Items of Interest COST OF LIVING GOES DOWN A NOTCH The federal Department of Labor says the cost of living in New York City declined in the last year for the first time in more than half a century, reports the New York Times. Caused primarily by a big drop in the cost of energy, the dip in the Consumer Price Index (CPI) for the city was 0.1 percent its first decline in any 12-month period since 1956. The biggest factor by far in the decrease was the fall in the price of gasoline and heating oil from the extraordinarily high levels they reached in the first half of 2008. Energy prices in the city were almost 25 percent lower in May than they had been a year before, according to data compiled by the federal Bureau of Labor Statistics. Other expenses such as rent and food rose in price over the last year. Rent went up 5.3 percent, and the cost of food consumed at home or in restaurants, 2.9 percent since last May, the bureau said. “This may be a one-month anomaly, as gasoline prices are rising again,” said Michael Dolfman, the regional commissioner of labor statistics. On a month-to-month basis, prices are already rising. UNEMPLOYMENT REACHES 12-YEAR HIGH The city’s unemployment rate jumped a full percentage point in May to its highest level since October 1997, reports Crain’s. The citywide seasonally-adjusted unemployment rate was 9 percent in May, one percentage point higher than April’s and 3.9 points higher than one year earlier, according to the state Department of Labor. The rate translates into some 361,000 persons out of work, more than at any time during the recession that surrounded the Sept. 11 terrorist attack and the largest number of city residents out of work since 1993. “Obviously the jump is eye-catching, but it really is a continuation of a trend we’ve seen since last fall,” said James Brown, principal economist with the state Department of Labor. “One percent indicates deterioration in the job market, but doesn’t mean that things were spectacularly worse in May than in April.” On a seasonally adjusted basis, the city lost 8,500 jobs in May. The cumulative loss of jobs since the city’s employment peak in August 2008 is now 107,800. Significant gains in jobs in accounting, construction and leisure and hospitality hinted that the outlook for workers in the city might be brightening, said Barbara Byrne Denham, chief economist for real estate investment services firm Eastern Consolidated, told the New York Times. “These gains suggest that the city’s economic outlook may not be as dire as it had looked as recently as three months ago,” she said, adding that some weak sectors such as securities brokerage and real estate appear to be shedding jobs at a slower pace than had been forecast. INCREASES AUTHORIZED FOR RENT-STABILIZED TENANTS The board that regulates rents for New York City’s one million rent-stabilized apartments ignored pleas from tenants and elected officials to freeze rents for the first time in its 40-year history and approved a set of modest increases, reports the New York Times. The nine-member board, known as the city’s Rent Guidelines Board, authorized rent increases that were lower than last year’s, approving increases of 3 percent on one-year leases and 6 percent on two-year leases. Last year, the board approved its highest set of increases since 1989, 4.5 percent on one-year leases and 8.5 percent on two-year leases. WHILE VANANCIES FALL, RENTS CONTINUE TO LAG 2008 LEVELS Year-over-year comparisons show that June prices in Manhattan are behind 2008 by as much as 12.3 percent in doorman one-bedroom units, reports the Real Estate Group of New York. On a month-to-month basis, however, rents are beginning to stabilize in most categories. The only category to post a decline this month was non-doorman two-bedroom units, which fell 2.56 percent. Landlords that had been previously testing the market by removing tenant concessions have put the incentives back into the mix. Summer seasonality is helping to rid the market of excess inventory, the firm says. Non-doorman units saw a decrease of 4.36 percent, and doorman vacancies also fell, by 1.98 percent. You’ll find additional information and a number of charts in the full report. THOSE PESKY EMBEDDED PET ODORS WILL COST YOU When pet odors persist even after a floor has been sanded and refinished, that probably means the urine soaked through the flooring, observes the Washington Post. Although enzyme products can neutralize pet odors, there's no effective way to get the liquid through thick