Chaska Real Estate Blog

Forecaster Predicts Drop in Home Prices

2006-10-06T13:01:00.000-05:00

Daily Real Estate News October 4, 2006
Forecaster Predicts Drop in Home Prices
In one of the starkest views yet of the housing slowdown, Moody’s Economy.com is projecting that housing prices will decline in more than 100 of the nation’s metropolitan areas.

The forecasting firm projects that the median sales price for an existing home will decline in 2007 by 3.6 percent, which would be the first nationwide decline for an entire year in home prices since the Great Depression of the 1930s.Moody’s predicts the biggest percentage price decline will be in Danville, Ill., where prices have already fallen by 18.7 percent from the peak in the second quarter of 2005 to a low point in the first three months of this year.

That setback occurred because of layoffs in autos and other manufacturing industries, which depressed the local economy.The second-biggest decline is projected to occur in the Fort Myers, Fla., area, a fall of 18.6 percent from the peak in the final three months of last year to a low-point for prices that is projected to occur in the second quarter of 2007.Otherwise, the 133 areas with slumping prices are concentrated in the states of California and Florida and the Northeast corridor from southern Maine to just south of Washington, D.C., as well as boom areas of Nevada and Arizona and some depressed sections of the Midwest such as Detroit.

"Prices are going to go down and stay down for awhile. It will take at least a couple of years to work off the excesses of the last decade," says Mark Zandi, chief economist at Economy.com and the principal author of the report.

Source: Associated Press (10/04/2006)

Sellers Slow to Realize It's a Buyer's Market

2006-09-22T16:32:00.000-05:00

Daily Real Estate News September 21, 2006Sellers Slow to Realize It's a Buyer's Market

It’s not a seller’s market anymore, but some sellers haven’t gotten the word.“There’s a disconnect between buyers and sellers,” says Dona Crowder, a former president of the San Francisco Association of REALTORS® and an associate with Pacific Union-GMAC.

“We’ve shifted to a normal market where buyers can negotiate, where they’re no longer in hurry. But some sellers are not aware of the change.”She says it’s hard to convince sellers on issues regarding pricing because they’re often basing their ideas on sales prices from months before. “Pricing is a matter of perspective. Until you have the perspective, you can’t see anything.”

As the real estate market cools, some real estate professionals are finding themselves in the unfamiliar role of explaining to sellers that they can’t hope to get what they want. “It’s a classic dilemma in the changing dynamics of real estate,” explains John Asdourian with McGuire Realty. “Both parties are slow to accept that change.”

Crowder says many sellers balk when they don’t get the price they want and decide to continue living in the home or rent it. She estimates as many as 30 percent of sellers don’t need to sell and are choosing other avenues when they don’t get their price. Overall, this is one factor in keeping prices from plummeting, but it’s also keeping sales volume low

.Source: San Francisco Chronicle, Carol Lloyd (09/01/06)

Overall Sales Down, But 20 States Show Increase

2006-08-18T12:42:00.000-05:00

Existing-home sales, including single-family houses and condos, were down in the second quarter compared with the record set in the same period in 2005, according to the NATIONAL ASSOCIATION OF REALTORS®.

Despite the overall decline, 20 states showed increases in sales activity from the year earlier period.

The quarterly report on total state existing-home sales shows the seasonally adjusted annual rate was 6.69 million units in the second quarter, down 7 percent from the record 7.19 million-unit level in the second quarter of 2005.

The biggest increase was in Alaska, where existing-home sales rose 48.6 percent from the second quarter of 2005. In Arkansas, the second-quarter resale pace rose 17.9 percent from a year earlier, while Texas experienced the third-strongest gain, up 11.3 percent. Twenty-eight states and the District of Columbia experienced declines. Complete data for two states was not available.

Local Conditions Vary

David Lereah, NAR’s chief economist, says two sets of market conditions are apparent in the report.

“When you look at states with high housing costs or that have experienced a prolonged period of rapid price gains, you typically see slower home sales,” he says. “By contrast, states with moderately priced areas that have experienced healthy job creation are seeing sales gains. The economic backdrop remains favorable for the housing market, which is helping home sales to level out.”

According to Freddie Mac, the national average commitment rate on a conventional 30-year, fixed-rate mortgage was 6.6 percent in the second quarter, up from 6.24 percent in the first quarter; it was 5.72 percent in the second quarter of 2005.

NAR President Thomas M. Stevens from Vienna, Va., says interest rates have been trending down in recent weeks. “This is good news for buyers who have been on the sidelines; now there is a window of opportunity in the market,” says Stevens, senior vice president of NRT Inc.

Last week, Freddie Mac, reported the average rate on a conventional 30-year, fixed-rate mortgage was down to 6.55 percent.

Regional Data: South is Strongest

Regionally, the South reported an existing-home sales pace of 2.6 million units in the second quarter, down 4.2 percent from a year ago. After Arkansas and Texas, the next strongest increase in the South was in North Carolina, up 11 percent from the second quarter of 2005, while resales in South Carolina rose 9 percent; six other Southern states also posted sales gains.

In the Midwest, existing-home sales declined 4.7 percent to a 1.54 million-unit annual sales level from the second quarter of 2005. The strongest increase in the region was in Indiana, up 4.8 percent from a year earlier, followed by Iowa, up 3.8 percent, and Missouri, with an increase of 0.8 percent.

The Northeast saw an existing-home sales pace of 1.15 million units in the second quarter, which was 5.2 percent below the year earlier period. Sales activity in Vermont rose 9.1 percent from the second quarter of 2005, while Maine increased 1.5 percent.

In the West, the existing-home sales level of 1.41 million units was 14.7 percent lower than the second quarter of 2005. After Alaska, the best performance in the region was in New Mexico where existing-home sales rose 6.2 percent from a year earlier; Wyoming sales increased 5.7 percent while Montana rose 5.2 percent.

The Rooms Formerly Known as Kitchen, Laundry

2006-07-26T08:50:00.000-05:00

Daily Real Estate News | July 25, 2006 The Rooms Formerly Known as Kitchen, Laundry
Gone are the days when rooms were named for their purpose.

Say goodbye to laundry rooms, studies, living rooms. Say hello to the “Live-In Room,” where people do what they want to do without feeling limited by walls.

Take the room formerly known as a kitchen. The new concept room features a professional cooking area, a less formal dining and entertaining space, and a comfortable lounge area with sofas, a television, and a beverage center.

Electrolux, an international appliance company, debuted "Live-In Room" concepts at the 2006 Kitchen & Bath Industry Show. “We reviewed how the kitchen is used and developed a space that makes it a comfortable setting that encourages togetherness,” says John Swenson, director of brand marketing for the company.

Instead of walls, the room has "zones" that allow for residents to move around into different areas seamlessly and perform different tasks, from paying bills to watching movies on a comfy couch.

Then there’s the room formerly know as the laundry room. Cabinetry manufacturer Merillat Industries LLC showed off its ideas for multiuse layouts incorporating various types of cabinetry to bring together laundry, craft, office, and other spaces.

Design Services Director Paul Radoy says his team discovered that small kitchen spice drawers make great storage for sewing materials, fly-tying supplies, or model-building parts. Pull-out desk surfaces double as sewing stations, and an island on casters is ideal for a laundry-folding table or gift-wrapping surface.

Both Electrolux Electrolux and Merillat have tools and checklists on their Web sites that encourage multiuse-space thinking. “It's exciting to see what people will do with this mixed-use approach because the result will be different for everyone,” Radoy says.

Source: Remodeling Magazine

Home Sales Dip in June as Market Stabilizes

2006-07-26T08:37:00.000-05:00

Daily Real Estate News | July 25, 2006 Home Sales Dip in June as Market Stabilizes
Existing-home sales declined modestly in June, while home prices were up slightly from a year ago, according to the NATIONAL ASSOCIATION OF REALTORS®.

Total existing-home sales — including single-family, townhomes, condominiums and co-ops — declined 1.3 percent to a seasonally adjusted annual rate1 of 6.62 million units in June from an upwardly revised level of 6.71 million May. Last month’s sales were 8.9 percent below the 7.27 million-unit pace in June 2005.

David Lereah, NAR’s chief economist, says the housing market is flattening-out.

“Over the last three months home sales have held in a narrow range, easing to a level that is near our annual projection, which tells us the market is stabilizing,” he said. “At the same time, sellers have recognized that they need to be more competitive in their pricing given the rise in housing inventories. Home prices are only a little higher than a year ago.”

The national median existing-home price for all housing types was $231,000 in June, up 0.9 percent from June 2005 when the median was $229,000. The median is a typical market price where half of the homes sold for more and half sold for less.

“The change in price performance is directly tied to housing inventories; a year ago we had a lean supply of homes and a sellers’ market, with monthly home sales at an all-time record high,” Lereah said.

Total housing inventory levels rose 3.8 percent at the end of June to 3.73 million existing homes available for sale, which represents a 6.8-month supply at the current sales pace. By contrast, in June 2005, there was a tight 4.4-month supply on the market.

