Items of Interest RENT REGULATION STYMIES SOME BIG INVESTORS In recent years, private equity firms that once rarely ventured outside Midtown Manhattan began investing in Harlem, the South Bronx, East New York and other working-class neighborhoods, paying top dollar for tenement buildings in the belief they could make big profits by replacing rent-regulated residents with higher-paying tenants, says the New York Times. But tenant advocates and bond rating agencies say that many of those firms' properties are in danger of foreclosure because optimistic profit projections have fallen short, leaving enormous gaps between the rent rolls and mortgage payments. As many as 54,000 of the 90,000 apartments acquired in those deals, or 60 percent, are at risk, according to a new report by the Association for Neighborhood Housing and Development, a nonprofit advocacy group for low- and middle-income tenants. "Many of these properties have moderate to high risk of default over the next 6-12 months, because the debt service reserve funds are either inadequate or exhausted and the cash flows are very poor," said Frank A. Innaurato, a managing director of Realpoint, a bond rating agency. "The apartments are just not generating revenues anywhere close to market rents. Yet, they were underwritten as if they were." WEB SITE REPORTS MORE AND DEEPER 3RD QUARTER CUTS Overall, the average Manhattan sales price decreased from the second quarter by 7.7 percent to $1.46 million but increased by 9.4 percent since last year, according to Streeteasy.com. The median sales price declined 5.5 percent since the second quarter but increased by 7.9 percent over the same quarter last year. The average time on market for condo listings rose 12.7 percent above the previous quarter, while co-ops slipped by nearly 4.9 percent. In the three months ending Sept. 30, condo resales stayed on the market for an average of 112 days and co-op resales, 95 days. The number of closings went up 18 percent over the last quarter; co-op resales gained 21.4 percent over the prior quarter, while condo resales increased by 5 percent. Also rising was inventory, which remained above 8,000 despite a 27 percent average weekly decline since the second quarter. There were more than 1,300 price cuts in available listings for condos, a 2.1 percent increase since last quarter but more than double the number of cuts since last year. Co-ops, on the other hand, had a 3.1 percent decrease in the number of price cuts, to just over 1,600 listings. The average price cut this quarter for both co-ops and condos was 6.6 percent. LENDERS ARE SCRUTINIZING CO-OP FINANCES MORE CLOSELY Lenders increasingly are denying buyers who are looking to get into a co-op when the co-op can't prove that its financial house is in order, according to the Real Deal. With increasing frequency, co-op boards are being forced to deliver audited financial statements to a lender before any transaction takes place. They must also show a high percentage of owner-occupants and provide evidence of reserve funds adequate to protect the building in the case of major repair or improvement. "I think it's pretty common across the marketplace to find that most banks have tightened their guidelines," said Chris Goettke, a regional president at National Consumer Cooperative Bank (NCB), the nation's leading lender to the New York cooperative market. Debra Shultz, director and senior certified mortgage advisor at Manhattan Mortgage Co., noted that the majority of co-op guidelines have not changed at most lenders. They want at least 50-70 percent of a building's units occupied by primary owners, no more than 20 percent investor-owned units, as well as strong financials, no outstanding litigation and a minimum of 10 or more units per building, which lessens the risk that one individual in default could drag an entire building into foreclosure. Attorney Lawrence DiGiovanna, whose firm represents more than 30 co-op apartments in Brooklyn, added that banks demand that co-ops increase reserve funds to handle future capital repairs. And attorney David Schachter said that banks are refusing to lend to buyers if a co-op board cannot produce audited financial statements. "If they see a financial statement that's not audited, they say, ‘We don't want to do the loan,'" he observed. "Before, you didn't hear any of this." BUILDING BOOM TO PEAK THIS YEAR The long-running boom will peak this year, before new office and residential projects peter out in the coming years and the number of construction jobs falls by almost 30,000 by 2010, according to a report released by the New York Building Congress, says the New York Times. The building congress, a trade group for construction and real estate companies, estimates that construction spending on new housing, office towers, stadiums, subway tunnels and schools will decline slightly in 2009 before falling to $26.2 billion in 2010, from $33.8 billion this year. Housing construction is expected to slow drastically after a spectacular four years in which new apartments, mostly condominiums, were built in virtually every neighborhood in the city. The report estimated that 35,700 housing units would be built this year, up from 31,900 last year. But by 2010, that number is expected to drop to 18,500. WITH HIGHER ENERGY COSTS, GUESS WHAT ELSE COST MORE No surprise to anyone who looks at a ConEd bill, but folks who used 300 kilowatts of electricity in August got a bill for $109.99, the company says, according to the New York Post. That was up 58.6 percent from the $69.34 that the same amount of electricity would have cost in August 2007. Officials had been predicting that