Items of Interest THE FED STATES THE OBVIOUS According to the Federal Reserve Board's Beige Book, which was released Wednesday, here's where things stand in the nation: Residential real estate continued at a slow pace nationwide. Sales were down in most Districts, but mixed activity was noted in the Boston, Atlanta and Minneapolis Districts. Boston, New York, Cleveland, Richmond, Atlanta, Chicago, Minneapolis, Kansas City and Dallas noted decreases in housing prices. Inventories of unsold homes remained high in the New York, Atlanta, Kansas City and San Francisco Districts, but declined in Chicago and Minneapolis. Philadelphia, Richmond, Chicago and Kansas City reported relatively stronger demand for lower- and middle-priced "starter homes." THIRD-QUARTER PRICES SINK IN 80 PERCENT OF METRO AREAS Four out of five metropolitan areas recorded lower home prices in the third quarter than a year earlier, while existing-home sales fell in 32 states below the second quarter, according to the latest quarterly survey by the National Association of Realtors (NAR). In the third quarter, 28 out of 152 metropolitan statistical areas showed increases in median existing single-family home prices over the same quarter in 2007, four were unchanged and 120 metros experienced declines. Foreclosures and short sales accounted for 35-40 percent of transactions in the third quarter, pulling down the national median price of previously owned homes to $200,500, which is 9 percent lower than the third quarter of 2007. Total existing-home sales, including single-families and condo, rose 2.6 percent in the second quarter but remain 7.7 percent below one year earlier. "A pattern of sharply higher sales in areas with large price declines is well established," said Lawrence Yun, NAR chief economist. Median third-quarter metro area single-family home prices ranged from $65,800 in the Saginaw-Saginaw Township North area of Michigan to $650,000 in the San Jose-Sunnyvale-Santa Clara area of California. In the condo sector, metro area apartment prices posted a median of $210,800 in the third quarter, down 7.1 percent from $227,000 in the third quarter of 2007. Sixteen metros had annual increases and 41 areas had price declines. HOUSING STARTS AND PERMITS FALL TO RECORD LOWS Home builders reduced the pace of new construction and permit issuance in October to the lowest levels for any single month on record, according to the U.S. Commerce Department. Overall housing starts declined 4.5 percent to the slowest pace recorded for any month since the government started keeping track in 1959. Single-family starts declined for a fifth consecutive month, by 3.3 percent, the slowest pace since October of 1981. Multifamily starts fell 6.8 percent. BUYER UNCERTAINTY PUSHES DOWN OCTOBER SALES, PRICES Sales of previously owned homes - including single-family, townhomes, condominiums and co-ops - fell 3.1 percent, according to the National Association of Realtors (NAR). The drop was 1.6 percent below one year earlier. Single-family home sales declined 3.3 percent, unchanged from October 2007. Apartment sales eased by 1.8 percent, 12.0 percent lower than the previous year. Commented Lawrence Yun, NAR chief economist: "Many potential home buyers appear to have withdrawn from the market due to the stock market collapse and deteriorating economic conditions." Total housing inventory at the end of the month slipped 0.9 percent, representing a 10.2-month supply, up from a 10.0 months in September. The national median existing-home price for all housing types was $183,300 in October, down 11.3 percent from a year ago, largely because of distress sales. The median for single-family homes was $181,800, down 11.2 percent from a year ago. The median apartment price was $193,000 in October, 13.0 percent below October 2007. LUXURY HOME BUILDERS ARE WITNESSING FROSTBITE From Malibu to Manhattan, would-be buyers of $5 million-and-up properties are getting cold feet, RECORD DECLINE POSTED FOR PRICES OF SINGLE-FAMILY HOMES The S&P/Case-Shiller Home Price Indices evinced continued broad-based declines in the prices of existing single family homes across the United States, a trend that prevailed since 2007. The drop was 16.6 percent in the third quarter versus one year earlier and 15.1 percent and 14.0 percent in the first two quarters of 2008 respectively. The 10-city and 20-city composites also continued to set new records, with annual declines of 18.6 percent and 17.4 percent, respectively. Prices are back to where they were in early 2004. As of September 2008, the 10-city composite was down 23.4 percent from its peak; the 20-city composite, 21.8 percent; and the national figure, 21.0 percent. Phoenix was the weakest market, reporting an annual decline of 31.9 percent, followed by Las Vegas, 31.3 percent and San Francisco, 29.5 percent. Miami, Los Angeles, and San Diego did not fair much better. New York was off 7.3 percent, while D.C. had an 18.5 percent decline over a year. FOR OCTOBER ALONE, COMMERCE RECORDS A 5.3 PERCENT DROP Sales of new single-family homes declined 5.3 percent in October to a seasonally adjusted annual rate of 433,000 and an 18-year low. The U.S. Commerce Department further reported that home builders were making progress in reducing the number of unsold units. According to Chief Economist David Crowe of the National Association of Home Builders (NAHB), "The number of new homes for sale dropped from 414,000 on a seasonally adjusted basis to 381,000. Builders are doing what they need to do to get the market moving again, including cutting prices to the bone, offering incentives and decreasing production." So that's how you spell s-p-i-n. AS IF THE FOREGOING WEREN'T ENOUGH, HERE'S MORE U.S. home prices fell in the third quarter at a faster pace across a wide area of the country - after moderating earlier in the year - and are now 6.5 percent below their 2007 peak, according to IHS Global Insight. The economic and financial analysis firm said that house prices fell at a 6.9 percent annualized pace, affecting 241 of the 330 analyzed metropolitan areas, up from 150 metro areas in the second-quarter 2008. For the United States as a whole, the housing market is now slightly undervalued, the company's report said. When weighted by market value, the nation is 3.8 percent