Items of Interest - July 22, 2006
FED CHAIRMAN NOTES COOLING OF HOUSING MARKET: In congressional testimony, Ben Bernanke observed that the market for residential real estate has been cooling, as can be seen in the slowing of new and existing home sales and housing starts. "The downturn in the housing market so far appears to be orderly," the chairman said during a hearing before the House Financial Services Committee. Some of the recent softening in housing starts may have resulted from the unusually favorable weather during the first quarter of the year, which pulled forward construction activity, he said, adding that the slowing of the housing market appears to be more broad-based than can be explained by that factor alone. "Home prices, which have climbed at double-digit rates in recent years, still appear to be rising for the nation as a whole, though significantly less rapidly than before," Bernanke declared. "These developments in the housing market are not particularly surprising, as the sustained run-up in housing prices, together with some increase in mortgage rates, has reduced affordability and thus the demand for new homes."
FANNIE MAE ECONOMISTS PROJECT 10 PERCENT DROP IN SALES: The number of homes changing hands in 2006 could decline by up to 10 percent next year, the top economists at Fannie Mae project, according to Inman News. Economists David Berson and Molly Boesel said in a report that a weakening investor demand and a lack of affordability could bring sales volume down 8-10 percent next year, to 7.61 million units. That would still be the third-best year ever for home sales, the report noted. "The surge in the number of immigrants over the past 25 years, the age-structure of the population and continued job and income growth as the overall economy grows around trend rates should partially offset the drop in sales related to affordability and investors," the report said. The falloff in sales will be most pronounced in areas with weak economies and where the decline in investor demand creates a large increase in the supply of homes for sale. Home prices could fall in those areas, slowing overall home-price gains to 3 percent in 2006, ending two years of double-digit growth. "Even though new sales have increased, the level of unsold inventories has continued to climb to record highs - clearly a warning sign for home prices should sales slip in coming months," the Fannie Mae report said. "We think that sales will decline over the rest of the year, as leading indicators of sales continue to weaken."
HOUSING STARTS TAKE A DIVE: Total housing starts dropped 5.3 percent in June to a seasonally adjusted annual rate of 1.850 million units, according to figures released by the Commerce Department. That number was 11.0 percent below the pace of a year ago. Single-family starts were down 6.5 percent for the month, a 13.8 percent drop from June 2005. Multifamily housing construction was up 0.3 percent for the month. "The June declines in single-family starts and permits clearly show that the housing downswing still is under way, a pattern consistent with our signals from the field," said Chief Economist David Seiders of National Association of Home Builders (NAHB). "Builders are reporting not only systematic declines in home sales, but also increases in sales cancellations and inventories - due to eroding affordability conditions as well as a withdrawal of investors/speculators from the market." Issuance of total building permits decreased 4.3 percent from May to June, 14.9 percent below a year ago. Single-family permit issuance was down 6.3 percent on a national basis to a pace of 1.395 million units for the month, reflecting declines in all regions of the country.
YOU CAN TELL A HOUSE BY ITS COVERS: Stone and brick are marvelous means of sprucing up the appearance of a home, notes the Associated Press in the Washington Post in a piece about improving the appearance of dwellings. An essential part of any facelift plan, lighting not only is a decorative element but can improve safety and security. Replacing an old, worn-out three-tab shingle roof with an architectural-grade laminated roof can have a tremendous impact on a home's appearance. Plus, replacing a leaking roof can prevent water damage and rot that could threaten the safety and integrity of the home. A fresh coat of paint can do wonders, with the right combination of colors dramatically transforming a home by accenting certain elements such as shutters, the entry door, trim or other architectural elements. Where the exterior cladding has been neglected and is too far gone, new siding presents the opportunity to tweak the architectural appearance, add insulation and install a more maintenance-free finish such as a vinyl, fiber-cement or a composite material. And trim around windows and doors, window shutters, or shingle mold at barge rafters are subtle elements of that much-needed touch that may have been missing. A new entry door can do wonders in improving the curb appeal of a home. Add decorative glass, one or more sidelights with decorative glass, a decorative glass transom, energy-efficient and maintenance-free fiberglass construction, and a new decorative lockset. A garage door can account for up to 40 percent of the exterior appearance of your home. If your garage door is one of the old one-piece, tilt-up-style doors or if it is a "sagging sectional," consider replacing it with a new sectional door constructed of steel or fiberglass. If your entry path, porch or driveway is cracked, discolored or otherwise unsightly, there are several "fixes" that you can consider, including a self-leveling concrete caulk or a vinyl concrete patch, penetrating concrete stains, paint and architectural coatings that consist of polymers offering a "stamped" finish in a host of colors that can transform virtually any concrete finish into a thing of beauty. Finally, when it comes to curb appeal, not enough can be said about the importance of a well-manicured yard.
READING, 'RITING AND REAL ESTATE: Student scores on state proficiency tests can drive up housing prices, a new study suggests, according to Realtor magazine. A study of Ohio school districts showed that an increase of about 20 percentage points in the proficiency test "pass rate" increased home values in a school district by about 7 percent - even after considering other factors that can have an impact on home values. "In Ohio, there are districts with 20 percent pass rates and some with 85 percent pass rates, so based on our findings that would result in about a 23 percent difference in house values solely because of the schools. It is not [a] trivial amount," said Donald Haurin, co-author of the study and professor of economics at Ohio State University. More complex measures such as how much proficiency test pass rates improved between the 4th and the 9th grades didn't have much impact on home values.
