REAL ESTATE TAXES, ENERGY COSTS WORRY POTENTIAL HOMEOWNERS

Survey shows housing affordability, healthcare costs are also top issues

Rising property taxes and energy costs are among the leading worries associated with home ownership, according to an annual survey conducted by the National Association of Realtors trade group's Housing Opportunity Program.

About 34 percent of respondents stated that property taxes are a top worry, while 28 percent said they were most troubled by energy costs and 14 percent cited rising mortgage interest rates as a leading concern.

The Housing Opportunity Program, created in 2002, has a mission to promote rental and home-ownership opportunities for consumers.

By a 2-to-1 margin, respondents said they believe that high monthly payments, rather than high down payments, are "the greatest obstacle to buying a home," according to an association announcement about the survey.

About 82 percent of respondents said high energy costs are one of their top three concerns, 53 percent cited lack of affordable healthcare and 42 percent cited lack of affordable housing in their community. About one-third said they worry that the cost of housing is so unaffordable that they will never be able to buy a home and more than 58 percent are concerned that the cost of a home is becoming so unaffordable that it is hurting their local economy, the Realtor group reported.

Between one-fifth and one-third of respondents said they are not seeing enough of their friends and family and they are not as involved in their neighborhood as they would like, according to the survey results. They also report missing out on promotions, having less productivity and cutting back on vacations because they have to work too much to pay for their home or they don't have the money because of high home costs.

About 68 percent of survey participants said they believe having enough money to pay rent every month is difficult for families in their community -- up 7 percent from last year.

Eight in 10 said they would be willing to support more affordable housing for people in their community and a record 68 percent said they would be more likely to vote for a candidate who worked to make housing more affordable in their area, up 6 percent in two years, the Realtor group reported.

"Many families are struggling to meet the high cost of home ownership, and increasingly those costs are property taxes and energy utilities," stated Thomas M. Stevens, NAR president and senior vice president of NRT Inc.

In 2003, the average monthly mortgage principal and interest payment was $840. In 2005, families were paying 23.8 percent more, or $1,040 monthly. In the past year alone, the average monthly mortgage principal and interest payment has gone up 11.5 percent -- from $1,015 in April 2005 to $1,132 in April 2006, the Realtor group reported.

The Energy Information Administration estimates that in February 2006 the price of electricity was 12 percent higher than February 2005; natural gas was up 28 percent; and home heating oil was up 25 percent. State and local property taxes for the 2004 fiscal year averaged $1,121 per person, up 13.8 percent from fiscal year 2003 when the average was $985, and 15.7 percent higher than the $969 average for the 2002 fiscal year, according to Census Bureau statistics.

"Americans are increasingly looking to their community leaders to seek ways to take a more active role in addressing affordability issues in their communities," Stevens stated.

About 57 percent of respondents said they are increasingly concerned that their children or other family members will not be able to afford housing in their communities, and 46 percent said they worry that they and family members will be forced to live in less desirable areas because homes in more desirable areas are not affordable.

***

June 28, 2006

Article offered by Inman News

EXISTING-HOME SALES SLOW IN MAY

Nationwide median price rises 6% from a year ago

The rate of existing-home sales dropped 1.2 percent in May compared to April and fell 6.6 percent compared to May 2005, the National Association of Realtors reported today.

The median sales price of existing homes, meanwhile, increased 6 percent from May 2005 to May 2006 while the average sale price rose 3.8 percent in that time.

Total existing-home sales -- including single-family, townhomes, condominiums and co-ops -- slowed since April to a seasonally adjusted annual rate of 6.67 million units in May.

The annual rate for a particular month represents what the total number of actual sales for a year would be if the relative pace for that month were maintained for 12 consecutive months. Seasonally adjusted annual rates are used in reporting monthly data to factor out seasonal variations in resale activity, the association noted.

David Lereah, NAR's chief economist, said in a statement, "There's now a clear pattern of slower home-sales activity in many higher-cost markets, which are more sensitive to rises in interest rates, and higher home sales in moderately priced areas, which have experienced job growth. Although mortgage interest rates remain historically low, the uptrend in interest rates this year is affecting those buyers who are at the margins of affordability."

Freddie Mac reported that the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.6 percent in May, up from 6.51 percent in April. The rate was 5.72 percent in May 2005.

The national median existing-home price for all housing types was $230,000 in May, up 6 percent from $217,000 in May 2005. The median is a typical market price where half of the homes sold for more and half sold for less.

"Overall price appreciation has returned to normal levels as the supply of homes on the market has risen to a balanced range," Lereah stated.

Total housing inventory levels rose 5.5 percent at the end of May to 3.6 million existing homes available for sale, which represents a 6.5-month supply at the current sales pace. A supply of more than six months is generally indicative of a buyer's market.

Existing condominium and cooperative housing sales increased 1.9 percent to a seasonally adjusted annual rate of 852,000 units in May from a pace of 836,000 in April, but were 6.6 percent below the 912,000-unit pace in May 2005. The median existing condo price was $229,300 in May, up 1.9 percent from a year earlier.

Single-family home sales slipped 1.5 percent to a seasonally adjusted annual rate of 5.82 million in May from 5.91 million in April, and were 6.6 percent below the 6.23 million-unit level in May 2005. The median existing single-family home price was $229,700 in May, up 6.4 percent from a year ago.

Regionally, existing-home sales in the West rose 0.7 percent to an annual pace of 1.41 million in May, but were 13.5 percent lower than May 2005. The median price in the West was $345,000, up 4.5 percent from a year ago, the Realtor group reported.

