By Jeff D. Opdyke From The Wall Street Journal Online
Another mortgage-refinancing boom is under way. But this time around, many homeowners will be watching from the sidelines.
For the first time since 2005, mortgage rates have slipped well below 6%, ending last week at about 5.87%, according to mortgage tracker HSH Associates. Some lenders are offering even lower deals. At these levels, about 37% of homeowners could refinance their mortgages and save money on their monthly payment, estimates investment bank Bear Stearns Cos. As rates drop further -- and some expect that to happen if the economy continues to weaken -- increasing numbers of consumers will find refinancing their existing mortgage worthwhile.
But here's the catch, and it's a big one: Many homeowners won't benefit, either because their mortgage is too big or their credit score is too low. In other cases, falling home prices will make it tough for them to refinance.
As the subprime-lending crisis continues to roil the housing and financial markets, rates for so-called jumbo mortgages -- those above $417,000 -- are now uncharacteristically priced so far above conventional mortgages that refinancing generally makes no sense for homeowners who hold them. At the same time, conventional borrowers who have lower credit scores -- or relatively little equity in their houses -- are finding that they generally don't qualify for the best rates, often negating any expected benefits to the pocketbook.
The result: The big winners will be conventional borrowers with so-called conforming loans -- those eligible for purchase by Fannie Mae and Freddie Mac, the two government-sponsored entities that rule the mortgage market. In particular, borrowers with high credit scores or a large amount of equity already in their home, or some combination of both, stand to benefit, says Dale Westhoff, who heads Bear Stearns's mortgage research. In the past, when rates have dived below 6%, "you'd normally see subprime and Alt-A and jumbo borrowers" in the market, Mr. Westhoff says. "But they're really not going to be participants in this refi wave."
Fiona Furlong of South Glastonbury, Conn., is one borrower who has been able to refinance her home. She originally sought to refinance her conventional mortgage in December 2005, but missed the last of the sub-6% rates by a few weeks. She told her mortgage broker to keep her in mind if rates ever slipped below 6% again.
"When he called recently, I had sort of forgotten about this," Ms. Furlong says. "I was surprised to hear rates have dropped so significantly." She locked in a rate of 5.75%, reducing her current rate from above 6%, a move that will shrink her monthly payment by about $100. "My house just got reappraised and I'll be paying more in taxes, so that savings will help," she says.
Ms. Furlong's broker, Michael Menatian, president of Sanborn Mortgage Corp., in West Hartford, Conn., says his refinancing business is "surging" these days among those who qualify. "It's going nuts, because we've had such a dramatic drop in rates in such a short time."
At Regions Financial Corp., a Birmingham, Ala., regional bank, refinancing business is up between 40% and 45% since October. "This market will be very different than previous markets, and that's a function of the credit constraints and the jumbo-rate issues," says Todd Chamberlain, Regions's head of mortgage banking.
Ron Hermance is more blunt. The chairman and CEO of New Jersey's Hudson City Bancorp Inc. says many consumers "will be left out in the cold this time because underwriting is back in vogue," and many homeowners will find that during the previous housing boom "they originally got credit they weren't entitled to." In the first two weeks of this year, refinancings accounted for 56% of Hudson City's mortgage volume, compared with 42% for all of last year.
Overall, the Mortgage Bankers Association reports that for the week ended Jan. 11, weekly mortgage applications surged to a level not seen since spring 2004. Refinancings accounted for nearly two-thirds of the application volume, the group says. Still, those are just applications, and many are being rejected these days as lenders adopt tighter standards.
For jumbo borrowers, though, higher standards aren't the biggest problem: Rates on those loans averaged 6.8% at the end of last week, according to HSH, meaning the spread between conventional and jumbo rates is nearly a full percentage point -- four times the typical gap.
Jumbo rates, lenders say, aren't coming down alongside conventional rates because buyers of those mortgages in the secondary market remain skittish. As such, today's jumbo rates are well above the existing rates many homeowners currently have on their mortgage, meaning "there's no reason to refinance," says Jay Steren, CEO at Mortgage Capital Associates, a Los Angeles mortgage banker.
In the conventional-mortgage market, Fannie Mae and Freddie Mac are moving to risk-based pricing, which has the effect of tightening lending standards across the country. The upshot: Homeowners with weak credit scores or little equity in their home will pay for the risk associated with underwriting their mortgage through higher interest rates and added fees -- which has the effect of dimming, if not eliminating, the benefits of refinancing.
To get the best rates under the new risk-based guidelines, homeowners "need a credit score over 679, or equity of greater than 30%," says Sanborn Mortgages' Mr. Menatian. But as home prices fall in many markets, homeowners' equity sinks alongside it -- making it tough to get more-attractive rates.
The risk-based guidelines impose so-called delivery fees that range between 0.75% and 2% of the mortgage value for consumers with credit scores below 680. The highest fees are charged to those with credit scores below 620.
Mr. Menatian says buyers with credit scores in the 620 to 639 range, and who have less than 30% equity, are getting mortgage rates these days of about 6.375%, while the best borrowers are getting 5.75%.
Holders of jumbo mortgages, meanwhile, are running into other problems. Rodney Rideout, of Darien, Conn., has an adjustable-rate mortgage of about $500,000 scheduled to reset in March, meaning his interest rate will rise to more than 6%. That will bump up his monthly payments by about $460. He wants to refinance, but because of the jumbo market, he's unable to find an affordable fixed-rate mortgage.
"Everything is up near 7%, so it makes no sense," says Mr. Rideout. "I was thinking 'jumbo' meant something up near $1 million; I didn't think it would apply to my loan."
Indeed, the definition of jumbo could actually be changing soon. For months, Congress has been debating the idea of raising the limit on jumbo mortgages, possibly to $600,000 or more. If so, that would allow a larger number of borrowers to refinance at lower rates. But just what will happen, and when, remains uncertain.
