NEW BREAK ON MORTGAGES IS OFFERED BY THE STATE New York will offer a federal income tax credit to first-time homebuyers to encourage home sales. The New York State Mortgage Credit Certificate (MCC) will enable first-time homebuyers to claim a tax credit equal to 20 percent of their annual mortgage interest costs, potentially saving the average homebuyer about $1,500 each year. The program will effectively extend, and in some cases improve upon, the federal government’s $8,000 First-Time Homebuyer Credit enacted as part of the American Recovery and Reinvestment Act of 2009, which expires Nov. 30. The MCC can be used to reduce a homebuyer’s tax burden for every year the mortgage loan remains outstanding. The credit allows borrowers to deduct the 20 percent from their federal income tax liability, and the remainder continues to qualify as an itemized tax deduction. THIS WAY NOT TO THE EGRESS BUT TO THE MANSION The Bailey mansion, a rare free-standing house in Harlem with 12,000 square feet of space was originally listed last November for $10 million, but the 121-year-old house sold in July for $1.4 million cash, according to the Wall Street Journal and Curbed.com. The sellers chopped to list price to $6.5 million in April in the particularly hard-hit Harlem market. The home was built by circus entrepreneur James A. Bailey, who intended it to be his last residence. But the neighborhood never fulfilled Bailey’s expectations. The buyers are listed as Martin and Jie Spolle, whose new property requires a good deal of renovation. RENTAL MARKET HITS THE SUMMER DOLDRUMS The residential rental market has continued its lackluster trend, according to the August Manhattan monthly market report from TDG/TREGNY. Both doorman and non-doorman rentals in Manhattan for studios and one- and two-bedroom units dropped 5-10 percent since August 2008; from July, the average price for units in some neighborhoods fell significantly. For doorman studios in Soho, for example, the average rent dropped more than 11 percent since July. There’s a detailed chart on the Service You Can Trust blog. The biggest changes were in non–doorman two-bedroom units, which fell 1.75 percent since July. Year-over-year, rents were down by as much as 10.02 in doorman one-bedroom units. Non-doorman and doorman vacancies both dropped, leading to the largest overall month-to-month decrease in inventories since last September (3.45 percent). It was the fifth straight month of declines for doorman units, which went down 4.39 percent, while non–doorman units slipped 2.36 percent. For the full report, in PDF, visit this site. Another report, just released in PDF format, had consistent results. A HOUSE CAN BE TOO RICH BUT NEVER TOO THIN The skinniest house in the city has hit the market for the first time since 2000, priced at $2.75 million, reports the Real Deal. The home, at 75 1/2 Bedford Street, was built in the mid-1800s. Poet Edna St. Vincent Millay once lived there, and actors Cary Grant and John Barrymore are rumored to have lived in the dwelling. It last sold in 2000, for $1.6 million. The New York Post notes that the 1,500-sf townhouse made headlines when it was sold in 1943, 1982, and 2000. (And apparently now as well.) Owner Stephen Balsamo, who never lived at the house as his primary residence, renovated the 1873 building to maximize its space. In the kitchen, a custom stove has all four burners in a single row, rather than the usual two-by-two arrangement. The three floors are each open, but the balconies overlooking the garden were extended, adding depth to make up for lack of width. LESS EXPENSIVE PROPERTIES BOOST SALES Last month saw a 47 percent spike in the number of contracts signed for homes below $500,000 from severely depressed levels a year earlier, according to a Crain’s report on Streeteasy.com data. Overall, there were 838 contracts signed in August, up 27.2 percent from the same month a year ago. “This season has seen a dramatic increase in contract activity since a year ago,” said Sofia Kim, vice president of research for Streeteasy.com. “While this seems like very good news for the industry, one has to keep in mind that average prices of these contracts are down 2 percent from a year ago.” They were also well below the asking prices. WHAT’S GOING ON HERE If it’s crime in your current or prospective neighborhood that interests you, you might want to check out a cool interactive map that PropertyShark.com has contrived. Although the merits and reliability of sexual offender registries are debatable, you can as well check on your neighbors’ proclivities with the map on this site. A WEST SIDE CONDO CONVERSION IS IN BANKRUPTCY Beleaguered real estate developer Yair Levy, a partner in the failed condo conversion of the Sheffield57 in Midtown, filed for Chapter 11 bankruptcy on another one of his projects: Park Columbus, an Upper