How Do New McMansions Affect The Value of Neighboring Homes?
By Terri Cullen From The Wall Street Journal Online
Our neighborhood is changing. A number of homes are undergoing major renovations that will double their sizes, and new homes are being built that are much larger than existing homes in the community. Our three-bedroom, one-and-a-half bath, 2,400-sq.-ft. home, once among the largest in the neighborhood, will soon be among the smallest.
The building boom has given Gerry and me pause. What impact is the sudden McMansioning of our neighborhood going to have on the value of our home? And will the super-sizing of nearby homes have any affect on our neighborhood's culture? Is it cause for concern, or are we just jealous?
The building boom began across the street early in the spring. Our neighbor started an addition, doubling the size of his home. Then another home, one of the smallest in our neighborhood -- a tiny two-bedroom, situated on a 100 ft. by 100 ft. lot -- was purchased for $285,000 and quickly razed by a building company. A three story, five-bedroom "castle" is taking its place -- complete with spire. As summer began, our next-door neighbors' contractor began adding a third floor to their home. Up the block, three large five-bedroom homes have sprung up on a lot where neighborhood kids used to play baseball.
Remodeling activity nationwide is far from the blistering pace in my neck of the woods, but despite the soft real-estate market homeowners are still investing in their homes. Growth in spending for home-improvement projects is expected to increase by 3% for 2007, and spending is expected to remain constant through the first quarter of 2008, according to Harvard University's Leading Indicator for Remodeling Activity.
My husband Gerry and I have done our fair share of renovation, but our focus over the last six years has been on updating our home's dated interior look and infrastructure, and making our outdoor space more livable. We've lived with contractors overrunning the house, and all the dirt, dust and inconvenience involved in a home-renovation project. After completing a backyard renovation this spring, Gerry and I agreed it was time to take a breather.
Still, as I watch the addition next door begin to tower over our house I have to admit to having space envy. (Ok, so yes, I'm jealous.) In the summer, my father-in-law Gerald often stays in our guest bedroom on weekends when he comes up to visit and spend time on our boat. That room has done double-duty as my home office for the last seven years, and I often find myself having to interrupt my father-in-law to handle work-related tasks. At times I suffer Internet withdrawal -- not being able to check the news or poke around my favorite Web sites whenever the urge strikes can be frustrating. The remodeling boom in my neighborhood reminds me daily how an additional room or two would make my life easier.
Gerry doesn't covet our neighbors' newly added space so much as he resents how the new construction makes our home look more dated. If you've ever spent any time driving through middle-class New Jersey suburbs, you've seen our home -- a boxy Colonial bi-level, encased in aluminum siding.
When we first considered adding a room and bathroom back in 2004, Gerry suggested we make other changes. He wanted to add a portico, and make some architectural changes to make our home look less boxy, he said. Our friend Steve, who's also our contractor, warned that our "small addition" of a bedroom and bath (which he estimated he could do for about $60,000) might easily escalate into a home makeover that would cost $100,000 or more if we made the other changes Gerry wanted.
After a long talk, we decided against the addition -- we didn't think it was worth more than doubling our current $96,000 mortgage. One of our longtime financial goals has been to have our 30-year fixed-rate mortgage paid off before our 8-year-old son Gerald enters college. Doubling our mortgage now to pay for an addition would torpedo the chances of achieving that goal.
With all the construction going on in the neighborhood, it's wasn't long before Gerry once again raised the topic of adding on to our home. After talking over the pros and cons again, we agreed that it wasn't a good idea.
So we've made our peace with living within our home's boundaries. But we wondered: Would not keeping up with the Joneses hurt the home's resale value?
Most long-established New Jersey neighborhoods like ours have a mix of large and small homes. When shopping for homes, the general rule of thumb is to avoid buying the largest home in the neighborhood. A home that's much bigger than other homes in the neighborhood will typically sell for less than if that same home were in a neighborhood with equally large homes. Why?
Recent home sales help determine the fair-market value of your home. If no comparably large homes have been sold in your area, it may be difficult to convince home buyers that the larger home is worth considerably more than recent sales of smaller homes in the neighborhood.
On the other hand, having a medium-sized house in a neighborhood with much larger homes can boost its resale value. So in a situation like ours, where larger, more expensive homes are now more common than our home, my neighbors' home renovations should help to improve our home's value. Adding to its value is our lot size -- with an acre of land there's plenty of room for a homebuyer to add on to the home.
That said, people who are shopping for homes in a certain neighborhood expect certain amenities in those homes, says Kermit Baker, director of the remodeling futures program at Harvard University's Joint Center for Housing Studies. "If you're not keeping up with other homes in the neighborhood, you may have home buyers walk away from it," he says. "There's a limited number of folks who want to buy assuming they're going to have to do a significant remodeling project."
Figuring out how the super-sizing of neighborhood homes will affect our neighborhood's culture is more difficult. The larger homes will likely attract more-affluent families, and discourage older homebuyers who are looking to downsize home-maintenance costs. So our neighborhood should remain a kid-friendly haven.
Walter Molony, a spokesman for the National Association of Realtors, says the neighborhood's location is also key to how home improvements alter a neighborhood's culture. If the neighborhood is run-down and a few home buyers come in and do home improvements and tear-downs, it could attract more investment in the neighborhood. "The broad impact is that it raises property values overall and attracts more buyers because it's perceived as an up and coming area," he says.
Harvard University's Mr. Baker says it's less clear how cultures are affected when major home improvements are made in more affluent neighborhoods. "A lot of times when homeowners begin to make big home improvements other homeowners will update their homes as well," he says. So generally little actually changes in terms of the neighborhood's culture.
Gerry and I aren't planning on super-sizing our home, but we'll continue to make upgrades to make the home a more comfortable and attractive place to live.
Tuesday, July 31, 2007
Monday, July 30, 2007
Some Hard-Hit Cities See Signs of a Housing Market Turnaround
Some Hard-Hit Cities See Signs Of a Housing Market Turnaround
By James R. Hagerty and Ruth Simon From The Wall Street Journal Online
Tighter credit is prolonging a deep slump in home sales, but a quarterly Wall Street Journal survey of 28 major metro areas shows that the surge in inventories of unsold homes is slowing.
In two of those markets -- Boston and Denver -- the number listed for sale has actually declined from a year ago.
The latest trends offer some hope for an eventual recovery in a U.S. housing market that generally has been cooling since mid-2005. Even so, many economists and industry executives say that recovery will be very gradual and won't start before 2008 at the earliest. That's partly because more-stringent lending policies are keeping many potential buyers on the sidelines, while others are holding off in hopes of prices heading even lower. Meanwhile, there is still a glut of homes on the market in much of the country, especially in Florida and parts of Arizona, Nevada and California.
Home sales and prices generally should bottom out around mid-2008, says Mark Zandi, chief economist at Moody's Economy.com, a research firm in West Chester, Pa. "The market will not revive quickly, however," he says. "It won't be until the turn of the decade before housing activity returns to more normal conditions."
The message for home sellers is that they need to be flexible on price and may have to spruce up their house to stand out against plenty of competition, including from builders desperate to shed inventory. In Atlanta's southwestern suburbs, builder Winstar Neighborhoods is offering free Chevrolet Aveo subcompacts to buyers of certain new homes. Given the glut, buyers in most markets can take their time and bargain hard on price.
Yesterday, the National Association of Realtors reported that sales of previously occupied homes in June were down 3.8% from the prior month to a seasonally adjusted annual rate of 5.75 million. The number of homes listed for sale nationwide was 4.2 million, up 12% from a year earlier but down 4.2% from May, the Realtors said. The median home price was $230,100, up 0.3% from a year earlier.
Median prices can be skewed by shifts in the market, however. Lenders are turning down more and more people with weak credit records or high debt in relation to income, and that is hurting sales of lower-end homes. Jeffrey Mezger, chief executive of KB Home, one of the nation's largest mass-market builders, says its average home price has fallen about 12% from a year ago.
In some markets, such as Southern California, he says, "there are two markets emerging." While the high-end housing market has remained strong, prices are down in the entry-level and first-time move-up market.
As measured by the S&P/Case-Shiller national index, house prices in this year's fourth quarter are likely to be down about 7% from a year earlier, says Thomas Lawler, a housing economist in Vienna, Va. He expects a further fall of about 3.5% in 2008.
Yet the picture varies greatly by region and even by neighborhood. The well-heeled can still get loans on attractive terms, and demand has held up far better for homes in desirable neighborhoods near city centers than for homes in more distant and humdrum suburbs. In the San Francisco Bay area, prices have continued to rise briskly in Marin County, a posh area with fairly short commutes to the city, and Santa Clara County, buoyed by hiring at Silicon Valley firms, says Scott Kucirek, general manager of Prudential California Realty. But prices generally have fallen in Solano County, which is a longer commute and has more new construction and entry-level homes.
But tight credit is squeezing lots of people still trying to buy a first home. William and Kimberly Glass were preapproved for a mortgage in May and found a $540,000, four-bedroom, three-bathroom home in Santa Clarita, Calif., near Los Angeles. But by the time they made the offer, lending standards had tightened to the point where they could no longer buy the home with no money down. "It's a little frustrating that a month and a half ago we were in a better position than we are now," says Mr. Glass, an actor. Putting "3% to 5% down would have basically drained our savings and put us in a precarious position with the renovations [the house] needed."
Lenders, under pressure from regulators and investors, are continuing to tighten the screws. Countrywide Financial Corp., J.P. Morgan Chase & Co., National City Corp. and others are making it tougher for borrowers to finance 100% or even 95% of their home's value by combining a home-equity loan or line of credit with a mortgage. Lenders had earlier cut back on such loans to borrowers with weak credit records and are now tightening standards for borrowers with better credit profiles, particularly those who aren't documenting their income and assets.