wood. The only real solution is to replace the flooring. Removing the smelly boards and replacing them will cost at least $15 a square foot, including materials, by one estimate. A good flooring company can probably blend the patch into the surrounding area without refinishing the entire floor. Still, it is an art and is usually most successful with light-colored stains. IS YOUR TOILET REALLY GREEN ENOUGH Leaking toilets result in six billion gallons of water loss every day, according to Richard Quintana, founder of AquaOne Technologies, in a Realty Times article. He says there are more than one billion toilets in the U.S., and the American Water Works Association adds that one out of five leaks. The toilets can lose anywhere from 30 to 500 gallons of water daily just from a small silent leak that is the size of a staple. The article is a veritable fount of information. NEW GRADUATES CAN FURNISH STYLISHLY WITH THIS ADVICE Designer Nick Olsen tells the Washington Post that it’s important to figure out your style if you don’t already know it. Do you want bare and minimal or a cozy apartment that looks like you've been in it for 15 years? he asks. “I know it's a big cliché, but start at Ikea.” If bare and minimal is your thing, “go to Ikea and pick out the plainest, simplest big pieces you can find, like a sofa, a comfortable chair, a credenza, a bed and probably your dresser.” Then, he adds, “splurge on the little things that can give your apartment character, like an interesting area rug that you put over the jute rug from Pottery Barn or expensive-looking pillows.” Says Olsen: “No one is going to notice your couch if you have gorgeous pillows.” RATES FOR 30-YEAR FIXED MORTGAGES EDGE UP The 30-year fixed-rate mortgage (FRM) averaged 5.42 percent for the week, up from last week’s 5.38 percent bud down from 6.45 percent last year at this time, according to Freddie Mac. The 15-year FRM was 4.87 percent this week versus 4.89 percent last week and 6.04 percent last year. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) were 4.99 percent, up from 4.97 percent; a year ago, it was 5.99 percent. One-year Treasury-indexed ARMs averaged 4.93 percent, down from last week’s 4.95 percent and last year’s 5.27 percent. “Mixed economic reports on the state of the housing market helped hold mortgage rates fairly flat this week,” observed Freddie Mac Chief Economist Frank Nothaft. FANNIE MAE CHANGES JOB-TRANSFER RULES The mortgage giant issued a laundry list of tougher policies on June 8 that could directly affect thousands of buyers in the coming months, especially those involved in job-related transfers, says Kenneth R. Harney in the Washington Post. Reversing a long-standing policy, Fannie no longer will permit mortgage applicants to count the income of "trailing spouses" toward the household income needed to qualify for a loan. A trailing spouse is one who joins his or her spouse or partner in a job-related move but who has yet to obtain employment in the new location. But Fannie's sister firm, Freddie Mac, still counts trailing spouse or co-borrower income for loan applications using strict guidelines. As part of its June 8 tightening of underwriting rules, Fannie Mae also announced that it plans to discount the values of all borrowers' stock, bond, mutual fund and retirement fund holdings that are claimed toward the applicants' financial reserves needed to qualify for a mortgage. While Fannie previously counted 100 percent of the claimed or documented value of stocks, bonds and mutual funds toward reserves, it will discount them by 30 percent under its revised policy. For retirement accounts, it will count only 60 percent of the value toward reserves. RATES RISE FORCES DROP IN BANKERS’ HIGHER FORECAST The Mortgage Bankers Association (MBA) lowered its forecast of mortgage originations in 2009 to $2.03 trillion, a drop of over $700 billion from its raised March forecast. The group said $84 billion of the drop is owing to lower purchase originations and the rest, to lower rate/term refinancings and very low volumes in the Fannie Mae and Freddie Mac Home Affordable Refinance Program (HARP). The MBA is now forecasting $737 billion in purchase originations and $1,297 billion in refinance originations. It projects that total existing-home sales for 2009 will dip 1.2 percent from 2008, new-home sales will fall 27 percent and median home prices for new and existing homes will likely drop by about 10 percent from 2008 levels, but level off in 2010 as the economy improves. Commented