New Opportunities for Home Buyers

NAR President Thomas M. Stevens from Vienna, Va., said opportunities have opened for home buyers. “People who were discouraged by the bidding wars that were so common over the last few years are finding more choices now,” said Stevens, senior vice president of NRT Inc. “Relative to the five-year housing boom, this year is a buyer’s market in much of the country with plentiful supply, along with interest rates which remain historically favorable, so it’s a good time to buy a home.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.68 percent in June, up from 6.60 percent in May; the rate was 5.58 percent in June 2005.

Single-family home sales eased 0.9 percent to a seasonally adjusted annual rate of 5.81 million in June from an upwardly revised 5.86 million in May, and were 8.2 percent below the 6.33 million-unit pace in June 2005. The median existing single-family home price was $231,500 in June, up 1.1 percent from a year ago.

Existing condominium and cooperative housing sales fell 5.5 percent to a seasonally adjusted annual rate of 805,000 units in June from a pace of 852,000 in May, and were 14.6 percent below the 943,000-unit level in June 2005. The median existing condo price3 was $226,900 in June, down 2.1 percent from a year earlier.

Regional Market Conditions

Existing-home sales in the Midwest were unchanged in June, holding at a level of 1.52 million, and were 6.2 percent lower than a year ago. The median price in the Midwest was $175,000, which is 1.7 percent below June 2005.

Existing-home sales in the West also were unchanged, at an annual pace of 1.41 million in June, and were 17.1 percent lower than June 2005. The median price in the West was $342,000, the same as a year ago.

Existing-home sales in the South eased 2.3 percent to a pace of 2.57 million in June, and were 5.5 percent below June 2005. The median existing-home price in the South was $191,000, down 0.5 percent from a year earlier.

Existing-home sales in the Northeast declined 3.5 percent to an annual sales rate of 1.11 million units in June, and were 9.8 percent below a year ago. The median price in the Northeast was $298,000, up 7.2 percent from June 2005.

Rising Monthly Payments Are Greater Barrier to Homeownership Than Down Payments

2006-07-06T09:15:00.000-05:00

WASHINGTON (June 27, 2006) – One out of three Americans worries that rising monthly payments – especially property taxes and energy costs – will force them to sell their home and buy a less expensive one, according to the fourth annual National Housing Opportunity Pulse, a survey released today by the National Association of Realtors^®.

The survey also found that, by a 2-to-1 margin, Americans believe that high monthly payments rather than high down payments are the greatest obstacle to buying a home. Rising property taxes are the leading concern associated with owning a home (34 percent), followed by increasing electrical, fuel and other energy costs (28 percent). Only 14 percent said rising mortgage interest rates would keep them from becoming homeowners.

“It’s clear America is facing a crisis in housing opportunities with nearly two-thirds of families concerned about being able to find a home they both like and can afford,” said Thomas M. Stevens, 2006 NARpresident from Vienna, Va., and senior vice president of NRT Inc. “Many families are struggling to meet the high cost of homeownership, and increasingly those costs are property taxes and energy utilities.”

In 2003, the average monthly mortgage principal and interest payment was $840. In 2005, families were paying 23.8 percent more or $1,040 monthly. In the past year alone, the average monthly mortgage principal and interest payment has gone up 11.5 percent – from $1,015 in April 2005 to $1,132 in April 2006. The Energy Information Administration estimates that in February 2006 the price of electricity was 12 percent higher than February 2005; natural gas was up 28 percent; and home heating oil was up 25 percent. State and local property taxes for the 2004 fiscal year averaged $1,121 per person, up 13.8 percent from fiscal year 2003 when the average was $985, and 15.7 percent higher than the $969 average for the 2002 fiscal year, according to the Census Bureau.

The survey found that more than 42 percent of Americans cite the lack of affordable housing in their community as one of their top three concerns, following high energy costs (82 percent) and the lack of affordable health care (53 percent). Nearly a third worry that the cost of housing is so unaffordable that they will never be able to buy a home and more than 58 percent are concerned that the cost of a home is becoming so unaffordable that it is hurting their local economy.

Anywhere between one-fifth and one-third report not seeing as much of friends and family and not being as involved in their neighborhood as they would like. They also report missing out on promotions, having less productivity and cutting back on vacations because they have to work too much to pay for their home or they don’t have the money because of high home costs.

The lack of affordable housing is also affecting renters. More than two-thirds (68 percent) of Americans believe having enough money to pay rent every month is difficult for families in their community, up 7 percent from last year.

Support for affordable housing is high. Eight in 10 would be willing to support more affordable homes being made available for people in their community and a record 68 percent would be more likely to vote for a candidate that worked to make housing more affordable in their area, up six percent in two years.

“People care about affordable housing, and a candidate’s position on this issue makes a significant difference to voters,” said Stevens. “Americans are increasingly looking to their community leaders to seek ways to take a more active role in addressing affordability issues in their communities.”

Most Americans are also increasingly concerned that their children or other family members will not be able to afford housing in their communities (57 percent) and that they and family members will be forced to live in less desirable areas because homes in more desirable areas are not affordable (46 percent).

“Realtors^®play an important role in building communities,” Stevens said. “We understand the housing concerns in our neighborhoods and can therefore be leaders in promoting programs, resources and business opportunities to expand housing availability and help make every family’s dream of homeownership a reality.”

The annual survey is conducted by NAR’s Housing Opportunity Program. The Housing Opportunity Program was created in 2002 with the mission of providing Realtors^® with the tools and information they need to promote housing opportunities in their community, in both the rental and homeownership sectors of the market. The program encourages local Realtor^®associations to create housing opportunity initiatives aimed directly at helping consumers gain access to housing. At this point, nearly 300 state and local associations have such programs in place.

The National Association of Realtors^®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

Practitioners Fall Short on Disclosure

2006-03-24T12:02:00.000-06:00

(March 21, 2006) -- Only 30 percent of home buyers were given representation disclosures last year when they met with their real estate professional for the first time, according to the NATIONAL ASSOCIATION OF REALTORS®, despite the fact that state law typically requires practitioners to provide such documentation at the initial meeting.

NAR also reports that close to 50 percent of first-time buyers were not given disclosures at all or had no idea whether they had received one. Disclosures about representation are key, mainly because buyers who unknowingly provide the seller's agent with information about their finances or personal situations will be at a disadvantage during pricing and negotiations.

Buyers who do not receive such disclosures might pay too much for the home or be persuaded to waive contingency clauses and other protections. Experts warn buyers that the lack of a buyer-agent agreement means that the practitioner is probably representing the seller and looking to achieve a top-dollar sale.

One Silver Spring, Md.-based home buyer is currently battling a pair of practitioners from Weichert, REALTORS®, in court, because the buyer contends he signed a contract to purchase a home at an inflated price because the practitioner that he believed was acting on his behalf was actually the seller's agent.

The buyer is looking to recover his $34,000 deposit and $300,000 in punitive damages.

Source: The Washington Post, Kenneth R. Harney (03/18/06)

Buyer Beware! This Could Be Expensive

2006-03-24T11:59:00.000-06:00

(March 20, 2006) -- Rather than being enamored with the fashionable décor, smart home buyers should pay attention to aspects of a home that really count in the long run, says Greg Haskett, vice president of HomeTeam Inspection Service Inc., an Ohio-based national franchiser. Here are Haskett’s chief buyer bewares:

- Driveways, walkways, or low spots that pitch toward the home. Water should be directed away from the foundation, not toward it. The cost to regrade or repair: $1,000 to $10,000.

- Wall cracks in the basement or interior rooms. As a foundation shifts, floors and walls can move with it. It could be a sign of age, sagging or bowed basement walls, or other factors. Cost to repair the foundation: $10,000 to $30,000.

- Buckled or wavy roofing. Caused by aging shingles, heat trapped in an unventilated attic or ice dams. Cost to repair or replace faulty roofing: $2,500 to $20,000.

- High utility bills. If the heating or cooling bills are whoppers, the insulation and drafty windows could be upgraded or replaced. Cost for new windows: $2,000 to $15,000 installed. Insulation costs: $750 for the attic.

- Aging infrastructure. The furnace may be a relic and air conditioners may be aging or inadequate. Inefficient HVAC systems will probably need a total makeover. Cost to repair and replace major components: $5,000 and up.

- Sagging or cracked floors or ceilings. May be evidence of past water damage or damaged support beams. Cost to replace: $1,500 to $7,500.

Housing Market Readjusting to Normal Balance

2006-03-17T12:58:00.000-06:00

(March 13, 2006) -- A lower level of home sales expected this year will create a more level playing field for buyers and sellers on the heels of a five-year sellers’ market, according to the NATIONAL ASSOCIATION OF REALTORS®.

David Lereah, NAR’s chief economist, said the number of homes on the market has been improving nicely. “The cooling from overheated sales conditions in recent months is helping to bring inventory levels up to the point where buyers have more choices than they’ve seen in the last five years,” Lereah said. “Annual price appreciation is still running at double-digit rates, but the cause of those sharp increases is going away.

As the market readjusts, price appreciation should return to more normal rates of growth this year.”The national median existing-home price for all housing types is projected to rise 5.8 percent in 2006 to $220,300. The median new-home price should increase 5.4 percent this year to $250,200.