National City has been tightening standards for home-equity loans every month or so in an effort to stay one step ahead of its competitors, says E. Kennedy Carter Jr., an executive vice president there. "We don't want to be the last girl at the dance when it comes to credit quality."
With home prices falling, he says, lenders are moving closer to standards set earlier in the decade, when most required at least a 10% down payment.
On Tuesday, Countrywide blamed its 33% drop in second-quarter earnings largely on sharply higher defaults on home-equity loans, particularly those made to borrowers who had little money for a down payment.
Lenders are adopting federal guidelines for nontraditional mortgages, making it harder for borrowers to qualify for mortgages that allow them to pay interest but no principal in the loan's early years, or make a minimum payment that may not even cover the total interest owed. Lehman Brothers Inc.'s Aurora Loan Services unit put the guidelines into effect over a six-month period beginning in December, and Wells Fargo & Co. said it will do so in August. Fannie Mae and Freddie Mac, which purchase loans from lenders and package them into securities, will apply the guidelines to loan applications beginning in September.
"The noose is definitely tightening" around interest-only loans and option adjustable-rate mortgages, two products that were often used by cash-strapped borrowers to make their loan payments more affordable, says Brian Chappelle, a mortgage banking consultant in Washington. About one-third of borrowers who have used these loans in recent years wouldn't qualify under the tighter standards, he says.
House prices are likely to remain weak in many areas until inventories of unsold homes fall. That process has begun in a few places, including the Boston metro area, where the number of homes listed for sale at the end of June was down 16% from a year earlier. Boston's market cooled in early 2005, before most other areas, and so has had more time to adjust. Some frustrated sellers who don't need to move have taken their homes off the market.
The fall in inventories is a "hopeful sign," says Timothy Warren Jr., chief executive of Warren Group, a financial publisher in Boston, but he thinks sales won't begin rising again before next year. Sales of single-family homes in Massachusetts as a whole in the first half of this year were down 4.3% from a year earlier, and the median price declined 3.6%, to $318,000, according to Warren.
In the Denver area, the number of homes listed for sale is down 5% from a year ago. Contrary to the national trend, Denver's housing market began cooling in 2001 amid losses of jobs in technology and telecommunications. Job growth in the Denver metro area lagged the national average from mid-2001 through late 2004, but has since been above average. "The market is recovering," says Jeff Bernard, a Denver real-estate broker and developer.
But inventories have continued to bloat in Florida, where a speculative binge has led to an enormous glut of condos. Miami-Dade County has enough condos on the market to last 31 months at the current sales rate, says Esslinger-Wooten-Maxwell Inc., a big real-estate brokerage firm there. Still, the rate of increase in unsold homes in the Miami area has slowed recently, says Ronald Shuffield, president of the firm.
Atlanta's inventory of unsold homes is up 43% from a year ago, according to Smart Numbers, a local research firm. It says there are enough homes on the market to last more than 10 months at the current sales rate, up from six months a year earlier. "We haven't hit the bottom yet in Atlanta," says Steve Palm, the firm's chief executive. Job growth in Atlanta remains strong, but many of the jobs aren't very high-paying, Mr. Palm says.
Lewis Glenn, president of Harry Norman Realtors in Atlanta, says he believes lots of potential buyers are waiting to see whether prices will come down. Some of them are marooned because they can't sell their current homes for what they consider a fair price -- or enough to pay off their mortgages.
In the Seattle metro area, the number of listings is up 55% from a year ago. But inventories were unusually lean there last year, and the market is now regaining balance.
In the New Jersey suburbs near New York, listings surged in 2005 and 2006. At the end of June, though, listings in 12 northern New Jersey counties were up just 3% from a year ago, according to Otteau Valuation Group, an East Brunswick, N.J., appraisal firm. In Manhattan, inventories are down 17%, according to Corcoran Group, a real-estate brokerage. A torrent of Wall Street bonuses and foreign buyers lured by the weaker dollar have helped keep the market firm there, says Jonathan Miller, chief executive of Miller Samuel Inc., an appraisal firm in New York. The median sale price for co-ops and condos in Manhattan was $895,000 in the second quarter, up 1.7% from a year earlier, according to Miller Samuel.
Jeffrey G. Otteau, president of Otteau Valuation Group, says the parts of New Jersey popular with commuters into New York are doing best. In those areas, he says, sales are no longer slumping and the number of homes on the market has leveled off. "Proximity to Manhattan is once again becoming the primary force in the market," he says.
-- Joseph De Avila contributed to this article.
By James R. Hagerty and Ruth Simon From The Wall Street Journal Online
Tighter credit is prolonging a deep slump in home sales, but a quarterly Wall Street Journal survey of 28 major metro areas shows that the surge in inventories of unsold homes is slowing.
In two of those markets -- Boston and Denver -- the number listed for sale has actually declined from a year ago.
The latest trends offer some hope for an eventual recovery in a U.S. housing market that generally has been cooling since mid-2005. Even so, many economists and industry executives say that recovery will be very gradual and won't start before 2008 at the earliest. That's partly because more-stringent lending policies are keeping many potential buyers on the sidelines, while others are holding off in hopes of prices heading even lower. Meanwhile, there is still a glut of homes on the market in much of the country, especially in Florida and parts of Arizona, Nevada and California.
Home sales and prices generally should bottom out around mid-2008, says Mark Zandi, chief economist at Moody's Economy.com, a research firm in West Chester, Pa. "The market will not revive quickly, however," he says. "It won't be until the turn of the decade before housing activity returns to more normal conditions."
The message for home sellers is that they need to be flexible on price and may have to spruce up their house to stand out against plenty of competition, including from builders desperate to shed inventory. In Atlanta's southwestern suburbs, builder Winstar Neighborhoods is offering free Chevrolet Aveo subcompacts to buyers of certain new homes. Given the glut, buyers in most markets can take their time and bargain hard on price.
Yesterday, the National Association of Realtors reported that sales of previously occupied homes in June were down 3.8% from the prior month to a seasonally adjusted annual rate of 5.75 million. The number of homes listed for sale nationwide was 4.2 million, up 12% from a year earlier but down 4.2% from May, the Realtors said. The median home price was $230,100, up 0.3% from a year earlier.
Median prices can be skewed by shifts in the market, however. Lenders are turning down more and more people with weak credit records or high debt in relation to income, and that is hurting sales of lower-end homes. Jeffrey Mezger, chief executive of KB Home, one of the nation's largest mass-market builders, says its average home price has fallen about 12% from a year ago.
In some markets, such as Southern California, he says, "there are two markets emerging." While the high-end housing market has remained strong, prices are down in the entry-level and first-time move-up market.
As measured by the S&P/Case-Shiller national index, house prices in this year's fourth quarter are likely to be down about 7% from a year earlier, says Thomas Lawler, a housing economist in Vienna, Va. He expects a further fall of about 3.5% in 2008.
Yet the picture varies greatly by region and even by neighborhood. The well-heeled can still get loans on attractive terms, and demand has held up far better for homes in desirable neighborhoods near city centers than for homes in more distant and humdrum suburbs. In the San Francisco Bay area, prices have continued to rise briskly in Marin County, a posh area with fairly short commutes to the city, and Santa Clara County, buoyed by hiring at Silicon Valley firms, says Scott Kucirek, general manager of Prudential California Realty. But prices generally have fallen in Solano County, which is a longer commute and has more new construction and entry-level homes.
But tight credit is squeezing lots of people still trying to buy a first home. William and Kimberly Glass were preapproved for a mortgage in May and found a $540,000, four-bedroom, three-bathroom home in Santa Clarita, Calif., near Los Angeles. But by the time they made the offer, lending standards had tightened to the point where they could no longer buy the home with no money down. "It's a little frustrating that a month and a half ago we were in a better position than we are now," says Mr. Glass, an actor. Putting "3% to 5% down would have basically drained our savings and put us in a precarious position with the renovations [the house] needed."
Lenders, under pressure from regulators and investors, are continuing to tighten the screws. Countrywide Financial Corp., J.P. Morgan Chase & Co., National City Corp. and others are making it tougher for borrowers to finance 100% or even 95% of their home's value by combining a home-equity loan or line of credit with a mortgage. Lenders had earlier cut back on such loans to borrowers with weak credit records and are now tightening standards for borrowers with better credit profiles, particularly those who aren't documenting their income and assets.
National City has been tightening standards for home-equity loans every month or so in an effort to stay one step ahead of its competitors, says E. Kennedy Carter Jr., an executive vice president there. "We don't want to be the last girl at the dance when it comes to credit quality."
With home prices falling, he says, lenders are moving closer to standards set earlier in the decade, when most required at least a 10% down payment.
On Tuesday, Countrywide blamed its 33% drop in second-quarter earnings largely on sharply higher defaults on home-equity loans, particularly those made to borrowers who had little money for a down payment.
Lenders are adopting federal guidelines for nontraditional mortgages, making it harder for borrowers to qualify for mortgages that allow them to pay interest but no principal in the loan's early years, or make a minimum payment that may not even cover the total interest owed. Lehman Brothers Inc.'s Aurora Loan Services unit put the guidelines into effect over a six-month period beginning in December, and Wells Fargo & Co. said it will do so in August. Fannie Mae and Freddie Mac, which purchase loans from lenders and package them into securities, will apply the guidelines to loan applications beginning in September.