higher fuel costs would result in a 30 percent increase for the air-conditioning season. Officials also blamed warmer days for the higher prices. Since summer of 2007 was relatively cool, wholesale power prices were depressed a bit as consumers used less air conditioning. COMPTROLLER RAISES FORECAST OF JOB LOSSES The New York City comptroller's office is now forecasting that the city will lose 165,000 private-sector jobs over the next two years, reports the New York Times. That would be almost twice as many as the comptroller's office had projected three months ago, when it said that about 85,000 jobs would be lost. The difference, according to the comptroller, William C. Thompson Jr., is that the nation has slipped into a general recession with effects that will spread far beyond the financial services sector and across the whole city economy. About one-fifth of those lost jobs, about 35,000, will come in investment banking and other financial services, according to the revised forecast. The previous projection was for a loss of 25,000 jobs in financial services, or almost one-third of the expected total. According to Crain's, the city's seasonally adjusted unemployment rate was 5.8 percent in September, unchanged from August but up from 5 percent in September 2007. The city's rate came in below the national rate of 6.1 percent, which also held steady between August and September. Citywide, the number of people collecting unemployment totaled 66,840 in September, down 10.6 percent from August but up 26 percent from September 2007. SELLERS IN THE CITY DON'T FOLLOW FSBO TREND While For Sale by Owner (FSBO) listings are on the rise nationally because of the downturn in the economy, real estate experts told the Real Deal that New York City seems to be bucking that trend. Sources said that they have seen a decline in so-called FSBOs in the five boroughs in the last 12-18 months, and that they don't expect a turnaround. That's because, historically, FSBO activity in the city has waned during economic downturns, said Jonathan Miller, the president of appraisal firm Miller Samuel. "In a stronger market, sellers are braver - they'll use discount brokers or try to sell properties themselves," Miller said. "During a housing boom, the agent ends up as an order taker. In a weaker market, the marketing skills and the brand strength behind the brokerages play a bigger role." Left to their own devices, FSBO sellers tend to be two to three months behind the market when it comes to pricing their properties, added Miller. Bruce Katz, a New York real estate attorney whose firm facilitates several hundred closings a year, said FSBO transactions this year were half of what they were previously. Today, most clients who list their properties as FSBO eventually end up hiring a broker, he said. "A few years ago, when anyone could get a mortgage, there were many more people trying to sell on their own - and having a lot more success with it than they would now," Katz said. Even in the best of times, FSBO sales represent only a small fraction of real estate transactions in New York City, in part, because of the prevalence of co-ops in which prospective buyers must gain board approval based on financial and other factors. Sellers have long relied heavily on brokers to screen would-be buyers, who, in turn, rely on brokers to help them with sometimes idiosyncratic co-op applications. A SMALL SPACE COMMANDS A BIG PRICE City property records show that a 412-sf studio, intended for a maid, nanny, butler or even guest of a building resident on the seventh floor of 15 Central Park West, has sold for $1.2 million, or $2,913 a square foot, according to the New York Times. It faces the interior courtyard. The staff studio was sold by Brian France, the chairman of Nascar on the same day in early September that he also sold a 3,176-sf apartment on the 34th floor for $18.8 million. France bought both units in June. He paid $780,000 for the studio and sold it for $420,000 more, for a gain of 54 percent. He paid $10.6 million for the three-bedroom and sold it for a gain of $8.2 million, or 77 percent. The buyers of both were Gotham and Vicky Makker, who have been trading up apartments, first at Time Warner Center and later at 15 Central Park West. REAL ESTATE AGENT CHARGED IN $100,000 SCAM A flailing former Citi Habitats sales agent, Leif Lopez, was busted for allegedly duping an apartment hunter out of $100,000 in a phony transaction negotiated at Starbucks, says the Real Deal. Lopez was charged with second-degree grand larceny, according to the criminal complaint. His customer believed she was renting two apartments at Rockrose's Midwest Court at 410 West 53rd St. for a two-year period, but Lopez absconded with the money, the complaint said. Patxy Peguero, a daytime doorman at the building, said the victim discovered the loss months later when she attempted to move in. "She came here to move in with this funny lease," Peguero said. "She was asking me for the key to move in, and I said, ‘are you kidding me? How could you give somebody that much money in cash?'" The victim said she'd signed a lease and given Lopez the cash during three meetings at a nearby Starbucks, the doorman said. But Lopez allegedly never filled out paperwork at the on-site leasing office for the building. Lopez and the victim had come into the building several times to look at apartments, but "didn't do any business here," Peguero said. He is licensed as a real estate salesperson at Citi Habitats' 465 Columbus Avenue office, according to the Department of State's office. But Citi Habitats spokesman Christopher Dente said that Lopez was terminated