Poll Finds Homeowners Expect Home Values to Continue to Grow

By Tara Siegel Bernard
From Dow Jones Newswires

Most American homeowners expect home values to keep rising and don't believe that gains in their own homes have affected how they spend, a recent study found.

That conflicts with Federal Reserve Chairman Alan Greenspan's recent research, which found that consumers have become very dependent on borrowing against their homes to fuel their spending -- and that a rise in mortgage rates may crimp expenditures.

Still, only 10% of homeowners polled said they believe that rising real-estate values had affected their spending, according to a survey of 1,001 consumers conducted this month by Royal Bank of Canada's RBC Capital Markets unit.

Some 85% of homeowners surveyed said they had experienced real-estate gains in the past three years, and more than 70% saw gains of more than 10% in that period, the study found. But more than half of those surveyed said they firmly disagreed with the idea that their spending had changed, even though half of all respondents had extracted equity from their homes through refinancing, home-equity loans or lines of credit.

"These findings raise the question of whether people spend more freely than they otherwise would because of their real-estate gains, and they simply don't recognize it," said Scot Ciccarelli, a managing director at RBC Capital Markets. "If that's the case, a simple slowing of real-estate gains, not just a fall in housing prices, could have a significant adverse impact on spending patterns."

Almost 60% of homeowners polled by RBC said they expect their home values to rise by at least 5% annually in the next several years, and a quarter of those respondents anticipate annualized gains of 10% or more in the next few years. Only 3% said they expect their home prices to decline in the same period.

Rising gas and energy prices, however, are having an effect already, with 60% of respondents saying those costs were causing them to pull back their spending.

RBC conducted the survey with assistance from InsightExpress, an online market-research firm based in Stamford, Conn., during the week of Sept. 19. The sample was spread across geography, gender and income brackets, to make it representative of the general U.S. population. The survey's margin of error was plus or minus 3%.

Email your comments to rjeditor@dowjones.com.

Housing Numbers Continue to Surprise

September 27, 2005
Amey Stone

This week has brought the latest monthly home sales data from the
National Association of Realtors. Reading these releases is starting
to be a bit of a yawn -- sales weren't quite at record levels, but
darn near close to it.

Today we got new home sales figures. Sales slipped a bit to 1.24
million homes (annualized) from 1.37 in July. The slip came after a
surge in July, so it isn't meaningful, notes High Frequency
Economics. Plus, as the Valhalla, New York-based research firm
reports, "Recent mortgage applications data suggest sales will run at
about 1.35 million for the next few months; there is no sign of any
trend weakening."

Monday's existing home sales showed a 2% rise to 7.29 million
annualized -- the second highest level ever. Prices jumped 16.2% over
last year -- the fastest rise in 26 years.

High Frequency Economics believes new home price gains are lagging
existing homes because of an oversupply of new construction. The dip
is simply an inventory correction, much like the one the
manufacturing sector is experiencing, the firm concludes.

05:09 PM

Overseas Slowdown In Housing Shows Impact On Consumption

BY KIRK SHINKLE

INVESTOR'S BUSINESS DAILY

Posted 9/26/2005

Euphoric U.S. homeowners reveling in record real estate windfalls
might want to look across the Atlantic before their next trip to the
mall.

The view might stiffen a few upper lips.

In the U.K., the housing bubble burst last year, and despite a soft landing for home prices, the fallout left many Brits feeling a bit
poorer.

U.K. consumption has stalled, savings have risen and economic growth has slowed.

The same thing could happen here with even more dire consequences since U.S. consumers remain one of the biggest drivers of the world economy.

David Rosenberg, Merrill Lynch's chief North American economist, points to both the U.K. and Australia as harbingers of what a housing slowdown might do to consumer spending.

In the U.K., home price growth peaked last summer, with July prices rising a whopping 20% year over year.

The Brits treated the windfall as an excuse to spend freely, but as
the U.K. market cooled, a slowdown followed.

Home-grown Slowdown

Home appreciation fell to just 2.3% in August as GDP growth weakened from 3.7% to 2.1%.

British retail sales grew at a 6.2% clip in May 2004, but slowed to just 0.8% last month, despite deep end-of-summer discounts.

U.K. shoppers are feeling less wealthy than they did just a year ago.

A recent rate cut by the Bank of England this summer has failed to
spur consumer spending. Shares of U.K. retailers are lagging the rest
of the market.

And that's in a housing market where prices are going up less
quickly — not falling, as they could in a host of overheated local
U.S. markets.

In Australia, the story is similar.

Home price gains peaked at 19% in Dec. 2003. Now prices are flat.

Over that time, Aussie GDP growth has fallen from 4.5% to 1.9% year
over year.

Jobs in both countries are relatively plentiful, but spending growth
keeps shrinking.

Savings have increased in both the U.K. and Australia, another sign
that shoppers are wary.

By contrast, U.S. savings are getting worse. They've turned negative,
falling to -0.6% as Americans tap into wealth above and beyond their
incomes.

And why shouldn't they? Existing home sales rose 2% to an annualized
7.29 million in August, second only to June's 7.35 million. The
median prices swelled 15.8% vs. a year earlier, the best since 1979.

New home prices have been retreating in recent months, though it's
not clear why.

If housing does cool off, the impact won't be uniform. The largest
gains have been in coastal areas like New York, California and Florida.

They will likely be the first to fall, experts warn.

Homeowners in the Midwest face fewer worries, since their homes have
risen less in value.

In the worst-case scenario, where prices drop substantially, Standard
& Poor's says we still wouldn't see a recession, with estimates for
2006 GDP growth at 1.2%, provided the Federal Reserve cuts interest
rates if growth indeed slows.

So how will U.S. spending fare?

If price growth only moderates, consumers will be OK. But a 20% drop
in U.S. home prices over two years — 30% in hot markets, 10% in
cooler ones — would slash more than $2 trillion from household
wealth, Standard & Poor's said. That would cut $100 billion from
household spending.

That's still less than 1% of GDP, but gloomier predictions note that
housing is the final pillar supporting consumer spending.

Americans already face soaring energy prices and pay raises that
aren't keeping up with inflation.

Several retailers have warned of weaker results in recent weeks,
sending shares lower as investors fear worse news to come. But some
leaders, like women's clothier Chico's FAS, continue to shine.

S&P said credit card charge offs, an early gauge of consumer woes,
were below 2002 levels as of the first quarter.

But chief economist David Wyss pointed to an American Community
Survey in July that saw more households reporting they're "severely
burdened" by housing costs.

Housing woes don't exist in a vacuum. If a housing slowdown, a hike
in gas prices and damage from Hurricanes Katrina and Rita each slices
a percentage point off GDP growth, the U.S. is flirting with recession.

Mix that with the huge amount of consumer debt pulled out of homes
via equity loans and refinancing in recent years, and the next
several quarters look decidedly less rosy.

Federal Reserve data show households withdrew $317 billion in home
equity in 2004. That's 3.7% of last year's disposable income. As the
home-as-ATM phenomenon subsides, a huge source of cash for spending
will dry up.

The wild card, economists said, will be the Federal Reserve.

Alan Greenspan's final months as Fed chairman could prove
challenging. Consumers — and investors — might welcome a pause in
rate hikes, but inflationary pressures — especially in energy —
can't be ignored.

Greenspan has spoken out on housing, though on Monday he moderated
his fears, saying homeowners can "absorb" a drop in prices.

But a housing slowdown would likely curb personal spending, he added.



Figures suggest debt burden isn't onerous

By Kenneth R. Harney
September 26, 2005

WASHINGTON - You've probably seen the dire news reports:

U.S. homeowners are becoming debt junkies, piling up record mortgage amounts,credit card bills, home equity credit lines. They are putting down less whenthey buy and borrowing a lot more.

Families in high-cost real estate markets are stretching their household budgetsto the breaking point in order to buy even a modest home. Some families are devoting 40 percent to 50 percent of their monthly income just to hang on totheir high-priced houses.

With interest rates virtually certain to rise from 40-year lows, debt pressureson borrowers can only get worse, pushing some families to the brink.

Given all that gloom and doom, you would think that homeowners' growingfinancial challenges would be visible in their payment performances mortgages.

But the reverse is true: Late payments on home mortgages were actually lower in mid-2005 than they were at the same time the year before -- 4.3 percent of all homeowners were at least slightly behind on their payments this year vs. 4.6 percent last year. Foreclosure rates are low and continue to fall. In mid-2005, 1 percent of all outstanding mortgages were in foreclosure, compared with 1.2 percent in mid-2004.

These figures come from the latest quarterly survey of nearly 40 million home loans -- in 50 states, plus the District of Columbia and Puerto Rico -- by the Mortgage Bankers Association of America. The second-quarter 2005 study also documents U.S. homeowners' significant differences in propensities to fall behind on their mortgages, based on where they live.