Existing-home sales in the South increased 0.4 percent to a pace of 2.62 million in May, and were 3.7 percent below May 2005. The median existing-home price in the South was $190,000, up 5.6 percent from a year earlier.

In the Midwest, existing-home sales declined 3.8 percent in May to a level of 1.51 million, and were 5.6 percent lower than a year ago. The median price in the Midwest was $174,000, up 1.2 percent from May 2005.

Existing-home sales in the Northeast dropped 4.2 percent to an annual sales rate of 1.13 million units in May, and were 5 percent below a year ago. The median price in the Northeast was $287,000, up 7.1 percent from May 2005.

The association noted that the only valid comparisons for median prices are with the same period a year earlier because of the seasonality in buying patterns. "Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns," the association reported.

June 27, 2006

Article offered by Inman News

ECONOMIC REPORT -- LAST WEEK IN THE NEWS!

After three months of declines, the pace of housing construction -- measured by the number of new housing starts -- rose 5% in May to a 1.957 million-unit annual pace, the Commerce Department reported June 20. (Economists had expected May housing starts to stabilize at a 1.85 million-unit pace.) Permits for future groundbreaking, an indicator of builder confidence, fell by 2.1% to a 1.932 million-unit pace in May, the lowest since November 2003 and the first time since January that total housing permits fell below starts.

The Conference Board, an industry-backed research group, said its Index of Leading Economic Indicators slipped 0.6% in May after a 0.1% decline in April, which was in line with analysts' expectations. Seven of the 10 indicators that comprise the closely watched index decreased, led by weekly jobless claims which rose by a larger-than-expected 11,000 for the week ending June 18.

Orders for durable goods -- items expected to last three years or longer -- fell 0.3% in May after an even bigger 4.7% plunge in April, the Commerce Department reported June 23. A decline in orders for commercial aircraft led the weaker-than-expected showing.

On June 22, Freddie Mac reported that interest rates on 30-year fixed-rate mortgages reached their highest level in more than four years. Not surprisingly, U.S. mortgage applications fell by 0.8% for the week ending June 16, according to the Mortgage Bankers Association. While the MBA's purchase index rose 0.1%, refinances fell 2.2%.

(INFORMATION PROVIDED BY COURTESY OF Louise Rose, ELB Mortgage Brokers)

"LOSING" ON REAL ESTATE PRICE A MATTER OF PERSPECTIVE

When it comes to pricing your house when you’re ready to sell it, keep in mind you must sell in the market you’re in today. It doesn’t matter what your former neighbor got six months ago, or what properties are listed for now. All that matters is this -- whatever the last sale price in your neighborhood of your model -- that’s probably your sale price now.

When you’re looking at what you’ll gain on the sale of your house, let’s keep it in perspective. If house prices increased year after year at 4 percent per year and then suddenly people were selling their houses for 1 percent less than last year’s asking price, would that be reasonable? If so, then when property is moving up at 20 percent per year for several years and then suddenly you have to sell it for 5 percent less than the prices last year, would that be reasonable? The challenge is when we move from percentages to dollar amounts. If 5 percent represented $5,000, most people wouldn’t blink. It’s when 5 percent represents $25,000 that sellers start to freak.

In the DC area, we were experiencing astounding rates of appreciation as a region, 20 percent from 2004 to 2005 prices. Many homeowners have experienced a doubling in property values over the last five years. The average home price is now about $540,000, according to the local multiple listing system. Now, price appreciation has subsided and is sitting at a mere 5 to 8 percent region wide (depending on where you’re standing). Sounds pretty healthy, still, right? You would think.

However, there are stories from the field on how sellers are defending their prices as if their lives depended on it. While sellers are sitting on hundreds of thousands of dollars of equity, they can’t stand the idea of dropping their price by $25,000 or $50,000 to sell it today. The house that was $260,000 in 1999, is now selling for $569,000 today. But some sellers now want that same type appreciation and can’t imagine selling it for less than $589,000. Bringing it down the $20,000 or $40,000 to sell the property seems, well, just not fair.

What’s even scarier are the agents who are defending their prices in a correcting market. I have to keep in mind that nearly half the agents in the country (as well as here in the Capital region) were not in business five years ago. They’ve just now entered a market where prices have to be corrected, dropped -- improved, as it were.

However, as I talk with agents around the region about their listings, they’ll be the first to let you know, "It won’t sell for what the seller’s asking," but they’re too afraid to tell the seller the sobering news.

The market is like playing Russian roulette. Sometimes you don’t know what you have until you pull the trigger. Somebody needs to blink. Sellers seem to be saying to buyers, "I’ll drop my price, just make an offer." While buyers are blankly replying, "I’ll make an offer, just lower your price."

It’s this stalemate that has played a part in creating an abundant supply of houses on the market in the DC area. We’re talking upwards to 200 percent more homes on the market in any given year-to-year comparison. And, folks, after a dearth of homes in this area, it’s a good thing. Is it affecting prices? Sure thing. Will prices come down? Absolutely. Are sellers going to lose money? Well – in some cases.

For sellers staying in the same area, keep in mind, if you have to drop your price by 5 percent, then the seller of the house you’re buying (usually a lot more expensive) is probably doing to drop the sales price by about the same percentage point. It means that while you may "lose" money on the sale of your home, you’ll more than likely "gain" it on the purchase up.

Keep in mind, the market is the market. When it’s time to buy, buy. When it’s time to move, then sell. Work with the market you’re in, not in the market you wish it would be.

