Fort Lauderdale luxury condos to include boat slips

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Fort Lauderdale luxury condos to include boat slips

by Robyn Friedman, Special to the Sun-Sentinel

November 28, 2005

A Boca Raton developer has announced plans to build 22 luxury condominiums in Fort Lauderdale that will each come with a boat slip large enough to dock a 45-foot boat.

The project, called Indigo, will rise on a one-acre parcel at 58-72 Hendricks Isle, an area of the city that is undergoing a transformation thanks to redevelopment. It will consist of two buildings, each five stories. The first floor of each will be devoted to parking.

"We've been interested in infill properties for about a year and a half because the availability of land for single-family homes in Palm Beach and Broward counties is pretty much exhausted," said Paul Asfahl, president of Sterling Communities at Hendricks Isle LLC, the developer. "This property caught our eye."

Asfahl plans to apply for site plan approval for the project within six weeks. If all goes as planned, he expects to break ground in the fall of 2006. The site currently contains five aging multifamily properties that will be demolished. "It's going to be a real upgrade for the area," Asfahl said.

The condos at Indigo will range from 2,100 to 3,350 square feet and will have three and four bedrooms. Prices will range from $1.25 million to $2.25 million. The units will have upscale features such as granite countertops, marble bathrooms, top-of-the-line appliances and balconies. Some will be flow-through units offering both water and city skyline views. The amenities will include a fitness center in each building and pool.

Asfahl is targeting the units to several types of buyers, all of which he expects to have a strong interest in boating. He thinks the project will appeal to vacation-home buyers, people who live or work in the Fort Lauderdale area and to Latin Americans.

"If real estate has a unique and irreplaceable value like a boat slip in the middle of the Las Olas area, then it's almost guaranteed for success," Asfahl said. "It can't be duplicated anyplace else."

One local real estate expert agrees. "At the $1.25 million price point, selling on Hendricks Isle with a boat slip should not be a problem at all," said Tim Elmes, a real estate agent with Coldwell Banker Residential Real Estate Inc. in Fort Lauderdale who specializes in waterfront properties.

Elmes said that the luxury real estate market has softened significantly in California, Atlanta and other parts of the United States. "Some people say it's spreading this way," he said.

While Elmes doesn't think the values of single-family waterfront homes in Fort Lauderdale will be affected, he does have concerns about the condo market. "When you can buy a postage-stamp sized piece of land and build 300 units anywhere, the potential is there for a softening," he said.

Asfahl said that Indigo is facing competition because of resales at other condominium projects on Hendricks Isle that are under construction. "We're competing against flippers more than anything else," he said.

He's compiling a list of interested prospective buyers and plans to start selling the units in the summer of 2006.

The architect for Indigo is Fort Lauderdale-based Pasquale Kuritzky Architecture Inc.

Sterling Communities has more than 30 years of experience in the home-building industry and has built residences in developments such as San Michele in Palm Beach Gardens, Royal Palm Yacht and Country Club in Boca Raton and Cedar Creek Ranch in Lake Worth.

Copyright � 2005, South Florida Sun-Sentinel

Longtime Realtor critic proposes national MLS

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Longtime Realtor critic proposes national MLS San Francisco attorney releases report to federal regulators Tuesday, November 29, 2005 By Glenn Roberts Jr. Inman News David Barry A San Francisco lawyer, who has engaged in many antitrust lawsuits against Realtor groups over the past 25 years, Monday released an 82-page report that alleges a history of "price fixing, tie-ins, punitive fee splits and trademark fraud" in the real estate industry. In his report, "Nine Pillars of the Citadel," lawyer David Barry urges the U.S. Justice Department to bring criminal charges against the National Association of Realtors trade group, which has about 1.3 million members nationwide, and to dissolve the association. He also proposes the creation of a national multiple listing service that would require all real estate agents to submit all of their property listings unless property owners choose not to include their properties in this system. Steve Cook, a spokesman for the National Association of Realtors, said of the report, "It's hard to take Dave Barry's claims seriously," adding that courts have tossed out some of the same claims in lawsuits brought by Barry. Cook also said that Barry appears to have a "career dedicated to suing Realtor associations, usually unsuccessfully. The simple fact is that real estate is probably the most competitive industry in America. Realtors and Realtor associations bring professionalism, ethics and an entrepreneurial spirit to the field." Barry said today he expected a "chilly reception" for the report by Realtor associations. The report, he said, is intended to advise regulators that "they need to be more active in patrolling their marketplaces," and to present a historical perspective of alleged restraint of trade within the real estate industry. He said the current network of hundreds of local MLS systems across the country is dysfunctional and needs a major overhaul. There should be a "single, central national MLS, free from every kind of political control and restraint. There deserves to be a fair and neutral marketplace," Barry said, adding that he envisions an operating structure that is similar to the New York Stock Exchange or the Internet Corporation for Assigned Names and Numbers, which is a private corporation that coordinates some technical management of the Internet. This new MLS could be created through federal legislation, he said, and he plans to promote this concept to Rep. Michael G. Oxley, R-Ohio, chairman of the House Financial Services Committee and an important opponent of Realtor efforts to block the entry of federally chartered banks into the business of real estate brokerage. Oxley in March requested that the U.S. Government Accountability Office investigate price competition for real estate brokerage services, and in November 2004 called for a GAO report examining other aspects of the real estate industry. Barry's "Nine Pillars of the Citadel" is among hundreds of other comments and documents submitted to the U.S. Federal Trade Commission and U.S. Department of Justice that relate to a federal workshop on real estate industry competition, held on Oct. 26 in Washington, D.C. Both agencies have engaged in a series of actions this year against real estate laws, practices and policies that they charge are harmful to consumers and industry competition. Most notably, the U.S. Justice Department in September filed an antitrust lawsuit against the National Association of Realtors, charging that the group's policy for the display and sharing of online property listings is too restrictive. The department has since filed an amended complaint that more specifically addresses a new online listings policy adopted by the association, and the association has announced plans to file its legal response in early December. Also, federal agencies have opposed state measures banning real estate rebates for consumers and state measures that require all real estate brokers and agents to perform a specific set of services for clients that they say have said will restrict some types of real estate business models and limit consumer choice. Barry's report calls attention to membership costs and policies associated with the National Association of Realtors and association-operated MLSs. The report cites instances in which Realtor-affiliated MLSs require users to purchase Realtor association memberships in order to receive MLS services, and Barry asserts that this tying of Realtor membership to MLS use should not be allowed. Barry's report also criticizes real estate commission-setting practices, the trademark of the word "Realtor," the cost of real estate services and the productivity of agents. "Only when the Department of Justice began a string of civil and criminal cases in the 1970s did the Realtor associations disavow commission fixing," the report alleges, citing a number of court cases brought by the federal government against several local Realtor boards. Real estate agents, brokers, real estate company officials, Realtor association and MLS officials, lawyers, public policy experts and academics are among the individuals who have submitted public comments to the U.S. Justice Department and Federal Trade Commission. The public comment period relating to the federal workshop on real estate competition closed Nov. 28. *** What's your opinion? Send your Letter to the Editor to glenn@inman.com; (510) 658-9252, ext. 137. Copyright 2005 Inman News

Existing-Home Sales Fell By 2.7% in Latest Month

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Existing-Home Sales Fell
By 2.7% in Latest Month

From The Wall Street Journal Online

Sales of previously owned homes fell by 2.7% in October as the housing market continues to signal that the boom of the past five years is ringing more hollow these days.

The National Association of Realtors reported Monday that sales of existing homes and condominiums declined by 2.7% last month to a seasonally adjusted annual rate of 7.09 million units. The decline would have been an even larger 3.2% without a spurt in sales in areas where people displaced by the Gulf Coast hurricanes have moved.

Even with the decline in sales, the median price of an existing home sold last month rose by 16.6% to $218,000 compared to the median -- or midpoint -- price in October 2004.

"This signals that the housing sector has likely passed its peak. The boom is winding down to an expansion," said David Lereah, chief economist for the Realtors.

The 2.7% drop in sales of existing homes would have been a larger 3.2% decline without a boost in activity from people relocating after Hurricanes Katrina and Rita devastated the Gulf Coast. The boost in sales outside of the hurricane areas offset sales declines in cities hardest hit by the storms.

Sales surged by 83% in Baton Rouge, La.; 32% in Mobile, Ala., and 14% in Houston. By contrast, sales were down 42% in New Orleans and 44% in Beaumont, Texas.

