Items of Interest - July 29, 2006
PRICES OF EXISTING HOMES EDGE UP FROM 2005, BUT SALES DECLINE: Sales of previously owned home - including single-family, townhomes, condominiums and co-ops - declined 1.3 percent to a seasonally adjusted annual rate of 6.62 million units in June from May, reports the National Association of Realtors (NAR). Last month's sales were 8.9 percent below the 7.27 million-unit pace in June 2005. Commented David Lereah, NAR's chief economist: "Over the last three months home sales have held in a narrow range, easing to a level that is near our annual projection, which tells us the market is stabilizing," he said. "At the same time, sellers have recognized that they need to be more competitive in their pricing given the rise in housing inventories. Home prices are only a little higher than a year ago." The national median existing-home price for all housing types was $231,000 in June, up 0.9 percent from June 2005, when the median was $229,000. "The change in price performance is directly tied to housing inventories; a year ago, we had a lean supply of homes and a sellers' market, with monthly home sales at an all-time record high," Lereah said. Total housing inventory levels rose 3.8 percent at the end of June to 3.73 million existing homes available for sale, representing a 6.8-month supply at the current sales pace. By contrast, in June 2005, there was a tight 4.4-month supply on the market. Single-family home sales eased 0.9 percent from May to a seasonally adjusted annual rate of 5.81 million and were 8.2 percent below June 2005. The median existing single-family home price was $231,500, up 1.1 percent from a year ago. Existing condominium and cooperative housing sales fell 5.5 percent from May to a seasonally adjusted annual rate of 805,000 units and were 14.6 percent below the 943,000-unit level in June 2005. The median existing condo price was $226,900, down 2.1 percent from a year earlier.
SALES SLUMP OF NEW SINGLE-FAMILY HOMES: They were down 3.0 percent in June to a seasonally adjusted annual rate of 1.131 million units, following a downward revision to the sales rate for May, according to figures released by the U.S. Commerce Department. Year-to-date, actual new-home sales for the first half of the year were down 11.9 percent from the same period during last year's record year in new home sales. "The slowdown reported today, coupled with the downward revisions of the previous two months, indicates that we are well into the predicted cooling down process," said Michael Carliner, an economist at the National Association of Home Builders (NAHB). "We expect this to continue as the impact of recent increases in interest rates is fully reflected in sales." He added that NAHB's current forecast shows about a 12 percent decline in new-home sales for 2006 as a whole. "However, any further monetary tightening by the Federal Reserve would have a more severe negative impact on sales," Carliner contended. The inventory of new homes for sale rose to 566,000 units at the end of June, a 6.1 months' supply at the current sales pace. Almost all of the increase was for-sale units that were permitted but not yet started, representing nearly 20 percent of the inventory level. Units still under construction were almost 57 percent of the inventory, and completed homes for sale were 23 percent of the total - about the same as a year earlier. The median length of time that completed homes for sale were on the market was 3.8 months in June, compared with 4.0 months a year earlier.
AND SEE WHAT'S HAPPENING IN CALIFORNIA AND FLORIDA: Home sales there plunged 26.3 percent in June compared with last year while the median price of an existing home increased 6.2 percent, an industry trade association reported, according to Inman News. Closed escrow sales of existing, single-family detached homes in California totaled 483,690 in June at a seasonally adjusted annualized rate, according to information collected by the California Association of Realtors. That was down from the 656,310 sales pace recorded in June 2005. The median price of an existing, single-family detached home in California during June 2006 was $575,800, up from the $542,330 median for June 2005, C.A.R. reported. The June 2006 median price increased 2 percent compared with May's $564,440. Sales declined 29 percent from the year-ago level, according to the Florida Association of Realtors. A total of 18,089 existing single-family homes sold statewide last month, down from 25,552 homes sold during the previous June. Statewide, the existing-home median price rose 3 percent to $257,800 last month, up from $249,800 a year ago.
THIS IS ONE LIST TO AVOID: Forbes magazine factored in job-growth and cost-of-living rankings, then added to the mix a housing affordability index from research firm Moody's Economy.com plus a salary index from Seattle-based compensation collection firm PayScale, says Realtor magazine. The result was 10 metropolitan areas with the "worst" combined scores, reflecting the highest cost of living, lowest salaries, least job growth and least affordable housing. In order, the losers: Essex County, Mass., just north of Boston; San Francisco; San Jose, Calif.; Honolulu; New York City; Cambridge, Mass.; Tucson, Ariz.; Oakland, Calif.; Boston; and Los Angeles.
APPRAISALS COULD BE YOUR BANE: As the housing market cools, Americans are confronting a problem that was easy to ignore during the boom: inflated appraisals of home values, says the Wall Street Journal. Critics inside and outside the appraisal business have long warned that many appraisals are unrealistically high. That's partly because generous appraisals help loan officers and mortgage brokers, who often choose the appraiser, complete more deals. If a home is appraised at less than the buyer offered, the deal is likely to fall through. Inflated appraisals didn't matter much when home prices were rising at double-digit rates, since market values would quickly catch up. Now, however, prices are leveling off in many places and falling in some. Some homeowners are finding that the market value is below what past appraisals led them to believe. For sellers, that can mean being forced to drop their asking prices. Some people hoping to refinance, meanwhile, may be unable to lock in new loan terms because they have less equity in their homes than they thought. Lenders and mortgage investors, too, could take a hit if it turns out the collateral backing their loan is worth less than expected. Most homeowners have enough equity in their homes so they don't need to worry much about whether past appraisals were realistic. But dubious appraisals are a risk for the hundreds of thousands of people who in the past few years have bought homes with little or no down payment, or used almost all of their home equity to finance home improvements or other types of spending. That has left these people with little financial cushion to deal with rising interest rates. "Now it's pay-the-piper time for people, and they're finding out they don't have the value in the house they thought they had," says John Taylor, president of the National Community Reinvestment Coalition, a Washington-based nonprofit that supports low-income housing.