TENANTS, DON'T OMIT INSURANCE: Renter's insurance is a protection against losses suffered by the tenant caused by his or her negligence or by factors beyond the control of the tenant but for which the tenant could be blamed, says the Washington Post. Landlords like the protection because, without the insurance, they cannot rely on the tenant to cover significant damage. Instead, they or their own insurance would be forced to pay. Tenants should like renter's insurance since it not only covers damage to property but also pays them for losses occurring from theft or other incidents (for example, fire or water leaks). The downside, of course, is the cost of the policy, which just increases the monthly cost of living. The good news is that this cost is pretty low and is for a service and protection that can be of great value to the tenant.
PULL UP A ROCKING CHAIR: A city council member in Tampa, Fla., feels so strongly about front porches that he wants to change the city's zoning code to encourage home owners to add the feature, says the St. Petersburg Times in Realtor magazine. Councilman John Dingfelder says the city would benefit from the sense of community that porches encourage. Life is better, he says, "when you sit on the front porch and watch your kids play and wave at your neighbors." Dingfelder's plan would change the city's zoning code to allow for an open porch that could extend up to 8 feet into required setback space. Tampa currently requires a 20- to 30-foot setback in front of homes. The Tampa Bay Builders Association doesn't think it's such a good idea because it could increase home costs and there is no indication that buyers are eager for porches. But Tampa police spokesperson Laura McElroy says the department is in favor of passage. "We love front porches," McElroy says. That's because porches encourage people to watch for suspicious cars and people in the neighborhood.
ARE DEVELOPERS BRIBING MUNICIPALITIES: In the frenzy to build subdivisions in Northern Virginia's exurbs, one of the nation's largest housing developers has offered to write the small Fauquier County town of Warrenton a $22 million check, an unprecedented cash donation, according to Virginia real estate specialists, the Washington Post reports. In exchange, Centex Homes of Dallas would get permission from county and town leaders to build a subdivision just outside Warrenton with nearly 300 luxury homes for seniors starting at $850,000. Town and county leaders have given their initial approval to Centex's proposal, which involves asking Warrenton to annex property so the builder can connect to the town's sewer system. Development specialists say the unusually large promise of cash highlights a disturbing trend in Virginia's booming housing market. Developers eager to plant new homes in exurban locales are building roads, establishing parks and offering money - all in an effort to appease increasingly resistant communities. The result, the specialists say, is more expensive homes. In Loudoun County, the developer Greenvest has offered to spend $192 million on road improvements in exchange for permission to build 15,000 homes near Dulles International Airport. Toll Brothers, another developer, plans to contribute 233 acres of parkland to Prince William County so it will rezone rural land to build 420 houses near Silver Lake.
BUILDER CONFIDENCE SINKS AGAIN: Increased concerns about interest rates and housing affordability caused builder confidence in the market for new single-family homes to slip three more notches to 39, a 15-year-low, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for July. "The HMI is down from its most recent cyclical high of 72 in June of last year and reflects growing builder uncertainly on the heels of reduced sales and increased cancellations related to eroding affordability as well as an ongoing withdrawal of investors/speculators from the marketplace," commented Chief Economist David Seiders of the National Association of Home Builders (NAHB). "But just as concerning to many builders is the potential for more monetary tightening by the Federal Reserve that could drive interest rates, and thereby homeownership costs, even higher. Ironically, the Fed's inflation-fighting moves have helped firm up the rental market and raise the 'owners' equivalent rent' components of the core inflation measures that the Fed is seeking to contain." With the seasonally adjusted index, any number over 50 indicates that more builders view sales conditions as good than poor. "In terms of historical comparison, the HMI's movement is essentially in line with readings from the 1994-95 period, when the Federal Reserve tightened monetary policy and a fairly orderly cooling-down process occurred in the nation's housing markets," Seiders continued. "That is what our forecasts anticipate happening in the current period, provided the downside risks of rising interest rates and a bail-out by investors/speculators do not become too pronounced. With respect to interest rates, we expect the Federal Reserve to maintain the current 5.25 percent target for the federal funds rate for some time, and we're projecting only modest increases in long-term interest rates from current levels."
FAIRFAX SUPERVISORS END HIATUS FOR ZONING CHANGE: The Board of Supervisors approved new rules last week to satisfy the court and homeowners that will allow the limited approval of variances to resume after a two-year hiatus, according to the Washington Post. The new system, approved unanimously, allows homeowners to seek a special permit or exception from the Board of Zoning Appeals. The size of a house can grow up to 150 percent if the expansion cannot be completed within the neighborhood's limits on setbacks and lot lines. The renovation cannot, however, raze more than half of the existing house. Rules on setbacks and lot lines vary among neighborhoods and depend on the density allowed. Planning and zoning officials devised the new system after 18 months of community meetings.
