Items of Interest A FORWARD-LOOKING INDICATOR SLIPS 2.6 PERCENT The Pending Home Sales Index of the National Association of Realtors (NAR) fell 2.6 percent in November from an upward revision in October. Although it was 19.2 percent below the previous November, the index was higher than the August and September readings. Commented NAR Chief Economist Lawrence Yun: "There are more people with financial capacity now than in 2005, but many are trying to market-time their purchase. As a result, the exact timing and the strength of a home sales recovery is a bit uncertain. A meaningful recovery in existing-home sales could occur as early as this spring, or it may be further delayed toward late 2008." Acknowledging that there could be "some minor slippage" in the first quarter, the economist said existing-home sales "should hold in a narrow range before trending up." INVENTORIES ARE DECLINING WIDELY They
fell in 15 of 19 major U.S. markets during the fourth quarter
as sellers dropped their listing prices in most areas, according
to a research report cited by Inman News. But time on market continued
to increase, indicating that demand fell faster than inventories
were reduced. The findings were contained in the Real-Time Housing
Market Report published by Altos Research and Real IQ, which HOUSING STARTS, PERMIT ISSUANCE WENT DOWN IN DECEMBER Single-family housing starts declined 2.9 percent to a seasonally adjusted annual rate of 794,000 units in, according to newly released data from the U.S. Commerce Department. A sharp reduction in the volatile multifamily sector contributed to an overall 14.2 percent decline in nationwide housing starts for the month to a one million-unit rate, the lowest since May of 1991. Overall permit issuance, which can be an indicator of future building activity, declined 8.1 percent to a seasonally adjusted annual rate of 1.07 million units in December. Single-family permits declined 10.1 percent, while multifamily permits were down 4.1 percent. On an annual basis, year-end figures show that overall housing starts declined 24.8 percent in 2007. IT'S NOT THE LONGEST YARD IN FLORIDA Actor Burt Reynolds has cut the price on his 12,500-square-foot waterfront Florida compound for the second time, reports the Wall Street Journal. It's now listed for $10.5 million, 30 percent below its original asking price. The estate of more than three acres borders a wildlife refuge in Hobe Sound, about 25 miles north of Palm Beach. The Mediterranean-style home has five bedrooms, a billiards room, a paneled office, an exercise room and a home theater, according to the property listing. There's a two-bedroom guest house, a pool with a gazebo and waterfall, a boat dock and a helipad. Reynolds, 71, paid $700,000 for the property in 1980, records show. He first listed the home about two years ago for $15 million, then changed agents and raised the price to $15.9 million about a year ago. Over the summer, he cut the price to $12.9 million and has now lowered it again. Spokesman Jeffrey Lane says the actor no longer needs so large a house and plans to buy something smaller in the area. (His primary home is in Beverly Hills, Calif.) "There's just no need at this stage in life for something so huge," Lane says. Are you listening, Donald? BUT DOES HE HAVE A PRE-NUP TOO Howard Stern wants to give his bride-to-be, Beth Ostrosky, some space, according to the New York Post. So he's paid $15.1 million for the apartment directly below his West Side condo. Building sources say the ultra-wealthy satellite shock jock is doubling the size of his penthouse pad to more than 8,400 square feet at 101/111 West 67th St. with the addition of a 4,200-square-foot residence. Which means Regis Philbin and his wife Joy, who live in the same apartment line two floors below, might want to invest in some good earplugs. Stern first bought in the building in 1998 when he combined two penthouse apartments for approximately $5.8 million. Now, if he'd just do something about that hair. . . THE CAPITOL ARCHITECT IS LEAVING FOR THE FINANCE CAPITAL The architect who oversaw the biggest expansion in the history of "the people's house" is ready to sell his own home, according to the Washington Post. Alan M. Hantman settled in the Barnaby Woods neighborhood of Northwest Washington in 1997, when President Clinton appointed him the 10th architect of the Capitol. He was responsible for construction of the Capitol Visitor Center, a controversial five-acre underground complex connected to the Capitol's east front. The much-delayed center is scheduled to open in November. But before then, Hantman hopes to be out of the Federal-style house that he and his wife Rosalyn purchased and renovated. The home is on the market for roughly $1.1 million. Hantman's 10-year appointment ended in February. The couple plan to head back to the New York City area to join their extended family. "From the outside, it looks like a modest Federal-style home, but it is surprisingly large when you're inside," said Rosalyn Hantman. "If we could take the house with us, we would." The Hantmans have bought a condominium in New York and plan to rent or buy a small place in the District, where one of their three daughters continues to live. 30-MINUTE MEALS, YES, BUT NO 30-DAY CLOSING Rachael Ray has two more kitchens after she and her husband finally signed the contract that went out last summer for their Southampton dream home, says the New York Post. The couple agreed to buy the home on 6.2 acres with a price tag of $2.9 million. Included in the mini-compound - with a pool, a pond and multiple gardens between two golf courses - is a three-bedroom, three-bath European villa-style main house. There is also a two-bedroom guest cottage with a kitchen and a sauna, plus another one-bedroom cottage. Post sources say that after a land survey was performed, the Southampton Golf Club and the property's owner were at odds over the exact placement of the property line. After both retained legal counsel, an agreement was finally reached last month for an undisclosed settlement. The closing is expected to take place this month. TERRELL OWENS IS PLAYING ANOTHER KIND OF GAME The Dallas Cowboys receiver bought two homes in Dallas last month, according to the Wall Street Journal. One is a 2,300-square-foot townhouse in Eastside Lofts, a new development in the city's downtown Deep Ellum neighborhood. Developer Tom Granese says the