Existing-home sales are expected to fall 5.7 percent to 6.67 million in 2006 from the record 7.08 million last year. At the same time, new-home sales are forecast to decline 7.7 percent to 1.18 million from a record 1.28 million in 2005 – each sector would be at the third highest year following the tallies for 2005 and 2004. Housing starts are likely to total 1.98 million this year, down 4.3 percent from 2.06 million in 2005.

NAR President Thomas M. Stevens from Vienna, Va., said some home buyers and sellers have unrealistic expectations. “Some sellers in markets that have had rapid appreciation are listing the price of their home too high, but those homes are just languishing on the market,” said Stevens, senior vice president of NRT Inc. “At the same time, some buyers who have believed hype about a housing bubble are hoping prices will drop, but that’s not happening either.“

Consumers need professional assistance to understand and negotiate the current market realities. Sellers should listen to their agent’s advice to competitively price and show the home, and buyers may want to choose a buyer’s agent to represent their interests and help them negotiate favorable terms. Today’s market has changed a lot from the conditions we’ve seen during the last five years.”

The 30-year fixed-rate mortgage should increase gradually to 6.9 percent in the fourth quarter.Inflation as measured by the Consumer Price Index is projected at 3.3 percent this year. Inflation-adjusted disposable personal income is expected to grow 3.7 percent in 2006.Growth in the U.S. gross domestic product is forecast at 3.5 percent in 2006, while the unemployment rate is seen to average 4.8 percent this year.--NAR

Sales Strategies for a Buyer's Market

2006-03-03T12:05:00.000-06:00

( February 28, 2006) -- A buyer’s market calls for new sales strategies.

Here are a few tips from real estate professionals based in South Florida, who are facing a slowing market after years of fast-paced sales.

Start with the basics. Encourage the seller to prepare the property thoroughly, including fix-up, paint-up, and landscaping projects.Be realistic. Determine what the house is worth by looking at comparable sales.

Price property within 5 percent of what comparable properties have sold for in the last four months. “With the market settling down a bit, sellers can’t get egregious prices anymore,” says Barry Rothman, a professional with Lang Realty in Boca Raton.Be patient and sit tight. "Don't let your [or your seller’s] anxiety about the market cost you an optimal sales price by attracting buyers who smell blood," said Rob Rose, owner of R.L. Rose & Co. in Fort Lauderdale.

Source: South Florida Sun-Sentinel, Robyn A. Friedman, (02/28/06)

Unrepresented Sellers Return to Realtors

2006-02-24T17:22:00.000-06:00

( February 24, 2006) -- Home sellers are finding that the waiting game isn't to their liking when trying to sell their homes without the assistance of a real estate professional.

Take Orlando, Fla., for instance. Last year, an unprecedented 29 percent of the homes sold in the city — more than 10,000 properties — were by unrepresented owners, according to the Orlando Regional REALTOR® Association.

That number is expected to drop significantly this year and be more on level with the national average, which is 13 percent of homes sold in 2005 by unrepresented sellers.The expected drop is attributable to a change from last year's seller's market — when Orlando was one of the hottest real estate markets in the country — to more of a buyer's market so far this year.

By January, more than 6,000 homes were listed — about double the number of a year ago. Overall, there are more than 12,000 homes in the metro inventory now. At the highest level last year, there were only a few thousand.Source: Orlando Sentinel, Susan Strother Clarke (02/24/06)

Pending Home Sales Expected to Rebound Soon

2006-02-03T18:33:00.001-06:00

( February 1, 2006) -- Pending home sales continue to decline but are expected to recover in the months ahead, according to the NATIONAL ASSOCIATION OF REALTORS®.
The Pending Home Sales Index, based on contracts signed in December, was down 3 percent to a level of 116.4 from 120.0 in November, and is 5.5 percent below December 2004. Pending sales have trended steadily down from a record index of 129.2 last August.The index is based on pending sales of existing homes.

A sale is listed as pending when the contract has been signed and the transaction has not closed, but the sale usually is finalized within one or two months of signing. An index of 100 is equal to the average level of contract activity during 2001, the first year to be examined, and was the first of five consecutive record years for existing-home sales.

David Lereah, NAR’s chief economist, says momentum in the housing market shifts slowly. “Changes in the overall direction of the housing market are akin to a large ship making course corrections – it takes some time for the driving factors to materialize as a change in the sales level,” he says. “In many recent transactions we’re looking at a delayed effect of mortgage interest rates that peaked in November but are now lower than expected."

Mortgage applications have trended up in recent weeks, so we shouldn’t be surprised to see pending home sales rise in the next couple months, he adds.Even with an upturn in sales, Lereah expects the housing market to stay below last year’s record. “We’re going through a period of adjustment," he says. "As home sellers recognize a return to more normal rates of price growth, some that have been holding out for higher prices will be more willing to negotiate terms that are acceptable to buyers but still provide them a solid return on their investment.”

Regionally, the Pending Home Sales Index in the South rose 2.3 percent in December to 135.9 and was 4.1 percent above December 2004. In the Northeast, the index increased 1.5 percent to 90.7 but was 11.1 percent below December 2004. The index in the West fell 8.1 percent to 117.1 in December and was 11.8 percent lower than a year ago. In the Midwest, it dropped 9.3 percent to a level of 105.8 and was 11.0 below December 2004.

The Pending Home Sales Index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity from 2001 through 2004 closely parallels the level of closed existing-home sales in the following two months.

Existing-home sales for January will be released Feb. 28; the next Pending Home Sales Index will be on March 6. —NAREditor's

Pending Home Sales Expected to Rebound Soon

2006-02-03T18:33:00.000-06:00

Chaska’s next big thing: Heights of Chaska plans presented Feb. 8

2006-02-03T13:51:00.001-06:00

Chaska’s next big thing: Heights of Chaska plans presented Feb. 8
Mollee Francisco Staff Writer - The Chaska Herald Wednesday, February 01, 2006

Farm fields will soon make way for thousands of homes, as the city of Chaska unveils initial plans next week for the Heights of Chaska development. (Photo by Mollee Francisco)
There are no glossy, color renderings just yet, but plans for the city's next mega-neighborhood are firming up. Next Wednesday, the Chaska Planning Commission will get the first look at the comprehensive plan for the Heights of Chaska, a large-scale community development set to envelop much of the former Chaska Township.

City staff has been working with the three major landowners to develop and execute their vision for the 1,000-acre site. Klingelhutz Construction, D.R. Horton and Traditions have acquired the land for development.

Depending on the housing market, Kevin Ringwald, Chaska director
of planning and development, estimated that the Heights could contain anywhere from 2,600 to 3,200 households.

"We're saying 2,800 as the number for people who need a number," said Ringwald.
That could mean upward of 7,000 new residents for a city already experiencing a generous population boom.

City staff expects the development to contain a mixture of housing from high-density apartments to townhouses to single-family homes. Preliminary plans show a small business district, an elementary school and soccer fields at the center of the development.

"There should be enough population to sustain an elementary school," said City Administrator David Pokorney. City staff is also shopping around for a church to sit atop the hill.

"It has to have a steeple," said Pokorney. "That's our only requirement."
Not too many drastic changes have been made to the plan for the Heights since the city first began putting their ideas down on paper. The biggest change has been with regard to transportation within the development.

MnDOT recently released transportation models that showed the interchange at Engler Boulevard and Highway 212 failing due to traffic congestion in the area.

That issue raised concerns for city staff as well as MnDOT officials. For a time, city staff discussed building an interchange at County Road 140 to alleviate pressure at Engler Boulevard, but that idea was scrapped in favor of an alternate street design within the Heights development.

"The main road is going to have an L-shape now," said Ringwald. While most traffic will still use the Engler/212 interchange to access the freeway, local traffic will have an option to bypass the busy interchange by heading toward the downtown or connecting to Engler Boulevard via a collector street.

After the Planning Commission gets a look at the comprehensive plan for the Heights of Chaska, it will move on to the Chaska City Council for discussion.
"This is not going to be very controversial," said Pokorney.
I
f plans are approved as expected, Ringwald anticipates that work could begin yet this year. He does not expect that all three developers will begin work at the same time.

"They may all do the grading at once," said Ringwald.

Envisioning a place for teens:Local group proposes Chaska youth center

2006-02-03T13:51:00.000-06:00

Envisioning a place for teens: Local group proposes Chaska youth center

Mollee FranciscoStaff Writer Chaska Herald Wednesday, February 01, 2006

Lon Hand, Wayne Bourne, Mike Fahey and John Meyer want to turn this space, Chaska’s old water treatment plant, into a youth center for middle-school students. “Of course, there’s a lot of work to be done in here,” said Meyer. (Photo by Mollee Francisco)
Wayne Bourne knows he's lucky. When his children were growing up, he didn't have to worry that they might be home after school causing trouble, or experimenting with drugs, alcohol or sex while he was still at work.

"I'll tell you this," he said. "I have six kids and my wife stayed home with all of them."
But the Bournes had a luxury that most parents don't have. And while many area elementary schools provide after-school programs for kindergarteners through fifth-graders, one local group has noted that the options for parents diminish greatly after kids graduate to middle school.
"Our kids stayed home alone," said Lon Hand.

