The overall inventory in Santa Clara County remained stable over the past week at 2390 as increased buyer demand hit the market and new, well priced listings sold quickly (list price remains key for sellers).
It is important to note, however, that the overall number of sales (units) for the month of January 2006 was off approximately 20% from January 2005 according to reinfolink data. The increased activity and demand we're seeing this week should elevate those figures over the next 30+ days.
Some properties coming on the market at unrealistic prices are sitting. Once they adjust and get in line with the market, buyers are swarming over them. One property in our Cupertino office came on the market in the high 900k range. It sat for 45 days with no offers. Once the property was reduced to 949k, it received six offers and sold above list.
Sales activity is increasing across the board from South County, through Santa Cruz and throughout our Silicon Valley offices. Both Los Altos offices reported that 50% of their sales saw multiple offers. Los Gatos reported increased activity and sales in the $1.5 million range and in the $3 million range as well. Gilroy noted that sales "took off this past week" including high traffic and offers on upper end homes in the area.
Expect increased activity as we launch into February as the peak buying season kicks-off following Super Bowl Sunday.
Tuesday, January 31, 2006
Monday, January 30, 2006
Home Selling Exclusions: A Great Benefit for Homeowners
by Benny L. Kass
If you have recently sold your house at a significant profit, and if you have not been keeping up with the tax laws, you will be pleasantly surprised. If you are married, if you meet the legal requirements described below, you can exclude up to $500,000 of the profit you have made. If you are not married, or file a separate tax return, the exclusion is reduced down to $250,000 of profit.
For many years, there were two tax concepts which helped save homeowners from paying a lot of capital gains tax: the "roll-over" and the "once in a lifetime." However, the Taxpayer Relief Act of 1997, signed by President Clinton on August 5, 1997, abolished both of these concepts. The roll-over and the once-in-a-lifetime exemption for homeowners over 55 years of age are real estate and tax history.
Read More->
If you have recently sold your house at a significant profit, and if you have not been keeping up with the tax laws, you will be pleasantly surprised. If you are married, if you meet the legal requirements described below, you can exclude up to $500,000 of the profit you have made. If you are not married, or file a separate tax return, the exclusion is reduced down to $250,000 of profit.
For many years, there were two tax concepts which helped save homeowners from paying a lot of capital gains tax: the "roll-over" and the "once in a lifetime." However, the Taxpayer Relief Act of 1997, signed by President Clinton on August 5, 1997, abolished both of these concepts. The roll-over and the once-in-a-lifetime exemption for homeowners over 55 years of age are real estate and tax history.
Read More->
Sunday, January 29, 2006
Plenty of Programs for First Timers, Cash Poor
by M. Anthony Carr
With the cooling of the housing market, first-time buyers need to be assertive in elbowing their way up front of the home-buying line -- now. The cooling, or normalizing, doesn't mean the market is tanking. It means just what it says -- it's going to be more normal. Housing will continue to appreciate, sellers will continue to sell and buyers will continue to buy. The question is whether buyers will take advantage of this leveling off and get a good deal while the sellers are forced to give up a few things.
Read More->
With the cooling of the housing market, first-time buyers need to be assertive in elbowing their way up front of the home-buying line -- now. The cooling, or normalizing, doesn't mean the market is tanking. It means just what it says -- it's going to be more normal. Housing will continue to appreciate, sellers will continue to sell and buyers will continue to buy. The question is whether buyers will take advantage of this leveling off and get a good deal while the sellers are forced to give up a few things.
Read More->
Friday, January 27, 2006
Top 10 Tax Breaks, On The House
by Broderick Perkins
The New Year always turns thoughts to the new tax season and when it comes to taxes there's no place like home to find shelter.
Your home offers a score of tax deductions and credits designed to help offset the cost of housing and to keep the housing market fueled with new buyers.
Some federal-level politicians would like to separate you from some of those benefits and they may or may not be successful, so take advantage of them while you can.
Here's a look at the Top 10 Tax Breaks, On The House. Visit the Internal Revenue Service's website for more details on each item.