home is an investment for Owens, who owns several other properties in the neighborhood. Granese wouldn't say how much the athlete paid for the property, but a nearly identical home in the development is on the market for $350,000. Two days later, according to property records, Owens bought a condominium in Azure, a new high-rise building in Dallas's Uptown neighborhood, for an undisclosed price. He also owns homes in Lithonia, Ga., Moorestown, N.J., and Miami. The New Jersey home has been on the market for more than two years and is now listed for $3.4 million. The Georgia home has also been on and off the market for over a year but isn't currently listed for sale. NO SHRINKING VIOLET, GLORIA ALLRED WINS AGAIN The celebrity-chasing attorney and talking head Gloria Allred has argued a successful bid for an Upper West Side apartment, says the New York Post. The outspoken, Los Angeles-based legal eagle has paid $1.75 million for a three-bedroom prewar apartment on West 81st Street (at Broadway) that first went on the market at $1.695 million. Included in the renovated 51/2-room condo are two bathrooms, a separate dining area, a cook's kitchen with breakfast bar, a spacious living room with high ceilings, custom closet systems and numerous built-ins. The monthly maintenance is just under $1,900. FAST TIMES IN NEWPORT BEACH Nicolas Cage sold his Newport Beach, Calif., house last week for $35 million - a new record for Orange County, according to the Wall Street Journal. The movie star, who has bought and sold many houses, paid $25 million for the nearly 0.6-acre property in 2005. The contemporary house on Newport Bay has a view of the harbor's main turning basin. It has a stone loggia with retractable glass doors. The dock, if expanded, could accommodate boats of more than 150 feet. It's next door to the former home of John Wayne. Cage asked $40 million for the house but never officially put it on the market. The buyer, 70-year-old Jerry Herbst, is owner, chairman and president of Las Vegas-based Terrible Herbst, which runs gas stations and other retail operations and is known for its "Bad Guy" cowboy logo. Charming. ART DEALER COLLECTS THE WAGES OF ALLEGED SIN An art dealer who filed for bankruptcy last year after his gallery was ordered padlocked by a judge is seeking permission to sell his Upper East Side town house, for up to $25 million, according to the New York Times. The dealer, Lawrence B. Salander, ran the Salander-O'Reilly Galleries. By the time he filed for bankruptcy in November, complaints were mounting from people who said they had consigned artworks to the gallery but were never paid for them. Some former clients maintained that the gallery had sold their paintings without their permission. Last week, Salander and his wife Julie asked a federal bankruptcy judge to approve a plan to sell their six-story town house, at 63 East 82nd Street, 11 blocks from the gallery. The Salanders' latest filing lists more than 40 creditors, including John McEnroe, the hedge fund investor Roy Lennox and the Bank of America. The Salanders' agreement with their brokers set an asking price of $25 million "or such other price and terms as owner may accept in its discretion (subject to court approval)." The house, between Madison and Park Avenues, was the longtime residence of the writer Lillian Hellman. IT'S NOT A GOOD IDEA TO SKIP PRIMER WHEN YOU PAINT After you paint bare wood with a water-based primer, the Washington Post observes that the wood may seem rougher than before you started. That's because the water in the paint can raise the grain of the bare wood and you can feel some of the coarse pigments in the paint. For professional results, you need to lightly sand the primer before you apply the first coat of finish paint. Try to recoat the primer with a finish coat of paint within 12 hours to maximize the bond will be between the two paints. Also, be sure to read and follow the label instructions of the primer. If it says to apply the primer to a clean, dry surface, do so. Clean means the surface has been washed with soap and water if necessary to remove dirt, oils, grease and tree sap. IF YOU HAVE THE URGE TO GET ORGANIZED, YOU'RE NOT ALONE As the
$6 billion storage and organization industry continues to grow
briskly, manufacturers are filling every niche, notes the Wall
Street Journal, which says specialized storage products are now
available for most conceivable uses in an array of materials -
from bamboo to faux leather to sea grass. Organizers are no longer
sold only at home improvement stores. They get floor space at
drug stores and grocery chains such as Wal-Mart, CVS and Wegmans,
which recently expanded its selection to include holiday wreath
keepers and storage bags for artificial trees. According to the
International WITH KITCHENS MORE A MAN'S WORLD, THEY'RE CHANGING Poggenpohl has partnered with Porsche Designs to create sleek and functional cabinets loaded with all kinds of bells and whistles that men love, says Realty Times. Aluminum profiles of different sizes constitute the basic framework of the new kitchen, where cabinets can be positioned in a variety of ways - kind of like setting up a high tech workshop. The result is a modular, spacious and extremely versatile system of frames for what Poggenpohl believes men will feel is a stunning design concept. Porsche's metal or metal-and-glass frames have lighting integrated into them to offer light where it's needed most - on countertops. And if guys prefer wood, there are three unique wood varieties to choose from. The kitchen boasts a hi-tech audio-video system in a built-in LCD module installed behind glass to protect the delicate components from dirt or splashing water but requires no ventilation system. And a plug-and-play solution offers options for analogue and digital connections. What, no humidor? AND A MAN'S DOMAIN IS BECOMING SOME WOMEN'S The home-improvement industry has always been a no-woman's land known for its drab aisles lined with nail bins and mysterious steel objects whose purpose was understood only by grunting guys in flannel shirts. Now, observes the Wall Street Journal, it is going designer pink. Companies such as Tomboy Tools, Barbara K Enterprises and Girlgear Industries are offering the female do-it-yourselfer fabulous pink hammers and saws in stores and on the Web. These items usually fit snugly inside a smart satchel of the same hue, the tool box as it