Items of Interest - September 9, 2006
REALTOR GROUPS LOWERS SALES AND PRICE PROJECTIONS: Home sales during the rest of the year will be lower than earlier projections as the market works its way through an inventory and price imbalance, according to the National Association of Realtors (NAR). Said David Lereah, NAR's chief economist: "A year ago we had record home sales and tight supply with buyers bidding over the asking price. This year, sales are slowing, homes are plentiful and sellers are negotiating. Under these conditions, we'll probably see prices dip temporarily below year-ago levels as the market works through a build up in housing inventory." He added that the movement represented "a normal pattern during a market correction" but that "home prices should return to positive territory within a few months and annual appreciation will be slower than historic norms." Over time, Lereah said, home prices rise at the rate of inflation plus one-to-two percentage points. "Buyers in most of the country who plan to stay in their home for a normal period of homeownership can pretty well bank on those historic averages, but people who purchased last year with the intent of flipping are likely to get burned," the economist declared. The NAR expects the national median existing-home price for all housing types to grow 2.8 percent this year to $225,900, with the median new-home price rising only 0.2 percent to $241,400 because new-home appreciation is dampened by builders offering incentives to reduce inventory. Existing-home sales are forecast to fall 7.6 percent to 6.54 million in 2006, the third best year after consecutive records in 2004 and 2005. New-home sales should to drop 16.1 percent this year to 1.08 million, the fourth highest on record. Housing starts are projected to decline 9.6 percent to 1.87 million in 2006. According to the NAR, the 30-year fixed-rate mortgage is likely to rise to 6.7 percent in the fourth quarter.
U.S. HOME PRICES CONTINUED TO RISE IN THE SECOND QUARTER: Although the rate of increase fell sharply, prices were 10.06 percent higher than they were one year earlier, according to the Office of Federal Housing Enterprise Oversight (OFHEO). Appreciation for the most recent quarter was 1.17 percent – an annualized rate of 4.68 percent. The quarterly rate reflects a sharp decline of more than one percentage point from the previous quarter and is the lowest rate of appreciation since the fourth quarter of 1999. The decline in the quarterly rate over the past year is the greatest since the beginning, in 1975, of OFHEO's House Price Index. "These data are a strong indication that the housing market is cooling in a very significant way," said OFHEO Director James B. Lockhart. "Indeed, the deceleration appears in almost every region of the country." Possible causes were given as higher interest rates, a drop in speculative activity, and rising inventories of homes. "The very high appreciation rates we've seen in recent years spurred increased construction," OFHEO Chief Economist Patrick Lawler said. "That coupled with slower sales has led to higher inventories, and these inventories will continue to constrain future appreciation rates." Among other of the index's findings: All states show four-quarter appreciation, but five Midwestern and New England states had small price decreases in the second quarter. In the market that includes the District, Northern Virginia and Prince George's, Charles and Calvert counties in Maryland and Jefferson County in West Virginia, the Washington Post noted that home prices increased by 1.79 percent in the second quarter. But the region posted a year-over-year increase of 16 percent because of jumps in prices late last year. In the Montgomery County-Frederick County market, which the agency measures separately, the second quarter saw a home price gain of 1.64 percent over the first quarter and 13 percent over the same period last year.
HOMEBUILDING COSTS ARE UP 8 PERCENT OVER LAST YEAR: It's getting more expensive to build a home, according to research from the Bureau of Labor Statistics and the Associated General Contractors of America, reports Investor's Business Daily in Realtor magazine. The latest data show an 8 percent jump in the cost of building materials costs during the year-over-year period ended in July. Prices for copper and brass surged a whopping 88 percent over the same time span. Costs rose 27 percent for gypsum boards, 20 percent for plastics, 11 percent for cement, and 6 percent for sheet metal siding. According to the Consumer Price Index, housing costs edged up 4 percent for borrowers from July 2005.
INVESTORS ARE GLUM: Their optimism hit an annual low in August, continuing a steady decline since January, according to the latest UBS/Gallup index, says Inman News. The Index of Investor Optimism dropped two points since July, to 53 in August, and it has fallen 40 points since January. The index is based on a monthly survey and had a baseline score of 124 when it was established in October 1996. "One key issue of growing concern to investors is the residential real estate market," UBS said. Approximately 44 percent of respondents rate conditions in the real estate market as "only fair," and 12 percent, as "poor;" that's up from a combined 46 percent in June and July. Some 70 percent of investors believe that conditions in the real estate market are getting worse, up from 63 percent in June, the survey also found. Investor sentiment toward investing in real estate assets nationwide also has also fallen: In August, 50 percent of investors said that now is a good time to invest in real estate related assets nationwide, down from 55 percent in June. "The drop in confidence in the real estate market reflects the economic data for that sector and suggests that investors are feeling the pinch in their local markets," said Anne Briglia, senior fixed income strategist for UBS Wealth Management Research, in a statement.
GOING ONCE, GOING TWICE, GOING FOR A BARGAIN: Auction companies say new-home sales represent a growing part of their business, according to the Wall Street Journal. In Denver, auctioneer Janelle Karas has gotten so many inquiries from builders and developers worried about mounting inventories that she recently changed her business model to specialize in them. In Gadsden, Ala., auctioneer Craig King says he handled 12 auctions of new homes in 2005, and this year he's on pace for about twice that number. Walt Driggers, who runs an auction house in Ocala, Fla., says many of the developers who are now coming to him started the building process more than two years ago when real-estate prices were climbing. This month, his parent company, Tranzon, will try to sell a 5,000-square-foot brick mansion in Lorton, Va. Unlike private homeowners, who may overvalue their homes and are often reluctant to reduce their asking price at auction, small builders and developers tend to be more sophisticated and motivated, auctioneers say, with a clear-eyed understanding of the value of their properties. And because builders make as much as 40 percent gross profit on the homes they sell, they also have more wiggle room when it comes to reducing the price. "A home seller is in a retail position," says Destin, Fla., auctioneer Ben Anderson. "A builder is in a wholesale position." To register for an auction, a buyer must put down a deposit, usually 8-10 percent of the home's estimated value. As with any transaction, caveat emptor: New homes sold at auction are often in out-of-the-way places, with few comparable recent sales. Although sellers must disclose defects, brokers caution buyers to check to make sure the property isn't encumbered by liens, has had proper permitting and inspections, and that all new home warranties apply. And the hammer price isn't necessarily the final price: Some auctioneers take a "buyer's premium" of 5-12 percent.