The New Year always turns thoughts to the new tax season and when it comes to taxes there's no place like home to find shelter.
Your home offers a score of tax deductions and credits designed to help offset the cost of housing and to keep the housing market fueled with new buyers.
Some federal-level politicians would like to separate you from some of those benefits and they may or may not be successful, so take advantage of them while you can.
Here's a look at the Top 10 Tax Breaks, On The House. Visit the Internal Revenue Service's website for more details on each item.
Mortgage Loan Interest: The Mother Of All Tax Breaks, because interest payments comprises a large portion of your mortgage payment in the early years of the loan's term, mortgage interest on a maximum of $1 million in mortgage debt secured by a first and second home is deductible. Deductions reduce your taxable income against which your taxes due are calculated. The $1 million level applies to joint tax filers. You get half the deduction if you file single or separately. Likewise, home equity loan interest is deductible, but limited to the smaller of $100,000 (half as much for each member of a married couple if they file separately), or the total of your home's fair market value as determined by a complicated formula you may need a tax professional's help to decipher.
Home Improvement Loan Interest: The interest on a home improvement loan is also deductible, but calculated differently. You can deduct all the interest on a home improvement loan provided the work is a "capital improvement" rather than repairs, maintenance or cosmetic upgrades. Capital improvements typically increase your home's value (say, because you added a room), prolong it's life (a new roof) or adapt it to new uses (universal design improvements to assist older people or people with disabilities). You get tax benefits from repair work (painting, repairing, etc.) only when you sell your home but you can use a home equity loan to make repairs and deduct the interest -- up to the limits
Points: Points, each equal to 1 percent of the loan principal, are charged by lenders as part of the cost of the loan. You can fully deduct points associated with a home purchase mortgage, but not a mortgage broker's commission. Refinanced mortgage points are deductible too, but only when they are amortized over the life of the loan. Once you refinance a second time, the balance of the old points from a refinanced loan offer an immediate write off, as you begin to amortize the new points.
Property Taxes: Property taxes or real estate taxes are fully deductible. Any local city or state property tax refunds reduces your federal property tax deduction by the same amount.
Capital Gains Exclusion: Home buying investors' best tax shelter comes from provisions in the Taxpayer Relief Act of 1997 which allows married taxpayers who file jointly to keep, tax free, up to $500,000 in profit on the sale of a home used as a principal residence for two of the prior five years. The amount is halved for those filing single or separately. You can use the benefit as often as you qualify.
Home-Based Business Deduction: Home offices that use a portion of your home exclusively for business could qualify you to deduct a percentage of costs related to that portion. Included are a percentage of your insurance and repair costs, utility bills and depreciation. Under clarified provisions of the Taxpayer Relief Act of 1997, if your home office qualifies, you don't have to allocate a home sale's capital gains between the home and the business. Previously if you used, say, 10 percent of your home for a home-based business, 10 percent of the gain from a sale would be subject to capital gain taxes and you couldn't use the capital gains tax exclusion on that portion. The clarified provision does not excuse you from a recapture tax if you've taken a depreciation deduction because of the home-based business.
Selling Costs and Capital Improvements: When you sell your home, you can reduce your taxable capital gain by the amount of your selling costs, which include real estate commissions, title insurance, legal fees, advertising and inspection fees. Cost typically stemming from decorating or repairs -- painting, wallpapering, planting flowers, maintenance, and the like -- are also selling costs if you complete them within 90 days of your sale and with the intention of making the home more saleable. Selling costs are deducted from your gain. Gain is your home's selling price, minus deductible closing costs, minus selling costs, minus your tax basis in the property. Your basis is the original purchase price, plus the cost of capital improvements, minus any depreciation.
Moving Costs: A move triggered by a new job comes with some deductible moving costs. To qualify, you must meet certain requirements including, moving within one year of starting your new job, moving 50 miles farther from your old home than your old job was and working full-time at the new job for 39 of 52 weeks following the move. Deductions include travel or transportation costs and expenses for lodging and storing your household goods.
