LITTLE CHANGE FORESEEN FOR HOUSING MARKET: It is, in the opinion of the National Association of Realtors (NAR), in a process of stabilizing, with little change in overall sales volume expected over the balance of the year. Comments David Lereah, NAR's chief economist: "We've seen a minor easing in closed transactions of existing-home sales and a slight increase in the leading indicator of pending sales based on contracts. New-home sales and housing starts have been fluctuating, so the overall market is stabilizing." Noting the rise in mortgage interest rates has slowed sales in many higher-cost markets, he added that 3.8 million new jobs have been created over the last two years. "This means many potential home buyers could enter the market in the foreseeable future, especially in moderately priced areas where affordability conditions remain favorable. In fact, this is already occurring," Lereah said. Although sales will be fairly steady over the balance of the year, declines since last fall mean annual totals will be lower. Existing-home sales are forecast to fall 6.5 percent to 6.61 million this year, the third highest on record after 2005 and 2004. New-home sales are projected to drop 12.8 percent in 2006 to 1.12 million, also the third best on record. Housing starts should be down 9.1 percent to 1.88 million this year, according to the NAR.
MORTGAGE RATES ARE ON A BENEFICIAL SLOPE: The 30-year fixed-rate mortgage (FRM) averaged 6.55 percent for the week, down from last week's 6.63 percent and up from 5.89 last year at this time, according to Freddie Mac. The 15-year FRM this week was 6.20 percent, down from 6.27 percent. A year ago, it averaged 5.47 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were 6.21 percent this week in comparison from 6.27 percent last week and 5.40 percent last year. One-year Treasury-indexed ARMs were unchanged at 5.69 percent. At this time last year, the one-year ARM averaged 4.57 percent. "The weaker than expected jobs report combined with the Fed's decision to pass on raising rates at its last meeting led directly to lower rates this week," said Frank Nothaft, Freddie Mac vice president and chief economist. "Interest rates for fixed-rate mortgages have dropped to levels last seen in the spring of this year." He added that lower rates "may bring about a rise in refinancing activity as homeowners with ARMs getting ready to reset decide to take advantage by locking into a fixed-rate mortgage now rather than waiting until the adjustment date when rates may be higher."
PAINT THE TOWN EXPENSIVE: In the past couple of years, the price of paint across the board, from the least costly to top-of-the-line brands, has been climbing, observes the Washington Post. The chief culprit is petroleum, its byproducts and other raw and manufactured materials critical to the paint industry. The increase covers "transportation costs, natural gas at the refineries that make the pigments, and steel that is used for containers," says Casey McCormick, president of Maryland-based McCormick Paints. "We use a lot of plastics for containers, which have also skyrocketed. And the resins that go into paint manufacturing have, over the last 18 months, gone up quite a few times." Since 2004, his company has raised prices "a couple of bucks a gallon" on a wide range of products. A gallon of the least expensive flat latex wall paint now retails for $21.60, while the priciest "scrubbable" finish costs $35.05. "For the last two years, we have had rising prices of 5-10 percent a year," adds Bill Thornton, owner of Alexandria Paint Co. and Arlington Paint and Decorating Center. Contractor-grade Benjamin Moore paint that sold for about $17 a gallon in 2004 is now up to $19 a gallon, while Fine Paints of Europe, a brand imported from the Netherlands, has climbed from about $85 a gallon to $95, he says. Some solace: Even with the increases, says Thornton, "paint is still the least expensive way to transform a room."
THOUGH RISING, PENDING HOME SALES FALL BEHIND LAST YEAR'S: The leading indicator for the housing sector has risen for the two months in a row, according to the National Association of Realtors (NAR). Based on contracts signed in June, the Pending Home Sales Index increased 0.4 percent from May to June, but it was 9.6 percent below June 2005. The index is based on pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed, but the sale usually is finalized within one or two months of signing. Commented David Lereah, NAR's chief economist: "Once again, we have various housing indicators moving in different directions, which itself is an indicator of a market in transition. The housing market is striving for balance - a process that will take several months. A quieting in the movement of indicators should restore confidence to home buyers who've been on the sidelines, waiting for the right time to get into the market, and now is the best time we've seen since the 1990s in terms of housing choices and flexible terms."