might be interpreted by Sarah Jessica Parker. Tomboy Trades, a Canadian concern, has also recently introduced pink work boots; adorable as they are, the boots also come in stylish, but less assertively girly, red, blue and green. Pink or blue, these boots are made for workin'. It's the color of money. HUG THAT SHOWERHEAD What do sunflowers, lotus leaves, owls and sea urchins have in common? asks the Wall Street Journal. Designers are imitating both the way they look and the way they work to create better-functioning products for the home - a process known as biomimicry. Companies are coming out with bathroom fixtures, draperies, paint - even swizzle sticks - inspired by designs from nature. Plumbing giant Moen has introduced a showerhead whose spray holes are inspired by a Fibonacci spiral, the branching or spiral shapes often found in natural objects like the whorls of seeds in a sunflower. Last January, German manufacturer Ziehl-Abegg introduced to the U.S. an air-conditioning fan blade for commercial cooling systems called the Owlet. It mimics the serrated edges of the owl's wing, which allows the predator to hunt silently at night. And Evo Design of Watertown, Conn., created the "olive buoy" - a plastic float that sits atop a garnish-skewering toothpick - for retailer Crate and Barrel. The floating toothpick, modeled after buoyant tropical-tree pods, allows martini drinkers to eat the olive without getting their fingers wet. Thank goodness! RATES SLIDE FOR THE THIRD CONSECUTIVE WEEK The 30-year fixed-rate mortgage (FRM) averaged 5.69 percent for the week, down from last week's 5.87 percent, according to Freddie Mac. Last year at this time, it was 6.23 percent. The 15-year FRM this week was 5.21 percent, down from the previous week's 5.43 percent and 5.98 percent a year ago. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.40 percent in comparison with 5.63 percent last week and 6.04 percent last year. One-year Treasury-indexed ARMs were 5.26 percent this week, down from 5.37 percent. At this time last year, they averaged 5.51 percent. The results from this week's survey mark the first time in seven years that the average rate on the 15-year FRM is lower than the average rate on one-year adjustable-rate mortgages. LENDERS URGED TO GIVE PRIME BORROWERS A BREAK TOO Treasury Secretary Henry Paulson suggested the mortgage industry should consider greatly expanding its White House-backed program to ease loan terms for millions of financially troubled homeowners whose mortgages are due to rise, according to the Wall Street Journal. It was the first time the Bush administration has hinted that the plan to expedite refinancing or freeze interest rates for cash-strapped subprime borrowers should also target homeowners who took out other kinds of adjustable-rate loans. In a speech to the New York Society of Securities Analysts, Paulson suggested that the home-loan industry should use a "systematic approach for adjustable-rate mortgages other than subprime if it will benefit homeowners and investors" - a hint toward renegotiating loan terms to enable broad swaths of borrowers to keep up with their payments and stay in their homes. Paulson "has noted that default rates are rising in the prime market, and it bears watching," said a Treasury spokeswoman. The secretary's suggestion drew immediate support from a key mortgage-industry player, the American Securitization Forum, which represents investors who have bought mortgage-backed securities. BALTIMORE TAKES AIM AT WELLS FARGO The city's mayor and City Council are suing the bank, contending that its lending practices discriminated against black borrowers and led to a wave of foreclosures that has reduced city tax revenues and increased its costs. The civil suit that officials in Baltimore are filing in United States District Court may presage another type of litigation against lenders by municipalities facing shortfalls in their budget, says the New York Times. In the suit, the court is asked to bar Wells Fargo from charging higher fees to black borrowers. Many of these borrowers paid more under the bank's subprime lending program, designed for less creditworthy consumers, and are more likely to default on their loans. In 2006, Wells Fargo made high-cost loans, with an interest rate at least three percentage points above a federal benchmark, to 65 percent of its black customers in Baltimore and to only 15 percent of its white customers in the area, according to the lawsuit. Similarly, refinancings to black borrowers were more likely to be higher cost than to white ones and to carry prepayment penalties. "We do not tolerate illegal discrimination against or unfair treatment of any consumer," Wells Fargo spokesman Kevin Waetke said. "Our loan pricing is based on credit risk." REVIEW IS WIDENED OF WALL STREET'S ROLE IN CREDIT CRISIS Securities regulators have asked several brokerage firms for information about the marketing and sale of mortgage-related products, specifically those sold to individual investors, reports the Wall Street Journal. The Financial Industry Regulatory Authority, Wall Street's self-regulatory body, sent letters to more than a dozen firms asking for documents, including marketing materials, a list of supervisory policies and procedures, and descriptions of how collateralized mortgage obligations were valued, according to a copy of the letter reviewed by the Journal. The sweep comes amid probes by the Securities and Exchange Commission and several state attorneys general into how Wall Street firms are valuing mortgage-related products and how they packaged and sold them to investors. Regulators are probably looking to see whether firms sold the products to investors without disclosing the risks, or to investors who didn't have the financial wherewithal to take on riskier investments. A MORTGAGE BROKER TELLS ALL The banker, who says he witnessed shady practices firsthand, spilled his guts in the Real Deal. In some cases, he said he saw mortgage brokers who evaded punishment for fraud by skipping to another bank; in other instances, loan officers accepted fake verification of employment letters. The banker's name is being withheld to protect his identity and the identity of his former employers. His words are largely unedited, and you can read them by clicking here. ARMS' SHARE OF OVERALL LENDING IS SHRINKING Freddie Mac's annual survey of prime loans also found smaller lender