BASH-AND-BUILD IS WHAT THEY CALL THEM IN NEW JERSEY: In Colorado they're called "scrape offs." Here, they're "teardowns." An "orgy of irrational destruction" is how Richard Moe, president of the National Trust for Historic Preservation, characterized the trend in a speech before the Commonwealth Club of California, says Realtor magazine. The practice of demolishing an existing home to make way for a much larger one on the same lot is the "biggest threat to America's older neighborhoods since the heyday of urban renewal and interstate highway construction," Moe declared. "From 19th-century Victorians to 1920s bungalows and 1950s Eichlers, the older houses that grace our communities are valuable historical documents in brick and wood, steel and glass. Without proper safeguards, historic neighborhoods will lose the identities that drew residents to put down roots in the first place." In the Chicago suburb of Kenilworth, Ill., 50 of the town's early 20th-century homes, many designed by notable architects such as D. H. Burnham, have been demolished. In the Dallas communities of Highland Park and University Park, more than 1,000 historic homes have been replaced, and in Palo Alto and Menlo Park, Calif., more than 450 older homes were torn down. Even classic Modernist homes, many the work of prominent architects, have been under siege in New Canaan, Conn. For communities, effective strategies to slow the teardown trend include set back requirements, open space standards, and local ordinances requiring owners to get permission before demolishing or altering older or historic builders. Cities as diverse as Atlanta, Chevy Chase, Md., and Palo Alto, Calif., have adopted moratorium measures to give civic leaders time to assess their land-use and zoning practices.
AFFORDABLE HOUSING FACILITATED IN MONTGOMERY COUNTRY: Officials took steps to address the scarcity of affordable housing by trying to make it easier for middle-class workers to buy and rent homes in Maryland's largest jurisdiction, reports the Washington Post. Unlike past programs that have targeted the county's poorest residents, the latest initiative is aimed at helping workers such as teachers, firefighters and county employees who are increasingly being priced out of the housing market in one of the nation's wealthiest suburbs. The measure, passed unanimously by the County Council, would lead to the construction of as many as 2,500 units over 20-30 years in urban areas surrounding Metro stations, officials said.
MONTHLY PAYMENTS WORRY MANY AMERICANS: One out of three worries that rising monthly payments - especially property taxes and energy costs - will force them to sell their home and buy a less expensive one, according to a study by the National Association of Realtors (NAR). According to the study, high real estate taxes are most prevalent in states with high home prices and also in states such as New Hampshire that don't have a state income tax. New Jersey, with an average real estate tax deduction of $6,000, was the highest, followed by New York ($5,181), New Hampshire ($4,830), Connecticut ($4,769) and Texas ($4,501). Soaring energy costs affect an even wider swath of home owners. According to estimates by the Energy Information Administration, from February 2005 to February 2006, the cost of electricity was up 12 percent; natural gas, up 28 percent; and home heating oil, up 25 percent. Six in 10 of the survey's respondents said that high property taxes and rising energy costs could cause them to sell their home. Nearly four in 10 were worried about rising home interest rates. Three in 10 were worried that they or members of their family may have their home repossessed because they are unable to pay rising monthly mortgage payments. More than 20 percent of respondents reported not seeing friends and family, not being involved in neighborhood, missing out on promotions, lack of productivity and missing out on vacations because they have to work too much to pay for their home or they don't have the money because of high home costs.
THERE'S NO CONCEALING THE STEADINESS OF THIS MARKET: Much of the real estate near St. Petersburg, Fla., has been selling slowly, but there's one niche hasn't been hit by the slowdown: nudist resort housing, according to the St. Petersburg Times in Realtor magazine. Paradise Lakes nudist resort put 39 new 1,167-square-foot condominiums up for sale late last year for $200,000 each. The units aren't scheduled for completion until October, but all 36 are sold. Property at the Oasis, a 28-home gated community for those who prefer life in the buff, doesn't turn over often. In the last 12 months only one home has changed hands - an 1,800-SF property sold for $360,000. "The slowdown really didn't worry us," said Joe Lettelleir, Paradise Lakes' owner. "We are fortunate that we are somewhat insulated from the mainstream market." Insulated by what, he didn't say.
FORT COLLINS TOPS THE LIST, COLUMBIA/ELLICOTT CITY ARE 4TH: On its annual "Best Places to Live " list, Money magazine awarded the No. 1 ranking to Fort Collins, Colo. for its city offerings but suburban feel, good schools, plenty of parks and open space and a solid economic base with large employers like Colorado State University and Hewlett-Packard, observes the Wall Street Journal. However, this town made the news in 1997 when a flash flood derailed a train, ravaged two trailer parks and killed five people. Other towns making the top 10 (Nos. 2 to 10, in order) are: Naperville, Ill.; Sugar Land, Texas; Columbia/Ellicott City, Md.; Cary, N.C.; Overland Park, Kan.; Scottsdale, Ariz.; Boise, Idaho; Fairfield, Conn.; and Eden, Prairie, Minn.
MORTGAGE VOLUME DECLINES FOR THE WEEK ENDED JULY 14: It decreased by 4.6 percent on a seasonally adjusted basis from one week earlier, says the Mortgage Bankers Association. On an unadjusted basis, volume increased 36.4 percent compared with the previous week, which included Independence Day, but fell 31.3 percent compared with the same week one year earlier. Seasonally adjusted, purchase applications dipped 6.2 percent from the previous week, and refinancings went down by 1.6 percent. The refinance share of mortgage activity increased to 35.0 percent of total applications from 34.0 percent the previous week, while the adjustable-rate mortgage (ARM) share edged up to 29.0 percent from 28.7.