Mortgage Tax Credit: Mortgage Credit Certificates (MCCs) allow qualifying low-income, first-time home buyers to take a mortgage interest tax credit of up to 20 percent (the amount varies by jurisdiction) of the mortgage interest payments made on a home. This credit is available every year you keep the loan and live in the house purchased with the certificate. Unlike a deduction that reduces your income, the credit is subtracted, dollar for dollar, from the income tax owed. For example, with a 20 percent tax credit, if you paid $10,000 in interest, your tax credit would be $2,000. If you owe $2,000 in income taxes without the credit, you would end up owing nothing to the IRS after the credit was applied. The remaining 80 percent of your mortgage interest -- $8,000 -- is taken as a normal mortgage interest deduction.
Energy Tax Credits: The newest home-based tax credits were made possible last year by the Energy Policy Act of 2005. Tax credits of up to $500 in 2006 and 2007 are available for upgrading heating and air conditioning systems, insulations, windows, doors and thermostats, caulking leaks, installing pigmented metal roofs and for otherwise putting the bite on energy waste in your home. Qualified solar energy and fuel cell systems can net tax credits of up to $2,000. Some states also offer tax credits or rebate deals that could reduce the federal credit. Related tax credits are available for consumers who buy alternative- and clean-fuel burning cars and for entrepreneurial consumers who install clean-fuel vehicle refueling property at the principal residence of the taxpayer.
Thursday, January 26, 2006
Want to be a landlord? Be smart about it
by Al Heavens
I'd hate to be a landlord.
I had the opportunity once. In 1987 we were unable to sell our first house for several months after we'd acquired our second, and we briefly considered getting into the business.
The first house had been built in 1848, and I had spent six years and $30,000 trying to undo all the dumb things previous owners had done in the name of renovation and modernization.
The new house, built in 1904 and three times bigger than the first, need 10 times more work.
We were hoping to use the profit on the sale of the first to rehab the second. But the market was souring, we were around the corner from the worst housing project in the city and our first listing agent didn't seem in any hurry to move the property.
We tightened our belts, prepared to juggle two mortgages (one 13.5 percent, the other 10 percent) and prayed that nothing serious would go wrong with either house before we sold number one.
Read More->
I'd hate to be a landlord.
I had the opportunity once. In 1987 we were unable to sell our first house for several months after we'd acquired our second, and we briefly considered getting into the business.
The first house had been built in 1848, and I had spent six years and $30,000 trying to undo all the dumb things previous owners had done in the name of renovation and modernization.
The new house, built in 1904 and three times bigger than the first, need 10 times more work.
We were hoping to use the profit on the sale of the first to rehab the second. But the market was souring, we were around the corner from the worst housing project in the city and our first listing agent didn't seem in any hurry to move the property.
We tightened our belts, prepared to juggle two mortgages (one 13.5 percent, the other 10 percent) and prayed that nothing serious would go wrong with either house before we sold number one.
Read More->
Tuesday, January 24, 2006
Weekly Market Report for the Week of January 8th-14th, 2006
Most everyone is sensing that the market is really beginning to pick up steam. Multiple offer activity has picked up substantially from a few weeks ago when we literally had no multiple offer situations reported. Many analysts have been comparing the activity in late 2005 to earlier, more active times of the year. The reality is that we typically experience a seasonal slowdown in the last quarter of any year. While we may not continue to see a rapid rate of double-digit appreciation, most analysts including NAR, CAR and most recently, some local newspapers expect the market to be healthy in 2006 with mild appreciation.
The long holiday, incredibly wet weather and a hang-over from all the activity during the record breaking year of 2005 contributed to a slower start in 2006. As I look outside my window today, I see beautiful sunshine and it just happens to bringing along with it, a hotter real estate market in Silicon Valley.
Santa Clara County inventory remained much lower than expected as we closed out 2005 and we are starting off this year at a historically low level (approximately 2350 in Santa Clara County). Many multiple offers are being reported this week. We have historically low supply and very low interest rates.