Mr. Lereah predicted that housing activity would cool further in coming months if, as expected, the Federal Reserve keeps pushing interest rates higher to combat rising inflation pressures that have been triggered by a surge in energy prices.

Those price increases have contributed to a rise in mortgage rates although rates retreated a bit last week to 6.28% from 6.37% the previous week, which had been the highest level in two years.

"We feel confident that housing is landing softly as rates continue to rise," Mr. Lereah said.

Some economists had expressed fears that rising mortgage rates could burst the housing bubble much as a speculative bubble in Internet stock prices burst in early 2000, sending shockwaves throughout the economy.

The 16.6% increase in the median sales price was the biggest year-over-year price increase since a 17.2% jump in July 1979.

By region of the country, the biggest sales decline in October occurred in the Northeast, a drop of 7.4%. Sales were down 1.9% in the Midwest and 1.2% in the West. Sales were down 1.8% in the South despite the big gains in areas where displaced homeowners relocated.

Email your comments to rjeditor@dowjones.com.

-- November 28, 2005

   

Developers Sign Big Designers To Prepackage Condos

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Developers Sign Big Designers
To Prepackage Condos

By Troy McMullen
From The Wall Street Journal Online

There's nothing Nicole Tzougrakis likes more than telling guests her new almost $1 million condo in South Beach was outfitted by French designer Philippe Starck, from the stainless-steel lighting fixtures to the white-marble bathrooms.

The fact that Ms. Tzougrakis never met Mr. Starck -- and that he also provided prepackaged designs for about 100 other apartments in the same building -- doesn't take away from her pleasure "at all," she says. Working with the designer personally "would have taken me way too much time and money," adds the 31-year-old Internet entrepreneur.

In their scramble to attract high-end buyers, condominium and co-op developers are adding another item to their list of amenities: design and furnishings packages from famous names like Barbara Barry and Jade Jagger. Unlike furnished apartments offered in the past, which were stocked with off-the-store-floor sofas and tables, the new packages include one-of-a-kind designs and six-digit price tags. Some of the packages offer just the basic design elements, like bathroom tiles and lighting fixtures. Others include furnishings, too, down to sofas, silverware and bedsheets. Buyers are typically offered a number of models to choose from, with names like "nature," or "modern," and pay between $40,000 and $450,000 for the service.

The downside, of course, is what happens when neighbors think alike. Adrienne Krieger, for example, recently paid $85,000 for the design package at Turnberry Towers in Las Vegas. A retired media consultant, Ms. Krieger, 58, says she likes the apartment's finished contemporary look, from the black Italian-made leather sofa to a teak coffee table, but wishes she'd thought about other buyers' taste. Having paid $900,000 for the two-bedroom home, "It's a little embarrassing to see the same furniture at your neighbor's place," she says.

In Las Vegas, the developers of the Turnberry Towers condominiums are working with Home of Fine Decorators, a Florida-based firm, to offer furnishings packages for $50 a square foot and up. Buyers interested in the W Fort Lauderdale Hotel & Residences, which broke ground in May, have the option of two looks from Clodagh Aubry, a New York designer known for spa-like interiors, for $60,000 to $70,000 extra. At 110 Central Park South, a co-op under development in New York City, the option is straight up or down: Buyers can take -- or not -- the Art Deco-inspired design package with furniture from makers including Ms. Barry and Holly Hunt (it's $245,000 extra for a one-bedroom, $385,000 for a two-bedroom and $445,000 for a three-bedroom).

Investment Question

At a time when consumers are more brand-oriented than ever, teaming up with a prestigious designer is one way developers can add cachet to a project. It's also a way for them to attract second-home buyers too busy to do their own decorating. But since buyers are investing in design that is somewhat prepackaged, they rarely meet with the designer personally; instead, they furnish their homes by consulting catalogs provided by the building, taking virtual tours and visiting model apartments. What's more, appraisers say the investment may not hold up over the long term, because taste varies from buyer to buyer.

The offering at Avenue East, a new condominium tower under construction in Chicago, includes interiors by local designer Helen Velas, known for her hotel entertainment spaces. Customers pay $68 a square foot for either a "tailored, contemporary" look or "classic traditional." They have four color schemes to choose from, and a 50-page furniture catalog with about 30 fabric samples from designers including Ralph Lauren and Donghia.

Yet some buyers are showing resistance to the idea. New York's 110 Central Park South, which offers one set design for each apartment size, has sold about half of its 65 units. But no buyers have opted for the design option, says Stephen Glascock, who is developing the property. Of the 281 apartments sold at the Icon in Miami, 40% have opted for the design by Mr. Starck, for an extra $75,000 to $125,000. (Buyers chose from four decorating looks: minimal, classic, culture, nature.) Clients "want unique interior spaces -- not something off the rack," says New York interior designer Jasmine Lam. "If they wanted a packaged look, they'd go to Ikea."

In theory, the packages help new condos stand out in an increasingly crowded and uncertain market. The National Association of Home Builders estimates that 35% of all new-home construction in the U.S. this year consists of condos, up from 20% in 1998. Las Vegas has 40,000 to 50,000 condo apartments in the planning stages. Developers in Miami have applied for building permits for more than 50 new condominium towers. In New York, more than 25,000 new units will hit the market by the end of this year, according to some estimates.

In this market, developers need more "bells and whistles" to reel buyers in, says Jonathan Miller, of New York appraisal firm Miller Samuel. He points out that while celebrity designers are an important marketing tool for developers -- and can benefit investors who are seeking to flip apartments for immediate gain -- the impact of a designer package on resale is minimal over the long term. It "diminishes as you get further away from the initial sale," says Mr. Miller.

Hotel and real-estate developers have long used furnished homes to woo buyers, and model homes have been a fixture in suburbia for decades. But the looks of these offerings were often generic, or down-market. That started changing in the late 1990s, when big name architects like Robert A.M. Stern and Richard Meier began teaming with developers to push high-end condos.

Ms. Jagger Designs a Lobby

Indeed, designers stand to benefit from the prepackaged trend almost more than the developers. To custom-design a private home, a designer typically earns between 10% and 15% of the cost of a project, or charges the client an hourly rate of between $50 and $200. By teaming with a developer, a designer not only helps brand himself, he can get a cut of the whole project. For the Icon project in Miami -- where Ms. Tzougrakis bought -- Mr. Starck has been paid between 5% and 10% of the total price of all 281 units sold, according to the developer. (The designer has also recently joined with a European developer and Ms. Jagger, the daughter of Rolling Stone Mick Jagger, to launch Yoo Design; the firm works with developers to create elements like floor plans and entrance lobbies.)

Deborah DiMare, a designer on the Learning Channel's "In a Fix" decorating show, says she's hoping her profile will rise, now that she's signed up with three developers, including one in the Miami area, to work on condominium projects. She says will be paid a fee of about $90,000 per apartment by the buyer. "As a designer, you don't want to miss the boat on opportunities like these," says Ms. DiMare.

Email your comments to rjeditor@dowjones.com.

-- November 29, 2005

 

Rising Inventories of Unsold Homes

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November 28, 2005

Rising Inventories of Unsold Homes

Peter Coy

There was worrisome news today in the report from the National Association of Realtors on October sales of existing homes. But the scary part wasn't where you would think to look first.

Sales were down slightly more than economists' expectations, yes, falling 2.7% from September's pace to an annual rate of 7.09 million. But they were still 3.7% above the level of October 2004.

Prices weren't the problem, either. The national median existing-home price for all housing types (including townhouses, codos and c-ops) was $218,000, up nearly 17% from a year ago. That's a huge increase--the biggest year-over-year jump since the high-inflation days of July 1979.

The real warning sign in the Realtors' report was the increase in existing homes available for sale--up 3.5% to 2.87 million, which is a 4.9-month supply at the current sales pace.

What that means is that even though people are buying homes at a near-record pace, it's still not enough to keep up with the number that are coming onto the market.

Realtors President Thomas S. Stevens gave an optimistic interpretation to the inventory jump, saying in a press release that "the rise in inventory means that buyers will have a wider choice available to them."

But as any business person knows, swelling inventories can be a sign of trouble ahead. Action Economics points out that the inventory of homes available for sale is the highest since 1986.