MBA Chief Economist Jay Brinkmann: “Even with higher projected home sales for all of 2009, the projected lower average home price and higher cash share have combined to lower projected volume of purchase originations.” WHEN RATES SLIPPED, LOAN APPLICATIONS INCREASED The Mortgage Bankers Association (MBA) says mortgage loan application volume grew 6.6 percent for the week ending June 19 on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the rise was 6.0 percent compared with the previous week and 17.2 percent versus the same week one year earlier. Refinancings went up 5.9 percent and purchase volume, 7.3 percent, seasonally adjusted, from the previous week. The refinance share of mortgage activity ticked down to 54 percent of total applications from 54.1 percent the previous week, and the adjustable-rate mortgage (ARM) share of activity decreased to 4.1 percent from 4.3 percent. FROM THE DEPARTMENT OF THE WAGES OF SIN Federal authorities charged 41 defendants in five separate mortgage-fraud cases in the Chicago area, alleging the defendants used schemes that resulted in $48 million in fraudulently obtained mortgages issued by various lenders, says the Wall Street Journal. A total of 37 individuals and four businesses are facing new federal charges stemming from the cases, according to the Department of Justice. The individuals include a vice president of a title company, LaSalle Title, mortgage brokers, loan officers, real estate investors, appraisers and an attorney. The charges allege the defendants with falsely inflating the value of dilapidated homes in urban areas and other schemes that involved million-dollar condominiums in a Chicago high-rise and sprawling homes in affluent suburbs. The Department of Justice alleges that, as a result of the various schemes, the lending companies suffered "millions of dollars in losses after the loans went into default and the properties were foreclosed upon." CITIGROUP TAKES AIM AT MORTGAGE BROKERS The big lender put mortgage applications in its correspondent lending channel on hold for the next week, citing a re-engineering and tightening of the standards involved with the loans, reports HousingWire.com. A spokesperson said the company entered the suspension over “quality control” issues surrounding documentation of appraisals or income verification seen in - or missing entirely from - previous mortgages purchased through the channel. (Lenders such as Citi purchase mortgage loans originated by independent mortgage bankers through correspondent channels.) “We review our quality control practices on an ongoing basis, and we have identified areas of improvement,” the spokesperson, Mark Rodgers, added. “We will temporarily suspend the acceptance of correspondent mortgage loan registrations while we work with correspondent customers to make improvements to this important business that will ensure the continued delivery of superior quality loans.” INSURANCE COSTS RISE DESPITE FALLING VALUES Homebuyers may be surprised to find that homeowners insurance isn’t going down, despite precipitous declines in sale prices, notes Lew Sichelman in a United Feature Syndicate column summarized in Realtor magazine. “There has been a lot of noise lately around market values, but market value and the cost to rebuild are two totally different things,” Elaine Baisden, vice president of national property for property casualty insurer Travelers, tells the columnist. Marshall & Swift, which calculates building costs, says it can cost as much as 30 percent more to rebuild than to build. Reconstruction costs are greater because of demolition and removal expenses and the price of bringing older structures up to current codes. While mortgage companies require borrowers to carry 100 percent coverage at time of closing, it is unnecessary to continue this coverage because the value of the land isn’t at risk. Typically, the building lot accounts for 25 percent of a home’s value. Q2 REAL ESTATE VOLUME IS OFF BY TWO THIRDS GLOBALLY Global real estate transaction volume dropped 67 percent year-over-year in the second quarter of this year, according to a June 2009 report on global capital trends from Real Capital Analytics, says the Real Deal. But the drop between the first and second quarters was only five percent, suggesting that the decline may have hit a plateau. For the Americas, the projected quarterly sales volume is $8 billion, an 83 percent decline year over year and a 6 percent drop from the first quarter. FOREIGN INVESTORS ARE UPBEAT ABOUT THE U.S.