WHAT'S IN A NAME: If you're confused about the differences between "traditional" real estate firms and those that offer fee-for-service or limited-service advice, the Washington Post seeks to clear the air. Discount brokers, for example, claim to charge less than traditional brokers for either full-service treatment or only some of the services that a full-service real estate firm provides, according to the newspaper. Limited-service brokers and fee-for-service brokers typically charge by each task they do for a seller such as putting a listing on the multiple listing service or providing yard signs. The Federal Trade Commission offers help sorting out the options, which have become more popular as online research companies proliferate and as consumers balk at paying commissions of 5-7 percent. The agency recently established a Web site that focuses on real estate competition issues. The site ftc.gov/bc/realestate includes consumer publications and background on actions the commission is taking to promote competition.
THERE'S HARDWOOD AND THERE'S HARDWOOD: Unfinished solid wood floors are traditional and dependable, but they can be a hassle to install, notes the New York Times, which advises consumer not to discount automatically the value and durability of floors that look like solid wood but harbor high-tech secrets below the surface. Like plywood, engineered flooring is made from laminated wood layers and can be topped with a premium veneer, like oak. It resists warping and resembles wood slabs at a reasonable price - starting at around $4 a square foot. (Solid wood often runs more than $5.) Most engineered floors are factory finished, eliminating the hassle of surfacing the wood after installation. You can lay regular engineered strips traditionally, but herringbone planks from manufacturers like Mirage, at (800) 463-1303 or miragefloors.com are one way to make a decorative pattern. Much like parquet, engineered flooring can be glued to a cement slab or nailed to a plywood subfloor. To minimize the slight level changes or gaps between strips, manufacturers bevel away a little wood all the way around the top edge. As you shop, try running your hand across the joints between planks on the store's sample boards. If they do not meet your standards, you may be even less happy with your installation at home. Just as with solid wood tongue-and-groove boards, there is a limit to the number of times you can resurface; you will not want to sand so far down that you expose the tongues of engineered strips. Buying solid wood will sometimes let you sand a little further down, though it will not guarantee top quality. If you are buying prefinished boards from a liquidator, for instance, many of the boards may not match the color sample you approved. Or your installer may have to be creative to use a dismaying number of boards that are less than 18 inches long (in the closets, for example). The short pieces were probably culled from a more expensive grade of strips sold to someone else for a higher price.
GASOLINE PRICES COULD BE AFFECTING THE HOUSING MARKET: John Wasik, author of "The Merchant of Power," used data from the American Automobile Association and the National Association of Realtors (NAR) to conclude that, beginning in September 2005, home sales fell each time gasoline prices jumped, reports Bloomberg in Realtor magazine. Wasik believes that soaring gas prices are weakening the housing market, prompting the Federal Reserve Board to hike short-term interest rates to curtail inflation and subsequently boosting monthly payments for homeowners with adjustable-rate mortgages. If gas prices continue to creep above the $3-per-gallon mark, Wasik expects a more dramatic slowdown in housing markets where buyers are commuting the furthest. These markets include Los Angeles; San Diego; New York; Atlanta; Orlando, Fla.; Tampa, Fla.; Miami-Fort Lauderdale; and Denver.
D.C.'S POPULATION SPURTS: The U.S. Census Bureau has now acknowledged that it had underestimated the number of people living in Washington and revised its data to reflect the largest increase in the city's population since 1950, reports the Washington Post. The decision immediately adds more than 31,000 people to Washington's official population, increasing it to 582,049. William H. Frey, a demographer at the Brookings Institution, called the decision "a big deal," adding that "this is real." Said he: "D.C. is increasing its population at a very significant level. The addition of 31,528 people "makes up for all the losses of the 1990s and is equivalent to the loss in the 1980s as well." In its challenge to census figures, the city submitted building permits from 1999 to 2005, Phillips said, in addition to school enrollment figures showing that public charter schools had absorbed much of a decline in the number of students attending public schools. The city also submitted data showing that the number of people filing taxes in the District had remained steady between 2004 and 2005 and that Pepco was serving an increasing number of residential units. The revision marks the most significant increase in the city's population since it peaked in 1950 at 802,178. In every census since, Phillips said, the city has recorded a decline, although mid-census estimates during the late 1990s twice bumped population slightly upward.
