Items of Interest IS THE MESSENGER TO BLAME OR IS THE MEDIUM THE MESSAGE The housing market is horrible in most parts of the country, says the chief executive of the luxury home builder Toll Brothers, and he fears it will not get better until newspapers stop saying how bad it is, according to the New York Times. For the quarter that ended Oct. 31, the company said sales fell 36 percent, to $1.17 billion and that customers backed out of 39 percent of their orders, the highest rate ever. Robert I. Toll, the chief executive, handed out grades for 37 markets that the company operates in, and most got a mark of F or worse. The lowest grade went to Las Vegas and Tampa, Fla. He said a survey of Toll customers who canceled contracts showed that only 11 percent reported trouble getting mortgages. More either had personal financial problems or were unable to sell the homes they already owned. "People who just wanted to walk" accounted for 17 percent of the cancellations, he said. "Translation, they've read one too many Times articles, and decided now is not the time to buy a home," he said. Nearly all the decent grades went to markets in and around New York City, while some of the worst grades were given to once-hot second-home markets. The best grade, B-plus, went to Toll's "city living" apartment projects in the New Jersey suburbs of New York, while similar projects in the city received a B, as did Princeton, N.J., and the states of Delaware and Connecticut. CREDIT RATING AGENCIES SAY ONE THING, DO ANOTHER "Piggyback" credit-score-inflation schemes for mortgage applicants haven't been reined in, despite industry pledges to do so at the end of the summer, observes Kenneth R. Harney in the Washington Post. As a result, lenders continue to be misled into treating loan applicants with poor credit as prime-credit candidates. Fair Isaac, developer of the FICO score widely used for home-loan underwriting, confirmed that its "FICO '08" scoring model is not yet available at the three national credit bureaus. The new model, announced with fanfare in June as an antidote to piggybacking, was to have been activated in September at one of the bureaus, Experian. But Experian says it has no firm time table to make the model available. The two other bureaus, Equifax and TransUnion, are not scheduled to receive the model until next year. The piggybacking problem involves Internet-based firms that "rent" high-quality credit account histories to people with bad credit. FED RATE CUTS HAVE NOT TURNED OUT WELL FOR BORROWERS The Fed
has trimmed a total of three-quarters of a percentage point from
short-term rates in recent weeks, but rates on certain types of
borrowings, including home-equity loans and auto loans, remain
stubbornly high, notes the Wall Street Journal. Behind the discrepancies
is continuing tightness in credit markets, where many banks raise
much of their capital. Instead, banks remain especially eager
THE FED NOTICES TIGHTER LENDING STANDARDS More banks are tightening lending standards for home buyers - even those with good credit - and raising borrowing costs for larger businesses, according to the Federal Reserve's latest survey of banks' senior loan officers, reports to the Wall Street Journal. About 40 percent of banks said they tightened terms for prime mortgages in the prior three months for people with the best credit records. That was up from about 15 percent in the previous survey in July. About 60 percent of banks said they tightened standards on home mortgages classified as "nontraditional," up from 40 percent in the previous survey. Responding to a special question in the latest survey, about 45 percent of banks said their volume of "jumbo-loan" originations - those above the $417,000 threshold set by regulators - had declined during the prior three months. NY ATTORNEY GENERAL EXPANDS APPRAISAL INQUIRY Andrew Cuomo, who last week launched a lawsuit against First American Corp. and a subsidiary charging appraisal inflation, has issued subpoenas to Freddie Mac and Fannie Mae seeking details about loans they purchased from banks and information about appraisal practices, reports Inman News. The seek information on the mortgage loans they purchased from banks, including Washington Mutual, and mortgage-backed securities associated with those loans. The lawsuit alleges that First American and subsidiary eAppraiseIT caved into pressure from Washington Mutual to use a list of preferred appraisers who inflated property appraisals, though First American said in a statement that the lawsuit "has no foundation in fact or law." The subpoenas also seek information about the "due diligence practices of Fannie Mae and Freddie Mac," the appraisals and values by the originating lenders, and policies and procedures relating to valuing properties and appraisals, according to Cuomo's office. In letters to Fannie Mae and Freddie Mac, the attorney general stated that the ability of lenders to sell their mortgage loans into the financial markets "has the effect of making the lender less vigilant against risky loans since any risk is quickly transferred to the purchasers of the loans." Fannie Mae spokesman Brian Faith said the appraisal practices described in the attorney general's complaint against First American "would violate Fannie Mae's requirements for loans we purchase from lenders or securitize." For its part, Freddie Mac said "appraisals are fundamental to our effective credit risk management as well as to the long-term success of home buyers." HERE’S ONE REASON FOR TIGHTER LENDING STANDARDS