STUYVESANT TOWN IS ABOUT TO CHANGE NOT ONLY HANDS: Metropolitan Life is putting Stuyvesant Town and Peter Cooper Village - a stretch of 110 apartment buildings along the East River - on the auction block, says the New York Times. The sale of Stuyvesant Town and Peter Cooper Village, shown in 1947, would transform a complex built for World War II veterans. With a target price of nearly $5 billion, the sale would be the biggest deal for a single American property in modern times. It would undoubtedly transform what has been an affordable, leafy redoubt for generations of Manhattan's middle class: teachers and nurses, firefighters and police officers, office clerks and construction workers. MetLife, one of the largest life insurers in North America, said in July that it might sell the two complexes, which it built nearly 60 years ago with government help. It has hired a broker, who started registering bidders last week for the 80-acre property along First Avenue between 14th and 23rd Streets. The deal is likely to lead to profound changes for many of the 25,000 residents of the two complexes, where two-thirds of the apartments have regulated rents at roughly half the market rate. Any new owner paying the equivalent of $450,000 per apartment is going to be eager to create a money-making luxury enclave, real estate executives say. City Councilman Daniel R. Garodnick, who grew up in Stuyvesant Town and Peter Cooper Village, said he is organizing a group of investors who, with the backing of tenants and the Council speaker, will try to buy the two complexes and keep them affordable to the middle class. Under his plan, the investors, likely to include union pension funds and banks, would bid on the properties; the group would ask the Bloomberg administration for assistance, perhaps in the form of financing and tax incentives, to help make the deal work.
WASHINGTON AND NEW YORK SHARE A DUBIOUS DISTINCTION: They top the list of long commutes, according to a U.S. Census survey released yesterday that also showed clogged roads and high gasoline prices are pushing a growing number of people onto mass transit, the Washington Post and New York Times report. New York's reliance on its transit systems explains why the boroughs other than Manhattan perennially top the list of American counties with the longest commutes. The average trip to work for residents of Staten Island, Queens, the Bronx and Brooklyn has hovered above 40 minutes for several years. Last year, Staten Islanders again faced the longest daily slog, a full 42 minutes on average, with average commutes from Queens, the Bronx and Brooklyn just a minute or so less. For Manhattan residents, the typical commute lasted about 31 minutes, still considerably longer than the national average of about 25 minutes. The Washington region's average commute is more than 33 minutes one way, ranking second to the New York area's 34 minutes among large metropolitan regions. In Calvert, Prince William and Stafford counties, however, the average journey to work takes 40 minutes or more, according to the 2005 American Community Survey of households. The Washington area, where 13 percent of workers get to their jobs by bus or rail, ranks behind only New York and San Francisco in use of mass transit. Two-thirds of workers still drive to their jobs alone, but that share appears to have leveled off since 2000 in the D.C. area. A growing number of New Yorkers are deciding that if the trip to work takes more than a half-hour, then someone else can do the driving, a new survey by the Census Bureau shows. In the metropolitan region, which for years has been home to the nation's longest average commute, tens of thousands of workers have stopped driving to their jobs and switched to riding subways, trains, buses and ferries, according to an analysis of the data released this week by demographers at Queens College. More than 2.5 million residents of the region - about 2 of every 7 commuters - regularly rode some form of public transportation to work in 2005, up from about 2.2 million in 2000. The share of commuters driving themselves or riding in private cars fell, a trend that could bode well for America's energy consumption if only it were taking hold nationally.
NOW HERE'S AN INDISPUTABLY STIGMATIZED PROPERTY: The Clutter House, a national historic home with a gory past, is on the market in Holcomb, Kan., reports Realtor magazine. The five-bedroom, three-bathroom house was the scene of a grisly murder in 1959 that became the basis of the nonfiction novel "In Cold Blood," by Truman Capote. The original owner, farmer Herbert Clutter, was found dead, along with his wife and two teenage children one fall morning. Donna and Leonard Mader, the current owners, purchased the two-story house in 1990. The sale is being conducted as a "private auction;" bids will be taken over the phone, and bidders will be notified privately if a higher bid is received.
CONDO DEVELOPERS TAKE AIM AT CHILDREN: The list of amenities at condominiums and housing developments keeps growing, as developers tout fancy gyms, rooftop pools and on-call staff. Not for you - for your children, the Wall Street Journal observes. Developers and builders are spending millions of dollars on elaborate water parks and fake fossil digs and promoting couture romper rooms by name-brand designers. For example, in Lakewood, Colo., the developers of Belmar, a mixed-use downtown community, spent $600,000 on a kidney-shaped ice-skating rink and $200,000 on an interactive water fountain with an 11-ton, six-foot-high granite ball that children can rotate. At One Carnegie Hill on New York City's Upper East Side, a just-completed luxury building where one-bedrooms start at $895,000, the amenities include two play houses on the roof with child-size loft-style furniture. Even Donald Trump is thinking family friendly: His recently announced Trump Hollywood, a 40-story oceanfront glass tower in Hollywood Beach, Fla., where three-bedroom apartments start at $1.5 million, will feature an on-call children's nanny. Gym chain Equinox Fitness is planning a children's wellness program for residential buildings in conjunction with its new owner, Related Cos., the New York-based developer of One Carnegie Hill, according to David Wine, Related's vice chairman. David Rockwell, the award-winning residential and commercial architect who designed that building and its play space, is adding playground design to his practice.