ORGANIZATION CONTENDS THE FOX IS WATCHING THE HENHOUSE: State real estate commissions are dominated by practicing real estate brokers, according to a new study by the Consumer Federation of America (CFA). In most states, state regulators have failed to adequately inform, educate, and protect home sellers and buyers using brokerage services, and in some states these regulators have acted to restrict competition and consumer choice, the report found. "Several real estate commissions have supported controversial minimum service laws that have been actively opposed by the U.S. Department of Justice," said Patrick Woodall, CFA's Senior Researcher. "These laws were developed by traditional brokers who sought to restrict the services offered by nontraditional Internet-based or discount brokers," he added. "If insurance leaders were to serve as insurance commissioners or utility executives as public service commissioners, newspapers would report these blatant conflicts of interest on page one and editorialize against them," said Stephen Brobeck, CFA's Executive Director. "Governors and state legislators should support measures to prohibit practicing real estate brokers from serving as real estate commissioners," he maintained. Thomas M. Stevens, a Fairfax County broker who is president of the National Association of Realtors was quoted by the Washington Post as praising the services rendered to the public by the dozens of active agents who serve on state-appointed regulatory commissions, "just like doctors, lawyers and other professionals." CFA research found that nearly four-fifths of all commissioners earn a living through real estate transactions. Seventy percent of all commissioners are real estate brokers or salespeople. Another 9 percent are affiliated with businesses ? developers, appraisers, title agents, and real estate attorneys ? with direct ties to the industry. So says the consumer advocacy group.
MAKE THE MOST OF THAT SMALL BEDROOM: Need a guest bedroom and a den? asks Realty Times. These days with many people working from home, one challenge is finding space for both an office and a guest bedroom. Homeowners are utilizing Murphy beds and fold-up futons to save space and make the extra bedroom usable as a part-time guest bedroom/office. But the old style wall beds aren't the only way to save space. The Europeans have introduced the computer bed. This might be perfect for a dorm or a child's room. A bed folds out and beneath it is the computer center. Fold it back up and the bed is conveniently tucked away inside, leaving a computer desk exposed and accessible for study time. You can see other styles at flyingbeds.com.
WHAT SOME ARE DOING TO COPE WITH RISING RATES: As monthly payments on adjustable-rate mortgages are starting to balloon, many Americans have found a way to put off the day of reckoning, observes the New York Times. They are refinancing with new adjustable-rate mortgages that keep monthly payments low - for now, that is, though their payments will likely rise even higher in the future. Millions of Americans have turned to adjustable-rate mortgages, or A.R.M.'s, in recent years to afford a home as prices soared. Typically set at artificially low rates in the first years of the loan, these mortgages are then reset at the prevailing interest rates. For borrowers, the bet was that interest rates would remain low. Now, the first big wave of the mortgage boom is cresting as more than $400 billion worth of adjustable-rate mortgages, or about 5 percent of all outstanding mortgage debt, will readjust this year for the first time, according to Loan Performance, a research firm. Next year, another $1 trillion in loans will readjust. When that happens, for instance, a typical borrower with a $200,000 A.R.M. could see his monthly payments increase nearly 25 percent when the A.R.M. adjusts from 4.5 percent to 6.5 percent. In total dollars, that is an increase from $1,013 a month to $1,254. Yet instead of paying more now, many borrowers are refinancing into their second or third adjustable-rate mortgage, loan data indicate and industry experts confirm. So far, the number of borrowers refinancing this way is relatively small - several hundred thousand in the estimate of the credit ratings firm Fitch Ratings - but mortgage industry officials and analysts expect the numbers will surge next year. In doing so, these borrowers are pushing out any eventual shock of higher payments by another two or three years, if not longer. "They get another two- or three-year hybrid with a low introductory rate to keep payments down," said Frank E. Nothaft, a vice president and chief economist at Freddie Mac, the mortgage buyer. "They're trying to put it off forever, which is O.K. as long as interest rates are low. But when they start to spike, then it's going to be more problematic."
THERE GOES THE NEIGHBORHOOD: Many buyers choose a neighborhood before they choose a home, notes Realtor magazine. At least three Web sites point homeowners and buyers toward addresses where sex offenders live and work. The most sophisticated is Family Watch Dog.com, which uses a color-coded mapping system. Users can click on the identifying squares and see photos, addresses, convictions, and other information about the offender. The site was created by Julie Clark, founder of the Baby Einstein Co., and John Walsh, host of the "America's Most Wanted" TV show. Not quite so complete are Sex-Offenders.com and MapSexOffenders.com. Some states and municipalities have individual sites as well.
BYE, BYE KITCHEN, HELLO LIVE-IN ROOM: Gone are the days when rooms were named for their purpose, notes Remodeling magazine in Realtor magazine. Say goodbye to laundry rooms, studies, living rooms. Say hello to the "Live-In Room," where people do what they want to do without feeling limited by walls. Take the room formerly known as a kitchen. The new concept room features a professional cooking area, a less formal dining and entertaining space and a comfortable lounge area with sofas, a television and a beverage center. Electrolux debuted "Live-In Room" concepts at the 2006 Kitchen & Bath Industry Show. "We reviewed how the kitchen is used and developed a space that makes it a comfortable setting that encourages togetherness," says John Swenson, director of brand marketing for the company. Instead of walls, the room has "zones" that allow for residents to move into different areas seamlessly and perform different tasks, from paying bills to watching movies on a comfy couch. Then there's the room formerly known as the laundry room. Cabinetry manufacturer Merillat Industries showed off its ideas for multiuse layouts incorporating various types of cabinetry to bring together laundry, craft, office and other spaces. Design Services Director Paul Radoy says his team discovered that small kitchen spice drawers make great storage for sewing materials, fly-tying supplies or model-building parts. Pull-out desk surfaces double as sewing stations, and an island on casters is ideal for a laundry-folding table or gift-wrapping surface.