You might assume, for example, that homeowners in the states with the highest prices, lowest affordability and wildest appreciation rates would show the highest incidences of late payments. But that's just not so.

The lowest late payment rate in the country: Hawaii, where home prices are stratospheric and last year's average appreciation rate was 25.9 percent, third highest in the country. Yet only 0.89 percent of outstanding home loans in Hawaii are even slightly in arrears.

The next lowest late-payment rate was in California (1.02 percent), followed by Virginia (1.32 percent). California's 25.2 percent average appreciation rate last year ranked it fourth in the country. Virginia real estate is less expensive than California and Hawaii, but it's still well above the national average. And its 21 percent appreciation rate last year ranked it the eighth fastest-inflating state, according to the Office of Federal Housing Enterprise Oversight.

The highest rates of late payments, by contrast, turn out to be in states with relatively low housing costs, below-average appreciation rates and slow economic growth. Mississippi homeowners had the highest delinquency rate among the 50 states at mid-year (8.5 percent), followed by Louisiana (6.7percent), Indiana (6.66 percent), Tennessee (6.32 percent), Texas (6.31 percent) and Ohio (6.13percent). All of these states have moderate- to below-average housing costs andranked among the slowest-appreciating markets in the country last year,according to federal statistical data.

Where are foreclosure rates the highest? Nationwide, the rate was 1 percent at midyear. But several Midwestern states are experiencing foreclosures at two to three times that rate. Ohio had the highest incidence -- 3.3 percent of all
loans outstanding were in or beginning the foreclosure process. Next was Indiana (2.8 percent of all loans), Kentucky (1.9 percent) and Mississippi (1.7 percent).

The lowest rates of foreclosure in the country? You guessed it. Just 0.17 percent of California home loan borrowers faced that financial nightmare as of midyear, followed by Hawaii (0.23 percent), Virginia (0.29 percent), Arizona (0.35 percent) and New Hampshire and Vermont (both 0.36 percent).

Foreclosure rates in general are lower in 2005 than they have been in prior
decades in part because Fannie Mae, Freddie Mac, the Federal Housing Administration and most major lenders all now use sophisticated``loss-mitigation'' techniques to keep even the most seriously delinquent borrowers in their homes. The techniques include restructuring loan terms, deferring late balances to the end of the loan, and sometimes even lowering
interest rates.

Bubble Trouble? Not Likely

(September 20, 2005) -- Some housing market observers point to rapid appreciation, the widening gap between home prices and incomes, and the fact that home prices greatly outpace rents in many cities as evidence of a housing bubble. But Columbia Business School's Chris Mayer and Wharton real estate professor Todd Sinai disagree.

They insist that the annual cost of homeownership—after-tax financing costs, plus maintenance and depreciation—has not increased significantly over the last 10 years.

Research by Mayer, Sinai, and Federal Reserve Bank of New York research economist Charles Himmelberg reveals that annual housing costs in Boston, Los Angeles, New York, and San Francisco, for instance, rose no higher than 3 percent over long-run averages between 1980 and 2004.

Mayer and Sinai note that low interest rates are responsible for the large difference between ownership costs and actual home prices, adding that the hottest housing markets are extremely sensitive to interest rates and tend to have the lowest costs of owning.

Source: The Wall Street Journal (09/19/05); Mayer, Chris; Sinai, Todd

Is It Better to Buy or Rent?

Here is an interesting article in the New York Times discussing the economics of renting or buying in the current economic environment.

Existing home sales hit 2nd highest level

The Associated Press/WASHINGTON
By MARTIN CRUTSINGER
AP Economics Writer

SEP. 26 12:20 P.M. ET Defying expectations, sales of previously owned homes rose in August to the second-highest level on record with home prices rising at the fastest pace in 26 years.

The National Association of Realtors reported Monday that sales of existing homes rose 2 percent in August to a seasonally adjusted annual rate of 7.29 million units, a sales pace that was exceeded only by an all-time high of 7.35 million units in June. Economists had been forecasting a slight decline, believing that the red-hot housing market was finally beginning to cool off.

The strong demand pushed prices up to a record level of $220,000 last month, a gain of 15.8 percent from August 2004. That was the biggest 12-month increase since a 17.2 percent increase in July 1979.

By region of the country, sales were up in every area but the South, which saw a small 0.4 percent drop last month.
While the Realtors predicted that Hurricane Katrina, which came ashore in New Orleans in late August, would impact sales in September, they said the impact in August appeared to be minimal.

Sales were up 5.6 percent in the West and rose by 1.9 percent in the Midwest and 1.7 percent in the Northeast.

The 15.8 percent rise in median home prices -- the point where half the homes sold for more and half for less -- was just the latest in a string of double-digit increases in home prices over the past number of months.

Federal Reserve Chairman Alan Greenspan has worried that exotic mortgage products such as interest-only loans are allowing people to purchase homes that they may not be able to afford if interest rates rise, pushing their monthly payments higher.

David Lereah, chief economist for the Realtors, said he believed that price increases will slow in coming months as the inventory of homes for sale continues to rise.

Copyright 2005, by The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Goldman Sachs Economist on the Bubble

Peter Coy
September 23, 2005


Just got off the phone with Jan Hatzius, a Goldman Sachs economist who has written extensively on the housing market. He gave me permission to post a research note that he wrote today about the same academic study that I questioned in a post yesterday.

Hatzius says he's not sure I'm correct that the authors of the study assumed their conclusion. His criticisms are different. The biggest one is that the authors ended their analysis too soon--last year--missing the further inflation of housing prices since then. Here's what he wrote:

Continue reading "Goldman Sachs Economist on the Bubble"

New Tools Available to Hedge Your Home

By James R. Hagerty
From The Wall Street Journal Online

Once, a home was a castle. Now it is looking more like Fort Knox -- a pile of money in need of protection.

Amid warnings from economists that real-estate values in some parts of the country may drop eventually, there is a nascent movement to offer new investment products designed partly to hedge against falling property prices. The goal: Offer limited protection against the risk of riding real-estate prices back down again after the record run-up in recent years.

In recent months, Merrill Lynch & Co. and other investment banks have started offering investment products that will rise in value if a basket of housing-related stocks declines. Already, nearly $400 million of these investments have been sold, according to Daniel Carrigan, vice president for new-product development at the Philadelphia Stock Exchange.

The Chicago Mercantile Exchange also is preparing to announce plans to introduce in the second quarter of next year futures contracts based on home prices in each of 10 cities. It will also offer a composite contract covering all 10 cities. That plan follows the introduction last May by HedgeStreet Inc., based in San Mateo, Calif., of financial contracts called Hedgelets that let investors bet on a rise or a fall in home prices in six individual cities.

Strategies like these are far from foolproof, however. Derivative products like these can be complicated and risky, and none of them offers a perfect hedge against the risk that the value of any individual home will fall. But they do provide a new strategy for people worried about an eventual slump in housing.

For people who shy away from the complexities of derivatives, there are an array of other options for shielding home equity. These strategies range from the straightforward -- for example, locking in a fixed-rate mortgage while rates are still low -- to riskier approaches, including perhaps becoming a renter for a while.

The stakes are high for homeowners: In the past five years, home prices nationwide have jumped an average of 50%. That has bulked up the net worth of many Americans but also left a much larger proportion of their wealth locked up in real estate.

Since 1999, Americans' equity in their homes has soared 68%, to nearly $10 trillion in this year's first quarter, according to Federal Reserve data. During the same time, the value of stocks and mutual-fund shares held by households and nonprofit groups has declined 18% and also equals about $10 trillion.

Tom Atkin, a 58-year-old marketing consultant, nine years ago paid about $335,000 for a three-bedroom ranch house in he San Fernando Valley near Los Angeles. He figures it is now valued at well over $1 million, and has thought about selling his home now while the market is hot and moving to a less-expensive area. One problem, he says: "I wouldn't know where to put all the cash [from the sale] that would earn as good a return."

While many economists warn that prices in some regions eventually could level off or fall, the housing market has thrown off mixed signals in recent weeks. Inventories of unsold homes are up sharply in some areas, including Boston and the Virginia suburbs of Washington, suggesting that buyers have become more cautious and are taking their time. Another indicator of concern is that houses have become hard for most people to afford in some places. A new study by Carl Haacke, a consultant who was a White House economics aide in the Clinton administration, found that nearly a third of homeowners in Miami, for instance, are paying more than 40% of their incomes in housing costs.

Yet at the same time, there are optimistic signals. Applications for mortgages by rospective home buyers have rebounded in the past two weeks after slumping on a seasonally adjusted basis during most of the summer. And prices are continuing to rise steeply in much of the country, though that only adds to worries that any eventual decline might be more severe.