West Side condo conversion. Crain’s said his company owes $20 million to its creditor, Manhattan-based Garrison Investment Group, according to a recent filing with the U.S. Bankruptcy Court, Southern District of New York. Park Columbus, formerly a rental building at 101 W. 87th St. known as Columbus Green, was a 95-unit condo conversion. BEDBUGS KEEP REARING THEIR UGLY LITTLE HEADS If you want to make sure your apartment is free of the pests, especially if you’re about to move in, the New York Times offers some useful information. For an inspection, pest control companies charge anywhere from $75 to several hundred dollars, said Gil Bloom, the vice president of the Standard Extermination Company in Queens. Bedbug-sniffing dogs ($300 to $500) can be useful, though there are growing concerns about the number of false positives they produce. Or some folks actually hire surrogate sleepers for a week – an occupation with questionable benefits, but no doubt Craigslist would be a potential source. If a gut renovation is planned, that’s a great time to discourage bugs. You’ll find details in the article. IF YOU ACTUALLY LIKE POPCORN, HERE’S HOW TO PAINT CEILINGS If you want to encapsulate the asbestos in older popcorn ceilings or cover stains, a stain-blocking primer is the right way to go, according to Inman News. But do the entire ceiling and cover the stain twice. Sprayed-on texture sucks up water-based paint unbelievably. A solid coat of primer will give the finish coat a good base and guarantee a consistent finished look when done. Be advised, though, it will probably be a three-coat job. The best way to do the job is with an airless paint-sprayer. Spraying allows you to get paint into all the nooks and crannies of the popcorn easily. Using a brush and roller will remove a fair number of kernels of corn but just won't do the job. Airless sprayers are available for a reasonable fee at any rental shop and at some Home Depot and Lowe's stores. As with any painting project, preparation is the key. In this case, that means "cover up anything you don't want to paint - including yourself." HANG IT ALL In recent years, the hook aisle at hardware stores has grown to include an encyclopedic selection of devices for hanging pictures that can accomplish any number of feats: holding 350 pounds on drywall; securing frames safely above children’s beds; latching onto concrete and then moving four inches when you decide a picture could do with being pushed down a smidge, the New York Times notes. Yet many folks still hang frames on a simple nail, a strategy that horrifies the pros at galleries and museums. The correct method of hanging is to use D-rings. For more on the art of picture hanging, see the whole article. RATES REMAIN AT SURPRISING LOWS The 30-year fixed-rate mortgage (FRM) averaged 5.07 percent for the week, down from last week’s 5.08 percent and last year’s 5.93 percent, according to Freddie Mac. The 15-year FRM was 4.50 percent versus 4.54 percent last week and 5.54 percent last year. Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.51 percent this week, down from 4.59 percent the prior week and 5.87 percent a year ago. One-year Treasury-indexed ARMs were 4.64 percent on average in comparison with last week’s 4.62 percent; at this time last year, they were 5.21 percent. “Mortgage rates remained historically low over the past two weeks, keeping housing very affordable,” said Frank Nothaft, Freddie Mac vice president and chief economist. MORTGAGE BROKERS EKE OUT AN IMPROVED PROFIT Mortgage bankers had a $184 profit per loan on every loan they originated in the second half of 2008 despite lower net warehousing income and higher production operating expenses, according to the Mortgage Bankers Association (MBA). This modest profit marks an improvement over average per-loan losses in 2006 and 2007, according to the MBA’s Annual Mortgage Bankers Performance Report. The average firm posted pre-tax net financial income of $0.7 million in 2008 versus $0.9 million in 2007 and $6.4 million in 2006. In 2008, loan origination and ancillary fees grew, compensating for continued per-loan increases in production operating expenses. DELINQUENCIES GROW TO A RECORD 40% IN 12 MONTHS Lender Processing Services reports that total delinquencies remained unchanged at 8.6 percent in July from June, but the year-over-year level of 40 percent was the highest on record. Foreclosure inventories continued to climb to record highs, with a month-over-month increase of 4.2 percent and a year-over-year increase of 89.6 percent. Jumbo prime foreclosure rates were up 634 percent from January 2008. LPS’s Mortgage Monitor showed that the percentage of 90-day or greater delinquent loans rolling to foreclosure status has decreased from 2007 and 2008 levels; however, those loans not referred into foreclosure continue to roll to the next stage of delinquency, meaning that the volume of at-risk loans is worsening. The absolute volume and percentage of foreclosure starts relative to the total number of active loans continues to increase as well. FOR MANY BORROWERS, THE WORST IS YET TO COME
