Items of Interest - June 10, 2006
HOME PRICE GROWTH SLOWS IN FIRST-QUARTER: Freddie Mac says its quarterly national Conventional Mortgage Home Price Index (CMHPI) rose 8.7 percent in the first quarter of 2006 on an annualized basis, down from a revised fourth quarter of 2005 annualized rate of 12.9 percent and a third quarter 2005 growth rate of 13.7 percent. "Home prices are starting to feel the effects of the upward trend in mortgage rates," said Frank Nothaft, Freddie Mac vice president and chief economist. He added that the trend continued during the first quarter, with 30-year fixed mortgage rates climbing from an average 6.15 percent in January to 6.32 percent in March, according to the Primary Mortgage Market Survey. Rates on adjustable-rate mortgages rose even faster, with the introductory rates on 1-year Treasury-indexed ARMs rising from an average of 5.16 percent at the start of the year to 5.51 percent by the end of March. "We have seen a lot of mixed news with respect to the housing market in the past few months. Construction employment, which had been one of the reliable growth sectors, was relatively flat throughout the first quarter," the economist continued. "But a gradual and orderly slowing of the housing market has been anticipated for some time now as we come off of record high sales and single-family home construction. We anticipate about a 7 percent decline in home sales this year and a transition from a sellers market to a buyers market." Nothaft said that the first quarter of 2006 marks the third consecutive quarter of moderation in home-value growth. "We are expecting about half of the increase that we saw in the national average home-value appreciation in 2005 for 2006, which puts annual home price growth between six and eight percent, depending on how fast interest rates rise over the remainder of the year," he opined. Nationally, home values increased 12.7 percent from the first quarter of 2005 through the first quarter of 2006, down from the 12.9 percent annual growth seen over the four quarters ended in March 2005.
RATES MOVE DOWN FOR A CHANGE: The 30-year fixed-rate mortgage (FRM) averaged 6.62 percent for the week, down from last week's 6.67 percent and up from last year's 5.56 percent, according to Freddie Mac. The 15-year FRM this week was 6.23 percent, down from of 6.26 percent last year. A year ago, it averaged 5.14 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were 6.20 percent this week, versus 6.26 percent last week and 5.01 percent a year ago. One-year Treasury-indexed ARMs averaged 5.63 percent, down from last week, when it was 5.68 percent. At this time last year, it was 4.21 percent. "Mortgage rates are down a little this week on news of disappointing job growth in May coupled with downward revisions for the previous two months," said Frank Nothaft, Freddie Mac vice president and chief economist. "The slight drop in long-term rates reflects a cautiously optimistic outlook in the market that core inflation remains contained. The soon-to-be released Producer Price Index (PPI), followed by the Consumer Price Index (CPI), will give a better indication which way inflation is headed."
REALTORS GROUP SOFTENS FORECAST: The housing boom has ended, but sales at historically healthy levels will continue and price appreciation will return to normal patterns across much of the country, according to the National Association of Realtors (NAR). Said David Lereah, NAR's chief economist: "Now the housing market has cooled, but 2006 still expected to be the third strongest on record. In this case, experiencing a slowing from a hot market is a good thing because we need a solid housing sector to provide an underlying base to the economy, and slower appreciation will help to preserve long-term affordability." He projected existing-home sales to drop 6.8 percent to 6.6 million this year from the record 7.08 million in 2005. New-home sales are forecast to fall 13.4 percent to 1.11 million from a record 1.28 million in 2005. Housing starts are likely to decline 6.2 percent to 1.94 million in 2006 compared with 2.07 million last year, the economist says. Lereah added that the national median existing-home price for all housing types should rise 5.3 percent this year to $231,300. With more construction in 2006 taking place in lower-cost housing markets, the median new-home price is projected to increase 0.8 percent to $242,900. "Historically, home prices rise 1.5 to 2 percentage points faster than the rate of inflation, so the rise we anticipate in existing home prices this year is actually a little above the high end of historic norms," Lereah said. "The double-digit home price gains we saw in 2005 underscore what a superlative year it was."
NOT ONLY ARE THEY PRETTY, BUT YOU CAN EAT (!) THEM: At Brookside Gardens on Saturday 10 a.m. -4 p.m. , the annual herb fair includes vendors, who are not to be consumed, with plants for sale as well as the culinary and therapeutic products of herbal plants. The address is 1800 Glenallan Ave., Wheaton, and the Web site is brooksidegardens.org.
BUILDER CONFIDENCE IN RENTAL MARKET SOARS: It reached a new high in the first quarter of 2006 as rising occupancies and rental rates pointed to increased consumer demand, according to new results of the National Association of Home Builders/Fannie Mae Multifamily Housing Market Index (MMI. The same survey also found that multifamily builders are less optimistic about the market for condos, which is in the midst of a cooldown. Chief Economist David Seiders of the National Association of Home Builders (NAHB) said the slowdown in the condo sector is because of serious affordability problems as well as a pullout by the investors who drove the market to unsustainable heights last year. "The changing supply-demand balance in the condo segment means that this component of the multifamily sector is slowing to a more sustainable level," Seiders said. Yet the index tracking condo supply dipped sharply in the first quarter of 2006, down to 37.0 in the first quarter of 2006 from 66.9 at the same time last year. The index tracking builders' expectations for condo starts over the next six months also dropped, from 54.0 in the first quarter of 2005 to 46.0 in the first quarter of this year. The indexes tracking builder expectations for all classes of rental apartments all moved higher, with each at 50 – the line between optimism and pessimism - or above.