As Ian Shepherdson of High Frequency Economics observes today, there are now 14.4% more existing homes for sale than there were a year ago, while actual sales are up just 3.3%.

Merrill Lynch chief North American economist David Rosenberg says today that "we think it's pretty safe to say that the housing boom is over."

11:09 AM

Economy, Housing Prices

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November 29, 2005

Sales of New Homes Stay Strong in October, Setting Record

By VIKAS BAJAJ

Gasoline is cheaper than it was before Hurricane Katrina slammed into New Orleans. Consumer confidence jumped last month and new home sales hit a record. The stock market has been rising. Even the nation's beleaguered factories appear to be headed for a happy holiday season.

By most measures, the economy appears to be doing just fine. No, scratch that, it appears to be booming.

But as always with the United States economy, it is not quite that simple.

Consumer confidence is bouncing back from what was arguably some of its worst readings in years. Gasoline prices-the national average is now $2.15, according to the Energy Information Administration- have fallen because higher prices tamped down demand and supplies in the Gulf Coast have been slowly restored. The latest read on home sales, released today, contradicts virtually every other recent measure of housing activity that generally indicate a slowdown. And yes, manufacturers' fortunes are on the mend, but few besides airplane makers are celebrating.

It all means that the economy is likely to end the year with a splash, but that does not mean the broad economic picture next year will be even better. Indeed, the Organization of Economic Co-operation and Development said today that the United States economy is likely to be a repeat of 2005. The O.E.C.D. projected that 2005 growth will settle at 3.6 percent, down from 4.2 percent in 2004. The O.E.C.D. also forecast 2006 growth at 3.5 percent, but other economists think that may be too optimistic.

Now investors, whose stock-buying had been fueling an end-of-year rally, fear that the latest positive figures will lead the Federal Reserve to take the punchbowl away by raising interest rates more than most analysts expected just a few weeks ago. In turn, that could further slow the housing market, dampen consumer spending and crimp corporate profits. "The two major concerns are the extent of slowdown in housing and how it can feed into growth and consumer spending," said Joshua Shapiro, chief United States economist at Maria Fiorini Ramirez Inc., a research firm in New York.

Many analysts, including Mr. Shapiro, believe a housing slowdown is already under way. Along with rising interest rates and anemic job growth, any such drop-off could sap the economy next year - by just how much is still subject to debate.

Americans have taken advantage of historically low mortgage rates to buy homes, refinance existing loans and borrow money for renovations or other household needs, all of which have been an important and substantial boost to spending, Mr. Shapiro said. While neither he nor others expect that activity to dry up, even a modest tapering off could knock growth down a peg or two. Mr. Shapiro, for one, says growth could drop from 3.5 percent in 2005 to 3.2 percent in 2006.

The average interest rate on a 30-year, fixed-rate mortgage was 6.28 percent last week, from a low of 5.53 percent in June, according to Freddie Mac, the housing-finance company.

The Commerce Department said today that new home sales jumped 13 percent in October, to an annual pace of 1.42 million, a record. But that contradicted earlier data that shows existing home sales slowing, construction activity easing, falling mortgage applications and declining confidence among home builders.

"I basically have a wait-and-see attitude with some healthy suspicion about this report," said David Seiders, chief economist at the National Association of Home Builders. "Either there is something that all of those other reports are not telling us, or this will get revised."

In another seemingly upbeat report, the Conference Board showed consumer confidence jumped 16 percent. Still, that is below the level before Hurricane Katrina tore up the Gulf Coast last summer. And the Commerce Department said orders for durable goods - big-ticket items that last more than three years - jumped 3.4 percent, but most of that increase was concentrated in military and commercial planes.

In addition to housing, the Federal Reserve and businesses will have a big part in setting the economy's pace next year - the Fed, through interest rates, and companies, by their hiring decisions.

There is great speculation about how much more the Fed, where Ben S. Bernanke is expected to replace Alan Greenspan as chairman in February, will raise its benchmark short term rate, now at 4 percent, before Mr. Greenspan leaves. And will Mr. Bernanke feel compelled to prove his inflation-fighting mettle by nudging them higher still? The question may seem like splitting hairs, especially when the debate is whether the rate is 4.5 percent or 4.75 percent, but it has certainly got investors' attention.

The recent rally in the bond market, which is considered a haven during periods of economic stress, indicates that many investors are betting that the Fed "is likely to overshoot in its tightening," Ethan Harris, chief United States economist at Lehman Brothers, wrote in a note to clients.

A harder question, and one that could greatly influence policy makers, is whether business will pick up any of the slack if consumers are no longer spending as much.

So far the evidence is inconclusive.

After adding an average of 202,000 jobs a month for the first seven months of the year, companies hit a slow patch late this summer. In August, businesses created just 148,000 jobs followed by a decline of 8,000 in September after Katrina. And just when economists expected a big bounce back in October, the Labor Department reported a net increase of just 56,000 jobs.

Analysts are eagerly awaiting the Labor Department's next jobs report, out Friday, and hoping the recent weakness will prove temporary. But they worry that new-job creation may turn out to be disappointing because of deep-rooted concerns about thinning profit margins, due to, among other things, high energy costs.

"This is only a fear that has sprung up recently," Mr. Shapiro said.

Economists expect 220,000 new jobs will be created, according to a survey by Bloomberg News.

Another hard-to-measure factor that could have a positive bearing on both businesses and consumers is rebuilding activity on the Gulf Coast and in parts of Florida. The reconstruction that accompanies major disasters have been known to have a greater economic impact than the initial series of negative aftershocks from tragedies.

Many analysts say a housing-led slowdown is likely to be delayed until the second half of 2006 because billions of dollars that the federal government and insurance companies are starting to pump into hurricane-affected regions will make up for softer consumer spending.

"That is going to push up production activity into the first half of the year," said Mike Fratantoni, an economist at the Mortgage Bankers Association, which expects 3.7 percent economic growth in 2006, up from 3.6 percent in 2005. "The second half of the year, we see somewhat of a drop off."

Baby boomers spark second-home surge abroad

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Baby boomers spark second-home surge abroad Part 3: Second-home market ripe for picking Wednesday, November 30, 2005 By Tom Kelly Inman News Editor's note: The second-home or vacation-home market is a booming niche that's vastly different than the market for primary homes. Many foreign buyers are playing a larger role in second-home purchases in the U.S., while many domestic buyers are crossing the border for their second homes. In this three-part series, we examine the fast evolving second-home market, looking at the trends of foreign buyers coming to the U.S., U.S. buyers looking outside the borders, and how booming second-home markets impact affordability for everyone else. (See Part 1: Florida says 'cheerio,' 'hola' to international real estate buyers and Part 2: Priced out of paradise.) The traditional vision of a second home was a cabin close to the shore of Dad's favorite fishing lake or a condo on the fairway of Dad's beloved golf course in the desert. That's no longer the case. Aging baby boomers, who have redefined every aspect and item of their life cycle ranging from jeans, to cars, to home design, also are redefining the second-home market. The healthiest, wealthiest and largest group ever to surface on the American landscape is borrowing more, traveling further and purchasing additional real estate sooner in life. They are more adventuresome than their parents who comprised the pay-it-off, stay-close-to-home Greatest Generation. To the contrary, boomers never met a loan they didn't like and are proud to journey to distant lands to buy and declare "this is not your father's second home." Boomers are buying abroad in droves, spearheaded by memories of rediscovering their spring break Mexican jaunts of 30 years ago or a romp in the Italian countryside with their partner before children cluttered their last two decades. Some of these people are the same movers and shakers who built their large homes on small lots in the 1980s and their gate-guarded castles in the 1990s. Now, armed with more home equity than they had ever dreamed possible, boomers are being romanced by stories like those contained in the Frances Mayes book (and the movie made from it) "Under the Tuscan Sun" and investing in property jammed with intrigue, adventure and fun. They are seeking the "cool factor" of dealing with foreign laws, craftsman and culture. No specific data is available to ascertain the number of Americans who currently own second homes outside the United States. According to the U.S. State Department, approximately 4 million U.S. citizens live abroad - not including embassy and military personnel - yet that number could also include second-home buyers. While some 380,000 Social Security retirement checks go to citizens outside the U.S. each month, many part-time international residents receive their checks in the states, have them deposited into U.S. bank accounts or are simply too young to receive them. The move toward international second homes comes as no surprise to the analysts who have tracked the boomer bracket for decades. In an effort to pinpoint factors for the potential size and shape of domestic homes, Shea Homes completed a survey asking baby boomers whether they were politically active, involved with their children's educational experience, and how often they had guests over for dinner. According to the findings, the assumption that boomers are politically active is incorrect. The huge group that once protested, waved banners and flashed the peace sign has not remained politically involved. "The results were surprising because of the perception we still retain of the1960s,'' said Eric Snider, Shea Homes' marketing director for Trilogy, the company's upscale active adult communities. "People immediately shift their minds to that decade when boomers even begin to be mentioned. After the war, boomers put their signs down, went home and essentially turned on their televisions," Snider said. The most surprising revelation in the Shea data was that boomers are no longer social beings. According to Snider, the group once known to say, "pass me the joint, let's go get stoned" is no longer so inclusive. "They have retreated to their homes and away from society,'' Shea said. "Yet, that is not their reality at all.'' More and more of those homes are out of the country. Realtors in Spain, Bulgaria, Costa Rica, Belize, France and Germany are among the sales professionals reporting an increased number of U.S. buyers - and with them rising sales prices. But before boomers take the leap overseas, a word of advice: Conduct a genuine reality check first. If boomers spent many happy hours on vacation with their families in a particular spot, they might want to return there and buy a home in the same location. This is a legitimate wish, but boomers should consider how important this is to them. Also, sometimes you can't go home again. Prices have risen, congestion has increased and many of the things fondly remembered may have disappeared. More importantly, if the second home is to provide real satisfaction, it must meet the needs of the whole household. Even a seemingly familiar place requires investigation. Don't let nostalgia take precedence over the more important considerations of the present. Tom Kelly's new book "Cashing In on a Second Home in Mexico: How to Buy, Sell and Profit from Property South of the Border" was co-written with Mitch Creekmore, senior vice president of Houston-based Stewart International. The book is available in retail stores and at TomKelly.com. *** What's your opinion? Send your Letter to the Editor to opinion@inman.com. Copyright 2005 Tom Kelly