Expect more heated activity in the coming weeks as we head into the peak buying season. Inventory should continue to climb at a healthy pace and is now being met with some strong buyer demand.
The long holiday, incredibly wet weather and a hang-over from all the activity during the record breaking year of 2005 contributed to a slower start in 2006. As I look outside my window today, I see beautiful sunshine and it just happens to bringing along with it, a hotter real estate market in Silicon Valley.
Santa Clara County inventory remained much lower than expected as we closed out 2005 and we are starting off this year at a historically low level (approximately 2350 in Santa Clara County). Many multiple offers are being reported this week. We have historically low supply and very low interest rates.
Expect more heated activity in the coming weeks as we head into the peak buying season. Inventory should continue to climb at a healthy pace and is now being met with some strong buyer demand.
Economy picks up steam
U.S. leading index grows for third month
Monday, January 23, 2006
Inman News
The U.S. leading index, a key barometer of economic conditions, increased 0.1 percent in December, the Conference Board reported today.
The leading index now stands at 138.5 (1996=100). Based on revised data, this index increased 0.9 percent in November and increased 1 percent in October. During the six-month span through December, the leading index increased 1 percent, with seven out of 10 components advancing.
The leading index grew strongly from mid-2003 to mid-2004, but it has been fluctuating around a more moderate upward trend since mid-2004. The strengths and weaknesses among the leading indicators were balanced through mid-2005, and the strength has become somewhat more widespread in recent months. The current behavior of the leading index suggests the economy should continue expanding moderately in the near term.
Six of the 10 indicators that make up the leading index increased in December. The positive contributors -- beginning with the largest positive contributor -- were index of consumer expectations, real money supply, stock prices, average weekly initial claims for unemployment insurance (inverted), interest-rate spread, and manufacturers' new orders for consumer goods and materials. The negative contributors were vendor performance, manufacturers' new orders for nondefense capital goods, building permits, and average weekly manufacturing hours.
The coincident index, a measure of current economic activity, increased again in December. It has been on a relatively steady upward trend since April 2003, but its growth rate has moderated since June 2005. The six-month growth rate of the coincident index has been fluctuating around a 1.5 percent annual rate in the last four months. The coincident index grew at almost a 2 percent annual rate in 2005, down from about 3 percent in 2004.
The Conference Board is a nonprofit research and business group.
Monday, January 23, 2006
Inman News
The U.S. leading index, a key barometer of economic conditions, increased 0.1 percent in December, the Conference Board reported today.
The leading index now stands at 138.5 (1996=100). Based on revised data, this index increased 0.9 percent in November and increased 1 percent in October. During the six-month span through December, the leading index increased 1 percent, with seven out of 10 components advancing.
The leading index grew strongly from mid-2003 to mid-2004, but it has been fluctuating around a more moderate upward trend since mid-2004. The strengths and weaknesses among the leading indicators were balanced through mid-2005, and the strength has become somewhat more widespread in recent months. The current behavior of the leading index suggests the economy should continue expanding moderately in the near term.
Six of the 10 indicators that make up the leading index increased in December. The positive contributors -- beginning with the largest positive contributor -- were index of consumer expectations, real money supply, stock prices, average weekly initial claims for unemployment insurance (inverted), interest-rate spread, and manufacturers' new orders for consumer goods and materials. The negative contributors were vendor performance, manufacturers' new orders for nondefense capital goods, building permits, and average weekly manufacturing hours.
The coincident index, a measure of current economic activity, increased again in December. It has been on a relatively steady upward trend since April 2003, but its growth rate has moderated since June 2005. The six-month growth rate of the coincident index has been fluctuating around a 1.5 percent annual rate in the last four months. The coincident index grew at almost a 2 percent annual rate in 2005, down from about 3 percent in 2004.
The Conference Board is a nonprofit research and business group.