In the meantime, rates on jumbo mortgages can vary significantly. While the average jumbo rate is about 6.8%, Hudson City Bancorp -- which operates in New Jersey, New York and Connecticut -- is offering jumbo mortgages at 6.25%, for example.
"You need to do some legwork, scour the market, to find the best rates," says Keith Gumbinger, vice-president of HSH. He suggests starting with lenders who often keep on their books the mortgages they underwrite, such as local banks, thrifts and credit unions. "They can easily be a half-percent lower than the averages," he says.
All of this is affecting the home-buying market, particularly for expensive homes. Buyers are increasingly aware of the high jumbo-mortgage rates and the impact on their monthly payment. Thus, sellers these days are adjusting their sales price or offering other incentives in order to trim a buyer's mortgage below the jumbo limit.
Neil Saunders, president of Greenwich Mortgage Corp. in Providence, R.I., is selling a 4,400-square-foot house in East Greenwich, R.I., priced at $998,000. To entice buyers, he's willing to offer an interest-free loan for a year or two on the cash needed above the $417,000 cutoff. Mr. Saunders expects Congress will raise the ceiling on jumbo mortgages and the buyer will then be able to refinance into a lower-rate, conventional mortgage.
Other sellers, says Ron Phipps, president of Phipps Realty and Relocation in Warwick, R.I., are buying down the interest rate for buyers, often for just a year or two, to make it more comparable to a conventional rate.
"Everyone is very sensitive to this situation right now," Mr. Phipps says. "This is still a correcting market."
Saturday, January 19, 2008
Wednesday, January 16, 2008
Lower Home Prices in Denver? Possible But Not Certain
Denver Business Journal 1-15-08
The Denver-Aurora metropolitan statistical area is on the list of regions where home prices are likely to be lower in two years.
But the report issued Tuesday by PMI Mortgage Insurance Co. of Walnut Creek, Calif., doesn't place the risk of home prices falling in the region as a certainty.
The report is based on third-quarter data on mortgages, foreclosures, home prices, labor market statistics and offers metro areas a scale of one to 100. The scale translates to a percentage; a score of 50 indicates a 50 percent chance home prices will be lower in two years.
The score for the Denver-Aurora MSA -- which covers 10 counties including Denver, Jefferson, Adams, Arapahoe, Broomfield and Douglas -- is one. The same score is shared by the Cleveland area. Other metro areas, such as San Antonio, Pittsburgh and Dallas, were given a score of less than one.
The risk of home prices falling in two years is highest in California and Florida as well as in Las Vegas and Phoenix. The Riverside area of California had the highest risk score, at 94 percent, while the score for Las Vegas was 89 percent.
The Denver-Aurora metropolitan statistical area is on the list of regions where home prices are likely to be lower in two years.
But the report issued Tuesday by PMI Mortgage Insurance Co. of Walnut Creek, Calif., doesn't place the risk of home prices falling in the region as a certainty.
The report is based on third-quarter data on mortgages, foreclosures, home prices, labor market statistics and offers metro areas a scale of one to 100. The scale translates to a percentage; a score of 50 indicates a 50 percent chance home prices will be lower in two years.
The score for the Denver-Aurora MSA -- which covers 10 counties including Denver, Jefferson, Adams, Arapahoe, Broomfield and Douglas -- is one. The same score is shared by the Cleveland area. Other metro areas, such as San Antonio, Pittsburgh and Dallas, were given a score of less than one.
The risk of home prices falling in two years is highest in California and Florida as well as in Las Vegas and Phoenix. The Riverside area of California had the highest risk score, at 94 percent, while the score for Las Vegas was 89 percent.
Saturday, January 12, 2008
Plus to Downturn: Lower Costs For Renovating or Building a Home
By Sara Lin From The Wall Street Journal Online
It's not the best time to be selling a house in much of the country. But increasingly, it's a good time to build or renovate one.
The housing slump has pushed down prices on everything from lumber and drywall to labor and design fees. Legions of carpenters, tile layers and landscapers are idle. Architects are taking on small renovation projects they once would have sniffed at and contractors are offering their services at a discount. Some people in the building trades are even posting fliers at construction sites to drum up business.
It's a striking contrast from the heady days of the real-estate boom, when builders and contractors could hardly keep pace with demand, prices of materials soared and a six-month wait to start a kitchen renovation was commonplace.
Now, some homeowners are moving forward on renovation or building projects they've put off for years. Others are exacting substantial price cuts from contractors desperate for work.
A few months ago, Mike Bowes remodeled the bathroom and guest bedroom of his $200,000 condo in Las Vegas. The job, which cost $14,000, included a walk-in shower, a new vanity, bamboo flooring in the guest room and retextured plaster on the walls and ceilings. Last year, the same work would have cost nearly twice as much, he estimates, "and I would have had to beg someone to do it." Now, the 47-year-old commercial roofing sales manager is planning to upgrade his kitchen, living room and porch. While prices remain low "I'm going to keep going," he says.
Even small repair jobs, once the province of independent plumbers, electricians and handymen, are getting scooped up by larger firms. When a bathroom pipe burst at the home of Julie Gebhardt, a schoolteacher in Manchester, Mich., she called a local builder for a referral. Instead, the firm, Peters Building Co., said it would take the job itself. The company needs the work, says President Jim Haeussler. Before the slump, the company built 70 to 80 houses a year to sell on the market at $300,000 to $500,000. So far this year it has built just 18 houses, Mr. Haeussler says.
'Now Is the Best Time'
The Joint Center for Housing Studies at Harvard University estimates that 1.3 million homes will be built this year in the U.S. -- down from just over two million in 2005. On Tuesday, the Commerce Department said construction of single-family houses fell 25% in October from a year earlier.