undervalued; when weighted by housing units, it is 5.7 percent undervalued. "Extreme overvaluation is now 'essentially nonexistent' - only three metro areas met the definition of extreme overvaluation, down from a peak of 52 metro areas in 2005," Global Insight said, referring to Atlantic City, Bend, Ore., and St. George, Utah. Only the Pacific Northwest remains overvalued," Global Insight said. WHICH DO YOU TRUST In the real-estate industry, there is no single accurate index of home prices, the Wall Street Journal observes. They are all over the map, cover different sets of homes and may exclude parts of the country or be unduly influenced by the mix of homes sold in a given month. The good news is your home may be worth more than the rock-bottom price that your neighbors' houses fetched. The bad news: No one but you might think so. As the home market surged earlier this decade, the two leading indicators of home prices diverged. One didn't count homes sold with exotic or subprime mortgages, which fueled much of the bubble. To address these discrepancies, indexes are going increasingly local. Other, less-well-known measures of home prices - some of them available only to paying customers - are adjusting to exclude homes sold by banks. "Whether the transaction pool is reflective of the entire housing stock - nobody addresses that problem," says Karl Case, professor of economics at Wellesley College and co-creator of the Case-Shiller Index, a competitor to the federal government's measure. The Case-Shiller index includes properties that had subprime loans attached. Not everyone thinks the Case-Shiller index is useful. Richard A. Smith, chief executive of real-estate broker Realogy Corp., says the index omits 13 states. "Case-Shiller as a broad index is inaccurate," Mr. Smith says. To dig into the details, click here. SAGGING RETIREMENT COMMUNITIES MAY CUT AGE LIMITS At "active adult" developments across the U.S., residents are debating whether to scrap the age restrictions that have helped define their way of life for almost five decades, says the Wall Street Journal. Proponents of "age desegregation," as it's known in the industry, say opening the doors to people under 55 is the only way their once-idyllic enclaves can stay afloat amid a worsening economic climate. From Florida to Arizona, condos are sitting idle as potential buyers find themselves stuck, unable to sell their houses and relocate. Residents of one New Jersey 55-plus development are living next to open foundations, with only 32 of 175 planned homes sold. And with retirement accounts hammered by the investment markets' plunge, people living in these communities are falling behind on homeowners' dues and scaling back on clubhouse activities. But desegregation is nonetheless a hard sell among some residents of these developments, who say the change would ruin the dream they bought into in the first place. Last year, about 1.1 million households could be found in active-adult settings, down from 1.8 million in 2001, according to the National Association of Home Builders. And in a recent survey by AARP, the membership group for older Americans, almost nine in 10 people said they don't want to move at all in retirement; instead, they want to "age in place." IF YOU SEEK ROOMMATES, READ THIS A federal district judge has ruled the Web site Roommates.com can be held liable for violations of the Fair Housing Act because it requires users to disclose their gender, sexual orientation and TWIN CITIES AGAIN TOPS 10 FOR BUSINESS AS NYC DROPS OFF For the second year in a row, the Twin Cities region stayed at the top of MarketWatch's list of best metro areas for business, based on results from a variety of sources. In order, the area was followed by Boston, Denver, the District of Columbia, Richmond, Charlotte, Columbus, Nashville and Dallas tied, and San Francisco. Last year, the Twin Cities was at the top of MarketWatch's list in the first annual survey of where companies tend to gravitate and create the most jobs. Dropped from the top 10: New York and Birmingham, Ala. New York moved up 15 spots in the unemployment rankings and eight spots in job growth but lost ground in other categories, particularly on the small-business measure. The city ended up in 11th place, down from eighth a year ago. Washington rose from seventh place to fourth. According to Steve Moore, a marketing manager for the D.C., Economic Partnership, Washington has produced 11,000 jobs this year, nearly 5,000 more than it expected. The area's unemployment numbers are up as well. FORMER DENVER REAL ESTATE BROKER REAPS THE WAGES OF SIN The onetime broker has been sentenced to seven years in federal prison after being found guilty in a scheme involving homes sold to "unsophisticated" buyers knowing little or no English to obtain FHA-insured loans fraudulently, reports Inman News. Arvin Stanley Weiss, 58, also was sentenced to pay restitution totaling approximately $853,000 to the Department of Housing and Urban Development and $5,000 to two victimized banks. Weiss was sentenced after a jury convicted him in July of eight counts of mail fraud, five counts of wire fraud and three counts of witness tampering. Prosecutors said Weiss bought up dozens of single-family residences in the Denver area at low prices between June 1998 and February 2002, reselling them at "substantially higher prices to unsophisticated low-income buyers." Many of the buyers were living in the United States illegally. They would provide their personal information directly to Weiss or Guevara, and Weiss would secretly provide funds for down payments and falsify numerous documents to support the borrowers' applications to meet HUD's underwriting requirements. Weiss usually sold his properties for two or three times his company had recently paid for them, in some cases not disclosing the true purchase price until closing. MAYBE SHAKESPEARE HAD A POINT Well, not all the lawyers, just this Manhattan real-estate lawyer who stole a $735,000 condo down payment from his wealthy clients. They found out only at the closing that both their lawyer and their money had vanished, prosecutors charged. The New York Post says James John Armenakis, 65, is facing up to 15 years prison if convicted of swiping the money out of an escrow account. The money had been put