FOLLOW THE MONEY: The three most prosperous large counties in the United States are in the Washington suburbs, according to newly released census figures, says the Washington Post. They show that the region has the second-highest income and the least poverty of any major metropolitan area in the country. Rapidly growing Loudoun County has emerged as the wealthiest jurisdiction in the nation, with its households last year having a median income of more than $98,000. It is followed by Fairfax and Howard counties, with Montgomery County not far behind. The result is that the Washington area's households rank second in income only to those in San Jose, eclipsing such well-heeled places as San Francisco and the bedroom suburbs of New York. The poverty rate in the Washington region was 7 percent last year - the lowest among the nation's major metropolitan areas, according to the Census Bureau's American Community Survey, a separate set of census figures also just released. That survey shows that the District remains an area of relative poverty among its more affluent suburbs, although its poverty rate is not particularly extreme compared with other large U.S. cities.
INDICATOR OF HOUSING MARKET STRENGTH DECLINES: The Pending Home Sales Index fell to 105.6 in July, a decline of 7 percent from a downwardly revised 113.5 in June and down 16 percent from July 2005, according to the National Association of Realtors (NAR). The index is derived from pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed. An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined, and was the first of five consecutive record years for existing-home sales. "In looking at year-to-year comparisons, the Pending Home Sales Index has been very close in predicting the actual pace of home sales," commented David Lereah, NAR's chief economist. "The index shows existing-home sales should continue to ease after a stronger-than-expected decline in July, but are likely to flatten in the months ahead." He added that there hasn't been a general decline in the housing market against a healthy economic backdrop where jobs are being created, the economy is growing and interest rates are favorable. Added the economist: "Psychological factors are causing some buyers to remain on the sidelines, waiting for prices to stabilize or for more favorable news about the market and the economy. Contributing to this hesitancy is a lot of negative news stories, but in the end we believe that underlying market fundamentals will prevail."
IS IT TIME TO THROW OUT THE TUB WITH BATH WATER: Lately, tub manufacturers have been testing the waters with stand-alone basins, says the Wall Street Journal. The newest designs are larger and more design-oriented than the claw-footed models of Victorian times. Some are hand-hewn in the mold of slippers, boulders or eggs, out of materials including copper, cast iron and concrete. At April's Kitchen/Bath Industry Show in Chicago, Sonoma Cast Stone introduced the $12,500 Ofuro. The 870-pound, bowl-shaped soaker is made from pre-cast stainless concrete, a material that has been used in kitchen countertops. Waterworks of Danbury, Conn., has a total of seven detached tubs; two years ago, it had two. Its new acrylic-based .25 tub, for $8,500, resembles an egg cut in half lengthwise, while the $29,000 Clothilde is made from hand-hammered copper and can accommodate 80 gallons of water. Stone Forest's Natural bathtub is chiseled out of boulders, at about $15,000 each. The maker, based in Santa Fe, N.M., says it features "anomalies" like minor pitting. Still, consumers spent only $7.7 billion redoing their bathrooms last year, according to the U.S. Census Bureau, down from $9.1 billion in 2004. Freestanding tubs are a small but pricey piece of the market. Last year, homeowners spent an average $400 on a new, non-whirlpool tub, according to the Home Improvement Research Institute. There is one challenge with the free-standing things: the installation. Fittings, including a drain and faucet handles, are usually extra, and can cost over $3,000. Interior designer Despina Souhlas recently worked with a client to get a 1,800-pound stone tub into a 1890s row house in Chicago. The homeowner first had to reinforce the wooden joists underneath the tub to hold its weight. Then the tub had to be lifted up to the second floor with a crane, which required six movers. "It was a nightmare," she says. Be careful what you wish for.
YOU PAYS YOUR MONEY AND YOU TAKES NO CHANCES: A luxury home builder in Rockville, Md. has begun resorting to the kind of tactic usually reserved for screaming electronics discounters - the Lowest Price Guarantee. To ease buyers' worries about declining prices, Mid-Atlantic Builders will adjust its sales contract if the price it is charging for one of its houses falls from the time a customer signs an agreement to 45 days before settlement. So, the thinking goes, jittery buyers shelling out $500,000 to more than $1 million for one of the builder's single-family houses can rest assured that they're not sinking money into a depreciating asset. "That's a very real fear," said John J. Lavery, director of sales and marketing for the home builder. While builders and developers have for months been dangling tens of thousands of dollars in incentives to prod hesitant buyers - free upgrades, help with closing costs, plasma screen TVs, vacations, cars - Mid-Atlantic's latest marketing strategy is unusual in that it leaves the most important line in the contract, the selling price, somewhat open-ended. "We know people want to buy because traffic remains very strong," Lavery said. "Yet people aren't making the decision to buy as rapidly as they used to." Mid-Atlantic has not reduced its base home offering price, but it has increased incentives to as much as $55,000. Those will figure into the lowest-price promotion, so if $20,000 in incentives are available one month, and two months later the buyers in the same subdivision are offered $30,000, the earlier buyers will be credited for that extra $10,000.
BROOKLYN'S ATLANTIC YARDS PROJECT WILL BE SCALED DOWN: Facing mounting criticism of its $4.2 billion project in Brooklyn Heights, the developer, Forest City Ratner, plans to reduce the size of the complex by 6-8 percent, eliminating hundreds of apartments from the largest development proposal in the city, according to government officials and executives working with the developer, says the New York Times. Forest City is also considering reducing the height of the project's tallest tower, which is known as Miss Brooklyn, to get it under the height of the borough's tallest building, the nearby Williamsburgh Savings Bank tower, according to real estate executives. The Atlantic Yards project - which includes a Frank Gehry-designed arena for the New Jersey Nets basketball team, more than 6,000 apartments, high-rise towers and a hotel on 22 acres near Downtown Brooklyn - has drawn a torrent of criticism as it nears the end of its public approval process. Critics fear that it would overwhelm the nearby brownstone neighborhoods and clog an already congested area with traffic. City officials say the developer will announce the reduction later this month.