"The noose is definitely tightening" around interest-only loans and option adjustable-rate mortgages, two products that were often used by cash-strapped borrowers to make their loan payments more affordable, says Brian Chappelle, a mortgage banking consultant in Washington. About one-third of borrowers who have used these loans in recent years wouldn't qualify under the tighter standards, he says.
House prices are likely to remain weak in many areas until inventories of unsold homes fall. That process has begun in a few places, including the Boston metro area, where the number of homes listed for sale at the end of June was down 16% from a year earlier. Boston's market cooled in early 2005, before most other areas, and so has had more time to adjust. Some frustrated sellers who don't need to move have taken their homes off the market.
The fall in inventories is a "hopeful sign," says Timothy Warren Jr., chief executive of Warren Group, a financial publisher in Boston, but he thinks sales won't begin rising again before next year. Sales of single-family homes in Massachusetts as a whole in the first half of this year were down 4.3% from a year earlier, and the median price declined 3.6%, to $318,000, according to Warren.
In the Denver area, the number of homes listed for sale is down 5% from a year ago. Contrary to the national trend, Denver's housing market began cooling in 2001 amid losses of jobs in technology and telecommunications. Job growth in the Denver metro area lagged the national average from mid-2001 through late 2004, but has since been above average. "The market is recovering," says Jeff Bernard, a Denver real-estate broker and developer.
But inventories have continued to bloat in Florida, where a speculative binge has led to an enormous glut of condos. Miami-Dade County has enough condos on the market to last 31 months at the current sales rate, says Esslinger-Wooten-Maxwell Inc., a big real-estate brokerage firm there. Still, the rate of increase in unsold homes in the Miami area has slowed recently, says Ronald Shuffield, president of the firm.
Atlanta's inventory of unsold homes is up 43% from a year ago, according to Smart Numbers, a local research firm. It says there are enough homes on the market to last more than 10 months at the current sales rate, up from six months a year earlier. "We haven't hit the bottom yet in Atlanta," says Steve Palm, the firm's chief executive. Job growth in Atlanta remains strong, but many of the jobs aren't very high-paying, Mr. Palm says.
Lewis Glenn, president of Harry Norman Realtors in Atlanta, says he believes lots of potential buyers are waiting to see whether prices will come down. Some of them are marooned because they can't sell their current homes for what they consider a fair price -- or enough to pay off their mortgages.
In the Seattle metro area, the number of listings is up 55% from a year ago. But inventories were unusually lean there last year, and the market is now regaining balance.
In the New Jersey suburbs near New York, listings surged in 2005 and 2006. At the end of June, though, listings in 12 northern New Jersey counties were up just 3% from a year ago, according to Otteau Valuation Group, an East Brunswick, N.J., appraisal firm. In Manhattan, inventories are down 17%, according to Corcoran Group, a real-estate brokerage. A torrent of Wall Street bonuses and foreign buyers lured by the weaker dollar have helped keep the market firm there, says Jonathan Miller, chief executive of Miller Samuel Inc., an appraisal firm in New York. The median sale price for co-ops and condos in Manhattan was $895,000 in the second quarter, up 1.7% from a year earlier, according to Miller Samuel.
Jeffrey G. Otteau, president of Otteau Valuation Group, says the parts of New Jersey popular with commuters into New York are doing best. In those areas, he says, sales are no longer slumping and the number of homes on the market has leveled off. "Proximity to Manhattan is once again becoming the primary force in the market," he says.
-- Joseph De Avila contributed to this article.
Sunday, July 29, 2007
New-Home Sales Decline; Housing Weighs on Economy
New-Home Sales Decline; Housing Weighs on Economy
By Jeff Bater From The Wall Street Journal Online
New-home sales took their fifth fall in six months during June, while a measure of inventory rose and the median price dropped, the government said Thursday.
Meanwhile, demand for expensive goods climbed for the fourth time in five months during June, spurred by stronger demand for airplanes, the government reported Thursday.
Sales of single-family homes decreased by 6.6% to a seasonally adjusted annual rate of 834,000, the Commerce Department said Thursday. May new-home sales fell 2.2% to an annual rate to 893,000; originally, the government said May sales dropped by 1.6% to 915,000.
Demand rose 10.0% in April and declined 1.2% in March, 5.6% in February and 12.7% in January.
The median estimate of 26 economists surveyed by Dow Jones Newswires was a 1.6% decrease in June sales to a 900,000 annual rate.
Year-to-year, new-home sales were 22% lower than the level in June 2006.
The moribund housing sector has pulled down U.S. economic growth for six straight quarters, and analysts expect more of the same going forward. They think a large inventory of unsold homes will depress prices, which dilutes incentive to invest in property. A report Wednesday showed demand in June for existing homes fell a fourth straight time, tumbling to the lowest point since November 2002 amid higher mortgage rates and tightening lending standards.
Thursday's data showed the ratio of new houses for sale to houses sold climbed during June, rising to 7.8 from 7.4 in May. There were an estimated 537,000 homes for sale at the end of June, unchanged from May.
The median price of a new home fell by 2.2% to $237,900 in June, down from $243,200 in June 2006. The average price increased by 3.7% to $316,200 from $305,000 a year earlier. In May this year, the median price was $241,000 and the average was $310,800.
Regionally last month, new-home sales decreased 27.1% in the Northeast, 22.5% in the West, and 17.1% in the Midwest. Demand rose 7.6% in the South.
An estimated 77,000 homes were actually sold in June, down from 82,000 in May, based on figures not seasonally adjusted.
Durable-Goods Orders Rise
Orders for durable goods increased by 1.4% last month to a seasonally adjusted $217.07 billion, the Commerce Department said. Durables, which are goods designed to last at least three years, fell 2.3% in May, revised from a previously estimated 2.4% decrease. Orders rose 1.0% in April, 5.1% in March and 0.5% in February.
A key barometer of business equipment spending -- orders for nondefense capital goods excluding aircraft -- fell by 0.7%, after decreasing 1.5% in May. Shipments for nondefense capital goods excluding aircraft decreased in June by 0.4%, after rising 0.7% in May; the shipments are used in calculating gross domestic product, which is the barometer for economic growth in the U.S.
Wall Street expected a slightly bigger increase in orders. The median estimate of 26 economists surveyed by Dow Jones Newswires had durables 1.6% higher in June.
Demand during June for durable goods in the transportation sector increased 6.1%, after falling 7.0% in May. Orders for commercial planes surged 29%, after dropping 21% in May. Military aircraft orders increased 9.9%. Motor vehicles and parts decreased by 1.4% last month.
Demand for all durables except transportation goods decreased 0.5% in June. Orders fell by 3.6% for primary metals and 4.6% for computers and electronics. Demand rose by 1.7% for fabricated metals, 1.5% for electrical equipment, and 2.6% for machinery. Demand ex-transportation had gone 0.2% lower in May.
June capital goods orders increased by 2.7%. Nondefense capital goods -- items meant to last 10 years or longer -- rose by 4.6%.
Defense-related capital goods orders dropped 14%. Orders for everything except defense goods increased by 1.9% in June, after going 2.7% lower during May.
Durable-goods shipments of manufacturers went 1.1% lower last month. Unfilled orders, a sign of future demand, rose 1.5%. Inventories increased 0.2%.
Jobless Claims Decline
The number of U.S. workers filing new claims for jobless benefits fell in the latest week, in contrast with Wall Street expectations for a slight rise, suggesting labor markets remain robust.
Jobless claims were down 2,000 to 301,000 on a seasonally-adjusted basis in the week ended July 21, the Labor Department said Thursday. Claims for the July 14 week were revised upward slightly to 303,000 from 301,000.
Wall Street forecasts called for claims to increase by 9,000 last week to 310,000.
The four-week average -- which economists use to gauge underlying labor market trends -- fell to 308,500 last week from a previous level of 312,500.
According to the Labor Department report Thursday, continuing claims for workers drawing unemployment benefits for more than a week fell 19,000 to 2,545,000 in the week ended July 14, the latest week for which such data are available. These numbers are seasonally adjusted.
The insured unemployment rate was unchanged at 1.9% in the July 14 week, the same level as the previous week.
There were 15 states and territories reporting an increase in initial jobless claims for the July 14 week, while 38 reported a decrease.
North Carolina and Tennessee had the biggest increases, of 12,842 and 6,749 respectively, attributed to layoffs in the transportation and construction industries, among others. Michigan reported the biggest decrease, 18,269, due to fewer layoffs in the automobile industry.
-- Benton Ives-Halperin contributed to this article.
By Jeff Bater From The Wall Street Journal Online
New-home sales took their fifth fall in six months during June, while a measure of inventory rose and the median price dropped, the government said Thursday.
Meanwhile, demand for expensive goods climbed for the fourth time in five months during June, spurred by stronger demand for airplanes, the government reported Thursday.
Sales of single-family homes decreased by 6.6% to a seasonally adjusted annual rate of 834,000, the Commerce Department said Thursday. May new-home sales fell 2.2% to an annual rate to 893,000; originally, the government said May sales dropped by 1.6% to 915,000.
Demand rose 10.0% in April and declined 1.2% in March, 5.6% in February and 12.7% in January.
The median estimate of 26 economists surveyed by Dow Jones Newswires was a 1.6% decrease in June sales to a 900,000 annual rate.
Year-to-year, new-home sales were 22% lower than the level in June 2006.
The moribund housing sector has pulled down U.S. economic growth for six straight quarters, and analysts expect more of the same going forward. They think a large inventory of unsold homes will depress prices, which dilutes incentive to invest in property. A report Wednesday showed demand in June for existing homes fell a fourth straight time, tumbling to the lowest point since November 2002 amid higher mortgage rates and tightening lending standards.