up by a wealthy family from Hong Kong as a down payment on a $7.35 million three-bedroom apartment on Lafayette Street near Houston Street. When the buyers showed up for the closing, however, neither Armenakis nor their money could be located, said Manhattan DA Robert Morgenthau. ARCHITECTS ARE HURTING Architectural firms are scrambling to find more work, lowering their fees, chasing smaller projects, seeking more international assignments and bidding on more institutional contracts to generate revenues, reports Crain's. But architects fear their traditional coping strategies will fall short. For example, they note that as the recession spreads globally, work is evaporating in former construction hot spots like Dubai and China. Architects also worry that clients that have long provided lifelines, such as municipalities, universities and hospitals, will retreat as donations and taxes shrivel. "This is unprecedented," says Kenneth Drucker, senior principal at architecture firm HOK New York. "Usually when one business dries up, another takes its place." U.S. TREASURY DEPARTMENT ISSUES FRAUD ALERT The Department is investigating incidences whereby individuals are using fraudulent promissory notes and bonds to attempt to purchase vehicles and real estate. The fraudulent documents are not referenced as "U.S. Treasury" bonds or promissory notes. They are referenced as "personal promissory note" and "private offset bond;" however, they have the name of Treasury Secy. Henry Paulson on the face of the documents. The only type of hard-copy bond issued by the U.S. Treasury that a citizen can purchase today is a savings bond A CONTRACT IS A CONTRACT IS - SURPRISE! - NOT A CONTRACT New York State's top court recently ruled that lawyers can disapprove clients' real estate contracts for any reason. The panel concluded that it is not bad faith even if attorneys simply register their disapproval on the say-so of a client who wants to back out of a deal, according to Newsday. Overturning lower courts, the Court of Appeals said lawyer-client confidentiality would be threatened if any attorney who reviews and rejects a property contract within the allowed three business days after signing is required to testify about client communications. A trial court had ordered Mehmet and Susan Erk to pay $234,000 to James and Kathleen Moran after the Erk's lawyer disapproved their 1995 bid to buy the Morans' home in Clarence for $505,000. It sold three years later for $385,000. The court held "that where a real estate contract contains an attorney approval contingency providing that the contract is 'subject to' or 'contingent upon' attorney approval within a specified time period and no further limitations on approval appear in the contract's language, an attorney for either party may timely disapprove the contract for any reason or for no stated reason." SOME BUYERS WANT TO RE-OPEN CONTRACTS (SEE ABOVE) They are using increasingly aggressive tactics to drive down apartment prices, says the Real Deal. The latest move: renegotiating an apartment's price after having already signed a contract and placing a down payment in escrow. While many buyers have responded by generally angling for additional discounts and perks in all stages of negotiations and taken more demanding stances during initial discussions, others have tried to tweak agreements that in past years would have been considered set in stone. Some brokers have seen renegotiations most frequently among buyers who settled on contracts several months or a year ago but have watched the market decline while waiting to close. These buyers usually ask for discounts of 5-10 percent to compensate for what many believe to be a fundamental shift in the market. Some, however, have demanded concessions like having the seller refinish an apartment's floors. MARKET-RATE TENANTS LOSE ONE, LANDLORDS WIN ONE In a major victory for residential landlords, a New York State appeals court late last month overturned two controversial rulings that prevented the eviction of market-rate tenants at Manhattan House and Sheffield57, two of the biggest condominium conversions in the city's history, reports the Real Deal. In March 2007, Housing Court Judge David Cohen blocked Sheffield57 sponsor Kent Swig from evicting 23 market-rate tenants and later that year hindered Manhattan House's sponsors, O'Connor Capital Partners, from evicting 29 tenants. In his decisions, Cohen said that the intent of New York State's 1982 Martin Act was to protect all tenants from losing their homes in case of condo or co-operative conversions. However, the three-judge panel said in the November decision that since the leases had expired prior to the state attorney general's accepting the "red herring" plan - which outlines the specifics of the conversion - the Martin Act does not protect them. "Where the tenant holds over after the expiration of the lease term, the landlord is not required to allege or prove any basis for eviction other than the expiration of the lease," the court wrote in the Manhattan House case. COMPTROLLER ISSUES THE BLEAKEST JOBS FORECAST TO DATE The upheaval on Wall Street could result in the loss of 225,000 jobs across New York State and cost the city and state $6.5 billion in securities industry-related tax revenue over the next two years, the said state Comptroller Thomas DiNapoli in a new report. Already, the city has shed 16,300 Wall Street jobs, the comptroller said. Those losses will mount and could total 38,000 by next October. Another 10,000 jobs could be lost in banking, insurance and real estate, bringing total job loss in the city's financial activities sector to 48,000. Since salaries on Wall Street are high- the $400,000 average in 2007 was nearly seven times the salary of non-financial jobs in the city - the economic impact of losses in the securities industry ripples through the economy. DiNapoli estimates each job on Wall Street results in two other jobs created in the city and one in the suburbs. As Wall Street contracts, the job losses will spread throughout the economy, with private sector job loss reaching 175,000 in the city and 225,000 statewide. "Wall Street is the engine that drives the economies of the New York State and New York City, but the global credit crunch has slowed that engine down," DiNapoli