In a growing percentage of cases, government-linked bodies are the ones putting up the cash for home loans and taking the risk that a borrower won't pay the money back, according to the Wall Street Journal. Borrowers now generally must meet tighter standards familiar from earlier years, such as proving their income and making a down payment of 10-20 percent. Among U.S. mortgage securities offered to investors, the portion guaranteed by Fannie Mae and Freddie Mac has rebounded to around 72 percent in October from as low as about 41 percent in 2005 at the height of the housing boom, when Wall Street gobbled up loans with no federal backing, according to trade publication Inside Mortgage Finance. Countrywide says more than 80 percent of the loans it is making now are eligible for sale to Fannie or Freddie, up from about one-third last year. Before this summer's credit squeeze hit, Countrywide raised money to fund its lending through short-term borrowings such as selling commercial paper. With that spigot largely closed, Countrywide also is leaning on the federal Home Loan Bank system for credit. The company's borrowings soared to $51 billion on Sept. 30 from $28 billion nine months earlier. At the same time, Countrywide is relying more on the FDIC by heavily promoting certificates of deposits, with above-market rates, insured by that federal agency. MORE BORROWERS ARE REFINANCING WITH FIXED-RATE LOANS Freddie Mac says that in the third quarter of 2007, 85 percent of borrowers who originally had a one-year adjustable-rate mortgage (ARM) chose a new fixed-rate mortgage when they refinanced, and 82 percent of borrowers that initially had a hybrid ARM refinanced into a fixed-rate loan. The comparable numbers in the second quarter were 86 percent and 85 percent, respectively. Also, 58 percent of borrowers who originally had a 15-year fixed-rate loan switched to a 30-year fixed-rate mortgage when they refinanced in the third quarter, the highest percentage since the start of quarterly reporting in 2002. The rate was 53 percent in the second quarter, and only 8 percent in the third quarter of 2002. Conversely, only 5 percent of borrowers with 30-year fixed-rate loans chose 15-year fixed-rate when they refinanced in the third quarter, the lowest level since the first quarter of 2002. LOAN APPLICATION VOLUME CONTINUES TO RISE For the week ending Nov. 9, volume was 5.5 percent higher on a seasonally adjusted basis than one week earlier, reports the Mortgage Bankers Association. On an unadjusted basis, the increase was 4.2 percent; it was up 21.8 percent versus the same week one year earlier. Refinancings grew 6.4 percent from the previous week and seasonally adjusted purchase applications, by 4.8 percent. On an unadjusted basis, purchase loans increased 2.1 percent. The refinance share of mortgage activity rose to 50.2 percent of total applications from 49.1 percent, while the adjustable-rate mortgage (ARM) share increased to 15.5 from 14.2 percent. FORECLOSURES ARE HURTING NEIGHBORS NOT IN DEFAULT Subprime foreclosures are resulting in a severe drain on property values - even for families paying their mortgages faithfully every month - and will cause 44.5 million homes to lose a total of $223 billion in wealth over the next few years, most of it in 2008 and 2009, according to a report by the Center For Responsible Lending (CRL), says Realty Times. In addition to foreclosed homeowners, the $223 billion drain - which amounts to $5,000 per nearby household - will have a severe impact on many cities and communities because lower property values translate into less revenue to fund schools, hospitals and other vital community organizations at the county level. The research finds that, as a result of subprime foreclosures, 42 counties and about half the states will lose more than $1 billion each in reduced property values. NEW REVERSE MORTGAGE PRODUCTS WARRANT ANALYSIS Nearly a dozen large banks and mortgage lenders have launched reverse-mortgage products with lower fees and larger payouts, notes the Wall Street Journal. One lender has reduced the minimum age requirement to 60 from the standard 62; others are making loans on second homes and vacation rentals. "Jumbo" reverse mortgages - for houses valued at as much as $10 million - are becoming more common. The product is evolving from meeting basic needs to fulfilling the desires of a new generation of retirees, from funding a vacation getaway or a recreational vehicle to renting a Paris pied-a-terre. The new products - and new bells and whistles - mean that homeowners considering a reverse mortgage are facing more homework than ever before. There are two questions they should ask first: What index does the loan use and what are the fees? RATES ARE FLAT THIS WEEK The 30-year fixed-rate mortgage (FRM) was unchanged from last week's and last year's 6.24 percent. The 30-year FRM has not been lower since the week ending May 17, 2007, when it averaged 6.21 percent. The 15-year FRM this week was 5.88 percent, down from 5.90 percent the prior week and from 5.94 percent at this time last year. It has not been lower since the week ending May 10, 2007, when it averaged 5.87 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were 5.96 percent this week, up from 5.89 percent last week but lower than last year’s 6.04 percent. One-year Treasury-indexed ARMs averaged 5.50 percent this week, unchanged and below 5.53 percent a year ago. It has not been this low since the week ending May 17, 2007, when it averaged 5.48 percent. "Higher productivity