CONDO ASSOCIATIONS TAKE A HARD LINE As more condominium owners default on home loans, the amount of unpaid dues owed to condo associations is piling up, according to the Wall Street Journal, which focuses on Florida. To collect the arrears, some condo boards have begun foreclosures on units already seized by banks. FROM THE DEPARTMENT OF DUBIOUS DISTINCTIONS An outfit called Auto Advantage asked drivers to rate cities according to drivers who overreact and lose their tempers and aggressive drivers who cut into lanes, tailgate and sound their horns. Probably to no one’s surprise, reports Realtor magazine, New York City topped the list. Following, in order, were: Dallas/Fort Worth; Detroit (Motown!); Atlanta; and Minneapolis/St. Paul. At the other end of the spectrum were the cities that respondents rated as the most courteous, respectively: Portland, Ore.; Cleveland; Baltimore; Sacramento; and Pittsburgh. EVEN A TOP FEDERAL REGULATOR CAN’T UNLOAD HER HOUSE Sheila Bair, chairman of the Federal Deposit Insurance Corp., has removed her 14-room colonial in Amherst, Mass., from the market after cutting its sale price by $100,000 from an initial $795,000 in April, according to the Wall Street Journal. It's across the street from Emily Dickinson's house in the college town. Bair and her husband Scott P. Cooper paid $355,000 for the house in 2002. In ‘02 and ’03, they received building permits valued at $89,500 to renovate the 1860s dwelling, including new roofing and a counter-current basement pool. After listing the five-bedroom property in April, the couple cut the price to $745,000 fewer than three weeks later, then reduced it again before withdrawing the listing. An FDIC spokesman said Ms. Bair decided to remove the listing and wait for the market to improve on the advice of her real-estate agent. The family will continue to lease the house to its tenants. The Bair family currently rents a house in Maryland. VERY, VERY, VERY RICH ART PATRON CUTS PRICE, THEN BAIT Billionaire entrepreneur, philanthropist and art collector Eli Broad slashed the price of his home Fifth Avenue again, to $10.95 million, from August’s initial asking price of $15 million, then apparently took the listing off the market, according to the Wall Street Journal. The full-floor co-op on the 33rd floor of the Sherry-Netherland Hotel has two bedrooms, two bathrooms, a powder room and a library. The six-room apartment includes views of Central Park and access to hotel amenities. Broad, founder and former chief executive of home-builder KB Home, had reduced the property’s price three times, most recently this spring. FIGHTING A CONGRESSWOMAN, THEY ENLIST CITY HALL Neighbors of Rep. Laura Richardson (D-Long Beach) have complained to the city and written letters and e-mails to her and House Speaker Nancy Pelosi about her three-bedroom vacant house, reports the Los Angeles Times. They’ve cut the grass, watered the lawn and raked leaves, stopping short of painting the peeling clapboard. Richardson did not return phone calls from the Times, which said problems with the house began shortly after the politician was elected to the Assembly in 2006 from Long Beach and bought the two-story house in the leafy Curtis Park neighborhood. The front lawn is a patchwork of grass and weeds with brown splotches of dirt. A toilet sits on the back patio. Brown paper covers many windows. There is no furniture inside. Two beer cans are in the kitchen sink surrounded by dirt. The city declared the house a public nuisance in August. In late May, after a neighbor complained that the front lawn was out of control, the city filed a violation notice. Now residents are discussing whether to hire a lawyer to try to force her to fix it. Richardson bought the house in early 2007 for $535,000. She already owned two other houses on which she had defaulted six times. The property went into foreclosure last year and was sold to real estate investor James York for $388,000 in May. Washington Mutual took back the house and returned it to Richardson. York sued, and the case was settled privately. THIS ACTOR HAS TO GET OUT OF THERE Stephen Baldwin is about to lose his abode, according to the Vancouver Sun. He had paid $515,000 for a 1.4-acre home north of New York City in 1997 but owes $824,000 on the mortgage. He had reportedly attempted to sell the property in 2006. Baldwin and his wife Kennya are in default to Bankers Trust Company, and their property was headed for auction. Baldwin's most recent job was on the TV reality show, I'm a Celebrity, Get Me Out of Here. IT DOESN’T SEEM THAT HE’S COUNTING DOWN Keith Olbermann already lives at the Trump Palace on East 69th Street, says the Real Deal. He paid $4.2 million for a 2,100-sf three-bedroom apartment on the building's 40th floor in 2007. But the MSNBC host paid $810,000 two weeks ago for a seventh-floor apartment in the same building. The apartment was most recently listed for $849,000, having sliced $39,000 off the final price. He put down $203,000 in cash and secured a $607,000 mortgage from Wells Fargo for the remainder, but it has not been disclosed why he needs a second unit. THIS ATHLETE IS DOWNSHIFTING Lance Armstrong has lowered by $1.5 million his elaborate retreat near Dripping Springs, Tex., says the Austin American-Statesman. The 447-acre property, now on the market for $10.5 million, has seven miles of hike-and-bike trails, Hill Country views and 1,886 feet of frontage on the Pedernales River. It also comes with ownership in Dead Man's Hole, the famous natural swimming pool. Armstrong wrote