said in a statement. "This year is on pace to be one of the worst years ever." SELLERS ARE STARTING TO FACE REALITY New York magazine asked Streeteasy.com to calculate asking prices for Manhattan condos during the week of Nov. 10 and compared those numbers to those from the same time last year. Condo owners are definitely dropping their starting prices. Those living downtown - in Chinatown, the financial district and Greenwich Village, especially - appear to have made the most peace with the new financial-world order, cutting their median asking prices by nearly 11 percent. Midtown condo sellers, on the other hand, especially those in Times Square, Clinton, and Central Park South (the Plaza owners, most likely) have raised their asking prices by 2 percent. FEWER BUILDINGS WILL BE FALLING DOWN ON PURPOSE The number of demolition permits in New York City fell sharply last month compared with a year ago, indicating a continued construction slowdown in the five boroughs. The city's Department of Buildings issued 72 initial demolition permits in November, 65 percent fewer than the 205 issued the same month a year ago, and a steep decline from the 164 issued in October. Initial demolition permits do not include demolition permit renewals. The number of demolition permits rose from 3,386 in 2002 to a high of 6,480 in 2006. The number fell in 2007 to 5,582, and there have only been 2,112 permits issued in 2008, according to the Real Deal's analysis of Department of Buildings data. There were just six initial demolition permits issued for Manhattan last month, representing three development sites. THE FED'S BEIGE BOOK CHRONICLES A SLUMP "Housing markets in the District have deteriorated further since the last report," the new document observes. "A major residential appraisal firm reports substantial deterioration in New York City's housing market over the past two months: prices of Manhattan co-ops and condos are reported to have fallen by 15 to 20 percent since mid-summer, though it is hard to get a clear handle on prices due to thin volume - much of the recent activity is reportedly from desperate sellers," according to the Beige Book. "Transaction activity has dropped off noticeably, and there has been a large increase in the number of listings. Some buyers that had signed contracts for units under construction earlier this year are having trouble getting financing at the contract price now that market values have dropped. Many of those having difficulty selling their apartments are putting them up for rent, boosting the number of rental listings substantially - particularly in doorman buildings. Average asking rents are reported to be down 1 to 4 percent from a year earlier." ANOTHER APPRAISAL FIRM ALSO DOCUMENTS LOWER PRICES Wall Street layoffs and the economic crisis have started to damage the Manhattan real estate market, says the Real Deal. The average home price in Manhattan has fallen 8.8 percent since the beginning of the year, according to appraisal firm Mitchell, Maxwell & Jackson. And the number of contracts signed in September and October are 75 percent lower than the same time last year, the firm said. IMMIGRANTS INHABIT A SECOND CLASS FOR HOUSING Foreign-born New Yorkers, who make up more than a third of the city's population, are most likely to pay higher portions of their income for rent and least likely to receive support from the city's subsidized housing programs, according to a new report cited by Crain's. The Pratt Center for Community Development produced the report in conjunction with the New York Immigration Coalition. About 56 percent of city immigrants put more than 30 percent of their income toward rental costs compared with 47 percent for native-born New Yorkers, according to the report, which is based on surveys of 541 foreign-born city residents in neighborhoods with the greatest concentration of immigrants. Nearly a third of immigrants pay more than 50 percent of their income toward rent, compared with 25 percent for native-born New Yorkers. Immigrants in the city also are three times more likely to live in overcrowded conditions than native-born New Yorkers, the report found. NOW YOU, TOO, CAN EASILY COMPETE FOR BUYERS AND SELLERS New York Real Estate Institute is offering online education for the new 75-hour real estate salesperson course and 30-hour remedial course in partnership with Hondros Learning. The interactive courses include video clips and activities to highlight and reinforce key concepts. The courses, which have state approval, provide New Yorkers with the education they need to obtain their New York real estate salesperson license. ROLLING STONES KEEP ON TRUCKIN' One in four baby boom generation households (26 percent) expects to move from their current homes in the future, with the majority looking for a single-level home that is more comfortable or convenient, according to a new survey prepared for AARP. As in the past, 79 percent of the 45-64 year old respondents say they would like to stay in their current home for as long as possible. Fewer than 10 percent said they would like to stay where they are but don't think they will be able to do so. Many of those who plan to move said they will be looking for a better house, a better climate or a home that is closer to family and friends. Fifty-nine percent of those planning to move will look for a home that's all on one level. About half said they will look for a newer home or a smaller home. Conducted by Opinion Research Corp. for AARP, the poll found older boomers are significantly more likely than younger boomers to think that they will move into a single level home (68 percent vs. 54 percent of those planning to move). But men are more likely than women to believe they will move into a newer home (61 percent vs. 42 percent) or move into a home in a warmer or better climate (41 percent vs. 25 percent). Women are more likely than men to think they will move into a smaller home (54 percent v. 41 percent). The number of persons age 65 and older is expected grow to 70 million by 2030. ONE CITY ATTRACTS AND REPELS RELOCATING EMPLOYEES A survey Human Capital Institute, a Washington-based think tank and professional association largely made up of human resources professionals, asked some 2,500 employees and entrepreneurs in 40 large