growth in the third quarter coupled with a larger-than-expected decline in consumer confidence in November sent mixed signals to the current state of the economy," commented Frank Nothaft, Freddie Mac vice president and chief economist. "As a result, there were no definite upward or downward pressures on mortgage rates this week." HOUSE PASSES BILL ON PREDATORY LENDING The controversial legislation amends some provisions to address criticism that the bill could worsen the credit crunch, but strengthening others, according to Inman News. The Mortgage Reform and Anti-Predatory Lending Act of 2007 would create a national licensing system for mortgage loan originators and require lenders to determine that borrowers have a reasonable ability to repay a loan. The bill also would create limited liability for companies that bundle mortgages for sale to Wall Street investors. Although the Bush administration opposes many of the bill's provisions, the 291-127 vote reflects bipartisan support. The House bill's most contentious restrictions include a ban on incentive payments brokers and loan officers receive when they place borrowers in high-cost loans as well as prohibitions on prepayment penalties used to discourage borrowers from refinancing their loans. WHERE THERE'S SMOKE, THERE'S IRE The New York Times has documented what it terms "a growing movement" to restrict smoking in apartments and condominiums that is having some success. This year, two California cities passed laws restricting smoking inside multi-unit residential buildings. In the last 14 months, two large residential real estate companies with apartment complexes in several states banned smoking inside units. Thousands of smaller apartment complexes across the country have taken similar steps, said Jim Bergman, founder of the Smoke-Free Environments Law Project, which is based in Michigan. And about 60 public housing authorities across the country have smoke-free policies, compared with fewer than 10 three years ago, Bergman said. Edward Sweda Jr., senior lawyer at the Tobacco Control Resource Center of the Northeastern University School of Law in Boston, says he has studied the legal issues of secondhand smoke for 28 years and knows of no law in the United States prohibiting residential property owners from banning smoking. At least 27 lawsuits have been filed since 1991 over smoking in multiunit housing, and judges have often sided with the nonsmoker, Sweda said. Researchers have analyzed whether smoke can be contained in various kinds of apartment buildings and found that the percentage of shared air generally ranges from 10 percent to 50 percent, with upper floors most at risk, said James Repace, a biophysicist who performs research on secondhand smoke in collaboration with the Tufts University School of Medicine. WHERE WILL IT EVER END With pet owners demanding increasingly elaborate goods and services for their animals, one of the latest strategies in the $40.8 billion pet industry is taking its cue from the genius idea behind hawking plastic containers: displaying the products in living rooms and inviting friends and neighbors to come over and check them out, says the Washington Post. Premised on the assumption that busy people will gather for a shopping opportunity cloaked in a social event, direct-sales companies such as Shure Pets and Petlane are selling their paw balm and pesticide-free pet food over artichoke dip and a glass of pinot. The evenings may begin with neighborhood gossip but typically end with conversations about cherished pets and how to pamper them. According to the American Pet Products Manufacturers Association, Americans are spending twice as much on their pets as they did a decade ago and seeking out more than the usual offerings at pet superstores and grocery aisles. "As we continue to humanize pets, we will do more and more things that are traditionally human with them," says Bob Vetere, president of the manufacturers association, which tracks statistics such as how many people buy Christmas gifts for their pets (56 percent of dog owners, 42 percent of cat owners). "They have birthday parties for pets, engagement parties for pets. I have even seen weddings for pets." He does not say who he has seen sit - SIT! - on which side of the aisle (dog run?). HOT TRENDS IN THE KITCHEN COULD MEAN CHAMELEON WALLS The kitchen
will continue to be a central gathering place, but on a more social
level, as it has becomes IT’S GETTING HARDER THAN EVER TO KEEP UP WITH THE JONESES Yet another restaurant appliance has gone residential, the Washington Post reports. Makers of the TurboChef electric wall oven, now available for the home cook, say it can roast a 12-pound turkey in 42 minutes and bake a batch of biscuits in 90 seconds. A two-oven combo (TurboChef on top, conventional/convection oven below) is $7,895. A single TurboChef, available next year, runs $5,995. It comes in red, blue, orange, ivory, white, charcoal or stainless steel; the bottom is stainless only. A fan circulates hot air from 153 jets at speeds up to 60 mph, cooking food quickly while preserving moisture, says Leslie Hoffman, a spokeswoman for TurboChef Industries. For a thick steak or other dense protein, the oven's microwave function also kicks in. TAKE TIME TO PLAN ANY MOVE TO A RETIREMENT LOCATION David Savageau, the author of Retirement Places Rated: What You Need to Know to Plan the Retirement You Deserve, in which he evaluates 200 potential retirement locales, says there are some important factors that people often overlook