about his experiences at the property in his memoir, Every Second Counts, saying that he would challenge himself by jumping from the ledges around Dead Man's Hole during his battle with cancer. The seven-time Tour de France winner had to contend with complaints from nearby property owners, who said construction on the property in 2003 had polluted the area. The 4,241-sf house has five bedrooms, five bathrooms, and, outside, a negative-edge pool, fire pits, living and dining areas, and a recreation building with a full bathroom. Armstrong has numerous other homes, including another in the Austin area and one in Aspen, Colo. A $16 MILLION ‘SHACK’ FINALLY IS SOLD After four years and several price cuts, Shaquille O'Neal has finally sold his Miami Beach mansion for $16 million, about 29 percent below his asking price of $22.5 million, says the Wall Street Journal. The NBA star paid $18.8 million for the nearly 20,000-sf house on 2.5 acres in 2004 and first listed it in 2005. The seven-bedroom Mediterranean-style home, with an indoor basketball court, is on Star Island off Miami Beach's southern tip. NEW-HOME SALES DIP BELOW EXPECTATIONS Sales of newly built, single-family homes in May held virtually declined less than one percentage point, reports the U.S. Commerce Department. Volume slipped by 0.6 percent, and the number of new homes for sale fell 2.3 percent to a 10.2-month supply at the current sales pace. Regionally, the decline was entirely focused on the South, where sales fell 8.5 percent for the month. They gained 1.3 percent in the West and posted double-digit gains of 28.6 percent and 18.6 percent in the Northeast and Midwest, respectively. Economists surveyed by Dow Jones expected May sales to climb by 2.3 percent. "The report provides further evidence that the recovery is going to be a slow one as the housing market continues to bump along, trying to find a bottom," said Chief Economist David Crowe of the National Association of Home Builders. "The good news is that, even as the sales pace leveled in May, inventories of unsold new homes continued to shrink for a 25th consecutive month.” SALES OF PREVIOUSLY OWNED HOMES GAIN IN MAY
MORE PERMITS ISSUED AS HOME CONSTRUCTION REBOUNDS Housing starts rebounded nationwide in May from record lows in the previous month, posting a 17.2 percent gain, according to U.S. Commerce Department figures. While driven largely by a double-digit gain in the volatile multifamily sector, the uptick also reflected a substantial gain on the single-family side and applied consistently to all regions of the country. The report registered the third consecutive gain for single-family homes and the second for permits. Economists surveyed by Dow Jones Newswires had forecast a 7 percent increase. The figures were “a very welcome sign that the market may be nearing a turning point,” said Chief Economist David Crowe of the National Association of Home Builders, adding that builders were “very cautious” about the future and aware of the upcoming expiration of the first-time buyer tax credit at the end of November. “Homes that get started now should be able to close by that deadline, and this may be spurring some of the latest construction activity.” Single-family housing starts gained 7.5 percent in May, and those for the multifamily sector were up 77 percent after a nearly equivalent decline in the previous month. Building permit issuance, which can be an indicator of future building activity, rose 4 percent overall in May. Economists had mixed reactions to the statistics. IF YOU TRUST FORBES, YOU CAN BUY WELL IN SOME CITIES While the overall housing market isn't on the upswing, certain metro areas singled out by Forbes magazine show “long-term promise.” According to the publication, “While the majority of the nation's housing markets are still working toward a bottom, some cities are boasting fundamentals that make them good places to buy a home now.” Among them are Denver, Boston, Phoenix, Los Angeles and San Diego. Denver tops the list. It had 25 percent of its property sales occur within approximately 25 percent of the city's ZIP codes, meaning that sales in various parts of the city were fairly evenly distributed and thereby showed proportionate activity. “The further a city deviates from the 25 percent mark, the less evenly distributed the market is in that city, and thus the lower that city ranks. To see the magazine’s methodology and its analysis of all the cities, click here. HOMEOWNERSHIP DOESN’T FULFILL A DREAM In a new paper, Wharton Associate Professor Grace Wong Bucchianeri maintains that the average homeowner “consistently derives more pain (but no more joy) from their house and home” than renters, according to the Wall Street Journal. Her report says that homeowners spend, on average, less time on leisure than those who don’t own homes. And the average homeowner is around 12 pounds heavier that those who rent. The basis for the research comes from a survey of women in Franklin County, Ohio, which includes Columbus, the state capitol and Ohio’s largest city. The research took place in 2005, so the recent drop-off in home prices wasn’t an issue. "Overall, I found little evidence that homeowners are happier by any of the following definitions: life satisfaction, overall mood, overall feeling, general moment-to-moment emotions and affect at home," Bucchianeri writes. Her paper also concludes there’s little evidence that homeowners are better citizens. Bucchianeri tells a Wharton newsletter that the research isn’t designed to argue against