THEY COULD CLOSE PERHAPS ON VALENTINE'S DAY: The Brooklyn, N.Y., boyhood home of r Al Capone is under contract for about $1 million, reports the New York Times in Realtor magazine. The house at 21 Garfield Place in Park Slope is the stuff of legend among old-timers in the neighborhood. Laurence Bergreen, author of the 1994 biography ''Capone: The Man and the Era," says Al Capone of Garfield Place was no angel. Shocking! He was often truant from Public School 133 on Butler Street, and he was finally kicked out of school for hitting a teacher. (As the story goes, she hit him first. And who could blame her? Peggy Aguayo of Aguayo & Huebener, who listed the property, says she doubts that the building's infamous former resident affected its value for the buyers, who plan to maintain it in its current state as a three-family house.
WHAT NEXT WITH RESIDENTIAL REAL ESTATE: The biggest housing boom in recent U.S. history is coming to an end, according to the Wall Street Journal, which asks: How bad will the aftermath be? At this point, most economists expect a "soft landing," a gradual decline that won't derail the nation's economic expansion, now in its fifth year. But there is a good chance they are being too optimistic, the writer contends, adding that the boom has depended heavily on the upbeat psychology of consumers, builders and lenders. As moods swing, the landing could be very hard indeed, the Journal opines. "We could be underestimating the dark side," says Mark Zandi, chief U.S. economist at Moody's Economy.com and among the first to seek to quantify the housing boom's broader effects. "Euphoria could turn into abject pessimism very quickly." Still, the fallout from a slowing housing market doesn't look all that unpleasant. Economists have few clues on which to base their predictions. Today's housing boom differs radically from its predecessors. For one, it has been bigger and longer-lived. Because the market has risen so far, economists worry it has the potential to fall much harder than their main forecasts would suggest. As Janet Yellen, president of the Federal Reserve Bank of San Francisco put it in a speech last week: "We can't ignore the risks of more unpleasant scenarios developing." Economists can't quantify some risks, including the biggest: the chance that a sharp drop in house prices - what economists call a "disorderly downturn" - would leave many homeowners owing more on their mortgages than their homes are worth. If that led to a wave of foreclosures and losses on riskier mortgage-backed securities, banks and investors could get spooked and cut back on all kinds of lending - a move that could snuff out economic growth.
AUGUST IS THE CRUELIST MONTH: So it is with mosquitoes infected with West Nile virus. If they bug you too much, driving you inside, the New York Times recommends the Mosquito Magnet, made by American Biophysics and available at home improvement and garden shops. Resembling an outboard motor, the device uses a propane tank to dispense carbon dioxide mixed with an attractant that seduces mosquitoes and other flying creatures into a vacuum nozzle. They are sucked into the machine and their eventual demise.
CENTEX PLAYS HARDBALL WITH WARRENTON: Centex is withdrawing its offer to give the Virginia town an unprecedented amount of money in exchange for approval to build a subdivision, citing the cooling housing market for the change of heart, according to the Washington Post. Centex, one of the nation's largest developers, said it can no longer afford to offer Warrenton $22 million to approve 300 luxury homes for seniors. "It was possible to consider such [an offer] as remotely feasible only in a rising market, where Centex could hope to make a reasonable return on its very substantial investment," wrote Robert K. Davis, the company's division president. "[We] would not have made that agreement had it been possible to predict the timing of the current residential downturn." Warrenton officials said they were stunned by the letter. The tone, they said, was confrontational compared with the "good faith" discussions that had occurred for more than a year. In the letter, Davis gave an ultimatum: Approve a higher-density project, which would be more profitable for the company, or give up the $22 million. Town officials say Centex has other options, such as renegotiating the cost of the land.