Published: June 16, 2006

by M. Anthony Carr

RECORD-BREAKING HOUSING BOOM MAY BE NEARING A CLOSE

The recent housing boom is the biggest the United States has ever seen, but its underlying reasons may have been psychological, economist Robert J. Shiller said on Friday. New data also suggest the market might be at the end of a cycle, he added.

The only time since 1890 that compares to the recent residential real estate market is just after World War II, the Yale University professor said during a presentation on U.S. home prices, held at Standard & Poor's in New York and broadcast to journalists on the Web.

"After World War II, the soldiers came back and they wanted houses and started the baby boom. And when you had babies, you wanted houses with at least two bedrooms -- and that wasn't so common back then. They went on a buying spree and it pushed home prices up," he said.

The recent boom, however, doesn't have the same fundamental variables causing prices to soar, he said, adding that variation in such things as building costs, population and interest rates doesn't adequately explain the reason for the housing boom.

"I don't see why home prices should be shooting up that strongly," Shiller said, adding that speculation may have played a role. "It's a sign of concern."

Shiller was co-author of "Irrational Exuberance," a book that chronicled the stock-market bubble of the late 1990s. He also co-developed the S&P/Case Shiller Home Price Indices, designed to measure the average change in U.S. home prices. The indexes are based on 10 cities -- Boston, Miami, New York, San Diego, San Francisco, Washington, D.C., Chicago, Denver, Las Vegas and Los Angeles -- and are now the basis of new futures and options trading at the Chicago Mercantile Exchange.

Within that index, Shiller has noticed a short-term trend of cooling home prices that could signal an end to the cycle of steep appreciation increases. Investing in the index could help homeowners hedge against price fluctuations in their homes, he said.

Shiller said he is not allowed to invest in home price index futures.

During a question-and-answer session, he said that the stabilization of home prices could also have some effect on consumers' means of gaining equity. Low interest rates inspired people to refinance their homes, and the increasing value of their houses allowed them to pad their pockets with spending money; consumers will now have to turn to other means for financing, including credit, he said.

In the future, insurance companies may offer policies to shield consumers from lowering home prices, thanks to the futures now available, said David Blitzer, managing director and chairman of the Index Committee at Standard & Poor's, who also participated in the presentation. He identified the housing market as a continued stable investment.

"If you want volatility, go to the stock market," he said. "If you have any doubts of that, take a look at it over the past six weeks."

-- June 20, 2006

by Amy Hoak

From Marketwatch

MARKET CONDITIONS

A new bill presented in the Senate this week could have far reaching effects for low and moderate income buyers.

Senator Jim Talent (Rep) of Missouri already has the support of HUD secretary Alphonso Jackson for his "The Expanding American Homeownership Act."

The new proposal would "modernize" the FHA, which doesn't meet the demands of many low and moderate income buyers, by:

1. Eliminating three percent minimum down payments and offering a variety of downpayment options.



2. Create new insurance premium structures to match the credit profile of borrowers.



3. Increase and simplify loan limits -- 87 to 100 percent in high cost areas and 48 to 65 in lower cost areas.

"In many areas of the country, the existing FHA limits are lower than the cost of new construction, eliminating FHA financing as an option for buyers of new homes in those markets. FHA has simply been priced out of the market in other areas, such as California, where FHA insured only about 5,000 home mortgages in all of 2005, down 95 percent from 109,000 in 2000." (HUD)

And it isn't just the Senate that is getting in on the action. The House introduced its version of the Expanding American Homeownership Act in early April, which intends to "modernize and update the National Housing Act and enable the Federal Housing Administration to use risk-based pricing to more effectively reach underserved borrowers, and for other purposes." It was approved by the House Financial Committee on May 24, 2006.

For information on your area, please click here.

by Carla L. Davis

BORROWERS RUSH MARKET DESPITE RISING INTEREST RATES

Real estate purchases, refis jump in latest survey

Overall mortgage applications climbed 7 percent last week on a seasonally adjusted basis from the week before, with refinancings fueling the growth, the Mortgage Bankers Association reported today.

The seasonally adjusted purchase index increased by 4.8 percent to 414.6 from 395.6 the previous week, and the refinance index increased by 10.6 percent to 1,499.4 from 1,356 one week earlier.

The refinance share of mortgage activity increased to 35.7 percent of total applications from 34.2 percent the previous week. The adjustable-rate-mortgage share of activity increased to 30.7 percent of total applications from 29.4 percent the previous week.

The average contract interest rate for 30-year fixed-rate mortgages increased to 6.61 percent from 6.6 percent, with points including the origination fee decreasing to 1.13 from 1.19 for 80 percent loan-to-value ratio loans.

Points, which are fees charged by lenders for loan processing, are equal to 1 percent of the total loan amount.

The average contract interest rate for 15-year fixed-rate mortgages increased to 6.27 percent from 6.23 percent, and is now at the highest point since April 2002, MBA reported. Points including the origination fee decreased to 1.13 from 1.16 for 80 percent loan-to-value ratio loans.

The average contract interest rate for one-year adjustable-rate mortgages increased to 6.09 percent from 6.05 percent, with points including the origination fee decreasing to 0.82 from 0.86 for 80 percent loan-to-value ratio loans.

Washington, D.C.-based Mortgage Bankers Association is a national association representing the real estate finance industry. The survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.

***

Wednesday, June 14, 2006

By Inman News

LENDERS ADJUST 'OPTION ARMS' TO LESSEN IMPACT OF RISING RATES

In a bid to lessen the impact of higher interest rates, mortgage lenders are starting to tweak the features of popular "option adjustable-rate" mortgages, which allow borrowers to lower their monthly payments in the early years of the loan.