Buyers Need Real Estate Professionals in the Internet Marketplace

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NAR: Buyers Need Real Estate Professionals in the Internet Marketplace

10/25/2005 9:24:00 AM

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To: National and City desks, Real Estate Reporter

Contact: Steve Cook of National Association of Realtors(r), 202-383-1014, 202-257-3652 (cellular) or scook@realtors.org

 

WASHINGTON, Oct. 25 /U.S. Newswire/ -- The Internet has changed but not diminished the role real estate brokers play in helping buyers close real estate transactions successfully, a former president of the National Association of Realtors(r) told a workshop on competition in the real estate industry sponsored by the Federal Trade Commission and the Department of Justice's Antitrust Division today.

 

"About three out of four buyers today use the Internet to search for homes, and those using the Internet are more likely to work with a professional than those who do not," said Cathy Whatley, a REALTOR(r) from Jacksonville, Fla., who served as NAR president in 2003. One reason Internet buyers use professionals may be that the hardest task in today's market is not to locate the property but to negotiate a successful purchase agreement with sellers who frequently receive multiple offers often exceeding list price and then bring the transaction to a successful close, she suggested.

 

"Providing buyers with information about the properties that are for sale, usually by consulting one of the nation's 900 multiple listing services, is just one of the services real estate professionals provide. Once buyers identify the house they want to buy, they must be able to successfully negotiate a contract. If they are successful in getting their offer accepted, many other services are required in order to close the transaction. These include arranging inspections, mortgage application and approval, escrow, title insurance, coordination and scheduling of closing, ordering utilities, planning the move, etc. In most cases, participation of a broker/agent to assist the buyer throughout the process is very helpful, if not essential," Whatley said.

 

Whatley also discussed the importance that the MLS plays in helping brokers serve buyers. "Without the MLS, it would be far less efficient -- and therefore more time-consuming and Costly -- for buyers to be able to learn about all the properties available for sale in a given market," she said. She appeared on a panel on real estate buyers.

Addressing another panel at the workshop, Lawrence Yun, a senior economist at NAR, said that real estate customers are free to choose from nearly 80,000 real estate brokerages and more than 2 million real estate licensees, about 1.2 million of whom are Realtors(r), who abide by the strict Realtor(r) Code of Ethics, and are members of NAR.

"America's real estate industry is one of the most competitive business environments in the world, characterized by low barriers to entry, intense personal client service and a results-based compensation structure," Yun said.

 

"Competition is fierce. Today's consumer is bombarded with choices on television, radio, newspapers, and the Internet. They are enticed by offers of flat fees, rebates, and other incentives. In fact, discount brokerages and many innovative business models are doing very well in today's real estate marketplace," he said. He said that average real estate commission, as computed by Real Trends, have dropped from 5.5 percent in 1998 to 5.1 percent in 2003.

Yun cited a recent study by researchers at Pennsylvania State University that found that consumers in 12 residential real estate markets have more information, demand more services, and have more agents and business models to choose from than ever before. The study, undertaken by Professor Steve Sawyer, suggested that increased consumer access to real estate information online is redefining how consumers engage real estate services and may be contributing to the growth of real estate markets and a high level of competition. Potential sellers are more knowledgeable about property values, alternatives and service options. Access to multiple listing service data may be creating better consumers who demand more of their real estate agents and other value-adding service providers.

 

The National Association of Realtors(r), "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.

 

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.

http://www.usnewswire.com/

 

� 2005 U.S. Newswire 202-347-2770/

No tax break with simple sale of vacation homeb

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Posted on Sun, Nov. 27, 2005 REALTY MAILBAG No tax break with simple sale of vacation home By ROBERT J. BRUSS www.bobbruss.com Q: Since 1971, we have owned a vacation home about 35 miles from our primary home. Is it possible to avoid capital gains tax on our approximate $500,000 gain if we sell it? We have occupied it for summers and weekends for a total of more than 24 months during the 60 months before its sale. We never received mail there, nor licensed a vehicle there. We only have utility bills as proof of occupancy. My husband has cancer so the place needs to be sold. A: There is no tax break for the sale of a second or vacation homes, unless you want to make it a rental property before sale, then make an Internal Revenue Code 1031 tax-deferred exchange for another rental property of equal or greater cost. Because your second home clearly was not your primary residence for at least 24 of the 60 months before sale, the Internal Revenue Code 121 tax exemption up to $250,000 (up to $500,000 for a qualified married couple filing a joint tax return) is not available. Q: I am a retired realty agent who began my career in 1946. Recently, you wrote about ''interest-only mortgages.'' Back when I started selling homes, interest-only mortgages were strongly blamed for the many realty foreclosures during the Great Depression. The problem was that the value of the security often fell below the mortgage balance. That's why the FHA was created to provide monthly-amortized mortgages to slowly reduce mortgage balances. Do you think American borrowers (and lenders) are setting themselves up for a foreclosure debacle? A: No. Most of today's ''interest-only'' home mortgages, often called ''option mortgages,'' give borrowers the choice of paying interest only, fully amortized, partially amortized or negative amortization (less than interest only, with the unpaid interest added to the principal balance). After the first 10 years, most of these mortgages are ''recast'' and become fully amortizing for 20 years. More likely, the borrower will sell the home and pay off the mortgage. Interest-only mortgages allow first-time home buyers to get started building equity. They are also ideal for buyers who expect to stay in their homes less than 10 years. I hope today's interest-only mortgages won't have the same sad result that occurred during the Great Depression. Home mortgage money is much more abundant today than it was then. Also, Fannie Mae and Freddie Mac create secondary mortgage market liquidity that was not available in the 1930s. I'm not worried. Q: I am not yet 62 so I am not eligible for a senior citizen reverse mortgage. Is there any alternative to help me with my money problems? My house is free and clear, worth approximately $365,000. A: I am aware of no other mortgage program that eliminates monthly repayments to the lender. If you have adequate income, you might consider a home equity credit line, which costs nothing until you use it. For example, suppose you need to pay off credit cards and put a new roof on your house. A home equity credit line would be ideal. Most lenders should easily approve a home equity credit line for 50 to 75 percent of your home's market value if you have decent income and credit. When you become 62 (or later) you could then obtain a reverse mortgage to pay off the home equity credit line and be free of monthly payments as long as you stay in your home. Q: I want to thank you for recommending, several years ago, that condominium owners restrict the percentage of renters. That's what our homeowner's association did about two years ago. We changed our CC&Rs to prohibit additional rentals (although existing rentals were ``grandfathered''). At that time we had about 30 percent rental occupancy and the building was poorly managed. Gradually, we got our renter percentage down to about 10 percent today. The results have been amazing when we have owner-occupants who care about properly maintaining the property. Also, our building is more attractive to buyers and their realty agents so prices are rising nicely. A: It's good to hear the results of limiting rentals. The big problem of having more than 20 or 25 percent rentals is that many lenders either refuse to make new loans or they charge higher interest rates. The mortgage default rate in condo complexes with a high percentage of renters is greater than where most of the units are owner-occupied. Also, owner-occupants usually take better care of the facilities than do absentee landlords. Q: I own a house worth about $650,000, which I am renting to tenants. I owe only $62,000 on it. I also am buying my principal residence. Can I refinance and take $25,000 cash out of my rental property to make improvements on my primary residence? A: Yes. However, it will be much easier and far less expensive to obtain a home equity credit line on your rental. If you owe only $62,000 on the $650,000 house, it will be a ''no-brainer'' for your bank to approve a $100,000 or greater home equity credit line on that property. The interest rate should be prime rate (or lower) with no closing costs. Robert J. Bruss is a California lawyer and licensed real estate broker. Leave your questions at www.bobbruss.com