While it is impossible to protect yourself entirely from the possibility of a decline in ome prices, there are strategies for shielding yourself against at least part of the risk. Here is a sampling:

Dabble in derivatives: There are a variety of ways to use the financial markets to provide a limited hedge against a weak housing market. All of them are far from perfect, and most would be too complicated or risky for the average homeowner.

Among the newest twists in this area are the housing-related notes recently offered by Merrill and other investment banks. Merrill's Protected Bear Notes, introduced this past spring, offer a way to bet on a decline over the next eight years in the Philadelphia exchange's Housing Sector index, which is based on the stock prices of 21 companies involved in home building or closely related businesses. The notes will gain in value if that index declines.

Several other firms, including Morgan Stanley and Royal Bank of Canada, have offered similar notes. ABN Amro Holding NV, the Dutch banking concern, has offered a version of these notes to investors outside the U.S.

While these notes offer a way to profit from a slump in the housing industry, they aren't an ideal hedge. House prices in certain areas could fall or rise based on such factors as the health of the local job market, regardless of how national home builders are performing.

The Chicago Mercantile Exchange is focusing more directly on house prices. It recently reached an agreement to launch housing futures contracts devised by Macro Securities Research LLC, Morristown, N.J. The owners of Macro include a Yale economics professor, Robert J. Shiller, who is known for his gloomy views on the housing market. The futures will be based on indexes of prices in 10 large U.S. metropolitan areas, says Sam Masucci, chief executive of Macro. "We believe there is tremendous interest from people who are interested in hedging home prices," he says.

HedgeStreet, whose Web site is www.hedgestreet.com, has a jump on the Chicago Merc. The firm offers its hedgelets as a way to allow buyers to bet on a rise or a fall in home prices in Chicago, Los Angeles, Miami, New York, San Diego and San Francisco.

For instance, the site on a recent day offered the possibility of betting that the median San Diego home price at the end of the current quarter will be either above or below $643,000, compared with about $605,000 in the second quarter, as calculated by the National Association of Realtors. If a client correctly bet $1,000 that the third-quarter price will be lower than $643,000 when it is reported in mid-November, the Hedgelet would be valued at $1,140, or 14% more than the amount invested. However, if the price rose above $643,000, that Hedgelet would be worthless.

There is little trading in these contracts so far. Also, the contracts expire quarterly, so it is impossible to buy a long-term hedge. "It's small but growing steadily," says Russell Andersson, a vice president and co-founder of HedgeStreet.

Jonathan Reiss, a financial consultant in New York, says he has been experimenting with housing Hedgelets and has made some money by betting on a weaker market. Mr. Reiss, who owns a home in Manhattan, says the Hedgelet market is too illiquid to allow any real hedging.

Switch to a fixed-rate loan: Over the past few years, more Americans have been taking out adjustable-rate mortgages, which offer lower rates but expose borrowers to the risk that they will have to pay much higher rates later on. So far this year, around a third of all applications for home loans have involved adjustable rates, though that proportion has been falling in recent weeks.

Many financial planners say it is time to ditch those adjustables and lock into long-term fixed-rate loans, taking advantage of fixed rates of around 5.75%, very low by historical standards.

When the general level of interest rates goes up, so do payments on adjustable-rate loans. "You kind of put yourself in a vise if you have an adjustable-rate mortgage and you see your property value going down while your mortgage payments are going up," says Michael Maloon, a planner in San Ramon, Calif.

Even so, adjustable-rate loans are cheaper, at least in the short run, and can make sense for people who know they are going to move within a few years.

Make sure you have cash reserves or a credit line. Financial planners recommend that homeowners make sure they could keep paying their mortgage even if they lose their jobs or suddenly can't work for health reasons. "You need something between you and the equity in your house," says Phil Cook of Cook & Associates in Torrance, Calif.

That is vital because in a weak housing market you may need lots of time to find a buyer for your home. If you are unable to meet monthly payments, you would have the choice of defaulting (and destroying your credit rating) or slashing the price to fire-sale levels.

Having enough savings would let you keep paying the mortgage while waiting for a buyer. An alternative for those without much savings is to take out a home-equity line of credit now, says Charlie Fitzgerald, a financial planner in Maitland, Fla. That provides a standby loan that could be used temporarily to meet mortgage payments in a pinch.

Sell some property. People who own second homes or rental units might consider selling some of them while prices are high. Seok H. Jo, a financial planner in Los Angeles, says some wealthy clients are cashing out of rental properties and second homes, putting the money into municipal bonds or large-cap stocks instead.

Bill and Linda Cronin were so worried about the danger of a housing collapse that they recently sold their primary residence in Lake Helen, Fla. -- and moved into a recreational vehicle, which they are using to tour the U.S. Mr. Cronin, 58, a retired management consultant, figures the housing boom "is going to come to a screeching halt eventually."

Still, the Cronins have hedged against the risk that house prices will keep rising: They still own a rental home in New Smyrna Beach, Fla.

Another tactic: If you live in a frothy housing market and expect to move within a year or so, it may be worthwhile to consider selling now and renting for a few months. Last year Dean Baker, a Washington economist who is bearish on U.S. real-estate prices, decided to take profits on the two-bedroom condominium he and his wife owned in Washington's Adams Morgan neighborhood. Having bought the condo for about $160,000 in 1997, Mr. Baker says, they sold it for nearly $450,000 in May 2004. The couple now live in an apartment nearby, costing $2,250 a month in rent.

Since they sold, Mr. Baker concedes, the market value of his old condo probably has gone up even further. But he says he is happy with his decision. "Realistically," he says, "you're not going to be able to pick the
exact top" of the market.

Email your comments to rjeditor@dowjones.com.

-- September 20, 2005

Highlights from California Association of REALTORS® 2005 Use of Technology Survey

Media contact: Mark Giberson (213) 739-8304
E-mail:markg@car.org
Tuesday, Sept. 20, 2005


The survey tracks current trends in technology used by REALTORS® on topics ranging from computer and technology usage to Internet needs and adoption within their real estate business, and was conducted during the second quarter of 2005.

Highlights of the “2005 Use of Technology Survey” include:

- 90 percent of REALTORS® have a high-speed Internet connection at home, an increase from 82 percent a year ago and 71 percent in 2003;

- 46 percent of REALTORS® use e-mail as their primary form of communication with their clients;

- 31 percent said a Blackberry or Treo was their most important technology upgrade in 2005;

- 61 percent of REALTORS® post listings to their own Web site;

- 67 percent of REALTORS® find the Internet extremely or very important in the marketing and promotion of their business;

- 33 percent of REALTORS®’ business is coming from the Internet.

Something special "in common"

TICs - investment properties owned by two or more tenants - rising in popularity
By Beth Potter
Special to The Denver Post
DenverPost.com

For commercial real-estate broker Art Haag, owning and managing a Loveland mobile- home park can be a big hassle.

So if he can sell the park without paying capital-gains tax and invest in something that will pay him a monthly stipend, it sounds like a great deal, Haag said.

"It's a strong tenant-lease property. But then you have the hassles of ownership and management," Haag said. "I'm 74 years old, so I'm at the point now where I don't want to deal with it."

Haag and others with investment property who are looking to retire are prime candidates to invest in "tenants in common" real-estate deals, said Gary Herick, owner of Herick Asset Management in Denver.

Such deals shield them from paying capital-gains tax and pay up to 7 percent in yearly returns, Herick said.

How it works: Say you bought a condo in Vail for $85,000 in 1970 that now is worth $1 million. When you sell it, you and other real-estate investors (i.e., the tenants in common) buy an office building, which pays you, say, $70,000 a year as it appreciates, Herick said.

Because you are rolling money into the new real-estate investment - in a process known as a 1031 Exchange - you needn't pay an estimated $212,000 in capital-gains tax on the condo sale. The Internal Revenue Service in 1992 approved rules that made it easier for individual investors to get involved.

"You don't want the tenants, toilets and trash, but you want to have the tax benefits," Her ick said. "You don't want to manage the property, and you may want more income."

While the use of "tenants in common," or TICs, has been around for 20 years, it has exploded in places such as California and Arizona in the past few years as property values have risen rapidly.

An estimated $4 billion will be invested in them this year, Herick said, citing industry data.

Howard Runyan, who just retired from Xcel Energy in Colorado and who owns land in Punta Gorda, Fla., on the Gulf Coast, is considering the strategy.

Office property seems like a good investment, and the tax shelter also means if he dies, his children won't have to pay the capital-gains tax either, Run yan said.

"It doesn't make any sense to give the government money when you can collect interest and not pay any taxes," Runyan said. "Between what you get in the interest and not paying the taxes, it's quite a good deal for me."

Farm families with land holdings also are good potential clients because they have already used up depreciation methods to save on taxes over the lives of their land, Herick said. Once all the depreciation has been used, the tax liability is huge, making the tax-free exchange process a good one, he said.

On the upside of TICs, Her ick and other money managers scour real-estate investments across the United States to find the biggest returns, he said.