homeownership, but instead is designed to question the seemingly unchallenged premise that homeownership should be regarded as the ultimate goal of the American Dream. AFTER MAY BLIP, BUILDERS’ MOOD SLIPS AGAIN The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) declined one point, to 15, in June. Said Chief Economist David Crowe of the National Association of Home Builders: "Builders are taking their cue from consumers, who remain uncertain about the economy and their own situation. Builders are also finding it difficult to complete a sale because customers cannot sell their existing homes." Any number over 50 indicates that more builders view conditions as good than poor. OUTLYING COUNTIES OUTPACE CENTRAL COUNTIES IN GROWTH Outlying counties in metropolitan statistical areas grew faster than central counties between 2000 and 2007, according to the Census Bureau. Their population increased 13 percent in comparison with an 8 percent increase for the central counties of metro areas. Metro area central and outlying counties both grew faster than the remainder of the nation (2 percent). The report shows that outlying counties grew faster in the South (17 percent) than in any other region. The percentage-point difference in growth between the South’s outlying and central counties (which grew by 11 percentage points) was the largest among the four regions. The outlying counties as a whole grew more through net migration than through natural increase - 12.5 per 1,000 population versus 4.8 per 1,000 – as opposed to central counties; central counties grew by 6.6 per 1,000 attributed to natural increase and by 3.6 per 1,000 from net migration. Among the nation’s nine census divisions, the Mountain Division (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming) experienced the highest percentage growth in its metro area population - 20 percent. A THIRD OF METRO AREAS AVOID PRICE DECLINES
INTEREST WANES IN HOME OWNERSHIP TO BUILD WEALTH The National Foundation for Credit Counseling (NFCC) says almost half of all American adults, more than 100 million people, no longer believe that homeownership is a realistic way to build wealth. In a survey, the methodology of which was not disclosed, nearly a third of respondents, said they don’t think they will ever be able to afford to buy a home. Forty-two percent of those who once purchased a home but no longer own it believe they’ll ever be able to afford to buy another one. Of those who still own a home, 31 percent think they will never be able to buy another home – for example, upgrade their existing home or buy a vacation getaway. RESEARCH FIRM SEES EVIDENCE OF STABILIZATION During the past few months, a "growing consensus has emerged" among many industry sources that housing has begun to stabilize, notes the real estate research firm Radar Logic. "While it is too soon to declare a recovery, we see evidence of stabilization from a number of sources, which may indicate the beginning of a return to normalcy in housing markets." The firm goes on to say that the large volumes of existing housing inventory may continue to put downward pressure on prices. "The combination of inventory and a market price that is migrating towards the median motivated sales price in most MSAs will put builders in a difficult position," the report observes. You can obtain the firm’s report or read a comprehensive summary. DEUTSCHE BANK CHANGES HOME-PRICE PREDICTION FOR NYC The financial institution forecasts a decline of 40.6 percent in the New York metropolitan area from the first quarter of 2009 in relatively slight contrast to its March estimate of a 47.4 percent decline, according to the Wall Street Journal. The change reflects, in part, a drop in prices since then. Still, prices would have to drop in the region (which includes the suburbs) another 32 percent from the first quarter of 2009 to return the New York market to levels of affordability not seen since 1998. Affordability measures whether a household at the median family income could purchase a home given median prices and at prevailing interest rates, which Deutsche Bank assumed to be 5 percent. Median prices in the first quarter of 2009 dropped to $446,000 in the New York area, down 19 percent from the peak of $552,000 set in the second quarter of 2007. Deutsche Bank forecasts a total peak-to-trough decline of 52.1 percent. CONTINUING STRESS AFFLICTS HOUSING MARKET, SAYS HARVARD
‘MILLIONAIRE’ HOMES MAY AWAIT BUYERS FOR YEARS Prices for the most expensive U.S. homes may not reach bottom for another few years, according to JPMorgan Chase & Co. analysts cited by Bloomberg News. Using California data that they said could be extrapolated, mortgage-bond analysts including John Sim and Matthew Jozoff found that the supply of homes priced $750,000 to $1 million held steady while the supply of more expensive properties increased. “Tighter lending standards and the lack of cheap financing for these borrowers continue to be key issues,” the New York- based analysts wrote, referring to jumbo mortgages. “Currently, we have national home prices bottoming in 2011. However, prices for more expensive homes may not bottom out until 2012 and ultimately result in peak-to- trough declines in excess of 60 percent (compared to 40 percent nationally).” In a telephone interview with Bloomberg, Sim acknowledged that California was “probably worse” than other states while adding that “higher-priced homes in general are going to be a problem.” Still, that he also expects prices of higher-end homes to fall swiftly in the months