Thursday's data showed the ratio of new houses for sale to houses sold climbed during June, rising to 7.8 from 7.4 in May. There were an estimated 537,000 homes for sale at the end of June, unchanged from May.
The median price of a new home fell by 2.2% to $237,900 in June, down from $243,200 in June 2006. The average price increased by 3.7% to $316,200 from $305,000 a year earlier. In May this year, the median price was $241,000 and the average was $310,800.
Regionally last month, new-home sales decreased 27.1% in the Northeast, 22.5% in the West, and 17.1% in the Midwest. Demand rose 7.6% in the South.
An estimated 77,000 homes were actually sold in June, down from 82,000 in May, based on figures not seasonally adjusted.
Durable-Goods Orders Rise
Orders for durable goods increased by 1.4% last month to a seasonally adjusted $217.07 billion, the Commerce Department said. Durables, which are goods designed to last at least three years, fell 2.3% in May, revised from a previously estimated 2.4% decrease. Orders rose 1.0% in April, 5.1% in March and 0.5% in February.
A key barometer of business equipment spending -- orders for nondefense capital goods excluding aircraft -- fell by 0.7%, after decreasing 1.5% in May. Shipments for nondefense capital goods excluding aircraft decreased in June by 0.4%, after rising 0.7% in May; the shipments are used in calculating gross domestic product, which is the barometer for economic growth in the U.S.
Wall Street expected a slightly bigger increase in orders. The median estimate of 26 economists surveyed by Dow Jones Newswires had durables 1.6% higher in June.
Demand during June for durable goods in the transportation sector increased 6.1%, after falling 7.0% in May. Orders for commercial planes surged 29%, after dropping 21% in May. Military aircraft orders increased 9.9%. Motor vehicles and parts decreased by 1.4% last month.
Demand for all durables except transportation goods decreased 0.5% in June. Orders fell by 3.6% for primary metals and 4.6% for computers and electronics. Demand rose by 1.7% for fabricated metals, 1.5% for electrical equipment, and 2.6% for machinery. Demand ex-transportation had gone 0.2% lower in May.
June capital goods orders increased by 2.7%. Nondefense capital goods -- items meant to last 10 years or longer -- rose by 4.6%.
Defense-related capital goods orders dropped 14%. Orders for everything except defense goods increased by 1.9% in June, after going 2.7% lower during May.
Durable-goods shipments of manufacturers went 1.1% lower last month. Unfilled orders, a sign of future demand, rose 1.5%. Inventories increased 0.2%.
Jobless Claims Decline
The number of U.S. workers filing new claims for jobless benefits fell in the latest week, in contrast with Wall Street expectations for a slight rise, suggesting labor markets remain robust.
Jobless claims were down 2,000 to 301,000 on a seasonally-adjusted basis in the week ended July 21, the Labor Department said Thursday. Claims for the July 14 week were revised upward slightly to 303,000 from 301,000.
Wall Street forecasts called for claims to increase by 9,000 last week to 310,000.
The four-week average -- which economists use to gauge underlying labor market trends -- fell to 308,500 last week from a previous level of 312,500.
According to the Labor Department report Thursday, continuing claims for workers drawing unemployment benefits for more than a week fell 19,000 to 2,545,000 in the week ended July 14, the latest week for which such data are available. These numbers are seasonally adjusted.
The insured unemployment rate was unchanged at 1.9% in the July 14 week, the same level as the previous week.
There were 15 states and territories reporting an increase in initial jobless claims for the July 14 week, while 38 reported a decrease.
North Carolina and Tennessee had the biggest increases, of 12,842 and 6,749 respectively, attributed to layoffs in the transportation and construction industries, among others. Michigan reported the biggest decrease, 18,269, due to fewer layoffs in the automobile industry.
-- Benton Ives-Halperin contributed to this article.
New-Home Sales Decline; Housing Weighs on Economy
New-Home Sales Decline; Housing Weighs on Economy
By Jeff Bater From The Wall Street Journal Online
New-home sales took their fifth fall in six months during June, while a measure of inventory rose and the median price dropped, the government said Thursday.
Meanwhile, demand for expensive goods climbed for the fourth time in five months during June, spurred by stronger demand for airplanes, the government reported Thursday.
Sales of single-family homes decreased by 6.6% to a seasonally adjusted annual rate of 834,000, the Commerce Department said Thursday. May new-home sales fell 2.2% to an annual rate to 893,000; originally, the government said May sales dropped by 1.6% to 915,000.
Demand rose 10.0% in April and declined 1.2% in March, 5.6% in February and 12.7% in January.
The median estimate of 26 economists surveyed by Dow Jones Newswires was a 1.6% decrease in June sales to a 900,000 annual rate.
Year-to-year, new-home sales were 22% lower than the level in June 2006.
The moribund housing sector has pulled down U.S. economic growth for six straight quarters, and analysts expect more of the same going forward. They think a large inventory of unsold homes will depress prices, which dilutes incentive to invest in property. A report Wednesday showed demand in June for existing homes fell a fourth straight time, tumbling to the lowest point since November 2002 amid higher mortgage rates and tightening lending standards.
Thursday's data showed the ratio of new houses for sale to houses sold climbed during June, rising to 7.8 from 7.4 in May. There were an estimated 537,000 homes for sale at the end of June, unchanged from May.
The median price of a new home fell by 2.2% to $237,900 in June, down from $243,200 in June 2006. The average price increased by 3.7% to $316,200 from $305,000 a year earlier. In May this year, the median price was $241,000 and the average was $310,800.
Regionally last month, new-home sales decreased 27.1% in the Northeast, 22.5% in the West, and 17.1% in the Midwest. Demand rose 7.6% in the South.
An estimated 77,000 homes were actually sold in June, down from 82,000 in May, based on figures not seasonally adjusted.
Durable-Goods Orders Rise
Orders for durable goods increased by 1.4% last month to a seasonally adjusted $217.07 billion, the Commerce Department said. Durables, which are goods designed to last at least three years, fell 2.3% in May, revised from a previously estimated 2.4% decrease. Orders rose 1.0% in April, 5.1% in March and 0.5% in February.
A key barometer of business equipment spending -- orders for nondefense capital goods excluding aircraft -- fell by 0.7%, after decreasing 1.5% in May. Shipments for nondefense capital goods excluding aircraft decreased in June by 0.4%, after rising 0.7% in May; the shipments are used in calculating gross domestic product, which is the barometer for economic growth in the U.S.
Wall Street expected a slightly bigger increase in orders. The median estimate of 26 economists surveyed by Dow Jones Newswires had durables 1.6% higher in June.
Demand during June for durable goods in the transportation sector increased 6.1%, after falling 7.0% in May. Orders for commercial planes surged 29%, after dropping 21% in May. Military aircraft orders increased 9.9%. Motor vehicles and parts decreased by 1.4% last month.
Demand for all durables except transportation goods decreased 0.5% in June. Orders fell by 3.6% for primary metals and 4.6% for computers and electronics. Demand rose by 1.7% for fabricated metals, 1.5% for electrical equipment, and 2.6% for machinery. Demand ex-transportation had gone 0.2% lower in May.
June capital goods orders increased by 2.7%. Nondefense capital goods -- items meant to last 10 years or longer -- rose by 4.6%.
Defense-related capital goods orders dropped 14%. Orders for everything except defense goods increased by 1.9% in June, after going 2.7% lower during May.
Durable-goods shipments of manufacturers went 1.1% lower last month. Unfilled orders, a sign of future demand, rose 1.5%. Inventories increased 0.2%.
Jobless Claims Decline
The number of U.S. workers filing new claims for jobless benefits fell in the latest week, in contrast with Wall Street expectations for a slight rise, suggesting labor markets remain robust.
Jobless claims were down 2,000 to 301,000 on a seasonally-adjusted basis in the week ended July 21, the Labor Department said Thursday. Claims for the July 14 week were revised upward slightly to 303,000 from 301,000.
Wall Street forecasts called for claims to increase by 9,000 last week to 310,000.
The four-week average -- which economists use to gauge underlying labor market trends -- fell to 308,500 last week from a previous level of 312,500.
According to the Labor Department report Thursday, continuing claims for workers drawing unemployment benefits for more than a week fell 19,000 to 2,545,000 in the week ended July 14, the latest week for which such data are available. These numbers are seasonally adjusted.
The insured unemployment rate was unchanged at 1.9% in the July 14 week, the same level as the previous week.
There were 15 states and territories reporting an increase in initial jobless claims for the July 14 week, while 38 reported a decrease.
North Carolina and Tennessee had the biggest increases, of 12,842 and 6,749 respectively, attributed to layoffs in the transportation and construction industries, among others. Michigan reported the biggest decrease, 18,269, due to fewer layoffs in the automobile industry.
-- Benton Ives-Halperin contributed to this article.
By Jeff Bater From The Wall Street Journal Online
New-home sales took their fifth fall in six months during June, while a measure of inventory rose and the median price dropped, the government said Thursday.
Meanwhile, demand for expensive goods climbed for the fourth time in five months during June, spurred by stronger demand for airplanes, the government reported Thursday.
Sales of single-family homes decreased by 6.6% to a seasonally adjusted annual rate of 834,000, the Commerce Department said Thursday. May new-home sales fell 2.2% to an annual rate to 893,000; originally, the government said May sales dropped by 1.6% to 915,000.
Demand rose 10.0% in April and declined 1.2% in March, 5.6% in February and 12.7% in January.
The median estimate of 26 economists surveyed by Dow Jones Newswires was a 1.6% decrease in June sales to a 900,000 annual rate.