cities where they would love or hate to go if they were offered a dream job, says Business Week. Although they preferred New York, San Diego or San Francisco, the Big Apple also topped the list of America's least favorite places to live and work. Survey-takers who liked the Big Apple gave it high marks for entertainment options, professional and personal opportunities, and ease of transportation. Those who didn't like the city overwhelmingly pointed to the high cost of living. Detroit was the second-least appealing city, followed by Los Angeles (also No. 5 on the best cities list), New Orleans, Chicago and D.C. The most important issue for respondents was the environment, including climate and park space, according to the survey. Affordability, which was No. 4 in last year's list, is now the second-most important attribute workers consider before relocating, thanks to the economic downturn. ADD A DECK, INSTALL NEW SIDING, UPGRADE A KITCHEN But bear in mind that the value of home remodeling in the U.S. has declined 3.86 percent in a year, according to an annual report by the National Association of Realtors (NAR) and Remodeling magazine. On a national level, wood deck additions and all types of siding replacements returned more than 80 percent of project costs upon resale. In addition to wood decks and siding, window replacements and kitchen remodels also returned a relatively high percentage of remodeling costs on a national basis. All types of window replacements returned more than 76 percent of costs. A major midrange kitchen remodel returned 76 percent of project costs, while a minor midrange kitchen remodel returned 79.5 percent of costs. On a national level, bathroom remodels, while still a relatively good investment, do not return as high a percentage as in previous years. A midrange bathroom remodel was estimated to return 74.4 percent on resale, comparable to a midrange attic-to-bedroom conversion, at 73.6 percent of costs recouped, and a midrange basement remodel, at 72.7 percent of costs recouped. As in last year's report, the least profitable remodeling projects in terms of resale value were home office remodels, sunroom additions and back-up power generators, returning only 54.4 percent, 56.6 percent, and 57.1 percent, respectively, of project costs. Full project descriptions, as well as national, regional and local project data for the 79 cities covered by the report can be found here. PITY THE POOR DESIGNERS OF LIMITED-EDITION FURNITURE With its extravagant, over-the-top installations and six-digit price tags, the biannual Design Miami fair gained renown as a celebration of the most extreme end of design: limited-edition contemporary furniture, says the Wall Street Journal. Last year, the pricey but often impractical pieces sold out in hours, and New York retailer Moss set a record by selling two sets of bronze furniture for $1.2 million. This year, the glow has faded from the fair. Moss has sold only three pieces of its latest pricey furniture set, which is asking $495,000. And at the VIP preview, the most-crowded stall was that of car maker Audi, which was serving up free Champagne and shrimp ceviche. Now that's called getting priorities in order. THE FEDS CHART A NEW COURSE ON MORTGAGES Federal Reserve Chairman Ben S. Bernanke proposed government-engineered loan modifications and more taxpayer money to help people refinance and stay in their homes, according to the New York Times. "The public policy case for reducing preventable foreclosures does not rely solely on the desire to help people who are in trouble," Bernanke said. "More needs to be done." At the Treasury Department, officials continued to work on a plan to subsidize 30-year home mortgages with rates as low as 4.5 percent. But the new focus on helping individuals could create a bitter split between those who want to buy homes and those who already own them. That's because the cheap mortgages would be available only for people buying houses, not the roughly 50 million families that already have mortgages and would want to refinance at a lower rate. For more on the controversy, click here. NOW FOR SOME GOOD NEWS Posting the biggest weekly decline 27 years, the 30-year fixed-rate mortgage (FRM) averaged 5.53 percent for the week, down from last week's 5.97 percent and even last year's 5.96 percent, says Freddie Mac. The 30-year FRM has not been lower since Jan. 24, when it was 5.48 percent. The 15-year FRM this week was 5.33, down from 5.74 percent last week and 5.65 percent at the same time last year. It has not been lower since March 20, when it averaged 5.27 percent. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.77 percent, down from 5.86 percent. A year ago, the five-year ARM was 5.75 percent. One-year Treasury-indexed ARMs were 5.02 percent this week, down from 5.18 percent and 5.46 percent the same week of 2007. "After Federal Reserve actions to increase liquidity in the mortgage market, interest rates for fixed-rate mortgages (FRMs) took a dive," said Frank Nothaft, Freddie Mac vice president and chief economist. "This week's decline was the largest since the week of Nov. 27, 1981, and 30-year FRM rates are now almost a full percentage point lower since the last week in October." REFINANCING APPLICATIONS CAUSE SURGE IN ACTIVITY The Mortgage Bankers Association (MBA) reports that mortgage loan application volume for the holiday week ending Nov. 28 soared by 112.1 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the increase was 51.4 percent, but it was down 21.9 percent compared with one year earlier. Many borrowers missed an opportunity to take advantage when rates dropped sharply for a brief period following government conservatorship of Freddie Mac and Fannie Mae, said Orawin Velz, an MBA economic forecaster. "When rates plummeted following the Fed's announcement that it would buy GSE debt and MBS, many of those on the sidelines decided to quickly jump in and take advantage of lower rates before they began to rebound," he declared. Refinancings were 203.3 percent higher than the previous week, and purchase applications grew by the 38.0 percent. The refinance share of mortgage activity increased to 69.1 percent of total applications from 49.3 percent the previous week, and the adjustable-rate mortgage (ARM) share slipped to 1.4 percent