Items of Interest - May 6, 2006
SO YOU WANNA BE A STAR: "Offbeat America," a series on Home & Garden Television (HGTV) that celebrates unusual homes, is looking for homes to feature that are architecturally extraordinary or furnished/decorated in a fun and funky way. The show will be shooting homes in Indiana in June and homes throughout the country through the end of the summer. Recent episodes have featured a Pennsylvania home covered in mirrors that appears to disappear as it reflects the surrounding landscape; a homeowner in Green Bay, Wis., who loves racing slot cars so much that he designed his home to look like a giant racetrack; and a Mojave Desert resident who engineered his aluminum home to spin like a top. The Offbeat series airs Sundays at 6 p.m. on HGTV. For more information or to submit a home for consideration, contact Gregg Stucker at 303/712-3172 or send digital photos of your home and a description to gstucker@highnoonentertainment.com.
A DROP IN SALES IS FORECAST: David Seiders, chief economist for the National Association of Home Builders (NAHB), says he expects new-home sales to drop 12 percent this year compared with a record 1.28 million units in 2005, according to Inman News. New-home sales in the first quarter of this year were down 10 percent from fourth-quarter 2005, and Seiders said he expects sales to ease further in the coming months before leveling off in 2007. He spoke at a National Association of Home Builders Construction Forecast Conference. "After topping out in the third quarter of last year, it is pretty clear that the housing sector is in a period of transition. Sales and starts are trending lower toward more sustainable levels," Seiders said. "Hopefully, most of this decline will be due to investors and speculators stepping out of the market. What we don't want to see is investors dumping homes on the market." In the view of Michael Moran, chief economist at Daiwa Securities America, "The housing sector is going through an adjustment, not a collapse." Added Jim Glassman, managing director and senior policy strategist with JP Morgan Chase: "Real estate is pricing itself back to reality, and in the long-run it is reasonable to expect starts in the 1.8 million to 2 million range." Home-price appreciation is expected to fall from an average 12 percent in 2005 to about 4 percent in 2007, Seiders said, and mortgage rates are expected to rise to 6.7 percent later this year. The rental market should regain some ground while the condo markets cools, he continued. According to Bernard Markstein, NAHB's director of forecasting, the forces driving housing demand vary significantly by region. Home prices, population growth, household formation and growth in employment opportunities are among the drivers, he said, and other factors include immigration and migration, energy prices, large-scale natural disasters such as Hurricane Katrina, and an area's appeal as a second-home location. Mark Zandi, chief economist for Moody's Economy.com, weighed in with a prediction that "nationally, house prices and supply will go flat in 2006, 2007 and 2008," implying that there will be some price declines in key markets and that markets are going to "correct, not crash." Markets where Zandi anticipates significant corrections – more than a 10 percent peak-to-trough decline – are in the Northeast, the Mid-Atlantic, Florida, California, parts of Arizona, and Las Vegas. "Any fundamental rise in interest rates will bite hard," Zandi said. "The rise will lock out two key groups that are important to local and regional markets: first-time home buyers and investors." He said home prices in much of the Washington region will likely drop 10 percent or more because prices have far outpaced affordability for first-time buyers and investors, according to the Washington Post. Condominiums will be hardest hit, Zandi declared, saying that there are no hard data to pin down how far prices might fall or how the prices of single-family houses would be affected, compared with condos. In an interview later, he said that the growing inventory of condo units that are for sale or being built here suggests that the slide would be worse for that sector. "I could say roughly that prices would fall about zero to 5 percent for single-family homes and about 15 to 20 percent for condos," he said. He's been wrong before, often, though no one can say that he is now.
THEY'RE YOUNG, RICH . . . AND RISK-AVERSE: Maybe it is time to update that F. Scott Fitzgerald quotation about the rich being different from you and me, suggests the New York Times. It turns out that the young rich are especially different - at least when it comes to the way they invest. Northern Trust surveyed 1,014 wealthy households - those with more than $1 million in investable assets - headed by someone 35 or younger and found they had doubts about the American equities markets. "One-fifth of the young investor's portfolio lies in cash, compared to only 13 percent for all high-net-worth portfolios," Marshall Eckblad reports in Financial Planning. "Wary of more domestic volatility and scandal, the wealthy young allocate only 29 percent of their funds to U.S. equities, compared to 41 percent of the whole." They are also more partial to real estate: While only 6 percent of all respondents said they planned to put most of their new money into real estate in 2006, 21 percent of those under age 35 viewed real estate as their first choice.