discounts for introductory ARM rates. In addition 3/1 and 5/1 hybrid ARMs were the mostly widely offered products among lenders. "Disruptions in the capital markets beginning in August and an increase in delinquencies on ARM product has led to a sharp decline in interest-rate discounting and a tightening of credit underwriting on ARMs in recent months," said Frank Nothaft, Freddie Mac vice president and chief economist. "A year ago, the initial-rate discount on the popular 3/1 and 5/1 hybrid products was about 1.8 percentage points. In our latest survey, the rate discount had virtually disappeared on these products." He added that "tighter underwriting and reduced initial-rate discounts have diminished the appeal of ARMs with consumers." The survey found that starting rates for ARMs were close to or above rates a year earlier, even though the Federal Reserve had lowered its federal funds target from 5.25 percent to 4.25 percent over the time since Freddie Mac's previous survey. In contrast, fully-indexed rates had fallen to their lowest levels in three years, resulting in erosion in the initial-rate discount that had been prevalent in the market during 2005 and 2006. The fully-indexed rate is the rate on the index plus the ARM margin; the margin averaged about 2.75 percent across ARM products in the survey, very similar to last year's. ARMs accounted for 17 percent of loan applications in October 2007, the lowest since June 2003 when fixed-rate loans were near a 45-year low in interest rates and refinance activity was near a peak. Since 1995, the first year that Freddie Mac collected ARM share data, the ARM share has fluctuated between an annual low of 11 percent in 1998 and a high of 33 percent in 2004. The initial rate on jumbo one-year ARMs was about one-quarter of a percentage point higher than on conforming one-year adjustables, the largest gap in seven years, according to Freddie Mac's surveys. REFIS CAUSE MORTGAGE APPLICATIONS TO SOAR For the week ending January 11, volume surged by 28.4 percent on a seasonally adjusted basis from one week earlier, the Mortgage Bankers Association reports. On an unadjusted basis, the change was 64.8 percent compared with the previous week, which was shortened by the New Year's holiday, and 39.0 percent compared with the same week one year earlier. The double-digit gain comes on the heels of a 32.2 percent rise one week earlier, the largest in four years. The Refinance Index increased 43.4 percent over the previous week and purchases, 11.4 percent. The refinance share of mortgage activity grew to 62.7 percent of total applications from 57.7 percent, and the adjustable-rate mortgage (ARM) share of activity slipped to 9.2 percent from 9.3 percent. WITH RATES FALLING, BORROWERS OF JUMBOS DON'T BENEFIT For the
first time since 2005, mortgage rates have slipped well below
6 percent, but the Wall Street Journal notes that increasing numbers
of consumers will find refinancing their existing mortgage worthwhile.
Still, many homeowners won't benefit, either because their mortgage
is too big or their MOODY'S SEES HOUSING 'RECESSION' ENDING IN 2009 The company's forecast by Mark Zandi indicates that the situation will "ultimately be severe enough to be characterized as a housing crash." Home sales are expected to hit bottom in early 2008, declining by over 40 percent from their peak, housing starts will reach their nadir in mid-2008, falling by 55 percent, and house prices are expected to decline by 12 percent through early 2009, according to the forecast. After accounting for the plethora of non-price discounts home sellers are offering to buyers, effective house-price declines peak to trough will total well over 15 percent, the forecast says. Citing U.S. Census Bureau data over the last quarter century, the forecast calculates supply nationwide at 750,000 homes, "far and away the highest level of excess inventory in the post-World War II period." And inventories of unsold homes will rise "substantially further" in coming quarters. "The outlook for the housing market thus appears very daunting," the forecast continues. "The mountain of housing inventory will only clear sufficiently for the market to find a bottom if homebuilders significantly further curtail construction, and thus new supply, and for home sellers to slash their prices to restore affordability and stimulate housing demand." In Moody's scenario, the housing market finds a bottom by early 2009 with average annual housing starts of approximately one million units over the entire period and a peak-to-trough decline in national house prices of 12 percent. NAR SAYS 2008 EXISTING-HOME SALES WILL BE 5th HIGHEST Sales of previously owned homes in 2007 will probably total 5.66 million, the fifth highest on record, according to the National Association of Realtors (NAR). Sales will edge up to 5.7 million this year and 5.91 million in 2009, compared with 6.48 million in 2006, the industry group said. But it estimates prices for 2007 to be down 1.9 percent to a median of $217,600, then hold even this year and rise 3.1 percent in 2009. "Rising home prices in the affordable midsection of the country are likely to offset declines in some of the previously hot markets," said NAR Chief Economist Lawrence Yun. As for new-home sales, they are projected at 773,000 for 2007 but declining to 669,000 this year before rising to 730,000 in 2009 - well below the 1.05 million 2006. The median new-home price is anticipated to drop 2.1 percent to $241,400 for 2007, rise 0.4 percent to $242,200 this year and gain another 5.9 percent in 2009, according to the forecast. MORTGAGE FOLKS FORSEE A 3RD QUARTER BOTTOM The Mortgage Bankers Association (MBA) projects a 16 percent reduction in total mortgage production from a projected $2.34 trillion in 2007. Total originations should see a further drop of four percent in 2009 to $1.88 trillion, the organization said. "The principal concern of the current credit crisis lies in the possibility that banks will eventually run out of capital. Banks are running up against capital limits as they write down the value of assets at the same time they are putting loans on their balance sheets because the markets for securitized products are essentially closed," said Chief Economist Doug Duncan. "Fortunately, the banking system entered the current credit crunch well capitalized, so the danger of a sharp and widespread contraction of credit