LADY MACBETH HAD A POINT: Get it? Anyway, the New York Times says the best way to get out a spot of red wine is with a spray remover that can obliterate organic stains such as wine, berries and even, ugh, blood. Simple Solution runs $5.38 for 16 ounces at amazon.com and $7.99 at petfooddirect.com. The manufacturer says it is safe to use around children and animals.
FORECLOSURE NEWS IS MIXED: The number of new residential foreclosures hit its highest level of the year in July, while the active foreclosure inventory for the month actually dropped 3.1 percent from the June level, according to Foreclosure.com, a company that tracks foreclosure information, says Inman News. "The decline in active foreclosures can be attributed to many of these properties being purchased," the company announced. There were 28,130 new residential foreclosures in July - a 4.95 percent increase over June and a 10 percent increase from July 2005. Michigan, Colorado and Ohio were among the states hardest hit by new foreclosures, the company reported. "New residential foreclosures across the nation are up this year, driven in large part by increases in adjustable-rate mortgages," said Brad Geisen, Foreclosure.com president and CEO, in a statement. Meantime, Realtytrac.com said 570,000 houses were in some stage of foreclosure a week ago, making it a buyer's market in many areas such as Michigan, Georgia and Texas, where homes in foreclosure are going for 70 percent of their current market value and sometimes less. Added James J. Saccacio, CEO of RealtyTrac: "The majority of metros we track, along with the nation as a whole, reported fewer foreclosures compared to the previous quarter." Of the cities with the 10 highest foreclosure rates, Houston, Austin and Stockton were the only ones to report increasing foreclosure activity in the second quarter. Houston led the way with 11,659 properties entering some stage of foreclosure, a 40 percent increase from the previous quarter. Austin reported a 7 percent increase, and Stockton reported a 2 percent increase. Washington-Baltimore reported a 6 percent increase in foreclosure activity, though foreclosure rates in both cities ranked among the bottom 50.
LET'S MAKE A DEAL: A real estate "dealer" is someone who is in the business of buying and selling real estate for short-term profits, notes Realty Times. A real estate dealer is known by other names: wholesaler, flipper, or rehab'er. Although the person gets the label of "real estate dealer," it's a decision that's made based on each property. It's possible to be a dealer on one property, but not on another. The key question is whether the property was purchased to sell or purchased to hold. If you "flip" the property for a short term property, it's just the same as if you flip a burger - you have a business. That means as a real estate dealer your income is subject to self-employment taxes and is taxed at the ordinary income tax rate. There's one more additional wrinkle, as well. Normally when you sell a property "over time" you can take what's called the "installment method" for calculating tax due. You pay tax only as you collect payments. A real estate dealer can not take the installment method. That means if you're considered a real estate dealer for a property that you sell and carry back paper on, you'll pay tax on the whole profit now - whether you've collected any money or not.
UNPLEASANT ALLEGATION ON THE GERIATRIC FRONT: The Justice Department has sued a northwest Missouri landlord, alleging he sexually harassed female tenants and threatened them with eviction if they refused his advances, according to the Washington Post. The lawsuit alleges that 85-year-old Harold Calvert, manager of 16 rental properties in Richmond, Mo., made unwanted verbal and physical sexual advances to women who lived in his units. "Housing is a fundamental need and no woman should be victimized while trying to obtain shelter for herself and her family," said Wan J. Kim, assistant attorney general for the Justice Department's civil rights division. Filed in U.S. District Court in Kansas City, the lawsuit alleges that Calvert violated the federal Fair Housing Act, which prohibits sexual discrimination in housing. Some of Calvert's tenants receive Section 8 federal rental assistance from the Richmond Housing Authority. A person who answered the phone at Calvert's residence said he was not available for comment. In June, Calvert and his company faced similar charges from the U.S. Department of Housing and Urban Development. HUD officials said their investigation showed at least seven female tenants were subjected to "offensive sexual behavior." The administrative action alleged that Calvert offered to pay tenants for sex, requested sex in exchange for rent or other favors, made unwanted attempts to kiss and grope and had repeated sexual intercourse with at least one female tenant. The HUD action is pending before an administrative law judge.