IF YOU'RE A VEGAN, SKIP THIS ITEM: Aiming to help homeowners who want to add warmth to their modern and often-cold interiors, retailers and urban decorators are pushing an unusual solution: stuffed dead animals, the Wall Street Journal observes. Over the past year, boutiques and high-end department stores have begun adding everything from $450 deer heads to $25,000 zebras. Taxidermy shops report they're selling more pieces to people other than those who shot them. Many members of the new taxidermy class have never picked up a rifle, and are, in some cases, vegetarians. Since last fall, when Parisian taxidermist Deyrolle teamed up with New York department store Bergdorf Goodman, the store has sold pieces including a $19,500 ostrich. (Offerings on the store's housewares floor also include a $795 black crow and a goose for $2,595.) Later this year, Barneys New York will introduce a line of mounted birds - from $700 exotic finches to $3,400 peacocks - in its Manhattan store. There's at least a six-month wait for 12-point buck mounts at Animal Artistry in Reno, Nev. "They fly in here from San Francisco or Seattle to get these things," says Stuart Farnsworth, the store's general manager. "A few years ago, we couldn't give that stuff away." Cynthia Vincent, a fashion designer, fielded some grousing after she added animals to her two-story contemporary Los Angeles home last year. A 4-foot English pheasant stands on her living room coffee table, and two swifts are mounted side by side near a bay window. Her favorite is a free-standing 2-foot-tall partridge on a bookshelf in the home's entryway. More than one friend told her the décor was "a little peculiar," she says. "Some of them thought it was ugly." No comment.
HOMEOWNER EXPECTATIONS OF VALUE MEET REALITY: They have declining expectations for increases in home value, according to an annual survey conducted for ING Direct, reports Inman News. Homeowners who participated in the survey said their home has increased in value by about 6 percent over the past 12 months, and they expect their home's value to increase by about 4 percent in the next 12 months. Approximately 74 percent of respondents who have owned a home for at least three years also said they "were not very concerned that there might be a downturn in the housing market in the next year, which would lower the value of their home." Two-thirds estimated that even a 10 percent decrease in home value would have no impact on day-to-day spending. Synovate, a market research arm of Aegis Group, conducted a telephone survey in April and May 2006 of 1,000 respondents using a continental U.S. Census-balanced group of homeowners with residential telephone numbers. In addition, respondents who indicated that closing costs were higher than they had expected said the difference was nearly $600 higher.
KATIE COURIC HAS YET ANOTHER REASON TO BE PERKY: She just paid close to $6.3 million for a seven-bedroom, six-bath cedar-shingle house in the tony Long Island resort community of East Hampton. Given driving conditions on the Long Island Expressway, you can be sure that she won't be commuting from there.
A NOVEL, IF QUESTIONABLE, WAY EMERGES TO AVOID TAXES: The soaring real-estate prices of the past few years are helping to feed the popularity of a complex tax-savings technique called a "private annuity trust," notes the Wall Street Journal. The strategy is being promoted as a way for investors to defer hefty capital-gains taxes on the sale of highly appreciated assets - especially real estate - and save on estate taxes while also generating a stream of income. In a private annuity trust, you essentially exchange appreciated assets for fixed annuity payments, which spreads out your capital-gains taxes over many years. Private annuity trusts can cost anywhere from about $3,000 to well over $10,000 to set up, plus additional administration and investment fees that can run upwards of 1 percent of trust assets. In a typical arrangement, you sell appreciated assets to a trust in exchange for a series of fixed annuity payments that last for the rest of your life. The trust then goes ahead and sells the appreciated asset to an end buyer. The cash proceeds are invested by the trust, and are used to fund your annuity payments. By selling the property in exchange for an annuity, you avoid paying the upfront capital gains that you would have owed if you had simply sold the asset outright. Instead, you are taxed on the annuity payments when they come out of the trust, which spreads out the taxes over a longer period of time. What's more, you can defer receiving the annuity payments for years, thereby further postponing your tax payments. The strategy also has estate-planning benefits. When you die, the annuity payments stop and whatever is left over in the trust is considered out of your estate and isn't subject to estate taxes. The annuity payments you receive during your lifetime are considered part of your estate unless you spend down the money. However, the strategy is on the IRS's radar screen. The agency doesn't like arrangements in which sellers continue to control trust assets or properties that were purportedly sold. The IRS is also concerned that, before the trust is even set up, a buyer has already contractually agreed to take the property. In that case, the government could ultimately view the trust as an improper shelter, set up chiefly to avoid immediate capital-gains taxes rather than providing real economic substance.
A PIED-A-TERRE THIS IS NOT: Anyone who wants to tour the house with the highest asking price in the country will first have to prove a net worth of $500 million or an annual salary of $10 million, reports the Los Angeles Times in Realtor magazine, failing to note that anyone so wealthy would be unlikely to bruit it about. The house is a 30,000-SF mansion known as Portabello perched on a cliff in Corona del Mar, Calif., south of Newport Beach. It's priced at $75 million. Some local real estate professionals are shaking their heads. ''Every agent in town is talking about it,'' says real estate associate Mark Whitehead, who sells homes in Corona del Mar. "It's a joke. It's an image thing. It's an ego trip to sell the most expensive home on the market.'' Bill Cote, owner of Cote Realty Group in Newport Beach, said Portabello's asking price is 300 percent more than the highest amount paid for an Orange County home. Listing agent John McMonigle released a statement saying that the house was reasonably priced considering that the land was worth $45 million and it would cost up to $1,500 per square foot to rebuild the home. The estate belongs to Frank Pritt, who in 1982 founded software maker Attachmate Corp., a large privately held technology company in Bellevue, Wash.
INSURANCE MAN BITES DOG: There is a push by lawmakers and animal-welfare groups to ban the growing insurance-industry practice of refusing to write homeowners' policies for people who own dogs of certain breeds, observes the Wall Street Journal. Some big insurers, including Allstate and Farmers Insurance Group, won't cover homes in some states if certain breeds are present. Others exclude the breeds from liability coverage or charge extra for it. The so-called vicious-breed lists include such popular pooches as German shepherds, Akitas and Siberian huskies, along with Alaskan Malamutes, Chow Chows, Doberman Pinschers, American pit bull terriers and their cousins. The insurers' practice is spurring rising complaints by dog owners that their homeowners' and renters' policies have been dropped, or they have been denied coverage, because their dog is on the list. They say the rules unfairly link well-behaved family pets with aggressive miscreants responsible for high-profile attacks. Dogs bite an estimated 4.7 million people in the United States annually, 800,000 seriously enough to require medical attention. About 40 percent of victims are children. Dog bites were responsible for $317.2 million in claims in 2005, an average of more than $21,000 each. They make up 15 percent of liability claims, which in turn are about 4 percent of total claims, according to the Insurance Information Institute. Some insurers cite a 2000 study conducted by the Centers for Disease Control and Prevention of 20 years of fatal attacks by dogs on humans. It found that pit-bull-related breeds and Rottweilers were involved in more than half of the 238 dog-attack deaths between 1979 and 1998. But the study's authors, including Julie Gilchrist, say that public and private policymakers have drawn flawed conclusions from it. Dr. Gilchrist said the study wasn't designed to determine which are the most dangerous dog breeds and didn't establish bite-fatality rates for the breeds it named. "You can't say that one breed is more likely to bite (than another)," she said. Dr. Gilchrist, a pediatrician, said the involvement of some breeds in more attacks may reflect the sheer prevalence of those breeds. Other factors, such as training and neutering, are more relevant than breed, she said, noting that owners choose and train some dogs for aggression. The CDC has posted a notice on its Web site trying to discourage lawmakers and others from using the study to ban specific breeds. Not every insurer limits coverage for owners of certain breeds. State Farm and Fireman's Fund are examples. But Farmers Insurance excludes several dog breeds from coverage in five of the 41 states in which it does business. Nationwide also has a list of banned breeds, but owners can be exempted by having their dog pass an American Kennel Club-approved "Canine Good Citizenship" test, though probably not by reciting the Pledge of Allegiance.