Year-to-year, new-home sales were 22% lower than the level in June 2006.
The moribund housing sector has pulled down U.S. economic growth for six straight quarters, and analysts expect more of the same going forward. They think a large inventory of unsold homes will depress prices, which dilutes incentive to invest in property. A report Wednesday showed demand in June for existing homes fell a fourth straight time, tumbling to the lowest point since November 2002 amid higher mortgage rates and tightening lending standards.
Thursday's data showed the ratio of new houses for sale to houses sold climbed during June, rising to 7.8 from 7.4 in May. There were an estimated 537,000 homes for sale at the end of June, unchanged from May.
The median price of a new home fell by 2.2% to $237,900 in June, down from $243,200 in June 2006. The average price increased by 3.7% to $316,200 from $305,000 a year earlier. In May this year, the median price was $241,000 and the average was $310,800.
Regionally last month, new-home sales decreased 27.1% in the Northeast, 22.5% in the West, and 17.1% in the Midwest. Demand rose 7.6% in the South.
An estimated 77,000 homes were actually sold in June, down from 82,000 in May, based on figures not seasonally adjusted.
Durable-Goods Orders Rise
Orders for durable goods increased by 1.4% last month to a seasonally adjusted $217.07 billion, the Commerce Department said. Durables, which are goods designed to last at least three years, fell 2.3% in May, revised from a previously estimated 2.4% decrease. Orders rose 1.0% in April, 5.1% in March and 0.5% in February.
A key barometer of business equipment spending -- orders for nondefense capital goods excluding aircraft -- fell by 0.7%, after decreasing 1.5% in May. Shipments for nondefense capital goods excluding aircraft decreased in June by 0.4%, after rising 0.7% in May; the shipments are used in calculating gross domestic product, which is the barometer for economic growth in the U.S.
Wall Street expected a slightly bigger increase in orders. The median estimate of 26 economists surveyed by Dow Jones Newswires had durables 1.6% higher in June.
Demand during June for durable goods in the transportation sector increased 6.1%, after falling 7.0% in May. Orders for commercial planes surged 29%, after dropping 21% in May. Military aircraft orders increased 9.9%. Motor vehicles and parts decreased by 1.4% last month.
Demand for all durables except transportation goods decreased 0.5% in June. Orders fell by 3.6% for primary metals and 4.6% for computers and electronics. Demand rose by 1.7% for fabricated metals, 1.5% for electrical equipment, and 2.6% for machinery. Demand ex-transportation had gone 0.2% lower in May.
June capital goods orders increased by 2.7%. Nondefense capital goods -- items meant to last 10 years or longer -- rose by 4.6%.
Defense-related capital goods orders dropped 14%. Orders for everything except defense goods increased by 1.9% in June, after going 2.7% lower during May.
Durable-goods shipments of manufacturers went 1.1% lower last month. Unfilled orders, a sign of future demand, rose 1.5%. Inventories increased 0.2%.
Jobless Claims Decline
The number of U.S. workers filing new claims for jobless benefits fell in the latest week, in contrast with Wall Street expectations for a slight rise, suggesting labor markets remain robust.
Jobless claims were down 2,000 to 301,000 on a seasonally-adjusted basis in the week ended July 21, the Labor Department said Thursday. Claims for the July 14 week were revised upward slightly to 303,000 from 301,000.
Wall Street forecasts called for claims to increase by 9,000 last week to 310,000.
The four-week average -- which economists use to gauge underlying labor market trends -- fell to 308,500 last week from a previous level of 312,500.
According to the Labor Department report Thursday, continuing claims for workers drawing unemployment benefits for more than a week fell 19,000 to 2,545,000 in the week ended July 14, the latest week for which such data are available. These numbers are seasonally adjusted.
The insured unemployment rate was unchanged at 1.9% in the July 14 week, the same level as the previous week.
There were 15 states and territories reporting an increase in initial jobless claims for the July 14 week, while 38 reported a decrease.
North Carolina and Tennessee had the biggest increases, of 12,842 and 6,749 respectively, attributed to layoffs in the transportation and construction industries, among others. Michigan reported the biggest decrease, 18,269, due to fewer layoffs in the automobile industry.
-- Benton Ives-Halperin contributed to this article.
Thursday, July 26, 2007
Why Housing is Still Hot On The Western Front
Why Housing Is Still Hot On the Western Front
By Lauren Baier Kim
Here's a look at what's new in real-estate markets across the U.S. from around the Web.
Hot Western towns
A handful of small to midsize cities are outpacing the rest of the housing market, and in some cases are showing double-digit home-price appreciation, says an Associated Press article posted by Yahoo Finance. Among places that showed significant increases in home prices between the first quarters of 2006 and 2007 were: Salem, Ore. (13.4%), Boise City/Nampa, Idaho (14.5%), and Grand Junction, Colo. (16.8%). U.S. housing prices rose only 0.5 percent from the fourth quarter of last year to the first quarter of this year, the Associated Press says. Boosting these towns' residential real-estate markets are population and job growth, plus the fact that these locales were passed over by the housing boom, the article says.
Tough times for first-timers
Home buyers looking to purchase their first home are facing the most difficult real-estate market since the early 1990s, according to USA Today article. To get a foothold, many in this group are using extreme measures to come up with a down payment, such as raiding retirement accounts, moving in with family and taking on extra jobs. Many can't come up with a down payment -- about half of all first-time buyers didn't make a down payment last year and about one in 10 raided their retirement accounts to place one, the article says. Adding to the negative outlook for first-time buyers is a stricter mortgage industry. "I'm turning away 50% of my first-time home buyers," the paper quotes ones loan officer as saying. "They just can't qualify."
Big demand for lakefront properties
There was a time when the average middle-income consumer could purchase a vacation home on one of New York's Finger Lakes, but not so anymore, thanks to increased interest from out-of-town buyers from places like New Jersey and Philadelphia, says the Democrat and Chronicle of Rochester, N.Y. In the past five years, lakefront prices on lakes Keuka and Canandaigua have doubled, while lakes Seneca, Conesus and Honeoye have also seen significant price appreciation, the newspaper says. Last year, Keuka Lake saw an average price of $481,000, whereas the average price in 2002 was $245,000, while prices on Canandaigua Lake rose from $340,000 to $619,000, the article says. Meanwhile, on Conesus Lake, the average price has gone from $180,000 in 2003 to nearly $238,000, and Honeoye Lake has seen prices appreciate 15% to 20% in the past five years, the paper says.
Beach community sees increased development
Overall, Michigan's housing market has been weak, but for New Buffalo, Mich., a lakefront community on Lake Michigan, residential development is booming, making the community the strongest real-estate market in the state, according to a New York Times article. Known as "Harbor Country," the area, which soon will be home to a 220,000-square-foot casino, hotel and six restaurants on 50 tribal acres, has seen construction of $245 million worth of new homes, or 400 residential units, since 2005, the newspaper says. Eighty percent of those homes are being utilized as second homes, the Times reports.
Weeds threaten real-estate sales
In Southwest Florida, rising weeds are hurting real-estate sales in some neighborhoods, as a growing number of properties sit vacant, according to a News-Press of Fort Myers, Fla., article. Here, homes are remaining empty for months, sometimes a year, the newspaper says. The same problem is echoed across the U.S. as a record 1.4 million new housing units are vacant, the article says. Some Florida homeowners are allowing their unused homes to fall into disrepair, leaving uncut lawns and poorly maintained swimming pools. "When people look at a street and they find foreclosures and uncared-for vacant properties, it decreases the value of surrounding homes," the New-Press quotes one local real-estate agent as saying. The article offers tips on what to do if your neighborhood seems to be falling into neglect -- such as approaching home sellers of vacant properties directly about the situation, filing a complaint with the local municipality or contacting the homes' listing agents.
-- Ms. Kim is a senior editor at RealEstateJournal.com.
By Lauren Baier Kim
Here's a look at what's new in real-estate markets across the U.S. from around the Web.
Hot Western towns
A handful of small to midsize cities are outpacing the rest of the housing market, and in some cases are showing double-digit home-price appreciation, says an Associated Press article posted by Yahoo Finance. Among places that showed significant increases in home prices between the first quarters of 2006 and 2007 were: Salem, Ore. (13.4%), Boise City/Nampa, Idaho (14.5%), and Grand Junction, Colo. (16.8%). U.S. housing prices rose only 0.5 percent from the fourth quarter of last year to the first quarter of this year, the Associated Press says. Boosting these towns' residential real-estate markets are population and job growth, plus the fact that these locales were passed over by the housing boom, the article says.
Tough times for first-timers
Home buyers looking to purchase their first home are facing the most difficult real-estate market since the early 1990s, according to USA Today article. To get a foothold, many in this group are using extreme measures to come up with a down payment, such as raiding retirement accounts, moving in with family and taking on extra jobs. Many can't come up with a down payment -- about half of all first-time buyers didn't make a down payment last year and about one in 10 raided their retirement accounts to place one, the article says. Adding to the negative outlook for first-time buyers is a stricter mortgage industry. "I'm turning away 50% of my first-time home buyers," the paper quotes ones loan officer as saying. "They just can't qualify."
Big demand for lakefront properties
There was a time when the average middle-income consumer could purchase a vacation home on one of New York's Finger Lakes, but not so anymore, thanks to increased interest from out-of-town buyers from places like New Jersey and Philadelphia, says the Democrat and Chronicle of Rochester, N.Y. In the past five years, lakefront prices on lakes Keuka and Canandaigua have doubled, while lakes Seneca, Conesus and Honeoye have also seen significant price appreciation, the newspaper says. Last year, Keuka Lake saw an average price of $481,000, whereas the average price in 2002 was $245,000, while prices on Canandaigua Lake rose from $340,000 to $619,000, the article says. Meanwhile, on Conesus Lake, the average price has gone from $180,000 in 2003 to nearly $238,000, and Honeoye Lake has seen prices appreciate 15% to 20% in the past five years, the paper says.