availability does not seem imminent." He expressed the opinion that housing starts will hit bottom before the end of 2008. "The 30-year fixed-rate mortgage yield should trend up only modestly higher over the second half of the year, reaching 6.2 percent by the fourth quarter and edging up just slightly through 2009. Thus, interest rates will still be quite low by historical standards," added Duncan. Total existing home sales for 2008 will decline by about 13 percent from 2007 to 4.94 million units, he said, estimating that sales will pick up by about four percent in 2009. New home sales will decline by about 15 percent in 2008 from 2007 to 666,000 units, Duncan continued, saying that he expects sales to increase about seven percent in 2009. "Median home prices for new and existing homes are expected to decline this year, with nominal median prices falling about two percent. Prices should increase by between one and two percent in 2009," the economist said. AN INDEX PREDICTS FURTHER PRICE DROPS The chance that home prices will fall during the next two years increased in 39 of the 50 largest U.S. markets during the third quarter, according to the latest quarterly risk index from PMI Mortgage Insurance Co., says Inman News. The index showed a greater than 50 percent chance of price declines in 13 of the nation's 50 largest housing markets, up from 10 in the previous quarter. PMI said some of the increase in house-price risk was due to changes to its model, which now includes data on foreclosure rates provided by the Mortgage Bankers Association. But in many cases, higher risk scores reflected "a significant deterioration of the housing market in the third quarter." There is a "high likelihood that home prices will be lower in many of these MSAs two years from now," the report said. Although the number of MSAs with relatively low home-price risk continues to outnumber those with relatively high risk, that could change if the economy and financial markets worsen further, PMI warned. All but two of the 13 highest-risk markets were in California and Florida. The metropolitan statistical areas (MSAs) with the highest risk scores were Riverside, Calif., where PMI forecasts a 94 percent chance of a two-year price decline; Las Vegas (89 percent); and Phoenix (83 percent). ABSOLUTELY SHOCKING NEWS ABOUT EXPENSIVE CITIES FOR TENANTS The Marcus & Millichap real estate investment firm says New York City tops the list with median rent of $2,922, according to Forbes. Following in order are San Francisco, $1,904; Boston, $1,658; San Jose, $1,612; Los Angeles, $1,452; San Diego, $1,304; Washington, D.C., $1,302; Miami, $1,080; Philadelphia, $1,014; and Chicago, $1,010. Vacancy rates most affect price acceleration. In the sales market, a 5 percent unsold inventory equals a glut, whereas in the rental market, a 5 percent vacancy rate indicates a healthy market. Still, there's a little more to the figures than basic supply and demand. New York's 2.8 percent vacancy rate keeps prices high, of course. But what also plays a role are the incomes of its renters. High home prices keep middle-income and upper-income residents here renting. They can afford, and demand, higher value properties than are rented in other cities. In addition, landlords can charge more, so long as the cost to rent remains significantly below the cost to buy. At the lowest quartile price - the 25 percent mark - the rents paid by residents in New York, Las Vegas and Charlotte, N.C., are almost identical. It's as rents head toward the median and to the top quartile that the divergence becomes most striking. Expected construction also adds a wrinkle to the present rental market. Job growth also affects renters. THERE'S MORE THAN ONE WAY TO SKIN THE FORECLOSURE CAT (But please don't skin anything livelier than a peanut.) The insurance industry fears more homeowners will see arson as a way out of their financial woes, says Forbes. (Don't try that either.) A recent report by the industry-funded Coalition Against Insurance Fraud notes that with "untold thousands of homeowners struggling with ballooning subprime mortgage payments, fraud fighters are watching closely for a spike in arsons by desperate homeowners who can no longer afford their home payments." History indicates such a spike is coming. Allstate spokesman Mike Siemienas says his company has seen an increase nationally in arsons among homes in foreclosure. In California, the state¹s insurance division reports that the number of questionable residential fires in 2007 increased 76 percent over 2006. National arson statistics for 2007 aren't yet available, but Federal Bureau of Investigation crime data shows there was a significant uptick - 4 percent - in suburban arson in 2006. The arson increase in 2006 marked a change from the prior three years when suburban arson fell 3 percent, 5 percent and 6 percent, respectively. Says Dennis Jay, the Coalition Against Insurance Fraud's executive director, "It's a growing problem." YOUR BUILDING'S MASTER POLICY MAY NOT COVER YOU ENOUGH If a unit is destroyed, the master policy will pay for the restoration of the walls and the ceilings, Benny L. Kass reminds readers of Inman News. In some cases (depending on the insurance policy) if your appliances are damaged, the policy will reimburse you for the cost of replacement. Keep in mind that every insurance policy contains a deductible, and you should inquire of your association manager what that number is. But any improvements that you - and even previous owners - made to the unit will not be covered. Many owners do not understand this and find out only when it is too late. An unfortunate - but typical - situation is where an owner inadvertently lets his or her bathtub overflow, causing water to cascade down into all of the units below. The master policy will cover the cost to repair the ceilings and the floors, but your valuable Oriental rug and expensive plasma television set that were damaged will not be covered. You need to obtain your own insurance policy. In the trade, it is referred to as an "HO-6" policy. You've been warned. STANDARD IS AS STANDARD DOES THESE DAYS Coast to coast, Lennar Corp.'s potential home buyers see different scenery, but they might encounter the same kitchen faucets, observes the Wall Street Journal. The nation's second-largest home builder is whittling down options and moving toward a one-faucet-fits-similar-price-points