WATCH OUT FOR HIGHER HOME HEATING OIL PRICES: Expect the price of heating oil to cost about 45 percent more next winter than it did last winter, heating oil companies say, according to the Associated Press in Realtor magazine. In Concord, N.H., where summer is short and winter comes early, oil companies are already filling customers' tanks. They say customers who lock in now will pay about $2.60 per gallon, up from $1.85 per gallon last year. That translates into an additional $600 to heat the average home.
IS IT THE END OF THE ROAD FOR THE CUL-DE-SAC: For many families, cul-de-sac living represents the epitome of suburban bliss: a traffic-free play zone for children, a ready roster of neighbors with extra gas for the lawnmower and a communal gathering space for sharing gin and tonics, reports the Wall Street Journal. But thanks to a growing chorus of critics, ranging from city planners and traffic engineers to snowplow drivers, hundreds of local governments from San Luis Obispo, Calif., to Charlotte, N.C., have passed zoning ordinances to limit cul-de-sacs or even ban them in the future. While homes on cul-de-sacs are still being built in large numbers and continue to fetch premiums from buyers who prefer them, the opposition has only been growing. The most common complaint: traffic. Because most of the roads in a neighborhood of cul-de-sacs are dead ends, some traffic experts say the only way to navigate around the neighborhood is to take peripheral roads that are already cluttered with traffic. And because most cul-de-sacs aren't connected by sidewalks, the only way for people who live there to run errands is to get in their cars and join the traffic. For all the criticism aimed at them, cul-de-sacs do seem to have one last defender: the free market. Real-estate brokers say that despite the recent opposition by policy makers, homes on cul-de-sacs still tend to sell faster than other homes - and often command a comfortable premium.
HOMEOWNERS, RENTERS DIFFER ON CREDIT MANAGEMENT: More than 81 percent of homeowners and 65 percent of renters believe that they manage their credit extremely well, according to a survey of more than 1,200 persons conducted by the Mortgage Bankers Association (MBA). The survey on consumer credit habits also revealed that 54 percent of renters feel that they have more debt than they should in comparison with 39 percent of homeowners. While renters report that they are generally familiar with important mortgage terminology, homeowners are significantly more knowledgeable about these mortgage terms. Of the renters surveyed, 45 percent say that they are considering buying a home in the next year or two.
ADVICE FOR HOME SELLERS: Steer clear of renovations that will cost you money at resale time, counsels the Wall Street Journal. If you want an edge over other home sellers in an iffy market, here's what not to do: Trying to keep up with the Joneses is fine, but don't keep outdoing neighbors with additions unless you plan to stay put a long time; don't change the general architecture of the home, and make sure that renovations match; think hard about completely altering the purpose of a room is risky since they were built that way for a reason; be extremely confident you're capable of taking on a project before trying to do it yourself; don't underestimate how much projects will cost because expenses usually are added, not subtracted when remodeling for resale; don't waste time with renovations that won't pay off; and perform proper maintenance and annual upkeep.
FALTERING MARKET CLAIMS TWO MAJOR CONDO PROJECTS: Citing slow sales and a cooling real estate market, two major developers are abandoning plans for two condominium projects in the Washington region, according to the Washington Post. The decisions, by District-based Monument Realty and Wood Partners of Atlanta, are among the strongest signs yet of how much - and how quickly - the market for new condos has changed here. Monument said it would not go forward with its plan to convert the three-building, 574-unit Park Center apartment complex in Alexandria to condos. Wood Partners said that it would continue building its 300-unit 1901 West building in Annapolis but that the apartments would be rentals, not condos as planned. Together the two projects would have cost $226 million, according to the developers. Thus, as double-digit housing-price appreciation cools in many markets, rental apartments once seen as ripe for conversion into more lucrative condominiums are beginning to return to their roots. Said Gregory H. Leisch, chief executive of Delta Associates, a real estate consulting firm in Alexandria: "It's a precursor of more to come." He estimated that developers would take 1,200 more units out of the pipeline by year-end. About 25,000 condo units are being marketed now, 16,000 of which are under construction, according to Delta. And the Wall Street Journal observes that buildings converting to condos across the nation are in jeopardy of failure as well. Michael Cohen, a research strategist at Boston real-estate analysis firm Property & Portfolio Research, dubs the reversions "repartments." "It's definitely becoming a problem," he says. "Some of these projects probably don't look as attractive as they did six months ago when developers were buying the conversions." So far, the reversions are dwarfed by the number of units that have been converted into condos in recent years. But an emerging trend is evident as developers stuck with slow-selling condo units struggle to recoup part of their investment and as tenants gripe about being caught in the middle when their building swings from apartments to condos and back again. In south Florida - where the condo-conversion craze has been particularly frenzied - eight converted complexes containing 2,156 units have reverted to rentals in Broward and Palm Beach Counties, according to Jack McCabe, chief executive of McCabe Research & Consulting in Deerfield Beach, Fla. That compares with about 62,904 units that have been converted or have begun to be converted into condos in the area since 2004, he adds. McCabe expects the trend to spill over to San Diego, Washington, D.C., Las Vegas and Phoenix.