VERY LOW RATES PUSH UP MORTGAGE LOAN APPLICATIONS The Mortgage Bankers Association (MBA) said volume increased 17 percent on a seasonally adjusted basis for the week ending Sept. 4 from one week earlier as refinancings boomed. On an unadjusted basis, the gain was15.8 percent compared with the previous week and 64.5 percent compared with the same week one year earlier. Refinancings went up 22.5 percent from the previous week, the biggest jump since mid-March. Seasonally adjusted, purchase applications grew by 9.5 percent from one week earlier, the largest gain since early April and the highest level since the first week of January. The refinance share of mortgage activity increased to 59.8 percent of total applications from 56.5 percent the previous week, and the adjustable-rate mortgage (ARM) share rose to 5.8 percent from 5.6 percent. LENDERS ADD FULL-TIME EMPLOYEES, BUT BROKERS LOSE OUT Mortgage companies added 3,600 full-time employees to their payrolls in July, while the number of active mortgage brokers fell to a level not seen since September of 2001, notes reports National Mortgage News. The U.S. Bureau of Labor Statistics (BLS) reported that employment in the mortgage banker/broker sector rose to 267,200 in July from 265,500 in June. The BLS survey counted 70,100 existing mortgage brokers in July, a 1,900 drop from the previous month. After a slight decline in the second quarter, employment at mortgage banking companies is now at first quarter levels. PAY ATTENTION TO YOUR MORTGAGE INTEREST DEDUCTION Mortgage interest deductions are the subject of recent examinations conducted by the Internal Revenue Service through the mail, according to Investors News Daily. The examinations basically require taxpayers or their representatives to complete worksheets to determine how the deduction on Schedule A of Form 1040 was determined. The process requires extensive record keeping on the part of the taxpayer regarding the original financing (so-called acquisition indebtedness) and any home equity loans they may have taken, plus any refinancing that may have occurred during the period of home ownership. In addition, many have borrowed against home equity for purposes other than acquisition of a second home or repairs or improvement to the primary residence (or one other). Basic rules state that acquisition indebtedness is limited to $1 million regardless of the number of residences. The publication has much more vital information on this potentially treacherous issue. IT’S NOT ONLY LONELY, BUT COSTLY, AT THE TOP Many Americans are finding themselves in the uncomfortable position of landlord, says the Wall Street Journal. And they often find that rent checks don't come close to covering their mortgage payments. Hard data are scant on how many homeowners are renting out their homes, but anecdotal evidence suggests numbers are up. In one indication of the trend: More homeowners are converting their homeowners insurance to landlord policies that cover the additional risks of leasing out a home. Allstate, the second largest home insurer in the U.S., reported a 27 percent increase in conversions in the first quarter from the previous year. Utilities, maintenance and repairs generally run higher with tenants than when the owner occupies the house. Rental income is taxable, but it can be offset with business expenses – including mortgage interest, real-estate taxes and homeowners insurance – plus depreciation. One additional concern: Renting for an extended period can eliminate or diminish the value of capital-gains tax exclusions. FORFEITURE OF DEPOSIT ISN’T AUTOMATIC AFTER BUYER DEFAULT When a buyer gives money to an attorney for good-faith earnest money deposit, the funds are held in escrow, notes Benny L. Kass in the Washington Post. And even if the buyer clearly is in default - which is not always the case - the escrow agent cannot unilaterally release the funds to the seller. For that matter, even if the buyer is not in default, unless the contract authorizes an immediate release of the escrow funds, the escrow agent cannot give the money back to the buyer. (Escrow is defined as "a deed, a bond, money, or a piece of property held in trust by a third party to be turned over to the grantee only upon fulfillment of a condition," according to Webster's online dictionary.) In practical terms, when an escrow agent holds the earnest money deposit, the money cannot be released to anyone unless the parties agree in writing as to its disposition or a court specifically orders how the money shall be released. DON’T TRY THIS AT HOME