Meantime, more homeowners will renovate their kitchens this year -- 7.57 million, up from 7.44 million in 2006 -- but they will spend a lot less, $96.2 billion compared with $127 billion, according to the National Kitchen & Bath Association. Bathroom renovations this year are expected to rise by 5.3% to 10.9 million from 2006, while spending on them will grow 3.8% to $70.2 billion from 2006, the trade group projects.
One reason some renovations will cost less this year is the falling price of many key building materials. The price of oriented strand board, a plywood substitute used for walls and roof sheathing, dropped 40% from the third quarter of 2005 to the same quarter this year, according to the National Association of Home Builders. During the same period, framing-lumber prices fell 24%, says the association. And drywall prices -- which soared during the real estate run-up to a record -- dropped 35% from last year's third quarter, according to United States Gypsum Co., the largest manufacturer of drywall in North America.
"If you're going to do any kind of construction...now is the best time you're going to have to do that in the next five years," says Bill Harrison of Harrison Design Associates, an Atlanta-based architecture firm that specializes in high-end homes.
It's also a good time to be shopping for an architect. Bryan Jones, of Jones Pierce Architects, also of Atlanta, says his 12-person company used to concentrate on remodeling jobs valued between $250,000 and $750,000. But now, he says, inquiries about new projects are down by nearly half from a year ago, and the firm is taking on smaller jobs to make up for the lost work. "We're chasing stuff we definitely wouldn't have done a year ago," he says.
The same goes for builders. After Russ Nank Jr.'s three-bedroom ranch house in Rock Creek, Ohio, burned down last year, he snagged Payne & Payne Builders, a Cleveland-based firm, to erect a four-bedroom Cape Cod-style home. The firm took on the $179,000 project even though it was located outside its usual territory and was about one-third the size of its usual jobs. "The timing could not have been better for us," Mr. Nank says, adding that he was able to afford a bigger home with more costly upgrades, including hickory cabinets and granite counters, than he had expected.
Two years ago, says company co-owner Dave Payne, he would have politely declined such a project. "We had a map, we had a line and we didn't go outside of that line," he says of his company, which is about 45 miles from Rock Creek. But as he watched his list of prospective projects shrivel to five from 30 last fall, Mr. Payne says he threw out the rules. In April, his company even built a $25,000 one-room addition for one client. "We're chasing every lead," he says.
Not all parts of the country have been affected equally. Builders in Seattle, New York and Los Angeles, where the job and housing markets have remained firm, report business as usual. And many architects who specialize in high-end homes say they are as busy as ever.
But the picture is much different in states like Nevada, Florida and Arizona, building hotbeds during the housing boom that have since gone bust. The same is true in Midwestern states such as Michigan and Ohio, particularly hard hit by foreclosures and subprime-mortgage defaults. In these areas, builders, contractors and landscapers say they're watching their backlog of work shrink to a few weeks from months, as new projects dry up.
Prices Too Low?
Amid the flurry of competitive pricing from hungry builders comes a warning for homeowners: Prices that seem too good to be true very well might be. "If somebody's low-balling it, they're probably cutting out something that's important and you need to know what it is," says Deborah Pierce, an architect in Newton, Mass.
This spring, Nicki Tragesser, 54, of Atwater, Calif., started building a 635-square-foot, two-story addition for her ranch house. She had called 10 contractors and chosen the one who gave the cheapest estimate after being impressed by a house he'd just finished.
"I felt flabbergasted he was only going to charge me $69,000 for what I wanted," Ms. Tragesser says. Only after she signed a contract did she learn that she would have to purchase an air-conditioning unit herself and pay an electrician separately to do the wiring. And that was just the beginning. Four months after construction should have wrapped up, her cement floors are cracking, the flooring upstairs is uneven and doors hang lopsided on their hinges. The contractor has quit and Ms. Tragesser spent an extra $12,000 trying to correct his work. The contractor didn't return a call seeking comment.
But others have used their newfound bargaining edge to their advantage. Amy and Bob Phillips of Tucson, Ariz., began work on a four-bedroom, Adobe-style house in February. With newly lower pricing on a variety of items, including stucco, wood and labor, the Phillips were able to afford upgrades such as solid wood doors, glass doorknobs and steel garage doors on their $800,000 budget.
While their builder did most of the bargaining on materials for the house, the couple bid out a backyard pool themselves. By pressuring contractors to lower their bids, the Phillipses have knocked $8,000 off the cost. "We're definitely playing people off each other, and they're definitely dropping their prices," says Mrs. Phillips, 44, a convention planner.
It's not the best time to be selling a house in much of the country. But increasingly, it's a good time to build or renovate one.
The housing slump has pushed down prices on everything from lumber and drywall to labor and design fees. Legions of carpenters, tile layers and landscapers are idle. Architects are taking on small renovation projects they once would have sniffed at and contractors are offering their services at a discount. Some people in the building trades are even posting fliers at construction sites to drum up business.
It's a striking contrast from the heady days of the real-estate boom, when builders and contractors could hardly keep pace with demand, prices of materials soared and a six-month wait to start a kitchen renovation was commonplace.
Now, some homeowners are moving forward on renovation or building projects they've put off for years. Others are exacting substantial price cuts from contractors desperate for work.
A few months ago, Mike Bowes remodeled the bathroom and guest bedroom of his $200,000 condo in Las Vegas. The job, which cost $14,000, included a walk-in shower, a new vanity, bamboo flooring in the guest room and retextured plaster on the walls and ceilings. Last year, the same work would have cost nearly twice as much, he estimates, "and I would have had to beg someone to do it." Now, the 47-year-old commercial roofing sales manager is planning to upgrade his kitchen, living room and porch. While prices remain low "I'm going to keep going," he says.