THE AFFLUENT VIEW REAL ESTATE AS LESS APPEALING: Although the wealthy continued to hold an average of 15 percent of their portfolios in real estate, the Associated Press reports that they are not as optimistic about future gains in this category as in the past. The information comes from a 2006 U.S. Trust survey that, since 1933, has been measuring the confidence of a sample of the top 1 percent wealthiest Americans - those with an adjusted gross income of more than $300,000 or a net worth greater than $5.9 million. Some 48 percent of the 2006 respondents think real estate values will increase over the next year, down from 72 percent who felt this way in 2005, the study found. The study involved in-depth telephone interviews with 150 randomly selected wealthy Americans, with results accurate to plus or minus 7 percent.
THE SOUTH AFRICAN MARKET REMAINS HOT: Sellers' markets are nothing new in South Africa, where demand for real estate - and the rise in prices - has been more robust this decade than almost anywhere, says the New York Times. But until now the boom was largely confined to middle- and upper-class homes. Now there are hints that it is spreading to an unlikely venue: townships, the ready-made slums erected by South Africa's former apartheid rulers to separate black and mixed-race citizens from whites. A recent survey by FNB Bank of South Africa concluded that for every township home put up for sale, there are 7 potential buyers in Johannesburg, 8 in Cape Town and 16 in Durban. Few homes come to market. In most townships the idea of selling one's home is still a novelty because most have traditionally been handed down to family members. But not for long. In the last 18 months, two of South Africa's biggest real-estate firms have moved into major townships and it is not hard to see why. "Take Beacon Hill," said Agenor Lureman, a principal in the Pam Golding Properties office in Mitchell's Plain. "A year ago, you could sell a house there for 80,000 or 90,000 rand. Today you can sell the same house for 140,000 rand." (That's the equivalent of $21,000.) Beacon Hill is in Mitchell's Plain, a sprawling township thrown up 30 years ago south of Cape Town to isolate mixed-race South Africans who had been forcibly removed from their homes in the city.
AND THE SKY LOOKS LIKE THE LIMIT IN MANHATTAN: Median sales prices for Manhattan cooperatives and condominiums increased 13 percent in the first quarter to $749,000 compared with first-quarter 2005, the Real Estate Board of New York (REBNY) reported, according to Inman News. The median price of condos gained 22 percent to $838,000, while the price of cooperatives grew 5 percent to $665,000. East Side apartments had median sales price increases of 24 percent to $876,000 between the two first quarters, the highest gain among all Manhattan neighborhoods surveyed. East Side condominium units had a 35 percent gain in median sales price, to $958,000. Downtown condominium units registered the highest median sales price, at $1.08 million. East Side and Mid-Manhattan cooperative units posted the highest percentage increase for cooperatives, with median sales prices up 13 percent. The East Side also had the highest overall median price for cooperatives at $799,000, REBNY reported. The price per square foot grew 21 percent to $1,036, for Manhattan condo units, 31 percent to $510 for Northern Manhattan condo units, and 25 percent to $1,061 for East Side condos. Median room prices for Manhattan cooperative units rose 13 percent to $196,000. Compared with first-quarter 2005, East Side median room prices were up 18 percent to $210,000, the highest price and percentage increase of the five major market areas.
MORTGAGE APPLICATIONS CONTINUE TO SLIDE: For the week ended June 2, volume decreased by 1.4 percent on a seasonally adjusted basis from one week earlier, according to the Mortgage Bankers Association. On an unadjusted basis, the decline was 11.7 percent compared with the previous week and 28.0 percent compared with the same week one year earlier. Seasonally adjusted, purchase applications edged up insignificantly, and refinancings dropped 3.8 percent. The Refinance Index is at its lowest level since April 2002. The refinance share of mortgage activity decreased to 34.2 percent of total applications from 34.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity fell to 29.4 percent from 30.7 percent.
APPRAISERS HOP ON THEIR BANDWAGON: In the last year, Kaplan Professional Schools, one of the largest trainers of real estate appraisers nationally, has seen a 10 percent increase in the number of people seeking instruction to become a licensed appraiser, says Realtor magazine. Besides a widespread growing interest in the real estate field, the number of people seeking training is up because a more stringent education requirement goes into effect Jan. 1, 2008 and hopeful licensees want to get in under the wire. Beginning in 2008, education hours for a licensed appraiser go from 90 to 150. A certified residential appraiser will be required to have 200 education hours, up from 120, and an associate degree will be mandatory. The education required of a certified general appraiser will rise from 180 to 300 hours and a bachelor's degree will be required. For many, education is the easiest part. The required 2,000-2,500 hours of appraising experience over a 24-30 month time period working for an experienced appraiser who will mentor, train and compensate apprentices for their work can be the most difficult.
HONEY, I'M HOME: As the potential buyers filed into the open house in Southern California, they gasped in surprise, reports Inman News. Instead of the traditional empty residence with a few pieces of tastefully arranged furniture, they discovered a family baking a cake. Like the tastefully arranged furniture and the cake in the oven, the family was part of the staging of the Centex model home in Santa Clarita, Calif. - completely fake. A public relations firm had hired actors to enact the skit. "There were a few moments of surprise and confusion," said Jim Garfield of California property public relations firm Roddan Paolucci Roddan, the company that created the concept. "But once people caught on, there was an embracing of the moment." Enuff said.
D.C. IS THE TOPS, ACCORDING TO A D.C. GROUP: The Washington area has the wealthiest households and most educated work force of any metropolitan area in the United States, according to a report the Greater Washington Initiative, which cites data from the U.S. Census Bureau, the Bureau of Labor Statistics, market data firm Claritas Inc and other sources, says Reuters. Including the District of Columbia, Maryland and Virginia, the region had the highest U.S. median household income, at nearly $72,800, ahead of the San Francisco area at $71,201 and Boston at $63,958. Housing costs in greater Washington were ranked fourth, with a 2005 median price of $424,700. San Francisco was highest at $715,700, followed by Los Angeles at $529,000 and New York at $446,000. But measuring total living costs among cities internationally, the report ranked Washington 78th, based on the W.M. Mercer Cost of Living Index for 2005. The most expensive city was Tokyo, while London was third and Paris, 12th. Greater Washington had the largest employment growth from 2000 to 2005, at 270,800.