MANY BOOMERS RELUCTANTLY FACE DOWNSIZING Leaving the home they once believed would be theirs into retirement is a painful decision that many baby boomer families are facing, the New York Times observes. It’s an issue that especially resonates in suburbia, where highly taxed, stressed-out parents wrestle with the prospect of moving sooner than they had planned. But children can be uncomfortable with decisions that change their notions of security, and their unhappiness forces parents to consider what they do - or don’t - owe their offspring. Baby boomers are already driving a new market for smaller, less expensive homes, according to Stephen Melman, the director of economic services for the National Association of Home Builders in Washington. In a recent member survey, 59 percent of builders nationwide said they were planning to, or were already, significantly downscaling from the McMansion era. “Many boomers seem to be thinking they are going to do it eventually, they may as well do it now while they need the money for tuition or because there’s just less money available,” Melman said. IS SHE LOOKING TO BUY AS WELL Tuesday Weld, whose career took her from teenage stardom to a 1978 Oscar nomination for "Looking for Mr. Goodbar," has sold her Manhattan apartment for $1.04 million, says the Wall Street Journal. The 1,400-sf co-op in a pre-war building on the Upper West Side is a convertible three-bedroom with two baths. The asking price was $1.2 million. YOU CAN DRINK TO THAT A winery and two vineyards that make up Palmer Vineyards on the north fork of New York's Long Island are on the market for $10.8 million, reports the Real Deal. Founded by adman Bob Palmer in 1983, Palmer Vineyards produces some 16,000 cases of wine a year. The first property, on 61 acres in Aquebogue, includes the winery, a tasting room and a restored 18th Century farmhouse. It is being offered for $6.9 million. The second vineyard, 62 acres of planted grapes in Cutchogue, is available for $3.9 million. Varietals grown include Pinot Blanc, Cabernet Sauvignon and Merlot. The Palmer Vineyards brand isn't included but can be negotiated separately. Palmer died at 74 of a blood infection in January. YOU ONLY LIVE ONCE Daniel Craig has by now moved to the Park Imperial building on West 56th Street, according to the New York Post. His lair is a 63rd-floor three-bedroom, three-bathroom rental with Central Park views, costing him a mere $38,000 a month for the privilege. The twice-divorced Craig, 41, who is dating 30-year-old film producer Satsuki Mitchell, has chosen an apartment that was formerly occupied by NASCAR driver Jeff Gordon, who rented the place for $26,000 a month before moving into a condo he bought at 15 Central Park West. The A-line of apartments at the building also includes Sean "Diddy" Combs and Christopher Meloni of "Law & Order." Deepak Chopra, who lives in the Park Imperial as well, has been spotted in the gym. Craig is in town to star in a new Broadway play with Hugh Jackman. SHRIVER ESTATE IN POSH POTOMAC FINDS A BUYER The Maryland estate of the late Eunice Kennedy Shriver has sold for $7.81 million, 34 percent below its original offering price last fall, reports the Wall Street Journal. The sister of President John F. Kennedy and Sens. Robert F. and Edward M. Kennedy owned the property with her husband Sargent Shriver. The 16,000-sf Georgian-style home sits on almost seven acres in the Bradley Farms neighborhood of Potomac, about 20 miles northwest of Washington. The four-story home has 10 bedrooms and 11.5 baths, a foyer stretching the width of the residence and a flagstone terrace along the rear. The estate has a swimming pool, tennis court, pool house and acres of pasture and gardens. Shriver purchased the land in 1985 for $817,400. The buyer, the MA Center, was described as an international humanitarian organization. WHATEVER HAPPENED TO HER WEST HOLLYWOOD APARTMENT The former West Hollywood home of Oscar-winning actress Bette Davis is for sale at $2.45 million, says the Los Angeles Times. The 2,242-sf condominium is on the fourth floor of the 1930 Colonial House, which was designed by architect Leland A. Bryant and is on the National Register of Historic Places. The building features a library, a swimming pool, gardens, wood-paneled elevators, security and gated parking. The renovated and updated three-bedroom, two-and-a-half-bath unit has city, mountain and treetop views, many original built-ins, hardwood floors and a terrace. HOW THE MIGHTY HAVE PROFITED Former Lehman Brothers Chairman and CEO Richard Fuld Jr. has sold his cooperative apartment on New York's Park Avenue for $25.87 million, records show, according to the Wall Street Journal. Fuld and his wife Kathleen purchased the apartment for $21 million in January 2007. The full floor, four-bedroom, 6,200-sf apartment, which underwent a multimillion-dollar renovation, was not