Millions of parents across the nation make the same confession, but a group of nine parents and concerned citizens is proposing to give area residents another option for the hours after school.
Hand and Bourne are part of this group trying to open a youth center in the city's old water treatment plant building. They pitched their idea to the Chaska City Council at a Jan. 23 workshop session.

"We're proposing a supervised, safe, drug-free, alcohol-free environment for the 3 to 6 p.m. time period," John Meyer told councilors.

"We'd like to turn this into a model youth center for the state," fellow group member Richard Scott told the council. "Just like the Town Course and the wireless Internet."
The group's plan is to target middle-school students in sixth through eighth grades.
"We feel that's a critical age group," said Hand, in a later interview. "And the 3 to 6 p.m. timeframe is critical as well."

According to research by Fight Crime: Invest in Kids, an anti-crime group of over 2,000 police chiefs, sheriffs, prosecutors, victims of violence, youth violence experts and leaders of police associations, the hours from 3 to 6 p.m. are the peak hours for teens to "commit crimes, be victims of crime, be in or cause a car crash, and smoke, drink or use drugs."
"We don't want juvenile crime any more than we have to," said Carver County Attorney Mike Fahey, group member.

"From a law-enforcement/prosecution standpoint, it is a concern," he added. "It's important to be as proactive in Carver County as possible."

This group believes that a youth center could counter the urge to cause trouble by providing a host of activities for students.

"We're trying to find an avenue for the good kids not to become bad kids," said Bourne. "We're trying to give them a path, a good option."

A fixer-upperThey don't have the space yet, but that doesn't keep this group from envisioning what could be: a mezzanine full of video game equipment, a computer lab or a band stage.
"The building is perfect," said Bourne. "The location is phenomenal and the size works, too."
The group has already discussed busing options from the middle school to a youth center in that location. The water treatment building is the only site this group is looking at currently.
"Plan B is not to lose sight of Plan A," explained Bourne.

The group is proposing to lease the lower level of the old water treatment plant from the city for $1 a year. The city indicated that one of the preferred uses for the now-vacant space would be something benefiting the community.

If the city agreed to lease them the building, the group estimates it would cost roughly $125,000 to install bathrooms, electrical, heating and a sprinkler system in the 5,000-square-foot space. A portion of an existing well and equipment would also have to be secured inside the facility.
Another $85,000 would be spent on furniture, televisions, pool tables, games and a snack bar.
Operating costs are estimated at $175,000 annually, assuming a $1 lease. To recoup costs, the group is proposing a $100 fee per student, per month.

"Parents are paying $200 right now for the elementary school program," noted Hand.
But according to the group's figures, it wouldn't take long for them to pull their numbers out of the red.

"We believe after the second year, we would break even," said Hand.
Those estimates are based on attracting 6 percent, roughly 100 students, of the current middle school population. Additional revenue would come from arcade games, concessions, donations and in-kind gifts.

Council reactionCouncil reaction to the youth center concept was mixed.
"This is something great for the children," said Mayor Gary Van Eyll.

"We do have a real problem in Chaska with kids not getting on track and staying on track," said Councilor Bob Lindall. "This is a possible solution."

But Jay Rohe declared that it was going to take "some strong convincing" to get him on board for the project. "This is money for the Klein Mansion," he said.

According to Chaska City Administrator David Pokorney, the water treatment building is valued at $200,000 to $300,000. If sold outright, it could provide the necessary funds to renovate the C.P. Klein mansion, adjacent to City Square Park.
But if the city leased the building for a youth center, its involvement would be financially minimal, Pokorney stated.

"The city is not as much providing a building, as providing the community with a great discount," said Bourne. "This building would be the difference between charging $100 per student or $300 per student."

Rohe said that if they were to go ahead and lease the building, they should be looking to area cities like Victoria and Chanhassen, to kick in some support.
"It may be a case where you charge more for students from those communities," said Pokorney.
The council will continue to look at options for the water treatment plant. City staff was instructed to prepare a report on various options, including the youth center, for review at an upcoming meeting.

Tips for Selling a House That Won't Sell

2006-01-27T14:18:00.000-06:00

(January 24, 2006) -- Young buyers like a pretty house, so when a house won’t sell, Mark Nash, author of 1001 Tips for Buying and Selling a Home, urges home sellers to make these simple cosmetic updates.

*Expose hardwood floors and buff them until they shine. Nash, who sells homes in the Chicago area, says an increasing number of younger buyers dislike homes with wall-to-wall carpeting. ''It's amazing how often I hear from young clients who won't even look at a place unless it has hardwood floors,'' he says.

*Remove antiquated furnishings. Many young buyers have eclectic tastes. Get rid of matched sets of look-alike furniture from the ’70s and ’80s then rearrange what’s left to make the house feel more contemporary.

*Take down your old draperies and light fixtures, including old-style track lightings. Nash says outdated lighting and heavy, elaborate draperies (the kind with swags and valances) are a turn-off to young buyers.

*Remove wallpaper. Young buyers are unwilling to purchase any home that needs wallpaper removal—it’s just too daunting.

*Repaint your walls. Nash encourages home sellers to stick with neutrals or calm earth tones, like a light sage green. Using bold tones can be very tricky, he cautions. “I call these ‘commitment colors.’ Chances are good that your buyers won't like them as much as you do,'' he says.

Source: The Miami Herald, Ellen James Martin (01/22/06)

When Mom and Dad Are the Lender

2006-01-27T14:14:00.000-06:00

(January 23, 2006) -- The number of first-time homebuyers who use monetary gifts from family or friends to make down payments has increased to 25 percent from 20 percent over the past 10 years. I

f you're thinking of doing that for your children, be aware of tax and other issues that arise. Given that the Internal Revenue Service taxes gifts of $12,000 or more, you might want to set up an intrafamily mortgage to help your offspring achieve homeownership. Your children benefit from below-market interest rates--though they must pay the applicable federal rate of about 4.5 percent to avoid gift taxes--flexible payment schedules, the absence of credit checks, and lower closing costs. They also still can deduct the interest from their income taxes, provided that there is a deed of trust and the mortgage is recorded with the county clerk.

While you can benefit from steady cash flow during your retirement years, avoid such arrangements if you make the loan solely as an investment. You could achieve better investment returns elsewhere, and your emergency or retirement savings might be depleted by lending the money.

Source: Wall Street Journal (01/22/06); Gullapalli, Diya

More Home Buyers and Sellers Use Internet

2006-01-20T15:33:00.000-06:00

(January 17, 2006) -- Technology is transforming how Americans buy and sell homes in unexpected ways, including how they work with real estate salespeople and brokers, according to one of the largest surveys of real estate consumers ever conducted and released Jan. 17 by the NATIONAL ASSOCIATION OF REALTORS®.The 2005 NATIONAL ASSOCIATION OF REALTORS® Profile of Home Buyers and Sellers, based on more than 7,800 responses to a questionnaire mailed to a large national sample of consumers located through county deed records, is the latest in a series of surveys evaluating demographics, marketing, and other characteristics of home buyers and sellers.

According to the survey, nine out of 10 home buyers use a real estate professional in the search process, but use of the Internet to search for a home has risen dramatically over time, increasing to 77 percent of buyers in 2005 from only 2 percent in 1995; it was 74 percent in 2004. The next largest source of information for buyers is a yard sign, mentioned by 71 percent of buyers.When asked where they first learned about the home purchased, 24 percent of buyers identified the Internet, up strongly from 15 percent in 2004 and only 2 percent in 1997. Although most buyers use a practitioner to complete the transaction, 36 first learn about the home they buy from a real estate professional and 15 percent from yard signs; five other categories were 7 percent or less.NAR President Thomas M. Stevens from Vienna, Va., says the findings underscore the complexity of the homebuying process. “Buyers who use the Internet in searching for a home are more likely to use a real estate practitioner than non-Internet users, and consumers rely on professionals to provide context, negotiate the transaction, and help with the paperwork,” says Stevens, senior vice president of NRT Inc.

The real estate industry today bears little resemblance to how the the real estate industry conducted business 10 years ago, Stevens says. "It is hard to find another industry that has adopted technology so readily to its customers," he says. "REALTORS® have invested a lot of time and money in building information technology, and because of these efforts, more consumers than ever are using the Internet in their home search.”The survey shows 81 percent of buyers who use the Internet to search for a home ultimately purchase through a real estate practitioner, while 63 percent of non-Internet users buy through a practitioner; non-Internet users are more likely to purchase directly from a builder or an owner they knew in advance of the transaction.“We find that the level of for-sale-by-owners is on a sustained decline and is now at a record low," Stevens says. "In addition, a growing share of FSBO properties are not placed on the open market—they’re private transactions.”A clear downtrend in FSBOs has been seen since that market share experienced a cyclical peak of 18 percent in 1997. Only 13 percent of sellers conducted transactions without the assistance of a real estate professional in 2005, and 39 percent of those FSBO transactions were “closely held” between parties who knew each other in advance, up from 32 percent in 2004. The FSBO market share was at 14 percent in both 2003 and 2004. NAR began tracking the FSBO market in 1981; the record was 20 percent in 1987.“In reality, the term ‘FSBO’ is a misnomer when used to broadly describe homes sold directly by owners," Stevens says. "Since two out of five of these transactions are between related parties, and those properties are not placed on the open market, we believe that ‘unrepresented sellers’ would be a much more accurate term to describe this segment.”