Even small repair jobs, once the province of independent plumbers, electricians and handymen, are getting scooped up by larger firms. When a bathroom pipe burst at the home of Julie Gebhardt, a schoolteacher in Manchester, Mich., she called a local builder for a referral. Instead, the firm, Peters Building Co., said it would take the job itself. The company needs the work, says President Jim Haeussler. Before the slump, the company built 70 to 80 houses a year to sell on the market at $300,000 to $500,000. So far this year it has built just 18 houses, Mr. Haeussler says.
'Now Is the Best Time'
The Joint Center for Housing Studies at Harvard University estimates that 1.3 million homes will be built this year in the U.S. -- down from just over two million in 2005. On Tuesday, the Commerce Department said construction of single-family houses fell 25% in October from a year earlier.
Meantime, more homeowners will renovate their kitchens this year -- 7.57 million, up from 7.44 million in 2006 -- but they will spend a lot less, $96.2 billion compared with $127 billion, according to the National Kitchen & Bath Association. Bathroom renovations this year are expected to rise by 5.3% to 10.9 million from 2006, while spending on them will grow 3.8% to $70.2 billion from 2006, the trade group projects.
One reason some renovations will cost less this year is the falling price of many key building materials. The price of oriented strand board, a plywood substitute used for walls and roof sheathing, dropped 40% from the third quarter of 2005 to the same quarter this year, according to the National Association of Home Builders. During the same period, framing-lumber prices fell 24%, says the association. And drywall prices -- which soared during the real estate run-up to a record -- dropped 35% from last year's third quarter, according to United States Gypsum Co., the largest manufacturer of drywall in North America.
"If you're going to do any kind of construction...now is the best time you're going to have to do that in the next five years," says Bill Harrison of Harrison Design Associates, an Atlanta-based architecture firm that specializes in high-end homes.
It's also a good time to be shopping for an architect. Bryan Jones, of Jones Pierce Architects, also of Atlanta, says his 12-person company used to concentrate on remodeling jobs valued between $250,000 and $750,000. But now, he says, inquiries about new projects are down by nearly half from a year ago, and the firm is taking on smaller jobs to make up for the lost work. "We're chasing stuff we definitely wouldn't have done a year ago," he says.
The same goes for builders. After Russ Nank Jr.'s three-bedroom ranch house in Rock Creek, Ohio, burned down last year, he snagged Payne & Payne Builders, a Cleveland-based firm, to erect a four-bedroom Cape Cod-style home. The firm took on the $179,000 project even though it was located outside its usual territory and was about one-third the size of its usual jobs. "The timing could not have been better for us," Mr. Nank says, adding that he was able to afford a bigger home with more costly upgrades, including hickory cabinets and granite counters, than he had expected.
Two years ago, says company co-owner Dave Payne, he would have politely declined such a project. "We had a map, we had a line and we didn't go outside of that line," he says of his company, which is about 45 miles from Rock Creek. But as he watched his list of prospective projects shrivel to five from 30 last fall, Mr. Payne says he threw out the rules. In April, his company even built a $25,000 one-room addition for one client. "We're chasing every lead," he says.
Not all parts of the country have been affected equally. Builders in Seattle, New York and Los Angeles, where the job and housing markets have remained firm, report business as usual. And many architects who specialize in high-end homes say they are as busy as ever.
But the picture is much different in states like Nevada, Florida and Arizona, building hotbeds during the housing boom that have since gone bust. The same is true in Midwestern states such as Michigan and Ohio, particularly hard hit by foreclosures and subprime-mortgage defaults. In these areas, builders, contractors and landscapers say they're watching their backlog of work shrink to a few weeks from months, as new projects dry up.
Prices Too Low?
Amid the flurry of competitive pricing from hungry builders comes a warning for homeowners: Prices that seem too good to be true very well might be. "If somebody's low-balling it, they're probably cutting out something that's important and you need to know what it is," says Deborah Pierce, an architect in Newton, Mass.
This spring, Nicki Tragesser, 54, of Atwater, Calif., started building a 635-square-foot, two-story addition for her ranch house. She had called 10 contractors and chosen the one who gave the cheapest estimate after being impressed by a house he'd just finished.
"I felt flabbergasted he was only going to charge me $69,000 for what I wanted," Ms. Tragesser says. Only after she signed a contract did she learn that she would have to purchase an air-conditioning unit herself and pay an electrician separately to do the wiring. And that was just the beginning. Four months after construction should have wrapped up, her cement floors are cracking, the flooring upstairs is uneven and doors hang lopsided on their hinges. The contractor has quit and Ms. Tragesser spent an extra $12,000 trying to correct his work. The contractor didn't return a call seeking comment.
But others have used their newfound bargaining edge to their advantage. Amy and Bob Phillips of Tucson, Ariz., began work on a four-bedroom, Adobe-style house in February. With newly lower pricing on a variety of items, including stucco, wood and labor, the Phillips were able to afford upgrades such as solid wood doors, glass doorknobs and steel garage doors on their $800,000 budget.
While their builder did most of the bargaining on materials for the house, the couple bid out a backyard pool themselves. By pressuring contractors to lower their bids, the Phillipses have knocked $8,000 off the cost. "We're definitely playing people off each other, and they're definitely dropping their prices," says Mrs. Phillips, 44, a convention planner.
Wednesday, January 09, 2008
Auction Reveals Strength of Local Housing Market
By Nancy Keates
Here's one way to gauge the health of your local housing market: Attend a housing auction.
When I heard that a local homebuilding company would be auctioning off hundreds of brand-new houses, it seemed like a good opportunity to see what people are willing to pay for a home where we live, Portland, Ore. We are building our home to live in -- but reselling it is always in the back of my mind.
On December 15 and 16, 2,400 people showed up at the Oregon Convention Center for an auction of 220 houses by builder Buena Vista Custom Homes. The well-marketed event opened with blaring rock music and slideshows of the houses for sale; it quickly turned to business as auctioneers dressed in black suits urged bidders on. The auctioneers, from the Irvine, Calif.-based Real Estate Disposition Corporation, yelled "Today's the day," "It's a great subdivision, folks" and "This is a once-in-a-lifetime opportunity to own a brand-new home at auction prices."