GOOD NEWS AND BAD NEWS FOR GEORGE CLOONEY: The near-Las Vegas strip site of a proposed $3 billion condo and small casino project backed by actor George Clooney has been sold and plans for the project scrapped, according to the Associated Press in Realtor magazine. Clooney's business partner, nightclub owner Rande Gerber, told the news organization that the project wasn't shaping up to be profitable unless they added more casino and hotel space. "We're the largest developer of residential property in the country, and we saw ourselves getting away from what we do best," confirms Related Las Vegas President Marty Burger, which had partnered with Centra Properties and Clooney to build the project. Buyer deposits are being returned. Related and Clooney have sold the 25 acres to Edge Group for $202 million, twice what Clooney paid a year ago. Edge plans to build a more conventional hotel casino complex on the site. "I'll donate my profits from the sale to the African Debt Relief Project," Clooney said in a statement. "And I guess I'll find someplace else to gamble."
RATES MOVE DOWN FOR A CHANGE: The 30-year fixed-rate mortgage (FRM) averaged 6.62 percent for the week, down from last week's 6.67 percent and up from last year's 5.56 percent, according to Freddie Mac. The 15-year FRM this week was 6.23 percent, down from of 6.26 percent last year. A year ago, it averaged 5.14 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were 6.20 percent this week, versus 6.26 percent last week and 5.01 percent a year ago. One-year Treasury-indexed ARMs averaged 5.63 percent, down from last week, when it was 5.68 percent. At this time last year, it was 4.21 percent. "Mortgage rates are down a little this week on news of disappointing job growth in May coupled with downward revisions for the previous two months," said Frank Nothaft, Freddie Mac vice president and chief economist. "The slight drop in long-term rates reflects a cautiously optimistic outlook in the market that core inflation remains contained. The soon-to-be released Producer Price Index (PPI), followed by the Consumer Price Index (CPI), will give a better indication which way inflation is headed."
REALTORS GROUP SOFTENS FORECAST: The housing boom has ended, but sales at historically healthy levels will continue and price appreciation will return to normal patterns across much of the country, according to the National Association of Realtors (NAR). Said David Lereah, NAR's chief economist: "Now the housing market has cooled, but 2006 still expected to be the third strongest on record. In this case, experiencing a slowing from a hot market is a good thing because we need a solid housing sector to provide an underlying base to the economy, and slower appreciation will help to preserve long-term affordability." He projected existing-home sales to drop 6.8 percent to 6.6 million this year from the record 7.08 million in 2005. New-home sales are forecast to fall 13.4 percent to 1.11 million from a record 1.28 million in 2005. Housing starts are likely to decline 6.2 percent to 1.94 million in 2006 compared with 2.07 million last year, the economist says. Lereah added that the national median existing-home price for all housing types should rise 5.3 percent this year to $231,300. With more construction in 2006 taking place in lower-cost housing markets, the median new-home price is projected to increase 0.8 percent to $242,900. "Historically, home prices rise 1.5 to 2 percentage points faster than the rate of inflation, so the rise we anticipate in existing home prices this year is actually a little above the high end of historic norms," Lereah said. "The double-digit home price gains we saw in 2005 underscore what a superlative year it was."
NOT ONLY ARE THEY PRETTY, BUT YOU CAN EAT (!) THEM: At Brookside Gardens on Saturday 10 a.m. -4 p.m. , the annual herb fair includes vendors, who are not to be consumed, with plants for sale as well as the culinary and therapeutic products of herbal plants. The address is 1800 Glenallan Ave., Wheaton, and the Web site is brooksidegardens.org.
BUILDER CONFIDENCE IN RENTAL MARKET SOARS: It reached a new high in the first quarter of 2006 as rising occupancies and rental rates pointed to increased consumer demand, according to new results of the National Association of Home Builders/Fannie Mae Multifamily Housing Market Index (MMI. The same survey also found that multifamily builders are less optimistic about the market for condos, which is in the midst of a cooldown. Chief Economist David Seiders of the National Association of Home Builders (NAHB) said the slowdown in the condo sector is because of serious affordability problems as well as a pullout by the investors who drove the market to unsustainable heights last year. "The changing supply-demand balance in the condo segment means that this component of the multifamily sector is slowing to a more sustainable level," Seiders said. Yet the index tracking condo supply dipped sharply in the first quarter of 2006, down to 37.0 in the first quarter of 2006 from 66.9 at the same time last year. The index tracking builders' expectations for condo starts over the next six months also dropped, from 54.0 in the first quarter of 2005 to 46.0 in the first quarter of this year. The indexes tracking builder expectations for all classes of rental apartments all moved higher, with each at 50 – the line between optimism and pessimism - or above.
IF YOU'RE A VEGAN, SKIP THIS ITEM: Aiming to help homeowners who want to add warmth to their modern and often-cold interiors, retailers and urban decorators are pushing an unusual solution: stuffed dead animals, the Wall Street Journal observes. Over the past year, boutiques and high-end department stores have begun adding everything from $450 deer heads to $25,000 zebras. Taxidermy shops report they're selling more pieces to people other than those who shot them. Many members of the new taxidermy class have never picked up a rifle, and are, in some cases, vegetarians. Since last fall, when Parisian taxidermist Deyrolle teamed up with New York department store Bergdorf Goodman, the store has sold pieces including a $19,500 ostrich. (Offerings on the store's housewares floor also include a $795 black crow and a goose for $2,595.) Later this year, Barneys New York will introduce a line of mounted birds - from $700 exotic finches to $3,400 peacocks - in its Manhattan store. There's at least a six-month wait for 12-point buck mounts at Animal Artistry in Reno, Nev. "They fly in here from San Francisco or Seattle to get these things," says Stuart Farnsworth, the store's general manager. "A few years ago, we couldn't give that stuff away." Cynthia Vincent, a fashion designer, fielded some grousing after she added animals to her two-story contemporary Los Angeles home last year. A 4-foot English pheasant stands on her living room coffee table, and two swifts are mounted side by side near a bay window. Her favorite is a free-standing 2-foot-tall partridge on a bookshelf in the home's entryway. More than one friend told her the décor was "a little peculiar," she says. "Some of them thought it was ugly." No comment.