The median home price for sellers who use a practitioner is 16.0 percent higher than a home sold directly by an owner ($230,000 vs. $198,200); there were no significant differences between the types of homes sold. “While many unrepresented sellers are motivated to save on paying a commission, we think the price difference speaks for itself,” Stevens says. “Owners without professional assistance also have problems in understanding and completing paperwork, prepping the home for sale, getting the right price, and selling within the time planned.”Survey data don’t explain the price difference, but Stevens offered some context. “Real estate professionals know best how to prepare a home and maximize value, and they provide broader exposure to the market and are more likely to generate multiple bids, while the portion of sales that are between private parties are likely to be at a lower price than those on the open market.“The housing market today contrasts sharply with predictions a decade ago that the Internet would ‘disintermediate’ real estate professionals, including speculation that NAR membership would fall in half," Stevens says. "In reality, it’s grown dramatically—selling real estate is not like selling a book or buying an airline ticket.”REALTOR.com was the most popular Internet resource, used by 54 percent of buyers, followed by MLS Web sites (50 percent), real estate company sites (38 percent), real estate practitioner Web sites (31 percent), and local newspaper sites (15 percent); other categories were smaller.Married couples make up the largest share of the housing market, accounting for 61 percent of transactions. Single women purchase 21 percent of homes while single men account for 9 percent. Unmarried couples were 7 percent of the market, and 2 percent were listed as other. In 2004, single women were 18 percent of buyers and single men were 8 percent.The typical buyer walked through nine properties, searched eight weeks to buy a home and moved 12 miles from their previous residence. The typical seller placed their home on the market for four weeks, had lived in it for six years, moved 15 miles to their new residence and previously owned three homes, including the one just sold.NAR’s senior economist Paul Bishop says both buyers and sellers use traditional methods to choose a real estate professional. “Word-of-mouth recommendation is the most common way to learn about real estate professionals,” Bishop says. “The most important criteria, whether you’re buying or selling, are the individual practitioner’s reputation and their knowledge of the local market.”In finding a real estate professional, 44 percent of buyers were referred by a friend, neighbor, or relative, 11 percent used a practitioner from a previous transaction, 7 percent found a practitioner on the Internet, 7 percent met the practitioner at an open house, and 6 percent saw contact information on a For Sale sign. Six other categories accounted for smaller shares each.The most important factor in choosing a real estate professional was reputation (41 percent of home buyers), followed by a practitioner's knowledge of the neighborhood (24 percent). In terms of desired qualities in a real estate professional, three categories were rated as very important by more than nine out of 10 buyers: knowledge of the purchase process, responsiveness, and knowledge of the market. Of buyers who use a real estate professional, 63 percent choose a buyer representative. Satisfaction with real estate professionals is very high, with 85 percent of buyers saying they were likely to use the practitioner again.Seller responses are comparable: 43 percent chose practitionerd based on a referral by a friend, neighbor, or relative, and 28 percent used their practitioner previously; 10 other categories were 5 percent or less. Fifty-seven percent of sellers said reputation was the most important factor in selecting a real estate professional, followed by their knowledge of the neighborhood (17 percent). Eighty-two percent said they were likely to use the same practitioner again or recommend to others.Four out of 10 respondents are first-time buyers, a finding that is consistent for more than a decade. The median age of entry-level buyers is 32 years, also typical over time, and the household income was $57,200. They made a down payment of 2 percent on a home costing $150,000, but 43 percent purchased with no money down. Of first-time buyers who made a down payment, 23 percent received a gift from a friend or relative.The typical repeat buyer is 46 years old and had a household income of $83,200. They placed a down payment of 21 percent on a home costing $235,000, but 11 percent of repeat buyers paid cash for their home. In all, 94 percent of buyers and sellers believe their home purchase is a good financial investment.“To underscore the value of housing as an investment, all you have to do is look at the difference in how repeat buyers purchase their next home—the wealth effect of home ownership provides the greatest source for their downpayment, which is significantly larger,” Bishop says. Aside from sellers who pay cash for their new home, 66 use the equity from their previous home for a down payment.

The most important factors in choosing a location to purchase a home are neighborhood quality (68 percent), close to a job or school (43 percent), close to family or friends (36 percent), and the school district itself (23 percent); seven other categories were under 20 percent.NAR mailed an eight-page questionnaire to a national sample of 145,000 home buyers and sellers, based on county records, who purchased their homes between August 2004 and July 2005. It generated 7,813 usable responses; the response rate was 5.4 percent.The 2005 NATIONAL ASSOCIATION OF REALTORS®

REALTORS® Help Consumers Remodel

2005-12-23T15:00:00.000-06:00

(December 23, 2005) -- Kitchen and bathroom remodeling projects are returning more of a home owner’s investment than ever before, according to the 2005 Cost vs. Value Report published by REALTOR® Magazine and

Remodeling magazine. Many home owners who complete midrange bathroom remodels can expect to make money; the cost on a national average for this project is $10,499, and the return is $10,727, or 102.2 percent, compared with 87.5 percent in 2002. On average, major midrange kitchen remodels cost $43,862 and return $39,920, or 91 percent of the costs to remodel, up from 66 percent in 2002. Nationally, home owners who add an attic bedroom spend an average of $39,188, and on resale, they recoup 93.5 percent of the cost. Master suites, however, do not fare as well; an upscale addition, which costs $137,891 on average, returns only $110,512 on resale, or approximately 80.1 percent of the remodeling expense.The 2005 Cost vs. Value Report includes information provided by NAR members about the resale value of common remodeling projects in 58 U.S. housing markets.

The report includes cost data, resale value, and percentage recouped at sale for 18 projects, including a first this year: a home office remodel. Given that America’s home owners spent more than $139 billion on home improvements and repairs over the past year, according to data from the Joint Center for Housing Studies at Harvard University, the report contains valuable information for anyone who is considering embarking upon a remodeling project. “REALTORS® have industry expertise that goes beyond the initial real estate transaction,” says 2006 NAR President Thomas M. Stevens, senior vice president of NRT Inc., from Vienna, Va. “Our members’ experience and familiarity with the communities in which they work make them valuable resources. They understand what makes a good home investment, whether their clients are buying, selling, or remodeling. REALTORS® not only sell housing; we also build communities.”The desirability of different remodeling projects varies by region and metropolitan area. In the West, window replacements are highly valued, perhaps due in part to insulation and cooling concerns in desert regions, with nearly 103 percent of costs recouped on sale. Westerners also prefer remodeled kitchens and basements; in this region, for example, a minor midrange kitchen remodel may return 112.3 percent, and a basement remodel is estimated to return 108 percent.

In the Midwest, however, the same kitchen and basement projects return only 85 percent and 73 percent, respectively. Midwest buyers appreciate homes with updated siding; midrange and upscale siding replacements return 96 percent and 98 percent of the project costs, respectively. Siding replacement projects fared well at resale in all four regions, likely because new siding is a relatively inexpensive way to update and refresh a home’s curb appeal.Buyers in the South are partial to upscale bathrooms, which return an average of 98.5 percent of project costs. When considering resale value, however, Southerners may want to think twice about midrange window replacements; this improvement, which is so popular in the West, only returns an average of 83.7 percent of project costs in the South.In the East, a midrange attic bedroom addition returns an average of 98.1 percent at resale, but a home office remodel only returns 75 percent. In fact, remodeling projects that involved home offices were among the lowest returns on investment across all four regions.

“Local and regional differences in the resale value of remodeling projects are not surprising—the desirability of certain home features varies by neighborhood and is heavily influenced by buyers’ expectations in a given area,” says Stevens. “For example, adding a bathroom to a one-bathroom house in a neighborhood where most homes already have two may not return as much as remodeling an outdated bathroom in that same community.”

In the final analysis, however, homeowners who are thinking about a remodeling project should consider their own needs and desires as well as those of the home’s future inhabitants. “Keeping up with the Joneses can be a savvy investment move,” says Stacey Moncrieff, editor of REALTOR® Magazine. “But ultimately, the best reason for a remodel is to enjoy it.”

New Home Sales Tumble 11.3%, Biggest Decline in 12 Years

2005-12-23T14:58:00.000-06:00

Friday, December 23, 2005

WASHINGTON — Sales of new U.S. homes fell 11.3 percent in November, the biggest decline in nearly 12 years, as the number of houses for sale hit a record high, according to a government report on Friday that offered more evidence of a cooling housing market.

The Commerce Department said sales of new single-family homes fell to a 1.245 million unit pace in November -- slower than expected -- after striking a record in October.
Wall Street economists had expected sales to slow sharply in November, although only to a 1.305 million unit pace, due to rising interest rates. October's originally reported record rate of 1.424 million units was revised down to still-record 1.404 million.

The number of new homes on the market at the end of November climbed to a record 503,000. At the current sales pace, that represented 4.9 months' supply -- the highest level since December 1996, when the number of homes available for sale amounted to a 5 months' supply at the prevailing sales pace at that time.