When they asked audience members to raise their hands if this was their first housing auction, about two-thirds of the people had their hands in the air.
Fueled by free coffee and candy, bidders purchased 141 homes in two days for an estimated $65 million. The houses that didn't sell were either occupied by renters, located in Bend -- a town in Eastern Oregon that would necessitate a four-hour drive for interested bidders -- or had pre-set reserve prices higher than anyone was willing to pay.
Buena Vista won't disclose what those reserve prices were (saying only that the prices reflect building costs). But the company says about 96% of the homes sold for less than their reserve price, which averaged about $460,000.
Most of the homes up for auction were located in Happy Valley, a suburb about 18 miles east of the city. One 4,624 square-foot, four-bedroom, four-bathroom home there went for $465,000, while a 3,581-square foot, five-bedroom, four-bathroom home in the same area sold for $390,000.
Keep in mind that buyers had to pay a fee that equaled 5% of the winning bid.
It seems to me that if the home builder had to urge people to buy by telling them "Today's the day," then these weren't such amazing deals. That feeling was echoed by Kevin O'Keefe who attended the auction to find a new house with a main-floor master bedroom. He had his eye on two possibilities, but halfway through he said he doubted he would purchase one because the prices were much higher than what he had expected and wanted to pay -- under $450,000. Before the auction, he tried to buy one home listed with a starting bid of $299,000 -- but the company wouldn't sell it for less than $475,000, he says.
Just holding an auction shows that the market has slowed. In November, the number of closed home sales in the Portland metro area fell 20% and the number of accepted offers dropped 28% over a year earlier, according to Residential Multiple Listing Service.
However, the median home price for new and existing homes was $285,000, up 2.5% from $278,000 in November 2006. The number of days a house spent on the market was 67 days compared to 51 days a year earlier.
How did the company do? A Buena Vista spokesman says that since the prices were under the reserve -- and the reserve was set at about what it cost to build the homes -- that the company didn't come out ahead. But he says company owner Roger Pollock was "really pleased with sales." The spokesman adds, "There were no crazy sales," meaning that the prices weren't too low.
How about the buyers? Some 85% were "Dick and Jane home buyers," according to the Buena Vista spokesman. Most of the local real-estate agents I spoke with said they weren't worried that the auction would further depress the market because the selling prices were high. "I didn't see any fantastic deals," says Mike Ohrig of Rio Realty Inc. of Beaverton, Ore.
Buena Vista markets itself as a builder of "upscale family homes," but to my eye they are anything but unique and special. In various shades of development beige, they tend to have cheap-looking siding, are fronted by gaping garages and spaced not far from the houses next door. They're mostly located in what Buena Vista calls "growing suburbs"-- sterile developments near the city's big highways. If you're lucky and you drive in circles long enough, you might hit a strip mall with a Starbucks.
The auction renewed my confidence in the Portland housing market. If people are willing to pay almost $500,000 for these homes, then it seems likely there would be a buyer for the house that we are building, which is only a few miles from downtown Portland yet completely private, on more than an acre of land.
I didn’t see the insides of the homes for sale, but one of the home buyers at the auction, Craig Ziegler, said he was unimpressed with the finishes or choice of appliances. "It looks like they cut corners to get the houses built fast," he told me. "We looked at a dozen homes and they were all pretty much the same." Mr. Ziegler thought the materials seemed cheap, the trimmings were minimal and things like the furnaces and the water heaters were inefficient.
Throughout the process of choosing interior finishes and materials for the home we are building, I have been torn between going with what I love and choosing what might appeal to home buyers to boost our new house's resale value. For example, instead of choosing colored glass tiles for the master bathroom, I went with mostly white stone. But in every case I have decided not to cut corners, which will heighten my own experience living there. I also hope it will help us to sell it if and when we need to.
Here's one way to gauge the health of your local housing market: Attend a housing auction.
When I heard that a local homebuilding company would be auctioning off hundreds of brand-new houses, it seemed like a good opportunity to see what people are willing to pay for a home where we live, Portland, Ore. We are building our home to live in -- but reselling it is always in the back of my mind.
On December 15 and 16, 2,400 people showed up at the Oregon Convention Center for an auction of 220 houses by builder Buena Vista Custom Homes. The well-marketed event opened with blaring rock music and slideshows of the houses for sale; it quickly turned to business as auctioneers dressed in black suits urged bidders on. The auctioneers, from the Irvine, Calif.-based Real Estate Disposition Corporation, yelled "Today's the day," "It's a great subdivision, folks" and "This is a once-in-a-lifetime opportunity to own a brand-new home at auction prices."
When they asked audience members to raise their hands if this was their first housing auction, about two-thirds of the people had their hands in the air.
Fueled by free coffee and candy, bidders purchased 141 homes in two days for an estimated $65 million. The houses that didn't sell were either occupied by renters, located in Bend -- a town in Eastern Oregon that would necessitate a four-hour drive for interested bidders -- or had pre-set reserve prices higher than anyone was willing to pay.
Buena Vista won't disclose what those reserve prices were (saying only that the prices reflect building costs). But the company says about 96% of the homes sold for less than their reserve price, which averaged about $460,000.
Most of the homes up for auction were located in Happy Valley, a suburb about 18 miles east of the city. One 4,624 square-foot, four-bedroom, four-bathroom home there went for $465,000, while a 3,581-square foot, five-bedroom, four-bathroom home in the same area sold for $390,000.
Keep in mind that buyers had to pay a fee that equaled 5% of the winning bid.