OH PLEASE, MR. TRUMP, YOU'RE TIRED: Love seats by the Donald, curved couches that are hard to place in square rooms and neutrals that actually are colors are some of the design directions creating buzz this week at the International Home Furnishings Market, reports the Wall Street Journal. The massive twice-a-year trade show is the largest wholesale home-furniture show in the world, and with 90 percent of U.S. home-furnishings retailers attending, it sets the stage for what stores will sell this fall. Because new-home buyers are thought to drive more than half of the market, "there is an underlying, unspoken fear of what is to come," says Michael Kaplan, owner of a third-generation, custom-furnishings business in Philadelphia. Thus, attempts to reinvent the wheel. The clean lines and minimal detail of midcentury modern continue to be popular, but now makers are adding curves to give these designs a more feminine look. Manufacturers are introducing sofas shaped like a giant letter C or even an O. While the shape is attention-getting and can be comfortable to sit in, these sofas pose a decorating challenge: They won't fit flat against a wall. On the color front, dull is hot. In addition to the new neutrals - many of which seem like renamed colors - another hue is getting a push: brown. "This is the most brown I've seen ever at this show," says Gary Stewart, a designer from Louisville, Ky. Meantime, the craze for furniture that carries celebrity names continues to attract new players - even Donald Trump plans to jump in - although the trend seems to be losing some steam with consumers. Trump is near a deal with a department-store chain to sell furniture named after the real-estate developer, says Trump Organization spokeswoman Cathy Glosser. The line will include tables, chairs and love seats (especially love seats?) as well as office furniture, she says, declining to name the chain that will sell them or the company that will make them. Let's hope this is the last of it.
A KEY MARKET INDICATOR TAKES A TUMBLE: Pending U.S. home sales have slowed as interest rates continue to rise, the National Association of Realtors (NAR) has had to acknowledge. The Pending Home Sales Index, based on contracts signed in March, eased 1.2 percent from February. It is 6 percent below March 2005. The index is derived from pending sales of existing homes. Commented David Lereah, NAR's chief economist: "Home sales rebounded from the slide that started last fall, but the pending sales data is showing a dampening effect from rising mortgage interest rates that have been trending up since January. This means a modest slowing can be expected in the sales pace in the months ahead, although the market will hold at historically strong levels."
DO YOU HAVE A HAMMER: In the last 12 months, American homeowners spent about $155 billion on remodeling, an increase of more than 4 percent over the previous 12-month period, despite rising interest rates, says Kermit Baker, senior research fellow at the Joint Center for Housing Studies at Harvard, according to the New York Times. Yet Baker and other experts say there is little research into the returns that American homeowners get on that investment. The most widely quoted figures come from a construction trade magazine, Remodeling, publishes the Cost vs. Value Report. Noted in Realty Digest previously, the report found that a minor kitchen remodeling would cost $14,913 and return 98.5 percent of that investment when the house was sold. Adding a midrange master bedroom suite, with a walk-in closet and dressing area as well as a bathroom, would cost $73,370, with only 82.4 percent of that being recouped. A modest bathroom redo, costing $10,499, could earn back 102.2 percent of the investment, Remodeling said. But researchers at the Harvard center "threw up their hands" after trying to determine the return on investment of remodeling projects, said Baker. "How a bathroom renovation affects value depends on a lot of things that are hard to quantify," he observed. "To do it well, you need neighborhood level estimates, but that would be very difficult." For instance, the magazine estimates that it would cost $22,977, with an 86.4 percent return, at best to add a bathroom. But agents may say that a house with one bathroom in a neighborhood where two bathrooms is the norm is at a disadvantage when the house goes on the market. Baker added that the homeowner might then see a good return on the investment by making the house competitive, though a third bathroom might get little return. What the Remodeling magazine data show is just how few projects yield a positive rate of return. Of the 22 projects it analyzed, only two - an upper-range siding replacement and the modest bathroom remodeling - would make money. That suggests that remodeling projects ought to be regarded not as a creator of value, but as a consumer product, like a car or purse, that appeals to taste and style.
THERE IS MORE THAN ONE WAY TO SPELL S-T-A-T-U-S: Coinciding with the invasion of foreign appliance manufacturers - everything from the Chinese company Haier at the low end to the German companies Miele and Bosch at the top end - high-end German companies are shaking up the American market for kitchens and appliances, reports the New York Times. Homeowners who once preferred Formica counters, linoleum floors and white appliances are increasingly opting for the Euro look: straight lines, expensive wood veneers, granite countertops and sparkling stainless steel. And thanks to the spread of these über-kitchens and their high-end American counterparts such as the cabinet maker Wood-Mode, European appliances also have been marching steadily into the American home. Companies such as Bosch-Siemens and Miele are thriving. "The United States and North America belong to our high-growth regions," said Theodor Siepert, a spokesman for Miele. "We even have innovations like a 30-inch oven developed especially for the American Thanksgiving turkey." The stakes are rising: Americans are expected to spend $79 billion to remodel kitchens this year, a 16 percent leap from last year, according to Lyle Landon, publisher of Kitchen and Bath Business. Consumers pay more for such styling and cachet, of course, sometimes a lot more. Some Miele dishwasher models, for instance, sell for up to $1,900. The manufacturers stand out in the crowded market by connecting with earlier German design movements. "Design is not for design's sake," said Vanessa Trost, the spokeswoman for Gaggenau, an appliance unit of Siemens. "We are in the Bauhaus tradition: every element of design has to fulfill a function."
PANSIES AND PETUNIAS AND POPPIES, OH MY: Pick 'em out at Flower Mart 2006 at the Washington National Cathedral, where the All Hallows Guild will celebrate its 90th anniversary with a show themed "Flowers from around the World," even carnivorous plants – yum. The free event runs Friday, May 5 and Saturday from 10 a.m. to 5 p.m. More info: 202-537-3185.