IT'S NOT ONLY THE WINDY CITY: It's also the Emerald City, reports Realty times. Industry group Green Roofs for Healthy Cities (GRHC) says, with nearly 300,000 square feet of rooftops newly cultivated in 2005 for a total 2.5 million square feet growing on more than 200 rooftops throughout the city, Chicago is the first city in verdant rooftops. The 2005 amount compares with 200,000 square feet in 2004. New York City, D.C., Boston, Baltimore, and Ontario across the border are other locales that boast substantial rooftop gardening acreage. Probably, they could say a lot about elevators as well.
THE REAL-ESTATE MARKET HAS A NEW CRY AND IT'S LAND HO!: As the nation's housing market cools, there's a rush to snap up undeveloped property as buyers stake their claim on everything from New England creek-front parcels, to mountainous woodlands in Tennessee, to big-sky vistas in Montana, says the Wall Street Journal. Some people are buying dream lots now, while the land is available and prices affordable, with plans to one day build a vacation or retirement home. Others are investing in recreational property they want to use today: In rural west Texas, for example, scrubland that wouldn't even sell a few years ago has become popular with deer hunters and the offroad-vehicle set. In the face of demand like this, prices for undeveloped land in many parts of the country are shooting up. Around the country last year, farmland values rose at their highest year-over-year rate - 11 percent - since 1981, according to the Agriculture Department. The U.S. has roughly 1.5 billion acres of rural land, excluding public lands, representing about 65 percent of the country. Prices vary widely: Rural land can fetch $250 an acre in the brush country of far southwest Texas, to $3,000 an acre for timber and pasture land in Iowa, to a scenic, 37-acre property in southwest Colorado straddling both sides of a river for nearly $27,000 an acre. Even before you buy, consider having a survey done of the land you're interested in, or at least work through a local land agent who knows the area and terrain. Property lines aren't always well defined, and soils may be too wet to support a building in the spot you really want to build. Also, pay attention to how you access the land. In some places, makeshift roads that cross a variety of property lines have become semi-permanent through the years - although nothing about them is legal. As a result, you may not have legal access to your property, resulting in lawsuits. With rural land, you could find one day that your dream property is bordered by a new mobile-home park; a local real-estate agent with land expertise will know the zoning and covenants in place. Land prices often don't move in the same way home prices do. Despite the run-up in recent years in some housing markets, home prices are typically expected to rise alongside the rate of inflation. But with land, price appreciation is traditionally more closely tied to how much money it can generate from activities such as farming or grazing. And in general, land prices, when they cool, don't tend to fall as much as an overpriced residential market might, largely because while a housing market can be overbuilt, land can't. Land might make a good investment, but it can be a lot harder to sell in a pinch than a house, since fewer people are looking for land.
LOTS OF COMPETITION IN REAL ESTATE, SKEPTICAL HOUSE PANEL HEARS: In a hearing on Capitol Hill, members of a U.S. House committee looking into real estate competition and the effect of the Internet heard tales of the industry's rough-and-tumble character, but the House members appeared largely unconvinced by charges of anti-competitive behavior against Internet-based discount brokerages and skeptical of calls for federal intervention, according to Realtor magazine. "I don't see the rationale for the federal government to weigh into these issues," said Rep. Arthur Davis (D-Ala.), a member of the Financial Services Subcommittee on Housing and Community Opportunity, which conducted the hearing. Davis' remarks referred to a call by critics of the National Association of Realtors (NAR) for Congress to pass legislation giving all real estate business models equal access to multiple listing services and allowing the Federal Trade Commission to monitor and preempt state minimum service laws, which critics say are used to protect full-service real estate brokers and restrict consumer choice. Among recommendations by the Department of Justice are: Opening up MLS participation to brokers whose business model is based not on listing and selling real estate but on making money from the display of listings on their Web sites; prohibiting brokers from determining whether they want their listings advertised on other brokers' sites; and restricting state minimum service laws, which take aim at brokers that enter listings in the MLS, but leave deal particulars and risk to the selling agent.
EVEN REDUCED RATES FAIL TO EXCITE BORROWERS: For the week ended July 21, mortgage loan application volume slipped by 1.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the decrease was 1.2 percent compared with the previous week and 28.2 percent, with the same week one year earlier. Seasonally adjusted, purchase applications declined by 2.4 percent from the previous week and refinancings, 0.6 percent from one week earlier. Purchase loans have fallen to the three year low that occurred five weeks ago. The refinance share of mortgage activity increased to 35.6 percent of total applications from 35.0 percent the previous week, while the adjustable-rate mortgage (ARM) share declined to 28.6 percent from 29.0 percent the previous week.