The retooled mortgages, such as those rolled out recently by IndyMac Bancorp Inc. and American Home Mortgage Investment Corp., feature an extended fixed-rate period before interest charges reset and, in some cases, an option to defer repayment of principal for a longer period of time. Lenders say the new products allow borrowers more breathing room before the bigger payments come due. Some analysts, however, doubt that the new bells and whistles can actually help lenders reduce potential defaults among consumers pinched by rising interest rates and softening home prices.

The move to ease the payment burden comes at a time when the Federal Reserve and other banking regulators are sounding alarms about the potential "payment shocks" to borrowers for exotic mortgages. With "option ARMs," as such loans are called, borrowers decide every month whether to make a standard payment that involves paying interest and paying down part of the loan, an interest-only payment, or a minimum payment that usually isn't enough to cover all of the interest due. (In that case, the difference gets added to the mortgage balance.)

Often, the minimum payment remains fixed for 12 months, and each year thereafter it changes to reflect the prevailing rate the loans are pegged to. Now, with the new option mortgage offered by IndyMac, a borrower can opt to have the minimum monthly payment fixed for three years, five years or seven years, or until the principal due reaches 110% of the original balance. Once that "negative amortization" balance cap is reached, the monthly payment has to be adjusted higher.

The new option mortgage from American Home Mortgage offers a fixed rate for five years. A longer fixed-rate period makes the loan less sensitive to rising interest rates. In addition, borrowers typically have to start repaying both interest and principal once that preset balance cap is met. But IndyMac's new option-mortgage product allows borrowers to defer repayment of principal for as many as 10 years, even after the loan balance hits the 110% trigger for recasting.

The new option mortgage, designed to provide borrowers additional buffers to handle payment shocks, has become "the fastest-growing new product we rolled out," says Frank Sillman, head of IndyMac's mortgage business.

-- June 13, 2006

By Lingling Wei

From The Wall Street Journal Online

FHA READY IF CONGRESS ACTS

Government is famous for moving at a glacial speed. But not the "New FHA."

Though the first major Congressional overhaul of the Federal Housing Administration's mortgage insurance program in a decade has a long way to go in a short time, the agency is already thinking about how to implement the proposed changes, officials said. last week at the Mortgage Bankers Association's Government Housing Finance Conference here.

If lawmakers should allow the FHA to switch to risk-based pricing, as proposed in a House bill that is awaiting floor action, the agency would like to create a "little premium calculator" as a simple means of determining what FHA would charge to insure a particular loan, according to Meg Burns, director of FHA's Office of Single-Family Program Development.

The agency also plans to move condominiums into the standard 203(b) program to eliminate the "long, drawn-out" approval process, and to either completely revamp the Title I home improvement loan program or drop it altogether, Burns said at a recent conference on the government's housing finance programs.

But the question remains whether both the House and Senate, which has yet to hold hearings, can come to an agreement before members end what is expected to be an election-shortened session and go home. In other words, could some at the FHA be putting the proverbial cart before horse?

While the MBA has pointed out repeatedly that the clock is ticking, FHA Commissioner Brian Montgomery remains optimistic. "We have a real shot at modernization," he told the conference, which was sponsored by the Mortgage Bankers Association.

Montgomery said he was "encouraged" and "truly surprised" by bi-partisan support in the House, where 61 members have signed on to the bill which has been cleared by the House Finance Committee.

And he said he is "seeing growing enthusiasm in the Senate," where a bill is expected to be introduced this week and hearings could be held later this month.

Both conventional and subprime lenders have been steadily eating away at FHA's bread-and-butter market, which is low and moderate-income borrowers in general and first-time buyers in particular, and the agency's market share has dropped from 13 percent in 1990 to just 3.5 percent last year, Martha Simmons of SunTrust Mortgage and vice chair of the MBA's Residential Loan Committee, told the meeting.

"To be truly effective" and once again become a household name, Montgomery said, "we need to the flexibility to offer better products so borrowers can choose the one that suits them best."

And he is hoping the recent IRS Revenue Ruling that downpayment assistance providers are not non-profit corporations will give a shot in the arm to efforts to revamp the 74-year-old mortgage insurance program.

Noting that 25-30 percent of all FHA's volume is from loans in which the seller "donates" all or part of the downpayment through a third-party entity, the FHA Commissioner said he's "not sure what will fill the void" if Congress fails to give the FHA permission to back 100 percent mortgages.

While the ruling is "not a complete death knell" for downpayment assistance, he said, "it highlights the need" for lawmakers to move forward.

In her presentation, meanwhile, Burns said the premium calculator envisioned by her department would compute the cost of the insurance premium based on the borrower's credit score, the term of the mortgage and whether it has a fixed or adjustable rate, the loan-to-value ratio, and whether the loan is either a purchase-money mortgage or a refi.

The calculator would be available at FHA Connection, which provides approved lenders direct, secure, online access to the Department of Housing and Urban Development's computer systems, she said, or it could also be downloaded so lenders could incorporate it into their systems.

The calculator might even be made available to consumers on a free-standing website, she said

The plan for condos is to remove them from a "very onerous, time-consuming" clearance process by allowing lenders to certify condo loans directly based on a streamlined checklist.

Published: June 14, 2006

by Lew Sichelman

HOME SALES SETTLING DOWN AND APPRECIATION SLOWING

WASHINGTON (June 6, 2006) – The housing boom has ended but sales at historically healthy levels will continue, and price appreciation will return to normal patterns across much of the country, according to the National Association of Realtors®.