It seems to me that if the home builder had to urge people to buy by telling them "Today's the day," then these weren't such amazing deals. That feeling was echoed by Kevin O'Keefe who attended the auction to find a new house with a main-floor master bedroom. He had his eye on two possibilities, but halfway through he said he doubted he would purchase one because the prices were much higher than what he had expected and wanted to pay -- under $450,000. Before the auction, he tried to buy one home listed with a starting bid of $299,000 -- but the company wouldn't sell it for less than $475,000, he says.
Just holding an auction shows that the market has slowed. In November, the number of closed home sales in the Portland metro area fell 20% and the number of accepted offers dropped 28% over a year earlier, according to Residential Multiple Listing Service.
However, the median home price for new and existing homes was $285,000, up 2.5% from $278,000 in November 2006. The number of days a house spent on the market was 67 days compared to 51 days a year earlier.
How did the company do? A Buena Vista spokesman says that since the prices were under the reserve -- and the reserve was set at about what it cost to build the homes -- that the company didn't come out ahead. But he says company owner Roger Pollock was "really pleased with sales." The spokesman adds, "There were no crazy sales," meaning that the prices weren't too low.
How about the buyers? Some 85% were "Dick and Jane home buyers," according to the Buena Vista spokesman. Most of the local real-estate agents I spoke with said they weren't worried that the auction would further depress the market because the selling prices were high. "I didn't see any fantastic deals," says Mike Ohrig of Rio Realty Inc. of Beaverton, Ore.
Buena Vista markets itself as a builder of "upscale family homes," but to my eye they are anything but unique and special. In various shades of development beige, they tend to have cheap-looking siding, are fronted by gaping garages and spaced not far from the houses next door. They're mostly located in what Buena Vista calls "growing suburbs"-- sterile developments near the city's big highways. If you're lucky and you drive in circles long enough, you might hit a strip mall with a Starbucks.
The auction renewed my confidence in the Portland housing market. If people are willing to pay almost $500,000 for these homes, then it seems likely there would be a buyer for the house that we are building, which is only a few miles from downtown Portland yet completely private, on more than an acre of land.
I didn’t see the insides of the homes for sale, but one of the home buyers at the auction, Craig Ziegler, said he was unimpressed with the finishes or choice of appliances. "It looks like they cut corners to get the houses built fast," he told me. "We looked at a dozen homes and they were all pretty much the same." Mr. Ziegler thought the materials seemed cheap, the trimmings were minimal and things like the furnaces and the water heaters were inefficient.
Throughout the process of choosing interior finishes and materials for the home we are building, I have been torn between going with what I love and choosing what might appeal to home buyers to boost our new house's resale value. For example, instead of choosing colored glass tiles for the master bathroom, I went with mostly white stone. But in every case I have decided not to cut corners, which will heighten my own experience living there. I also hope it will help us to sell it if and when we need to.
Auction Reveals Strength of Local Housing Market
By Nancy Keates
Here's one way to gauge the health of your local housing market: Attend a housing auction.
When I heard that a local homebuilding company would be auctioning off hundreds of brand-new houses, it seemed like a good opportunity to see what people are willing to pay for a home where we live, Portland, Ore. We are building our home to live in -- but reselling it is always in the back of my mind.
On December 15 and 16, 2,400 people showed up at the Oregon Convention Center for an auction of 220 houses by builder Buena Vista Custom Homes. The well-marketed event opened with blaring rock music and slideshows of the houses for sale; it quickly turned to business as auctioneers dressed in black suits urged bidders on. The auctioneers, from the Irvine, Calif.-based Real Estate Disposition Corporation, yelled "Today's the day," "It's a great subdivision, folks" and "This is a once-in-a-lifetime opportunity to own a brand-new home at auction prices."
When they asked audience members to raise their hands if this was their first housing auction, about two-thirds of the people had their hands in the air.
Fueled by free coffee and candy, bidders purchased 141 homes in two days for an estimated $65 million. The houses that didn't sell were either occupied by renters, located in Bend -- a town in Eastern Oregon that would necessitate a four-hour drive for interested bidders -- or had pre-set reserve prices higher than anyone was willing to pay.
Buena Vista won't disclose what those reserve prices were (saying only that the prices reflect building costs). But the company says about 96% of the homes sold for less than their reserve price, which averaged about $460,000.
Most of the homes up for auction were located in Happy Valley, a suburb about 18 miles east of the city. One 4,624 square-foot, four-bedroom, four-bathroom home there went for $465,000, while a 3,581-square foot, five-bedroom, four-bathroom home in the same area sold for $390,000.
Keep in mind that buyers had to pay a fee that equaled 5% of the winning bid.
It seems to me that if the home builder had to urge people to buy by telling them "Today's the day," then these weren't such amazing deals. That feeling was echoed by Kevin O'Keefe who attended the auction to find a new house with a main-floor master bedroom. He had his eye on two possibilities, but halfway through he said he doubted he would purchase one because the prices were much higher than what he had expected and wanted to pay -- under $450,000. Before the auction, he tried to buy one home listed with a starting bid of $299,000 -- but the company wouldn't sell it for less than $475,000, he says.
Just holding an auction shows that the market has slowed. In November, the number of closed home sales in the Portland metro area fell 20% and the number of accepted offers dropped 28% over a year earlier, according to Residential Multiple Listing Service.
However, the median home price for new and existing homes was $285,000, up 2.5% from $278,000 in November 2006. The number of days a house spent on the market was 67 days compared to 51 days a year earlier.
How did the company do? A Buena Vista spokesman says that since the prices were under the reserve -- and the reserve was set at about what it cost to build the homes -- that the company didn't come out ahead. But he says company owner Roger Pollock was "really pleased with sales." The spokesman adds, "There were no crazy sales," meaning that the prices weren't too low.
How about the buyers? Some 85% were "Dick and Jane home buyers," according to the Buena Vista spokesman. Most of the local real-estate agents I spoke with said they weren't worried that the auction would further depress the market because the selling prices were high. "I didn't see any fantastic deals," says Mike Ohrig of Rio Realty Inc. of Beaverton, Ore.