in March, and an executive of Living Real Estate Group said Lopez trained at the company in late spring, then fell off the radar. FANS OF WEST END AVENUE SEEKING LANDMARK STATUS Landmark West is calling on the Landmarks Preservation Commission to designate a new historic district, encompassing all of West End Avenue, from 70th to 107th streets, according to the New York Times. The group expressed the belief that developers have been seizing individual sites to demolish them and replace them with slender glass-and-steel apartment buildings. "A large group of neighbors have gotten together and taken this up as a major issue," said Kate Wood, executive director of Landmark West, which has a petition online. "The larger buildings represent the work of some of New York's most prolific, bread-and-butter architects, who defined the city as we know it today. And now the low-rise spots - row houses - are now being targeted by developers. There's a cohesive character to this avenue that needs to be preserved as a whole, not just here and there." The Upper West Side is already home to seven historic districts. SELLER CONCESSIONS ARE BECOMING LESS RARE Brokers agree that price reductions have become almost commonplace in some developments and even in resales in established co-ops, reports the New York Times. The market slowed over the summer, convincing many sellers that they had been asking too much for their apartments. Then, the upheaval on Wall Street helped make buyers even bolder. Some are placing lowball bids on three, four or even five properties, just to see where they can get the best deal. Not all developers are open to negotiation or are offering incentives. But buyers who have been shopping around for a while have become well versed in the kinds of discounts available and are using that knowledge as a bargaining tool. Although developers are offering financing incentives as a way to avoid actually cutting their prices, most are not publicizing their incentive programs. They present them only to potential buyers at their sales offices. MORTGAGE RATES SKYROCKET The 30-year fixed-rate mortgage (FRM) averaged 6.46 for the week, up from last week's 5.94 percent and 6.40 percent last year at this time, according to Freddie Mac. This week's increase of 52 basis points was the largest weekly increase since the week ending April 17, 1987, when the rise was 84 basis points. The 15-year FRM of 6.14 percent this week compares with 5.63 percent last week and 6.08 percent a year ago. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.14 percent, up from last week 5.90 percent; a year ago, they were 6.11 percent. One-year Treasury-indexed ARMs were 5.16 percent versus last week's 5.15 percent and last year's 5.76 percent. "Interest rates for 30-year fixed-rate mortgages rose this week to an eight-week high," commented Frank Nothaft, Freddie Mac vice president and chief economist. "ARM rates, which tend to be based on shorter-term benchmarks, showed smaller gains in part due to the Federal Reserve's Oct. 8 inter-meeting rate cut in the overnight lending rate." COUNTRYWIDE WILL HELP THE MOST BORROWERS EVER Countrywide Financial has agreed to the largest program ever to modify home loans as part of a settlement with officials in 11 states, reports the New York Times. Countrywide, the nation's largest 3RD QUARTER LAYOFFS IN MORTGAGE INDUSTRY REACH 9,000 More than 9,000 mortgage jobs were slashed in the third quarter, according to employment data tracked by MortgageDaily.com, says Realtor magazine. From July 1 to Sept. 30, MortgageDaily.com tracked 10,131 U.S. mortgage layoffs and 996 mortgage hirings. The findings were based on an analysis of 38 companies, including those that went out of business. California had the biggest mortgage job losses of any state. Government reports indicate that mortgage employment this year has decreased from 358,500 on June 30 to 349,100 on Aug. 31. The organization with the biggest net job increase was HUD, which indicated it would add 300 jobs to meet growing FHA demand. Not included in the third-quarter figures were potential layoffs from big banks and mortgage companies that are going out of business as independent entities such as Washington Mutual Bank, which has more than 43,000 employees. LENDERS GOT HIT BADLY LAST YEAR, THEY SAY Mortgage companies lost an average of $560 on every loan they originated last year, a drop from the $50 per loan they lost in 2006, reports the Mortgage Bankers Association. While loan origination and ancillary fees grew on a per-loan basis, they did not keep pace with increases in production operating expenses, which grew 7 percent to $3,663 per loan. MBA's annual study was based on a sample of 180 mortgage banking companies that originate and service loans. Overall, the average firm posted pre-tax net financial income of $0.9 million in 2007 compared with $6.4 million in 2006. The "net cost to originate" was $2,655 per loan in 2007 versus $2,476 in 2006. SELLER FINANCING IS REGAINING POPULARITY Some home sellers are stepping in and financing deals on their own, says the Wall Street Journal. Seller financing can help buyers who may be having trouble getting a loan because they are self-employed or work on commission. It also can help someone barred from a traditional mortgage owing to scarred credit, if it can be explained. In return for financing the mortgage, sellers receive a steady income stream from the mortgage payments. And at a time when other investments are more volatile, the interest on these mortgages could provide sellers with a welcome return, perhaps 7 percent or more. But if the buyer defaults on the loan