MORE VIEWS ON THE FUTURE OF THE HOUSING MARKET: Now, as job growth and the economy slow under the twin burdens of higher borrowing costs and rising energy prices, the housing industry faces a precarious future, says the New York Times. Will it fall steeply and suddenly, as Wall Street did after the technology bubble burst? Or is housing, as many in the industry like to point out, different enough - with its patient sellers and real assets on the ground - to resist powerful downward drafts? "It won't sound like a stock market crash, because houses don't work like that," said Jan Hatzius, chief economist at Goldman Sachs. On one hand, he said, housing is unlike the financial markets because most homeowners hold on to their properties in bear markets. Except for those with powerful reasons to sell, like moving for a new job or going through a divorce, many owners are prepared to wait for the market to improve. On the other, Hatzius expects the correction to be painful anyway, especially along the coasts and in the Southwest, where home prices rose the fastest and the use of exotic mortgages that let people borrow more against their homes was the greatest. As a result, the return of housing prices to more realistic levels "is going to take a long time," predicted Hatzius, who described himself as being on the "more alarmist end of the spectrum." Indeed, while housing officials frequently point out that home prices have never fallen nationally, economists are quick to note that, adjusted for inflation, prices have fallen nationally and in major regional markets, sometimes for years at a time. In Southern California, for example, real home prices fell significantly in the early 1970's, after the Vietnam War boom ended, and the early 1990's, after the cold war ended and military spending was scaled back. The declines lasted for years.
THE VOLUME OF LOANS FOR PURCHASE PICKS UP AGAIN: For the week ended Aug. 4, mortgage loan application volume increased by 4.9 percent on a seasonally adjusted basis from one week earlier, reports the Mortgage Bankers Association. On an unadjusted basis, the change was up 4.3 percent compared with the previous week but down 24.9 percent compared with the same week one year earlier. Seasonally-adjusted, purchase applications rose by 3.4 percent from the previous week, and refinancings grew by 7.1 percent. The refinance share of mortgage activity increased to 38.0 percent of total applications from 37.0 percent, and the adjustable-rate mortgage (ARM) share dipped to 27.6 percent from 27.8 percent. The ARM is at its lowest since March 2004.
THE NEW YORK CITY MARKET HANGS TOUGH: Median sales prices for Manhattan apartments remained steady in the second quarter of 2006, with some areas seeing moderate increases, although not as robust as in previous quarters, the Real Estate Board of New York (REBNY) reports. The median sales price for Manhattan condos in the second quarter was virtually unchanged at $835,000, according to REBNY, while the cooperative median price inched up 1 percent from a year ago, to $685,000. The most sizable gains for the quarter were for East Side apartments, which climbed 5 percent to $870,000, led by in particular by East Side cooperatives, which had median sales prices jump 15 percent to $875,000. West Side condominiums also showed strength, with median prices climbing 9 percent to $850,000. Median sales prices per square foot for Manhattan condominium units increased 5 percent to $1,012, with East Side condominiums reporting the highest price per square foot - $1,050 - up 6 percent from second-quarter 2005. Downtown condominium units registered a 6 percent increase in median sales price per square foot to $998. Manhattan cooperative units had median prices per room increase 3 percent to $198,000, with the East Side registering the highest price and percentage increase of the five major market areas at $217,000, up 12 percent from second-quarter 2005.