model, seeing standardization and simplification as tools in a cost-cutting drive aimed at saving millions of dollars and surviving the housing slump. Other home builders are taking similar steps. Beazer Homes says it reduced its carpet offerings by 85percent. Pulte Homes cut back to 400 floor plans from more than 2,000, and Centex Corp. cut its roughly 4,500 plans in half, with more reductions under way. Variety, builders have realized, costs money. The savings potential goes beyond simply substituting lower-quality kitchen cabinets or cheaper carpet. Limiting the number of faucet styles, for example, lets builders order earlier and negotiate bigger bulk discounts from suppliers. Cutting countertop choices reduces the risk of installing Colorado red granite when the buyer specified Imperial red. Reducing and simplifying floor plans requires fewer architects and fees, and it speeds production. Pulte projects typical savings of $10,000 to $15,000 per house. "If you don't like cookie-cutter housing, you're not going to like the next several years," said Eric Landry, a Morningstar analyst. TAX TIP You are allowed to take a deduction on your personal tax return for mortgage interest you pay on a loan that is secured by either your principal residence or a second home, up to one million dollars in acquisition indebtedness. That means mortgages, lines of credit and home equity loans all qualify, as long as they are secured by your home, and you are the primary borrower, and legally obligated to repay that loan. AVERAGE WALL STREET BONUS DROPS BY 4.7 PERCENT The decline from the 2006 record brought bonuses to $180,420 on average, according to an estimate by State Comptroller Thomas P. DiNapoli. "Despite the decline in bonuses from last year, state and city personal income tax collections remain strong," the comptroller said. "But the future is not so bright. The losses sustained in the securities industry during the second half of 2007 are a fairly clear indicator that tax collections, especially from business taxes, will erode in 2008." DiNapoli noted that bonuses have historically declined at a slower rate than profits because Wall Street firms use bonuses to retain top producers. DiNapoli's office estimates that the bonus pool paid by the securities industry to its employees in New York City alone totaled $33.2 billion, 2 percent below the record $33.9 billion in 2006. The average bonus in 2007 reflected the slightly smaller pool and the employment gains in the securities industry. Wall Street added 9,600 jobs during the first 11 months of 2007, a 5.4 percent increase. According to Bloomberg.com, Wall Street's five biggest firms are paying a record $39 billion in bonuses for 2007, a year when three of the companies suffered the worst quarterly losses in their history and shareholders lost more than $80 billion. Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns together awarded $65.6 billion in compensation and benefits last year to their 186,000 employees. That means year-end bonuses, at 60 percent of the total, exceeded the $36 billion distributed in 2006, when the industry reported all-time high profits. ARE FALLOW PROPERTIES A MISSED OPPORTUNITY In 2006, the Office of Borough President Scott Stringer embarked on a one-day mission to count Manhattan's vacant properties, the Gotham Gazette reminds readers. The hundreds of volunteers identified more than 2,000 vacant properties in Manhattan - 505 lots and 1,723 buildings. Overall, the city has 492 million square feet of residentially zoned vacant land, with three-quarters of it in Queens and Staten Island alone. According to the Stringer report, they also constitute a major wasted resource. Enough vacant and underutilized property, such as parking lots or partially-occupied buildings, exists just in Manhattan, according to Stringer's report, to provide 24,000 units of affordable housing. So why does so much property lie fallow in a city where no commodity is valued as much as real estate? And what can be done to put this resource to better use? The answers: click here. CONTINGENCY CLAUSE IS OFTEN SOUGHT NOW- BY BUYERS Manhattan buyers, concerned about the difficulty of obtaining a loan in the wake of the subprime mortgage crisis, are more reluctant to purchase apartments without a mortgage contingency clause in place, according to the Real Deal. The desire for a contract with a mortgage contingency, where the purchase is dependent upon the buyer obtaining financing, is not new, but the request is now more commonplace, and that pool now includes qualified buyers who in the past did not need this added security measure. For sellers, however, a contingency clause request is not desirable. The result, in some cases, is that a buyer requiring a contingency gets turned down by sellers who do not want that kind of deal or gets shut out by another buyer who's willing to pull the trigger without one. "We are not seeing financing contingencies in any real numbers yet," said appraiser Jonathan Miller. "However, what we are seeing are deals where the buyer won't sign the contract until the mortgage commitment is issued." Furthermore, "brokers are requiring this be accomplished in 10 days or less to protect their sellers," he said. FOREIGN JOURNALISTS CELEBRATE THE FALLEN DOLLAR Journalists overseas and across the Canadian border are offering potential buyers advice on how to how to make the most of a rare opportunity, says the Real Deal. The articles repeat the same refrain: There's never been a better time to find a bargain in New York City's real estate market. They cite statistics like the fact that nearly one in five U.S. realtors has sold a home to an overseas client in the past year, according to a study published in July by the National Association of Realtors. A third are sold to Europeans, and of those, 12 percent are sold to people from the United Kingdom. And while a few articles caution buyers about market volatility and preparing for unexpected costs such as maintenance fees, nearly all have stories of prime New York properties being snatched up at incredible discounts. "The dollar's collapse has taken many by surprise and rendered one of America's most elite housing markets suddenly affordable to foreigners, even as suffering locals remain priced out," the Observer in London reported Nov. 18. A May 12 article in the Irish edition of the Sunday Mirror described buyers from Ireland buying