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� 2005 Herald.com and wire service sources. All Rights Reserved.
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Florida's Home Resales' Median Price Rises 28 Percent in October, Says Florida Association of Realtors

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Press Release

Source: Florida Association of Realtors(R)

Florida's Home Resales' Median Price Rises 28 Percent in October, Says Florida Association of Realtors
Monday November 28, 11:01 am ET

ORLANDO, Fla., Nov. 28 /PRNewswire/ -- Home sales statistics from the Florida Association of Realtors� (FAR) show that home prices continued to rise but the number of sales fell in October, notably in southern areas directly impacted by Hurricane Wilma's march across the state. Most insurers stopped issuing new policies when the hurricane neared Florida, and, following the storm, some lenders required a re-inspection of properties before they would release mortgage money.

Despite storm problems, however, the state's median home price rose 28 percent in October to $241,000 from $188,800 in October 2004. In September 2005, the median price was $247,800. In October 2000, FAR records show the statewide median sales price was $116,100, resulting in an increase of 107 percent over the five-year period.

Many Realtors across the state report gains in housing supply, giving buyers a larger selection of homes to consider. Statewide, a total of 16,029 existing single-family homes sold last month compared to 16,844 homes a year ago for a decrease of 5 percent, according to FAR.

The national median existing-home price in September was $212,000, up 13.4 percent from the previous September's median price of $187,000, according to the National Association of Realtors� (NAR). In California, the statewide median resales price was $543,980 in September; in New York, the median price was $275,000; and in North Carolina, the average resales price was $208,097.

Interest rates for a 30-year fixed-rate mortgage averaged 6.07 percent in October, a slight increase from the average 5.72 percent in October 2004. FAR's sales figures reflect closings, which typically occur 30 to 90 days after sales contracts are written.

Among the state's larger markets, the Daytona Beach metropolitan statistical area (MSA) reported that 1,037 homes sold in October for an 18 percent gain over October 2004 home sales of 881. The median home price in Daytona Beach rose 35 percent over the same time period, from $165,000 in October 2004 to $223,300 in October 2005.

Shawn M. Goepfert, president of the Daytona Beach Area Association of Realtors and owner of Ideal Realty of Volusia, says that demand for Daytona- area homes is now catching up with supply. "We started 2005 off with only about 1,000 residential listings, really robust sales and it taking only about two or three weeks to get a contract," Goepfert says. "That demand really pushed up our sales price, but in the last 30 days, our inventory has increased to about 3,000 residential listings."

Other larger MSAs with strong sales and price increases include Jacksonville, with 1,504 home sales in October for a 38 percent gain over October 2004 sales numbers; and Tampa-St. Petersburg-Clearwater, with 3,735 homes sold for an increase of 4 percent over the same time period. Prices also rose in both markets over the year. In Jacksonville, the median price rose 20 percent to $191,600; in Tampa-St. Petersburg-Clearwater the median price rose 35 percent to $225,700.

Among the state's smaller MSAs, Lakeland-Winter Haven posted a 24 percent gain in home sales in October, with 513 homes changing hands compared to 414 homes a year ago. The market's median sales price rose 50 percent in October to $173,500; last year, it was $115,500.

"I think people have discovered our little secret," says Peggy Daley, treasurer of the Lakeland Association of Realtors and a Realtor with ImperiaLakes Realty Services in Lakeland. "We've got the best of everything. People are moving here in droves from South Florida, plus people from the North keep coming down and quickly realize that we're centrally located with easy access to Tampa or Orlando -- but without the traffic."

Other smaller MSAs that posted gains in the number of homes sold in October include Ocala, where 482 homes sold for a 15 percent jump; and Tallahassee, where 393 homes sold for an 18 percent increase. The median sales price in those markets also rose. In Ocala, it rose 38 percent to $159,200; and in Tallahassee, 19 percent to $172,700.

A chart showing statistics for Florida and its 20 MSAs follows. The chart compares the volume of existing, single-family home sales and median sales prices in October 2005 to October 2004, based on Realtor transactions.

The Florida Association of Realtors, the voice for real estate in Florida, provides programs, services, continuing education, research and legislative representation to its more than 145,000 members in 68 boards/associations.

* Editor's Note:
October home sales in Florida, especially in Southeast and Southwest Florida, were directly affected by Hurricane Wilma, which crossed the state during the last week of October.

This information is based on a survey of MLS sales levels from Florida's Realtor boards/associations. MSAs are defined by the 2000 Census. Source: Florida Association of Realtors and the University of Florida Real Estate Research Center.

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Source: Florida Association of Realtors(R)

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November 27, 2005

Your Home

How Condops Differ From Condops

By JAY ROMANO

SAVVY New York apartment shoppers know the difference between a co-op and a condominium. But there is some confusion, it seems, when it comes to understanding the difference between a condop and, well, a condop.

Arthur I. Weinstein, a Manhattan lawyer who is vice president of the Council of New York Cooperatives and Condominiums, said that while the term condop was originally coined to describe a legal combination of co-op and condo, the term now seems to have morphed into a way of describing - usually for marketing purposes - a relatively unusual type of co-op.

When the term condop is used in the legal sense, Mr. Weinstein said, it describes a building (or a complex of buildings) that is part co-op and part condo.

Usually, the entire residential portion of the building (which contains co-op apartments) is legally one condo unit, while the commercial and professional spaces are owned as one or more additional condo units, he said.

With the legal ownership of the building divided that way, he said, the residential condo, for all intents and purposes, is just as much a co-op as any other co-op that owns its building. Apartments in such a building, he said, are managed, marketed, bought and sold as co-ops.

"This is not uncommon," he said. "And there are a number of reasons why condops have been formed."

One reason, he said, relates to tax laws governing co-ops. For co-op shareholders to get the same tax benefits as homeowners, and be able to deduct real estate taxes and mortgage interest on their tax returns, no more than 20 percent of the co-op corporation's income can come from nonshareholder sources.

So, he said, if a co-op owned a building that had so much valuable commercial space that the income from it would exceed the 20-percent limitation, the co-op shareholders could lose their tax benefits.

In such a case, Mr. Weinstein said, the sponsor would create two or more separate condos - with the co-op owning, and receiving income from, only the residential portion.

Another reason some sponsors created condops, he said, was that they simply didn't want to include valuable commercial space in the co-op when doing the conversion, either because they wanted to keep the rental income or because they wanted to sell the commercial or professional spaces separately.

But frequently these days, the term condop is used not in the legal sense but to describe a co-op building that behaves like a condo.

"The term 'condop' has been applied confusingly, and improperly, to New York City real estate," said Neil Binder, president of Bellmarc Realty in Manhattan and author of "The Ultimate Guide to Buying and Selling Co-ops and Condos in New York City" (Nice Idea Publishing, 2005). "The word now effectively has two meanings."

Mr. Binder said that brokers and sales agents often use the term condop to describe a relatively unusual co-op that has relaxed, or nonexistent, board-approval requirements.

"Everyone is aware that most co-ops require board approval of purchasers," he said. "So when a co-op is referred to as a condop, what they're saying is that the building has qualities that make it more like a condo than a co-op in its approval process."