TITLE INSURERS FACE SCATHING CRITICISM: Homeowners title insurance and "affiliated business" joint ventures among title agents, realtors and lenders have come in for withering criticism at a House financial services subcommittee hearing, according to Kenneth Harney in Realty Times. State and federal regulators, consumer groups and even a title agent from Minnesota charged that widespread illegal kickbacks, sham and "shell" companies have led to excessive title fees for millions of home purchasers. Representatives of the title and affiliated settlement industries disputed the claim that fees are too high, but generally applauded state and federal regulators' efforts to crack down on illegal kickback schemes. Federal law prohibits realty settlement kickbacks or provision of "anything of value" in exchange for referrals of consumer business. A consumer group representative, J. Robert Hunter of the Consumer Federation of America, broadened the focus of the hearing to the huge revenues paid by home purchasers and refinancers compared with the claims paid out by title insurers. Hunter, a former Federal Insurance Administrator, said consumers spent $17 billion on title premiums last year - twice what they paid in 2000 and four times what they spent in 1995. Claims paid out by insurers were about 5 percent - compared with 86 percent of premiums for HMOs and 60 percent for auto insurance. Equally significant, said Hunter, is the fact that 80 to 92 percent of the premiums paid for title insurance go to middlemen - title and settlement agents, escrow agents and lawyers - who in turn often split their fees with affiliated realty and mortgage partners.
PERMITS FOR NEW HOUSING ARE LOWER HERE THIS YEAR: Local governments issued them for 8,154 units in the region for the first quarter versus 8,455 during the same period last year, according to the Washington Post. Issuance has been declining since 2003. Permits for single-family homes declined 14 percent, to 5,464, while those for condos and apartments in buildings with five or more units jumped 32 percent, to 2683.
HERE'S A DO-IT-YOURSELF PROJECT TO AVOID LIKE THE PLAGUE: One Emily Pilloton has come up with something called the Human Nest chair, which is upholstered in scraps of fabric that she scavenges from discards, sometimes found on the street, says the New York Times. Inviting! Layered with well over 1,000 scraps of recycled textiles, the $1,800 conical chair is not meant solely to help its owners take refuge from the world. In addition to providing a place to rest, the Human Nest is a wry commentary on the worrisome issue of environmental sustainability. Pilloton says she was struck one day by the ways in which birds repurpose detritus - twigs, leaves, discarded coffee cups - as the building blocks of their nests. She was intrigued not only by the environmental soundness of this strategy, but also by how nests are constantly updated with fresh materials even after eggs have been laid. "I wanted to make a sort of framework that a user could contribute to and make their own," said Pilloton, who lives in Chicago. "That way you sort of age with it, and it becomes this modern heirloom." In her dreams. It took this birdbrain six months to layer 40 yards' worth of fabric strips onto the chair's bamboo frame. "I tied them into the very center of the bowl, so they came out like flower petals," she said. Once every inch of the frame was covered, she stuffed even more fabric into the chair's center, to act as cushioning. Over time, however, that makeshift cushion tends to lose some of its softness. When that happens, Pilloton suggests that the owner cut up old T-shirts into three-inch-wide strips and stuff them into the chair. What fun! If you want such chair, the Digest's little chickadees will get no help finding her Web site from this quarter. Is she on crack?
MARTHA, MARTHA, MARTHA: Martha Stewart's partnership with KB Home attracted 3,400 interested consumers during its opening weekend and sold out its first 100-home phase in Cary, N.C., within a week, reports the Atlanta Journal Constitution in Realtor magazine. First-time home buyers Rob and Amy Joyce were among the buyers of the Katonah model in the mid-$200,000s. "Her designing style is impeccable. You just can't argue with that," says Rob Joyce, who designs home theater systems for a living. KB Home plans other communities in Atlanta; Charlotte, N.C.; Houston; Daytona Beach, Fla.; and Las Vegas, Nev. Closets in the Martha Stewart homes are spacious, especially in the larger models. Kitchens and pantries offer glass-front doors and high-showcase cubbies for collectibles or china. There are no jail cells in these homes. Other designer-home builder duos are hoping on the bandwagon. Estridge Homes in Indianapolis has partnered with former supermodel Kathy Ireland. Can't wait.
JUST SIGN ON THE BOTTOM LINE IF YOU DARE: With rates on home-equity lines of credit at a five-year high, demand is slowing, so lenders are aiming to keep their business growing with new promotions, rate cuts and other offers, says the Wall Street Journal. Wells Fargo launched a new program last month that cuts the rate on home-equity loans and lines of credit by between 0.375 and 0.5 of a percentage point for customers who also have a Wells Fargo checking account. Bank of America is sending out "customer reward" certificates that give borrowers up to half a percentage point off their rate if they take out a home-equity line of credit. PNC Financial Services Group is offering $25 PNC Bank Visa gift cards - and, in some cases, two free airline tickets - to borrowers who take out a new home-equity loan or line of credit. Many lenders are also pushing fixed-rate home-equity options. Last week, Regions Financial introduced a fixed-rate home-equity loan with a term of up to 15 years. Before that, the Birmingham, Ala., bank's fixed-rate loans required borrowers to make a balloon payment at the end of five years. Yet if housing values fall, some home-equity borrowers could wind up owing more than their house is worth. And homeowners with credit lines are vulnerable to rising interest rates, which can make their monthly payments higher. SunTrust says that about a quarter of its borrowers are now opting for a fixed-rate home-equity loan, up from 10 percent a year ago. At Wachovia Corp., 40 percent of customers are choosing fixed-rate home-equity loans, compared with 30 percent last year. Meanwhile, lenders such as J.P. Morgan Chase & Co. and Bank of America are touting newly popular features that let borrowers lock in a fixed rate on some or all of their line of credit. This fixed-rate option "is the largest weapon in our arsenal" when it comes to retaining customers, says Brad Conner, president of Chase Home Equity.