AND BUYER INDIFFERENCE TAKES PRESSSURE OFF RATES: The 30-year fixed-rate mortgage (FRM) averaged 6.72 percent for the week, down from last week's 6.80 percent, according to Freddie Mac. Last year at this time, it was 5.77 percent. The average for the 15-year FRM this week was 6.34 percent, 6.41 percent a week earlier and up from 5.34 percent a year ago. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.35 percent this week compared with last week's 6.36 percent and up from 5.27 percent in 2005 at the same time. One-year Treasury-indexed ARMs were 5.78 percent this week, down from last week, when it averaged 5.80 percent. At this time last year, the one-year ARM was 4.46 percent. "Mortgage rates drifted lower this week on indications that economic growth is moderating, inflation remains under control and the Fed just may pause raising rates for awhile," said Frank Nothaft, Freddie Mac vice president and chief economist. "Meanwhile, recently released new homes sales for June fell to a lower than expected rate. That drop can be traced directly to higher mortgage rates, which are also helping to slow the growth of house prices in 2006."
SALES SLUMP OF NEW SINGLE-FAMILY HOMES: They were down 3.0 percent in June to a seasonally adjusted annual rate of 1.131 million units, following a downward revision to the sales rate for May, according to figures released by the U.S. Commerce Department. Year-to-date, actual new-home sales for the first half of the year were down 11.9 percent from the same period during last year's record year in new home sales. "The slowdown reported today, coupled with the downward revisions of the previous two months, indicates that we are well into the predicted cooling down process," said Michael Carliner, an economist at the National Association of Home Builders (NAHB). "We expect this to continue as the impact of recent increases in interest rates is fully reflected in sales." He added that NAHB's current forecast shows about a 12 percent decline in new-home sales for 2006 as a whole. "However, any further monetary tightening by the Federal Reserve would have a more severe negative impact on sales," Carliner contended. The inventory of new homes for sale rose to 566,000 units at the end of June, a 6.1 months' supply at the current sales pace. Almost all of the increase was for-sale units that were permitted but not yet started, representing nearly 20 percent of the inventory level. Units still under construction were almost 57 percent of the inventory, and completed homes for sale were 23 percent of the total - about the same as a year earlier. The median length of time that completed homes for sale were on the market was 3.8 months in June, compared with 4.0 months a year earlier.
AND SEE WHAT'S HAPPENING IN CALIFORNIA AND FLORIDA: Home sales there plunged 26.3 percent in June compared with last year while the median price of an existing home increased 6.2 percent, an industry trade association reported, according to Inman News. Closed escrow sales of existing, single-family detached homes in California totaled 483,690 in June at a seasonally adjusted annualized rate, according to information collected by the California Association of Realtors. That was down from the 656,310 sales pace recorded in June 2005. The median price of an existing, single-family detached home in California during June 2006 was $575,800, up from the $542,330 median for June 2005, C.A.R. reported. The June 2006 median price increased 2 percent compared with May's $564,440. Sales declined 29 percent from the year-ago level, according to the Florida Association of Realtors. A total of 18,089 existing single-family homes sold statewide last month, down from 25,552 homes sold during the previous June. Statewide, the existing-home median price rose 3 percent to $257,800 last month, up from $249,800 a year ago.
THIS IS ONE LIST TO AVOID: Forbes magazine factored in job-growth and cost-of-living rankings, then added to the mix a housing affordability index from research firm Moody's Economy.com plus a salary index from Seattle-based compensation collection firm PayScale, says Realtor magazine. The result was 10 metropolitan areas with the "worst" combined scores, reflecting the highest cost of living, lowest salaries, least job growth and least affordable housing. In order, the losers: Essex County, Mass., just north of Boston; San Francisco; San Jose, Calif.; Honolulu; New York City; Cambridge, Mass.; Tucson, Ariz.; Oakland, Calif.; Boston; and Los Angeles.
APPRAISALS COULD BE YOUR BANE: As the housing market cools, Americans are confronting a problem that was easy to ignore during the boom: inflated appraisals of home values, says the Wall Street Journal. Critics inside and outside the appraisal business have long warned that many appraisals are unrealistically high. That's partly because generous appraisals help loan officers and mortgage brokers, who often choose the appraiser, complete more deals. If a home is appraised at less than the buyer offered, the deal is likely to fall through. Inflated appraisals didn't matter much when home prices were rising at double-digit rates, since market values would quickly catch up. Now, however, prices are leveling off in many places and falling in some. Some homeowners are finding that the market value is below what past appraisals led them to believe. For sellers, that can mean being forced to drop their asking prices. Some people hoping to refinance, meanwhile, may be unable to lock in new loan terms because they have less equity in their homes than they thought. Lenders and mortgage investors, too, could take a hit if it turns out the collateral backing their loan is worth less than expected. Most homeowners have enough equity in their homes so they don't need to worry much about whether past appraisals were realistic. But dubious appraisals are a risk for the hundreds of thousands of people who in the past few years have bought homes with little or no down payment, or used almost all of their home equity to finance home improvements or other types of spending. That has left these people with little financial cushion to deal with rising interest rates. "Now it's pay-the-piper time for people, and they're finding out they don't have the value in the house they thought they had," says John Taylor, president of the National Community Reinvestment Coalition, a Washington-based nonprofit that supports low-income housing.