when looking for a place to retire. According to BusinessWeek Online in Realtor magazine, they include: health care, forgetting, for example that popular retirement places such as the Outer Banks of North Carolina, don't have hospitals nearby; employment potential, particularly true near military bases where military spouses generally aren't demanding about pay; impact on taxes in different states; potential for a clash of cultures, say, by moving from a blue state to a red state and thereby making a retiree feel like a fish out of water; and crime rates. NEW REGS ON IDENTITY THEFT WILL DEBUT NEXT YEAR Pre-emptive federal "red flag" regulations, designed to strike at identity theft in its earliest stages, roll out next year, according to Realty Times. Beginning Jan. 1, with all federally regulated financial institutions ordered to be in full compliance by Nov. 1, the so-called "red flag" provisions of the Fair and Accurate Credit Transactions Act of 2003 (FACTA) require that financial institutions and creditors develop and deploy an Identity Theft Prevention Program for combating ID theft on new and existing accounts. Each institution must develop a program that will Identify relevant patterns, practices and specific forms of activity that are "red flags" signaling possible ID theft; include a mechanism to detect red flags identified by the program; quickly respond to detected red flags in a way to both prevent and mitigate ID theft; and be updated regularly to reflect changes in real world risks from ID theft. YET ANOTHER LIST OF BEST CITIES Taking into account access to arts, leisure and entertainment offerings plus a low cost of housing, Forbes magazine has come up with a ranking of the nation's 50 largest metros, notes Realtor magazine. The result was a top 10 ranking of most affordable places to live well. The top 10 were Minneapolis, Indianapolis, Cincinnati, St. Louis, Milwaukee, Dallas, Pittsburgh, Houston and Columbus, Ohio. Atlanta was the only one on a coast. THOSE HUNGRY BLACK BIRDS ARE CIRCLING Real estate vulture funds are scouring the U.S. for distressed housing developments and land sites being sold at cheap prices by homebuilders looking to clean up their balance sheets, observes thestreet.com. These funds, which target internal rates of return greater than 20 percent, are not betting on any immediate recovery in housing. Instead, they're seeing profit in buying the housing sites today - many of which are selling at 50 percent or greater below their peak 2005 values - with the aim of flipping them or selling homes at the projects in two years or more. "We're seeing plenty of opportunities. The market changed in the last 90 days," says Rich Knowland, a partner with Pacific Terra Holdings, a fund that is looking for land opportunities on the West Coast. One major player looking for distressed land deals is Starwood Capital, a Greenwich, Conn., private-equity fund. Starwood Capital recently formed a new joint venture called Starwood Land Ventures to target distressed homebuilder projects. "The timing for making investments is very good," says John Peshkin, CEO of Starwood Land Ventures. He agrees that opportunities are starting to open up after land prices having been generally stagnant over the past year. Starwood is mostly looking at the previously "overheated" housing markets of California, Arizona, Las Vegas, Florida and the Mid-Atlantic for deals. Peshkin says recovery is still two to three years away and warns a recovery will not result in an immediate return to peak prices once again. IF YOU’RE PLANNING AN OPEN HOUSE, DON'T FAIL TO READ THIS A pair of brazen thieves - one possibly dressed in drag - have struck at least four open houses in one month, according to the New York Post. Police said the thieves have made off with plenty of big-ticket booty, including several diamond rings, a fur coat, a Coach bag, a Tiffany clock and even a bottle of Veuve Clicquot. Their latest larceny was on Sunday at a three-bedroom, three-bath duplex on Broadway near West 88th Street that's going for close to $1.9 million, according to the police. In one photo, captured on surveillance camera in an elevator, it appears the robber is adjusting a wig. The other three robberies were on Oct. 28, when the pilfering pair - again posing as potential buyers - hit up three open houses in three hours on the Upper East Side. They started on East 96th Street, right near Fifth Avenue, at noon, police sources said. After ripping off the owner's designer bag and pricey clock, they hurried along to an open house at 1 p.m. on East 82nd Street. There they stole a dress, earrings and the tasty bubbly, before heading to a 2 p.m. showing on East 78th Street near Third Avenue. OCTOBER SALES AND PRICES REMAIN STRONG The number of sales in October was well above the number recorded during the corresponding month a year earlier, although a bit behind the huge volume of sales recorded over the summer, according to a tabulation of co-op and condominium transactions that were filed with the city through the first seven days of November, says the New York Times. The number of sales of trophy properties costing more than $4 million increased sevenfold from October 2006. Prices also remained high, close to the record prices recorded over the summer, and well above the level in October 2006, when the market was in deep doldrums and there were worries that the market had begun to turn. Median prices were 16 percent higher last month than a year earlier, and average prices were 45 percent higher than