David Lereah, NAR’s chief economist, said home sales are settling into a slower pace. “In recent years we were occasionally challenged to find appropriate superlatives to describe surprisingly high home sales,” he said. “Now the housing market has cooled, but 2006 is still expected to be the third strongest on record. In this case, experiencing a slowing from a hot market is a good thing because we need a solid housing sector to provide an underlying base to the economy, and slower appreciation will help to preserve long-term affordability. But this is a time for the Fed to pause on rate hikes because we have some interest-sensitive housing markets that have become vulnerable.”

Existing-home sales are projected to drop 6.8 percent to 6.60 million this year from the record 7.08 million in 2005. New-home sales are forecast to fall 13.4 percent to 1.11 million from a record 1.28 million in 2005. Housing starts are likely to decline 6.2 percent to 1.94 million in 2006 compared with 2.07 million last year.

NAR President Thomas M. Stevens from Vienna, Va., said rising interest rates have slowed home sales in many high cost markets, while job growth has boosted sales in some moderately priced areas. “Broadly speaking, rising inventories have taken the pressure off of unsustainable home price growth,” said Stevens, senior vice president of NRT Inc. “For most of the nation, this means future home price gains will be much closer to the normal returns we expect from housing.”

The 30-year fixed-rate mortgage should average 6.9 percent during the second half of the year, and the unemployment rate is expected to average 4.8 percent in 2006.

The national median existing-home price for all housing types is forecast to rise 5.3 percent this year to $231,300. With more construction in 2006 taking place in lower cost housing markets, the median new-home price is projected to increase 0.8 percent to $242,900.

“Historically, home prices rise 1.5 to 2 percentage points faster than the rate of inflation, so the rise we anticipate in existing home prices this year is actually a little above the high end of historic norms,” Lereah said. “The double-digit home price gains we saw in 2005 underscore what a superlative year it was.”

Inflation, as measured by the Consumer Price Index, is seen at 3.1 percent in 2006, compared with 3.4 percent last year. Growth in the U.S. gross domestic product is likely to be 3.4 percent this year. Inflation-adjusted disposable personal income should grow 3.1 percent this year.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

# # #

Existing-home sales for May will be released June 27; the Pending Home Sales Index is scheduled for July 6 and the next forecast will be July 11.

Article offered by the NAR

HOME IMPROVEMENTS TO AVOID WHEN SELLING YOUR HOUSE

The in-ground swimming pool at a house in rural North Carolina is a huge asset in the social lives of Greg Gabbard's college-age children. But Mr. Gabbard sees the pool as one of the biggest home-investment mistakes he has ever made.

"Assuming I can sell this place, I will never have another pool," says the 43-year-old Internet-security contractor.

He blames the pool -- and the house's high-maintenance cedar siding -- for buyers' reluctance to purchase the four-bedroom home during its five-month stint on the market last summer. While nearby Charlotte, N.C., enjoyed a healthy real-estate market, Mr. Gabbard got a dozen lookers and no takers for the house.

His assumption is probably correct, says Holly Slaughter, brand manager for RealEstate.com, a Web site that provides information to home buyers and sellers. A pool often deters buyers, especially in areas with a number of community swimming holes, she says.

Homeowners hear a lot about improvements that might add value to houses. But less attention is paid to what to avoid.

Steer clear of renovations that will cost you money at resale time. Avoid these seven deadly sins of remodeling if you want an edge over other home sellers in an iffy market.

1. Overexpanding

Trying to keep up with the Joneses is fine, but don't keep outdoing neighbors with additions unless you plan to stay put a long time.

A home that becomes conspicuously larger -- and more expensive -- than those around it will risk becoming hard to sell, Mrs. Slaughter says.

Additions tend not to return their entire investment, according to Tom Stevens, president of the National Association of Realtors. The 2005 "Cost vs. Value Report" by the association and Remodeling magazine found that homeowners were able to recoup only 83% of the cost of a family-room addition and 82% of a midrange master suite.

2. Making your home into something it's not

Don't change the general architecture of the home, and make sure that renovations match. For example, a modern steel door doesn't belong on a ranch house built in the 1970s, Mrs. Slaughter says.

Changes that are obviously inconsistent with the home's style will limit the number of people interested in buying it, says Michael Nagel, vice chairman of the National Association of Home Builders' Remodelors Council. This is especially true for structures such as the Frank Lloyd Wright house he's working on; it's relevant to a somewhat lesser degree for a typical tract home.

3. Changing a room's function

Completely altering the purpose of a room is risky. Keep kitchens as kitchens, and bathrooms as bathrooms. They were built that way for a reason.

"We all expect basic functionality," Mrs. Slaughter says. "If you start changing the basic items that you expect out of your home, you're really customizing it for yourself."

Despite the rising number of people who work at home, building an office also can be a negative, Mr. Stevens says.

The National Association of Realtors/Remodeling magazine study found that installing a computer set-up, office storage and commercial carpeting while also rewiring the room for computer and fax use produced only an average 73% return of cost.

4. Doing it yourself -- when you shouldn't

Be extremely confident you're capable of taking on a project before trying to do it yourself.

"I wouldn't try and fix my own car; why would someone want to fix their own house?" says Mr. Nagel, who often sees sloppy tile jobs done by amateurs.

5. Underbudgeting

Don't underestimate how much projects will cost. Expenses usually are added, not subtracted.

Homeowners routinely go 20% to 30% over budget, Mrs. Slaughter says. "People not only underbudget from a monetary point, but they also underbudget time," she says. A prospective buyer walking through a home isn't going to see the glass as half full when a project is half done.