A DROP IN THE BUCKET IT IS NOT: Americans apparently can't stay away from buying personal water wonderlands, according to statistics compiled by the Association of Pool & Spa Professionals, reports the Wall Street Journal. In 2005, 176,500 in-ground pools were sold and installed, bringing the total number of those pools in the country up to 4.7 million, according to the association's statistics. About 4.3 million pools were sparkling throughout the country in 2002. In-ground pools do tend to add value to a home - about 7.7 percent, according to National Association of Realtors statistics. But because they're permanent, buyers who aren't interested in the upkeep or the energy costs of in-ground pools may turn away from a home with one. Heated pools especially can run up a power bill. Your own enjoyment, therefore, should be the primary reason for installing a pool, and for more than five years. Although there are still companies advertising in-ground pools around $16,000, the average price is more like $30,000 to $35,000, which would get its owner a water feature and possibly a spa. Then there's the maintenance once it's installed. Running the filter - assuming you have an efficient pump - will cost an average of $20 a month if it's run all day every day. Chemicals could cost $5-20 a month in the winter and anywhere from $20 to $100 a month during the summer. Pay someone to take care of the pool instead and the going rate is around $65 a month. Still want one? Ask yourself these questions: What do you want to use the pool for? Is it for exercise or to splash around in? Look around online for styles and prices. The Association of Pool & Spa Professionals' consumer site, poolpeopleusa.com, is a place to start. Who is going to use the pool? Adults? Children? The association also maintains a site for kids, splashzoneusa.com, that emphasizes pool safety. Do you want the design of the pool to mesh with the rest of the yard? Landscaping can be as simple as a small deck and as elaborate as an outdoor kitchen with fire pits and pizza ovens. What kind of pool do you want? In-ground? Above-ground? (Just say no!) A swim spa? Consider what kinds of pools are in your neighborhood or talk with a local real estate professional if you have any concerns about what installing a pool will do to your resale value.
MURDER MOST WELCOME: If you pull a garment or other textile out of storage and it has a musty odor, simple sunshine works wonders, the Washington Post counsels. Sunshine is the enemy not only of vampires but of mold and mildew. Place the item outside for a few hours on a bright sunny day. If your article is old and fragile, Newbold Richardson, a conservator from Alexandria, recommends putting it inside the dryer on air-fluff with a dryer sheet for 20 minutes. Doing so often is enough to solve the problem.
SALES OF VACATION HOMES ARE LANGUID: The once-bustling deal making in a wide variety of popular locations for second homes - areas like Florida, the Jersey Shore and Lake Tahoe, as well as the high-price playground on the East End of Long Island - has slowed markedly in recent months, reports the New York Times. As the overall housing market weakens, the interest in buying vacation homes, from the most modest condominiums on up, appears to be falling faster. Unlike most metropolitan areas - where underlying demand and the normal turnover in primary homes as a result of job moves, new households and family changes provide a more solid floor under prices - the second-home market relies on a different set of motivations that tends to exaggerate booms and busts. "Second-home buying is very discretionary," said Edward Leamer, an economist at the University of California, Los Angeles. "There is no force of demographics that is pushing people into buying homes as there is in primary home markets." In second-home markets around the country, the number of sales is shrinking even as the properties on the market increase. Prices at all levels are softening, and in a few places recently have begun dropping. In 2004, the latest year for which data is available, Ocean City, N.J., at 73 percent, headed the list of metropolitan areas with high shares of second homes. From 2002 to 2005, home prices in the area, which includes Cape May, rose at an average annual rate of 17 percent, compared with 10 percent for the nation as a whole and 14 percent for New Jersey. "These have been the most juiced-up markets," said Mark Zandi, chief economist at Economy.com. But this spring and summer, median home prices in the Ocean City area have fallen by 10 to 15 percent from a year earlier. Sales have slowed and more houses are sitting on the market, according to Nicholas J. Marotta, president of the Ocean City Board of Realtors. He blames speculators for rapidly inflating and then depressing the market by trading in condominiums and oceanfront homes that they bought with low-interest loans requiring only small down payments. A survey of consumer finances conducted every three years by the Federal Reserve found that the overall interest in second homes tends to closely follow the ups and downs of the economic cycle. In 1989, some 13.4 percent of those responding said they owned a second home, but that figure fell during the recession in the early 1990s and reached a low point of 11.9 percent in 1995. Such ownership rose to 13 percent in 1998 but fell back to 11.4 percent in 2001 before rising again to 12.6 percent in 2004. Anecdotal evidence suggests that vacation homes might have reached a new high-water mark in 2005.