MORTGAGE APPLICATIONS ARE ON THE RISE: The Mortgage Bankers Association says that, for the week ended April 2, volume increased by 8.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the growth was 9.6 percent compared with the previous week, but applications dropped 15.6 percent in contrast to the year before. Seasonally adjusted, purchase volume went up by 11.3 percent from the previous week, and refinancings gained 5.1 percent. The refinance share of mortgage activity decreased to 35.2 percent of total applications from 36.7 percent the previous week, which is the lowest share since June 25, 2004, and the adjustable-rate mortgage (ARM) share edged up to 28.3 percent from 28.2 percent.
CASH OUT IS GROWING IN POPULARITY: In the first quarter of 2006, 88 percent of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were at least five percent higher than the original mortgage balances, according to Freddie Mac's quarterly refinance review. This percentage is up from the fourth quarter of 2005, when the share of refinanced loans that took cash out was a revised 81 percent, and the ratio is the highest since the third quarter of 1990. Said Frank Nothaft, Freddie Mac vice president and chief economist: "Almost no one is refinancing to reduce their interest rate in today's environment. In fact, the first quarter of 2006 is the first time in 20 quarters in which the new mortgage rate was higher than the old one for more than half of refinancing borrowers. One reason why homeowners may be willing to increase the mortgage rate on their first-lien mortgage is because interest rates on most home equity lines of credit have been pushed up again as the Fed increased short-term interest rates in January and March, which in turn pushed up the prime rate." Nothaft added that the $244 billion in cash taken out of home equity will fall to an estimated $170 billion from the refinancing of first-lien, prime, conventional mortgages in 2006. Freddie Mac expects the refinance share of mortgage applications to fall to around 36 percent and home prices to grow at an average rate in the single-digits nationally in 2006, slowing from the 13 percent rate seen in 2005. Deputy Chief Economist Amy Crews Cutts noted that the first quarter of 2006 was the first time in five years that more than half of borrowers increased their mortgage rates when they refinanced, saying, "The difference is small enough that the average borrower's mortgage payment barely changed, but it is a significant turn from the trend of significantly lower payments that we came to enjoy since the start of 2001."
D.C. COUNCIL PONDERS END TO RENT CEILINGS: The legislative body takes a final vote next month on a measure approved unanimously to overhaul the rent control system, reports the Washington Post. The bill would tightly limit yearly rent increases and cap at the rate of inflation increases for seniors and disabled individuals. For vacant apartments, increases would be held to no more than 30 percent. For renters, the top rise would be 2 percent plus inflation.
UP INCH MORTGAGE RATES ONCE AGAIN TO A FOUR-YEAR PEAK: The 30-year fixed-rate mortgage (FRM) averaged 6.59 percent for the week, up from last week's of 6.58 percent and last year's 5.75 percent. The 30-year FRM has not been higher since the week of June 20, 2002, when it averaged 6.63 percent. The 15-year FRM this week was 6.22 percent, also up a bit from 6.21 percent last week and much more than 5.31 percent a year ago. The 15-year FRM has not been higher since May 24, 2002, when it averaged 6.28 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were unchanged at 6.21 percent this week and up from 5.16 percent the same week of 2005. One-year Treasury-indexed ARMs were 5.67 percent this week, down very slightly from last week's 5.68 percent. At this time last year, the one-year ARM averaged 4.22 percent. Said Frank Nothaft, Freddie Mac vice president and chief economist: "We expect that mortgage rates will continue to trend upward over the coming year, but that upward trend will be modest at best. Meanwhile, with gradually rising rates, refinance activity can be expected to shift. Fewer families will be refinancing, but of those who are, a larger percentage will be drawing some equity out of their homes, many to pay off previously existing home equity loans and lines of credit as those loans become more expensive."
TAKE IT FROM NEAL ZIMMERMAN: When relocating his home office, the architect and author of "Home Workspace Idea Book," stayed away from bulky commercial office furniture, notes the Wall Street Journal. Instead, Zimmerman had wall-to-wall counter space built in, with cabinets below for files and shelves above for regularly used items like pens. He moved extra paper and old files to the basement to cut down on clutter. Zimmerman tamed the jungle of electric wires from his fax, phone and printer by cutting a rectangular slot at the back of the counters and letting them hang down and drape along a lipped shelf on the wall below, six inches above the floor. He tried out his office chair for 30 days, disclosing that many catalog companies will let you return chairs after a tryout. To reduce glare on his computer monitor, Zimmerman installed a dimmer on the overhead light, uses nonflickering xenon tubes above his work space, and places his monitor perpendicular to the room's window.