during that slow October a year earlier. Inventories of unsold co-ops and condos were up from the summer but remained low in October, 22 percent below the inventory reported a year earlier, according to figures provided by appraisal executive Jonathan Miller. So far, city records show that 53 properties closed for more than $4 million in October. Last month, two researchers at the consulting firm Business360, John Marchant and Roger Sharp, analyzed long-term trends in Manhattan real estate prices and predicted that Manhattan prices would continue to rise 5 percent a year for the next three years. The pair cited figures showing an expanding base of wealth in New York City: The wealthiest 20 percent of Manhattan residents - the ones who can afford to buy high-end apartments at current prices - have a median income of $350,000, or 50 times the income of the bottom 20 percent. And they concluded that home prices are still catching up from the steep declines in the 1990s. THIRD QUARTER PRICES JUMPED BY 20 PERCENT IN A YEAR The average
sale price of all homes in New York City, including condominiums,
cooperatives and one- to three-family dwellings, jumped by 20
percent in the third quarter compared with the same period DEVELOPERS ARE TRIMMING CONDO AMENITIES Instead of trying to tempt buyers with a long list of luxurious amenities, developers are trying to provide only those that buyers see as essential, observes the New York Times. The new standard calls for a gym, a party room and outdoor space such as a common roof deck, if possible. Some amenities have a life span all their own. In the 1980s, buildings with swimming pools were all the rage, and they made a comeback in the most recent boom. But there is a downside. "When you put a pool in, everyone says it's great," said Allen Goldman, president of SJP Residential Properties. "Then, after it's in, they say, 'My God, why are the condo charges so big?' A pool is incredibly expensive to maintain. Then they say, 'No one is ever there.' And you know what? No one ever is." As developers take a second look at the bottom line, they are considering not just amenities but also escalating construction costs and the lack of buildable land in Manhattan. At buildings in up-and-coming areas - Harlem, say, or Long Island City, Queens - amenities can still serve as a lure, and buyers may rely on in-building services if they are in short supply in the surrounding neighborhood. AND THEY ARE SCALING BACK FUTURE PLANS Developers seem to be significantly reducing the number of new condo developments planned for the city, according to the Real Deal. The number of new condominium offering plans submitted to the office of the state attorney general was down 31 percent citywide for the first nine months of the year compared with the first nine months of 2006, going from 20,877 units to 14,351. The numbers don't reflect projects now starting sales, but do indicate what the development pipeline will look like in 12 to 24 months and hint at which areas might be prone to gluts in the future. Manhattan showed by far the greatest drop in new condo filings, with a 48 percent decline in offering plans submitted during the three quarters of this year compared to last year. In Manhattan neighborhoods, Lower Manhattan showed the most significant drop in new filings of any area, while Harlem remained on pace to see the most new developments of any location in Manhattan. THE NUMBER OF DEADBEAT CONDO OWNERS IS SEEN TO SWELL A precipitous rise in the number of condominium owners who are defaulting on their common payments, an important indicator of future foreclosures, is being reported, according to the New York Sun. Lawyers representing dozens of condominium boards in some of the city's wealthiest neighborhoods say they are seeing these default cases increase as much as 25 percent this year. "There has been a very substantial increase of cases involving condominiums," a lawyer who is the president of the Council of New York Cooperatives and Condominiums, Marc Luxemburg, said. Monthly common charges, which include general upkeep costs for the common area of a building and often reach into the thousands of dollars, can be the first indicator of foreclosures because homeowners stop paying them if they are having trouble with their mortgages. During the last housing downturn, in the early 1990s, there was a similar increase in defaults preceding numerous foreclosures, Luxemburg said. "This could be an indication that something larger is going on," a partner at Breier Deutschmeister Urban & Fromme, Lisa Urban, said. Last year at this time, she had one such case of a default on common charges; now, she has seven. A partner at the firm Belkin Burden Wenig & Goldman, Aaron Shmulewitz, said he has seen a 25 percent increase since the beginning of the year. MAYBE THEY SHOULD START CALLING IT THE GOLD LINE The High Line may be the city's newest jewel - and for Manhattan developers, the rusting rail trestle has been pure gold, according to the New York Post. From the Meatpacking District north through West Chelsea, the cachet of a park in the sky has sparked an estimated $900 million in new residential and commercial development in the city's hottest neighborhood. At least 30 new projects - including 10 already under construction - are on tap in the neighborhood between 10th Avenue and the Hudson River. The High Line's presence, with its cutting-edge landscape design alongside a bevy of art galleries has also attracted some of the world's most recognized architects, turning