NEW ENGLAND EXPERIENCES DISTINCT CHILL IN HOUSING MARKET: A persistent exodus of residents and a stagnant economy across the region are depressing home sales, the Wall Street Journal reports. The real-estate landscape in New England is diverse, of course. Even so, sales volume across New England fell sharply in the first five months of the year, with the region's biggest states posting broad declines. In Massachusetts, single-family-home sales fell 9.3 percent through May compared with the same period a year earlier, according to figures from Warren Group, a Boston real-estate news publisher that compiles housing statistics. Sales in the Cape Cod and Worcester areas saw steep drop-offs, 17.8 percent and 12.5 percent respectively. In Connecticut, sales volume fell 11 percent in the first five months of the year compared with the same period a year earlier, Warren Group reports. Fairfield County - home to pricey towns such as Greenwich, New Canaan and Westport - saw a 17 percent sales drop compared with the same 2005 period. The factors behind New England's slowdown are complicated. For starters, its economy appears to be stalling, researchers say, at a time when the country as a whole maintains a relatively strong economic outlook. A recent report issued by the New England Economic Partnership cites continued weakening in the manufacturing, leisure and hospitality industries, three of the region's important economic engines, through 2010, resulting in slightly higher unemployment numbers. Growth in total employment is expected to average 0.9 percent per year, as opposed to the national average of 1.3 percent over the forecast period. Meanwhile, the pool of potential home-buyers in the region is "falling like a stone," says New Hampshire-based demographer Peter Francese. He cites U.S. Census Bureau data showing almost 200,000 residents between 25 and 44 years of age left the region between 2000 and 2004. All six New England states show declines in that category, with Maine, Vermont and Connecticut far outpacing the national average. No wonder the real-estate scene in New England - where home prices climbed at least twice as fast as household income during the run-up - is frosty. The population flight "weighs on the region's economy and housing market," says Mark Zandi, an economist with Moody's Economy.com. The collapse in housing affordability, he says, has driven out first-time home-buyers.
WHILE DOWN SINCE MAY, FORECLOSURES ARE UP OVER 2005: The number of U.S. properties entering the foreclosure process dipped in June from the previous month but were considerably higher than a year ago, according to an industry report, notes Inman News. A total of 88,195 properties entered some stage of foreclosure in June, down 5 percent from one month earlier, but the sum was 17 percent above the June 2005 level, according to RealtyTrac's June foreclosure market report. The report shows a June national foreclosure rate of one foreclosure filing for every 1,311 U.S. households. "New U.S. foreclosures dropped to their lowest level of the year in June, despite some of the sensational and misleading figures that we've seen reported recently," said James J. Saccacio, chief executive officer of RealtyTrac. "We think it's irresponsible to present falsely inflated numbers to the media for commercial gain as we've seen happen recently. The fact is that most states, with the notable exception of California, Ohio and Nevada, reported decreased numbers of foreclosure filings in June."
SOME BABY-BOOMERS WEARY OF BEING LANDLORDS: As investors in apartments, some are plain tired of the hassle of fixing leaky faucets and responding to other tenant complaints. The Wall Street Journal says they are starting to sell these investments as they get closer to retirement. In a survey conducted for the newspaper, Marrcus & Millichap found that its apartment-investor clients who have recently sold their assets plan to move 59 percent of that equity to other properties, investments and cash. The results are based on an analysis of 700 apartment transactions ranging from $1 million to $10 million in the 12 months ended May 31. Harvey Green, chief executive officer of the Encino, Calif., real-estate investment brokerage firm, says the overwhelming majority of its private investor base is 50 and older. Many bought their properties between 1990 and 2000. It took awhile to build up equity because of the real-estate downturn of 1991 to 1993 and the slow recovery in the following years. As a result, many held on to their properties longer than they originally expected, Green adds. In recent years, however, apartment investors began to experience tremendous equity growth. The median price per unit of apartments in the U.S. rose 87 percent to $112,000 from 2000 to 2006. "A number of them found that they were 10 years older and had a much larger tax liability because of the tremendous amount of appreciation," Green says. "Now, they are thinking of the tax impact and coming up with exit strategies." They are also just looking for less-intensive investments. In addition to myriad tenants' service complaints, frequent apartment turnover requires repeated and expensive painting, cleaning and carpeting. Some investors who are cashing out "are more passive in terms of management," Green says. They are seeking stable, long-term cash flow and not necessarily as much equity buildup.
MORTGAGE RATES TURN UP AGAIN: The 30-year fixed-rate mortgage (FRM) averaged 6.80 percent for the week, up from last week's 6.74 percent and last year's 5.73 percent, according to Freddie Mac. The last time the 30-year FRM was higher was the week ending May 24, 2002, when it was 6.81 percent. The 15-year FRM this week was 6.41 percent, up from 6.37 percent the previous week and 5.32 percent a year ago. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.36 percent, up from last week, when the average was 6.33 percent. A year ago, the five-year ARM was 5.26 percent. One-year Treasury-indexed ARMs were 5.80 percent this week, up from 5.75 percent. At this time last year, they were 4.42 percent. "Financial markets were a bit jittery after core Consumer Price Index (CPI) figures for June were released that indicated inflation might still be a potential threat," said Frank Nothaft, Freddie Mac vice president and chief economist. "If this were the case, the Fed would be more inclined to continue to raise rates this year. Mortgage rates reflected that thinking and rose accordingly. However, Fed Chief Bernanke, in his semi-annual speech to Congress, hinted that another rise in overnight lending rates might not be imminent and financial markets breathed a collective sigh of relief, which should be reflected in the results of next week's survey."