officially on the market but had been quietly shopped for $32 million. The buyer, Glenn Fuhrman, co-founded and is a managing partner of investment firm MSD Capital, which manages the personal assets of Dell founder Michael Dell and his family. THERE’S SOMETHING ABOUT BEN Comic actor Ben Stiller and Christine Taylor have listed their Hollywood Hills compound at $12.5 million, reports to the Los Angeles Times. The property, which sits on nearly one acre, includes two houses and a one-bedroom guesthouse for a total of 10 bedrooms and 11 bathrooms. A gated and walled 1929 Spanish-style house of 5,334 square feet has been restored and updated. A courtyard and the living areas, as well as the lushly landscaped pool area, are defined by decorative terra-cotta tiles with colorful inlays. The second dwelling - a three-story contemporary Mediterranean, originally built in 1930 and also redone - has 4,062 square feet of living space. Several French doors along the back lead to extensive outdoor terrace and deck areas with built-in seating around mature trees. HIS LIGHT SHINES DEARLY Composer Adam Guettel, who won a Tony for “The Light in the Piazza,” has bought a 3,000-sf co-op from clothing-store mogul Marcy Syms, reports the New York Post. Guettel just closed on the residence for close to its $3.495 million asking price. The four-bedroom, three-and-a-half-bath apartment at the Osborne, diagonally across from Carnegie Hall, has five fireplaces and enjoys a distinguished past: Leonard Bernstein lived in the apartment while he wrote the music for “West Side Story” and sold the trophy unit with 14.5-foot ceilings to musician Bobby Short. Short sold it to Syms, whose company recently purchased Filene’s Basement. Syms restored the mahogany-rich home with integrity - even keeping pegs in the floors because they were installed before nails were used - and brought its Tiffany glass-pane windows back to their original glory. PERHAPS SHE HAS STRUCK THE RIGHT BALANCE Retired Olympic gymnast Mary Lou Retton has cut the price of her 9,000-sf Houston home by 10 percent to $4.7 million after three months on the market, says the Wall Street Journal. The 41-year-old gold-medal winner built the home in 2002 with her husband, real-estate investor Shannon Kelley, 43, who is becoming a high school football coach. The six-bedroom, eight-bathroom house, with a gym and pool, sits on two wooded acres in Houston's Memorial Villages area, where Roger Clemens and Jeff Bagwell also reside. The couple and their four daughters recently moved back to Retton's hometown of Fairmont, W. Va., to be near her family. "I was sad to leave it, yet happy to leave it because I wanted to come back to family," remarked Retton, now a motivational speaker. BIG JUMP RECORDED IN SALES OF PREVIOUSLY OWNED HOMES Sales of single-family homes, townhomes, condominiums and co-ops rose a record 7.2 percent in July over June levels, according to the National Association of Realtors (NAR). The monthly sales gain was the largest since 1999. Total sales were 5.0 percent above the same month one year earlier and represented the fourth consecutive monthly increase. The last time sales grew that consistently was in June 2004, and the last time sales were higher than a year earlier was November 2005. Said Chief Economist Lawrence Yun: “The housing market has decisively turned for the better. A combination of first-time buyers taking advantage of the housing stimulus tax credit and greatly improved affordability conditions are contributing to higher sales.” Still, housing inventory went up 7.3 percent; supply was unchanged at 9.4 months as a result of offsetting by strong sales volume. Raw inventory totals were 10.6 percent lower than a year ago, when the number of unsold homes was at a record. Lower prices helped push up the sales total, with the median slipping to $178,400, which is 15.1 percent lower than July 2008. For just single-family homes, sales increased 6.5 percent from June and 5.0 percent from the prior year; the median price was $178,300 in July, 14.6 percent below a year ago. Existing condominium and co-op sales leaped 12.5 percent in July, rising 5.9 percent above a year ago; the median condo price was $178,800 in July, down 18.9 percent from July 2008. CASE-SHILLER RECORDS SIGNIFICANT PRICE IMPROVEMENT The latest report of the Case-Shiller indices, which ignore apartments, showed an impressive 1.4 percent gain from May to June after an increase of 0.5 percent from April to May. Eighteen of the 20 metro areas surveyed went up in price. Although the second quarter of the year had a 14.9 percent decline in prices versus the same quarter of 2008, that change was a noteworthy improvement over the 19.1 percent decrease from the first quarter of 2008 to the first quarter of 2009. It was the first quarter-to-quarter improvement in three years, the company said. The 