while the seller is holding the paper, the seller may need to reclaim the property through foreclosure. Accepting too small a down payment - less than 10 percent down - can be a huge mistake because the buyer has less of a stake in keeping the home. LOAN APPLICATION VOLUME GROWS BY 5.1 PERCENT The Mortgage Bankers Association (MBA) said the increase over the previous seven days for the week ending Oct. 10 was seasonally adjusted. On an unadjusted basis, the change was 5.4 percent compared with the previous week but down 17.0 percent compared with the same week one year earlier. "Treasury yields were extremely volatile last week. The yield on the 10-year Treasury note - the benchmark for 30-year fixed mortgage rate - moved up about 40 basis points over the course of the week," observed Orawin Velz, MBA's associate vice president. "Lower yields earlier in the week appeared to have spurred refinance activity, which then faded as the week went on and rates began to rise." Refinancings went up 12.5 percent, and purchase applications slipped 0.3 percent from one week earlier on an unadjusted basis. The refinance share of mortgage activity increased to 46.4 percent of total applications from 43.4 percent the previous week, while the adjustable-rate mortgage (ARM) share edged up to 2.6 percent from 2.3 percent of total applications. UNITS OF HOUSING SWELLED FROM 2005 TO 2007 From seasonal vacation homes to mobile homes, housing units in the United States increased from 124.4 million in 2005 to 128.2 million in 2007, according to the U.S. Census Bureau. The number of occupied housing units went from 108.9 million to 110.7 million. Among other findings, median monthly housing costs for owners were $927 in 2007. For renters, housing costs were $755. The median home value in 2007 was $191,471 and the median monthly payment for principal and interest was $852 for owner-occupied housing. Among the 75.6 million homes that were owner-occupied, 24.9 million units, or one in three, were owned free and clear without a mortgage. Some 3.75 million housing units had six people or more residing in the home. There were smoke detectors in 93 percent of the homes but only 37 percent had a carbon monoxide detector. 16 PERCENT OF OWNERS ARE UNDER WATER, NOT FROM RAIN The relentless slide in home prices has left nearly one in six U.S. homeowners owing more on a mortgage than the home is worth, raising the possibility of a rise in defaults, says the Wall Street Journal. After a housing slump that has pushed values down 30 percent in some areas, roughly 12 million households, or 16 percent, owe more than their homes are worth, according to Moody's Economy.com. The comparable figures were roughly 4 percent under water in 2006 and 6 percent last year, says the firm's chief economist, Mark Zandi, who adds that "it is very possible that there will ultimately be more homeowners under water in this period than any time in our history." In contrast with the 12 million home borrowers estimated to be under water, 64 million have equity in their homes. These include 24 million households who own their homes free and clear and 40 million whose homes remain worth more than is owed on them. U.S. HOUSING PROBLEMS REDUCE OPTION TO MOVE A new study suggests buyer psychology and tighter credit aren't the only factors keeping would-be home buyers on the fence, reports Inman News, which says homeowners with negative equity are BUILDER CONFIDENCE SINKS TO A NEW RECORD LOW Their confidence in the market for new single-family homes declined three points, to 14, in October, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). "Undoubtedly, today's HMI reflects builder assessments of the recent events on Wall Street, the rapid deterioration in job markets and the corresponding weakness in consumer confidence," noted Chief Economist David Seiders of the National Association of Home Builders. CLOUDS HANG OVER HIGH-END HOME DESIGNERS Big-ticket decorators are scrambling to prove their worth and hang onto an increasingly jittery clientele, observes the Wall Street Journal. But even before the credit crisis, the amount of money people have been willing to spend renovating has been falling. According to the latest report by Harvard University's Joint Center for Housing Studies, homeowner improvement will fall by an annual rate of 11.1 percent to $122 billion by the first quarter of 2009. At San Francisco firm Sagan Piechota Architecture, which regularly handles $5 million-$40 million-jobs, two projects went on hold until further notice as a direct result of the market activity. With the market sinking, many designers are quickly switching into cost-cutting mode. A client at Eve Mode Design in Los Angeles suddenly put the brakes on a $150,000 home renovation set to begin next month, saying she had to check on financing. In an effort to save the project, the firm's Jackie Steinberg is working with the client to try to cut back the project's scope, making it a simple remodel instead of adding a room. "We are now giving a low-budget option for every decision," adds Robyn Singer-Dror of Conceptual Interiors in New York's Long Island City neighborhood. Some decorators are cutting costs by focusing their clients' dollars on the most-visible surfaces such as walls or cabinet doors. For example, Ossining, N.Y.