbing the home-buying frenzy in many parts of the country. "Where you are going to feel the pain the most is on the housing market," said Brian J. Carlin, a vice president at J.P. Morgan Private Bank. Carlin estimated that recent homebuyers with adjustable rate mortgages could experience a jump in interest rates of 3-4 percentage points in the next two years, as the typical 3 percent introductory rate is adjusted higher in annual increments. For a family with a $400,000 mortgage, that could translate into an increase of as much as $1,000 in monthly interest payments. Mortgage delinquencies have already started climbing, although they remain at relatively low levels. In the fourth quarter of last year, 4.7 percent of all home mortgages were delinquent, up from 4.4 percent in the third quarter, according to the Mortgage Bankers Association of America. A delinquent loan is one in which monthly payments are past due for 60 days or more. The Mortgage Bankers Association estimates that the burden of higher interest costs would fall on about 7 percent to 8 percent of all homeowners. The rest have either paid off their mortgages or face no immediate increase because they took out fixed-rate mortgages or refinanced their earlier loans to mortgages that hold rates steady for 5-10 years.
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