In addition, he said, such buildings may make it easier for shareholders to rent out their apartments.

"And that," he said, "makes the building much more attractive to investors."

But he added that describing a building as a condop when it is not one in the legal sense "really creates more confusion than clarity."

He said he had instructed his employees and managers to refer to such buildings simply as "co-ops, n.b.a." - co-ops with no board approval.

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November 27, 2005

So Few Properties, So Many Brokers

By NADINE BROZAN

THE name of the game in real estate is amassing listings, because they mean money. But thousands of brokers have no listings at all - not surprising, when there are far more brokers and sales agents than there are properties to be sold.

The New York State Department of State has licensed about 27,500 brokers and agents in Manhattan. (Although most people use the terms interchangeably, brokers have tougher licensing and education requirements.) But there are only 10,000 transactions in any given year, according to Jonathan J. Miller, president of the appraisal firm Miller Samuel.

A transaction often involves more than one broker or agent. But even so, Mr. Miller said, "there are a lot of brokers not selling any property, because there are many of them who sell dozens of apartments each year."

Though it is certainly possible to make a living without having listings - people who represent buyers for example, do not always have listings - doing so tends to be much harder and less lucrative.

The listing broker is the gatekeeper for the property, able to control viewings and, more important, get a cut of the commission even if another broker brings in the buyer. A listing has marketing and promotional benefits too. The name of the listing broker goes in the ad or on the Web site with the property, meaning potential buyers will start phoning and clicking, making contact with that broker.

A survey done by The Real Deal, a monthly industry newspaper, showed that as of May, the percentage of agents affiliated with the top 10 firms in the city who had no listings at the time of publication ranged from 30.7 to 63.1 percent.

The figures were gathered through searches of the Web sites of each firm, according to Stuart Elliot, the editor of The Real Deal, and did not separate brokers who work with buyers or renters and therefore would not have any listings. Although the survey was done earlier this year, he said the numbers probably still hold. "If anything, the number of agents with no listings would be higher now because the market is moderating," Mr. Elliot said.

The imbalance between brokers and properties available for sale has been made worse by the influx of aspiring agents and by the fact that top brokers like Dolly Lenz, Michele Kleier and Carrie Chiang tend to have dozens of listings at any given moment.

"There is such a disparity in the brokerage community, especially in Manhattan, between the top tier where the rich get richer and the bottom tier, which is really struggling," said JoAnne Kennedy, chief operating officer at Coldwell Banker Hunt Kennedy (where 61.6 percent of its agents had no listings in the Real Deal chart).

"The top brokers now are celebrities, making several million dollars a year," Ms. Kennedy said. "Midrange brokers make a satisfactory income, but they don't have as many connections and are trying to figure out how to get to the next level. The bottom range is usually comprised of new people just building their business."

The Internet has made it easier for buyers to connect directly with sellers or their brokers, keeping brokers without listings from potential clients. "The Web has changed our business for people coming in," said Paula Busch, a managing director at the Corcoran Group (where 46.7 percent of agents lacked listings). "Buyers in the below $1 million market go there first and then directly to open houses, and they say they don't need brokers."

So how does someone attract clients? For those without substantial track records, it is very difficult.

"It is frustrating when you see some agents just rolling with listings," said Elizabeth Marks, an agent with Coldwell Banker Hunt Kennedy who owned a travel agency specializing in safari and scuba diving trips until business was slowed by the Sept. 11, 2001, terrorist attacks.

Ms. Marks took several real estate courses, including one called Sweat Hogs, which dealt with getting listings. "You must really work for listings," she said. "It is hard because if someone wants to sell an apartment, they are bombarded by brokers. Everyone knows a friend or is loyal to someone they bought their apartment from and don't want to give you a listing because you are new."

She has tried a variety of tactics, even cold calling. "Nine times out of 10, people hang up on you," she said.

But she is not deterred. "I will call a particular building and say: 'Maybe there is a buyer interested in your building. Are you interested in selling?' Then I say: 'Can we set up an appointment. I would love to see your place.' I direct them to my Web site if they want referrals from the last six months."

So far, she has not gotten any listings that way. Nor has she reaped any from the mailings she has sent out, "but that isn't to say it doesn't work," she said.

"It helps when I meet people face to face," she said, "so sometimes I help out at open houses."

Deborah Elias, a sales associate at Prudential Douglas Elliman, who entered the field in April after a career in finance, does not yet have a listing. "That worries me," she said, but she added that she is not discouraged, either. "You need to have patience, and it will come if you do the right thing. A lot of successful brokers are seasoned and have paid their dues. You must be creative, think outside the norm and do a lot of networking. You can't just send out mailers."

Describing herself as a "networking person," Ms. Elias, who does represent several buyers, has found that cultivating a wide variety of interests not necessarily connected to real estate can be a conduit. "If I meet someone who is interested in restaurants, I will call them when there is a new restaurant opening," she said. "It builds rapport and fosters ongoing relationships. "

Indeed, networking is considered the paramount tool and everyone in an individual's "sphere of influence," as brokers like to describe it - all the people with whom they cross paths, no matter how fleetingly - is considered fair game.

"Agents get listings from dinner parties, boards, going to the gym, Weight Watchers, churches, synagogues," Ms. Kennedy of Coldwell Banker said. "I am not above telling my friends to get busy and send me more business."

Anne Touchard, who has been an agent with Dwelling Quest for a year, said, "When I started, I definitely used my personal connections and friends, and I do a lot of networking."

She came here seven years ago from Lyon, France, to pursue a master's degree in business at Baruch College and married Michael Touchard, owner of the restaurant Tout Va Bien. "So I would eat well even if I were broke," she said.

She joined the French-American Chamber of Commerce, where, she said, she found buyers but not sellers. To increase her contacts, she recently signed up for the Breakfast Network, an international networking group that puts people together for professional purposes. Ms. Touchard also tries to convince owners who want to sell their property without a broker (known as FSBO's, short for "For Sale by Owner") that they need her services, and she expects to do better in that arena now than she did in the spring.

"It didn't work at all then," she said. "The market was so insane that FSBO's would have 30 to 40 people showing up at their open houses and they would say, 'I don't need you.' Now they don't have a lot of people showing up, and that is a good thing for us as brokers. It's going well, but I have no listings yet."

Another way into the business is to become a buyer's broker, the route taken by her colleague at Dwelling Quest, Jason Gershon. A partner in his family's jewelry shop on Long Island, he became an agent because, he said, "I plan on acquiring real estate as an income for retirement." For now, he conceded, "This is a great job if you don't have to rely on it to pay your bills."

Mr. Gershon started out by tapping into his immediate circle of friends. "I grew up on the South Shore and went to the Fashion Institute of Technology in New York," he said. "Most of my friends moved into the city. They are making money and are not going to rent. So I approached friends and friends of friends, both selling and renting. But there was minimum supply and large demand, which made it tougher to get listings."

He decided to focus on buyers and narrow his area of expertise. "I specialize in the Upper East Side," he said, "and learned the market there like the back of my hand - where all the banks are, the cheap parking spots, nice restaurants, buildings where the co-op board is easy or located in a place where they can get their money back should they sell."

Susan Forrest-Reynolds, an agent with the City Sites Real Estate Group who worked on set relocations for movie companies, is also concentrating on buyers, at least for now.

"Most people prefer being the seller's broker because they don't have to run around looking and people come to them," she said. "I prefer the energy of the buyer's side. I love watching clients find an apartment they love."

Ms. Elias of Douglas Elliman has turned to another route: rentals.

"They are an opportunity to view a lot of properties and they provide immediate cash because transactions occur in a much shorter period of time than sales," she said. "And then I start to build relationships for the long term."

That approach is endorsed by Fanny Montalvo, director of client services at Fenwick-Keats. "I tell people that a renter will always turn into a buyer and a buyer into a seller and a happy seller will always give you referrals," she said.