MORTGAGE VOLUME EDGES UP: For the week ended Sept. 1, applications grew by 1.8 percent on a seasonally adjusted basis from one week earlier, according to the Mortgage Bankers Association. On an unadjusted basis, the increase was 0.4 percent compared with the previous week but down 26.1 percent compared with the same week one year earlier. Seasonally-adjusted, purchase applications went up by 3.7 percent from the prior week as refinancings slipped by 0.9 percent. The refinance share of mortgage activity decreased to 41.0 percent of total applications from 41.5 percent the previous week, and the adjustable-rate mortgage (ARM) share fell to 26.2 percent, its lowest level since October 2003.
ONE OF THE BIG TRENDS IN TODAY'S FURNITURE IS SMALL: Sofas are shorter and chairs are armless, notes the Washington Post. Console tables that fit snugly in hallways or behind couches open up to seat eight for dinner. Beds are being shown with headboards but no footboards, or resting atop storage units. Major furniture chains are promoting lines with names such as Small Spaces and Loft 21 to catch the latest home decor wave. In the past year, the home furnishings industry has responded to those in tight quarters, be they young urban pioneers or downsizing suburbanites, says Cheminne Taylor-Smith, editor in chief of InFurniture, a monthly magazine that tracks industry trends. "Baby boomers are almost all becoming empty-nesters, and they look around and say, 'Who needs this space? Who will clean it?' Not only do they have too much furniture, but it's too big to move," Taylor-Smith says. Savvy manufacturers are shrinking sofas, tables, chairs and chests in several styles, she says: contemporary, traditional but with "less carving and sleeker arms," and transitional, which bridges the two.
WASN'T IT DOCTORS AND LAWYERS WHO MADE THE BIG BUCKS: Pop singer Gwen Stefani, the lead singer of the band No Doubt, has bought a Beverly Hills home once owned by actress and singer Jennifer Lopez, reports the Wall Street Journal. Ms. Stefani and her husband, Gavin Rossdale, the former lead singer for the rock band Bush, paid close to the $15.5 million asking price, according to the seller, film producer and businessman Sam Nazarian. The couple had their first child in May. The two-acre property includes the four-bedroom 1998 house, a tennis court, basketball court, pool and screening room. Nazarian, whose SBE Entertainment Group produced the Edward Norton film "Down in the Valley" in 2005 and owns hotels, restaurants and nightclubs in California and other states, bought the house from Ms. Lopez in 2004 for a reported $12.5 million. He said he is selling to move to Hollywood Hills, next door to Leonardo DiCaprio. Whether to BE next door, he doesn't say.
LOUDON COUNTY MOVES TO RESTRICT GROWTH: The supervisors approved a far-reaching plan to restrict home building in the county's rural west, taking the first step toward guiding long-term growth in the region's fastest-growing jurisdiction, reports the Washington Post. The guidelines replace similar rules struck down last year by the state Supreme Court. But the Republican majority on the board opted for a less-restrictive compromise than they had been considering in recent months. They did so against the advice of County Attorney John R. Roberts, who said the changes could imperil the measure if it is challenged in court. About 90 minutes after the vote, the board decided to delay implementation of the plan to address the legal questions raised by the compromise. The soonest the plan could be implemented is late November or early December. If it stands up in court, the measure ultimately could reduce the number of homes that could be built in the west from 37,000 to roughly half that.
HISTORICALLY LOW MORTGAGE RATES EDGE UP: The 30-year fixed-rate mortgage (FRM) averaged 6.47 percent for the week ending, up from last week's average of 6.44 percent 5.71 percent a year ago, according to Freddie Mac. The 15-year FRM this week was 6.16 percent, up from last week, when it averaged 6.14 percent. A year ago, it was 5.30 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were 6.14 percent this week, compared with 6.11 percent last week and 5.24 percent last year. One-year Treasury-indexed ARMs averaged 5.63 percent this week, up from last week's 5.59 percent. At this time last year, the one-year ARM was 4.45 percent. "We expect that mortgage rates will continue to fluctuate as new economic data are released, but still remain in the 6.5-7 percent range for the rest of the year," observed Frank Nothaft, Freddie Mac vice president and chief economist. "Slowly rising mortgage rates are offset in part by a slowdown in house price appreciation. Consequently, higher rates have resulted in houses sitting on the market for longer periods of time, changing the real estate sector into more of a buyer's market from the seller's market of the last few years."
HERE'S HOW TO KEEP THAT GRANITE COUNTER SPARKLING: Apply a penetrating sealer, counsels the Washington Post. It will sink into areas that are still absorbent and merely sit on the surface of any areas that were previously treated. As long as you wipe off any excess before it dries, you should be fine, says Scott Lardner, past president of the Marble Institute of America, a trade group that represents companies that work with many types of natural stone. Maintain the sealer's effectiveness by cleaning the counter with mild soap and water, not a degreaser such as Formula 409 or an ammonia-based cleaner such as Windex. "These won't hurt the stone," Lardner says, "but they will degrade the sealer so you need to reapply it more often." Use only neutral cleaners on sealers; beware of even natural or homemade cleaners such as vinegar or lemon juice, which are acidic, or baking soda, which is alkaline. When you put down a cold glass and notice a water ring on the counter or see dark spots where water drips off your hands near the faucet, it's time to reapply the sealer.