6. Making unneeded renovations

When remodeling for resale, don't waste time with renovations that won't pay off. If you must have a pool, it helps to install a new patio, porch and alternative entryway, Mrs. Slaughter says, but you still may have to lower your expectations on who will be interested in buying.

Proceed first with projects that are going to have the highest rate of return, experts advise. In the last four annual editions, the National Association of Realtors/Remodeling magazine study has identified four renovations that show the greatest return at resale: improvements to siding, windows, kitchens and bathrooms.

In the 2005 study, a midrange bathroom renovation paid off with an average 102% return on investment and an upscale bathroom renovation recouped 93% of its cost. A midrange kitchen renovation recouped 91% of its cost on average, and an upscale kitchen recouped 85%. A minor kitchen remodeling job returned 99% of its cost.

7. Neglecting maintenance

Proper maintenance and annual upkeep may be the most important improvements of all.

Clean the gutters to protect the exterior from water damage. Trim shrubs. Check for termites. Keep track of annual checkups -- and use that as a selling point. Annual maintenance pays back handsomely when you sell. And before the house goes up for sale, experts recommend a fresh coat of paint.

By Amy Hoak
From The Wall Street Journal Online

REALTORS® BUILDING COMMUNITIES, HOUSING OPPORTUNITIES DURING HOMEOWNERSHIP MONTH

WASHINGTON (June 1, 2006) – Realtors® and Realtor® associations across America are organizing homeownership and community improvement projects in June in honor of National Homeownership Month. President George W. Bush has proclaimed June “National Homeownership Month” to raise awareness of homeownership and encourage more Americans to consider the benefits of owning their own home.

To support that initiative and encourage member participation, the National Association of Realtors has provided each state and local Realtor ® organization with a National Homeownership Month kit titled “It Takes a REALTOR®.” The theme springs from the awareness that Realtors® contribute to their communities and build better neighborhoods, towns and cities. It also illustrates how Realtors® give their time to strengthen their communities by promoting legislation, wielding a hammer, and selflessly helping others.

NAR President Thomas M. Stevens said Realtors® work in their communities to improve neighborhoods and increase possibilities for homeownership. “Realtors® build communities and we are carrying out the nation’s housing mission—helping to elevate homeownership to more than 69 percent of U.S. households.”

Proof of that is in the community improvement projects Realtors® run, the homeownership workshops they sponsor, and the thousands of community-run programs to which they contribute. “Realtors® and their associations are getting out and helping others because it’s just good business to be a good citizen,” said Stevens.

“Yet the work isn’t finished,” he said. “Realtors® will keep donating their time to manage community improvement projects, and we will continue to speak up and work for everyone’s homeownership rights. It’s up to us to ensure that our voice comes through loud and clear. There’s no challenge we can’t overcome together.”

The National Association of Realtors® , “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

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FIRST QUARTER STATE EXISTING-HOME SALES EASE

WASHINGTON (May 15, 2006) – Existing-home sales, including single-family and condo, remained historically high in the first quarter but have experienced a downtrend since hitting a record in the third quarter of last year. Even so, 26 states showed increases in sales activity from a year ago, according to the National Association of Realtors®.

The latest report on total existing-home sales shows that the seasonally adjusted annual rate* was 6.80 million units in the first quarter, down 2.1 percent from the 6.94 million-unit level in the first quarter of 2005.

The biggest increase was in New Mexico, where existing-home sales rose 26.2 percent from the first quarter of 2005. Louisiana’s first-quarter resale pace rose 22.9 percent from a year earlier, while Montana experienced the third strongest gain, up 17.5 percent. Six other states recorded double-digit sales increases from a year ago. Twenty-one states and the District of Columbia experienced declines. Complete data for three states was not available.

David Lereah, NAR’s chief economist, said rising interest rates have dampened sales. “A steady rise in mortgage interest rates has slowed home sales in higher cost areas, yet job growth in some moderately priced markets is boosting sales in other areas,” he said. “The net effect is a modest decline in home sales for the nation as a whole, but sales remain historically strong and are providing a solid underlying base for the overall economy.”

View Quarterly Data

According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was 6.24 percent in the first quarter, up from 6.22 percent in the fourth quarter; it was 5.76 percent in the first quarter of 2005.

NAR President Thomas M. Stevens from Vienna, Va., said the sales pattern is expected to level out. “We project home sales may soften a little further before picking up in the fourth quarter, but we’re not looking for any significant changes in the market moving forward,” said Stevens, senior vice president of NRT Inc. “This should provide stability in the market so that buyers and sellers will be on a fairly level playing field in most of the country.”

Regionally, the strongest performance was in the South, which reported an increase of 2.3 percent to an existing-home sales pace of 2.71 million units in the first quarter in comparison with a year ago. After Louisiana, the strongest increase in the South was in Mississippi, up 17.3 percent from the first quarter of 2005; resales in North Carolina rose 17.0 percent; Arkansas and Tennessee also posted double-digit sales increases.

In the Midwest, existing-home sales rose 1.1 percent to a 1.56 million-unit annual sales level from the first quarter of 2005. Indiana led the region, up 10.4 percent from a year earlier, followed by Iowa, up 9.0 percent, and Ohio, with an increase of 6.2 percent.

The Northeast recorded an existing-home sales pace of 1.12 million units in the first quarter, down 2.9 percent from a year earlier. Sales activity in Maine rose 4.6 percent from the first quarter of 2005, Rhode Island increased 2.0 percent and New York sales declined 2.2 percent.

In the West, the existing-home sales level of 1.41 million units was 12.4 percent below the first quarter of 2005. After New Mexico and Montana, the best performance the region was in Utah where existing-home sales rose 12.7 percent from a year earlier; Hawaii sales increased 6.3 percent while Alaska rose 5.9 percent.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.