10-City and 20-City Composites recorded annual declines of 15.1 percent and 15.4 percent, respectively, in comparison with their recent record losses of 19.4 percent and 19.1 percent. “For the second month in a row, we’re seeing some positive signs,” said S&P executive David M. Blitzer. “This is the first time we have seen a positive quarter-over-quarter print in three years.” He detected “hints of an upward turn from a bottom.” As of the second quarter of 2009, average home prices across the United States were at levels similar to early 2003. From the peak in the second quarter of 2006, average home prices were down 30.2 percent. HOMES WITH FANNIE AND FREDDIE MORTGAGES HAD Q2 PRICE DROP U.S. home prices fell 0.7 percent in the second quarter of 2009 from the first quarter of 2009, according to the Federal Housing Finance Agency’s (FHFA), slightly larger than the o.5 percent decline in the prior quarterly period. Over the year ending in the second quarter of 2009, seasonally adjusted prices fell 6.1 percent. The seasonally adjusted monthly index for June rose 0.5 percent following 0.6 percent in May, but those gains did not fully offset earlier declines affecting the quarterly result. At the same time, FHFA noted “much slower rates of depreciation” is “further evidence that prices may be stabilizing for the nation as a whole.” JULY SALES OF NEW HOMES WERE ABOVE JUNE BUT LAG A YEAR AGO Sales of new one-family houses in July were 9.6 percent higher than in the previous month 13.4 percent more than one year earlier, according to the Census Bureau and HUD. The median sales price of new houses sold in July was $210,100, and average sales price was $269,200. The seasonally adjusted estimate of new houses for sale at the end of July was 271,000, representing a supply of 7.5 months. THE NUMBER OF SIGNED CONTRACTS TOOK OFF IN JULY
‘BEIGE BOOK’ NOTES ‘SIGNS OF IMPROVEMENT’ Downward pressure on home prices continued in most Federal Reserve districts, although Dallas and New York noted that local prices were firming, the Federal Reserve Board’s Beige Book relates. “Residential real estate markets remained weak, but signs of improvement continued to be noted,” the document stated. “Chicago, Richmond, Boston, and San Francisco observed an uptick in sales over the last six weeks, while sales in the Philadelphia District were described as steady. St. Louis commented that residential home sales had not improved. Most Districts reported that sales remained below the levels of a year earlier. However, Atlanta, New York, Cleveland, and Minneapolis documented some year-over-year gains in select markets. Most Districts noted that demand remained stronger at the low-end of the housing market. Boston, Cleveland, Dallas, Kansas City, Richmond, and New York indicated that the first-time home buyer tax incentive was spurring sales. However, Philadelphia did note an upturn in sales at the high-end of the market. Reports on house prices generally indicated ongoing downward pressures, although Dallas and New York noted some increases. Construction remained at low levels overall, although Chicago and Dallas reported a small increase in activity.” IF YOU’RE LOOKING FOR A JOB, GO WEST Salvation may lie in the Lone Star State, says Forbes. Home to dozens of energy heavyweights and nearly as many innovative small companies, Texas has three of the best cities to earn a living: Dallas, Houston and Austin. When taking into account the cost of living, strength of industry, economists' predictions for the future state of employment and, of course, salary, the magazine put Dallas at the top. Following in order were: Houston, Minneapolis, Austin, Washington, D.C., St. Louis, Seattle, Atlanta, Kansas City, Mo. and Denver. For more, visit the Forbes site. LOST HOME EQUITY IS IN THE TRILLIONS Federal Reserve data show that the total market value of U.S. household real estate fell from $21.9 trillion to $17.9 trillion from the end of 2006 through March 31, reports the Wall Street Journal. That's about 18 percent, and the lost wealth works out to just over $13,000 for every person in the country. During the same period, total outstanding mortgage lending rose from $9.9 trillion to $10.5 trillion. Taken together, the figures demonstrate that homeowners' equity collapsed, falling about 40 percent from the peak. As of March 31, owners' equity accounted for just 41.4 percent of real estate values, falling to the lowest level on record. Given current mortgage levels, even if a miracle happened and home prices recovered all the way back up to their peak 2006 bubble levels, the average equity rate still would be only 52 percent. Ogden Nash was right: (Of all sad words of tongue or pen, the saddest are these, ‘It might have been.’) DOES HOME OWNERSHIP REALLY HELP KIDS New research by David Barker of the University of Iowa and Eric Miller of the