That means "unlocking equity" of the 7 percent returns he promises.

"If the economy goes to hell in a handbasket, you're a lot less vulnerable in this than in any other investment," Herick said.

On the downside, there can be heavy startup fees associated with handing your management duties to somebody else. As with real-estate investment trusts, or REITs, investment returns can also fluctuate depending on the commercial real-estate market, Herick said, no matter how solid the investment seems to start.

In addition, because of the unique nature of the deals - REITs are actually securities bought and sold on stock exchanges - investors might be asked to add money to the pot after the initial deal is done.

"You want to make sure you get a professional to help you, someone who is on your side," Herick said. "There can be good eggs and bad eggs (in advisers), so you want to make sure you're careful."

This e-mail was initiated by machine [10.148.8.4] at IP [10.148.8.4].

The 6 Percent Solution: Skip Real Estate Agents

---

September 17, 2005

By DAMON DARLIN

Stan and Gloria Wakefield are no fools. They built their three-bedroom house 12 years ago in Ponte Vedra Beach, Fla., an oceanside resort community dotted with golf courses and picturesque inland waterways. The real estate market in the area, near Jacksonville, took off and the house, overlooking lagoons, rose in value to nearly $1 million. "This house has appreciated almost obscenely, " said Mr. Wakefield, a retired naval intelligence officer.

What the Wakefields did next should scare real estate agents everywhere. They decided to put their house on the market this year, and concluded that the house would sell itself. So why pay a real estate agent a 6 percent commission? They tried negotiating a lower commission with prospective agents, who stood to make about $60,000, but the best they could get was 4.5 percent - and 5.5 percent if the agent had to share the commission with a buyer's agent.

They chose instead to list their property with one of the many real estate services that are challenging conventional brokerage firms, in this case, Assist2sell.com, an agency that charges a flat fee instead of a commission. The Wakefields had an offer within six days and sold their home for $985,000, paying a $10,000 fee to Assist2sell and $14,775 to the agent who brought in the buyer, for a savings of about $30,000 over a conventional broker

"Enough to pay off the boat," a 26-foot pocket cruiser, Mr. Wakefield said.

This is subversive stuff. Homeowners across the United States are figuring out that they do not need to pay what agents demand and they may not need an agent at all. At the same time, technology is giving consumers tools to nearly circumvent the agent. If enough people try it, agents are at risk of losing a good portion of their commissions - $100 billion last year.

So, agents are doing whatever they can to keep home sellers from paying less. Anyone who wants to know how to outfox them first has to understand where they derive their power: information. They know the market - or presume to know it - and help set the price of your house. They serve as the go-between and, again presumably, know how far you can push the other side.

(Note, however, that agents don't always push for the best price. Steven D. Levitt, co-author of "Freakonomics," and Chad Syverson, both University of Chicago economists, found that real estate agents have an incentive to persuade their clients to sell their houses too cheaply and too quickly because a few thousand dollars more in price won't yield them a significantly higher commission.)

But more than anything else, agents control access to the Multiple Listing Service, where all the houses for sale in a community are listed. The M.L.S. is the most powerful tool in real estate because it informs the widest pool of buyers that a home is for sale. Not open houses, not fliers, not big ads in the newspaper. "The M.L.S. is king," says Brett Weinstein, an Oakland, Calif., discount broker who prefers to be called "a full-service reduced-fee agent."

The M.L.S. is also a tool that agents use to protect their commissions. The problem for agents is that some of their colleagues are offering to list houses for a small flat fee, sometimes for less than $500. You sell it yourself, though you would be obligated to pay a 3 percent commission to any agent who brought you a buyer - in essence paying that agent for all the Sundays spent showing other houses to clients who never bought anything. That half-price deal is dangerous enough for a full-commission firm. But it gets worse.

In every community there are agents who open the M.L.S. to the public on the Internet (erealty.com has a fairly comprehensive list, or you can go directly to realtor.com, the Web site of the National Association of Realtors). They do it as a service to clients who want to buy a house - 70 percent of homebuyers now peruse listings on the Internet, the association's most recent survey says - as well as to cut their costs of showing clients the paper listings. Some even rebate part of their commission to buyers who do their own research on prospective homes.

But some buyers just freeload. (The Internet has a way of encouraging this behavior.) They can search the M.L.S. for a house with no brokerage firm listed, meaning it's being sold by the owner, and then work out a no-commission deal directly with that owner. So you can see where this is headed. If agents want to protect their commissions, they have to restrict access to the M.L.S. to sellers who are working with them, not going it alone.

Local realty groups have tried suing agents or brokerage firms that put "for sale by owner" listings in the M.L.S., accusing them of copyright infringement. Those agents have countersued, charging restraint of trade. Then two years ago, the Realtors association found what it thought was a better solution. It passed rules that essentially allowed a local M.L.S. service to block access to the listing service to any brokerage firm who discounted commissions or who posted listings for homeowners who intended to sell their own houses. The antitrust division of the Justice Department cried foul. This month it sued the Realtors' trade group, asserting that the rules stifled competition and hurt consumers.

The Realtors changed the rules just as the federal case was filed. But J. Bruce McDonald, deputy assistant attorney general, said that the group's policies continued to discriminate against innovative brokers and "stifle competition at the expense of home buyers and sellers."

In a news release, the Realtors association said it was "at a loss to understand" the Justice Department's legal action. "Many of the changes incorporated in the new policy are in direct response to concerns they have raised over the course of the two-year investigation," it said.

The Justice Department and the Federal Trade Commission have successfully fought state real estate boards that tried to limit consumer choices by imposing service requirements or forbidding commission rebates, but the fight goes on. Realtors have lobbied for and won state laws that prohibit commission rebates to buyers and require minimum levels of service, like requiring that an agent handle all negotiations or house showings. Federal regulators can't fight that.

Aaron Farmer, a discount real estate broker in Austin, Tex., has battled local and state realty boards to offer cheaper services. The Justice Department and the F.T.C. intervened to help him. Nevertheless, he has had to raise his fees to $700 from $600 because of the minimum service levels required by a law recently passed by the Texas Legislature. (Eight states have enacted such laws, accepting the real estate industry's argument that they are needed to protect consumers.) "All of these fights are over the M.L.S.," he said. "They don't want price wars."

But price wars are coming. No doubt about that. Here are a few suggestions on how to take advantage of the changing environment to sell your home with minimum services from - and fees to - a broker:

Set the price

Being a nosy neighbor is still the best way to know the market. Walk though every open house and find out later what the house sold for.

For the shy or decorous, technology offers an alternative. Homesmartreports.com will give you a sales analysis of your home based on prices for comparable homes in the immediate neighborhood. The $25 report is far more useful than cheaper versions from Domania.com (free) or Equifax.com ($7) because it gives you greater confidence that its high and low estimates are accurate by indicating the strength of your local market and by noting anomalies like a high number of foreclosures or house-flippings, where homes are bought with the idea of fixing them up and quickly reselling them.

Homesmartreports plans to offer a service for home buyers, too, that would provide an unlimited number of reports over a 30-day or 90-day period so you can get a better idea of how much to offer for a house.

Get listed

Some of the new sales services try to sidestep the M.L.S. As listings proliferate openly on the Web, the M.L.S. may one day be less important. But for now, in all but the hottest markets, it pays to get into the M.L.S.

Almost every community has a discount broker who will charge $300 to $800 just to type the information about your house into the local M.L.S. (Some will also take pictures of the house to run with the listing.)

There is one caveat: If you list there, you may be obligated to pay a commission to the buyer's agent, which is usually set at 3 percent. You can, however, build that commission into the price of the home, so the buyer actually pays it. Or, if the housing market is particularly hot in your area, you may be able to write into the contract that the buyer is responsible for paying his agent's commission.

Hand off the annoying stuff

For many sellers, the hardest part is all the details: staging the home for showings, holding the showings and handling all the paperwork and the negotiations. Many discount brokers offer an à la carte menu of services, which can quickly add up to more than a set commission.

Paperwork is not that hard to do if your discount broker gives you all the preprinted forms. (You can probably foist some of that work on the buyer's agent, who is really working for you anyway.) Alternatively, go with a sales service that for a higher fee of about 1 percent of the selling price will handle everything. But these services often don't include an M.L.S. listing.

As for stagings and showings, watch a few shows on the cable channel HGTV, like "Sell This House," to learn how decluttering or putting on a fresh coat of paint will raise the value of your home.

yourmoney@nytimes.com

HomeNet real estate listings site launches

Database includes FSBO, foreclosures, agent listings

Friday, September 16, 2005

By Janis Mara
Inman News

The HomeNet, a Birmingham, Ala.-based company that consolidates residential property listings and distributes them to participating real estate agents' Web sites, launched Thursday.

The company collects information about properties for sale from real estate professionals and makes the listings available to the contributors for display on their Web sites. The database includes properties listed with agents, for sale by owner, new construction and foreclosures, the company said.