RESTON BUILDER REPORTS DECLINING SALES: NVR, the Reston home building company, said that its profit rose in the second quarter, according to the Washington Post. The company, parent of Ryan Homes and NVHomes, said orders for new homes in its 23 major markets were down 13 percent in the quarter compared with a year ago and declined even more markedly in the Washington area, where they dropped 27 percent. Share prices for home building stocks as a group have fallen 50 percent in the past 12 months, according to the Dow Jones U.S. Home Construction Index. Also acknowledging fewer home orders was D.R. Horton Inc., one of the nation's largest home builders, which said they had fallen 4.4 percent in its fiscal third quarter, less sharply than at NVR. M.D.C. Holdings Inc. of Denver, which operates in the Washington area and elsewhere under the name Richmond American Homes, reported that home orders were off 43 percent.
FANNIE MAE ECONOMISTS PROJECT 10 PERCENT DROP IN SALES: The number of homes changing hands in 2006 could decline by up to 10 percent next year, the top economists at Fannie Mae project, according to Inman News. Economists David Berson and Molly Boesel said in a report that a weakening investor demand and a lack of affordability could bring sales volume down 8-10 percent next year, to 7.61 million units. That would still be the third-best year ever for home sales, the report noted. "The surge in the number of immigrants over the past 25 years, the age-structure of the population and continued job and income growth as the overall economy grows around trend rates should partially offset the drop in sales related to affordability and investors," the report said. The falloff in sales will be most pronounced in areas with weak economies and where the decline in investor demand creates a large increase in the supply of homes for sale. Home prices could fall in those areas, slowing overall home-price gains to 3 percent in 2006, ending two years of double-digit growth. "Even though new sales have increased, the level of unsold inventories has continued to climb to record highs - clearly a warning sign for home prices should sales slip in coming months," the Fannie Mae report said. "We think that sales will decline over the rest of the year, as leading indicators of sales continue to weaken."
HOUSING STARTS TAKE A DIVE: Total housing starts dropped 5.3 percent in June to a seasonally adjusted annual rate of 1.850 million units, according to figures released by the Commerce Department. That number was 11.0 percent below the pace of a year ago. Single-family starts were down 6.5 percent for the month, a 13.8 percent drop from June 2005. Multifamily housing construction was up 0.3 percent for the month. "The June declines in single-family starts and permits clearly show that the housing downswing still is under way, a pattern consistent with our signals from the field," said Chief Economist David Seiders of National Association of Home Builders (NAHB). "Builders are reporting not only systematic declines in home sales, but also increases in sales cancellations and inventories - due to eroding affordability conditions as well as a withdrawal of investors/speculators from the market." Issuance of total building permits decreased 4.3 percent from May to June, 14.9 percent below a year ago. Single-family permit issuance was down 6.3 percent on a national basis to a pace of 1.395 million units for the month, reflecting declines in all regions of the country.
YOU CAN TELL A HOUSE BY ITS COVERS: Stone and brick are marvelous means of sprucing up the appearance of a home, notes the Associated Press in the Washington Post in a piece about improving the appearance of dwellings. An essential part of any facelift plan, lighting not only is a decorative element but can improve safety and security. Replacing an old, worn-out three-tab shingle roof with an architectural-grade laminated roof can have a tremendous impact on a home's appearance. Plus, replacing a leaking roof can prevent water damage and rot that could threaten the safety and integrity of the home. A fresh coat of paint can do wonders, with the right combination of colors dramatically transforming a home by accenting certain elements such as shutters, the entry door, trim or other architectural elements. Where the exterior cladding has been neglected and is too far gone, new siding presents the opportunity to tweak the architectural appearance, add insulation and install a more maintenance-free finish such as a vinyl, fiber-cement or a composite material. And trim around windows and doors, window shutters, or shingle mold at barge rafters are subtle elements of that much-needed touch that may have been missing. A new entry door can do wonders in improving the curb appeal of a home. Add decorative glass, one or more sidelights with decorative glass, a decorative glass transom, energy-efficient and maintenance-free fiberglass construction, and a new decorative lockset. A garage door can account for up to 40 percent of the exterior appearance of your home. If your garage door is one of the old one-piece, tilt-up-style doors or if it is a "sagging sectional," consider replacing it with a new sectional door constructed of steel or fiberglass. If your entry path, porch or driveway is cracked, discolored or otherwise unsightly, there are several "fixes" that you can consider, including a self-leveling concrete caulk or a vinyl concrete patch, penetrating concrete stains, paint and architectural coatings that consist of polymers offering a "stamped" finish in a host of colors that can transform virtually any concrete finish into a thing of beauty. Finally, when it comes to curb appeal, not enough can be said about the importance of a well-manicured yard.
READING, 'RITING AND REAL ESTATE: Student scores on state proficiency tests can drive up housing prices, a new study suggests, according to Realtor magazine. A study of Ohio school districts showed that an increase of about 20 percentage points in the proficiency test "pass rate" increased home values in a school district by about 7 percent - even after considering other factors that can have an impact on home values. "In Ohio, there are districts with 20 percent pass rates and some with 85 percent pass rates, so based on our findings that would result in about a 23 percent difference in house values solely because of the schools. It is not [a] trivial amount," said Donald Haurin, co-author of the study and professor of economics at Ohio State University. More complex measures such as how much proficiency test pass rates improved between the 4th and the 9th grades didn't have much impact on home values.
TENANTS, DON'T OMIT INSURANCE: Renter's insurance is a protection against losses suffered by the tenant caused by his or her negligence or by factors beyond the control of the tenant but for which the tenant could be blamed, says the Washington Post. Landlords like the protection because, without the insurance, they cannot rely on the tenant to cover significant damage. Instead, they or their own insurance would be forced to pay. Tenants should like renter's insurance since it not only covers damage to property but also pays them for losses occurring from theft or other incidents (for example, fire or water leaks). The downside, of course, is the cost of the policy, which just increases the monthly cost of living. The good news is that this cost is pretty low and is for a service and protection that can be of great value to the tenant.