What's Behind the Boom

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November 21, 2005      THE JOURNAL REPORT: TRENDS      Housing What's Behind the Boom By JAMES R. HAGERTY Staff Reporter of THE WALL STREET JOURNAL November 21, 2005; Page R4 Conditions have been almost ideal for the housing industry in recent years. Mortgage interest rates hit their lowest levels in more than four decades, making it much easier for Americans to buy houses. Many people who were burned in the stock-market bubble of the late 1990s decided that real estate was the best place to stash spare cash. The children of baby boomers began buying their first houses even as their parents started purchasing second homes or speculating on rental units. And American businesses finally began creating jobs again. Home builders couldn't put up houses fast enough to keep up with all this demand. As a result, home prices are up by an average of 53% from five years ago, according to the closely watched index published by the Office of Federal Housing Enterprise Oversight. Almost everyone agrees that prices can't keep rising this fast much longer. The debate now is whether the boom will lead to a soft landing, with gentler price increases, or to a long, painful bust, in which prices fall considerably in some places before buyers regain confidence. However the current boom ends, longer-term forces are reshaping the housing industry. Here is a look at some of them. 1 > SHORT ON SPACE America still has lots of wide-open spaces, but many of them aren't where people want to live. And builders are finding it more difficult to get permits to put up new houses in many of the more economically vibrant metropolitan areas, particularly along the East and West coasts. "The housing supply has been constrained by government regulation as opposed to fundamental geographic limitations," concludes a paper released in December 2004 by Edward L. Glaeser, an economics professor at Harvard University, and two colleagues. Homeowners share the blame. Prof. Glaeser's paper says they have grown savvier about organizing themselves to block proposals that would bring new and more densely packed housing to their neighborhoods -- something that they fear could reduce the value of existing homes. In the more crowded markets, home values no longer have much to do with the cost of building a home. In San Francisco, the paper estimates, the structure itself typically accounts for no more than 30% of a home's value; the rest of the value reflects the costs of land and obtaining regulatory approvals to build. That's why some people pay as much as $1 million for an old home, immediately tear it down and build a new one. 2 > STRAINED BUDGETS The housing boom has enriched many Americans by pushing up the values of their homes. But it hasn't been splendid for everyone. Nearly a third of American households spend more than 30% of their income on housing, and more than one in eight households spend more than 50%, according to the Joint Center for Housing Studies at Harvard University. Others move to distant suburbs so they can pay less for housing, but then must pay high costs to commute. A third of all households in the Boston area are at least 30 miles from the central business district, according to a Harvard study, and about a fifth live 40 or more miles out. For people with modest incomes, housing has soared out of reach in some areas. The California Association of Realtors estimates that only 15% of households in that state earn enough to buy a median-priced home, currently costing about $544,000, without spending more than 30% of their income on mortgage payments, real-estate taxes and home insurance. 3 > A SHRINKING FORECAST For years, homes have been getting steadily bigger. The median size of new single-family homes in 2004 was 2,140 square feet, up from 1,535 square feet in 1975, according to the Census Bureau. But some academics and industry people believe more Americans will embrace smaller, more urban homes, to avoid long commutes. James Z. Pugash, chief executive officer of Hearthstone Inc., San Rafael, Calif., which finances housing developments, predicts that American cities will become more like their European counterparts, with more midrise buildings, higher housing costs and fewer square feet per person. In a 2004 paper for the Brookings Institution, Arthur C. Nelson, a professor at Virginia Tech, says there are at least tentative signs of growing demand for more "walkable" living environments combining homes, entertainment and offices. He cites as a model Arlington County, Va., near Washington. In 1990, Mr. Nelson writes, the conventional wisdom was that the county was "built out" and lacked space for more residents. Yet the population continues to grow rapidly. Mr. Nelson says the county is encouraging higher-density housing on former industrial sites and near mass-transit stations, while preserving the character of established neighborhoods. The desire for more urban living -- and speculation that it will grow -- has spawned a boom in condominiums. In the 12 months ended in August, sales of condos and cooperative housing soared 14%, to a seasonally adjusted annual rate of 942,000 units. In the same period, sales of single-family homes rose a more modest 6.9%. 4 > TAKING A RISK As home prices have soared, lenders have promoted loans that help people afford houses that otherwise would be beyond their reach. These "affordability" loans hold down monthly payments in the early years but subject borrowers to the prospect of much higher payments later. Among the most popular of these loans are interest-only mortgages, which allow borrowers to avoid paying down any of the principal in the first few years. Another twist is the payment-option loan, giving borrowers a choice of several payment levels each month, including one that is less than the interest due. If the borrower makes that choice, the loan balance increases, something known as negative amortization. Lenders also have reduced the amount of documentation that many borrowers have to provide to verify their income and assets. Bank regulators have started asking questions about all of these practices. The fear is that some borrowers have exaggerated their income or won't be able to meet the higher monthly payments once they come due. Another concern is that affordability loans have artificially pumped up housing prices by allowing people to bid more than they can really afford to pay in the long run. 5 > THE HOME AS PIGGY BANK The traditional goal of homeowners is to pay off the mortgage -- well before retirement, if possible. For now, many Americans seem to have forgotten that notion. To take advantage of lower interest rates, Americans regularly refinance their loans. In the process of refinancing, they often borrow a bit more -- in effect swapping home equity for cash to spend on other things. Such "cash out" refinances totaled $139 billion in 2004, according to Harvard's Joint Center for Housing Studies. Egged on by lenders, other people take out separate home-equity loans, using their homes as collateral. "I guess this generation believes that real-estate values will go up forever, so there's no need to pay down principal," said Angelo R. Mozilo, chief executive officer of Countrywide Financial Corp., the nation's largest mortgage lender, during a conference call with investors last year. This blithe attitude has fueled consumer spending. A recent Federal Reserve study found that borrowing against home values added $600 billion to American consumers' spending power last year, or 7% of personal disposable income, up from 3% in 2000 and 1% in 1994. 6 > FOREIGN FRENZY The proliferation of riskier mortgage loans comes as foreign investors are playing a larger role in financing the U.S. housing market. Investors in Asia and Europe have long been major buyers of debt issued by Fannie Mae and Freddie Mac, the two government-sponsored providers of mortgage financing. Now they also are buying an increasing amount of mortgage-backed securities, bonds backed by the payments of interest and principal on large pools of mortgages. There are no reliable figures on the total size of foreign investments in U.S. mortgage securities, because many of the purchases are indirect, made through U.S. entities. But the direction is clear. Inside Mortgage Finance, a newsletter, estimates that foreign holdings of one type of mortgage bond -- those not guaranteed by Fannie or Freddie -- jumped to $40 billion as of June 30 from $30 billion six months earlier. 7 > REDUCED-RATE REALTORS The Internet hasn't slashed transaction costs in residential real estate, as it has in such areas as airline reservations. Commissions paid to agents still average more than 5% and sometimes reach 7% or more, according to industry estimates. But brokers offering various cost-saving alternatives finally seem to be gaining traction. Many small brokers charge a flat fee, generally around $500, for putting a house into a multiple-listing service and providing a limited menu of other services; the consumer then typically offers to pay an additional 2.5% or 3% of the purchase price to any agent who supplies a buyer. Other brokers offer to rebate part of any commissions to the consumer. Some traditional brokers are experimenting with their own discount arms, even as they try to preserve the full-commission business by backing state laws that mandate a minimum level of service. U.S. antitrust enforcers at the Justice Department and Federal Trade Commission are putting heavy pressure on the industry to give new models a chance. For instance, the Justice Department in September sued the National Association of Realtors, alleging that its policy on sharing of listing information discriminates against brokers that mainly use Web sites to engage with their customers. The association denies that claim. 8 > THE BIG GET BIGGER Home building used to be mostly a local business, and there are still around 80,000 home builders in the country, most of them tiny. But the biggest builders are gobbling up more of the market. This year, the top 10 builders account for about 24% of the market (excluding homes built for customers on land they already own), up from 10% in 1997, says Ara K. Hovnanian, chief executive of Hovnanian Enterprises Inc., a large builder based in Red Bank, N.J. Within a decade, he predicts, that share will be more than 50%. Big players have the upper hand partly because they have the financial resources to acquire prime parcels of land. Robert I. Toll, chief executive of Toll Brothers Inc., Horsham, Pa., says he often approves land purchases of $100 million or more, something small builders couldn't contemplate. But Ivy Zelman, chief housing analyst at Credit Suisse First Boston in New York, says the big builders already have grabbed the easiest market-share gains in fast-growing metropolitan areas and now increasingly are butting heads with one another. That may make future market-share gains slower and more expensive. 9 > GIMME MORE SHELTER Americans have made so much money from their homes that they can't resist buying more real estate. Investment properties and vacation homes accounted for 14% of new mortgages last year, up from 7% in 2000, the Federal Reserve says. Much of this buying comes from baby boomers seeking retirement homes or people hoping to strike it rich as landlords. While these purchases have helped to feed the recent strength in housing, they also could make the market more volatile. That's because second homes and rental properties, unlike primary residences, can easily be dumped onto the market if their owners lose confidence or fail to find reliable tenants. 10 > WATCHING THE RANKINGS J.D. Power & Associates, the consulting and research firm best known for its surveys of automobile quality, also quizzes buyers of new homes. The home surveys, which began in 1997, now cover 30 large metropolitan areas. Companies that have done well in the surveys -- such as Pulte Homes Inc. and Centex Corp. -- are trumpeting the results. That's forcing other builders to try harder to score as well. One problem for the industry is that it relies mainly on a continually changing cast of subcontractors to perform tasks like pouring foundations, installing heating ducts and shooting nails into roofing tiles. That makes it hard to ensure that quality standards are always met. Hovnanian Enterprises is experimenting with using its own employees to do more of the tasks in some markets in an effort to improve consistency. Among other things, says Bruce Karatz, chief executive of KB Home, the surveys have nudged his company into communicating better with customers, including giving them earlier estimates of when houses will be completed. If KB is more than 30 days late, he says, "many customers will never forgive us." --Mr. Hagerty is a news editor for The Wall Street Journal in Pittsburgh. Write to James R. Hagerty at bob.hagerty@wsj.com3  URL for this article: http://online.wsj.com/article/SB113226292707000449.html   Hyperlinks in this Article: (1) http://online.wsj.com/page/2_1193.html (2) http://online.wsj.com/page/2_1193.html (3) mailto:bob.hagerty@wsj.com