WHAT DO BUYERS WANT ANYWAY: If looking at single-family homes, they generally prefer sophisticated landscaping that incorporates large leafy, evergreen and colored plants, according to results of recent research from Michigan State University, says Residential Specialist magazine. Design sophistication was the most important attribute, accounting for 40-45 percent of the value added to the home in each state. Plant size and plant sophistication followed in importance. The 2005 study included 1,323 volunteer participants, whose response suggested that attractive landscaping adds 5-11 percent to a home's base value.
A DROP IN SALES IS FORECAST: David Seiders, chief economist for the National Association of Home Builders (NAHB), says he expects new-home sales to drop 12 percent this year compared with a record 1.28 million units in 2005, according to Inman News. New-home sales in the first quarter of this year were down 10 percent from fourth-quarter 2005, and Seiders said he expects sales to ease further in the coming months before leveling off in 2007. He spoke at a National Association of Home Builders Construction Forecast Conference. "After topping out in the third quarter of last year, it is pretty clear that the housing sector is in a period of transition. Sales and starts are trending lower toward more sustainable levels," Seiders said. "Hopefully, most of this decline will be due to investors and speculators stepping out of the market. What we don't want to see is investors dumping homes on the market." In the view of Michael Moran, chief economist at Daiwa Securities America, "The housing sector is going through an adjustment, not a collapse." Added Jim Glassman, managing director and senior policy strategist with JP Morgan Chase: "Real estate is pricing itself back to reality, and in the long-run it is reasonable to expect starts in the 1.8 million to 2 million range." Home-price appreciation is expected to fall from an average 12 percent in 2005 to about 4 percent in 2007, Seiders said, and mortgage rates are expected to rise to 6.7 percent later this year. The rental market should regain some ground while the condo markets cools, he continued. According to Bernard Markstein, NAHB's director of forecasting, the forces driving housing demand vary significantly by region. Home prices, population growth, household formation and growth in employment opportunities are among the drivers, he said, and other factors include immigration and migration, energy prices, large-scale natural disasters such as Hurricane Katrina, and an area's appeal as a second-home location. Mark Zandi, chief economist for Moody's Economy.com, weighed in with a prediction that "nationally, house prices and supply will go flat in 2006, 2007 and 2008," implying that there will be some price declines in key markets and that markets are going to "correct, not crash." Markets where Zandi anticipates significant corrections – more than a 10 percent peak-to-trough decline – are in the Northeast, the Mid-Atlantic, Florida, California, parts of Arizona, and Las Vegas. "Any fundamental rise in interest rates will bite hard," Zandi said. "The rise will lock out two key groups that are important to local and regional markets: first-time home buyers and investors." He said home prices in much of the Washington region will likely drop 10 percent or more because prices have far outpaced affordability for first-time buyers and investors, according to the Washington Post. Condominiums will be hardest hit, Zandi declared, saying that there are no hard data to pin down how far prices might fall or how the prices of single-family houses would be affected, compared with condos. In an interview later, he said that the growing inventory of condo units that are for sale or being built here suggests that the slide would be worse for that sector. "I could say roughly that prices would fall about zero to 5 percent for single-family homes and about 15 to 20 percent for condos," he said. He's been wrong before, often, though no one can say that he is now.
THEY'RE YOUNG, RICH . . . AND RISK-AVERSE: Maybe it is time to update that F. Scott Fitzgerald quotation about the rich being different from you and me, suggests the New York Times. It turns out that the young rich are especially different - at least when it comes to the way they invest. Northern Trust surveyed 1,014 wealthy households - those with more than $1 million in investable assets - headed by someone 35 or younger and found they had doubts about the American equities markets. "One-fifth of the young investor's portfolio lies in cash, compared to only 13 percent for all high-net-worth portfolios," Marshall Eckblad reports in Financial Planning. "Wary of more domestic volatility and scandal, the wealthy young allocate only 29 percent of their funds to U.S. equities, compared to 41 percent of the whole." They are also more partial to real estate: While only 6 percent of all respondents said they planned to put most of their new money into real estate in 2006, 21 percent of those under age 35 viewed real estate as their first choice.
OH PLEASE, MR. TRUMP, YOU'RE TIRED: Love seats by the Donald, curved couches that are hard to place in square rooms and neutrals that actually are colors are some of the design directions creating buzz this week at the International Home Furnishings Market, reports the Wall Street Journal. The massive twice-a-year trade show is the largest wholesale home-furniture show in the world, and with 90 percent of U.S. home-furnishings retailers attending, it sets the stage for what stores will sell this fall. Because new-home buyers are thought to drive more than half of the market, "there is an underlying, unspoken fear of what is to come," says Michael Kaplan, owner of a third-generation, custom-furnishings business in Philadelphia. Thus, attempts to reinvent the wheel. The clean lines and minimal detail of midcentury modern continue to be popular, but now makers are adding curves to give these designs a more feminine look. Manufacturers are introducing sofas shaped like a giant letter C or even an O. While the shape is attention-getting and can be comfortable to sit in, these sofas pose a decorating challenge: They won't fit flat against a wall. On the color front, dull is hot. In addition to the new neutrals - many of which seem like renamed colors - another hue is getting a push: brown. "This is the most brown I've seen ever at this show," says Gary Stewart, a designer from Louisville, Ky. Meantime, the craze for furniture that carries celebrity names continues to attract new players - even Donald Trump plans to jump in - although the trend seems to be losing some steam with consumers. Trump is near a deal with a department-store chain to sell furniture named after the real-estate developer, says Trump Organization spokeswoman Cathy Glosser. The line will include tables, chairs and love seats (especially love seats?) as well as office furniture, she says, declining to name the chain that will sell them or the company that will make them. Let's hope this is the last of it.