PULL UP A ROCKING CHAIR: A city council member in Tampa, Fla., feels so strongly about front porches that he wants to change the city's zoning code to encourage home owners to add the feature, says the St. Petersburg Times in Realtor magazine. Councilman John Dingfelder says the city would benefit from the sense of community that porches encourage. Life is better, he says, "when you sit on the front porch and watch your kids play and wave at your neighbors." Dingfelder's plan would change the city's zoning code to allow for an open porch that could extend up to 8 feet into required setback space. Tampa currently requires a 20- to 30-foot setback in front of homes. The Tampa Bay Builders Association doesn't think it's such a good idea because it could increase home costs and there is no indication that buyers are eager for porches. But Tampa police spokesperson Laura McElroy says the department is in favor of passage. "We love front porches," McElroy says. That's because porches encourage people to watch for suspicious cars and people in the neighborhood.
ARE DEVELOPERS BRIBING MUNICIPALITIES: In the frenzy to build subdivisions in Northern Virginia's exurbs, one of the nation's largest housing developers has offered to write the small Fauquier County town of Warrenton a $22 million check, an unprecedented cash donation, according to Virginia real estate specialists, the Washington Post reports. In exchange, Centex Homes of Dallas would get permission from county and town leaders to build a subdivision just outside Warrenton with nearly 300 luxury homes for seniors starting at $850,000. Town and county leaders have given their initial approval to Centex's proposal, which involves asking Warrenton to annex property so the builder can connect to the town's sewer system. Development specialists say the unusually large promise of cash highlights a disturbing trend in Virginia's booming housing market. Developers eager to plant new homes in exurban locales are building roads, establishing parks and offering money - all in an effort to appease increasingly resistant communities. The result, the specialists say, is more expensive homes. In Loudoun County, the developer Greenvest has offered to spend $192 million on road improvements in exchange for permission to build 15,000 homes near Dulles International Airport. Toll Brothers, another developer, plans to contribute 233 acres of parkland to Prince William County so it will rezone rural land to build 420 houses near Silver Lake.
BUILDER CONFIDENCE SINKS AGAIN: Increased concerns about interest rates and housing affordability caused builder confidence in the market for new single-family homes to slip three more notches to 39, a 15-year-low, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for July. "The HMI is down from its most recent cyclical high of 72 in June of last year and reflects growing builder uncertainly on the heels of reduced sales and increased cancellations related to eroding affordability as well as an ongoing withdrawal of investors/speculators from the marketplace," commented Chief Economist David Seiders of the National Association of Home Builders (NAHB). "But just as concerning to many builders is the potential for more monetary tightening by the Federal Reserve that could drive interest rates, and thereby homeownership costs, even higher. Ironically, the Fed's inflation-fighting moves have helped firm up the rental market and raise the 'owners' equivalent rent' components of the core inflation measures that the Fed is seeking to contain." With the seasonally adjusted index, any number over 50 indicates that more builders view sales conditions as good than poor. "In terms of historical comparison, the HMI's movement is essentially in line with readings from the 1994-95 period, when the Federal Reserve tightened monetary policy and a fairly orderly cooling-down process occurred in the nation's housing markets," Seiders continued. "That is what our forecasts anticipate happening in the current period, provided the downside risks of rising interest rates and a bail-out by investors/speculators do not become too pronounced. With respect to interest rates, we expect the Federal Reserve to maintain the current 5.25 percent target for the federal funds rate for some time, and we're projecting only modest increases in long-term interest rates from current levels."
FAIRFAX SUPERVISORS END HIATUS FOR ZONING CHANGE: The Board of Supervisors approved new rules last week to satisfy the court and homeowners that will allow the limited approval of variances to resume after a two-year hiatus, according to the Washington Post. The new system, approved unanimously, allows homeowners to seek a special permit or exception from the Board of Zoning Appeals. The size of a house can grow up to 150 percent if the expansion cannot be completed within the neighborhood's limits on setbacks and lot lines. The renovation cannot, however, raze more than half of the existing house. Rules on setbacks and lot lines vary among neighborhoods and depend on the density allowed. Planning and zoning officials devised the new system after 18 months of community meetings.
BASH-AND-BUILD IS WHAT THEY CALL THEM IN NEW JERSEY: In Colorado they're called "scrape offs." Here, they're "teardowns." An "orgy of irrational destruction" is how Richard Moe, president of the National Trust for Historic Preservation, characterized the trend in a speech before the Commonwealth Club of California, says Realtor magazine. The practice of demolishing an existing home to make way for a much larger one on the same lot is the "biggest threat to America's older neighborhoods since the heyday of urban renewal and interstate highway construction," Moe declared. "From 19th-century Victorians to 1920s bungalows and 1950s Eichlers, the older houses that grace our communities are valuable historical documents in brick and wood, steel and glass. Without proper safeguards, historic neighborhoods will lose the identities that drew residents to put down roots in the first place." In the Chicago suburb of Kenilworth, Ill., 50 of the town's early 20th-century homes, many designed by notable architects such as D. H. Burnham, have been demolished. In the Dallas communities of Highland Park and University Park, more than 1,000 historic homes have been replaced, and in Palo Alto and Menlo Park, Calif., more than 450 older homes were torn down. Even classic Modernist homes, many the work of prominent architects, have been under siege in New Canaan, Conn. For communities, effective strategies to slow the teardown trend include set back requirements, open space standards, and local ordinances requiring owners to get permission before demolishing or altering older or historic builders. Cities as diverse as Atlanta, Chevy Chase, Md., and Palo Alto, Calif., have adopted moratorium measures to give civic leaders time to assess their land-use and zoning practices.