IF YOU WANT TO RENT, IT'S NOT GOING TO BE EASY: Apartment markets continue their upward trajectory, according to the National Multi Housing Council's (NMHC) July 2006 Quarterly Survey of Apartment Market Conditions. Fully 75 percent of the respondents reported tighter market conditions over the prior three months, measured by lower vacancy rates, higher rents or both. As a result, the survey's Market Tightness Index increased slightly from May to July, to 85, now the second highest index number on record. (An index reading above 50 indicates that, on balance, conditions are improving for landlords; a reading below 50 indicates that conditions are worsening; and a reading of 50 indicates that conditions are unchanged.) The Market Tightness Index has been 80 or above for five consecutive quarters, and above 50 for 12 consecutive quarters, signaling a significant improvement in demand for rental housing. In contrast, the index was 45 in July 2003 and 39 in July 2002, during the peak of the recession. "Improving rental demand in the face of rising interest rates and declining sales volume attests to the strong outlook for the apartment sector," noted Doug Bibby, NMHC's President. "According to Harvard University's 2006 State of the Nation's Housing report, the number of renter households rose in 2005 for the first time in years. The report goes on to say that as echo boomers, same-age immigrants and second-generation Americans move into adulthood, demographic forces will favor rental housing over for-sale housing."
JUST HOW BIG IS IT: To estimate the size of your home, multiply the length and width of the exterior, according to the Washington Post. Then deduct the measurement (length times width) of any space in the house that is unfinished or unconditioned, meaning not heated or cooled. Always take measurements from the exterior of the house. Spaces that should be deducted include a utility room or a crawl space, garage, decks, balconies and porches (front and screened). Also not included in determining a home's square footage: any area that is less than five feet tall, chimneys that extend outside the exterior wall and bay window bump-outs. The official National Association of Home Builders (NAHB) method of calculating square footage is available online ($26.50 for a hard copy; $10 for a download). The process is tedious. But if it's done correctly, it will provide a measurement accurate to the nearest square foot, according to an NAHB researcher, who said a homeowner with some technical background should be able to follow this method with ease. Call 800-638-8556 or visit nahbrc.org for more information.
NEW YORK IS TOPS IN CLOSING COSTS: New York's high title and settlement costs lifted the state well above No. 2 Texas, according to a survey by Bankrate.com. The Lone Star State was followed in the top five by Hawaii, Ohio and Florida. Home buyers in Missouri pay the lowest closing costs, according to this year's study. The Show Me State was followed by Michigan, New Hampshire and Montana. Wyoming, which was last year's lowest-cost state, was fifth-lowest this year. Way down the list were D.C., Maryland and Virginia, averaging around $2,900. The difference between New York and Missouri was $1,174 in this year's survey. Lender, title and settlement fees totaled an average of $3,024 nationally, and the median cost was $2,978. The figures don't include county recording fees or recurring costs such as homeowners insurance, property taxes, homeowner association dues or prorated mortgage payments. Caveat: For this year's annual closing costs survey, Bankrate.com obtained eight to 10 good faith estimates in each state from the Web sites of online lenders only. Researchers requested information on the closing costs for a $200,000 loan there. They requested fees on a 30-year, fixed-rate mortgage for a borrower with a 20-percent down payment and good credit to buy a single-family house.
PRINCE GEORGE'S EASES DEVELOPMENT RESTRICTIONS: Residential development, which has been slowed in Prince George's County by growth restrictions, could quickly resume in the wake of a County Council vote to suspend a requirement that the county hire more police officers and firefighters before approving building projects, reports the Washington Post. In 2004, the council adopted an "adequate public safety facilities test" for development in response to residents' fears that new subdivisions were overwhelming police and fire departments as county crime was surging. All development had to meet standards for emergency response times, and the police and fire departments had to increase staffing before new homes would be approved. This year, the test required that the county employ at least 1,349 police officers and 692 firefighters. During the first part of the year, both departments came close but did not meet the standards, and 11 project plans were rejected. Council members voted 6 to 3 to suspend the staffing requirements but keep the emergency response rules in place.