The Commerce Department report showed new home sales fell throughout most of the United States, except for the Northeast, where sales rose 13.4 percent.
The median home sales price fell 4.1 percent in November to $225,200 from $234,800 the prior month, the Commerce Department said. This report marked the latest in a string of data suggesting softening in the U.S. housing market after a five-year rally that toppled construction and sales records and pushed prices up more than 50 percent nationwide.

Following some anecdotal evidence of cooling over the summer months, economic data on the housing market began to offer signs of moderation after mortgage rates started to climb in September.

In the latest week, the 30-year fixed-rate mortgage loan averaged 6.26 percent, down slightly from 6.30 percent the previous week but up from 5.75 percent a year ago, according to Freddie Mac (FRE).

A Hint That Fed's Rate Increases May End Soon

2005-12-06T08:01:00.000-06:00

(November 23, 2005) -- Newly released minutes from the Federal Reserve's Nov. 1 meeting indicate that central bank officials soon may strike certain language from advance guidance about future rate increases. Though they do not indicate when they will cease short-term rate hikes, the minutes do hint that Fed policymakers may no longer suggest that rates will be increased at a "measured" pace. Nevertheless, concerns about inflation lead investors and analysts to believe that another two or three rate hikes are on the horizon. Ben Bernanke, who is slated to take over for Alan Greenspan as Fed chairman at the end of January, is expected to increase rates at least once after assuming the post, mainly to show that he is as committed as Greenspan to combating inflation.

Source: New York Times (11/23/05); Andrews, Edmund L.

No "Housing Bubble" Says FED Nominee

2005-11-03T08:38:00.000-06:00

October 27, 2005No housing bubble, says BernankeThere is no housing bubble getting ready to bust, Federal Reserve Chair nominee Ben S. Bernanke said in a Senate testimony last week, although home prices may cool in the short term. "[A]s reflected in many private-sector forecasts such as the Blue Chip forecast mentioned earlier, a moderate cooling in the housing market, should one occur, would not be inconsistent with the economy continuing to grow at or near its potential next year," said Bernanke, currently chairman of the Council of Economic Advisers. The housing market "will likely be among the key topics explored by members of the Senate Banking Committee during upcoming hearings on his nomination," predicts the Washington Post.

Home Sales Forecast Looks Stronger for 2005

2005-10-15T10:34:00.000-05:00

NAR's 2005 Home Sales Forecast Looks Stronger(October 12, 2005) -- The forecast for annual home sales has trended up as the year progressed, fueled lately by added demand resulting from recent hurricanes, according to the NATIONAL ASSOCIATION OF REALTORS®.David Lereah, NAR’s chief economist, says it was thought at the beginning of the year that 2005 would have the second-best total for both existing- and new-home sales, but by June it was apparent that another record was in the works. “Post-Katrina, our sales projections for this year have moved even higher,” Lereah says. “Short-term momentum is very strong, and our Pending Home Sales Index just set a record. In addition to the housing needs of hurricane victims, we may be seeing some ‘fence jumping’ from homebuyers who are getting into the market before interests rates move higher.”Existing-home sales are forecast to rise 4.2 percent to 7.07 million in 2005, while new-home sales are expected to increase 7.1 percent to 1.29 million. Total housing starts—single-family and multifamily—should be up 4.5 percent to 2.04 million units this year, the best showing since 1973. Single-family starts are seen at a record of 1.70 million.“Inflationary pressures—driven by higher energy costs—have become a concern, so we anticipate two more hikes in the fed funds rate by the end of the year," Lereah says. "In addition, long-term interest rates also are rising at a faster clip.” The rate for a 30-year fixed-rate mortgage is projected to reach 6.2 percent in the fourth quarter, and trend up to 6.7 percent by the end of next year.The national median existing-home price for all housing types is forecast to increase 12.5 percent in 2005 to $208,400, while the median new-home price should rise 3.9 percent to $229,700.NAR President Al Mansell, of Salt Lake City, says some easing of home sales is expected in 2006. “The rise in mortgage interest rates is likely to have a slight breaking action on the housing market, and the upside of that is it would help to bring the market closer to balance between homebuyers and sellers,” Mansell says. “As a result, there should be a cooling in the rate of price growth—on balance, the overall market should continue to favor sellers with price appreciation remaining above the high end of historic norms. The investment fundamentals for housing remain solid.” In 2006, NAR expects the median existing-home price to grow by 5.2 percent and the median new-home price to rise 7.1 percent. Historic home-price gains are 1.5 percentage points above the rate of inflation, which is seen at 2.6 percent next year.“Although energy prices are the chief culprit in current inflation concerns, we project oil prices to settle early next year—that would cause inflation to quickly dissipate,” Lereah says. The Consumer Price Index is forecast to rise 3.5 percent for all of 2005 before easing early next year.Inflation-adjusted disposable personal income is expected to grow by 1.4 percent for 2005. The U.S. gross domestic product is seen at 3.5 percent for all of 2005, then picking up early next year as hurricane rebuilding accelerates. The unemployment rate is projected to average 5.2 percent for the next three quarters, then decline to 5.0 percent in the second half of next year.—NAR

Mortgage Rates Pass 6%

2005-10-15T10:33:00.000-05:00

Mortgage Interest Rates Pass 6%(October 14, 2005) -- Freddie Mac reports a jump in the 30-year home loan rate to 6.03 percent from 5.98 percent during the past week, marking a six-month high. The one-year adjustable mortgage rate rose as well, climbing to a more than three-year high of 4.85 percent from 4.77 percent last week. Mortgage rates will continue to move upward due to soaring energy prices and concerns about inflation, making it more difficult for first-time buyers to achieve homeownership and less rewarding for adjustable-rate borrowers to switch to fixed-rate products. Freddie Mac chief economist Frank Nothaft believes the 30-year mortgage rate will hit 6.4 percent next year. Source: Los Angeles Times (10/14/05); Sanchez, Jesus

Minnesota Consumers Help by Meth Disclosure Law

2005-10-07T17:10:00.000-05:00

October 3, 2005) -- Beginning Jan. 1, Minnesota homebuyers have further legal protections against unknowingly buying a property contaminated by methamphetamines. A new law will require property sellers in Minnesota to disclose any knowledge they have that a property has been used for the production of the illegal drug, known as meth or crystal meth.A growing problem, meth can cause environmental hazards that harm occupants of buildings where the drug has been produced.The law also requires county health departments to prohibit occupancy of any property used as a meth lab site and found to be contaminated. Contractors who remediate a lab site must show that the work was done according to state health department guidelines.The Minnesota Association of REALTORS® has created a separate meth disclosure form that members can provide to sellers. The form is available on the association’s Web site. The form must be used only if the seller has knowledge that the property was used to make meth, however, says Susan Dioury, MAR vice president of government relations and regulatory affairs.—By Jane Adler for REALTOR® Magazine Online

Real estate on the internet

2005-10-07T17:09:00.000-05:00

October 4, 2005) -- On average, real estate professionals generate a full one-third of their business from the Internet, e-mail is the primary communications tool for nearly half, and a portable wireless device was the most important technological upgrade for nearly one-third.The CALIFORNIA ASSOCIATION OF REALTORS® capped off its opening session of the Centennial REALTOR® Expo in San Diego recently by unveiling the “2005 Use of Technology Survey,” which tracks current technology-use trends among members. The survey, conducted during the second quarter this year, examined what technology practitioners use and how they've incorporated it into their business. It found that:
90 percent have a high-speed Internet connection at home, an increase from 82 percent a year ago and 71 percent in 2003
67 percent find the Internet extremely or very important in the marketing and promotion of their business
61 percent post listings to their own Web site
46 percent of respondents use e-mail as their primary form of communication with their clients
33 percent of California REALTORS®' business comes from the Internet
31 percent said a Blackberry or Treo handheld device was their most important technology upgrade in 2005; the wireless devices incorporate cell phone communications, Internet access, e-mail, digital contact management, and other features—By Broderick Perkins for REALTOR® Magazine Online

The nuts and bolts of home improvement

2005-09-22T08:42:00.000-05:00

How can I protect myself during a home renovation?
July 5, 2005: 1:57 PM EDT By Lewis Schiff, the Armchair Millionaire

NEW YORK (Armchair Millionaire) - Dear Armchair Millionaire: I'm contemplating a major home remodel, but I'm worried about everything that could go wrong and end up costing me money. How should I protect myself?

Home remodeling is big business in the United States. A report by Harvard's Joint Center for Housing Studies says that Americans remodeled their homes to the tune of nearly $127 billion in 2004.

With that much money being spent, there's lots of room for things to go wrong, and everyone has heard a contractor horror story. However, if you're careful about how you go about your remodel, your experience can be a positive one. These comments from the Armchair Millionaire community reflect the good side of home remodeling:

"With a combination of professionals and our work, we've remodeled every room in our home.

We did the demolition to our 55-year old bathroom, while plumbers and electricians did the hard stuff. When we redid our kitchen, we bartered with a cabinet guy and got the labor free. My husband also added on a huge deck to our house. We've spent about $15,000 (plus sweat equity), but it's added about $40,000 to the value of our home." -- YJ

"We added onto our existing deck and put a sunk-in hot tub on the new deck area. We could have done it ourselves but opted to use a contractor and so glad we did -- it's absolutely beautiful, sturdy and better then we would have done. It has increased the value of our home." -- Kristi

The keys to successful home remodeling are good planning, hiring the right contractors and keeping an eagle eye on the work as it moves along. My guide provides the basics of a successful project.