from 3.0 percent. SELF-EMPLOYED INDIVIDUALS FACE LOCKOUT FOR LOANS For many self-employed people - even those with pristine credit - the mortgage freeze has yet to thaw, says the Wall Street Journal. "Underwriting criteria have swung from foolish ease to tighter DEFAULTS RISE ON HOMES WITH MORTGAGE INSURANCE Defaults on privately-insured mortgages rose 35 percent in October, topping 80,000 for the first time, says the Mortgage Insurance Co. of America (MICA) in Realtor magazine. It reported that 80,071 insured borrowers were 60 days late in October, up from 76,776 in September. Sales were off too: MICA said the number of traditional mortgage insurance policies issued in October fell 76 percent to 42,167 compared with the previous year, and applications for new insurance dropped 70 percent to 55,085. MORTGAGE FRAUD IS UP 45 PERCENT IN A YEAR Reported incidents of mortgage fraud in the U.S. increased by 45 percent on fewer loan applications in the second quarter of 2008 from a year ago, according to a new report by the Mortgage Asset Research Institute (MARI). A key finding is that fraud most often occurs at the beginning of the loan process. More than 65 percent of fraud incidents were attributed to "general application misrepresentation" - a trend that has continued over the past two quarters - when information such as an incorrect name, occupancy or asset is potentially provided. Reported misrepresentations related to "income" reached 36 percent of applications and "employment," 20 percent. MORTGAGE DELINQUENCY COULD DOUBLE BY YEAR'S END The number of consumers with delinquent mortgages is poised to almost double by the end of next year, hitting its highest level in at least 16 years, according to a leading credit bureau, says the Wall Street Journal. TransUnion, which analyzed about 27 million consumer records in its database, predicted that the proportion of consumers with mortgages that are 60 days or more past-due will hit 7.17 percent in the fourth quarter of 2009. That would be the highest level reached since the Chicago credit bureau first started tracking the rate. L.A. FORECLOSURES SHOOT UP, WHILE NEW YORK'S SLIDE DOWN Los Angeles foreclosures rose 51 percent over November 2007 after a large drop in October 2008, according to Property Shark. A total of 3,685 new foreclosures auctions were scheduled in that city last month, up 54 percent from October 2008. Miami foreclosures grew by 6 percent, and Seattle's dropped by 22 percent compared with November 2007. New York City foreclosures fell to November 2007 levels. Compared with October 2008, all New York City boroughs except the Bronx (up 8 percent) recorded a decrease in new scheduled foreclosure auctions, bringing the city to the exact same foreclosure level as in November 2007. Manhattan topped the list with a 58 percent decrease, followed by Brooklyn down 56 percent, Queens down 18 percent and Staten Island down 11 percent. New York, Miami and Seattle were each down from October 2008 and posted declines in the number of new foreclosure auctions compared with the previous month. New York City was down 23 percent; Miami, 21 percent; and Seattle, 28 percent. BUT A TIME BOMB IS TICKING FOR FORECLOSURES IN NEW YORK At the end of November, a statewide three-month moratorium on foreclosures expired, leading some analysts to believe that December may have a disturbingly large number of foreclosures, reports the Observer. "There could be a spike of foreclosures in December," says PropertyShark CEO Bill Staniford. In addition to lingering fallout from the sub-prime mortgage crisis, New York's housing market may also be weakened by the financial crisis, which blew up in September, when the moratorium on foreclosures was already in place. CAN YOU STAND ONE MORE ITEM ON FORECLOSURES The delinquency rate for mortgage loans on one-to-four-unit residential properties stood at a record 6.99 percent of all loans outstanding at the end of the third quarter of 2008, up from 6.58 percent second quarter of 2008 and 5.59 percent from one year ago on a seasonally adjusted basis, according to the Mortgage Bankers Association’s (MBA). The percentage of loans in the foreclosure process at the end of the third quarter was a record 2.97 percent, an increase from 2.75 percent in the second quarter and 1.19 percent a year ago. The increase in the overall delinquency rate was driven by increases in the number of loans 90 or more days past due, primarily in California and Florida. The 30-day delinquency percentage remains below levels seen as recently as 2002. “We have not gone into past recessions with the housing market as weak as it is now so it is likely that a much higher percentage of delinquencies caused by job losses will go to foreclosure than we have seen in the past,” said MBA Chief Economist Jay Brinkmann. If you want even more detail, click here. CELEBRITIES ARE VENTURING OUT AND ABOUT TOO Actress Natalie Portman recently sold her Charles Street apartment and now reportedly is renting a one-bedroom, one-bath unit at 15 Broad St., between Exchange Place and Wall Street, notes the New York Post. Actor Matt Damon, who currently has a loft downtown, has been looking at $20 million-plus apartments on Central Park West. Singer Josh Groban was spotted touring a two-bedroom duplex penthouse at 155 Perry St., between Washington and West streets, that is on the market for $3.85 million. And Adam Bronfman, the youngest son of Edgar Bronfman Sr., and brother of Warner Music CEO Edgar Bronfman Jr., just bought a $7 million apartment at 170 East End Ave., at 88th Street. NOVARTIS CEO IS JUST A COPYCAT The much-celebrated Xerox chief Anne M. Mulcahy sold her apartment at the Grand Beekman on East 51st Street last month to Robert Pelzer, the new chief of Novartis, the North American entity of the gigantic Swiss-based pharmaceutical company Novartis, according to the Observer. The price for the three-bedroom, 2,347-square foot condominium was $3.8 million. Might Mulcahy, a member of President-elect Obama's Transition Economic Advisory Board, be selling off some real estate to prepare for a move to the capital? "I wouldn't say that's the case," a company spokesperson said, calling back to add that Mulcahy had put a down payment on another New York City property. THE MATERIAL GIRL AND A-ROD LIKE THE