In a somewhat similar move, RE/MAX International in mid-August announced a plan to pool residential property listings into a national collection that can be viewed online at the company's Web site, www.remax.com. It remains to be seen how many agents will use HomeNet to collect and distribute their listings, however.

Currently, HomeNet has a distribution arrangement with Yahoo!, Classified and with one of the larger aggregator foreclosure companies, said Michael Poythress, the company's president. The company has some agents onboard and is seeking more through viral marketing in venues such as real estate e-mail listserv RealTalk.

"It's like a national equivalent to the homes magazines, where agents submit specific properties and then the magazine gets
distributed to all the other real estate offices and shopping centers," Poythress said.

"We're doing the same thing in the online world. The database contains properties from a number of different sources and gets distributed to a number of different places," the company president said.

The difference is that consumers probably won't be looking at the listings on HomeNet's site.

HomeNet's technology puts a searchable database on contributors' Web sites that includes all the properties listed with HomeNet. The database can be customized to look exactly like the rest of the site. When a consumer clicks on a listing, he or she is taken directly to the property contributor's Web site for more detailed information.

The company supplies its entire listings feed back to agents who participate. The agents can decide which listings they wish to display on their sites.

Real estate agents pay $5 per property they contribute, and construction companies pay $10 or $15 to do so, Poythress said.

Consumers and professionals can search the database by going to participant Web sites or the HomeNet's site, using the sual criteria such as address, price and number of bedrooms and bathrooms.

Poythress said HomeNet's anticipated value to agents is that "First, people will be able to put their properties on a database like the MLS. Second, they will be able to include the data on their own sites," Poythress said. Also, agents can put the properties other agents in their area have listed on their sites, he said. "Agents will be able to include all the listings on HomeNet on their sites."

If consumers follow the links displayed in those listings, they will be taken to the original listing agents' sites.

The value to consumers, Poythress said, is that they won't have to go to a number of sites such as Realtor.com, Foreclosure.com and ForSaleByOwner.com to find everything that's for sale.

Poythress got his start in the real estate industry six years ago. He was owner and manager of a discount brokerage, Time To Move, in Birmingham, Ala. HomeNet's staff includes Birmingham broker Susan Grace, as well as David Nelson, its chief software architect, and William Slappey, vice president of operations.

Poythress is optimistic about getting agents to come on board.

"Word of mouth is important. We've already started spreading the word. We have mailing lists with our own contacts to start the ball rolling," he said.

***

Send tips or a Letter to the Editor to
janis@inman.com or call (510) 658-9252, ext. 140.

Copyright 2005 Inman News

Hurricane Katrina Impact Mixed for Economy and Housing

For more information contact:

Walter Molony, 202/383-1177 (wmolony@realtors.org)
Lucien Salvant, 202/383-1176 (lsalvant@realtors.org)


WASHINGTON (September 13, 2005) – The direct housing needs for evacuees of Hurricane Katrina and lower interest rates that will soften its economic hit mean there will be long-term consequences for housing as well as the overall economy, according to the National Association of Realtors^®.


David Lereah, NAR’s chief economist, said shortages of building materials, made worse by the need to rebuild in areas hit by Katrina, will increase construction costs. “Given the general tight inventory of homes available for sale across the country, rebuilding in the region of the Gulf Coast will place additional pressure on overall home prices,” Lereah said. “As displaced residents try to get back on their feet in new locations, home sales have spiked – along with rental demand – in regions surrounding the disaster zone.”

Existing-home sales are expected to increase 3.4 percent to 7.02 million this year, while new-home sales are forecast to rise 6.7 percent to 1.28 million for 2005 – both would be records. Last month, the totals were projected to be 6.98 million and 1.26 million respectively. Total housing starts – single-family and multifamily – should grow by 4.8 percent to 2.04 million units this year, the highest since 1973; single-family starts are expected at a record of 1.69 million.

“Mortgage interest rates will rise more slowly as a result of post-storm economic conditions to accommodate the losses of homes, jobs and businesses,” Lereah said. “The lower level of borrowing costs will provide additional lift to home sales in other regions. Demand will continue to outstrip supply in most areas, which will keep pressure on home prices.” Total housing, commercial and public property losses by Katrina are in the range of $100 billion.

The 30-year fixed-rate mortgage is forecast to rise more slowly, reaching 5.9 percent in the fourth quarter, and 6.7 percent by the end of 2006. The national median existing-home price for all housing types is projected to rise 10.8 percent in 2005 to $205,100. With a greater concentration of construction in lower cost areas, the median new-home price should increase 3.8 percent to $229,300 this year before rising at a faster clip of 6.2 percent in 2006.

View Charts

NAR President Al Mansell of Salt Lake City said the association is focused on people displaced by the storm. “The Realtors^® Relief Foundation is providing emergency relief for hurricane victims,” he said. “Working with our state and local associations, this is helping to provide immediate shelter needs and essential supplies. We connect very strongly with these needs because 28,000 of our own members have their lost homes and businesses.”

The foundation has already collected nearly $2.8 million for relief efforts; NAR is absorbing all administrative costs to provide emergency relief for hurricane victims in Louisiana, Mississippi and Alabama, including displaced Realtors^®. Many Realtor^® associations throughout the region have developed a special information template that members can use to forward information to the federal government about available inventory that could be used to house people displaced by the storm.

It is estimated that most of the flooded homes will have to be rebuilt, including about 80 percent of the homes in the city of New Orleans. Along with homes that will have to be replaced along the Mississippi and Alabama coastline, a minimum of 200,000 homes have been lost. However, the level of new housing construction will be only 130,000 higher than pre-Katrina projections.

“Housing construction will be insufficient to replace the number of homes destroyed or that will have to be demolished,” Mansell said. “Apartment vacancies are dwindling, and mobile homes will help to address the jump in housing needs.” He is meeting with Realtors^® and member associations in the Gulf Coast region this week to present relief checks and to assess long term consequences.

The Louisiana Realtors^® Association has launched www.HurricaneHousing.net. Realtor^® members and property owners alike can submit data on available shelter in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi and Texas, and people displaced by the hurricane can search the database directly.

The storm’s impact will cause the economy to grow more slowly than in earlier projections, but the economy will get a lift once rebuilding gets under way. The U.S. gross domestic product is forecast to grow at a pace of 2.3 percent in the third quarter and 2.7 percent in the fourth quarter, with GDP for all of 2006 pegged at 3.8 percent.

The unemployment rate is seen to peak at 5.3 percent during the first half of next year before declining in the second half. The Consumer Price Index is expected to increase 3.5 percent this year, while inflation-adjusted disposable personal income should grow by 1.4 percent. The consumer confidence index is likely to dip to 100 early next year, and then rise to 107 by the end of 2006.

The National Association of Realtors^®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1 million members involved in all aspects of the residential and commercial real estate industries.

# # #

NOTE: The commercial real estate forecast news release has been postponed for additional analysis of the hurricane impact until September 14.

The next existing-home sales release will be September 26; the Pending Home Sales Index is scheduled for October 5; and the next forecast will be October 12.

Information about NAR is available at http://www.realtor.org. This and other news releases are posted in the Web site’s “News Media” section in the NAR Media Center. Statistical data, charts and surveys also may be found in the NAR Media Center by clicking on Economic & Housing Statistics.

Condo Humor

From The Daytona Beach News-Journal Opinion
9/15/05

U.S. Homebuyers Using Creative Mortgages

By BECKEY BRIGHT
Staff Reporter of The Wall Street Journal

From The Wall Street Journal Online

Nearly one in five U.S. homeowners bought a home within the past three years that exceeded their suggested price range, a new Wall Street Journal Online/Harris Interactive personal-finance poll found.

Homeowners in the South and West are more likely than those in the Northeast or Midwest to report buying over their price range, according to the online survey of 2,300 U.S. adults.

At the same time, one-third of Americans who have purchased a new home in the past three years say they are using creative mortgage options such as interest only, piggyback, payment option, or miss-a-payment mortgages. And homeowners in the West are twice as likely as those in the Northeast, Midwest or South to opt for an interest-only loan, according to the poll.

Non-traditional methods of funding a primary residence are becoming more commonplace and acceptable, especially in areas of the country that have seen housing prices skyrocket," says Anne Aldrich, senior vice president at Harris Interactive.

But it is important that consumers be aware of all of the options available to them, as well as the possible risks that they may take on with 'creative' mortgage options," she adds.

Nearly four out of 10 (39%) of Americans who had purchased a home in the past three years used a mortgage broker, while 32% obtained their mortgage through a direct lender. Homeowners ages 18-34 (55%) are much more likely than older homebuyers to use a broker, the poll shows.