The Armchair Millionaire's Guide to Successful Remodeling

Choose your contractor wisely. Perhaps the best way to find competent contractors is by word of mouth. Check with friends, neighbors, or co-workers for referrals.

Interview each contractor you're considering. Ask how long they've been in business (you want a well-established company), whether they're licensed and registered as required (ask to see proof), and whether they have the necessary insurance (again, ask for proof). Get references and check them out.

When you have several good candidates, get written estimates from each. Ask for explanations for price variations and don't automatically choose the lowest bidder.

Get the most bang for your buck. Lean toward those projects that will contribute the most to the value of your home over time. Each year, ]Remodeling magazine produces a report on how much of your cost you might recoup on various remodeling projects, were you to sell your home.

Here are a few examples:

Minor kitchen remodel: 92.9%

Deck addition: 86.7%

Family room addition: 80.6%

Basement remodel: 76.1%

Manage the project wisely. Get a written contract that describes the work to be done, the materials that will be used, how changes will be handled and what it all will cost.

As the job progresses, keep all paperwork related to the project organized, and consider taking photographs of the work -- these records will be important if you have any problems during or after construction. Don't make a final payment until the job is finished to your satisfaction and has passed inspection with your local building officials.

Finance it wisely. For all but the smallest projects, a home equity loan or line of credit will make the most sense. You can get these loans at little or no cost, will pay a very reasonable interest rate and, in most cases, the interest you pay on loans up to $100,000 will be tax deductible.

THE BOTTOM LINE: For most of us, our homes are our biggest asset, so making major improvements is no small matter. Armed with the right knowledge and plenty of advance planning, your home remodeling project will pay off both in enjoyment and increased resale value.

MORTGAGE INFO

2005-09-22T08:36:00.000-05:00

Crazy loans: Is this how the boom ends?Lenders are pushing risky loans with low payments. Desperate home buyers snap them up. Worried yet?

September 16, 2005: 2:34 PM EDT By Cybele Weisser, MONEY Magazine

Feeling nervous about real estate prices? Who can blame you? Even if you haven't bought or sold lately, the constant debate over whether or not there's a housing bubble is probably making you uneasy. These prices are crazy, you think as you scan the local real estate listings. How can anyone afford to buy a house in this market?

That's a question a lot of home buyers are asking themselves these days, and a growing number are coming up with the same answer: Skip the 30-year fixed-rate mortgage and grab a riskier loan with a lower initial payment. Interest-only, option-payment, 40-year fixed, piggy-back loan, low-doc loan: These weird mortgages come in an assortment of names and flavors, but they all have the same goal -- to help you afford an expensive home. How? More often than not by letting you put off paying down your mortgage. A few years ago, so-called "nontraditional" mortgages were a mere sliver of the market (less than 3 percent by some estimates); a July survey by the mortgages Federal Reserve found that they now account for more than a quarter of new business at a third of the nation's largest home lenders.

That swift rise has industry observers worried. "We're very concerned with how safe these products are," says Stu Feldstein, president of financial research firm SMR Research. "There's an awful lot of risk out there."

But who's at risk? Almost everyone. If you're a buyer, the risk is that you'll find yourself with a loan you won't be able to afford in a few years. But even if you're among the 75 percent of borrowers with a stodgy fixed-rate loan or the lucky 35 percent of homeowners with no mortgage at all, this loan lunacy could pose a danger to your home's value. That's because experts fear that the rash of nontraditional loans has been driving up prices in many markets -- and could intensify the decline if prices soften. "I think the creative mortgage structures have been the last puff on the real estate balloon," says Nick Buss, vice president of market research at PNC Finance. "Consumers were already stretched, and these products have stretched them just a little bit further."

The affordability puzzle
Taking out a risky mortgage is seldom the first choice for borrowers. A recent survey by the Consumer Federation of America found that an overwhelming majority of consumers prefer a fixed-rate loan. Yet when faced with the prospect of having to put off owning a home, buyers have been looking for any way to get in, especially when it means (they hope) a chance to ride the double-digit gains that homeowners have been racking up.

The solution: Borrow 100 percent of the price. Take an adjustable rate. Pay just interest for a few years (or not even that much) and hope to sell for a profit or find a way to pay more later. Whatever it takes. Banks, meanwhile, are looking for ways to continue to lend money as home prices rise. For both borrower and lender, the underlying assumption is that the market will continue to move in one direction -- up, up, up. In a few years, the thinking goes, borrowers can use their inflated equity to refinance into a safer loan. Trouble is, there's simply no guarantee that housing prices will continue to climb. And if prices soften and interest rates rise, the abundance of adjustable-rate, interest- only, option-payment and similar loans could backfire in several ways.

For borrowers, the biggest risk is payment shock. Say you buy a $300,000 home, financing 100 percent of the price with an interest-only loan. In five years, if your rate rises just as your principal becomes due, your monthly payment could easily spike by 50 percent. With little or no equity to fall back on for a refinancing, you could be forced to sell quickly or even default on the loan. (What's worse, if your home is worth just 5 percent less, you'll have to come up with $15,000 to pay off your mortgage.) An uptick in selling, in turn, would push up inventory on the local market, potentially causing prices to collapse.

At greatest risk, says David Lereah, chief economist with the National Association of Realtors, are markets where a majority of buyers are opting for nontraditional loans.
"There will be cases where lenders and borrowers will be caught with their financial pants down," he says. Finally, the explosion in innovative mortgages could sting the housing market in one other way. As banks have heavily marketed these loans, critics say, they may have stretched themselves too thin by lending money to consumers who wouldn't have qualified a few years ago. If those borrowers default, banks may pull back, leaving the marginally qualified buyers -- the ones who have kept the market bubbling along -- frozen out. Lenders counter that new credit scoring models have eliminated most of the risk of defaults. But Lereah notes that lenders have been testing their new scoring systems in an unusual time of low rates and economic growth.

"In a rising rate market, they're going to discover that some people are riskier than they'd thought," he predicts. Financial regulators, meanwhile, are beginning to share that concern. Several, including the Federal Deposit Insurance Corporation and the Office of Thrift Supervision, recently met to discuss underwriting guidelines for nontraditional loans.
Big loan losses or tougher regulation, the effect on the market is the same: fewer loans and fewer buyers. Boom over.

What's a home buyer to do?
With real estate prices in the stratosphere and lenders dangling crazy credit, the onus is on you to make sure you don't end up with more home than you can afford.
"When you go to buy a house, you know it's up to you to make sure the plumbing works and the neighborhood schools are good. Now financing has been added to the list of buyer-beware items," says SMR's Feldstein. If you're in the market for a new home, follow these steps.

Embrace a fixed-rate mortgage
At current interest rates, buyers should be flocking to fixed-rate loans. The 6 percent average rate on a 30-year fixed mortgage is still near historical lows, says Keith Gumbinger of financial data provider HSH Associates. His advice: "Go for as much fixed rate as you can afford."
Of course, once you've got your heart set on a certain home at a certain price, it's hard to ignore the siren call of a low-payment mortgage that lets you buy.

So start talking to lenders before you look for a home, not after you've fallen in love with one. If you've given yourself a loan limit, you'll have a better chance of resisting that unattainable love.

Construct the worst-case scenario
If you do decide to take an interest-only or option-payment ARM, consider what could go wrong. If interest rates increase by three percentage points, what will your monthly payment look like? If housing prices fall by 10 percent in your area, will you find yourself underwater if you need to sell?

Reset your expectations
Face it, nobody needs to buy a 4,000-square-foot house or live in a particular neighborhood. Don't change your mortgage to suit the home you want to buy; change the home to suit the type of mortgage you can afford.

Or consider renting (temporarily).
Yes, real estate is a great long-term investment. But in some markets around the country, you'll pay less to rent than you would pay for a fixed-rate mortgage for the same house.
Buying a home with no money down and a high-risk mortgage is simply speculating on the future of the local market -- and no market is immune from the occasional downturn.
Just how crazy are crazy mortgages? Check these out:

Interest-only mortgage
How it works: In the first three to 10 years, your payments cover only interest, not principal.
The risk: When the interest-only term is up, your payments could increase so much that you can't afford your mortgage. Right for you if...You plan to move before the term ends, or you can count on earning more money soon.

Option- or flexpayment ARM
How it works: You choose what to pay every month: the standard principal and interest, only interest or a minimum that's less than what's needed to cover the interest.
The risk: If you make minimum payments, the rest of that month's interest is tacked on to the loan balance , so you could easily end up owing more than your home is worth.
Right for you if...You need the flexibility to make smaller monthly payments once in a while -- but only once in a while.

40-year fixed mortgage
How it works: You pay the loan off over 40 years instead of the usual 15 or 30.
The risk: You will pay more interest over the term of the loan. Plus, it takes a loooong time to build equity. Right for you if...You can't afford a shorter-term loan but don't want to take on a lot of interest-rate risk.