A KEY MARKET INDICATOR TAKES A TUMBLE: Pending U.S. home sales have slowed as interest rates continue to rise, the National Association of Realtors (NAR) has had to acknowledge. The Pending Home Sales Index, based on contracts signed in March, eased 1.2 percent from February. It is 6 percent below March 2005. The index is derived from pending sales of existing homes. Commented David Lereah, NAR's chief economist: "Home sales rebounded from the slide that started last fall, but the pending sales data is showing a dampening effect from rising mortgage interest rates that have been trending up since January. This means a modest slowing can be expected in the sales pace in the months ahead, although the market will hold at historically strong levels."
DO YOU HAVE A HAMMER: In the last 12 months, American homeowners spent about $155 billion on remodeling, an increase of more than 4 percent over the previous 12-month period, despite rising interest rates, says Kermit Baker, senior research fellow at the Joint Center for Housing Studies at Harvard, according to the New York Times. Yet Baker and other experts say there is little research into the returns that American homeowners get on that investment. The most widely quoted figures come from a construction trade magazine, Remodeling, publishes the Cost vs. Value Report. Noted in Realty Digest previously, the report found that a minor kitchen remodeling would cost $14,913 and return 98.5 percent of that investment when the house was sold. Adding a midrange master bedroom suite, with a walk-in closet and dressing area as well as a bathroom, would cost $73,370, with only 82.4 percent of that being recouped. A modest bathroom redo, costing $10,499, could earn back 102.2 percent of the investment, Remodeling said. But researchers at the Harvard center "threw up their hands" after trying to determine the return on investment of remodeling projects, said Baker. "How a bathroom renovation affects value depends on a lot of things that are hard to quantify," he observed. "To do it well, you need neighborhood level estimates, but that would be very difficult." For instance, the magazine estimates that it would cost $22,977, with an 86.4 percent return, at best to add a bathroom. But agents may say that a house with one bathroom in a neighborhood where two bathrooms is the norm is at a disadvantage when the house goes on the market. Baker added that the homeowner might then see a good return on the investment by making the house competitive, though a third bathroom might get little return. What the Remodeling magazine data show is just how few projects yield a positive rate of return. Of the 22 projects it analyzed, only two - an upper-range siding replacement and the modest bathroom remodeling - would make money. That suggests that remodeling projects ought to be regarded not as a creator of value, but as a consumer product, like a car or purse, that appeals to taste and style.
THERE IS MORE THAN ONE WAY TO SPELL S-T-A-T-U-S: Coinciding with the invasion of foreign appliance manufacturers - everything from the Chinese company Haier at the low end to the German companies Miele and Bosch at the top end - high-end German companies are shaking up the American market for kitchens and appliances, reports the New York Times. Homeowners who once preferred Formica counters, linoleum floors and white appliances are increasingly opting for the Euro look: straight lines, expensive wood veneers, granite countertops and sparkling stainless steel. And thanks to the spread of these über-kitchens and their high-end American counterparts such as the cabinet maker Wood-Mode, European appliances also have been marching steadily into the American home. Companies such as Bosch-Siemens and Miele are thriving. "The United States and North America belong to our high-growth regions," said Theodor Siepert, a spokesman for Miele. "We even have innovations like a 30-inch oven developed especially for the American Thanksgiving turkey." The stakes are rising: Americans are expected to spend $79 billion to remodel kitchens this year, a 16 percent leap from last year, according to Lyle Landon, publisher of Kitchen and Bath Business. Consumers pay more for such styling and cachet, of course, sometimes a lot more. Some Miele dishwasher models, for instance, sell for up to $1,900. The manufacturers stand out in the crowded market by connecting with earlier German design movements. "Design is not for design's sake," said Vanessa Trost, the spokeswoman for Gaggenau, an appliance unit of Siemens. "We are in the Bauhaus tradition: every element of design has to fulfill a function."
PANSIES AND PETUNIAS AND POPPIES, OH MY: Pick 'em out at Flower Mart 2006 at the Washington National Cathedral, where the All Hallows Guild will celebrate its 90th anniversary with a show themed "Flowers from around the World," even carnivorous plants – yum. The free event runs Friday, May 5 and Saturday from 10 a.m. to 5 p.m. More info: 202-537-3185.