 

Holiday season ideal time to buy real estate

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Holiday season ideal time to buy real estate Make the most of motivated sellers, fewer competitors Monday, November 28, 2005 By Robert J. Bruss Inman News Are you a serious home buyer? If you are, get ready for the best time of the year to purchase. Between now and New Year's Day, or even Super Bowl Sunday in many communities, you will have little or no competition from other home buyers. Sellers who have their houses and condos listed for sale during this season are usually highly motivated to sell and are willing to make good deals because most buyers are tied up with holiday events. Purchase Bob Bruss reports online. PLAN YOUR HOME PURCHASE. November, December and January are ideal times to purchase a home. Realty agents and home sellers will treat you like royalty because there are usually few other buyers around. However, before shopping for a home, shop for a mortgage and get pre-approved in writing by an actual lender. The lender's mortgage pre-approval letter or certificate will help narrow down your home price range and finance alternatives. But never accept a lender's statement you are "pre-qualified." That means, "We think you can probably get a home loan but we really haven't checked out your credit qualifications." Before actually applying with a lender in writing, it pays to check your credit reports with all three major credit bureaus: Trans Union, Equifax and Experian. The easiest place to check your three credit reports and obtain your three credit scores is on the Internet at www.myfico.com. If all three of your credit scores are above 700, you should have no problem obtaining a mortgage pre-approval. Below 700, be sure to study your three credit reports, especially if you have a low FICO score barely above 600, to check for errors. Reportedly, about one-third of credit reports contain errors. Be sure to ask each credit bureau to "verify" any items you think are incorrect. If the disputed item cannot be verified within 30 days, by law, it must be removed from your credit report. Ask each credit bureau for a copy of your corrected credit report. A BUYER'S AGENT CAN HELP AVOID OVERPAYING. After you have your written mortgage pre-approval from an actual lender, the next home buying step is to find a buyer's agent to look out for your best interests. Ask friends, relatives and business associates for names of trusted realty agents who work primarily with home buyers. Although any licensed agent can be your buyer's agent, not all agents work with buyers; some specialize in only listing properties. A buyer's agent usually costs buyers nothing extra. The reason is your buyer's agent will usually split the sales commission paid by the home seller to the listing agent. However, an exception could occur if your buyer's agent shows you a "for sale by owner" house that you purchase but the seller refuses to pay your buyer's agent the customary 50 percent of a normal sales commission. Thankfully, that rarely happens. ASK YOUR BUYER'S AGENT FOR A "CMA." When you narrow your search to one or two homes, before making a purchase offer, ask your buyer's agent to prepare a written CMA (comparative market analysis). This valuable form will show recent sales prices of nearby similar homes, the asking prices of comparable neighborhood listings, and even the asking prices of recently expired nearby homes. After you have this CMA information, your buyer's agent can help you make a reasonable purchase offer for the house or condo you want to purchase. The CMA will help avoid offering too much for the home. Also, your buyer's agent will use that CMA to show the home seller why your purchase offer is fair and should be accepted. ATTACH A REASONABLE GOOD FAITH EARNEST MONEY DEPOSIT. After you decide on an offer price, as your buyer's agent guides you through the process of making a home purchase offer, a significant issue is the amount of your good faith deposit. If you make an offer substantially below the seller's asking price, a large deposit can often convince the seller to accept your low offer. For example, I still recall offering the full asking price for a nine-unit apartment building (which was a "good deal") but with only a $100 deposit check. To my shock, the highly motivated seller accepted. As a very general rule, a serious home buyer's deposit should be at least 1 percent of the offer price. A 5 or 10 percent deposit shows serious buyer motivation. The reason savvy home buyers usually don't offer larger deposits is to avoid tying up a large amount of cash in case a sales dispute arises and the seller refuses to refund the buyer's deposit. KEY CONTINGENCY CLAUSES TO INCLUDE IN YOUR PURCHASE OFFER. As a long-time investor in rental houses, my best advice to home buyers is keep the purchase offer as simple as possible. However, I always include at least two key contingency clauses: 1. INSIST ON A PROFESSIONAL INSPECTION CONTINGENCY. Home sellers are supposed to disclose in writing all known defects in their property which materially affects the market value or desirability. Although it's hard to believe, some sellers "forget" to reveal significant home defects. Can you imagine that? Well-meaning home sellers often obtain professional home inspections at the time of listing the home for sale and expect their buyers to accept such reports. While smart buyers read and consider such reports, it's best for home buyers to include a professional home inspection contingency clause in the purchase offer. After the seller accepts the purchase offer, the buyer should hire his or her own professional inspector at the buyer's expense, typically around $300. Buyers and their realty agents should always accompany their inspector for the two to three-hour inspection. The reason is the inspector will gladly discuss any defects discovered, whereas the inspector's report usually just reports the facts. The toughest professional home inspectors are members of the American Society of Home Inspectors (ASHI). ASHI members must have completed at least 250 inspections, pass a tough exam, and meet continuing education requirements. Local ASHI inspectors can be located at www.ashi.com or phone (800) 743-2744. If the home inspection reveals previously undisclosed defects, the home buyer can then (1) cancel the sale and ask for a full-deposit refund; (2) negotiate a repair credit from the home seller; or (3) if the seller refuses to renegotiate, go ahead with the home purchase anyway. In addition to a professional home inspection, home buyers should ask their buyer's agents about other customary local inspections. Examples include inspections for termites (pest control), energy efficiency, radon, building code compliance, well water quality, roof, plumbing, and electrical components. Often, the professional inspector's report will recommend further inspections, which are beyond the inspector's expertise. 2. INSIST ON A PROFESSIONAL APPRAISAL CONTINGENCY. Most mortgage lender pre-approval letters or certificates are contingent on the lender's satisfactory appraisal of the home. Buyers should be sure to include such an appraisal contingency clause in their purchase offers just in case the lender's appraiser doesn't value the home as high as the buyer's purchase offer price. If the home doesn't appraise for the offered price that was accepted by the seller, the buyer then can either (1) increase the cash down payment; (2) renegotiate the purchase price; or (3) cancel the sale and receive a full refund of the good faith deposit. SUMMARY: This is the best season to be a home buyer if you can tear yourself away from holiday events. However, savvy home buyers take advantage of the situation by protecting themselves to obtain the best purchase price and terms by safeguarding against paying too much or buying a home with undisclosed defects. More details are in my special report, "Vital Terms Smart Home Buyers and Investors Include in Their Purchase Offers," available for $5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at 1-800-736-1736 or instant Internet PDF delivery at www.bobbruss.com. (For more information on Bob Bruss publications, visit his Real Estate Center). *** What's your opinion? Send your Letter to the Editor to opinion@inman.com. Copyright 2005 Inman News