ahead as sellers become more desperate. FEDERAL AGENCY DOESN’T PROJECT QUICK RECOVERY Looking backward in a new research paper filled with caveats, the Federal Housing Finance Agency (FHFA) finds that the median time required to return to prior peak prices was 10.5-20 years. Also, data suggest that the time from peak to trough tends to be about 3.75 years, whereas the median recovery period (from trough to prior peak) was 6.67 years. “In reviewing the data, it should be recognized that the applicability of historical trends to the current U.S. house price downturn may be limited,” the paper states. “The economic drivers of price increases during the boom period in the early 2000s differed from the drivers of prior market booms, and the magnitude of recent price increases has generally been larger.” Most of the larger historical downturns were caused by sharp increases in unemployment rates and shocks to personal income, according to the authors. They note that “those factors were not among the precipitants of the latest downturn, which began in 2006, well before the financial crisis erupted in the third quarter of 2007 and the recession began in the fourth quarter of 2007.” FORECASTERS INTERVIEWED BY FORTUNE DON’T EITHER Sales in the decimated housing market may finally be bottoming, but don’t expect home prices to stop dropping before mid-2010 at the earliest, analysts and economists tell Fortune magazine. “Indeed, prices in the battered housing market could get a lot worse before they get better as an avalanche of specialized adjustable rate mortgages, known as option ARMs and Alt-A mortgages, are slated to reset over the next 18 to 24 months, and rising unemployment causes a surge in the number of prime mortgages going into default,” the magazine warns. “All of this is expected to trigger another round of foreclosures and cause home prices to tumble at least another 20 percent before the market rebounds, according to market analysts and economists.” To arrive at these conclusions, the magazine interviewed a number of market bulls and bears. Market bulls believe home prices could bottom in the second half of 2010, but the bears warn it could be 2013 before they finally trough. And once prices do reach a low, it could be years before they significantly rebound. AT REUTERS ‘SUMMIT,’ PRESENTERS RUN HOT AND COLD ON NYC Top economists, strategist and analysts at the Reuters Investment Outlook Summit said they would be in no hurry to purchase a slice of the Big Apple, the company said. For example, asked whether he would buy Manhattan real estate, perennially bearish economist Nouriet Roubini of New York University responded, "Absolutely not.” He added: "With all the job losses, whether it is Wall Street or otherwise, demand is very weak. I think prices are going to fall very sharply." He sees Manhattan residential real estate prices dropping another 20-25 percent. Greg Peters, global head of fixed income and economic research at Morgan Stanley, also predicts another drop in New York City, but by 20 percent. "Brooklyn, I would have down 30 percent," he said. But Robert Prechter, founder and president of Elliott Wave International who predicted the 1987 stock market crash, said of Manhattan real estate: "I would probably put it on my list for an eventual bargain." And Dino Kos, who previously ran the New York Federal Reserve Bank's markets desk and now is at research firm Portales Partners, responded positively: "If I had the money, yes. Yes, if I had the money. But I don't - too many years working in the public sector; the public sector will do that to you." If You're Buying a "Mansion," Beware the Taxman As New York State ludicrously defines a mansion, such a property in a new development or otherwise owned by a building’s sponsor must sell for $1 million or more to earn that dubious distinction. That’s the number used by legislators in 1989, when $1 million was $1 million. As of 2008, however, a million was $1.7 million, thanks to inflation. And whether $1.7 million would buy a mansion in New York City then or now certainly is open to question. Just try to find something that might correctly be called a mansion for $1.7 million – for example, a townhouse in excellent condition. You would be hard pressed to find one in good condition for under $10 million in popular neighborhoods. (The highest priced one today is on the Upper East Side at $75 million, but there’s not a scintilla of hope that it well sell for anything like that sum.) Even $1 million on the bottom line is too high to avoid the tax. That’s because there’s another tax that, in the state’s eyes, must be added to the purchase price. The culprit is the transfer tax, which can raise the selling price as defined by the government to $1 million, thereby subjecting the purchase to an additional 1 percent mansion tax. One percent of a million: $10,000. A contract price of approximately $980,000 is considered the safest maximum to avoid the tax. The Wool Law Group has an understandable explanation of the tax online, noting that the levy is imposed on the purchasers of a one-, two- or three-family home or an individual condominium or cooperative unit for $1 million or more. Furthermore, the real property must or may be used as a personal residence. Searching for a silver lining, the lawyers provide the following information:“First, mansion tax increases a seller's basis for the purpose of calculating capital gains tax. The amount of a seller's gain is reduced not only by capital improvements but by the amount paid in mansion tax.