the neighborhood into an enclave of state-of-the-art building design dubbed "Architects Row." Frank Gehry, Robert A.M. Stern, Jean Nouvel and Renzo Piano have designed projects including corporate headquarters, hotels, residential towers and a new gallery for the Whitney Museum at the southern end of the High Line, at Gansevoort Street. Robert Hammond, co-founder of Friends of the High Line, said his group has estimated that the new development will generate $260 million in tax revenues over the next 20 years. CONDO SALES IN EMERGENT AREAS APPEAR TO BE VULNERABLE While much of Manhattan appears to be largely insulated from the subprime loan fallout, some of the city's emergent areas may show a greater impact from the nationwide crisis, according to The Real Deal. Data collected by the publication show apartment resales and new development in "fringe areas," including Harlem and the Financial District, may be having more trouble than anticipated just months ago. But some areas, such as Long Island City in Queens and Williamsburg in Brooklyn, are holding up better than others. When it comes to specific neighborhoods, data provided by residential real estate Web site StreetEasy.com have shown that Harlem, where an onslaught of new development has been in the works, may be seeing some of the biggest price cuts in Manhattan. The Financial District is next on the list. In Harlem, new development Casa Brava, at 232 East 118th Street, sold well until July, but its three remaining listings have gone through three price cuts, falling an average of 19 percent. From July 27 to Sept. 25, the latest data available, 3.62 percent of Harlem's 636 listings were down 5 percentage points in their asking price, and asking prices of 1.57 percent of its listings dropped 10 percentage points. Some of the New York neighborhoods faring the worst are ones just starting to find their bearings, such as Crown Heights and Sunset Park/Greenwood in Brooklyn, says The Real Deal. Both neighborhoods have seen hefty decreases in the average asking prices of their listings - and both have lots more new development in the pipeline. Of all the boroughs, the Bronx seems to be an anomaly, suffering the worst plunges in pricing. According to data from StreetEasy.com, Riverdale, the wealthiest neighborhood in the Bronx, has seen average asking prices fall by 5 percentage points for 7.58 percent of its 132 listings, and by 10 percentage points for 3.03 percent of its listings. BEN BERNANKE IS STILL LOOKING FOR THE BOTTOM The chairman of the Federal Reserve told Congress that the economy was going to get worse before it got better, reports the New York Times. He said the battered housing market had yet to hit bottom, that delinquencies and foreclosures were likely to rise and that the depression in home-building was "likely to intensify." David Rosenberg, Merrill Lynch's chief economist for the United States, predicted that the housing market would not hit bottom by the end of next year. FORTUNE LISTS 25 MARKETS THAT ARE POISED TO FALL The magazine
says one way to know where housing prices are headed is to look
at their relationship to rents. As Fortune's data show, big declines
are needed to bring prices and rents back in line. No matter how
far prices get unhinged in a speculative craze, those basic forces
eventually regain their grip, adds Fortune. In most markets people
won't lay out much more in monthly costs to own a house or condo
than they would to rent a similar property unless they expect
a huge profit when they sell. The INDUSTRY GROUP RETAINS FAITH IN HOUSING AS INVESTMENT While the latest S&P/Case-Shiller home price statistics for 20 of the nation's largest metro markets showed a 4.4 percent year-over-year decline, the National Association of Home Builders (NAHB) contends that those markets appreciated in value by an average of more than 50 percent over the past five years. Among the markets surveyed by S&P/Case-Shiller, which represent more than 40 percent of the U.S. population, four posted home price appreciation rates of more than 80 percent over the past five years while 11 registered gains of more than 45 percent. In Chicago, home prices declined 1.3 percent between August 2006 and August 2007 while posting a 34.2 percent gain for the five-year period between August 2002 and August 2007. Home values in Los Angeles fell 5.7 percent in the last year but are up 88.9 percent since 2002. In Miami, home prices dropped 7.8 percent between August 2006 and August 2007 while showing a price appreciation of 89.2 percent during the past five years. The same pattern holds true in Phoenix and Las Vegas, which each posted yearly declines of 8 percent and 7.6 percent, respectively. However, home values surged 80.2 percent in Phoenix during the past five years and 83.2 percent in Las Vegas. You can find comparison tables at nahb.org/generic.aspx?genericcontentID=84844. THIS APARTMENT HAS A HISTORY The co-op apartment that served as the office and sanctuary of late historian and author Arthur Schlesinger has gone to contract after only two weeks on the market, reports the Wall Street Journal. The prewar apartment of approximately 1,200 square feet at 455 E. 51st St., which had a $1.5 million asking price, has two bedrooms, a fireplace and river views. The unit is located across a courtyard from Schlesinger's main residence, where his widow Alexandra still resides. A resident of the building is said to be the buyer. A list of fax numbers of editors is still taped to a wall, where the two-time Pulitzer Prize winner