WHAT'S IN A NAME: If you're confused about the differences between "traditional" real estate firms and those that offer fee-for-service or limited-service advice, the Washington Post seeks to clear the air. Discount brokers, for example, claim to charge less than traditional brokers for either full-service treatment or only some of the services that a full-service real estate firm provides, according to the newspaper. Limited-service brokers and fee-for-service brokers typically charge by each task they do for a seller such as putting a listing on the multiple listing service or providing yard signs. The Federal Trade Commission offers help sorting out the options, which have become more popular as online research companies proliferate and as consumers balk at paying commissions of 5-7 percent. The agency recently established a Web site that focuses on real estate competition issues. The site ftc.gov/bc/realestate includes consumer publications and background on actions the commission is taking to promote competition.
THERE'S HARDWOOD AND THERE'S HARDWOOD: Unfinished solid wood floors are traditional and dependable, but they can be a hassle to install, notes the New York Times, which advises consumer not to discount automatically the value and durability of floors that look like solid wood but harbor high-tech secrets below the surface. Like plywood, engineered flooring is made from laminated wood layers and can be topped with a premium veneer, like oak. It resists warping and resembles wood slabs at a reasonable price - starting at around $4 a square foot. (Solid wood often runs more than $5.) Most engineered floors are factory finished, eliminating the hassle of surfacing the wood after installation. You can lay regular engineered strips traditionally, but herringbone planks from manufacturers like Mirage, at (800) 463-1303 or miragefloors.com are one way to make a decorative pattern. Much like parquet, engineered flooring can be glued to a cement slab or nailed to a plywood subfloor. To minimize the slight level changes or gaps between strips, manufacturers bevel away a little wood all the way around the top edge. As you shop, try running your hand across the joints between planks on the store's sample boards. If they do not meet your standards, you may be even less happy with your installation at home. Just as with solid wood tongue-and-groove boards, there is a limit to the number of times you can resurface; you will not want to sand so far down that you expose the tongues of engineered strips. Buying solid wood will sometimes let you sand a little further down, though it will not guarantee top quality. If you are buying prefinished boards from a liquidator, for instance, many of the boards may not match the color sample you approved. Or your installer may have to be creative to use a dismaying number of boards that are less than 18 inches long (in the closets, for example). The short pieces were probably culled from a more expensive grade of strips sold to someone else for a higher price.
GASOLINE PRICES COULD BE AFFECTING THE HOUSING MARKET: John Wasik, author of "The Merchant of Power," used data from the American Automobile Association and the National Association of Realtors (NAR) to conclude that, beginning in September 2005, home sales fell each time gasoline prices jumped, reports Bloomberg in Realtor magazine. Wasik believes that soaring gas prices are weakening the housing market, prompting the Federal Reserve Board to hike short-term interest rates to curtail inflation and subsequently boosting monthly payments for homeowners with adjustable-rate mortgages. If gas prices continue to creep above the $3-per-gallon mark, Wasik expects a more dramatic slowdown in housing markets where buyers are commuting the furthest. These markets include Los Angeles; San Diego; New York; Atlanta; Orlando, Fla.; Tampa, Fla.; Miami-Fort Lauderdale; and Denver.
D.C.'S POPULATION SPURTS: The U.S. Census Bureau has now acknowledged that it had underestimated the number of people living in Washington and revised its data to reflect the largest increase in the city's population since 1950, reports the Washington Post. The decision immediately adds more than 31,000 people to Washington's official population, increasing it to 582,049. William H. Frey, a demographer at the Brookings Institution, called the decision "a big deal," adding that "this is real." Said he: "D.C. is increasing its population at a very significant level. The addition of 31,528 people "makes up for all the losses of the 1990s and is equivalent to the loss in the 1980s as well." In its challenge to census figures, the city submitted building permits from 1999 to 2005, Phillips said, in addition to school enrollment figures showing that public charter schools had absorbed much of a decline in the number of students attending public schools. The city also submitted data showing that the number of people filing taxes in the District had remained steady between 2004 and 2005 and that Pepco was serving an increasing number of residential units. The revision marks the most significant increase in the city's population since it peaked in 1950 at 802,178. In every census since, Phillips said, the city has recorded a decline, although mid-census estimates during the late 1990s twice bumped population slightly upward.
ORGANIZATION CONTENDS THE FOX IS WATCHING THE HENHOUSE: State real estate commissions are dominated by practicing real estate brokers, according to a new study by the Consumer Federation of America (CFA). In most states, state regulators have failed to adequately inform, educate, and protect home sellers and buyers using brokerage services, and in some states these regulators have acted to restrict competition and consumer choice, the report found. "Several real estate commissions have supported controversial minimum service laws that have been actively opposed by the U.S. Department of Justice," said Patrick Woodall, CFA's Senior Researcher. "These laws were developed by traditional brokers who sought to restrict the services offered by nontraditional Internet-based or discount brokers," he added. "If insurance leaders were to serve as insurance commissioners or utility executives as public service commissioners, newspapers would report these blatant conflicts of interest on page one and editorialize against them," said Stephen Brobeck, CFA's Executive Director. "Governors and state legislators should support measures to prohibit practicing real estate brokers from serving as real estate commissioners," he maintained. Thomas M. Stevens, a Fairfax County broker who is president of the National Association of Realtors was quoted by the Washington Post as praising the services rendered to the public by the dozens of active agents who serve on state-appointed regulatory commissions, "just like doctors, lawyers and other professionals." CFA research found that nearly four-fifths of all commissioners earn a living through real estate transactions. Seventy percent of all commissioners are real estate brokers or salespeople. Another 9 percent are affiliated with businesses ? developers, appraisers, title agents, and real estate attorneys ? with direct ties to the industry. So says the consumer advocacy group.