-based interior designer Kaja Gam, who says one client just asked her to hold off on a bathroom remodel, says she recently advised another to use melamine, a less-expensive material, for the usually hidden sides and backs of kitchen cabinets. HEATING HOMES WILL COST LESS Oil prices dropped below $70 a barrel for the first time in 14 months, reports the New York Times. Prices have tumbled by nearly $40 a barrel in just three weeks as indications grow that demand for energy will slow along with weakening economies around the world. As recently as July, oil was trading at a record of $145 a barrel. On Friday, crude oil for November delivery traded at around $73 a barrel on the New York Mercantile Exchange, according to news reports. Some analysts expect oil prices to keep declining, perhaps to as low as $50 a barrel in coming months. Americans will probably see lower energy bills this winter, as gasoline and heating oil futures also dropped sharply. AN ARCHITECT CAN BE YOUR CONTRACTOR TOO The architect-as-contractor model, called design-build, had been gaining new traction at the highest echelons of the housing market, as clients seek ways to execute cutting-edge designs without the headaches often associated with such construction, according to the Wall Street Journal. Membership in the American Institute of Architects' design-build community has nearly tripled over the past five years, and teachers at several architecture programs across the Midwest report that enrollment in design-build classes has doubled. And while critics argue that allowing one firm to handle both design and construction duties could result in out-of-control costs, advocates argue the opposite, saying double-duty firms are faring better in tough times because it's easier for them to keep costs in check. "The design-build process may be as close to a fixed cost contract that an owner can expect in today's construction world," writes Barry B. LePatner, a prominent construction lawyer, in his book, "Broken Buildings, Busted Budgets: How to Fix America's Trillion-Dollar Construction Industry." A TOUCH-UP PRODUCT WILL MATCH YOUR CHIPPED SINK KIT Industries, maker of the unfortunately branded Porc-a-Fix, specializes in touch-up products for bathroom fixtures and appliances, says the Washington Post. Porc-a-Fix offers an array of colors, and it helps to know the manufacturer of the tub. If green is the color of your tub, bear in mind that a number of manufacturers had green fixtures. For example, Kohler offered at least six greens: spruce green, fresh green, aspen green, evergreen, sea foam green and tea green. Your best bet in the likely event of confusion is to contact Porc-a-Fix and discuss your problem; the company might suggest other ways of tracking down a color. Call 800-526-3186 or see the company's Web site, porc-a-fix.net. But wait! There's more! If this is a deep chip, you will need two products - putty to fill the chip, called Porc-a-Filler, and the Porc-a-Fix glaze to add the color. Porc-a-help, anyone? AN INCREASE IN 2009 SALES OF EXISTING HOMES IS FORESEEN Looking at what it terms "middle-ground assumptions," the eternally optimistic National Association of Realtors (NAR) forecasts existing-home sales will grow 2-3 percent next year following national declines of 5-8 percent in 2008; home prices are projected to increase 2 to 3 percent next year. But new-home sales were predicted to fall from around 503,000 this year to 471,000 in 2009. Housing starts, including multifamily units, are likely to fall 28.2 percent this year, to 973,000 units, and to 843,000 in 2009, the NAR maintains. NOT SO FAST, SAYS ANOTHER REPORT Until the excess inventory of 950,000 single-family homes and condos sitting vacant in the United States has been depleted, no significant housing upturn is likely until 2010 at the earliest, according to a housing market analysis. In its latest issue of Research Notes, the National Multi Housing Council (NMHC) estimated there are approximately 825,000 excess vacant single-family homes and 125,000 excess vacant condos beyond normal vacancy levels in the United States. "Add to that some 2 million in excess houses and condos that are occupied and on the market, and the housing market faces incredibly rough times over at least the next 14 months, the organization maintained. The current excess inventory of single-family homes is actually greater than an average year of production in the 1990s, which was 725,000 units per year. The excess inventory will continue to push prices lower, according to NMHC. AND SOME ECONOMISTS PREDICT A DISTANT BOTTOM A RATINGS COMPANY ENVISIONS TOUGH TIMES FOR BUILDERS Tough market conditions will persist into 2009 for home builders, according to a Fitch Ratings report in an Associated Press story quoted by Realtor magazine. Fitch predicted that next year there is a 60 percent chance new-home construction will decline by 13 percent from the projected 2008 levels and new-home sales will fall by 7 percent. The report also forecasted a 3 percent drop in existing-home sales. "If mortgage rates should again rise or credit terms tighten further, then our housing forecasts could turn even more pessimistic," Fitch analyst Robert Curran said in the report. "And of course, if the economy, possibly now in a modest recession, slides into a sharp recession, then the downturn would not only deepen, but could extend further into 2009 or even 2010." If the economy avoids a severe recession, Fitch says housing will stabilize by the end of next year. It predicts that Texas, the Washington D.C. area and southeastern states, except Florida, will be the first markets to enjoy a recovery. A FORMER McCAIN HOME IS ON THE BLOCK A 15,000-sf home formerly owned by John and Cindy McCain is scheduled to be auctioned on Oct. 25. The home sits on 2.7 acres and has 13 bedrooms and 14.5 bathrooms in Phoenix, Ariz... Originally the parents of Cindy McCain, who was raised there, built the home. After they married, the Arizona senator