TITLE INSURERS FACE SCATHING CRITICISM: Homeowners title insurance and "affiliated business" joint ventures among title agents, realtors and lenders have come in for withering criticism at a House financial services subcommittee hearing, according to Kenneth Harney in Realty Times. State and federal regulators, consumer groups and even a title agent from Minnesota charged that widespread illegal kickbacks, sham and "shell" companies have led to excessive title fees for millions of home purchasers. Representatives of the title and affiliated settlement industries disputed the claim that fees are too high, but generally applauded state and federal regulators' efforts to crack down on illegal kickback schemes. Federal law prohibits realty settlement kickbacks or provision of "anything of value" in exchange for referrals of consumer business. A consumer group representative, J. Robert Hunter of the Consumer Federation of America, broadened the focus of the hearing to the huge revenues paid by home purchasers and refinancers compared with the claims paid out by title insurers. Hunter, a former Federal Insurance Administrator, said consumers spent $17 billion on title premiums last year - twice what they paid in 2000 and four times what they spent in 1995. Claims paid out by insurers were about 5 percent - compared with 86 percent of premiums for HMOs and 60 percent for auto insurance. Equally significant, said Hunter, is the fact that 80 to 92 percent of the premiums paid for title insurance go to middlemen - title and settlement agents, escrow agents and lawyers - who in turn often split their fees with affiliated realty and mortgage partners.
PERMITS FOR NEW HOUSING ARE LOWER HERE THIS YEAR: Local governments issued them for 8,154 units in the region for the first quarter versus 8,455 during the same period last year, according to the Washington Post. Issuance has been declining since 2003. Permits for single-family homes declined 14 percent, to 5,464, while those for condos and apartments in buildings with five or more units jumped 32 percent, to 2683.
HERE'S A DO-IT-YOURSELF PROJECT TO AVOID LIKE THE PLAGUE: One Emily Pilloton has come up with something called the Human Nest chair, which is upholstered in scraps of fabric that she scavenges from discards, sometimes found on the street, says the New York Times. Inviting! Layered with well over 1,000 scraps of recycled textiles, the $1,800 conical chair is not meant solely to help its owners take refuge from the world. In addition to providing a place to rest, the Human Nest is a wry commentary on the worrisome issue of environmental sustainability. Pilloton says she was struck one day by the ways in which birds repurpose detritus - twigs, leaves, discarded coffee cups - as the building blocks of their nests. She was intrigued not only by the environmental soundness of this strategy, but also by how nests are constantly updated with fresh materials even after eggs have been laid. "I wanted to make a sort of framework that a user could contribute to and make their own," said Pilloton, who lives in Chicago. "That way you sort of age with it, and it becomes this modern heirloom." In her dreams. It took this birdbrain six months to layer 40 yards' worth of fabric strips onto the chair's bamboo frame. "I tied them into the very center of the bowl, so they came out like flower petals," she said. Once every inch of the frame was covered, she stuffed even more fabric into the chair's center, to act as cushioning. Over time, however, that makeshift cushion tends to lose some of its softness. When that happens, Pilloton suggests that the owner cut up old T-shirts into three-inch-wide strips and stuff them into the chair. What fun! If you want such chair, the Digest's little chickadees will get no help finding her Web site from this quarter. Is she on crack?
MARTHA, MARTHA, MARTHA: Martha Stewart's partnership with KB Home attracted 3,400 interested consumers during its opening weekend and sold out its first 100-home phase in Cary, N.C., within a week, reports the Atlanta Journal Constitution in Realtor magazine. First-time home buyers Rob and Amy Joyce were among the buyers of the Katonah model in the mid-$200,000s. "Her designing style is impeccable. You just can't argue with that," says Rob Joyce, who designs home theater systems for a living. KB Home plans other communities in Atlanta; Charlotte, N.C.; Houston; Daytona Beach, Fla.; and Las Vegas, Nev. Closets in the Martha Stewart homes are spacious, especially in the larger models. Kitchens and pantries offer glass-front doors and high-showcase cubbies for collectibles or china. There are no jail cells in these homes. Other designer-home builder duos are hoping on the bandwagon. Estridge Homes in Indianapolis has partnered with former supermodel Kathy Ireland. Can't wait.
JUST SIGN ON THE BOTTOM LINE IF YOU DARE: With rates on home-equity lines of credit at a five-year high, demand is slowing, so lenders are aiming to keep their business growing with new promotions, rate cuts and other offers, says the Wall Street Journal. Wells Fargo launched a new program last month that cuts the rate on home-equity loans and lines of credit by between 0.375 and 0.5 of a percentage point for customers who also have a Wells Fargo checking account. Bank of America is sending out "customer reward" certificates that give borrowers up to half a percentage point off their rate if they take out a home-equity line of credit. PNC Financial Services Group is offering $25 PNC Bank Visa gift cards - and, in some cases, two free airline tickets - to borrowers who take out a new home-equity loan or line of credit. Many lenders are also pushing fixed-rate home-equity options. Last week, Regions Financial introduced a fixed-rate home-equity loan with a term of up to 15 years. Before that, the Birmingham, Ala., bank's fixed-rate loans required borrowers to make a balloon payment at the end of five years. Yet if housing values fall, some home-equity borrowers could wind up owing more than their house is worth. And homeowners with credit lines are vulnerable to rising interest rates, which can make their monthly payments higher. SunTrust says that about a quarter of its borrowers are now opting for a fixed-rate home-equity loan, up from 10 percent a year ago. At Wachovia Corp., 40 percent of customers are choosing fixed-rate home-equity loans, compared with 30 percent last year. Meanwhile, lenders such as J.P. Morgan Chase & Co. and Bank of America are touting newly popular features that let borrowers lock in a fixed rate on some or all of their line of credit. This fixed-rate option "is the largest weapon in our arsenal" when it comes to retaining customers, says Brad Conner, president of Chase Home Equity.