wrote for the past 15 years. IS NEW YORK CITY HIS VICE Bruce Willis has bought the three-bedroom apartment of Donald Trump enemy Eugenia Kaye, who pitted herself against the large-haired real estate mogul's son at the tower, Trump Place's 220 Riverside Boulevard, reports the Observer. He paid $4.26 million, buying the 2,318-square-foot condo through the Bruce Willis Family Trust, but took out a $3.408 million mortgage. This is a modest place compared with his previous New York condos. Willis has reportedly been renting a Trump International condo on Central Park West that costs around $50,000 per month; two years ago, he sold a Trump Tower duplex at 721 Fifth Avenue for more than $14 million. Kaye paid $2,362,340 for her 220 Riverside Drive apartment in August 2003, thereby making nearly $2 million on the sale to Willis. Apparently, she knows rich people when she sees them. OATSIE FORESAKES D.C. FOR NEWPORT, R.I. Washington hostess Marion Oates "Oatsie" Charles has sold her Georgetown home of more than 50 years for $7 million, notes the Wall Street Journal. On R Street, the 1850s Italianate brick house on 0.8 acre had been listed at $8.3 million. It was decorated with photos of the socialite with several U.S. presidents including John F. Kennedy. In an interview, the 88-year-old Charles, who has hosted Nancy Reagan among others, shrugged off her reputation as a party-giver: "My reputation as a hostess was due to the fact that I did it so seldom." Across the lawn from the three-story, five-bedroom house is a guest studio with a kitchen. HIS STREETS AREN'T MEAN Martin Scorsese departed and has now returned to his old neighborhood, says the New York Post. After selling the townhouse on East 62nd Street that he owned for 20 years, the Oscar-winning director has bought another vintage home just two blocks away. His new digs on East 64th Street, for which he paid $12.5 million, is a six-bedroom, six-bath renovated 1920s townhouse of approximately 7,000 square feet, with 10 rooms on five levels plus a finished basement. Features include an elevator, period details, lots of dark paneling and a chandelier in the third-floor master bedroom. The property also has a bricked garden on the first level and an English garden terrace on master-bedroom level. The seller is Harvey Schiller, who is president of the International Baseball Federation and previously served as executive director and secretary general of the U.S. Olympic Committee. Schiller was also president of sports for Turner Broadcasting. Scorsese and his fifth wife, Helen, sold their four-story residence with five bedrooms and six baths on East 62nd Street for $6.158 million last July. IT’S CHATEAU VERT FOR NICOLE KIDMAN She and Keith Urban have a contract at an undisclosed price to sell their home in Nashville, Tenn., after fewer than two months on the market, reports the Wall Street Journal. Oscar-winner Kidman - who starred in "Moulin Rouge!" - and her husband, the Grammy Award-winning country singer, wanted $2.45 million for the four-bedroom house on two acres. The 2004 house measures roughly 8,700 square feet, public records show. A trust purchased the property in 2005, for $1.72 million, according to the records. It has a large exercise room, recreation room and outdoor swimming pool. A PHILADELPHIA LAWYER CLEANS UP Despite the Miami area's real-estate woes, a penthouse located at South Beach's Setai condo-hotel has gone to contract for $24 million, breaking the city's record for a condominium. Andrew Barroway, a Philadelphia-area attorney, and his wife Elyse sold the unit, including furnishings. They'd bought the apartment unfinished for $9.5 million in 2004. The name of the buyer couldn't be learned. Taking up the 40th floor of the recently opened oceanfront resort, the roughly 6,000-square-foot apartment was listed for $29 million and has a separate butler's quarters, an outdoor pool and hot tub, and about 4,000 square feet of terraces. Over the Top No, this screed is not about penthouses. It's about décor that boggles the mind, the sort of over-the-top treatment encountered rarely but memorably. Owned apparently by a Russian aristocrat, the one-bedroom co-op just west of Park Avenue on the Upper East Side reeks of Old World charm, not that there's anything wrong with that. Let's say it will appeal either to someone with vision or someone who also hails from the old country. (In fact, the broker says that two buyers have shown serious interest, each of them from Russia.) First, the modest foyer: It features coppery satin drapery, mirrors and dramatic lighting, previewing the drama to come. Turn right and enter a 30'7" x 18'3" living room and dining area, where you'll find a beamed ceiling covered with leopard-skin print fabric and walls covered with tan suede. The one long wall without suede features an oppressive length of mahogany cabinets stretching from floor to ceiling. The hardwood floors are graced with an Aubusson rug, and wall sconces complete the picture of excessive luxury. Whether the space looks more like a bordello or bistro is open to question. The galley kitchen is the only room that is forgettable, dated and small as it is. But the baths, of which there are one and a half, present an irrepressible riot of mirrors - wall to wall and top to bottom. Think for a moment about the consequences. Is the ceiling mirrored as well? Might as well have been. Now to the 14' x 18' master bedroom, which is left from the foyer and down a claustrophobic hallway. It, too, was walls lined with custom cabinets and closets, these faced with burled maple. They're okay; the walls and ceilings padded with chintz fabric are, however, a bit much. Quite a bit much. At the far end of the bedroom is a doorway to the 200-sf terrace, where views of the backsides of surrounding buildings hurt the eyes. You can have all this for $1.5 million with maintenance of $1,630. The good news is that the lobby is being redecorated, and woe to the other residents of the pre-war building with 24-hour doorman if the owner of the apartment is on the committee. Unless over the top is the start of a new trend. Doubtful. Other Park Avenue properties listed by various brokers:
Upper West Side
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attract consumers' deposits, and are willing to pay savers handsomely
to keep the money coming in the door. At the same time, banks'
higher cost of raising capital is keeping many of them from lowering
rates on some kinds of loans. For borrowers, some lending rates
have declined in line with the Fed cuts, and consumers with home-equity
lines of credit and variable-rate credit cards should have already
seen some rate relief. But other loan rates haven't fallen as
quickly as would be expected. Rates on fixed-rate home-equity
loans, currently averaging 8.04 percent, have barely budged from
8.08 percent in July, according to Bankrate.com. Homeowners have
gotten some rate relief, though average rates on 30-year fixed-rate
conforming mortgages, which are typically influenced by rates
on 10-year Treasurys, haven't fallen as much as they would under
more normal circumstances. Keith Gumbinger, vice president of
mortgage-tracker HSH Associates, says mortgage-rate declines have
lagged behind those of Treasurys partly because institutional
investors are still skittish about mortgage risks and are demanding
higher premiums to hold the loans. Also, Treasury yields have
been falling more quickly as investors seek the safety of higher
quality investments. Lower rates could benefit some homeowners
with adjustable-rate mortgages that are soon to reset. 
the room of choice to entertain guests, according to something
called the Kitchens for Cooks Trend Report, issued by KitchenAid,
which, of course, just cannot be self-interested. Among other
key trends is an assertion that the work triangle is expanding
to provide additional room to welcome the help of a second person
when it comes to preparing meals. Also, the report says computer-chip
embedded products will lead to materials like chameleon wall surfaces
which change color on demand to match mood and weather. And heated
floors will recognize the walker, automatically adjusting room
temperature to suit that person's preferences close at hand. 
one
year earlier, according to the Real Estate Board of New York's
(REBNY) Third Quarter Residential Sales Report. The average sales
price in the city hit $782,000. Manhattan led the city's boroughs
with its sale price for all home types reaching $1.33 million,
up 17 percent in the third quarter versus a year earlier. Brooklyn's
average sale price was up by 8 percent to $621,000 and Queens'
average sale price increased by 6 percent to $503,000. Said REBNY
President Steven Spinola: "We see nothing to indicate the
market in New York City will cool anytime soon." The average
sales price for cooperative and condominium apartments in the
city in the third quarter was up 23 percent to $888,000 over the
same quarter in 2006. Manhattan again led the way, recording an
average price of $1.265 million, up 16 percent from a year ago,
and Brooklyn posted an increase of 19 percent with an average
sale price for the third quarter of $525,000. Prices for one-
to three-family dwellings across the city in the third quarter
rose 10 percent to $654,000 compared with the same period last
year. Brooklyn posted an 11-percent increase to $705,000, while
the average sale price in Queens rose six percent to $606,000.
ratio
of prices to rents "behaves much like price/earnings ratios
for stocks," says Yale economist Robert Shiller. "Like
P/Es, price-to-rent ratios are mean-reverting." In other
words, while prices soar from time to time, sending the ratio
to exceptional heights, sooner or later the relationship is bound
to return to its historical average. Prices in most markets will
fall by double digits over the next five years. Steadily advancing
rents will mitigate the price declines needed to make housing
broadly attractive once again - keeping in mind that people are
willing to devote a lot more of their income to shelter in New
York City than in Pittsburgh or Cincinnati.
In these classic cities, prices will still fall. But in most cases
the drops will be relatively modest, a projected 14 percent in
New York, 10 percent in San Francisco,
5 percent in Boston and 4 percent in Chicago.
The decline will also be slow and orderly, chiefly because it's
extremely difficult to build new housing in these areas. Sellers
will lower prices only grudgingly, keeping the supply of bargains
to a minimum. Manhattan, for example, largely escaped the invasion
of speculators. No less than three-quarters of its owner-occupied
housing stock consists of cooperative apartments governed by strict
boards that ban investors. Nor can buyers choose from a vast array
of fresh construction. About 4,000 newly built co-ops and condos
have been hitting the Big Apple market annually, says Jonathan
Miller of research firm Radar Logic. By contrast, more than 60,000
new homes and condos swamped the Phoenix area
last year, according to RL Brown Housing Reports. 