and his wife moved into the residence, which boasts a pole signed by the senator, and stayed for 20 years. The McCains sold the place in 2006 to the current owner, real estate developer Jane Popple, for more than $3 million. Popple renovated the place, adding a seven-car garage, wine-tasting room and exercise room. HE'S PAID A PRETTY PENNY FOR A NEW NOHO LOFT Portrait artist Chuck Close and his wife Leslie paid $5.95 million for a condop at the Deborah Berke-designed 48 Bond Street in Noho, reports the Real Deal. The sale by photographer Gary J. Cooper closed on Oct. 6, according to property records posted. The couple also owns a 2,500-sf coop nearby, at 20 Bond Street. Close, 68, was critical of development on Bond, which he said threatened to shut out sunlight, rendering his studio unusable. Cooper and his wife bought the apartment in the 17-unit building in April for $5.25 million, but never moved in, Cooper said. LERNER PLAYS A WINNING GAME Randolph D. Lerner, the owner of the Cleveland Browns of the National League Football League, closed on a 1,730-sf two-bedroom Greenwich Village co-op at 15 West 11th St. for $4.06 million, according to city property records, says the New York Times. That was $100,000 over the asking price, enough for Lerner to clinch the deal over an art dealer with a competing bid. The seller was Jason Mutchnick, the television producer who created "Will & Grace." A COSMETICS QUEEN CAN PUT ON A HAPPY FACE Ageless cosmetics queen Adrien Arpel, the Bronx-born Home Shopping Network hawker who looks a decade or two younger than her 65 years, and her husband Ronald Newman, have paid $5.9 million for a seven-room co-op at 900 Fifth Ave., says the New York Post. Included in the 10th-floor, three-bedroom, three-and-a-half-bath spread is a formal dining room, a maid's room and views over Central Park and the Frick museum to the south. ONETIME CAPOTE HOME IN THE HAMPTONS GOES ON THE MARKET The former home of Truman Capote recently was listed for $14.6 million, says the Wall Street Journal. The seller, noted abstract-expressionist painter Ross Bleckner, purchased the midcentury saltbox house for $800,000 in 1993 from the Nature Conservancy. The artist restored and enlarged the home, which is in Southampton's hamlet of Sagaponack and sits on four acres near the beach, adjacent to a nature preserve. The main house, now 2,000 square feet, has a view of the ocean. There's also a 1,900-square-foot studio, a two-bedroom guest house, a detached garage and a pool. Capote, who purchased the Sagaponack home in the early '60s, died in 1984 and left the house to his longtime companion, Jack Dunphy. Dunphy died in 1992 and left the property to the Conservancy. ECONOMISTS DOUBT RESCUE PLAN'S HELP FOR HOUSING The Treasury Department's rescue plan for the U.S. financial industry doesn't directly address the root cause of the crisis: falling home prices, says the Wall Street Journal. "If the financial system doesn't get working again, then the economic downturn is going to be much worse, and that means the housing market will be a lot worse than it otherwise would be," says Frederic Mishkin, a Columbia University economist and former Federal Reserve Board governor. Some economists say the government needs to do more to address the underlying problems that triggered the credit crisis. "It's very disappointing" that the plan doesn't do anything "to stop the spiral in home prices," says Harvard University economist Martin Feldstein. The supply of homes on the market remains stubbornly high, while demand for those homes remains relatively weak. Chris Mayer, vice dean of Columbia Business School, says the government should push mortgage rates down to 5.25 percent in order to spur demand. He has proposed that the government refinance homeowners who live in their homes, can document their income and show they can afford the new mortgage. When borrowers owe more than their homes are worth, he adds, the government and the mortgage holder should share the write-down in equity when the loan is refinanced. PENDING HOME SALES RISE SHARPLY Pending home sales activity surged as buyers took advantage of low home prices and affordable interest rates, according to the notoriously unreliable predictions of the National Association of Realtors (NAR). Its Pending Home Sales Index jumped 7.4 percent in August from July and was 8.8 percent higher than one year earlier. The index is at the highest level since June 200, but NAR chief economist Lawrence Yun warned that "we need to see just how much of this gain holds up." Said he: "What we're seeing is the momentum of people taking advantage of low home prices, with pending home sales up strongly in California, Nevada, Arizona, Florida, Rhode Island, and the Washington, D.C., region. "The improvement also reflects the drop in mortgage interest rates after the government takeover of Freddie Mac and Fannie Mae. It's unclear how much contract activity may be impacted by the credit disruptions on Wall Street, but we're hopeful most of the increase will translate into closed existing-home sales." FORECLOSURE AUCTIONS ATTRACT RELATIVELY FEW TAKERS While the number of foreclosure auctions is soaring, many transactions aren't taking place at asking prices because some lenders are demanding too much, brokers and investors say, according to the Wall Street Journal. So far this year, 2.22 percent of all homes in the U.S. have entered the foreclosure process, according to estimates by the Foreclosures.com Web site. By the end of the year, as many as one million homes in the U.S. may be in foreclosure. Many investors, who make up the bulk of active bidders at