Buena Vista markets itself as a builder of "upscale family homes," but to my eye they are anything but unique and special. In various shades of development beige, they tend to have cheap-looking siding, are fronted by gaping garages and spaced not far from the houses next door. They're mostly located in what Buena Vista calls "growing suburbs"-- sterile developments near the city's big highways. If you're lucky and you drive in circles long enough, you might hit a strip mall with a Starbucks.
The auction renewed my confidence in the Portland housing market. If people are willing to pay almost $500,000 for these homes, then it seems likely there would be a buyer for the house that we are building, which is only a few miles from downtown Portland yet completely private, on more than an acre of land.
I didn’t see the insides of the homes for sale, but one of the home buyers at the auction, Craig Ziegler, said he was unimpressed with the finishes or choice of appliances. "It looks like they cut corners to get the houses built fast," he told me. "We looked at a dozen homes and they were all pretty much the same." Mr. Ziegler thought the materials seemed cheap, the trimmings were minimal and things like the furnaces and the water heaters were inefficient.
Throughout the process of choosing interior finishes and materials for the home we are building, I have been torn between going with what I love and choosing what might appeal to home buyers to boost our new house's resale value. For example, instead of choosing colored glass tiles for the master bathroom, I went with mostly white stone. But in every case I have decided not to cut corners, which will heighten my own experience living there. I also hope it will help us to sell it if and when we need to.
Here's one way to gauge the health of your local housing market: Attend a housing auction.
When I heard that a local homebuilding company would be auctioning off hundreds of brand-new houses, it seemed like a good opportunity to see what people are willing to pay for a home where we live, Portland, Ore. We are building our home to live in -- but reselling it is always in the back of my mind.
On December 15 and 16, 2,400 people showed up at the Oregon Convention Center for an auction of 220 houses by builder Buena Vista Custom Homes. The well-marketed event opened with blaring rock music and slideshows of the houses for sale; it quickly turned to business as auctioneers dressed in black suits urged bidders on. The auctioneers, from the Irvine, Calif.-based Real Estate Disposition Corporation, yelled "Today's the day," "It's a great subdivision, folks" and "This is a once-in-a-lifetime opportunity to own a brand-new home at auction prices."
When they asked audience members to raise their hands if this was their first housing auction, about two-thirds of the people had their hands in the air.
Fueled by free coffee and candy, bidders purchased 141 homes in two days for an estimated $65 million. The houses that didn't sell were either occupied by renters, located in Bend -- a town in Eastern Oregon that would necessitate a four-hour drive for interested bidders -- or had pre-set reserve prices higher than anyone was willing to pay.
Buena Vista won't disclose what those reserve prices were (saying only that the prices reflect building costs). But the company says about 96% of the homes sold for less than their reserve price, which averaged about $460,000.
Most of the homes up for auction were located in Happy Valley, a suburb about 18 miles east of the city. One 4,624 square-foot, four-bedroom, four-bathroom home there went for $465,000, while a 3,581-square foot, five-bedroom, four-bathroom home in the same area sold for $390,000.
Keep in mind that buyers had to pay a fee that equaled 5% of the winning bid.
It seems to me that if the home builder had to urge people to buy by telling them "Today's the day," then these weren't such amazing deals. That feeling was echoed by Kevin O'Keefe who attended the auction to find a new house with a main-floor master bedroom. He had his eye on two possibilities, but halfway through he said he doubted he would purchase one because the prices were much higher than what he had expected and wanted to pay -- under $450,000. Before the auction, he tried to buy one home listed with a starting bid of $299,000 -- but the company wouldn't sell it for less than $475,000, he says.
Just holding an auction shows that the market has slowed. In November, the number of closed home sales in the Portland metro area fell 20% and the number of accepted offers dropped 28% over a year earlier, according to Residential Multiple Listing Service.
However, the median home price for new and existing homes was $285,000, up 2.5% from $278,000 in November 2006. The number of days a house spent on the market was 67 days compared to 51 days a year earlier.
How did the company do? A Buena Vista spokesman says that since the prices were under the reserve -- and the reserve was set at about what it cost to build the homes -- that the company didn't come out ahead. But he says company owner Roger Pollock was "really pleased with sales." The spokesman adds, "There were no crazy sales," meaning that the prices weren't too low.
How about the buyers? Some 85% were "Dick and Jane home buyers," according to the Buena Vista spokesman. Most of the local real-estate agents I spoke with said they weren't worried that the auction would further depress the market because the selling prices were high. "I didn't see any fantastic deals," says Mike Ohrig of Rio Realty Inc. of Beaverton, Ore.
Buena Vista markets itself as a builder of "upscale family homes," but to my eye they are anything but unique and special. In various shades of development beige, they tend to have cheap-looking siding, are fronted by gaping garages and spaced not far from the houses next door. They're mostly located in what Buena Vista calls "growing suburbs"-- sterile developments near the city's big highways. If you're lucky and you drive in circles long enough, you might hit a strip mall with a Starbucks.
The auction renewed my confidence in the Portland housing market. If people are willing to pay almost $500,000 for these homes, then it seems likely there would be a buyer for the house that we are building, which is only a few miles from downtown Portland yet completely private, on more than an acre of land.
I didn’t see the insides of the homes for sale, but one of the home buyers at the auction, Craig Ziegler, said he was unimpressed with the finishes or choice of appliances. "It looks like they cut corners to get the houses built fast," he told me. "We looked at a dozen homes and they were all pretty much the same." Mr. Ziegler thought the materials seemed cheap, the trimmings were minimal and things like the furnaces and the water heaters were inefficient.