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* The seasonally adjusted annual rate for a particular quarter represents what the total number of actual sales for a year would be if the relative sales pace for that quarter was maintained for four consecutive quarters. Total home sales include single family, townhomes, condominiums and co-operative housing. NAR began tracking the state sales series in 1981.

Minor revisions have been made to quarterly seasonally adjusted annual sales rates for 1999 through 2005. Each May, NAR Research incorporates a review of seasonal activity factors and fine-tunes historic data based on the most recent findings. Normally, revisions are for the past three years, but these revisions include some adjustments back to the benchmark year of 1999.

Seasonally adjusted rates are used in reporting quarterly data to factor out seasonal variations in resale activity. For example, sales volume normally is higher in the summer and relatively light in winter, primarily because of differences in the weather and household buying patterns.

Tables of state resale rates, percent changes and some historic data are available at the site below under Research – click on Existing-Home Sales, then State Existing-Home Sales.

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NAR: FHA REFORMS WOULD OPEN DOORS TO HOMEOWNERSHIP FOR MILLIONS OF
HARD-WORKING FAMILIES

WASHINGTON (May 24, 2006) – The National Association of Realtors® strongly supports the passage of the Federal Housing Administration reform package approved today in a mark-up vote by the House Financial Services Committee led by Congressman Bob Ney (R- Ohio) and Congresswoman Maxine Waters (D-Calif.). H.R. 5121, the Expanding American Homeownership Act of 2006, would raise FHA loan limits, eliminate restrictive down payment requirements, provide risk based mortgage insurance premium flexibility, and extend the possible terms of FHA loans from 30 years to 40 years. All of these changes will help make homeownership more attainable.

“The Expanding American Homeownership Act will make FHA a more viable tool for first-time home buyers and lower and moderate income families and many others pursuing the dream of homeownership. It is also the most substantive FHA reform legislation undertaken by Congress in over 15 years. Not only will hundreds of thousands of additional families have the opportunity to own their own home, but this legislation will improve FHA’s relevance and competitiveness in the housing market,” said Congressman Ney following today’s successful committee mark-up.

“On a typical loan, these changes will save many families hundreds of dollars per month – opening the door to the American Dream for thousands,” said NAR President Thomas M. Stevens. “We commend the House Financial Services Committee for taking this important step to make FHA once again competitive in the home mortgage arena. With interest rates climbing and housing prices at all time highs, it is imperative to have a modernized, effective FHA product.”

NAR also announced the formation of a coalition designed to help move this legislation ahead in Congress. The Coalition for a Strong FHA, led by NAR, is made up housing industry leaders including the National Association of Home Builders, National Council of State Housing Agencies, National Alliance of Independent Mortgage Bankers/Lenders One, National Association of Hispanic Real Estate Professionals, National Association of Real Estate Brokers, National Association of Local Housing Finance Agencies, Asian Real Estate Association of America, and the Strategic Alliance for Mortgage Subsidiaries.

The coalition is expected to become an advocacy force for the housing market. The coalition’s mission is to ensure FHA reform is enacted and that it becomes a competitive option. Additional information regarding the coalition is available at www.strongfha.org.

“For over 70 years, the Federal Housing Administration has made homeownership possible for millions of Americans at no cost to taxpayers. With the proposed reform legislation, FHA will continue to make homeownership available for millions,” said Stevens.

NAR and its Coalition for a Strong FHA partners urge House Members to cosponsor this legislation and urge the House leadership to schedule time for House floor consideration as quickly as possible following the Memorial Day recess.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.3 million members involved in all aspects of the residential and commercial real estate industries.

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BABY BOOMER SURVEY SHOWS BIG APPETITE FOR REAL ESTATE

WASHINGTON (May 18, 2006) – Baby boomers have a higher rate of homeownership than the national average and one out of four own more than one property, according to a new study of the largest generation in U.S. history commissioned by the National Association of Realtors®. Initial results were released here today at NAR’s Midyear Legislative Meetings & Trade Expo.

The comprehensive study of nearly 2,000 Americans born between 1946 and 1964, conducted for NAR by Harris Interactive®, also shows boomers are optimistic about the future, but many are not adequately prepared for retirement.

David Lereah, NAR’s chief economist, said marketing to this generation has been and can be a challenge. “As a group, boomers are in their peak earning years and continue to wield great influence in the U.S. economy, but they are not homogeneous – there are significant variances in needs, behavior, attitudes and resources,” he said. “On one hand is an almost insatiable desire for real estate, with some owning multiple properties, and on the other, many have not adequately planned for retirement. What should not be overlooked are the discretionary spending interests of this generation, and their appreciation of housing as a great investment.”

Nearly eight in ten boomers own their own homes and almost nine out of ten have owned at some point in their lives; 96 percent believe owning a home is a good financial investment – evidenced by their actions. According to the U.S. Census Bureau, the overall rate of home ownership is 69 percent.

For the portion of baby boomers who have never owned a home, 85 percent cited financial reasons but 38 percent simply didn’t want the responsibility of homeownership.

One-quarter of respondents own one or more other kinds of real estate in addition to a primary residence: 13 percent own land, 8 percent own rental property, 7 percent a vacation home or seasonally occupied property, 2 percent commercial real estate and 3 percent some other kind of real estate.

In addition to a higher rate of homeownership, analysis by NAR shows baby boomers are proportionately more active in the second home market, owning 57 percent of all vacation/seasonal homes and 58 percent of rental property.