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In a survey by the Association of Foreign Investors in Real Estate (AFIRE), two thirds of the organization’s 200 members say they plan to invest some debt or equity in U.S. real estate before 2009 is over. However, three quarters of them have yet to do so. Investors’ ranking of the three cities they expect to recover first are Washington, DC, New York City and San Francisco, unchanged since last January’s survey. “Twice as many respondents named Washington as their city of choice over second-place New York,” said AFIRE chief executive James Fetgatter. Rounding out the top five were Boston, which has not appeared among investors’ top five cities since 2001, and Los Angeles. The foreign real estate investors say they expect to see a recovery in the US real estate market by the end of the second quarter in 2010, the survey found.
Benefiting from favorable affordability conditions and a first-time buyer tax credit, re-sales of single-family, townhomes, condominiums and co-ops of rose 2.4 percent, according to the National Association of Realtors (NAR). May’s increase was the first back-to-back monthly gain since September 2005, but last month’s level was 3.6 percent below the pace one year earlier. The median of $173,000 was 16.8 percent lower than in 2008, and distressed properties - which declined to 33 percent of all sales in May from 45 percent in April - continue to distort the median price downwardly. "Distressed sales are what's driving down home prices, but they are also what's driving up existing home sales," Patrick Newport, an economist at IHS Global Insight, told CNBC. Total housing inventory at the end of May fell 3.5 percent to a 9.6-month supply at the current sales pace, down from a 10.1-month supply in April. Sales of single-family homes went up rose 1.9 percent, b
ut volume was 3 percent below the May 2008 level; the median price was $172,900 in May, down 16.1 percent from a year ago. For apartments, the increase was 6.1 percent, but activity was 8.9 percent below one year earlier; the median was $173,800 in May, down 21.9 percent from the year before. “With existing home sales still 35 percent below their 2005 peak, housing activity remains in the doldrums,” observed Paul Dales of Capital Economists. “What’s more, there is a danger that the recent surge in mortgage rates will snuff out a recovery before it even begins.” 
Thirty-eight of the country’s top 100 metro areas avoided declines in home prices in the past year, reports the Brookings Institution’s quarterly MetroMonitor, which tracks indicators of economic recession and recovery in those areas, according to Realtor magazine. Areas with stable home prices were concentrated in the less-affected parts of what Brookings calls the “Manufacturing Belt” - Pennsylvania and upstate New York - and the Sun Belt - Texas, Oklahoma, Arkansas and Louisiana. Those areas also had below average shares of properties affected by foreclosure. Cities with the strongest economies had businesses involved in oil and gas exploration, military employment, education and government. Cities both in the New York and D.C. regions were absent from lists of the top 10 and bottom 10. The top10, from No. 1 down: San Antonio; Oklahoma City; Austin; Houston; Dallas; McAllen, Tex.; Little Rock; Baton Rouge; Tulsa; and Omaha. At the bottom: Providence; Toledo; Stockton; Fresno; Modesto; Jacksonville; Lakeland, Fla.; Tampa; Bradenton, Fla.; and Detroit.
A sustained recovery for housing still faces an uphill climb, says Harvard’s Joint Center for Housing Studies. “Although there are some signs of improvement or at least steadiness in new construction and sales, housing starts stand near 60-plus year lows, and any life in home sales is coming from distressed foreclosure sales, temporary first-time buyer tax credits and low interest rates that moved higher in recent weeks.” notes Center Director Nicolas P. Retsinas. Adds Executive Director Eric S. Belsky: “The best that can be said of the market is that house price corrections and steep cuts in housing production are creating the conditions that will lead to an eventual recovery. For now, markets remain under considerable stress.” The report also contained 