See full results of the poll

Emergency Preparedness List

From SFgate.com

"People should expect to spend at least 72 hours -- if not more -- on their own, taking care of themselves with very little help from emergency responders, who will be either overwhelmed or unable to get to a lot of places," Sarah Nathe, a disaster planner at University of California at Berkeley's Disaster-Resistant University project, told the Chronicle in October 1999.


In order to prepare for another such disaster SF Gate has compiled a list of supplies the American Red Cross recommends you keep on hand.
****

WATER | FOOD | FIRST AID
TOOLS, SUPPLIES | SANITATION
CLOTHES, BEDDING | DOCUMENTS


WATER

• A three-day supply of water for everyone. One gallon per person per day. Don't forget your pets.
  
• Store the water in opaque plastic containers such as soft drink bottles and put it somewhere easy to reach after the shaking stops.
  
• Change this water every six months and treat with chlorine bleach when you use it.
  

FOOD

• Ready-to-eat canned meats, fruits, vegetables.
  
• Canned juices, milk, soup
  
• Sugar, salt, pepper
  
• High energy foods such as peanut butter, jelly, crackers, granola bars, trail mix; foods that will not increase thirst.
  
• Vitamins
  
• Foods for infants, elderly, persons with special dietary needs
  
• Comfort/stress foods: cookies, hard candy, sweetened cereals, lollipops, instant coffee, tea bags.
  
• Pet food, at least one ounce per animal pound per day.
  
• Avoid foods like rice, pasta and dry beans that require a great deal of water to prepare. Remember to restock your food once a year.
  
  BACK TO THE TOP
  

FIRST AID KIT

• Sterile adhesive bandages in assorted sizes
  
• Assorted sizes of safety pins
  
• Cleansing agent/soap
  
• Latex gloves (2 pairs)
  
• Sunscreen
  
• 2-inch sterile gauze pads (4-6)
  
• 4-inch sterile gauze pads (4-6)
  
• Triangular bandages (3)
  
• Non-prescription drugs such as Pain relievers, Anti-diarrhea medicines, Antacid, Syrup of Ipecac (used to induce vomiting with the advice of a Poison Control Center), Laxatives, Activated charcoal (used with advice from the Poison Control Center)
  
• Various roller bandages
  
• Scissors
  
• Tweezers
  
• Needle
  
• Moistened towelettes
  
• Antiseptic
  
• Thermometer
  
• Tongue blades (2)
  
• Tube of petroleum jelly or other lubricant
  BACK TO THE TOP
  

TOOLS AND SUPPLIES

• Paper cups, plates, and plastic utensils
  
• Battery-operated radio and extra batteries
  
• Flashlight and extra batteries
  
• Cash or traveler's checks, in case banks are closed in the days following an earthquake
  
• Non-electric can opener or a utility knife
  
• Small fire extinguisher
  
• Pliers
  
• Tape
  
• Matches in a waterproof container
  
• Aluminum foil
  
• Plastic storage containers
  
• Signal flare
  
• Paper, pencil
  
• Needles, thread
  
• Medicine dropper
  
• Wrench, to turn off gas and water
  
  
  BACK TO THE TOP
  

SANITATION

• Toilet paper
  
• Soap, liquid detergent
  
• Feminine supplies
  
• Plastic garbage bags and ties
  
• Plastic bucket with tight lid
  
• Disinfectant
  
• Household chlorine bleach
  
• Poop bags and scooper for pet waste
  
  
  BACK TO THE TOP
  

CLOTHING AND BEDDING

• Sturdy shoes or work boots (keep near your bed)
  
• Rain gear
  
• Blankets or sleeping bags
  
• Warm clothing
  
• Sunglasses
  
  BACK TO THE TOP
  

DOCUMENTS

• Will, insurance policies, contracts deeds, stocks and bonds
  
• Passports, social security cards, immunization records
  
• Bank account numbers
  
• Credit card account numbers and companies
  
• Inventory of valuable household goods, important telephone numbers
  
• Family records (birth, marriage, death certificates)
  BACK TO THE TOP
  

**Remember to include special needs family members such as a baby or an older person might have. It is also good to store in a water proof plastic bag important family documents (passports, wills, medical records etc.) along with your earthquake survival kit.

SOURCE: Chronicle, American Red Cross, Disaster Preparedness Handbook, City of Berkeley

Katrina impact will boost home prices nationwide

10:05am 09/13/05
Realtors By Greg Robb

WASHINGTON (MarketWatch) -- Lower mortgage rates and rebuilding in the Gulf Coast region will boost home prices nationwide, according to the National Association of Realtors' latest economic outlook released Tuesday. The NAR raised its forecast of sales of new and existing homes and housing starts in the wake of the hurricane. Shortages of building materials, made worse by the rebuilding effort, will increase construction costs, the NAR said. A minimum of 200,000 homes have been lost in the hurricane, the trade group forecast.

Dusty cities, swampy burbs face real-estate bubble

By Russ Britt, MarketWatch
Last Update: 5:43 PM ET Aug 26, 2005
BAKERSFIELD, Calif. (MarketWatch) -- Visalia. Merced. Fresno. Bakersfield.

These dusty centers of California's San Joaquin Valley epitomize the newest and, in many cases, surprising players in America's red-hot real-estate craze. Until now, most of them have sat on the sidelines while places like Los Angeles and New York racked up higher prices. Along the way, experts have identified these places as prime examples of inflated markets that carry significant risk of bursting their bubbles.

And this new real estate gold rush has spread east to Nevada and south to Arizona. Las Vegas, Reno, Phoenix and even tiny Prescott, Ariz., all are sharing in the wealth. Farther east, a number of cities in Florida are seeing their values catapult in sort of a rolling bull market where various regions take turns at the top of the heap.

It's all leaving experts to wonder when the massive price hikes will start to let up.

"My theory is it has become the investment du jour," said Jay Butler, director of Arizona State University's Real Estate Center.

One key is whether these new players will have the staying power if and when a downturn comes along. For many, the worst scenario is prices will level off as long as interest rates don't jump and easy loans like interest-only mortgages don't come back to bite buyers.

But there is also fear that personal-income levels won't be strong enough to support rapidly rising prices.

"I think right now we're in more for a moderation of the process," Butler said.

Florida, Arizona and Nevada -- along with California -- comprised four of the nation's top seven states in house price appreciation during the first quarter, according to the Office of Federal Housing Enterprise Oversight.

Topping the list was Nevada, which includes the white-hot Las Vegas-area market.

It's expected those four states will remain among the top seven when second-quarter figures are released, though there could be some reshuffling.

Figures from Fannie Mae show Arizona topping the list for the second quarter, with Florida in third, Nevada sixth and California seventh. U.S. housing oversight agency figures are based in part on Fannie and Freddie data.

High inventory in Florida

Inventory, however, may be the undoing of such communities such as Naples, Fla., an upscale city on the state's southern Gulf Coast. The number of existing home listings on Realtor.com for Naples stands at roughly 3,300 single-family homes and condominiums - 600 more than Phoenix.

But Naples has only 21,000 total housing units, less than 4% that of Phoenix. That leaves Naples with more than 15% inventory in existing homes -- and that doesn't include new home sales. Prices in the Naples area jumped 23.6% from March 2004 to March 2005, placing it 25th on the federal data list.

While Naples is high in inventory, it reflects what's going on in the rest of Florida. The West Palm Beach-Boca Raton-Boynton Beach metropolitan area, for example, placed 15th on the home-price appreciation list, rising 25.8% during the first quarter. But the existing home inventory in West Palm Beach stands at about 10%.

And even though it was ravaged by Hurricane Charley last year, Punta Gorda ranked 21st with a 24.3% price hike. Yet its inventory is just below the double-digit level at 9%.

In Naples and the rest of Collier County, prices have jumped to $500,000, said Mike Timmerman, Florida managing director for consultant Hanley Wood Market Intelligence. That's put the Naples market far ahead of other Gulf Coast cities.

But job creation, while brisk, has mostly been in service industries, he added.

"Our jobs have increased at a healthy rate of 7 to 10%, but the income is not nearly enough to support $500,000 homes," Timmerman said.

Half bought on spec?

Timmerman estimates more than half the listings now on the market in Naples are real estate speculators "flipping" properties -- buying properties and immediately putting them back on the market.

"I have some real concerns in the marketplace with the number of speculators there," he said.

One-third of the Naples listings seek $1 million or more and all are considered waterfront properties. In addition to being on the Gulf of Mexico, Naples is pockmarked with dozens of bays, inlets, estuaries, lakes and ponds.

Woody Hanson, past president of the Appraisal Institute who now runs an appraisal service in nearby Fort Myers, said Naples has overtaken Palm Beach for the highest median home prices in the state.

"It could be evidence to me that the speculators are at the end of the cycle," Hanson said. "No matter how much money you make, it can't go on forever."