UPPER EAST SIDE Madonna - yes, that material girl - and boyfriend Alex Rodriquez (who's not exactly in the poorhouse) are quietly shopping for love nests on the Upper East Side and on the East End, sources told the New York Post's Page Six. They are "discreetly looking at properties between Fifth and Park avenues, from just above 60th Street through the 80s," the newspaper says. "Madonna personally came to look at one house a couple of months ago, and Alex has been looking recently," a real estate insider reportedly said. "We're talking about private, double-width mansions in the vicinity of $30 million to $60 million." They're hoping for a place with a garage for additional privacy. Another source told the Post they were also looking in the Hamptons. No one on Madonna side returned a call or e-mail, but A-Rod's reps denied that the two were looking for real estate though he continues to list the home he shared with his ex-wife Cynthia. It's a four-bedroom, 4,600-square-foot pad offered for $10 million now, down from the original $14 million. A-Rod also is willing to rent it, unfurnished, for $50,000 a month. Madonna, meanwhile, is hanging on to her Central Park West apartment. A $16.5 MILLION TOWNHOUSE TOPS NOVEMBER SALES According to city records, Talbott Lea Simonds, grandson of the elderly Pittsburgh billionaire Henry Hillman - who inherited a steel-and-coke fortune and became an early backer of Kohlberg Kravis Roberts - has bought a $16.5 million townhouse at 69 East 91st St., says the Observer. It was one of November's biggest deals. The seller is the late Butch Kerzner's family. Kerzner, son of colossal South African gambling magnate Sol Kerzner, was surveying land off the Dominican Republic for resort development two years ago when his helicopter crashed. The five-bedroom house - designed by Annabelle Selldorf, who did the interiors at Philip Johnson's Urban Glass House - has a stucco facade; a garage ("currently housing a BMW X5 with room to spare"); a landscaped garden; a dumbwaiter connecting the parlor floor to the kitchen; a media room/library with a gas fireplace; a full-floor master suite with a fireplace, office, dressing room and gym; and terraced bedrooms on the fourth and sixth floors, plus a roof terrace. MOVING TO DALLAS, THE BUSHES ARE DOWNSIZING They have settled on a new home in the upscale Preston Hollow neighborhood of Dallas, a spokeswoman for Laura. Bush said. The 8,501-square-foot, four-bedroom, four-and-a-half-bath residence at the end of a tree-lined cul-de-sac has a market value of just over $2 million, according to property records, says the New York Times. Built in 1959 on 1.13-acres lot, the brick house include a wet bar and a fireplace. There also are a cabana, detached garage and servants' quarters. The records show that unlike the White House, the couple's new home does not have a pool, prompting the question of what is the function of the cabana. WHITHER THE BIG APPLE'S MARKET As the economic downturn roars through New York City, the Real Deal says it's tempting to conclude that Manhattan's real estate market is still somehow different from the rest of the country. "I don't think we're going to see the same degree of problems that are taking place in the rest of the country," said Douglas Durst, CEO of the Durst Organization. "New York is completely unique. People want to be in New York, and that's going to draw demand for housing here." However, some leading economists and industry experts predict that the downturn in Manhattan will likely be just as severe as that of the rest of the country, if not worse. While the inventory of new construction likely will not pile up as quickly as it has in Las Vegas or Miami, New York faces other challenges that those cities don't, including its dependence on Wall Street and a spectacular - and some say unsupportable - escalation in prices in recent years. New York's allure is such that economists Joseph Gyourko, Christopher Mayer and Todd Sinai named it on a list of "superstar cities" in a July 2006 study. The study posited that high prices in cities such as New York and San Francisco are driven by an "inelastic" supply of land in some attractive locations, combined with an increasing number of high-income households. However, Manhattan's uniqueness cannot save it from the economic factors at play: a shrinking employment base and a decline in demand, said Gyourko, a finance professor and the director of the Samuel Zell and Robert Lurie Real Estate Center at the University of Pennsylvania's Wharton School. More here. MANY HOMEOWNERS RETAIN AN OPTIMISTIC VIEW OF VALUE Many Americans still see real estate as their best shot at wealth, observes the Wall Street Journal. In survey after survey, people expect prices to bounce back - in some cases, as soon as six months from now. Those hoping for a quick rebound are likely to be disappointed. Economists and other pros generally say home prices won't bottom out before the second half of 2009, and some don't see a bottom until 2011 or 2012. Even when they stop falling, prices may scrape along the bottom of the rut for years. Over the next 10-20 years, housing economists expect prices will rise again - but, on average, probably not nearly as much as they've averaged over the past decade. That isn't to say that some places won't experience booms (and busts). But, the experts say, you should generally expect house prices to rise just a bit more than inflation and roughly in line with household income. Click for the whole story. Death by a Thousand Cuts The condo on Murray Hill is one of numerous good examples. With two bedrooms, two baths and 1,433 square feet, this brand-new apartment on the third floor in a 20-story full-service 2006 building seems to have everything going for it. According to the listing, the unit has a "comfortable layout with a natural logic, while hardwood floors unify rooms with inviting warmth." When it went on the market in early August, the apartment was offered for $1,495 million. Common charges are $1,363 a month plus $183 in monthly real estate taxes - not unusually high, though they inevitably rise quickly in a new building. Six weeks later, the price was cut by merely $20,000, to $1.475 million. And a week after that, there was another reduction, by $50,000 to $1.425 million. In