MAKE THE MOST OF THAT SMALL BEDROOM: Need a guest bedroom and a den? asks Realty Times. These days with many people working from home, one challenge is finding space for both an office and a guest bedroom. Homeowners are utilizing Murphy beds and fold-up futons to save space and make the extra bedroom usable as a part-time guest bedroom/office. But the old style wall beds aren't the only way to save space. The Europeans have introduced the computer bed. This might be perfect for a dorm or a child's room. A bed folds out and beneath it is the computer center. Fold it back up and the bed is conveniently tucked away inside, leaving a computer desk exposed and accessible for study time. You can see other styles at flyingbeds.com.
WHAT SOME ARE DOING TO COPE WITH RISING RATES: As monthly payments on adjustable-rate mortgages are starting to balloon, many Americans have found a way to put off the day of reckoning, observes the New York Times. They are refinancing with new adjustable-rate mortgages that keep monthly payments low - for now, that is, though their payments will likely rise even higher in the future. Millions of Americans have turned to adjustable-rate mortgages, or A.R.M.'s, in recent years to afford a home as prices soared. Typically set at artificially low rates in the first years of the loan, these mortgages are then reset at the prevailing interest rates. For borrowers, the bet was that interest rates would remain low. Now, the first big wave of the mortgage boom is cresting as more than $400 billion worth of adjustable-rate mortgages, or about 5 percent of all outstanding mortgage debt, will readjust this year for the first time, according to Loan Performance, a research firm. Next year, another $1 trillion in loans will readjust. When that happens, for instance, a typical borrower with a $200,000 A.R.M. could see his monthly payments increase nearly 25 percent when the A.R.M. adjusts from 4.5 percent to 6.5 percent. In total dollars, that is an increase from $1,013 a month to $1,254. Yet instead of paying more now, many borrowers are refinancing into their second or third adjustable-rate mortgage, loan data indicate and industry experts confirm. So far, the number of borrowers refinancing this way is relatively small - several hundred thousand in the estimate of the credit ratings firm Fitch Ratings - but mortgage industry officials and analysts expect the numbers will surge next year. In doing so, these borrowers are pushing out any eventual shock of higher payments by another two or three years, if not longer. "They get another two- or three-year hybrid with a low introductory rate to keep payments down," said Frank E. Nothaft, a vice president and chief economist at Freddie Mac, the mortgage buyer. "They're trying to put it off forever, which is O.K. as long as interest rates are low. But when they start to spike, then it's going to be more problematic."
THERE GOES THE NEIGHBORHOOD: Many buyers choose a neighborhood before they choose a home, notes Realtor magazine. At least three Web sites point homeowners and buyers toward addresses where sex offenders live and work. The most sophisticated is Family Watch Dog.com, which uses a color-coded mapping system. Users can click on the identifying squares and see photos, addresses, convictions, and other information about the offender. The site was created by Julie Clark, founder of the Baby Einstein Co., and John Walsh, host of the "America's Most Wanted" TV show. Not quite so complete are Sex-Offenders.com and MapSexOffenders.com. Some states and municipalities have individual sites as well.
BYE, BYE KITCHEN, HELLO LIVE-IN ROOM: Gone are the days when rooms were named for their purpose, notes Remodeling magazine in Realtor magazine. Say goodbye to laundry rooms, studies, living rooms. Say hello to the "Live-In Room," where people do what they want to do without feeling limited by walls. Take the room formerly known as a kitchen. The new concept room features a professional cooking area, a less formal dining and entertaining space and a comfortable lounge area with sofas, a television and a beverage center. Electrolux debuted "Live-In Room" concepts at the 2006 Kitchen & Bath Industry Show. "We reviewed how the kitchen is used and developed a space that makes it a comfortable setting that encourages togetherness," says John Swenson, director of brand marketing for the company. Instead of walls, the room has "zones" that allow for residents to move into different areas seamlessly and perform different tasks, from paying bills to watching movies on a comfy couch. Then there's the room formerly known as the laundry room. Cabinetry manufacturer Merillat Industries showed off its ideas for multiuse layouts incorporating various types of cabinetry to bring together laundry, craft, office and other spaces. Design Services Director Paul Radoy says his team discovered that small kitchen spice drawers make great storage for sewing materials, fly-tying supplies or model-building parts. Pull-out desk surfaces double as sewing stations, and an island on casters is ideal for a laundry-folding table or gift-wrapping surface.
IT'S NOT ONLY THE WINDY CITY: It's also the Emerald City, reports Realty times. Industry group Green Roofs for Healthy Cities (GRHC) says, with nearly 300,000 square feet of rooftops newly cultivated in 2005 for a total 2.5 million square feet growing on more than 200 rooftops throughout the city, Chicago is the first city in verdant rooftops. The 2005 amount compares with 200,000 square feet in 2004. New York City, D.C., Boston, Baltimore, and Ontario across the border are other locales that boast substantial rooftop gardening acreage. Probably, they could say a lot about elevators as well.