One saving grace for home prices in Naples and the rest of the Florida market is there is little land available for development. As Gulf Coast cities expand to the east and Atlantic Coast cities grow west, they're beginning to touch the swamplands in the Florida peninsula's central region.

Adjacent to Naples on the east is the Big Cypress National Preserve, and next to that are the Everglades.

"There is no more there," said Barry Diskin, a Florida State University business professor specializing in real estate.

But there also are signs of cooling off. Timmerman said pricing in Naples already is beginning to soften to the point where median prices may actually dip next year.

The frantic atmosphere in home sales is cooling as well, Timmerman said. Properties are staying on the market longer and there is little bidding for homes.

"We're beginning to see the pricing escalation soften," he added.

Watching Las Vegas

For some time, the strongest price growth has been in Las Vegas, where real-estate watchers are on the edge of their seats.

The federal housing oversight survey had ranked Las Vegas second among all markets during the first quarter, with gains of 33.3% compared with the first quarter of 2004.

Land speculators in the gambling capital contributed to record price gains in recent years, many of them buying new homes and "flipping" them, or putting them back up for sale for a quick profit, despite homebuilder covenants designed to prevent that.

There now may be a few fissures forming in the Las Vegas market. Some homebuilders reportedly have cut prices by as much as 20% to ward off speculators.

Of rising concern is that on Realtor.com, there are more than 11,400 single-family homes and condos up for sale, and about 200,000 total housing units in the city, putting the inventory at more than 5%. While that ratio is common in Florida, inventory for other western cities hovers around 1%.

"People are still moving to Las Vegas to buy a new house. Old houses are moving kind of slowly," said Thomas Carroll, an economist at the University of Nevada, Las Vegas.

Even more troubling is the way buyers are acquiring houses through interest-free loans, Carroll added.

"I think that the biggest problem is people are speculating and putting zero equity into their houses," he said.

The trump card in the Las Vegas market is the federal government, which owns 80% of the state's land but steadily has ceded it to private interests, Carroll said. At any moment, large parcels could be thrown on to the market, thus diluting the value of other properties.

Foreclosures.com recently reported that residential foreclosures in the city were up 37% in June.

For the second quarter, it appears Las Vegas will slip in the price appreciation standings although its gains will remain substantial. Fannie Mae statistics show home prices in Las Vegas were up 23.5% in the second quarter, dropping it out of the top 10.

The National Association of Realtors earlier this month estimated that Las Vegas's second-quarter price appreciation was 12%, less than a fourth of what it was a year ago.

Phoenix rises

Assuming Las Vegas's mantle of fastest-growing home prices for a major city could well be Phoenix - and it may be the new hotspot for growth.

Fannie Mae stats show the Arizona capital, along with suburbs Mesa and Scottsdale, saw prices jump 37% year-to-year during the second quarter, putting it third among all U.S. metro markets, behind Bakersfield and Palm Bay, Fla.

Another source, the National Association of Realtors, says the Phoenix market rose 47% on average during the second quarter, making it first in the nation.

Up to now, Phoenix has been fairly moderate in terms of price appreciation. U.S. stats show the Phoenix-Mesa-Scottsdale area rose 20% from March 2004 to March 2005. Over the past five years, prices are up 51%.

While there are concerns the vast desert around Phoenix is ripe for development, thus creating oversupply issues, there are limitations, said Arizona State University's Butler. For one, water supplies aren't infinite.

"We have a lot of land, but it's coming at a heavy price," Butler said. As a result, Phoenix is trying to fill in pockets of vacant land - in some cases with "urban condos" that command $300,000 for 800 square feet.

That seems to matter little, says Richard Olson, a real estate developer who is constructing a community of townhomes near downtown Phoenix.

"Price has nothing to do with it. People want to know two things - how much down and how much a month," Olson said. "People are buying as much house as they can afford."

Phoenix's inventory is remarkably low, considering the area's size. In Phoenix alone, there are 2,700 single-family homes and condos on the market, according to Realtor.com, but around 500,000 total housing units in the city. That puts the available housing inventory rate at around a half percentage point.

But Olson estimates there are roughly 60,000 homes under construction in and around the city now. He doesn't see that deterring buyers at all.

"It's going to be strictly a function of interest rates," Olson said.

Listings as a percentage of total housing units

State/City	Total housing units*	No. of listings**	%
CALIFORNIA
Bakersfield***	115,000	966	0.84
Visalia	32,654	235	0.72
Stockton	82,042	1,033	1.3
Merced	21,532	217	1.0
Fresno	149,025	766	0.51
Yuba City	13,912	242	1.7
Modesto	67,179	779	1.2
Sacramento	163,957	2,779	1.
FLORIDA
Naples	16,690	3,115	18.7
West Palm Beach	34,769	3,391	9.8
Punta Gorda	8,907	875	9.8
Sarasota	26,898	1,424	5.3
Port St. Lucie	36,785	1,875	5.1
ARIZONA
Phoenix	495,832	2,317	0.47
Tucson	209,609	1,287	0.61
Flagstaff	21,396	298	1.4
Prescott	17,144	421	2.5
NEVADA
Las Vegas	190,724	11,222	5.9
Reno	79,453	1,575	2.0

* Figures from 2000 U.S. Census and do not include housing units built since then. ** Listings of existing homes on Realtor.com for week ending July 22. ***Bakersfield figures compiled from local realty-agency statistics.

Legal battle over listings

Amey Stone

The National Association of Realtors (NAR) is being sued by the Justice Department for anti-competitive practices. In a claim filed Sept. 8, Justice Dept. attorneys claim that the NAR has adopted rules governing how properties are listed on other brokers' Web sites that could cripple online competition and stifle innovation (which hurts consumers' ability to get a better deal online).

The NAR says its rules don't discriminate against any particular brokerage model, but simply allow real estate agents to market properties as they see fit -- for example, by declining to have a listing included on any other brokers' Web sites (which they admit brokers rarely do).

The NAR, which has been in discussions with the Justice Dept. for the past four months, formally changed its rules the day the suit was filed (under prior rules, brokers could restrict specific competitors from displaying their listings online). But the switch was apparently too little too late to please the Feds.

“The reason this is an important issue for consumers and that the Dept. of Justice got involved is the Multiple Listings Service is the largest repository for real estate listings and the NAR wants to control who gets access to it and where listings show up on the Internet,” says Colby Sambrotto, chief operating officer of ForSaleByOwner.com. “The Internet has become the biggest avenue for marketing real estate. It is definitely not in the interest of a seller, who is paying a realtor an enormous fee, to have them try to restrict the property from being marketed on the Internet.”
The details of this legal battle over listings battle get pretty nitty-gritty. But if you want to learn more, plenty of information is available online from both sides:

- here's a link to the Justice Department complaint and press release.

- here's a link to the NAR's list of press releases, including one titled "Justice Sues Over Wrong Policy."

- and this is a news story on the battle from News.com.

03:14 PM

The Echo Boomers - The Next Big Consumers

The Echo Boomers or Generation Y currently make up about one third of the US Population. Many of the Echo Boomers are starting to reach an age where they want and need things like, Houses, Cars, Insurance. The Echo boomers don't respond to marketing like Earlier Generations. In recent Focus Groups an Echo Boomer is just as likely to being playing a Video Game or surfing the Internet as watching TV.

What is an Echo Boomer. An Echo Boomer are the Children born to the Baby Boomers. Depending on which definition of echo Boomer you listen too the First Echo Boomers were born between 1977 and 1982. The Last Echo Boomers were born 1994 to 2004. It is Safe to say for the purpose of this article anyone under the age of 30 is an Echo Boomer.

Recent studies show that college students have a huge loyalty to the first company that gives them a credit card. When College student overextend there credit if they have 10 credit cards and rip up 9 they will always keep that first one. This Loyalty extends for years beyond college they still have that first credit card.

The next question to ask is if Echo Boomers remain loyal to their first credit card company will they remain loyal to their first, Real Estate Agent, Insurance Agent, Mortgage Broker. The average American buys there first house when they are over 30. Why not target some of these echo boomer between 20 and 30 and sell them that house. Help them with that mortgage. Then Follow up with them a few times a year to see if they have any question or concerns, The Average Homeowner Trades up between 5 and 7 Times. Wouldn't it be nice to build 10 or more relationships a year that result in 5 more big transactions in the next 20 to 30 years.

About the Author
Call Mike Makler at 314 398-5547
Visit Mike's Web Page:
http://ewguru.com/finance

Copyright © 2005-2006 Mike Makler

Article Source: http://EzineArticles.com/

WSJ.com - Antitrust Suit Could Reshape Residential Real-Estate Sector

By JAMES R. HAGERTY
Staff Reporter of THE WALL STREET JOURNAL
September 12, 2005

A Justice Department antitrust suit against the National Association of Realtors raises a tricky legal question: Who controls information about homes listed by brokers as available for sale?