AFFORDABLE HOUSING FACILITATED IN MONTGOMERY COUNTRY: Officials took steps to address the scarcity of affordable housing by trying to make it easier for middle-class workers to buy and rent homes in Maryland's largest jurisdiction, reports the Washington Post. Unlike past programs that have targeted the county's poorest residents, the latest initiative is aimed at helping workers such as teachers, firefighters and county employees who are increasingly being priced out of the housing market in one of the nation's wealthiest suburbs. The measure, passed unanimously by the County Council, would lead to the construction of as many as 2,500 units over 20-30 years in urban areas surrounding Metro stations, officials said.
MONTHLY PAYMENTS WORRY MANY AMERICANS: One out of three worries that rising monthly payments - especially property taxes and energy costs - will force them to sell their home and buy a less expensive one, according to a study by the National Association of Realtors (NAR). According to the study, high real estate taxes are most prevalent in states with high home prices and also in states such as New Hampshire that don't have a state income tax. New Jersey, with an average real estate tax deduction of $6,000, was the highest, followed by New York ($5,181), New Hampshire ($4,830), Connecticut ($4,769) and Texas ($4,501). Soaring energy costs affect an even wider swath of home owners. According to estimates by the Energy Information Administration, from February 2005 to February 2006, the cost of electricity was up 12 percent; natural gas, up 28 percent; and home heating oil, up 25 percent. Six in 10 of the survey's respondents said that high property taxes and rising energy costs could cause them to sell their home. Nearly four in 10 were worried about rising home interest rates. Three in 10 were worried that they or members of their family may have their home repossessed because they are unable to pay rising monthly mortgage payments. More than 20 percent of respondents reported not seeing friends and family, not being involved in neighborhood, missing out on promotions, lack of productivity and missing out on vacations because they have to work too much to pay for their home or they don't have the money because of high home costs.
THERE'S NO CONCEALING THE STEADINESS OF THIS MARKET: Much of the real estate near St. Petersburg, Fla., has been selling slowly, but there's one niche hasn't been hit by the slowdown: nudist resort housing, according to the St. Petersburg Times in Realtor magazine. Paradise Lakes nudist resort put 39 new 1,167-square-foot condominiums up for sale late last year for $200,000 each. The units aren't scheduled for completion until October, but all 36 are sold. Property at the Oasis, a 28-home gated community for those who prefer life in the buff, doesn't turn over often. In the last 12 months only one home has changed hands - an 1,800-SF property sold for $360,000. "The slowdown really didn't worry us," said Joe Lettelleir, Paradise Lakes' owner. "We are fortunate that we are somewhat insulated from the mainstream market." Insulated by what, he didn't say.
FORT COLLINS TOPS THE LIST, COLUMBIA/ELLICOTT CITY ARE 4TH: On its annual "Best Places to Live " list, Money magazine awarded the No. 1 ranking to Fort Collins, Colo. for its city offerings but suburban feel, good schools, plenty of parks and open space and a solid economic base with large employers like Colorado State University and Hewlett-Packard, observes the Wall Street Journal. However, this town made the news in 1997 when a flash flood derailed a train, ravaged two trailer parks and killed five people. Other towns making the top 10 (Nos. 2 to 10, in order) are: Naperville, Ill.; Sugar Land, Texas; Columbia/Ellicott City, Md.; Cary, N.C.; Overland Park, Kan.; Scottsdale, Ariz.; Boise, Idaho; Fairfield, Conn.; and Eden, Prairie, Minn.
MORTGAGE VOLUME DECLINES FOR THE WEEK ENDED JULY 14: It decreased by 4.6 percent on a seasonally adjusted basis from one week earlier, says the Mortgage Bankers Association. On an unadjusted basis, volume increased 36.4 percent compared with the previous week, which included Independence Day, but fell 31.3 percent compared with the same week one year earlier. Seasonally adjusted, purchase applications dipped 6.2 percent from the previous week, and refinancings went down by 1.6 percent. The refinance share of mortgage activity increased to 35.0 percent of total applications from 34.0 percent the previous week, while the adjustable-rate mortgage (ARM) share edged up to 29.0 percent from 28.7.