THE HIGH PRICE OF COPPER IS HITTING HOME – LITERALLY: The metal's skyrocketing scrap value is inspiring criminals to hit houses, making off with copper coils in air-conditioning units, copper wires, even the copper pipes used for plumbing, and leaving some perplexed residents without running water, says the Wall Street Journal. Driven by increased world demand for commodities, prices of steel, copper, aluminum and other metals are at historic highs. The price of copper has more than doubled in the past year, at around $3.65 a pound on the Comex division of the New York Mercantile Exchange. The price of copper scrap - which is processed and sold to metal-making firms - has also doubled, with high-grade scrap now fetching around $3 or more per pound at scrap yards and lower-grade scrap, less. Copper isn't the only metal sought by thieves; products made from aluminum and steel are also being targeted, but thefts of copper are especially onerous for homeowners and builders, as the metal is used throughout modern homes, including the inner coil of central air-conditioning units, electrical systems, gutters and water pipes. Another target for thieves is copper piping, which often runs exposed beneath many older homes.
U.S. HOME PRICES CONTINUED TO RISE IN THE SECOND QUARTER: Although the rate of increase fell sharply, prices were 10.06 percent higher than they were one year earlier, according to the Office of Federal Housing Enterprise Oversight (OFHEO). Appreciation for the most recent quarter was 1.17 percent – an annualized rate of 4.68 percent. The quarterly rate reflects a sharp decline of more than one percentage point from the previous quarter and is the lowest rate of appreciation since the fourth quarter of 1999. The decline in the quarterly rate over the past year is the greatest since the beginning, in 1975, of OFHEO's House Price Index. "These data are a strong indication that the housing market is cooling in a very significant way," said OFHEO Director James B. Lockhart. "Indeed, the deceleration appears in almost every region of the country." Possible causes were given as higher interest rates, a drop in speculative activity, and rising inventories of homes. "The very high appreciation rates we've seen in recent years spurred increased construction," OFHEO Chief Economist Patrick Lawler said. "That coupled with slower sales has led to higher inventories, and these inventories will continue to constrain future appreciation rates." Among other of the index's findings: All states show four-quarter appreciation, but five Midwestern and New England states had small price decreases in the second quarter. In the market that includes the District, Northern Virginia and Prince George's, Charles and Calvert counties in Maryland and Jefferson County in West Virginia, the Washington Post noted that home prices increased by 1.79 percent in the second quarter. But the region posted a year-over-year increase of 16 percent because of jumps in prices late last year. In the Montgomery County-Frederick County market, which the agency measures separately, the second quarter saw a home price gain of 1.64 percent over the first quarter and 13 percent over the same period last year.
HOMEBUILDING COSTS ARE UP 8 PERCENT OVER LAST YEAR: It's getting more expensive to build a home, according to research from the Bureau of Labor Statistics and the Associated General Contractors of America, reports Investor's Business Daily in Realtor magazine. The latest data show an 8 percent jump in the cost of building materials costs during the year-over-year period ended in July. Prices for copper and brass surged a whopping 88 percent over the same time span. Costs rose 27 percent for gypsum boards, 20 percent for plastics, 11 percent for cement, and 6 percent for sheet metal siding. According to the Consumer Price Index, housing costs edged up 4 percent for borrowers from July 2005.
INVESTORS ARE GLUM: Their optimism hit an annual low in August, continuing a steady decline since January, according to the latest UBS/Gallup index, says Inman News. The Index of Investor Optimism dropped two points since July, to 53 in August, and it has fallen 40 points since January. The index is based on a monthly survey and had a baseline score of 124 when it was established in October 1996. "One key issue of growing concern to investors is the residential real estate market," UBS said. Approximately 44 percent of respondents rate conditions in the real estate market as "only fair," and 12 percent, as "poor;" that's up from a combined 46 percent in June and July. Some 70 percent of investors believe that conditions in the real estate market are getting worse, up from 63 percent in June, the survey also found. Investor sentiment toward investing in real estate assets nationwide also has also fallen: In August, 50 percent of investors said that now is a good time to invest in real estate related assets nationwide, down from 55 percent in June. "The drop in confidence in the real estate market reflects the economic data for that sector and suggests that investors are feeling the pinch in their local markets," said Anne Briglia, senior fixed income strategist for UBS Wealth Management Research, in a statement.
GOING ONCE, GOING TWICE, GOING FOR A BARGAIN: Auction companies say new-home sales represent a growing part of their business, according to the Wall Street Journal. In Denver, auctioneer Janelle Karas has gotten so many inquiries from builders and developers worried about mounting inventories that she recently changed her business model to specialize in them. In Gadsden, Ala., auctioneer Craig King says he handled 12 auctions of new homes in 2005, and this year he's on pace for about twice that number. Walt Driggers, who runs an auction house in Ocala, Fla., says many of the developers who are now coming to him started the building process more than two years ago when real-estate prices were climbing. This month, his parent company, Tranzon, will try to sell a 5,000-square-foot brick mansion in Lorton, Va. Unlike private homeowners, who may overvalue their homes and are often reluctant to reduce their asking price at auction, small builders and developers tend to be more sophisticated and motivated, auctioneers say, with a clear-eyed understanding of the value of their properties. And because builders make as much as 40 percent gross profit on the homes they sell, they also have more wiggle room when it comes to reducing the price. "A home seller is in a retail position," says Destin, Fla., auctioneer Ben Anderson. "A builder is in a wholesale position." To register for an auction, a buyer must put down a deposit, usually 8-10 percent of the home's estimated value. As with any transaction, caveat emptor: New homes sold at auction are often in out-of-the-way places, with few comparable recent sales. Although sellers must disclose defects, brokers caution buyers to check to make sure the property isn't encumbered by liens, has had proper permitting and inspections, and that all new home warranties apply. And the hammer price isn't necessarily the final price: Some auctioneers take a "buyer's premium" of 5-12 percent.