Beach community sees increased development
Overall, Michigan's housing market has been weak, but for New Buffalo, Mich., a lakefront community on Lake Michigan, residential development is booming, making the community the strongest real-estate market in the state, according to a New York Times article. Known as "Harbor Country," the area, which soon will be home to a 220,000-square-foot casino, hotel and six restaurants on 50 tribal acres, has seen construction of $245 million worth of new homes, or 400 residential units, since 2005, the newspaper says. Eighty percent of those homes are being utilized as second homes, the Times reports.
Weeds threaten real-estate sales
In Southwest Florida, rising weeds are hurting real-estate sales in some neighborhoods, as a growing number of properties sit vacant, according to a News-Press of Fort Myers, Fla., article. Here, homes are remaining empty for months, sometimes a year, the newspaper says. The same problem is echoed across the U.S. as a record 1.4 million new housing units are vacant, the article says. Some Florida homeowners are allowing their unused homes to fall into disrepair, leaving uncut lawns and poorly maintained swimming pools. "When people look at a street and they find foreclosures and uncared-for vacant properties, it decreases the value of surrounding homes," the New-Press quotes one local real-estate agent as saying. The article offers tips on what to do if your neighborhood seems to be falling into neglect -- such as approaching home sellers of vacant properties directly about the situation, filing a complaint with the local municipality or contacting the homes' listing agents.
-- Ms. Kim is a senior editor at RealEstateJournal.com.
Tuesday, July 24, 2007
States Aim to Stem Tide of Home Foreclosures
States Aim to Stem Tide Of Home Foreclosures
By Thaddeus Herrick From The Wall Street Journal Online
Hoping to slow the quickening pace of home foreclosures, about a half-dozen states are setting up funds to help homeowners with high-risk subprime mortgages refinance to more-affordable loans.
The states -- which include Maryland, Massachusetts, New Jersey, New York, Ohio and Pennsylvania -- are expected to invest a total of more than $500 million in the effort. That isn't much, given the size of the problem, but state officials hope it will be enough to keep some vulnerable low- and moderate-income neighborhoods from sliding into decline.
Some of the programs will be similar to existing government-lending programs, in which the state extends mortgages to homeowners and then sells those home loans, in some cases to companies such as government-sponsored mortgage-finance giants Fannie Mae and Freddie Mac. The state then recycles the proceeds from the sales to make additional loans.
Earlier this month, Massachusetts officials said the state's housing agency would team up with Fannie Mae to provide $250 million for a program that could keep about 1,000 delinquent borrowers from losing their homes. The Massachusetts Housing Finance Agency will sell bonds to cover $60 million of the funding, with Fannie Mae providing the remaining $190 million.
New York Mortgage Agency officials say they expect to announce a $100 million program in the next several weeks that would help an estimated 500 homeowners.
More than one million American homes are expected to enter foreclosure this year; the total represents about 2.3% of the nation's 44 million home loans, according to Freddie Mac, which bases its estimate on data provided by Mortgage Bankers Association, a Washington-based trade group. Freddie Mac says about 60% of those homes carry subprime mortgages. Subprime mortgages are home loans made to borrowers with shaky credit records.
The projected foreclosure rate -- higher than during the oil bust of 1987 but not as high as in the 2002 recession -- poses a significant threat to the housing sector, and possibly to the nation's economy if it spurs consumers to maintain a tight grip on their wallets. "Falling home prices hurt consumer spending," says Patrick Newport, an economist at consulting firm Global Insight.
The problem can be traced in large part to consumers who took out adjustable-rate mortgages that had low initial rates but which adjusted higher after two years to a rate that was significantly higher than they expected or could afford. Many of those consumers weren't aware that initial mortgage rates on such loans often are tied to long-term interest rates, which haven't changed much in the past several years. But adjustments are tied to changes in short-term rates, which the Federal Reserve has boosted 17 times since 2004.
For example, a borrower who took out a $300,000 ARM at 7.32% in mid-2005 would have had an initial monthly payment of $2,060.79. A typical adjustment would have pushed that payment to $2,692.63 this year, says Keith Gumbinger, vice president of HSH Associates, a New Jersey publisher of mortgage-rate data. Unable to cover the higher payments, a number of homeowners have fallen behind.
The trend can put neighborhoods at risk. Houses left vacant as the result of foreclosures tend to push property values down and cause neighbors that can afford to do so to sell out and move away, creating a snowball effect.
Foreclosures have been most common in low- and moderate-income neighborhoods, especially in states like Ohio, Michigan and Indiana, whose economies have been hurt by job losses. In Ohio's Cuyahoga County, which includes Cleveland and 48 suburbs, foreclosure filings rose 95.6% to 13,610 last year from 6,959 in 2001, according to the research group Policy Matters Ohio.
Congress is considering legislation that would allow the Federal Housing Administration to help low- and moderate-income buyers by, among other things, offering overstretched homeowners 40-year loans that would lower monthly payments. But much of the effort to remedy the situation is playing out at the state level.
'You've got local politicians responding to local problems and because the problems are bad enough, they are not going to wait for the federal government to provide the solution," says Kurt Pfotenhauer, senior vice president for government affairs and public policy at the Mortgage Bankers Association.
Even so, the state response has been somewhat limited in scope. In most cases, those who are more than 60 days delinquent won't qualify. As for those who do qualify, some are likely to be people who could refinance through private-sector lenders.
"No one is saying this will solve the problem," says Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University. "But it could make a difference."
The recent flurry of plans is likely to make less of a difference in regions such as the Midwest, where workers may be unemployed and thus unable to qualify for loans. A potentially more troubling issue is whether taxpayers could be left to pick up any costs, a prospect that led California lawmakers to abandon a similar effort earlier this year. "This only works if you're helping people who pay back what they borrow," says Mr. Retsinas.
For its part, the Massachusetts program sets aside a risk-capital pool to cover 25% of losses from the program, something of an insurance policy. Borrowers must be no more than 60 days behind on their monthly payments in order to refinance into 30-year loans at fixed rates of about 7.75%. As in other states, eligibility is restricted to borrowers with a household income that doesn't exceed certain thresholds -- 135% of the median income in the Boston area.
In places like Boston, where home prices soared, only to fall in recent years, the refinancing plans' success will likely hinge on mortgage lenders' willingness to take a loss. Officials in some states say lenders will do so because in most cases they don't want to risk foreclosure, which can be more costly and time consuming.
But lenders say they are likely to resist any pressure from the state to take a loss on their loans, or even to waive certain prepayment penalties. "Nobody wins in foreclosure," said Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association. "But it's doubtful mortgage lenders are going to agree to both take a hit and lose a consumer."
By Thaddeus Herrick From The Wall Street Journal Online
Hoping to slow the quickening pace of home foreclosures, about a half-dozen states are setting up funds to help homeowners with high-risk subprime mortgages refinance to more-affordable loans.
The states -- which include Maryland, Massachusetts, New Jersey, New York, Ohio and Pennsylvania -- are expected to invest a total of more than $500 million in the effort. That isn't much, given the size of the problem, but state officials hope it will be enough to keep some vulnerable low- and moderate-income neighborhoods from sliding into decline.
Some of the programs will be similar to existing government-lending programs, in which the state extends mortgages to homeowners and then sells those home loans, in some cases to companies such as government-sponsored mortgage-finance giants Fannie Mae and Freddie Mac. The state then recycles the proceeds from the sales to make additional loans.
Earlier this month, Massachusetts officials said the state's housing agency would team up with Fannie Mae to provide $250 million for a program that could keep about 1,000 delinquent borrowers from losing their homes. The Massachusetts Housing Finance Agency will sell bonds to cover $60 million of the funding, with Fannie Mae providing the remaining $190 million.
New York Mortgage Agency officials say they expect to announce a $100 million program in the next several weeks that would help an estimated 500 homeowners.
More than one million American homes are expected to enter foreclosure this year; the total represents about 2.3% of the nation's 44 million home loans, according to Freddie Mac, which bases its estimate on data provided by Mortgage Bankers Association, a Washington-based trade group. Freddie Mac says about 60% of those homes carry subprime mortgages. Subprime mortgages are home loans made to borrowers with shaky credit records.
The projected foreclosure rate -- higher than during the oil bust of 1987 but not as high as in the 2002 recession -- poses a significant threat to the housing sector, and possibly to the nation's economy if it spurs consumers to maintain a tight grip on their wallets. "Falling home prices hurt consumer spending," says Patrick Newport, an economist at consulting firm Global Insight.
The problem can be traced in large part to consumers who took out adjustable-rate mortgages that had low initial rates but which adjusted higher after two years to a rate that was significantly higher than they expected or could afford. Many of those consumers weren't aware that initial mortgage rates on such loans often are tied to long-term interest rates, which haven't changed much in the past several years. But adjustments are tied to changes in short-term rates, which the Federal Reserve has boosted 17 times since 2004.
For example, a borrower who took out a $300,000 ARM at 7.32% in mid-2005 would have had an initial monthly payment of $2,060.79. A typical adjustment would have pushed that payment to $2,692.63 this year, says Keith Gumbinger, vice president of HSH Associates, a New Jersey publisher of mortgage-rate data. Unable to cover the higher payments, a number of homeowners have fallen behind.