NEW ENGLAND EXPERIENCES DISTINCT CHILL IN HOUSING MARKET: A persistent exodus of residents and a stagnant economy across the region are depressing home sales, the Wall Street Journal reports. The real-estate landscape in New England is diverse, of course. Even so, sales volume across New England fell sharply in the first five months of the year, with the region's biggest states posting broad declines. In Massachusetts, single-family-home sales fell 9.3 percent through May compared with the same period a year earlier, according to figures from Warren Group, a Boston real-estate news publisher that compiles housing statistics. Sales in the Cape Cod and Worcester areas saw steep drop-offs, 17.8 percent and 12.5 percent respectively. In Connecticut, sales volume fell 11 percent in the first five months of the year compared with the same period a year earlier, Warren Group reports. Fairfield County - home to pricey towns such as Greenwich, New Canaan and Westport - saw a 17 percent sales drop compared with the same 2005 period. The factors behind New England's slowdown are complicated. For starters, its economy appears to be stalling, researchers say, at a time when the country as a whole maintains a relatively strong economic outlook. A recent report issued by the New England Economic Partnership cites continued weakening in the manufacturing, leisure and hospitality industries, three of the region's important economic engines, through 2010, resulting in slightly higher unemployment numbers. Growth in total employment is expected to average 0.9 percent per year, as opposed to the national average of 1.3 percent over the forecast period. Meanwhile, the pool of potential home-buyers in the region is "falling like a stone," says New Hampshire-based demographer Peter Francese. He cites U.S. Census Bureau data showing almost 200,000 residents between 25 and 44 years of age left the region between 2000 and 2004. All six New England states show declines in that category, with Maine, Vermont and Connecticut far outpacing the national average. No wonder the real-estate scene in New England - where home prices climbed at least twice as fast as household income during the run-up - is frosty. The population flight "weighs on the region's economy and housing market," says Mark Zandi, an economist with Moody's Economy.com. The collapse in housing affordability, he says, has driven out first-time home-buyers.
WHILE DOWN SINCE MAY, FORECLOSURES ARE UP OVER 2005: The number of U.S. properties entering the foreclosure process dipped in June from the previous month but were considerably higher than a year ago, according to an industry report, notes Inman News. A total of 88,195 properties entered some stage of foreclosure in June, down 5 percent from one month earlier, but the sum was 17 percent above the June 2005 level, according to RealtyTrac's June foreclosure market report. The report shows a June national foreclosure rate of one foreclosure filing for every 1,311 U.S. households. "New U.S. foreclosures dropped to their lowest level of the year in June, despite some of the sensational and misleading figures that we've seen reported recently," said James J. Saccacio, chief executive officer of RealtyTrac. "We think it's irresponsible to present falsely inflated numbers to the media for commercial gain as we've seen happen recently. The fact is that most states, with the notable exception of California, Ohio and Nevada, reported decreased numbers of foreclosure filings in June."
SOME BABY-BOOMERS WEARY OF BEING LANDLORDS: As investors in apartments, some are plain tired of the hassle of fixing leaky faucets and responding to other tenant complaints. The Wall Street Journal says they are starting to sell these investments as they get closer to retirement. In a survey conducted for the newspaper, Marrcus & Millichap found that its apartment-investor clients who have recently sold their assets plan to move 59 percent of that equity to other properties, investments and cash. The results are based on an analysis of 700 apartment transactions ranging from $1 million to $10 million in the 12 months ended May 31. Harvey Green, chief executive officer of the Encino, Calif., real-estate investment brokerage firm, says the overwhelming majority of its private investor base is 50 and older. Many bought their properties between 1990 and 2000. It took awhile to build up equity because of the real-estate downturn of 1991 to 1993 and the slow recovery in the following years. As a result, many held on to their properties longer than they originally expected, Green adds. In recent years, however, apartment investors began to experience tremendous equity growth. The median price per unit of apartments in the U.S. rose 87 percent to $112,000 from 2000 to 2006. "A number of them found that they were 10 years older and had a much larger tax liability because of the tremendous amount of appreciation," Green says. "Now, they are thinking of the tax impact and coming up with exit strategies." They are also just looking for less-intensive investments. In addition to myriad tenants' service complaints, frequent apartment turnover requires repeated and expensive painting, cleaning and carpeting. Some investors who are cashing out "are more passive in terms of management," Green says. They are seeking stable, long-term cash flow and not necessarily as much equity buildup.
MORTGAGE RATES TURN UP AGAIN: The 30-year fixed-rate mortgage (FRM) averaged 6.80 percent for the week, up from last week's 6.74 percent and last year's 5.73 percent, according to Freddie Mac. The last time the 30-year FRM was higher was the week ending May 24, 2002, when it was 6.81 percent. The 15-year FRM this week was 6.41 percent, up from 6.37 percent the previous week and 5.32 percent a year ago. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.36 percent, up from last week, when the average was 6.33 percent. A year ago, the five-year ARM was 5.26 percent. One-year Treasury-indexed ARMs were 5.80 percent this week, up from 5.75 percent. At this time last year, they were 4.42 percent. "Financial markets were a bit jittery after core Consumer Price Index (CPI) figures for June were released that indicated inflation might still be a potential threat," said Frank Nothaft, Freddie Mac vice president and chief economist. "If this were the case, the Fed would be more inclined to continue to raise rates this year. Mortgage rates reflected that thinking and rose accordingly. However, Fed Chief Bernanke, in his semi-annual speech to Congress, hinted that another rise in overnight lending rates might not be imminent and financial markets breathed a collective sigh of relief, which should be reflected in the results of next week's survey."
RESTON BUILDER REPORTS DECLINING SALES: NVR, the Reston home building company, said that its profit rose in the second quarter, according to the Washington Post. The company, parent of Ryan Homes and NVHomes, said orders for new homes in its 23 major markets were down 13 percent in the quarter compared with a year ago and declined even more markedly in the Washington area, where they dropped 27 percent. Share prices for home building stocks as a group have fallen 50 percent in the past 12 months, according to the Dow Jones U.S. Home Construction Index. Also acknowledging fewer home orders was D.R. Horton Inc., one of the nation's largest home builders, which said they had fallen 4.4 percent in its fiscal third quarter, less sharply than at NVR. M.D.C. Holdings Inc. of Denver, which operates in the Washington area and elsewhere under the name Richmond American Homes, reported that home orders were off 43 percent.
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