STUYVESANT TOWN IS ABOUT TO CHANGE NOT ONLY HANDS: Metropolitan Life is putting Stuyvesant Town and Peter Cooper Village - a stretch of 110 apartment buildings along the East River - on the auction block, says the New York Times. The sale of Stuyvesant Town and Peter Cooper Village, shown in 1947, would transform a complex built for World War II veterans. With a target price of nearly $5 billion, the sale would be the biggest deal for a single American property in modern times. It would undoubtedly transform what has been an affordable, leafy redoubt for generations of Manhattan's middle class: teachers and nurses, firefighters and police officers, office clerks and construction workers. MetLife, one of the largest life insurers in North America, said in July that it might sell the two complexes, which it built nearly 60 years ago with government help. It has hired a broker, who started registering bidders last week for the 80-acre property along First Avenue between 14th and 23rd Streets. The deal is likely to lead to profound changes for many of the 25,000 residents of the two complexes, where two-thirds of the apartments have regulated rents at roughly half the market rate. Any new owner paying the equivalent of $450,000 per apartment is going to be eager to create a money-making luxury enclave, real estate executives say. City Councilman Daniel R. Garodnick, who grew up in Stuyvesant Town and Peter Cooper Village, said he is organizing a group of investors who, with the backing of tenants and the Council speaker, will try to buy the two complexes and keep them affordable to the middle class. Under his plan, the investors, likely to include union pension funds and banks, would bid on the properties; the group would ask the Bloomberg administration for assistance, perhaps in the form of financing and tax incentives, to help make the deal work.
WASHINGTON AND NEW YORK SHARE A DUBIOUS DISTINCTION: They top the list of long commutes, according to a U.S. Census survey released yesterday that also showed clogged roads and high gasoline prices are pushing a growing number of people onto mass transit, the Washington Post and New York Times report. New York's reliance on its transit systems explains why the boroughs other than Manhattan perennially top the list of American counties with the longest commutes. The average trip to work for residents of Staten Island, Queens, the Bronx and Brooklyn has hovered above 40 minutes for several years. Last year, Staten Islanders again faced the longest daily slog, a full 42 minutes on average, with average commutes from Queens, the Bronx and Brooklyn just a minute or so less. For Manhattan residents, the typical commute lasted about 31 minutes, still considerably longer than the national average of about 25 minutes. The Washington region's average commute is more than 33 minutes one way, ranking second to the New York area's 34 minutes among large metropolitan regions. In Calvert, Prince William and Stafford counties, however, the average journey to work takes 40 minutes or more, according to the 2005 American Community Survey of households. The Washington area, where 13 percent of workers get to their jobs by bus or rail, ranks behind only New York and San Francisco in use of mass transit. Two-thirds of workers still drive to their jobs alone, but that share appears to have leveled off since 2000 in the D.C. area. A growing number of New Yorkers are deciding that if the trip to work takes more than a half-hour, then someone else can do the driving, a new survey by the Census Bureau shows. In the metropolitan region, which for years has been home to the nation's longest average commute, tens of thousands of workers have stopped driving to their jobs and switched to riding subways, trains, buses and ferries, according to an analysis of the data released this week by demographers at Queens College. More than 2.5 million residents of the region - about 2 of every 7 commuters - regularly rode some form of public transportation to work in 2005, up from about 2.2 million in 2000. The share of commuters driving themselves or riding in private cars fell, a trend that could bode well for America's energy consumption if only it were taking hold nationally.
NOW HERE'S AN INDISPUTABLY STIGMATIZED PROPERTY: The Clutter House, a national historic home with a gory past, is on the market in Holcomb, Kan., reports Realtor magazine. The five-bedroom, three-bathroom house was the scene of a grisly murder in 1959 that became the basis of the nonfiction novel "In Cold Blood," by Truman Capote. The original owner, farmer Herbert Clutter, was found dead, along with his wife and two teenage children one fall morning. Donna and Leonard Mader, the current owners, purchased the two-story house in 1990. The sale is being conducted as a "private auction;" bids will be taken over the phone, and bidders will be notified privately if a higher bid is received.
CONDO DEVELOPERS TAKE AIM AT CHILDREN: The list of amenities at condominiums and housing developments keeps growing, as developers tout fancy gyms, rooftop pools and on-call staff. Not for you - for your children, the Wall Street Journal observes. Developers and builders are spending millions of dollars on elaborate water parks and fake fossil digs and promoting couture romper rooms by name-brand designers. For example, in Lakewood, Colo., the developers of Belmar, a mixed-use downtown community, spent $600,000 on a kidney-shaped ice-skating rink and $200,000 on an interactive water fountain with an 11-ton, six-foot-high granite ball that children can rotate. At One Carnegie Hill on New York City's Upper East Side, a just-completed luxury building where one-bedrooms start at $895,000, the amenities include two play houses on the roof with child-size loft-style furniture. Even Donald Trump is thinking family friendly: His recently announced Trump Hollywood, a 40-story oceanfront glass tower in Hollywood Beach, Fla., where three-bedroom apartments start at $1.5 million, will feature an on-call children's nanny. Gym chain Equinox Fitness is planning a children's wellness program for residential buildings in conjunction with its new owner, Related Cos., the New York-based developer of One Carnegie Hill, according to David Wine, Related's vice chairman. David Rockwell, the award-winning residential and commercial architect who designed that building and its play space, is adding playground design to his practice.
FOLLOW THE MONEY: The three most prosperous large counties in the United States are in the Washington suburbs, according to newly released census figures, says the Washington Post. They show that the region has the second-highest income and the least poverty of any major metropolitan area in the country. Rapidly growing Loudoun County has emerged as the wealthiest jurisdiction in the nation, with its households last year having a median income of more than $98,000. It is followed by Fairfax and Howard counties, with Montgomery County not far behind. The result is that the Washington area's households rank second in income only to those in San Jose, eclipsing such well-heeled places as San Francisco and the bedroom suburbs of New York. The poverty rate in the Washington region was 7 percent last year - the lowest among the nation's major metropolitan areas, according to the Census Bureau's American Community Survey, a separate set of census figures also just released. That survey shows that the District remains an area of relative poverty among its more affluent suburbs, although its poverty rate is not particularly extreme compared with other large U.S. cities.