Piggy-back loan
How it works: By taking out two loans (a traditional mortgage and a home-equity loan or line of credit for the 20 percent down payment) you can avoid private mortgage insurance.
The risk: If the price of your house drops, you have no equity cushion, leaving you at risk of owing more than your home is worth. Right for you if...You have money saved for a down payment but fall a little short of 20 percent.

No-doc or low-doc loan mortgage:
How it works: This loan lets you borrow without proving you meet the usual income requirements and, in some cases, without documenting your income at all. Most lenders expect you to have a credit score of at least 620. The risk: Borrowing more than you can afford. Plus, depending on your credit score and how much documentation you provide, the rate may be one-half to three points higher than an equivalent full-doc loan. Right for you if...You don't earn enough to qualify for a normal loan (say, if you're starting a business), but you know you won't have trouble making the mortgage payments.

2005-08-16T11:41:00.000-05:00

From the National Association of Realtors
Affordability Index Down, But Still Favorable in 2Q(August 3, 2005)
-- General housing affordability conditions remained favorable but declined in the second quarter, largely the result of higher home prices, according to the NATIONAL ASSOCIATION OF REALTORS®.NAR’s composite Housing Affordability Index was 120.8 during the second quarter, down 12.4 percentage points from 133.2 in the first quarter, and was 11.5 points below the second quarter of last year when it stood at 132.3. A higher median home price and an increase in the average effective mortgage interest rate negated an increase in family income.The index shows a median-income family had 120.8 percent of the income needed to purchase a median-priced existing home, which was $208,500 in the second quarter. The typical family, earning $56,917, could afford a home costing $251,900 in the second quarter. This index measures affordability factors for all homebuyers making a 20 percent downpayment, with an index of 100 defined as the point where a median-income family has the exact amount of income needed to purchase a median-priced existing home.David Lereah, NAR’s chief economist, says the median home price in the second quarter was 13.6 percent higher than a year earlier. “The strong rate of home price appreciation caused some erosion in affordability conditions, yet it hasn’t dampened the market because the second quarter was a record for existing-home sales,” he says. “Since mortgage interest rates are still so low, housing affordability conditions remain historically favorable—there’s still headroom in this market.”NAR President Al Mansell of Salt Lake City says the national index masks widely varying conditions around the country. “We find excellent housing affordability conditions in most of the Midwest and South, but there are challenges in high-cost areas—concentrated in parts of the Northeast and West,” he says. “Even so, the fact that we continue to set sales records demonstrates the strength of homeownership as a priority and as an investment.”According to the Federal Housing Finance Board, the average effective mortgage interest rate for existing homes was 5.83 percent during the second quarter, up from 5.77 percent in the first quarter; the rate was 5.73 percent in the second quarter of 2004. This is a weighted average interest rate between fixed and adjustable loans, including the cost of points, and represents a true bottom-line mortgage cost.Affordability for first-time homebuyers also declined in the second quarter, falling to an index 70.1 from a reading of 76.8 in the first quarter; it was 7.0 points below the second quarter 2004.The association’s First-Time Homebuyer Affordability Index shows a typical first-time buyer household, aged 25 to 44, with an income of $32,433, had 70.1 percent of the income needed to purchase a typical starter home in the second quarter with a 10 percent downpayment. The median starter-home price was $177,200, during the second quarter; the typical first-time buyer could afford a home costing $124,200.“The index number doesn’t tell the whole story,” Mansell says. “For example, our survey data shows the median downpayment by first-time buyers is only 3 percent, and more than four out of 10 are purchasing with no money down. In addition, about a quarter of first-time buyers who make downpayments are receiving gifts from their parents.” When the index was created in the early 1980s, the median first-time buyer downpayment was 10 percent.—NAR

2005-08-16T10:39:00.000-05:00

The Realtor RacketAugust 12, 2005; Page A8
Why are Governors and state legislatures enacting regulations to make buying and selling homes as expensive as possible?
We ask this question because in recent weeks three normally level-headed Republican Governors -- Matt Blunt of Missouri, Rick Perry of Texas and Bob Riley of Alabama -- have signed into law legislation that protects Realtors from discount competitors.
About a dozen other states have also buckled to the National Association of Realtors lobby. They've effectively become partners in what looks suspiciously like a price-fixing scheme, whereby discounters are prevented by law from charging fees below the industry norm of 5% to 6% of the home sales price. The financial victims of this cartel are middle-income home buyers and sellers who are required to pay brokerage fees that can easily be several thousand dollars above a competitive market price.
Real estate brokers are under increasing price pressure from Web-based home-buying services and other discount brokers. With state lawmakers so often bellyaching about the decline in "affordable housing," one would expect politicians to salute these low-fee entrants to the market.
Instead, state legislatures and real estate commissions -- which happen to be populated by Realtors -- are enacting laws that make price competition illegal and thus treat Realtors as if they are members of a closed shop union.
The Realtors argue with a straight face that their political efforts are somehow in the interests of the home-buying public. Maybe we're missing something here, but in almost every other consumer industry -- booksellers, retailers, home appliances, insurance, banking, stock brokers -- the introduction of Internet and discount sellers has been a phenomenal financial benefit to customers. Discount airlines have cut airfares by 60% or more, to the economic benefit of everyone with the exception of the incumbent competitors.
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Economists call this process of squeezing out transaction costs "disintermediation." If any industry is ripe for this, it is the $70 billion-a-year real estate brokerage market. Yes, fees have fallen modestly to about 5.1% on average in recent years. But a new study by the Brookings Institution and American Enterprise Institute concludes that in an unimpeded free market, fees should be dropping much faster -- particularly amid a real estate boom that has doubled home values over the past decade. Many, if not most, of the services that Realtors provide don't vary with the sales price, so the percentage fee should fall as home price rises.
The problem is that state lawmakers are squashing such competition through two types of laws. First, they make it illegal for brokers to provide rebates on their commissions, which is an overt impediment to price competition. So, for example, LendingTree.com is prevented under these laws in about 10 states from continuing its popular practice of providing several thousand dollars of rebates and coupons at Home Depot to homeowners who use its real estate services. Discount real estate agents would also be prohibited under many of these laws from advertising their lower prices in newspapers.
The second legal device used to restrain trade are "minimum service requirements," which prevent real estate brokers from providing limited services to home sellers for a negotiated fee. These rules outlaw the increasingly popular choice of home sellers who contract with an agent to list their homes for a flat fee of typically around $500, but then handle all the other aspects of the home sale themselves in order to save $5,000 to $10,000 in additional fees.
More than a dozen states (see nearby list) have enacted these requirements, which are analogous to telling McDonald's that it can sell french fries only if the customer also buys a hamburger and Coke. We'll also note the supreme irony that states and the federal government sued Microsoft for illegally "bundling" its software, whereas in the real estate market the states are requiring bundling. In either software or real estate, the choice should be up to the individual sellers.
In some states, real estate agents collude to boycott homes that are being sold by agents who provide commission discounts. This practice is a clear breach of the fiduciary duty of the agent to find the best home at the lowest price for clients. Instead, the brokers are in effect finding homes for their clients that will afford them the highest fee structure. To our knowledge, neither the National Association of Realtors nor the state real estate commissions have ever sanctioned a real estate agent for this breach of ethics.
How large is the restraint of trade rents in this industry? One back-of-the-envelope way to quantify the costs to consumers is to compare the 5.1% standard fee in the U.S. to the industry average in other countries, which is estimated at about 3.6%. This means Americans are paying about $20 billion a year more for real estate services -- or about $3,000 on an average priced home -- than are home buyers in other nations.
In its own internal documents, the Realtors association acknowledges that the purpose of its state lobbying is to keep competition out and fees high. In an April 22 memo to its state affiliates, the national office urged members to keep agitating for "state laws that are designed to replace competition with regulation." The memo added that "Realtors have the right to lobby for legislative and regulatory action -- even if the effect of such action would be anti-competitive."
In response to a recent U.S. Justice Department complaint against a Kentucky Real Estate Commission policy that prohibited brokerage rebates and "other inducements to attract customers," the Realtors also acknowledged that these laws are intended to keep prices as high as possible.
The brokers admitted that the policy "inhibits free trade" but defended the regulation by arguing that it was necessary to "avoid a bidding war" and to protect against a "lessening of profits." And this was their defense. The Kentucky Real Estate Commission reversed itself, though the brokers no doubt will now scurry off to the state legislature to get a new law enacted.
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The Realtors have the First Amendment right to lobby for such anti-consumer legislation. But let's please dispense with their pretense that these laws are intended to "assure that the market for the sale of real estate functions efficiently and in the interests of buyers and sellers."
We have nothing against real estate agents or their trade. In fact, we think the Justice Department is wrong in its recent antitrust complaint demanding that the National Association of Realtors allow online sellers access to its Multiple Listing Service. The listing service is a privately owned data base, not a public utility, and the Realtors should have the right to share it with whomever they wish.
However, with their lobbying for state-imposed restraints of trade, the Realtors are the ones doing financial damage to millions of home buyers and sellers. We don't know who is more at fault here: the Realtors who maintain that such protectionism benefits consumers, or the pliant state lawmakers who actually believe them