For the segment of boomers who own rental investment property, 34 percent own multiple properties: 14 percent own two rentals, 5 percent own three and a small number own four properties; however, 14 percent own five or more rental units.

Of the portion who own vacation homes or seasonally occupied property, 13 percent said they own two or more vacation or seasonal homes.

Four out of ten respondents who own a vacation home or seasonal property intend to eventually make that property a primary residence. Historically, other NAR survey data shows only one in five vacation-home buyers had such intentions when they first purchased the property.

Lereah said this has emerged as an investment strategy. “Some boomers will take advantage of generous capital gains exclusions from their taxes when they sell their primary residence, and then place themselves in the position of being able to convert a vacation home into their new primary residence which would later become eligible for the same tax treatment,” he said. “Then, if their needs change in the future, they’ll be able to take the capital gains tax break after they have lived in that home as their primary residence for two out the five previous years. It becomes a great way to build and protect a nest egg.”

For the portion of respondents who own land, the median holding was 5 acres. Half of those with commercial property had an ownership interest in only one property and 29 percent have two holdings.

NAR President Thomas M. Stevens from Vienna, Va., said the survey shows one-quarter of all boomers are not satisfied with their present homes. “That means a good portion of baby boomers may be considering a move, so it’s important for the industry to understand their preferences and needs,” said Stevens, senior vice president of NRT Inc.

Ten percent of all boomers said they are likely to buy additional real estate in the next 12 months; two-thirds of those respondents said they were considering a primary residence but 26 percent were interested in land, 19 percent rental property, 15 percent a vacation or seasonal home and 14 commercial property.

Eight out of ten boomers used a real estate agent the last time they sold a home. The things they value most in a real estate agent when they buy a home are representation of interests and coordinating with other parties in the process; explaining all contracts, forms and agreements; and management of the closing process from start to finish.

In selling a home, they also want agents to establish the right asking price, show the home and negotiate all offers received on their behalf.

“This tells us the Internet is great for information, but baby boomers want real estate agents to provide services, whether they’re buying or selling,” Stevens said.

Typical boomers have lived in their present home for a median of nine years, and plan to stay there for another five years. Two-thirds think it’s important to pay off a mortgage quickly, but at the same time 58 percent are comfortable in purchasing with a small downpayment.

In deciding whether to buy a primary residence in the future, nearly half of the respondents that were considering a purchase said having sufficient wealth or favorable mortgage financing were factors.

In terms of their current financial condition, 43 percent say they are financially comfortable but 37 percent say they have just enough to make ends meet. Only 4 percent said they were well-off, and 17 percent said they are having financial difficulty. “That clouds the retirement options for many baby boomers,” Stevens said.

Nearly two-thirds say it costs too much today to truly retire and never work again, and four out of ten expect they will pay for at least some college expenses for children or grandchildren; 38 percent said current financial needs mean they give little attention to financial planning for retirement.

“Many baby boomers are simply too busy to give much thought to planning for retirement, but they really need to develop strategies now,” Stevens said. “Many just see themselves ‘going’ for as long as they can.”Only 14 percent expect to receive a sizeable inheritance that will be a critical help during retirement. Half of all boomers believe it is important to diversify savings for retirement into different types of investments.

In describing how they would like to retire, many boomers might be described as “dreamers.” One in ten said they already are retired but only 26 percent said they would never want to work for pay again. A third see themselves as going back and forth between periods of work and leisure, 17 percent would work part time, 11 percent would start a business and 7 percent would work full time.

Even so, 59 percent said it was not likely that they’d work beyond the time they become eligible for full Social Security benefits. The average respondent expects to stop working at age 65.

Three out of five say their idea of the perfect location to retire is in a rural area or small town, with only 12 percent saying an urban or city setting, and nearly half would consider living in an age-restricted community; 38 percent want to be close to family.If money were no object, access to quality health care is important to more bombers than being on a golf course (38 percent vs. 4 percent). Ideally, they would like to live in a rural area with access to quality health care. “One question is how many areas actually offer those kinds of amenities in that kind of environment,” Stevens said.

Half said they have a 401(k) or similar retirement plan, 39 percent a pension, 39 percent an IRA or Roth IRA, 11 percent a SEP (Simplified Employee Pension Plan), and 6 percent have investments in a REIT (real estate investment trust).

Most, 83 percent, do not plan to withdraw funds from an eligible retirement account starting at age 59½. For those who are very likely to withdraw, 75 percent said they’d use the funds for personal living expenses, and 51 percent said they’d travel; 39 percent would consider investment in some form of real estate.

The 2006 National Association of Realtors® study, BABY BOOMERS AND REAL ESTATE: Today and Tomorrow, was conducted online by Harris Interactive® between March 31 and April 6, 2006, among a nationwide cross section of 1,969 U.S. adults born between 1946 and 1964. Figures for age, sex, race, education, region and household income were weighted where necessary to bring them into line with their actual proportions in the population. Propensity score weighting was also used to adjust for respondents’ inclination to be online. With 95 percent certainty, overall results have a sampling error of plus or minus 2.2 percentage points; the sampling error for various sub-sample results is higher and varies.

The study, expected to be ready for publication in late June, can be ordered in advance by calling 800/874-6500. The cost is $50 for NAR members and $125 for non-members.

Harris Interactive Inc. (http://www.harrisinteractive.com/), based in Rochester, N.Y., is the 13th largest and the fastest-growing market research firm in the world, most widely known for The Harris Poll® and for its pioneering leadership in the online market research industry.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.2 million members involved in all aspects of the residential and commercial real estate industries.

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