INDICATOR OF HOUSING MARKET STRENGTH DECLINES: The Pending Home Sales Index fell to 105.6 in July, a decline of 7 percent from a downwardly revised 113.5 in June and down 16 percent from July 2005, according to the National Association of Realtors (NAR). The index is derived from pending sales of existing homes. A sale is listed as pending when the contract has been signed and the transaction has not closed. An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined, and was the first of five consecutive record years for existing-home sales. "In looking at year-to-year comparisons, the Pending Home Sales Index has been very close in predicting the actual pace of home sales," commented David Lereah, NAR's chief economist. "The index shows existing-home sales should continue to ease after a stronger-than-expected decline in July, but are likely to flatten in the months ahead." He added that there hasn't been a general decline in the housing market against a healthy economic backdrop where jobs are being created, the economy is growing and interest rates are favorable. Added the economist: "Psychological factors are causing some buyers to remain on the sidelines, waiting for prices to stabilize or for more favorable news about the market and the economy. Contributing to this hesitancy is a lot of negative news stories, but in the end we believe that underlying market fundamentals will prevail."
IS IT TIME TO THROW OUT THE TUB WITH BATH WATER: Lately, tub manufacturers have been testing the waters with stand-alone basins, says the Wall Street Journal. The newest designs are larger and more design-oriented than the claw-footed models of Victorian times. Some are hand-hewn in the mold of slippers, boulders or eggs, out of materials including copper, cast iron and concrete. At April's Kitchen/Bath Industry Show in Chicago, Sonoma Cast Stone introduced the $12,500 Ofuro. The 870-pound, bowl-shaped soaker is made from pre-cast stainless concrete, a material that has been used in kitchen countertops. Waterworks of Danbury, Conn., has a total of seven detached tubs; two years ago, it had two. Its new acrylic-based .25 tub, for $8,500, resembles an egg cut in half lengthwise, while the $29,000 Clothilde is made from hand-hammered copper and can accommodate 80 gallons of water. Stone Forest's Natural bathtub is chiseled out of boulders, at about $15,000 each. The maker, based in Santa Fe, N.M., says it features "anomalies" like minor pitting. Still, consumers spent only $7.7 billion redoing their bathrooms last year, according to the U.S. Census Bureau, down from $9.1 billion in 2004. Freestanding tubs are a small but pricey piece of the market. Last year, homeowners spent an average $400 on a new, non-whirlpool tub, according to the Home Improvement Research Institute. There is one challenge with the free-standing things: the installation. Fittings, including a drain and faucet handles, are usually extra, and can cost over $3,000. Interior designer Despina Souhlas recently worked with a client to get a 1,800-pound stone tub into a 1890s row house in Chicago. The homeowner first had to reinforce the wooden joists underneath the tub to hold its weight. Then the tub had to be lifted up to the second floor with a crane, which required six movers. "It was a nightmare," she says. Be careful what you wish for.
YOU PAYS YOUR MONEY AND YOU TAKES NO CHANCES: A luxury home builder in Rockville, Md. has begun resorting to the kind of tactic usually reserved for screaming electronics discounters - the Lowest Price Guarantee. To ease buyers' worries about declining prices, Mid-Atlantic Builders will adjust its sales contract if the price it is charging for one of its houses falls from the time a customer signs an agreement to 45 days before settlement. So, the thinking goes, jittery buyers shelling out $500,000 to more than $1 million for one of the builder's single-family houses can rest assured that they're not sinking money into a depreciating asset. "That's a very real fear," said John J. Lavery, director of sales and marketing for the home builder. While builders and developers have for months been dangling tens of thousands of dollars in incentives to prod hesitant buyers - free upgrades, help with closing costs, plasma screen TVs, vacations, cars - Mid-Atlantic's latest marketing strategy is unusual in that it leaves the most important line in the contract, the selling price, somewhat open-ended. "We know people want to buy because traffic remains very strong," Lavery said. "Yet people aren't making the decision to buy as rapidly as they used to." Mid-Atlantic has not reduced its base home offering price, but it has increased incentives to as much as $55,000. Those will figure into the lowest-price promotion, so if $20,000 in incentives are available one month, and two months later the buyers in the same subdivision are offered $30,000, the earlier buyers will be credited for that extra $10,000.
BROOKLYN'S ATLANTIC YARDS PROJECT WILL BE SCALED DOWN: Facing mounting criticism of its $4.2 billion project in Brooklyn Heights, the developer, Forest City Ratner, plans to reduce the size of the complex by 6-8 percent, eliminating hundreds of apartments from the largest development proposal in the city, according to government officials and executives working with the developer, says the New York Times. Forest City is also considering reducing the height of the project's tallest tower, which is known as Miss Brooklyn, to get it under the height of the borough's tallest building, the nearby Williamsburgh Savings Bank tower, according to real estate executives. The Atlantic Yards project - which includes a Frank Gehry-designed arena for the New Jersey Nets basketball team, more than 6,000 apartments, high-rise towers and a hotel on 22 acres near Downtown Brooklyn - has drawn a torrent of criticism as it nears the end of its public approval process. Critics fear that it would overwhelm the nearby brownstone neighborhoods and clog an already congested area with traffic. City officials say the developer will announce the reduction later this month.
MORTGAGE VOLUME EDGES UP: For the week ended Sept. 1, applications grew by 1.8 percent on a seasonally adjusted basis from one week earlier, according to the Mortgage Bankers Association. On an unadjusted basis, the increase was 0.4 percent compared with the previous week but down 26.1 percent compared with the same week one year earlier. Seasonally-adjusted, purchase applications went up by 3.7 percent from the prior week as refinancings slipped by 0.9 percent. The refinance share of mortgage activity decreased to 41.0 percent of total applications from 41.5 percent the previous week, and the adjustable-rate mortgage (ARM) share fell to 26.2 percent, its lowest level since October 2003.