The trend can put neighborhoods at risk. Houses left vacant as the result of foreclosures tend to push property values down and cause neighbors that can afford to do so to sell out and move away, creating a snowball effect.
Foreclosures have been most common in low- and moderate-income neighborhoods, especially in states like Ohio, Michigan and Indiana, whose economies have been hurt by job losses. In Ohio's Cuyahoga County, which includes Cleveland and 48 suburbs, foreclosure filings rose 95.6% to 13,610 last year from 6,959 in 2001, according to the research group Policy Matters Ohio.
Congress is considering legislation that would allow the Federal Housing Administration to help low- and moderate-income buyers by, among other things, offering overstretched homeowners 40-year loans that would lower monthly payments. But much of the effort to remedy the situation is playing out at the state level.
'You've got local politicians responding to local problems and because the problems are bad enough, they are not going to wait for the federal government to provide the solution," says Kurt Pfotenhauer, senior vice president for government affairs and public policy at the Mortgage Bankers Association.
Even so, the state response has been somewhat limited in scope. In most cases, those who are more than 60 days delinquent won't qualify. As for those who do qualify, some are likely to be people who could refinance through private-sector lenders.
"No one is saying this will solve the problem," says Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard University. "But it could make a difference."
The recent flurry of plans is likely to make less of a difference in regions such as the Midwest, where workers may be unemployed and thus unable to qualify for loans. A potentially more troubling issue is whether taxpayers could be left to pick up any costs, a prospect that led California lawmakers to abandon a similar effort earlier this year. "This only works if you're helping people who pay back what they borrow," says Mr. Retsinas.
For its part, the Massachusetts program sets aside a risk-capital pool to cover 25% of losses from the program, something of an insurance policy. Borrowers must be no more than 60 days behind on their monthly payments in order to refinance into 30-year loans at fixed rates of about 7.75%. As in other states, eligibility is restricted to borrowers with a household income that doesn't exceed certain thresholds -- 135% of the median income in the Boston area.
In places like Boston, where home prices soared, only to fall in recent years, the refinancing plans' success will likely hinge on mortgage lenders' willingness to take a loss. Officials in some states say lenders will do so because in most cases they don't want to risk foreclosure, which can be more costly and time consuming.
But lenders say they are likely to resist any pressure from the state to take a loss on their loans, or even to waive certain prepayment penalties. "Nobody wins in foreclosure," said Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association. "But it's doubtful mortgage lenders are going to agree to both take a hit and lose a consumer."
Sunday, July 22, 2007
A Look at the Luxury Real Estate Market / Market Trends
Luxury Houses Still Selling; Top Picks for Where to Live
By Lauren Baier Kim
Here's a look at what's new in real-estate markets across the U.S. from around the Web. Best places to live
Where's the best place to live in the U.S.? Middleton, Wis., according to this year's Best Places to Live list by Money Magazine and CNNMoney.com. The ranking of top 100 communities rates "smaller places" that have a good combination of schools, local economy and safety, among other features. Middleton, ranked as the top spot to live, is noted for its family life, parks, bike trails, beer garden and mix of good jobs and restaurants, the Web site says. This year's ranking also includes: the 15 top-earning towns (No. 1, Hillsborough, Calif.), the 25 most affordable towns (No. 1, Northbrook, Ohio) and where the most singles are (No. 1, State College, Pa.).
A tale of two markets -- or three
While the rest of the housing market is languishing, more expensive homes are performing comparatively well -- spending less time on the market and garnering better prices, says a New York Times article. In fact, in places like Manhattan, Seattle, Los Angeles, Denver and Houston, some homes are actually selling for more than their asking price.
Steve Schwarzman's expensive teardown
Eyes are on the Palm Beach, Fla., residence of Blackstone Group Chairman and Chief Executive Officer Steve Schwarzman. The home was torn down when Schwarzman's team realized that the existing 3,000-square-foot residence wouldn't be able to support a new planned-for second-story addition. So the residence, which was built in 1937 for E.F. Hutton by architect Maurice Fatio and purchased by Mr. Schwarzman in 2003 for $20.5 million, was demolished in 2004.
Robert Frank's Wealth Report blog post on WSJ.com notes that the new mansion is still under construction and looks like a larger version of the original residence, "The Four Winds." There's no telling how many millions Mr. Schwarzman has poured into the renovation, Mr. Frank writes.
Mortgage scams on the rise
Mortgage fraud is prevalent across the U.S., says a Pittsburgh Post-Gazette article, which highlights some of the most common schemes, including: flipping, getting a home appraised at a fraudulent amount to gain a higher price from a buyer; taking out a mortgage through a "straw buyer," an unwitting victim or an accomplice whose identity is used to secure a loan for someone with shaky credit and then foreclosing on the loan; appraisal fraud, getting a property appraised for an inflated amount, and often neglecting to make payments on a loan and finally foreclosing ; and foreclosure schemes that trick financially strapped homeowners out of their properties.
To avoid falling prey to such tactics, the Post-Gazette offers tips including: checking the price history of a property before purchasing (to check for inflated home values), researching the ownership of a home through a local tax assessment office or recorder of deeds, dealing directly with a lender or mortgage broker instead of going through a third party, being cautious about "no money down/cash back at closing" offers, getting and reading a complete set of closing documents, not signing documents that have portions left blank, and securing the help of an attorney if you need help understanding your contract.
Towns awash in open house signs
Perhaps it's an indication of the sluggish real-estate market: in Northern New Jersey, several towns have either introduced or are planning to adopt ordinances that restrict the number and placement of open house signs, according to the Record. One town, Hasbrouck Heights, limits real-estate agents to three open house signs -- one on the property itself and two directing motorists to the home -- and restricts the size of open house placards to 3 feet high by 24 inches wide. Hasbrouck also requires real-estate agents to secure a yearly sign permit at an annual fee of $100. While a town administrator is quoted in the Record as calling the move to reduce the number of these signs "an issue of aesthetics," the placards have been said by local residents to be a hazard and block motorists' view of the road.
-- Ms. Kim is a senior editor at RealEstateJournal.com
By Lauren Baier Kim
Here's a look at what's new in real-estate markets across the U.S. from around the Web. Best places to live
Where's the best place to live in the U.S.? Middleton, Wis., according to this year's Best Places to Live list by Money Magazine and CNNMoney.com. The ranking of top 100 communities rates "smaller places" that have a good combination of schools, local economy and safety, among other features. Middleton, ranked as the top spot to live, is noted for its family life, parks, bike trails, beer garden and mix of good jobs and restaurants, the Web site says. This year's ranking also includes: the 15 top-earning towns (No. 1, Hillsborough, Calif.), the 25 most affordable towns (No. 1, Northbrook, Ohio) and where the most singles are (No. 1, State College, Pa.).
A tale of two markets -- or three
While the rest of the housing market is languishing, more expensive homes are performing comparatively well -- spending less time on the market and garnering better prices, says a New York Times article. In fact, in places like Manhattan, Seattle, Los Angeles, Denver and Houston, some homes are actually selling for more than their asking price.
Steve Schwarzman's expensive teardown
Eyes are on the Palm Beach, Fla., residence of Blackstone Group Chairman and Chief Executive Officer Steve Schwarzman. The home was torn down when Schwarzman's team realized that the existing 3,000-square-foot residence wouldn't be able to support a new planned-for second-story addition. So the residence, which was built in 1937 for E.F. Hutton by architect Maurice Fatio and purchased by Mr. Schwarzman in 2003 for $20.5 million, was demolished in 2004.
Robert Frank's Wealth Report blog post on WSJ.com notes that the new mansion is still under construction and looks like a larger version of the original residence, "The Four Winds." There's no telling how many millions Mr. Schwarzman has poured into the renovation, Mr. Frank writes.
Mortgage scams on the rise
Mortgage fraud is prevalent across the U.S., says a Pittsburgh Post-Gazette article, which highlights some of the most common schemes, including: flipping, getting a home appraised at a fraudulent amount to gain a higher price from a buyer; taking out a mortgage through a "straw buyer," an unwitting victim or an accomplice whose identity is used to secure a loan for someone with shaky credit and then foreclosing on the loan; appraisal fraud, getting a property appraised for an inflated amount, and often neglecting to make payments on a loan and finally foreclosing ; and foreclosure schemes that trick financially strapped homeowners out of their properties.
To avoid falling prey to such tactics, the Post-Gazette offers tips including: checking the price history of a property before purchasing (to check for inflated home values), researching the ownership of a home through a local tax assessment office or recorder of deeds, dealing directly with a lender or mortgage broker instead of going through a third party, being cautious about "no money down/cash back at closing" offers, getting and reading a complete set of closing documents, not signing documents that have portions left blank, and securing the help of an attorney if you need help understanding your contract.
Towns awash in open house signs
Perhaps it's an indication of the sluggish real-estate market: in Northern New Jersey, several towns have either introduced or are planning to adopt ordinances that restrict the number and placement of open house signs, according to the Record. One town, Hasbrouck Heights, limits real-estate agents to three open house signs -- one on the property itself and two directing motorists to the home -- and restricts the size of open house placards to 3 feet high by 24 inches wide. Hasbrouck also requires real-estate agents to secure a yearly sign permit at an annual fee of $100. While a town administrator is quoted in the Record as calling the move to reduce the number of these signs "an issue of aesthetics," the placards have been said by local residents to be a hazard and block motorists' view of the road.
-- Ms. Kim is a senior editor at RealEstateJournal.com
Tuesday, July 17, 2007
Effective Incentives to Woo Buyers and Sell Your Home
By Amy Hoak
From MarketWatch
Flashy incentives like a new car parked in the driveway or a flat-panel television hanging in the den might sound like a good way for home sellers to woo buyers in a dismal real-estate market.