The answer is likely to help determine the future shape of the residential-real-estate brokerage business. Buoyed by a booming market for homes, that business reaps more than $60 billion a year in commissions on home sales, according to Real Trends, an industry publication.

In a suit filed Thursday, the department alleges that the association's policy on Internet displays of listings data -- which allows brokers to block their listings from being displayed on other brokers' Web sites -- "restrains competition" from brokers that rely mainly on Web sites to engage with their customers.

"It is the Web-based brokers who have been the most aggressive about cutting commissions," said J. Bruce McDonald, a deputy assistant attorney general in the Justice Department, in an interview Friday.

Realtors say that they aren't thwarting competition but that brokers have "ownership rights" in their listings and should be able to determine how they are displayed on the Web. The trade group argues that the department hasn't fully taken into account changes to its policy that were announced last week in a bid to avert the suit. Justice Department officials "do not understand the real-estate industry," Laurie Janik, the group's general counsel, said in an interview.

The policy involves Internet displays of information from multiple-listing services, or MLS, which are local databases of homes available for sale. As revised last week, the policy lets brokers refuse to allow their listings to be displayed on other brokers' Web sites. If they exercise this "opt out," brokers must inform home sellers that their listings won't appear on rivals' sites and get written consent.

Geoff Lewis, chief legal officer at RE/MAX International Inc., a major franchiser of brokerage firms, says very few brokers would opt out because their customers would demand maximum Internet exposure. "We intend to share all our listings with other companies," he said.

But Robert D. Butters, a Chicago lawyer who represents Internet-based brokers, still sees opt-outs as a big threat. If one or more major firms in a local market opted out from sharing data with rival Web sites, consumers would find they could get more information by going to a real-estate office to meet an agent face to face than they could get by dealing with a Web-based agent.

Traditional brokers who refuse to let their listings be shown on rivals' sites still could provide the data to Realtor.com, a site owned by the National Association of Realtors, Mr. Butters noted. By offering to put the listings on that popular national site, the brokers might persuade many consumers that they don't need to be on rival brokers' sites.

People looking for homes often start their searches on the Internet and favor sites with the most comprehensive and easily searchable data. Some of those sites pitch real-estate-brokerage, mortgage-lending and other services. The site operators then can collect referral fees from local firms eager for customers.

Write to James R. Hagerty at bob.hagerty@wsj.com

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Is Florida housing a bubble? One economist says no...

September 09, 2005

Dean Foust

Few markets have boomed like Florida. Prices there are up 33% in the past year, up 105% over the past five years, and have risen a honking 180.7% over the past decade. Amid all the concerns that Florida is a bubble just waiting to be pricked, one economist, Mark Vitner of Wachovia Corp. (who in a previous like was an economist for a Florida bank) has come out with a new report arguing that Florida isn't really a bubble. While Vitner currently works out of Charlotte, N.C., he knows a little about the Sunshine State: Prior to joining Wachovia, he was an economist for Barnett Banks in Jacksonville, Fla., for about nine years. His arguments: The robust growth in Florida's population, coupled with the inability of Florida builders to get houses up fast enough, has created a case where demand for single-family homes is vastly outstripping supply. Florida homeowners will be heartened by Vitner's analysis. Read on...

A+ College Real Estate 2005

Sara Clemence



The list of college costs can seem endless--ever-increasing tuition, textbooks so pricey they might as well be encrusted with gems and endless incidentals of food, clothing and activity fees.

There's not much you can do to make those expenses less painful. But there is one area where you can soften the hit to your wallet--and if you're lucky, even turn a profit. Invest wisely in housing, and instead of paying for pricey dorm rooms or ratty apartments, you can write a monthly check that boosts your equity.

The cost of housing a college kid keeps going up--according to The College Board, which puts out an annual report on college pricing trends, the average room-and-board expenses for undergraduates living on campus in the 2004 to 2005 school year totaled $7,434, up 4.6% from the year before. Meanwhile, the median existing home price in the U.S. went up a similar amount from July of last year to July of this year. Where would you rather have the increase?

College-area real estate can be less vulnerable to price declines than other areas, says Eric Tyson, former financial counselor and co-author of Home Buying for Dummies and Real Estate Investing for Dummies.

"It's not like being in the Rust Belt, where if a big company shuts down the factory, it can really throw a monkey wrench into the real estate market," he says. The University of Michigan, for example, isn't going to fold anytime soon. Plus, a campus means more cultural activities, a decent selection of restaurants and often less crime--all attractive in a neighborhood.

But investors may not see huge gains in prices over short periods of time.

"The down side, if there is a down side, is that people who work in the public sector, in universities and colleges, aren't going to get a $500,000 bonus and trade up to a more expensive home," Tyson says.

Still, there are the occasional exceptions.

"If you go back several decades, part of the reason the San Francisco Bay area, Silicon Valley and the Peninsula area took off as much as they did was because of the developments that were coming out of the universities," Tyson points out, referring to the high-tech boom. "That can change the dynamics of a local real estate market."

An area to keep an eye on, he suggests, is New Haven, Conn., home to Yale University. The seeds of a biotech industry have long been planted there, and they may yet flourish.

Jeff Groper, president of Bretton Realty in Brookline, Mass., near Boston University, says his office has seen a lot more families buying instead of renting apartments for their children, since interest rates have been so low.

"The kids are coming in with their parents and saying we want to spend $1,000 per kid to rent," he says. If the parents are able to make the upfront commitment, he suggests they buy a two-bedroom apartment and bring in a roommate.

Recently, a father and his son, a freshman at Boston University, came into the office because the child wasn't happy with his dorm, which cost about $800 per month, Groper says. The family spent $240,000 on a one-bedroom that could be split into a two-bedroom. With a roommate, the parents will end up paying less each month on housing costs.

"Through the course of the next four years, the property will appreciate, because it's within walking distance of B.U.," he says. "They will have saved $50,000. Even if they break even, they walk away having had free rent for four years."

With thousands of students descending on Boston each fall, Groper says he gets calls from around the country from investors who would like to own in the area.

But it's not just a matter of slapping down a few dollars--buyers need to consider several factors in their purchase.

Anyone looking to buy a rental property should look at the cost of renting versus buying the way they would look at a price-earnings ratio on a stock, Tyson advises.

"Look at what your monthly costs are going to be after tax benefits, and see how that compares to the rental income," he says. "If you can't come close to covering expenses or exceeding expenses with rent, the property may be inflated."

Areas near Stanford and Palo Alto, Calif., he suggests, are examples of overpriced locations.

Think about who you're going to be renting to. If you're going to get anxious about a scratch on the wall, you shouldn't buy a property that would most likely rent to college freshmen, Tyson says. Instead, try something that would appeal to professors or researchers.

Location is key--the closer to the university, the more likely students will want it. But if you hope to one day use the property as a pied-a-terre, or want to sell to professionals, you may not want to be in the very thick of things.

"The regular buyers that have done the college bit wouldn't purchase there, because they're too close to campus," says Liz Roberts, sales associate at Coldwell Banker Previews in Washington, D.C. "I wouldn't want to live in that campus-feely environment."

As always, make sure that the building is sound, and you have good resale potential, Roberts advises. If you do rent to students, be sure to get a substantial deposit to cover damage and cleaning costs, or in case your tenants decide to stop paying rent and go backpacking in Europe for the summer. And remember the bright side--you don't have to put as much upkeep into a student rental as you would if you were targeting professionals. You can also charge more money for students, because they are willing to pack more people in and share bedrooms, as they would have in a dorm.

"Your returns on college students as an investor can be very profitable," Groper says.

To help potential buyers, we looked at more than 300 metro areas and ranked them by their abundance of colleges, and by how much home prices have appreciated over the past five years.

We used data on higher education from Cities Ranked and Rated. The authors, Bert Sperling and Peter Sander, collected information on the number of two- and four-year colleges from the National Center for Education Statistics, and on the number of universities with selective admissions as judged by the Princeton Review. In our educational rankings, we weighted the number of four-year colleges heavier than the number of two-year colleges and highly ranked institutions.

Then we looked at home price appreciation data from the Office of Federal Housing Enterprise Oversight, part of the U.S Department of Housing and Urban Development. We ranked the metros by appreciation over the past five years, through the second quarter of this year. And we left out some places, such as Waterbury, Conn., and Sharon, Penn., where we couldn't obtain both educational and price data.

Finally, we combined the rankings to figure out which areas had both high numbers of colleges and high appreciation rates. The results weren't that surprising--among the locations that made the top ten were Boston, Philadelphia and New York--all known in part for their stellar universities. All the way on the other end of the scale were places, such as Decatur, Ala., and Victoria, Texas, that have no four-year colleges at all.

See our list of the ten metro areas with the best education and best real estate appreciation rankings. You just might learn--or earn--something.

If your college town didn't make the top ten, click here to search alphabetically by metro area and find out where they ranked.