MORTGAGE APPLICATIONS ARE ON THE RISE: The Mortgage Bankers Association says that, for the week ended April 2, volume increased by 8.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the growth was 9.6 percent compared with the previous week, but applications dropped 15.6 percent in contrast to the year before. Seasonally adjusted, purchase volume went up by 11.3 percent from the previous week, and refinancings gained 5.1 percent. The refinance share of mortgage activity decreased to 35.2 percent of total applications from 36.7 percent the previous week, which is the lowest share since June 25, 2004, and the adjustable-rate mortgage (ARM) share edged up to 28.3 percent from 28.2 percent.
CASH OUT IS GROWING IN POPULARITY: In the first quarter of 2006, 88 percent of Freddie Mac-owned loans that were refinanced resulted in new mortgages with loan amounts that were at least five percent higher than the original mortgage balances, according to Freddie Mac's quarterly refinance review. This percentage is up from the fourth quarter of 2005, when the share of refinanced loans that took cash out was a revised 81 percent, and the ratio is the highest since the third quarter of 1990. Said Frank Nothaft, Freddie Mac vice president and chief economist: "Almost no one is refinancing to reduce their interest rate in today's environment. In fact, the first quarter of 2006 is the first time in 20 quarters in which the new mortgage rate was higher than the old one for more than half of refinancing borrowers. One reason why homeowners may be willing to increase the mortgage rate on their first-lien mortgage is because interest rates on most home equity lines of credit have been pushed up again as the Fed increased short-term interest rates in January and March, which in turn pushed up the prime rate." Nothaft added that the $244 billion in cash taken out of home equity will fall to an estimated $170 billion from the refinancing of first-lien, prime, conventional mortgages in 2006. Freddie Mac expects the refinance share of mortgage applications to fall to around 36 percent and home prices to grow at an average rate in the single-digits nationally in 2006, slowing from the 13 percent rate seen in 2005. Deputy Chief Economist Amy Crews Cutts noted that the first quarter of 2006 was the first time in five years that more than half of borrowers increased their mortgage rates when they refinanced, saying, "The difference is small enough that the average borrower's mortgage payment barely changed, but it is a significant turn from the trend of significantly lower payments that we came to enjoy since the start of 2001."
D.C. COUNCIL PONDERS END TO RENT CEILINGS: The legislative body takes a final vote next month on a measure approved unanimously to overhaul the rent control system, reports the Washington Post. The bill would tightly limit yearly rent increases and cap at the rate of inflation increases for seniors and disabled individuals. For vacant apartments, increases would be held to no more than 30 percent. For renters, the top rise would be 2 percent plus inflation.
UP INCH MORTGAGE RATES ONCE AGAIN TO A FOUR-YEAR PEAK: The 30-year fixed-rate mortgage (FRM) averaged 6.59 percent for the week, up from last week's of 6.58 percent and last year's 5.75 percent. The 30-year FRM has not been higher since the week of June 20, 2002, when it averaged 6.63 percent. The 15-year FRM this week was 6.22 percent, also up a bit from 6.21 percent last week and much more than 5.31 percent a year ago. The 15-year FRM has not been higher since May 24, 2002, when it averaged 6.28 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were unchanged at 6.21 percent this week and up from 5.16 percent the same week of 2005. One-year Treasury-indexed ARMs were 5.67 percent this week, down very slightly from last week's 5.68 percent. At this time last year, the one-year ARM averaged 4.22 percent. Said Frank Nothaft, Freddie Mac vice president and chief economist: "We expect that mortgage rates will continue to trend upward over the coming year, but that upward trend will be modest at best. Meanwhile, with gradually rising rates, refinance activity can be expected to shift. Fewer families will be refinancing, but of those who are, a larger percentage will be drawing some equity out of their homes, many to pay off previously existing home equity loans and lines of credit as those loans become more expensive."
TAKE IT FROM NEAL ZIMMERMAN: When relocating his home office, the architect and author of "Home Workspace Idea Book," stayed away from bulky commercial office furniture, notes the Wall Street Journal. Instead, Zimmerman had wall-to-wall counter space built in, with cabinets below for files and shelves above for regularly used items like pens. He moved extra paper and old files to the basement to cut down on clutter. Zimmerman tamed the jungle of electric wires from his fax, phone and printer by cutting a rectangular slot at the back of the counters and letting them hang down and drape along a lipped shelf on the wall below, six inches above the floor. He tried out his office chair for 30 days, disclosing that many catalog companies will let you return chairs after a tryout. To reduce glare on his computer monitor, Zimmerman installed a dimmer on the overhead light, uses nonflickering xenon tubes above his work space, and places his monitor perpendicular to the room's window.
WHAT DO BUYERS WANT ANYWAY: If looking at single-family homes, they generally prefer sophisticated landscaping that incorporates large leafy, evergreen and colored plants, according to results of recent research from Michigan State University, says Residential Specialist magazine. Design sophistication was the most important attribute, accounting for 40-45 percent of the value added to the home in each state. Plant size and plant sophistication followed in importance. The 2005 study included 1,323 volunteer participants, whose response suggested that attractive landscaping adds 5-11 percent to a home's base value.
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