But when it comes to actually enticing someone to buy a home, it's the more practical perks that count, real-estate professionals say.
"Serious buyers are looking for a place to buy a home, not a trip to Tahiti," says Dave Ledebuhr, owner of Musselman Realty in East Lansing, Mich. Moreover, lenders are leery of gimmicky incentives, fearing that they're built into the price of the home and that loan dollars are being used to pay for that tropical trip, he adds.
Instead, effective incentives address what's on the minds of potential buyers -- the overall cost of the home and the monthly payments they'll have to manage, he says.
Help in bringing down the interest rate of the mortgage by paying points, for example, can give one home an advantage over another, says Dave Dalzell, owner of Dalzell Realtors in Abilene, Texas.
And contributions to the down payment and closing costs could especially be of help to a first-time home buyer, says Greg Zadel, owner of Zadel Realty in Firestone, Colo.
Incentives can be considered when the home is first listed, as a way to distinguish it from the start, Mr. Dalzell says.
They can also be added when the home hasn't sold in two or three months, as a way of enticing a buyer without lowering the price. Or the incentives could arise in negotiations, when a buyer needs that one extra little nudge to commit.
Make no mistake, the location and condition of a home are going to be its main selling points. But if sellers "put on their buyer's cap" and really consider what issues the buyer might have, it could make all the difference, Mr. Dalzell adds.
"I tell my seller to look at his bottom line," says Susan Ramsey, a Realtor with Re/Max Integrity Realtors in the Phoenix area. A seller should figure how low he or she is willing to go, factoring in both the selling price and other incentives used to get a buyer to commit.
But also be aware that most seller concessions need to be disclosed. "Everything should be in writing and attached to the contract," Mr. Dalzell adds. When someone says, "let's not tell anybody" about an incentive, it could signal imprudence, he says.
In addition, buyers and sellers need to make sure that they don't exceed the lender's allowable seller-paid assistance, Mr. Ledebuhr says.
Below are six of the most common incentives being used in markets today.
Reducing the Price
A price reduction is often the incentive that is looked at first, says Delores Conway, director of the Casden Forecast at the University of Southern California's Lusk Center for Real Estate.
"The price is something that is a common currency -- it appeals to everybody," she says.
Gene Rivers, who owns four Keller Williams real-estate offices in Florida, agrees. If a buyer has in her mind that she'll pay $350,000 for a home and the seller won't budge from $375,000, "$5,000 in closing costs and a plasma TV ain't going to get it done," he says.
Paying Points
Sellers can offer to pay mortgage points for a buyer, an incentive that Mr. Dalzell tends to use in environments like today's, when rising interest rates are at the front of a buyer's mind. One point is 1% of the loan amount, charged as prepaid interest.
"When a buyer sees a lower interest rate or monthly payment, that's something they can relate to," he says. The setup makes sense for a buyer who has to buy furnishings for the new place; it also can make for an easier monthly payment transition for families that are upsizing.
Buyers should understand, however, that the lower rate often lasts only from one to three years. Before accepting, understand and plan for the point in time when the mortgage bill will increase.
Down-Payment Aid
For some buyers, the hardest part of entering the ranks of homeownership is the down payment -- also an area where a seller can help. It's mostly first-time home buyers interested in this kind of assistance because they're often the ones lacking in funds to complete a deal, Mr. Zadel says.
"It gets people into homeownership," he says. "The disadvantage is that the buyer is financing that additional amount," he adds, because a seller would likely come down in the price of the home if a chunk weren't dedicated to down-payment assistance.
Closing-Costs Help
Closing costs include items ranging from legal fees to title insurance and can add up, ranging between 2% and 7% of the loan value, according to Freddie Mac. So many buyers, especially those stretching to make a down payment, will be interested in having a seller help out.
In Phoenix, buyers in every price range have been asking that these costs be covered, according to Re/Max's Ms. Ramsey. "They ask for it because they know that they'll get it," she says.
Adding a Warranty
A residential-service contract is sometimes thrown in as an incentive because it acts as insurance for a home's systems, often including plumbing, heating and cooling. At a cost of a few hundred dollars, some real-estate agents consider it an inexpensive add-on that affords a buyer a little extra peace of mind, Mr. Dalzell says. That peace of mind can be especially welcome during the first year in a house.
The Little Things
Other perks will appeal to buyers, too, ranging from the common to the unique. Payment of homeowner association fees -- typically associated with condo developments -- are sometimes offered. Ms. Ramsey says that a seller with a swimming pool might also offer a year's worth of upkeep for it, a welcome help for those worried about the maintenance of the backyard attraction.
Or maybe, if a corner of the home was designed for a grand piano, leaving that instrument behind entices a buyer to go through with the deal, USC's Ms. Conway says.
From MarketWatch
Flashy incentives like a new car parked in the driveway or a flat-panel television hanging in the den might sound like a good way for home sellers to woo buyers in a dismal real-estate market.
But when it comes to actually enticing someone to buy a home, it's the more practical perks that count, real-estate professionals say.
"Serious buyers are looking for a place to buy a home, not a trip to Tahiti," says Dave Ledebuhr, owner of Musselman Realty in East Lansing, Mich. Moreover, lenders are leery of gimmicky incentives, fearing that they're built into the price of the home and that loan dollars are being used to pay for that tropical trip, he adds.
Instead, effective incentives address what's on the minds of potential buyers -- the overall cost of the home and the monthly payments they'll have to manage, he says.
Help in bringing down the interest rate of the mortgage by paying points, for example, can give one home an advantage over another, says Dave Dalzell, owner of Dalzell Realtors in Abilene, Texas.
And contributions to the down payment and closing costs could especially be of help to a first-time home buyer, says Greg Zadel, owner of Zadel Realty in Firestone, Colo.
Incentives can be considered when the home is first listed, as a way to distinguish it from the start, Mr. Dalzell says.
They can also be added when the home hasn't sold in two or three months, as a way of enticing a buyer without lowering the price. Or the incentives could arise in negotiations, when a buyer needs that one extra little nudge to commit.
Make no mistake, the location and condition of a home are going to be its main selling points. But if sellers "put on their buyer's cap" and really consider what issues the buyer might have, it could make all the difference, Mr. Dalzell adds.
"I tell my seller to look at his bottom line," says Susan Ramsey, a Realtor with Re/Max Integrity Realtors in the Phoenix area. A seller should figure how low he or she is willing to go, factoring in both the selling price and other incentives used to get a buyer to commit.
But also be aware that most seller concessions need to be disclosed. "Everything should be in writing and attached to the contract," Mr. Dalzell adds. When someone says, "let's not tell anybody" about an incentive, it could signal imprudence, he says.
In addition, buyers and sellers need to make sure that they don't exceed the lender's allowable seller-paid assistance, Mr. Ledebuhr says.
Below are six of the most common incentives being used in markets today.
Reducing the Price
A price reduction is often the incentive that is looked at first, says Delores Conway, director of the Casden Forecast at the University of Southern California's Lusk Center for Real Estate.
"The price is something that is a common currency -- it appeals to everybody," she says.
Gene Rivers, who owns four Keller Williams real-estate offices in Florida, agrees. If a buyer has in her mind that she'll pay $350,000 for a home and the seller won't budge from $375,000, "$5,000 in closing costs and a plasma TV ain't going to get it done," he says.
Paying Points
Sellers can offer to pay mortgage points for a buyer, an incentive that Mr. Dalzell tends to use in environments like today's, when rising interest rates are at the front of a buyer's mind. One point is 1% of the loan amount, charged as prepaid interest.
"When a buyer sees a lower interest rate or monthly payment, that's something they can relate to," he says. The setup makes sense for a buyer who has to buy furnishings for the new place; it also can make for an easier monthly payment transition for families that are upsizing.
Buyers should understand, however, that the lower rate often lasts only from one to three years. Before accepting, understand and plan for the point in time when the mortgage bill will increase.
Down-Payment Aid
For some buyers, the hardest part of entering the ranks of homeownership is the down payment -- also an area where a seller can help. It's mostly first-time home buyers interested in this kind of assistance because they're often the ones lacking in funds to complete a deal, Mr. Zadel says.
"It gets people into homeownership," he says. "The disadvantage is that the buyer is financing that additional amount," he adds, because a seller would likely come down in the price of the home if a chunk weren't dedicated to down-payment assistance.
Closing-Costs Help
Closing costs include items ranging from legal fees to title insurance and can add up, ranging between 2% and 7% of the loan value, according to Freddie Mac. So many buyers, especially those stretching to make a down payment, will be interested in having a seller help out.
In Phoenix, buyers in every price range have been asking that these costs be covered, according to Re/Max's Ms. Ramsey. "They ask for it because they know that they'll get it," she says.
Adding a Warranty
A residential-service contract is sometimes thrown in as an incentive because it acts as insurance for a home's systems, often including plumbing, heating and cooling. At a cost of a few hundred dollars, some real-estate agents consider it an inexpensive add-on that affords a buyer a little extra peace of mind, Mr. Dalzell says. That peace of mind can be especially welcome during the first year in a house.
The Little Things
Other perks will appeal to buyers, too, ranging from the common to the unique. Payment of homeowner association fees -- typically associated with condo developments -- are sometimes offered. Ms. Ramsey says that a seller with a swimming pool might also offer a year's worth of upkeep for it, a welcome help for those worried about the maintenance of the backyard attraction.
Or maybe, if a corner of the home was designed for a grand piano, leaving that instrument behind entices a buyer to go through with the deal, USC's Ms. Conway says.
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