Early October, the sellers made another adjustment. The new price: $1.395 million, a change of a paltry $30,000. In the seller's and listing broker's minds, perhaps the strategy has been to test the market. Each time, they dangle a somewhat lower price in the hope that a buyer will snap at the bait. Sometimes, the strategy works, but it probably will not work in a normal market and certainly is not going to work in softening market. Buyers are smart too! What those sellers are doing is chasing, not testing, the market. When they eventually catch the market, they will have wasted precious time. More important, the eventual contract price almost invariably will be lower than it would have been if the first price cut (never mind the original asking price) had been sufficiently painful to the seller and sufficiently tempting to buyers. As much as that initial price reduction may have hurt the seller, the proceeds most likely will have been greater than the amount eventually reached by chasing the market. In the current market, it is apparent that many brokers are advising sellers to aim high in the expectation that buyers are always going to negotiate them down. Their strategy is nothing more complex than "let's make a deal." Such an approach avoids setting a price that many buyers will appreciate as realistic and fair. It means placing a false value on a property. And that approach means the listing will grow stale; appropriate buyers will miss a residence that is outside their price range; and a belief will be prolonged that the market has a lot farther to go before it sinks to the elusive bottom. When chasing the market, sellers never cut prices by enough money or in enough time. They'll catch the market eventually, but at what cost? They'll try again and again, always repeating the same action and expecting a different result, motivated by an understandable desire to make the most money and deluded by the notion that chasing the market is the way to achieve that goal. For them, the strategy is akin to the proverbial death by a thousand cuts. A property that is priced correctly always, always, always finds a buyer. So long as the price takes into account current market conditions, the availability of financing at attractive rates, the location of the property, its condition, its qualities, its quirks and its monthly costs, a well-priced listing absolutely will sell. Below, several of the listings being marketed by various brokers exemplify the futility of chasing the market. They were visited recently. Upper East Side Post-War Units
Upper West Side
Greenwich Village One-Bedrooms
Some of Manhattan's Latest Listings Please click here to view available properties. (To view all photos, tours, floor plans and maps, please use Internet Explorer.) Click Here to Sign Up For Your Free Issue of Realty Digest!
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says Barron's. They are pulling out of pending deals and suspending their searches out of concern over jarring drops in the stock market and dire economic news. While so far the hardest-hit high-end markets have been Miami, Southern California, Las Vegas and Phoenix, the worst-off areas in coming months are likely to be Manhattan and surrounding suburbs, says Celia Chen, director of housing economics for Moody's Economy.com. All told, luxury-home prices in and around Manhattan could drop by as much as 20-25 percent over the next 12-15 months, says Jack McCabe, CEO of McCabe Research & Consulting, a real-estate consulting firm in Deerfield Beach, Fla. The luxury market is suffering in part from dwindling interest from foreign buyers. Until lately, buyers from South America, Central America, Europe and Russia were flocking to U.S. shores to take advantage of the weak dollar. "Now foreign buyers are being devastated in their own stock markets and housing bubbles," Jack McCabe says.
family status, allowing them to use the same information about others to facilitate roommate matches, according to Inman News. But the site continues to collect such information from users, and an attorney representing the parent company says the company intends to appeal the decision all the way to the Supreme Court, if necessary. Meantime, fair housing groups that have reached a partial monetary settlement with Roommate.com are seeking an injunction to stop the site from collecting information that might be used to discriminate against users, such as their sexual orientation. A hearing on the injunction has been scheduled for Jan. 12. In a similar but unrelated case, a federal court of appeals ruled in March that under the Communications Decency Act, the online classified ad site Craigslist.com was merely a "messenger" and not liable for discriminatory ads posted by its users. Roommate.com maintains that when Congress enacted the law 40 years ago, members never intended for it to apply to the selection of roommates. If that was the law's intent, the company says, it amounts to an unconstitutional restriction of free speech and association. 
than any in modern times," opines Lou Barnes, a mortgage banker in Boulder, Colo. The changes are increasingly frustrating a group of borrowers whom banks once coveted: affluent self-employed professionals such as doctors, lawyers, accountants and small-business owners. The chief problem for self-employed people is that they don't have W-2 forms from an employer to document their full wages. For proof of income, they must rely solely on their income-tax returns. But income for the self-employed is often understated for tax purposes, in part because they tend to take large business-related deductions. Self-employed borrowers who don't take any big deductions won't likely face the same difficulty getting a loan. In the past, most self-employed people took out "stated-income loans," which don't require borrowers to fully document their income. Such borrowers typically made substantial down payments, had strong credit profiles and paid a slight premium - around 0.25 percentage point - on their interest rates. Defaults were low. Many banks have eliminated stated-income loans entirely, and Freddie Mac - which, with Fannie Mae, is one of two government-held buyers of mortgages - will end its stated-income lending program designed for self-employed borrowers next month.