auctions, say the banks are asking too much for the homes. So far this year, 748,381 homes - or 46 percent of the foreclosures - have gone into the possession of the banks as real-estate owned, or REOs, because no bidders were interested in them at auction. ANOTHER REAL ESTATE PRACTITIONER BITES THE DUST An Atlanta real estate practitioner has been sentenced to 14 years in federal prison for mortgage fraud, notes the Department of Justice in Realtor magazine. Joseph Sterling Jetton, the 61-year-old owner of Precision Construction Co. in Woodstock, Ga., was ordered to pay $11.2 million in restitution on charges of conspiracy, bank fraud, wire fraud and money laundering. Jetton orchestrated a mortgage fraud scheme that involved millions of dollars in fraudulently inflated mortgage loans being provided to unqualified straw borrowers from late 2004 through early 2006. The straw borrowers were paid through shell companies as much as $600,000 per property from the loan proceeds. Jetton was accused of writing sales contracts for inflated sales prices, then he and 10 others implicated in the scheme skimmed hundreds of thousands of dollars out of the loan proceeds. According to court documents, Jetton personally derived more than a $1 million in commissions from the mortgage fraud. SOME FIRST-TIME HOME BUYERS CAN GET A TAX CREDIT The First-time Home Buyer Tax Credit was passed this year as part of the Housing and Economic Recovery Act) on July 30. Targeting anyone who hasn't owned a home for at least three years, the measure allow taxpayers to take the credit on their 2008 tax return if they bought their house this year after April 9. Authorization for the credit ends July 1. The credit is 10 percent of the purchase price, up to $7,500, and can be taken in a single tax year. Income limits are $75,000 for individuals and $150,000 for households. Individuals whose income exceeds the $75,000 limit up to $95,000 and households up to $170,000 can receive the credit on a reduced basis. Any property is eligible so long as it is a primary residence in the United States. The tax credit must be repaid starting in 2011 in 6.67 percent increments over 15 years to a maximum of $500 annually. Some analysts have likened the credit to a 15-year, interest-free loan to help make home buying affordable. UNABLE TO REPLACE SOD, A PENSIONER IS IMPRISONED A 66-year-old grandfather in Bayonet Point, Fla., is doing jail time because he couldn't afford to replace the sod on his lawn in his deed-restricted community after his sprinkler system failed, according to the St. Petersburg Times in Realtor magazine. The Beacon Woods Civic Association took Joseph Prudente to court earlier this year after he failed to re-sod despite several warning letters. In September, Circuit Judge W. Lowell Bray ordered Prudente to resod. When Prudente repeatedly ignored the court order, Lowell sentenced him to jail without bail until the lawn is sodded. Prudente, who takes heart medication, says he was unable to fix the lawn after his adjustable rate mortgage rose to $600 a month, Wachovia Bank repossessed his Toyota Scion, and his daughter and her two children fell on hard times and moved in with him and his wife Pat. The Beacon Woods association expressed regret that Prudente had landed in jail. "It's a sad situation," says board president Bob Ryan, shedding crocodile tears. "But in the end, I have to say he brought it upon himself." WALL STREET'S PROBLEMS EXTEND TO THE HAMPTONS It's the East End where the Wall Street meltdown has led to immediate aftershocks, brokers tell the Real Deal. Sales activity in the Hamptons has all but stopped, prices have plunged and deals are disintegrating, brokers on the East End said. Fashion designer Adrienne Vittadini's five-bedroom waterfront home in Water Mill was recently reduced from $6.95 million to $6.495 million, down more than $1 million from its original listing price of $7.6 million, according to an Internet-based listings exchange system. An eight-bedroom home on Parsonage Lane in Sagaponack, originally listed at $9.995 million, is now $8.495 million, while a Bay Avenue home in Water Mill first priced at $4.995 million now is available for $3.995 million. FORBES IDENTIFIES REITS WORTH AN INVESTMENT The magazine recommends real estate investment trusts that have stable tenant bases, low leverage (liabilities as a percentage of assets) and no looming debt maturing, according to Realtor magazine. Among those mentioned in the article are Equity Residential - which owns apartments in New York, Los Angeles and Seattle - has one of the sector's strongest balance sheets, and recently secured a $550 million loan from untroubled Wells Fargo, at 6 percent interest; Washington REIT - which owns offices in and around the nation's capital, where demand for space is strong - raised $98 million in equity last month and has a $260 million line of credit; and General Growth Properties - which owns high-end malls in troubled places such as Las Vegas - has piled up debt building new malls and has had its share fall 87 percent from a 52-week high to $7.59. LONDON PROPERTY SALES ARE PLUNGING London's real-estate agents sold an average of 8.3 properties apiece in the three months ended in September, according to the Royal Institution of Chartered Surveyors. The Wall Street Journal says that is the lowest tally for any region of the country since the survey started in 1978. In Britain as a whole, agents sold an average of 11.5 properties during the three-month period, down more than 50 percent from a year earlier. THE BIGGEST U.S. BANK IS BUYING RISKY MORTGAGES AGAIN JPMorgan Chase, the largest U.S. bank by market