HOMEOWNER EXPECTATIONS OF VALUE MEET REALITY: They have declining expectations for increases in home value, according to an annual survey conducted for ING Direct, reports Inman News. Homeowners who participated in the survey said their home has increased in value by about 6 percent over the past 12 months, and they expect their home's value to increase by about 4 percent in the next 12 months. Approximately 74 percent of respondents who have owned a home for at least three years also said they "were not very concerned that there might be a downturn in the housing market in the next year, which would lower the value of their home." Two-thirds estimated that even a 10 percent decrease in home value would have no impact on day-to-day spending. Synovate, a market research arm of Aegis Group, conducted a telephone survey in April and May 2006 of 1,000 respondents using a continental U.S. Census-balanced group of homeowners with residential telephone numbers. In addition, respondents who indicated that closing costs were higher than they had expected said the difference was nearly $600 higher.
KATIE COURIC HAS YET ANOTHER REASON TO BE PERKY: She just paid close to $6.3 million for a seven-bedroom, six-bath cedar-shingle house in the tony Long Island resort community of East Hampton. Given driving conditions on the Long Island Expressway, you can be sure that she won't be commuting from there.
A NOVEL, IF QUESTIONABLE, WAY EMERGES TO AVOID TAXES: The soaring real-estate prices of the past few years are helping to feed the popularity of a complex tax-savings technique called a "private annuity trust," notes the Wall Street Journal. The strategy is being promoted as a way for investors to defer hefty capital-gains taxes on the sale of highly appreciated assets - especially real estate - and save on estate taxes while also generating a stream of income. In a private annuity trust, you essentially exchange appreciated assets for fixed annuity payments, which spreads out your capital-gains taxes over many years. Private annuity trusts can cost anywhere from about $3,000 to well over $10,000 to set up, plus additional administration and investment fees that can run upwards of 1 percent of trust assets. In a typical arrangement, you sell appreciated assets to a trust in exchange for a series of fixed annuity payments that last for the rest of your life. The trust then goes ahead and sells the appreciated asset to an end buyer. The cash proceeds are invested by the trust, and are used to fund your annuity payments. By selling the property in exchange for an annuity, you avoid paying the upfront capital gains that you would have owed if you had simply sold the asset outright. Instead, you are taxed on the annuity payments when they come out of the trust, which spreads out the taxes over a longer period of time. What's more, you can defer receiving the annuity payments for years, thereby further postponing your tax payments. The strategy also has estate-planning benefits. When you die, the annuity payments stop and whatever is left over in the trust is considered out of your estate and isn't subject to estate taxes. The annuity payments you receive during your lifetime are considered part of your estate unless you spend down the money. However, the strategy is on the IRS's radar screen. The agency doesn't like arrangements in which sellers continue to control trust assets or properties that were purportedly sold. The IRS is also concerned that, before the trust is even set up, a buyer has already contractually agreed to take the property. In that case, the government could ultimately view the trust as an improper shelter, set up chiefly to avoid immediate capital-gains taxes rather than providing real economic substance.
A PIED-A-TERRE THIS IS NOT: Anyone who wants to tour the house with the highest asking price in the country will first have to prove a net worth of $500 million or an annual salary of $10 million, reports the Los Angeles Times in Realtor magazine, failing to note that anyone so wealthy would be unlikely to bruit it about. The house is a 30,000-SF mansion known as Portabello perched on a cliff in Corona del Mar, Calif., south of Newport Beach. It's priced at $75 million. Some local real estate professionals are shaking their heads. ''Every agent in town is talking about it,'' says real estate associate Mark Whitehead, who sells homes in Corona del Mar. "It's a joke. It's an image thing. It's an ego trip to sell the most expensive home on the market.'' Bill Cote, owner of Cote Realty Group in Newport Beach, said Portabello's asking price is 300 percent more than the highest amount paid for an Orange County home. Listing agent John McMonigle released a statement saying that the house was reasonably priced considering that the land was worth $45 million and it would cost up to $1,500 per square foot to rebuild the home. The estate belongs to Frank Pritt, who in 1982 founded software maker Attachmate Corp., a large privately held technology company in Bellevue, Wash.
INSURANCE MAN BITES DOG: There is a push by lawmakers and animal-welfare groups to ban the growing insurance-industry practice of refusing to write homeowners' policies for people who own dogs of certain breeds, observes the Wall Street Journal. Some big insurers, including Allstate and Farmers Insurance Group, won't cover homes in some states if certain breeds are present. Others exclude the breeds from liability coverage or charge extra for it. The so-called vicious-breed lists include such popular pooches as German shepherds, Akitas and Siberian huskies, along with Alaskan Malamutes, Chow Chows, Doberman Pinschers, American pit bull terriers and their cousins. The insurers' practice is spurring rising complaints by dog owners that their homeowners' and renters' policies have been dropped, or they have been denied coverage, because their dog is on the list. They say the rules unfairly link well-behaved family pets with aggressive miscreants responsible for high-profile attacks. Dogs bite an estimated 4.7 million people in the United States annually, 800,000 seriously enough to require medical attention. About 40 percent of victims are children. Dog bites were responsible for $317.2 million in claims in 2005, an average of more than $21,000 each. They make up 15 percent of liability claims, which in turn are about 4 percent of total claims, according to the Insurance Information Institute. Some insurers cite a 2000 study conducted by the Centers for Disease Control and Prevention of 20 years of fatal attacks by dogs on humans. It found that pit-bull-related breeds and Rottweilers were involved in more than half of the 238 dog-attack deaths between 1979 and 1998. But the study's authors, including Julie Gilchrist, say that public and private policymakers have drawn flawed conclusions from it. Dr. Gilchrist said the study wasn't designed to determine which are the most dangerous dog breeds and didn't establish bite-fatality rates for the breeds it named. "You can't say that one breed is more likely to bite (than another)," she said. Dr. Gilchrist, a pediatrician, said the involvement of some breeds in more attacks may reflect the sheer prevalence of those breeds. Other factors, such as training and neutering, are more relevant than breed, she said, noting that owners choose and train some dogs for aggression. The CDC has posted a notice on its Web site trying to discourage lawmakers and others from using the study to ban specific breeds. Not every insurer limits coverage for owners of certain breeds. State Farm and Fireman's Fund are examples. But Farmers Insurance excludes several dog breeds from coverage in five of the 41 states in which it does business. Nationwide also has a list of banned breeds, but owners can be exempted by having their dog pass an American Kennel Club-approved "Canine Good Citizenship" test, though probably not by reciting the Pledge of Allegiance.