THE REAL-ESTATE MARKET HAS A NEW CRY AND IT'S LAND HO!: As the nation's housing market cools, there's a rush to snap up undeveloped property as buyers stake their claim on everything from New England creek-front parcels, to mountainous woodlands in Tennessee, to big-sky vistas in Montana, says the Wall Street Journal. Some people are buying dream lots now, while the land is available and prices affordable, with plans to one day build a vacation or retirement home. Others are investing in recreational property they want to use today: In rural west Texas, for example, scrubland that wouldn't even sell a few years ago has become popular with deer hunters and the offroad-vehicle set. In the face of demand like this, prices for undeveloped land in many parts of the country are shooting up. Around the country last year, farmland values rose at their highest year-over-year rate - 11 percent - since 1981, according to the Agriculture Department. The U.S. has roughly 1.5 billion acres of rural land, excluding public lands, representing about 65 percent of the country. Prices vary widely: Rural land can fetch $250 an acre in the brush country of far southwest Texas, to $3,000 an acre for timber and pasture land in Iowa, to a scenic, 37-acre property in southwest Colorado straddling both sides of a river for nearly $27,000 an acre. Even before you buy, consider having a survey done of the land you're interested in, or at least work through a local land agent who knows the area and terrain. Property lines aren't always well defined, and soils may be too wet to support a building in the spot you really want to build. Also, pay attention to how you access the land. In some places, makeshift roads that cross a variety of property lines have become semi-permanent through the years - although nothing about them is legal. As a result, you may not have legal access to your property, resulting in lawsuits. With rural land, you could find one day that your dream property is bordered by a new mobile-home park; a local real-estate agent with land expertise will know the zoning and covenants in place. Land prices often don't move in the same way home prices do. Despite the run-up in recent years in some housing markets, home prices are typically expected to rise alongside the rate of inflation. But with land, price appreciation is traditionally more closely tied to how much money it can generate from activities such as farming or grazing. And in general, land prices, when they cool, don't tend to fall as much as an overpriced residential market might, largely because while a housing market can be overbuilt, land can't. Land might make a good investment, but it can be a lot harder to sell in a pinch than a house, since fewer people are looking for land.
LOTS OF COMPETITION IN REAL ESTATE, SKEPTICAL HOUSE PANEL HEARS: In a hearing on Capitol Hill, members of a U.S. House committee looking into real estate competition and the effect of the Internet heard tales of the industry's rough-and-tumble character, but the House members appeared largely unconvinced by charges of anti-competitive behavior against Internet-based discount brokerages and skeptical of calls for federal intervention, according to Realtor magazine. "I don't see the rationale for the federal government to weigh into these issues," said Rep. Arthur Davis (D-Ala.), a member of the Financial Services Subcommittee on Housing and Community Opportunity, which conducted the hearing. Davis' remarks referred to a call by critics of the National Association of Realtors (NAR) for Congress to pass legislation giving all real estate business models equal access to multiple listing services and allowing the Federal Trade Commission to monitor and preempt state minimum service laws, which critics say are used to protect full-service real estate brokers and restrict consumer choice. Among recommendations by the Department of Justice are: Opening up MLS participation to brokers whose business model is based not on listing and selling real estate but on making money from the display of listings on their Web sites; prohibiting brokers from determining whether they want their listings advertised on other brokers' sites; and restricting state minimum service laws, which take aim at brokers that enter listings in the MLS, but leave deal particulars and risk to the selling agent.
EVEN REDUCED RATES FAIL TO EXCITE BORROWERS: For the week ended July 21, mortgage loan application volume slipped by 1.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the decrease was 1.2 percent compared with the previous week and 28.2 percent, with the same week one year earlier. Seasonally adjusted, purchase applications declined by 2.4 percent from the previous week and refinancings, 0.6 percent from one week earlier. Purchase loans have fallen to the three year low that occurred five weeks ago. The refinance share of mortgage activity increased to 35.6 percent of total applications from 35.0 percent the previous week, while the adjustable-rate mortgage (ARM) share declined to 28.6 percent from 29.0 percent the previous week.
AND BUYER INDIFFERENCE TAKES PRESSSURE OFF RATES: The 30-year fixed-rate mortgage (FRM) averaged 6.72 percent for the week, down from last week's 6.80 percent, according to Freddie Mac. Last year at this time, it was 5.77 percent. The average for the 15-year FRM this week was 6.34 percent, 6.41 percent a week earlier and up from 5.34 percent a year ago. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.35 percent this week compared with last week's 6.36 percent and up from 5.27 percent in 2005 at the same time. One-year Treasury-indexed ARMs were 5.78 percent this week, down from last week, when it averaged 5.80 percent. At this time last year, the one-year ARM was 4.46 percent. "Mortgage rates drifted lower this week on indications that economic growth is moderating, inflation remains under control and the Fed just may pause raising rates for awhile," said Frank Nothaft, Freddie Mac vice president and chief economist. "Meanwhile, recently released new homes sales for June fell to a lower than expected rate. That drop can be traced directly to higher mortgage rates, which are also helping to slow the growth of house prices in 2006."
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