Throughout the process of choosing interior finishes and materials for the home we are building, I have been torn between going with what I love and choosing what might appeal to home buyers to boost our new house's resale value. For example, instead of choosing colored glass tiles for the master bathroom, I went with mostly white stone. But in every case I have decided not to cut corners, which will heighten my own experience living there. I also hope it will help us to sell it if and when we need to.
Thursday, January 03, 2008
How to Sell a Home in 2008
By Amy Hoak From MarketWatch
If you're planning to sell a home in 2008, it's time to start thinking about how to make that home stand out from the rest.
But beware: Homeowners aren't able to recoup as many improvement costs as they did in recent years, according to a recent study by Remodeling magazine. In selling a home, "it's more important that it's neat, it's clean and it looks spacious, rather than making sure it's the top of the line," says Cheri Kuhn, owner of Waters Realty in Minnetonka, Minn.
"The thing I find with sellers -- if they do a lot of remodeling -- they will take the cost of the remodeling and add it to the cost of the home and ask the buyer to pay for it," she says. But often they're not going to get that higher price.
To keep costs down and remodel wisely, consider the following tips:
Ask for advice. When Ms. Kuhn first meets with clients -- sometimes six months before listing the home -- she'll make a list of improvements that will make a difference. Cleaning the carpets, painting the walls and removing wallpaper are common fixes -- if they're needed.
But prior to any remodeling, declutter your home and rent a storage unit if necessary to hold extra stuff while the home is on the market, says Shannon Aldrich, a Realtor in Maine and New Hampshire with Keller Williams Coastal Realty.
Dig deeper. It also could pay to look below the surface by getting a home inspection before listing the property. That way, problems that could hold up a sale are addressed in advance, says Dan Steward, president of Pillar to Post, a Tampa, Fla.-based home-inspection company. Some estimate that for every dollar of perceived defect, buyers want a $2 to $3 discount, Mr. Steward says. If that's true, it might pay to spend $2,500 replacing an old furnace.
If there's a problem with an essential element of the house, Ms. Kuhn says, a buyer might think "if that was neglected, what else was?"
Look outside: Pay attention to exterior details such as the condition of siding and windows, Ms. Aldrich says. According to Remodeling magazine, a wood window replacement recovers an average 81% of cost at resale and a siding replacement recovers an average 83%, some of the best payoffs in the survey.
Spend time in the bathroom. Freshening up the bathroom doesn't have to be expensive, but can be important. "People will put up with a lot of cosmetic challenges in a house if they know they could use the bathroom right away," Ms. Aldrich says. It's important for the bathroom to be clean, but also consider replacing cracked tiles, as well as the sink and the toilet -- if they need it, she adds. A toilet, for example, can cost less than $250.
Keep it small in the kitchen: Remodeling magazine found that homeowners could recover 83% of the cost of a minor kitchen remodel at resale compared with 78% of a major kitchen remodeling. Ms. Kuhn cautions her clients not to replace refrigerators, stoves or dishwashers. Buyers considering remodeling the kitchen will likely have their own preferences.
Along those same lines, replace a countertop if it's crumbling but not if its only fault is that it's outdated, Ms. Kuhn says. Even then, seriously consider material costs -- there's no need to update to granite unless the competition has granite countertops as well.
If you're planning to sell a home in 2008, it's time to start thinking about how to make that home stand out from the rest.
But beware: Homeowners aren't able to recoup as many improvement costs as they did in recent years, according to a recent study by Remodeling magazine. In selling a home, "it's more important that it's neat, it's clean and it looks spacious, rather than making sure it's the top of the line," says Cheri Kuhn, owner of Waters Realty in Minnetonka, Minn.
"The thing I find with sellers -- if they do a lot of remodeling -- they will take the cost of the remodeling and add it to the cost of the home and ask the buyer to pay for it," she says. But often they're not going to get that higher price.
To keep costs down and remodel wisely, consider the following tips:
Ask for advice. When Ms. Kuhn first meets with clients -- sometimes six months before listing the home -- she'll make a list of improvements that will make a difference. Cleaning the carpets, painting the walls and removing wallpaper are common fixes -- if they're needed.
But prior to any remodeling, declutter your home and rent a storage unit if necessary to hold extra stuff while the home is on the market, says Shannon Aldrich, a Realtor in Maine and New Hampshire with Keller Williams Coastal Realty.
Dig deeper. It also could pay to look below the surface by getting a home inspection before listing the property. That way, problems that could hold up a sale are addressed in advance, says Dan Steward, president of Pillar to Post, a Tampa, Fla.-based home-inspection company. Some estimate that for every dollar of perceived defect, buyers want a $2 to $3 discount, Mr. Steward says. If that's true, it might pay to spend $2,500 replacing an old furnace.
If there's a problem with an essential element of the house, Ms. Kuhn says, a buyer might think "if that was neglected, what else was?"
Look outside: Pay attention to exterior details such as the condition of siding and windows, Ms. Aldrich says. According to Remodeling magazine, a wood window replacement recovers an average 81% of cost at resale and a siding replacement recovers an average 83%, some of the best payoffs in the survey.
Spend time in the bathroom. Freshening up the bathroom doesn't have to be expensive, but can be important. "People will put up with a lot of cosmetic challenges in a house if they know they could use the bathroom right away," Ms. Aldrich says. It's important for the bathroom to be clean, but also consider replacing cracked tiles, as well as the sink and the toilet -- if they need it, she adds. A toilet, for example, can cost less than $250.
Keep it small in the kitchen: Remodeling magazine found that homeowners could recover 83% of the cost of a minor kitchen remodel at resale compared with 78% of a major kitchen remodeling. Ms. Kuhn cautions her clients not to replace refrigerators, stoves or dishwashers. Buyers considering remodeling the kitchen will likely have their own preferences.
Along those same lines, replace a countertop if it's crumbling but not if its only fault is that it's outdated, Ms. Kuhn says. Even then, seriously consider material costs -- there's no need to update to granite unless the competition has granite countertops as well.
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