WATCH OUT FOR HIGHER HOME HEATING OIL PRICES: Expect the price of heating oil to cost about 45 percent more next winter than it did last winter, heating oil companies say, according to the Associated Press in Realtor magazine. In Concord, N.H., where summer is short and winter comes early, oil companies are already filling customers' tanks. They say customers who lock in now will pay about $2.60 per gallon, up from $1.85 per gallon last year. That translates into an additional $600 to heat the average home.
IS IT THE END OF THE ROAD FOR THE CUL-DE-SAC: For many families, cul-de-sac living represents the epitome of suburban bliss: a traffic-free play zone for children, a ready roster of neighbors with extra gas for the lawnmower and a communal gathering space for sharing gin and tonics, reports the Wall Street Journal. But thanks to a growing chorus of critics, ranging from city planners and traffic engineers to snowplow drivers, hundreds of local governments from San Luis Obispo, Calif., to Charlotte, N.C., have passed zoning ordinances to limit cul-de-sacs or even ban them in the future. While homes on cul-de-sacs are still being built in large numbers and continue to fetch premiums from buyers who prefer them, the opposition has only been growing. The most common complaint: traffic. Because most of the roads in a neighborhood of cul-de-sacs are dead ends, some traffic experts say the only way to navigate around the neighborhood is to take peripheral roads that are already cluttered with traffic. And because most cul-de-sacs aren't connected by sidewalks, the only way for people who live there to run errands is to get in their cars and join the traffic. For all the criticism aimed at them, cul-de-sacs do seem to have one last defender: the free market. Real-estate brokers say that despite the recent opposition by policy makers, homes on cul-de-sacs still tend to sell faster than other homes - and often command a comfortable premium.
HOMEOWNERS, RENTERS DIFFER ON CREDIT MANAGEMENT: More than 81 percent of homeowners and 65 percent of renters believe that they manage their credit extremely well, according to a survey of more than 1,200 persons conducted by the Mortgage Bankers Association (MBA). The survey on consumer credit habits also revealed that 54 percent of renters feel that they have more debt than they should in comparison with 39 percent of homeowners. While renters report that they are generally familiar with important mortgage terminology, homeowners are significantly more knowledgeable about these mortgage terms. Of the renters surveyed, 45 percent say that they are considering buying a home in the next year or two.
ADVICE FOR HOME SELLERS: Steer clear of renovations that will cost you money at resale time, counsels the Wall Street Journal. If you want an edge over other home sellers in an iffy market, here's what not to do: Trying to keep up with the Joneses is fine, but don't keep outdoing neighbors with additions unless you plan to stay put a long time; don't change the general architecture of the home, and make sure that renovations match; think hard about completely altering the purpose of a room is risky since they were built that way for a reason; be extremely confident you're capable of taking on a project before trying to do it yourself; don't underestimate how much projects will cost because expenses usually are added, not subtracted when remodeling for resale; don't waste time with renovations that won't pay off; and perform proper maintenance and annual upkeep.
FALTERING MARKET CLAIMS TWO MAJOR CONDO PROJECTS: Citing slow sales and a cooling real estate market, two major developers are abandoning plans for two condominium projects in the Washington region, according to the Washington Post. The decisions, by District-based Monument Realty and Wood Partners of Atlanta, are among the strongest signs yet of how much - and how quickly - the market for new condos has changed here. Monument said it would not go forward with its plan to convert the three-building, 574-unit Park Center apartment complex in Alexandria to condos. Wood Partners said that it would continue building its 300-unit 1901 West building in Annapolis but that the apartments would be rentals, not condos as planned. Together the two projects would have cost $226 million, according to the developers. Thus, as double-digit housing-price appreciation cools in many markets, rental apartments once seen as ripe for conversion into more lucrative condominiums are beginning to return to their roots. Said Gregory H. Leisch, chief executive of Delta Associates, a real estate consulting firm in Alexandria: "It's a precursor of more to come." He estimated that developers would take 1,200 more units out of the pipeline by year-end. About 25,000 condo units are being marketed now, 16,000 of which are under construction, according to Delta. And the Wall Street Journal observes that buildings converting to condos across the nation are in jeopardy of failure as well. Michael Cohen, a research strategist at Boston real-estate analysis firm Property & Portfolio Research, dubs the reversions "repartments." "It's definitely becoming a problem," he says. "Some of these projects probably don't look as attractive as they did six months ago when developers were buying the conversions." So far, the reversions are dwarfed by the number of units that have been converted into condos in recent years. But an emerging trend is evident as developers stuck with slow-selling condo units struggle to recoup part of their investment and as tenants gripe about being caught in the middle when their building swings from apartments to condos and back again. In south Florida - where the condo-conversion craze has been particularly frenzied - eight converted complexes containing 2,156 units have reverted to rentals in Broward and Palm Beach Counties, according to Jack McCabe, chief executive of McCabe Research & Consulting in Deerfield Beach, Fla. That compares with about 62,904 units that have been converted or have begun to be converted into condos in the area since 2004, he adds. McCabe expects the trend to spill over to San Diego, Washington, D.C., Las Vegas and Phoenix.
THE AFFLUENT VIEW REAL ESTATE AS LESS APPEALING: Although the wealthy continued to hold an average of 15 percent of their portfolios in real estate, the Associated Press reports that they are not as optimistic about future gains in this category as in the past. The information comes from a 2006 U.S. Trust survey that, since 1933, has been measuring the confidence of a sample of the top 1 percent wealthiest Americans - those with an adjusted gross income of more than $300,000 or a net worth greater than $5.9 million. Some 48 percent of the 2006 respondents think real estate values will increase over the next year, down from 72 percent who felt this way in 2005, the study found. The study involved in-depth telephone interviews with 150 randomly selected wealthy Americans, with results accurate to plus or minus 7 percent.