apartments, mansions and even unfinished high-rise building blocks in Manhattan. How do you say "welcome" in English? FILINGS WERE DOWN IN THE 4TH QUARTER FOR NEW APARTMENTS In the last quarter of 2007, only 23 co-op and condo projects in Manhattan were submitted to the attorney general for review, says the New York Times. They would create a total of 635 units (mostly apartments, but also some offices, retail space, storage lockers and parking spaces). That is fewer new submissions than in any period since the fourth quarter of 2003, when the latest building boom was still in its infancy. Only a smattering of "red herrings," the preliminary plans festooned with red labels, have appeared in the lobbies of residential rental buildings in the last few months. Yet condominium lawyers say they have seen a sharp rise lately in fresh inquiries from property owners seeking to begin condo conversions. "I am getting calls about this every single day," said Stuart M. Saft, a partner at Dewey & LeBoeuf, who has represented developers in a series of large conversions in Manhattan. Though there are still thousands of units in the pipeline, new co-op and condo filings in Manhattan fell sharply in all of 2007, to about 5,400, from more than 15,800 units a year earlier, according to an analysis of data provided by the attorney general. SNAPPING UP PROPERTY BEFORE FORECLOSURE CAN WORK WELL With
foreclosures on the rise, particularly in the outer boroughs,
the distressed properties market is NOT EVERYONE LOST BY BETTING ON THE HOUSING MARKET The biggest winner looks to be John Paulson, a little-known hedge fund manager who smelled trouble two years ago, notes the Wall Street Journal. Funds he runs were up $15 billion in 2007 on a spectacularly successful bet against the housing market. Paulson has reaped an estimated $3 billion to $4 billion for himself - believed to be the largest one-year payday in Wall Street history. Investors had recently gained a new way to bet for or against subprime mortgages; it was the ABX, an index that reflects the value of a basket of subprime mortgages made over six months. An index of those made in the first half of 2006 appeared in July 2006. The Paulson funds sold it short. The index weakened in the second half. By year end, the new Paulson Credit Opportunities Fund was up about 20 percent. Paulson started a second such fund. On Feb. 7, 2007, a trader ran into his office with a press release: New Century Financial Corp., another big subprime lender, projected a quarterly loss and was restating prior results. Once-complacent investors now began to worry. The ABX, which had begun with a value of 100 in July 2006, fell into the 60s. The new Paulson funds rose more than 60 percent in February alone. In the fall, the ABX subprime-mortgage index crashed into the 20s. The funds' bet against it paid off richly. The older Paulson credit funds rose 590 percent last year and the newer one, 350 percent. BUILDERS, AT LEAST, ARE NOT LOSING MORE CONFIDENCE Their confidence in the market for new single-family homes was virtually unchanged for a fourth consecutive month in January, according to the latest NAHB/Wells Fargo Housing Market Index (HMI). The HMI rose a single point to 19 this month following a downwardly revised 18 reading in December and 19 readings in both October and November of 2007. "The HMI has held within a narrow two-point range for the past five months, indicating that builder views of housing market conditions essentially haven't changed over that time," said NAHB Chief Economist David Seiders. "Builders are anticipating a time when market conditions will support an upswing in building activity - most likely in the second half of 2008." RENTING IS GROWING IN ALLURE IN THE U.S. Vacancies have risen in 29 markets in the fourth quarter of 2007, including Las Vegas, Palm Beach, Memphis, Orange County, Calif., and Orlando, according to Reis Inc., a New York real-estate research firm, says the Wall Street Journal. Even healthy markets are beginning to feel downward pressure on rents. A disappointing employment report earlier this month and other signs of a possible recession don't bode well for landlords, since people who lose their jobs will resist paying higher rents or will move in with friends or family. Many displaced homeowners forced out by foreclosures also are doubling up, says Mark Obrinsky, chief economist at the National Multi-Housing Council. That means that landlords are seeing what should be one of their strongest markets in years weakened by the increasing supply of unsold properties entering the rental market. "Shadow inventory is coming out and competing against us for rentals," says Richard Campo, chief executive of Camden Property Trust, a Houston-based real-estate company that owns 70,000 apartments. That is weakening landlords' pricing power, he says, because homeowners are less concerned about getting full market value. The news isn't gloomy for landlords everywhere. Vacancy rates fell in 47 of the 79 markets tracked by Reis, and average rents saw their largest fourth-quarter increase since 2000. In San Francisco, rents grew 2.7 percent in the fourth quarter to $1,761 a month. New York City, which has the highest average rent in the country - $2,717 a month - saw a 2 percent rise. West End Avenue Story It inspired Stephen Schwartz to write a song for The Magic Show. "You win again!" the piece ends. It inspired an award-winning book by Otto Korner about a "prince," who was a Holocaust survivor living in what the publisher described as a "zany retirement home." And it inspired a New York Times writer to grumble about the quality of repairs to its parade of stately buildings on either side. As you must have guessed by reading the headline, the "it" above could be only West End Avenue, a north-south thoroughfare on the far West Side of Manhattan not far from the Hudson. Originating as Eleventh Avenue in the Meatpacking District and running uptown until its intersection with West 59th Street, where its name changes, West End Avenue continues without interruption to West 107th Street and ends there by merging with Broadway. As it labors north
toward 96th Street, West End Avenue presents a sort of humdrum
tone - not nearly so distinguished as the blocks below 86th Street,
with their bursts of Dutch- and Flemish-style architecture, observes
the New York Times, from which much of what follows has been stolen.