Congressional Budget Office indicates that homeownership actually has little to no effect on how kids do in school. Numbers from the U.S. Department of Education show that first-graders in owned homes scored an average 77.3 points on a test of reading, while children in rented homes scored an average 68.5 points. That gap persisted for math scores (62.6 vs. 54.8), as well as for reading and math scores among third-graders. The problem, though, is that the differences in the raw data went away once Barker and Miller controlled for other variables such as what language was spoken at home and whether a parent had lost a job. "For people who have stayed put for a long time, there's really no difference between ownership and rental," says Barker, who also studied high school students. The study, cited by Time magazine, challenges conventional thinking. ALPINE, N.J. TOPS FORBES’ LIST, BUT PRICES SAG EVERWHERE
FORECLOSURES SLIP IN A MONTH, RISE IN A YEAR RealtyTrac said default notices, scheduled auctions and bank repossessions dipped less than 1 percent in August from the previous month but gained 18 percent over one year earlier. Its report also shows one in every 357 U.S. housing units received a foreclosure filing in August. Nevada topped the foreclosures list, followed respectively by Florida, California, Arizona, Michigan, Idaho, Utah, Colorado, Georgia and Illinois. FORTUNE ASKS WHETHER THE HOUSING BUST IS OVER Shares of Toll Brothers, Hovnanian, KB Home and other builders surged last month, the magazine writes. The exchange-traded fund that tracks the group has nearly doubled since March. Home starts have risen for five straight months, while sales of new homes recently hit their highest level since last September. Prices are up as well: the Case-Shiller index of national house prices rose 2.9 percent in the second quarter, ending a three-year decline. These signs - as well as anecdotal reports about house shoppers growing more willing to write a deposit check - have executives at homebuilding firms declaring the worst is over. "We believe declining cancellations and more solid demand indicate that the housing market is stabilizing," Toll Brothers chief executive officer Bob Toll said. But housing boosters have forecast turnarounds repeatedly since the market peaked in 2006, only to be proved wrong by plunging prices. And skeptics say they're wrong again now. They argue that a deeply indebted consumer, a weak job market, expiring incentives and rising foreclosures spell a quick end to any housing rebound. See more of Fortune’s analysis, which provides nourishing food for thought. FORECASTING FIRM SEES ‘GOOD’ PRICE GAINS IN 2010 Covering local markets, Local Market Monitor, predicts that the best expected performance in prices over the next year in areas with populations greater than 600,000 will be Baton Rouge, Buffalo-Niagara Falls, Dallas-Plano-Irving, Fort Worth-Arlington, Houston-Sugar Land-Baytown, Little Rock-North Little Rock-Conway, Omaha-Council Bluffs, Pittsburgh, San Antonio, Syracuse and Wichita Falls. They are markets that did not have a big housing boom and have had relatively small job losses over the past year. The 10 largest markets with the worst expected performance in home price are Fresno, Las Vegas-Paradise, Miami-Miami Beach-Kendall, Orlando-Kissimmee, Phoenix-Mesa-Scottsdale, Portland-Vancouver-Beaverton, San Jose-Sunnyvale-Santa Clara, Stockton, Tacoma, Tucson, and West Palm Beach-Boca Raton-Boynton Beach. "Right now, a good market is still one where home prices aren't going down,” said Ingo Winzer of Local Market Monitor. “However, this will change as the recession eases. Next year we'll see good price increases in many markets." Investors can expect to see an average 5 percent drop in home prices nationally over the next year, including double-digit decreases in large markets such as Phoenix, Miami and Las Vegas, the firm said. PROMINENT ANALYST OFFERS A GLOOMY FORECAST U.S. home prices could plunge by another 25 percent as high unemployment levels continue, according to prominent banking analyst Meredith Whitney, reports the Wall Street Journal. “I think there is no doubt that home prices will go down dramatically from here, it’s just a question of when,” Whitney, known for accurately predicting troubles for Citigroup, told CNBC. “If you look at the drivers for unemployment, I don’t see that reversing very soon.” But Moody’s expects a drop of “only” about 10 percent from current levels, continuing late into next year, says analyst Joseph Snider. While S&P/Case-Shiller shies away from predictions, David Blitzer, chairman of the index committee, says Whitney’s is estimate is too negative. While prices may fall further, “a 25 percent decline from here sounds very steep,” he averred. “To say that we’re only halfway through this sounds pessimistic.” With Loan Approval, You May Not Be The Problem Most borrowers understand that mortgage lenders scrutinize their credit scores and liquid assets when it comes to approving them for a loan. The underwriters can be persistent is demanding more and more documentation. These days, that’s the easy part. That’s because Fannie Mae is looking hard at the buildings themselves. For co-ops, the troubled loan guarantor’s chief concerns center on the following:
For condos, Fannie Mae also looks the percentage of sold apartments – in most cases, at least 70 percent is mandatory – and the percentage of owner-occupied units. In pre-sales or even sales of apartments in new developments, that’s an impossible percentage, forcing developers to offer financing themselves. Consider the current case of a client whose loan commitment was held up by two issues relating to the building. For one thing, the co-op did not have a sufficiently high fidelity bond. For another, their apartment was a combination of two units, but the combination lacked the city’s approval. In the end, the loan will be granted, but only after the underwriters are satisfied that the co-op has raised its fidelity bond. And the closing, in October, may well be postponed because of the way the buyers’ attorney wrote a useful clause into the contract. It says the seller must satisfy the city’s requirements before a closing can occur. What the foregoing means is that all concerned must examine the numbers carefully as well as board minutes. Among apartments listed by various brokers and viewed recently:
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Many interest-only mortgages will soon become unaffordable because as the homeowners will actually have to start paying principal, says the New York Times. “This is going to be the source of tomorrow’s troubles.” commented Keith Gumbinger, an analyst with HSH Associates. “The borrowers might have thought these were safe loans, but it turns out they bet the house.” Monthly payments can jump by as much as 75 percent. “You’re heading straight for a big wall and you can’t put the brakes on,” added John Karevoll, a longtime senior analyst for MDA DataQuick.
Wealthy individuals’ Chapter 11 bankruptcy filings jumped 73 percent in the second quarter from a year earlier, according to the National Bankruptcy Research Center. More individuals or families with at least $1,010,650 in secured debt and $336,900 unsecured are using Chapter 11 of the U.S. bankruptcy code typically associated with business reorganizations. Falling U.S. home prices leave them unable to refinance or sell properties when they drop below the value of the mortgage, said Chicago bankruptcy attorney Joseph Baldi. Added Jason Green, a bankruptcy attorney based in Washington, “Real-estate is an incredible thing on the downside. “Equities can only go to zero. Property can go well below zero.” That’s because of ongoing expenses such as property taxes, insurance and maintenance on primary residences, vacation homes and investment properties. 
The Pending Home Sales Index of the National Association of Realtors (NAR) jumped 3.2 percentage points from June, 12.0 points higher than it was one year earlier. The forward-looking index of single-family homes that went under contract during the month is at the highest level since June 2007. Commented NAR Chief Economist Lawrence Yun: “The recovery is broad-based across many parts of the country.” Contract activity for pending home sales has risen for six straight months, a pattern not seen in the history of the index since it began in 2001, the NAR said.
In its list of America's 500 Most Expensive ZIP Codes, Alpine, N.J. (07620) had a median asking price of $4.14 million this year, 23 percent lower than in 2008. Atherton, Calif. (94027) is the nation's second most expensive ZIP code with a median asking price of $3.85 million, but prices there declined by 23 percent too. And Manhattan’s West Village neighborhood (10014) finished third with a $3.5 million median asking price, a decrease of 24 percent. The ZIP codes on the Forbes list saw a 7 percent average drop in asking price. Overall, however, one-fifth of areas saw prices rise, including the Upper West Side (10023), where Forbes says prices went up 4 percent. “Higher-priced properties are coming on the market and staying on longer, so the stuff that is moving is lower-priced," says Michael Simonsen, CEO of Altos Research, a Mountain View, Calif.-based real estate data firm. Consider East Hampton, N.Y., (11937), which has been punished by declines on Wall Street. There are currently 765 homes on the market in East Hampton, but there have been only five sales in the last two months. At that rate, it will take 25 years before all the homes currently on the market (with a median asking price of $1.31 million) are sold. Other winning ZIPS in the New York area were 10065 and 07926.