ONE OF THE BIG TRENDS IN TODAY'S FURNITURE IS SMALL: Sofas are shorter and chairs are armless, notes the Washington Post. Console tables that fit snugly in hallways or behind couches open up to seat eight for dinner. Beds are being shown with headboards but no footboards, or resting atop storage units. Major furniture chains are promoting lines with names such as Small Spaces and Loft 21 to catch the latest home decor wave. In the past year, the home furnishings industry has responded to those in tight quarters, be they young urban pioneers or downsizing suburbanites, says Cheminne Taylor-Smith, editor in chief of InFurniture, a monthly magazine that tracks industry trends. "Baby boomers are almost all becoming empty-nesters, and they look around and say, 'Who needs this space? Who will clean it?' Not only do they have too much furniture, but it's too big to move," Taylor-Smith says. Savvy manufacturers are shrinking sofas, tables, chairs and chests in several styles, she says: contemporary, traditional but with "less carving and sleeker arms," and transitional, which bridges the two.
WASN'T IT DOCTORS AND LAWYERS WHO MADE THE BIG BUCKS: Pop singer Gwen Stefani, the lead singer of the band No Doubt, has bought a Beverly Hills home once owned by actress and singer Jennifer Lopez, reports the Wall Street Journal. Ms. Stefani and her husband, Gavin Rossdale, the former lead singer for the rock band Bush, paid close to the $15.5 million asking price, according to the seller, film producer and businessman Sam Nazarian. The couple had their first child in May. The two-acre property includes the four-bedroom 1998 house, a tennis court, basketball court, pool and screening room. Nazarian, whose SBE Entertainment Group produced the Edward Norton film "Down in the Valley" in 2005 and owns hotels, restaurants and nightclubs in California and other states, bought the house from Ms. Lopez in 2004 for a reported $12.5 million. He said he is selling to move to Hollywood Hills, next door to Leonardo DiCaprio. Whether to BE next door, he doesn't say.
LOUDON COUNTY MOVES TO RESTRICT GROWTH: The supervisors approved a far-reaching plan to restrict home building in the county's rural west, taking the first step toward guiding long-term growth in the region's fastest-growing jurisdiction, reports the Washington Post. The guidelines replace similar rules struck down last year by the state Supreme Court. But the Republican majority on the board opted for a less-restrictive compromise than they had been considering in recent months. They did so against the advice of County Attorney John R. Roberts, who said the changes could imperil the measure if it is challenged in court. About 90 minutes after the vote, the board decided to delay implementation of the plan to address the legal questions raised by the compromise. The soonest the plan could be implemented is late November or early December. If it stands up in court, the measure ultimately could reduce the number of homes that could be built in the west from 37,000 to roughly half that.
HISTORICALLY LOW MORTGAGE RATES EDGE UP: The 30-year fixed-rate mortgage (FRM) averaged 6.47 percent for the week ending, up from last week's average of 6.44 percent 5.71 percent a year ago, according to Freddie Mac. The 15-year FRM this week was 6.16 percent, up from last week, when it averaged 6.14 percent. A year ago, it was 5.30 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were 6.14 percent this week, compared with 6.11 percent last week and 5.24 percent last year. One-year Treasury-indexed ARMs averaged 5.63 percent this week, up from last week's 5.59 percent. At this time last year, the one-year ARM was 4.45 percent. "We expect that mortgage rates will continue to fluctuate as new economic data are released, but still remain in the 6.5-7 percent range for the rest of the year," observed Frank Nothaft, Freddie Mac vice president and chief economist. "Slowly rising mortgage rates are offset in part by a slowdown in house price appreciation. Consequently, higher rates have resulted in houses sitting on the market for longer periods of time, changing the real estate sector into more of a buyer's market from the seller's market of the last few years."
HERE'S HOW TO KEEP THAT GRANITE COUNTER SPARKLING: Apply a penetrating sealer, counsels the Washington Post. It will sink into areas that are still absorbent and merely sit on the surface of any areas that were previously treated. As long as you wipe off any excess before it dries, you should be fine, says Scott Lardner, past president of the Marble Institute of America, a trade group that represents companies that work with many types of natural stone. Maintain the sealer's effectiveness by cleaning the counter with mild soap and water, not a degreaser such as Formula 409 or an ammonia-based cleaner such as Windex. "These won't hurt the stone," Lardner says, "but they will degrade the sealer so you need to reapply it more often." Use only neutral cleaners on sealers; beware of even natural or homemade cleaners such as vinegar or lemon juice, which are acidic, or baking soda, which is alkaline. When you put down a cold glass and notice a water ring on the counter or see dark spots where water drips off your hands near the faucet, it's time to reapply the sealer.
THE HIGH PRICE OF COPPER IS HITTING HOME – LITERALLY: The metal's skyrocketing scrap value is inspiring criminals to hit houses, making off with copper coils in air-conditioning units, copper wires, even the copper pipes used for plumbing, and leaving some perplexed residents without running water, says the Wall Street Journal. Driven by increased world demand for commodities, prices of steel, copper, aluminum and other metals are at historic highs. The price of copper has more than doubled in the past year, at around $3.65 a pound on the Comex division of the New York Mercantile Exchange. The price of copper scrap - which is processed and sold to metal-making firms - has also doubled, with high-grade scrap now fetching around $3 or more per pound at scrap yards and lower-grade scrap, less. Copper isn't the only metal sought by thieves; products made from aluminum and steel are also being targeted, but thefts of copper are especially onerous for homeowners and builders, as the metal is used throughout modern homes, including the inner coil of central air-conditioning units, electrical systems, gutters and water pipes. Another target for thieves is copper piping, which often runs exposed beneath many older homes.
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