According to the 1916 guide "Renting a Furnished Apartment,"
West End Avenue was favored by the prosperous. It described "expensive
baby carriages with their precious freight, rolled along by white-capped
maids" as a common sight there. Big buildings like the Tishman
family's Secessionist-style Dallieu, at 101st Street, had nine-room
apartments renting for $250 a month. The 1920 census shows that
more than half of the residents employed cooks - even the one-
and two-person households. The apartment houses in their current state are rich with examples of how not to repair buildings: the corner on No. 915 has been rebuilt, for example, but the new caulking is bright white and brought flush to the surface, fighting the varied reddish tones of the brick itself. The next three apartment houses on the same side were built by the Paterno family, all designed with a bold elegance by their favored architect, Gaetan Ajello, who left his name in each cornerstone. But these near triplets have aged quite differently. The northernmost, 905, has a desolate, blighted look, especially over the entrance, where leaks from high up have come out through the brick, leaving behind great whitish salt stains called efflorescence. The cornice has been ripped off, the brick patching at the edges is a sad mismatch, and a crude line of electrical conduit runs from the original grand lamp bases to smaller fixtures set about six feet too low. By comparison, 895 West End Avenue, across 104th Street, has had all the luck. Its windows are original; their wooden frames have a texture that even expensive metal replacements cannot approach. In the 1990s, the firm of Walter B. Melvin Architects replaced a missing cornice with an estimable reinterpretation, using off-the-shelf brackets, but to good effect. Best of all, the first two stories are in limestone in big rusticated blocks - it's sort of a mini-University Club - and the stone is blessedly unpainted. Bring a loupe, or even just a good pair of eyes, and peer up close at the ancient shells and other sea creatures from millions of years ago. There is a particularly scary spiderlike specimen below the second window to the left of the main entrance, and the whorls and patterns even run through the building's cornerstone. This part of West End has many good stretches of marine sediment turned to rock. The last of the three Ajello-Paterno projects, No. 885, has a fancy canopy and far too fancy replacement doors, but no one has stripped the stone of its paint. Who knows what delights hide under it? The saddest story of all along the northern stretch of the avenue is the Allendale, at 808 West End (99th Street), the Times opined. Designed in 1909 by Rouse & Goldstone, this was "The Building With the Tower," according to ads in The New York Sun in 1910, which also called West End "the Fifth Avenue of the West Side." The tower was an ingenious redesign: the roof tank, usually set well back from the street, was brought right to the corner and encased in a gorgeous Florentine-style temple. But the Allendale was detempled last year, leaving only a naked steel frame. The concerns above notwithstanding, the composer of West End Avenue described other of its characteristics - some praiseworthy, others not so. Wrote Schwartz:
(For all the lyrics, click here.) "West End Avenue is basically a middle- to upper-middle class neighborhood," Schwartz once told a questioner. "It is the type of neighborhood from which rebellious teenagers flee, swearing not to grow up to be their parents, only to return (in many instances) some years later and grow up to be precisely their parents." Properties listed by various brokers that have been seen recently make up a sampling of what can lies behind those pre-war façades:
Upper East Side
Elsewhere
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2007 Service You Can Trust |
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claims
to be the timeliest source of housing market data. "Sellers
continue to adjust their price expectations downward but not quickly
enough to keep pace with declining demand," Real IQ research
director Stephen Bedikian said. "Until we see declines in
both inventory levels and days on market, we won't have any confidence
that supply and demand are balancing out." Inventories dropped
in every market except Tampa, Miami, Charlotte and Cleveland,
while average days on market increased in 15 of 17 metropolitan
statistical areas (MSA) for which data was available. Markets
with the slowest rate of inventory turnover included Miami (143
days), and Minneapolis and Detroit (136 days). Denver had the
fastest rate of inventory turnover at 77 days, followed closely
by Dallas at 80 days. The only markets where days on market decreased
during the fourth quarter were Dallas and Atlanta. Boston saw
the most dramatic inventory reductions, with a decrease of 21
percent for the quarter. Minneapolis, Denver and Seattle also
saw inventories fall by more than 15 percent during the quarter.
Inventories typically decline during the winter and fall, and
pick up in the spring and summer, so those trends could be partly
accounted for by seasonal factors. The report found an 11.8 percent
decline in inventory in the New York MSA over the three-month
period.
Housewares
Association, closet and storage items were the fastest growing
housewares category over the past five years, with consumer spending
increasing at an average of 20.5 percent per year. The association's
latest HomeTrend Influentials study ranks home organization and
home storage among the hottest housewares product categories through
2010. A UCLA study published last year found what the authors
called "a storage crisis" - despite the fact that contemporary
Americans control the largest amount of private housing space
per person in the history of urban civilization. Annual consumer
expenditures have almost doubled in the U.S. since 1990 to $8
trillion in 2006, according to the Bureau of Economic Analysis.
"We've been through an orgy of getting, and now there's an
orgy of storing," says Perry Reynolds of the International
Housewares Association. Standolyn Robertson, president of the
National Association of Professional Organizers, says the biggest
mistake people make when organizing is to approach the process
backwards. "They say 'I want to get organized' so they go
to the store and buy lots of plastic containers," she says.
Instead, they should think about how they want their space to
look and what they'll be storing, and then buy products accordingly.
credit
score is too low. In other cases, falling home prices will make
it tough for them to refinance. Rates for so-called jumbo mortgages
- those above $417,000 - are now uncharacteristically priced so
far above conventional mortgages that refinancing generally makes
no sense for homeowners who hold them. At the same time, conventional
borrowers who have lower credit scores - or relatively little
equity in their houses - are finding that they generally don't
qualify for the best rates, often negating any expected benefits
to the pocketbook. For jumbo borrowers, though, higher standards
aren't the biggest problem: Rates on those loans averaged 6.8
percent at the end of last week, meaning the spread between conventional
and jumbo rates is nearly a full percentage point - four times
the typical gap. Jumbo rates, lenders say, aren't coming down
alongside conventional rates because buyers of those mortgages
in the secondary market remain skittish. With today's jumbo rates
well above the existing rates that many homeowners currently have
on their mortgage, "there's no reason to refinance,"
says Jay Steren, CEO at Mortgage Capital Associates, a Los Angeles
mortgage banker.
expanding
and giving investors an opportunity to buy at a discount, notes
the Real Deal. Real estate experts said that making an offer on
a property in lis pendens - a stage of pre-foreclosure that a
home enters after its owner has defaulted on mortgage payments
- is an even better option. Speaking with Bill Staniford, a partner
at Property Shark, which tracks homes in lis pendens, the Real
Deal's Jen Benepe learned most distressed properties are being
purchased in lis pendens. Staniford said not only is it possible
to physically enter a property in lis pendens - impossible for
a property in foreclosure - but that once you make contact with
the owner, you can make an offer and proceed just like any other
normal sale. And, he said it's reasonable to expect a discount
of 20 percent off market rate. 