value, has begun to buy up more risky mortgages in the belief that these loans will eventually generate gains for shareholders, according to Reuters in Realtor magazine. Bank executives reported during their quarterly conference that they have seen prices for some classes of mortgages stabilize in recent weeks. "We'll probably be mad at ourselves if we didn't buy more," says JPMorgan Chief Executive Jamie Dimon. Upstairs/Downstairs There is in the hearts of some buyers a special place reserved for the duplex apartment. They love the homey feel that a staircase engenders, plus the separation between sleeping quarters and the living/dining areas. Maybe the mystery to visitors of what's on that other floor adds a fillip that intrigues such buyers. Whatever the benefits, such apartments generally command a premium. Certainly, there is extravagance in the not inconsiderable space occupied by any staircase except the fearsome spiral. One case in point is a renovated West Side apartment in a post-war building overloaded with amenities on Broadway. This condop with a north-facing terrace on the 19th floor manages to feel cramped for two reasons: the standard-height ceilings and the staircase, which dominates the apartment. The staircase is in the center of the two-bedroom, two-and-a-half-bath unit. So is the entrance; thus are visitors greeted by a flight of stairs just a few feet in front of them in a mini-foyer. On the right is the living room - the only room of any decent space, 17'4" x 16'4". To the left is the nicely updated open kitchen and dining area, which features a wall of built-in storage. But the square footage devoted to them appears barely to equal that of the living room. Upstairs, the two bedrooms and two baths are well separated by the staircase and landing, but they feel skimpy, even a touch cheesy, compared with bedrooms in other similarly priced apartments. Those stairs bear a lion's share of the blame. This co-op went on the market in April (when sales were still strong) for $1.85 million. Doubtless because of amenities ranging from swimming pool to squash courts, garage and fitness center, maintenance is sky high at $3,125 a month; in addition, there is a special assessment of $270 a month through December. The place is now offered, after a second price reduction, at $1.698 million. With meager reductions (the last being about $50,000), the seller is chasing a market it cannot catch. Although some buyers may have a soft spot for duplexes (and apparently delight in trying to remember what they need when going up or down, then forgetting), this is one that destined to be orphaned for some time to come. Below, you'll find a couple of other duplex apartments and other properties that have been listed by various brokers and viewed recently: Upper East Side
Upper West Side
Upper End Chelsea/Flatiron Lofts
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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lender and loan servicer, recently acquired by Bank of America, had been sued by the states over what they said were predatory lending practices. To settle the suits, it will provide $8.4 billion in direct loan relief, affecting an estimated 400,000 borrowers nationwide, while waiving certain fees and setting aside additional funds to help people in foreclosure and relocating. Along with the direct relief, Countrywide will waive late fees of $79 million and prepayment penalties of $56 million and suspend foreclosures on delinquent borrowers with the riskiest loans. A foreclosure relief fund will be created with $150 million from Countrywide to help borrowers who are four months or more behind on their payments or whose homes have already been foreclosed on. The company also will provide $70 million to help troubled borrowers relocate to rental housing. In all, Countrywide is setting aside $8.7 billion to help borrowers.
often "locked in" to their existing homes and are nearly 50 percent less likely to move in order to take a new job, cut their commute time or move to a neighborhood with better schools. The study's authors - housing experts at the Wharton School of Business and the Federal Reserve Bank of New York - warned that the repercussions of "lock in" include less efficient job markets and reduced incentives for homeowners to keep up and make improvements to their homes. Some families will not be able to move to access better jobs in other labor markets, the study concluded, while others who would like to move to access better schools or a different-size home will be unable to do so. Covering the period from 1985 to 2005, the authors found that negative equity reduces homeowner mobility more than previously believed; within a two-year period, the decrease was 5.6 percentage points, 47 percent from the baseline mobility rate of 12 percent.
The American housing market is far from hitting bottom, says the New York Times. Home prices across much of the country are likely to fall through late 2009, economists say, and in some markets the trend could last even longer depending on the severity of the anticipated recession. In hard-hit areas like California, Florida and Arizona, the grim calculus is the same: More and more homes are going up for sale, but fewer and fewer people are willing or able to buy them. Adding to the worries nationwide are rising unemployment, falling wages and escalating mortgage rates - all of which will reduce the already diminished pool of would-be buyers. "The No. 1 thing that drives housing values is incomes," said Todd Sinai, an associate professor of real estate at the Wharton School. "When incomes fall, demand for housing falls."