THE SOUTH AFRICAN MARKET REMAINS HOT: Sellers' markets are nothing new in South Africa, where demand for real estate - and the rise in prices - has been more robust this decade than almost anywhere, says the New York Times. But until now the boom was largely confined to middle- and upper-class homes. Now there are hints that it is spreading to an unlikely venue: townships, the ready-made slums erected by South Africa's former apartheid rulers to separate black and mixed-race citizens from whites. A recent survey by FNB Bank of South Africa concluded that for every township home put up for sale, there are 7 potential buyers in Johannesburg, 8 in Cape Town and 16 in Durban. Few homes come to market. In most townships the idea of selling one's home is still a novelty because most have traditionally been handed down to family members. But not for long. In the last 18 months, two of South Africa's biggest real-estate firms have moved into major townships and it is not hard to see why. "Take Beacon Hill," said Agenor Lureman, a principal in the Pam Golding Properties office in Mitchell's Plain. "A year ago, you could sell a house there for 80,000 or 90,000 rand. Today you can sell the same house for 140,000 rand." (That's the equivalent of $21,000.) Beacon Hill is in Mitchell's Plain, a sprawling township thrown up 30 years ago south of Cape Town to isolate mixed-race South Africans who had been forcibly removed from their homes in the city.
AND THE SKY LOOKS LIKE THE LIMIT IN MANHATTAN: Median sales prices for Manhattan cooperatives and condominiums increased 13 percent in the first quarter to $749,000 compared with first-quarter 2005, the Real Estate Board of New York (REBNY) reported, according to Inman News. The median price of condos gained 22 percent to $838,000, while the price of cooperatives grew 5 percent to $665,000. East Side apartments had median sales price increases of 24 percent to $876,000 between the two first quarters, the highest gain among all Manhattan neighborhoods surveyed. East Side condominium units had a 35 percent gain in median sales price, to $958,000. Downtown condominium units registered the highest median sales price, at $1.08 million. East Side and Mid-Manhattan cooperative units posted the highest percentage increase for cooperatives, with median sales prices up 13 percent. The East Side also had the highest overall median price for cooperatives at $799,000, REBNY reported. The price per square foot grew 21 percent to $1,036, for Manhattan condo units, 31 percent to $510 for Northern Manhattan condo units, and 25 percent to $1,061 for East Side condos. Median room prices for Manhattan cooperative units rose 13 percent to $196,000. Compared with first-quarter 2005, East Side median room prices were up 18 percent to $210,000, the highest price and percentage increase of the five major market areas.
MORTGAGE APPLICATIONS CONTINUE TO SLIDE: For the week ended June 2, volume decreased by 1.4 percent on a seasonally adjusted basis from one week earlier, according to the Mortgage Bankers Association. On an unadjusted basis, the decline was 11.7 percent compared with the previous week and 28.0 percent compared with the same week one year earlier. Seasonally adjusted, purchase applications edged up insignificantly, and refinancings dropped 3.8 percent. The Refinance Index is at its lowest level since April 2002. The refinance share of mortgage activity decreased to 34.2 percent of total applications from 34.9 percent the previous week. The adjustable-rate mortgage (ARM) share of activity fell to 29.4 percent from 30.7 percent.
APPRAISERS HOP ON THEIR BANDWAGON: In the last year, Kaplan Professional Schools, one of the largest trainers of real estate appraisers nationally, has seen a 10 percent increase in the number of people seeking instruction to become a licensed appraiser, says Realtor magazine. Besides a widespread growing interest in the real estate field, the number of people seeking training is up because a more stringent education requirement goes into effect Jan. 1, 2008 and hopeful licensees want to get in under the wire. Beginning in 2008, education hours for a licensed appraiser go from 90 to 150. A certified residential appraiser will be required to have 200 education hours, up from 120, and an associate degree will be mandatory. The education required of a certified general appraiser will rise from 180 to 300 hours and a bachelor's degree will be required. For many, education is the easiest part. The required 2,000-2,500 hours of appraising experience over a 24-30 month time period working for an experienced appraiser who will mentor, train and compensate apprentices for their work can be the most difficult.
HONEY, I'M HOME: As the potential buyers filed into the open house in Southern California, they gasped in surprise, reports Inman News. Instead of the traditional empty residence with a few pieces of tastefully arranged furniture, they discovered a family baking a cake. Like the tastefully arranged furniture and the cake in the oven, the family was part of the staging of the Centex model home in Santa Clarita, Calif. - completely fake. A public relations firm had hired actors to enact the skit. "There were a few moments of surprise and confusion," said Jim Garfield of California property public relations firm Roddan Paolucci Roddan, the company that created the concept. "But once people caught on, there was an embracing of the moment." Enuff said.
D.C. IS THE TOPS, ACCORDING TO A D.C. GROUP: The Washington area has the wealthiest households and most educated work force of any metropolitan area in the United States, according to a report the Greater Washington Initiative, which cites data from the U.S. Census Bureau, the Bureau of Labor Statistics, market data firm Claritas Inc and other sources, says Reuters. Including the District of Columbia, Maryland and Virginia, the region had the highest U.S. median household income, at nearly $72,800, ahead of the San Francisco area at $71,201 and Boston at $63,958. Housing costs in greater Washington were ranked fourth, with a 2005 median price of $424,700. San Francisco was highest at $715,700, followed by Los Angeles at $529,000 and New York at $446,000. But measuring total living costs among cities internationally, the report ranked Washington 78th, based on the W.M. Mercer Cost of Living Index for 2005. The most expensive city was Tokyo, while London was third and Paris, 12th. Greater Washington had the largest employment growth from 2000 to 2005, at 270,800.
GOOD NEWS AND BAD NEWS FOR GEORGE CLOONEY: The near-Las Vegas strip site of a proposed $3 billion condo and small casino project backed by actor George Clooney has been sold and plans for the project scrapped, according to the Associated Press in Realtor magazine. Clooney's business partner, nightclub owner Rande Gerber, told the news organization that the project wasn't shaping up to be profitable unless they added more casino and hotel space. "We're the largest developer of residential property in the country, and we saw ourselves getting away from what we do best," confirms Related Las Vegas President Marty Burger, which had partnered with Centra Properties and Clooney to build the project. Buyer deposits are being returned. Related and Clooney have sold the 25 acres to Edge Group for $202 million, twice what Clooney paid a year ago. Edge plans to build a more conventional hotel casino complex on the site. "I'll donate my profits from the sale to the African Debt Relief Project," Clooney said in a statement. "And I guess I'll find someplace else to gamble."
posted by Service You Can Trust Team at
5:28 AM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home