Sunday, January 22, 2006
Home Buyer & Seller Survey Shows Rising Use of Internet, Reliance on Agents
WASHINGTON (January 17, 2006) – Technology is transforming how Americans buy and sell homes in unexpected ways, including how they work with real estate agents and brokers, according to one of the largest surveys of real estate consumers ever conducted. The study was released today by the National Association of Realtors®.
Nine out of 10 home buyers use a real estate agent in the search process, but use of the Internet to search for a home has risen dramatically over time, increasing from only 2 percent of buyers in 1995 to 77 percent in 2005; it was 74 percent in 2004. The next largest source of information for buyers is a yard sign, mentioned by 71 percent of buyers.
When asked where they first learned about the home purchased, 24 percent of buyers identified the Internet, up strongly from 15 percent in 2004 and only 2 percent in 1997. Although most buyers use an agent to complete the transaction, 36 first learn about the home they buy from a real estate agent and 15 percent from yard signs; five other categories were 7 percent or less.
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Nine out of 10 home buyers use a real estate agent in the search process, but use of the Internet to search for a home has risen dramatically over time, increasing from only 2 percent of buyers in 1995 to 77 percent in 2005; it was 74 percent in 2004. The next largest source of information for buyers is a yard sign, mentioned by 71 percent of buyers.
When asked where they first learned about the home purchased, 24 percent of buyers identified the Internet, up strongly from 15 percent in 2004 and only 2 percent in 1997. Although most buyers use an agent to complete the transaction, 36 first learn about the home they buy from a real estate agent and 15 percent from yard signs; five other categories were 7 percent or less.
Read More
Long-term Mortgage Rates Fall for the Sixth Straight Week
McLEAN, VA -- Freddie Mac (NYSE:FRE) today released the results of its Primary Mortgage Market SurveySM (PMMSSM) in which the 30-year fixed-rate mortgage (FRM) averaged 6.10 percent, with an average 0.5 point, for the week ending January 19, 2006, down from last week's average of 6.15 percent. Last year at this time, the 30-year FRM averaged 5.67 percent. This is the lowest the 30-year FRM has been since the week ending October 20, 2005 when it averaged 6.10 percent.
The average for the 15-year FRM this week is 5.67 percent, with an average 0.5 point, down from last week's average of 5.71 percent. A year ago, the 15-year FRM averaged 5.15 percent. This is the lowest the 15-year FRM has been since the week ending October 20, 2005 when it averaged 5.65 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.75 percent this week, with an average 0.6 point, down very slightly from last week when it averaged 5.76 percent. A year ago, the five-year ARM averaged 5.05 percent.
One-year Treasury-indexed ARMs averaged 5.18 percent this week, with an average 0.6 point, up from last week when it averaged 5.15 percent. At this time last year, the one-year ARM averaged 4.11 percent.
"Over the last six weeks, long-term mortgage rates have dropped nearly a quarter of a percent in the face of little or no inflationary pressures," said Frank Nothaft, Freddie Mac vice president and chief economist. "Our outlook for the housing industry continues to be that mortgage rates will remain affordable for the rest of the year at least, keeping the industry alive and well into the foreseeable future."
Published: January 20, 2006
The average for the 15-year FRM this week is 5.67 percent, with an average 0.5 point, down from last week's average of 5.71 percent. A year ago, the 15-year FRM averaged 5.15 percent. This is the lowest the 15-year FRM has been since the week ending October 20, 2005 when it averaged 5.65 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.75 percent this week, with an average 0.6 point, down very slightly from last week when it averaged 5.76 percent. A year ago, the five-year ARM averaged 5.05 percent.
One-year Treasury-indexed ARMs averaged 5.18 percent this week, with an average 0.6 point, up from last week when it averaged 5.15 percent. At this time last year, the one-year ARM averaged 4.11 percent.
"Over the last six weeks, long-term mortgage rates have dropped nearly a quarter of a percent in the face of little or no inflationary pressures," said Frank Nothaft, Freddie Mac vice president and chief economist. "Our outlook for the housing industry continues to be that mortgage rates will remain affordable for the rest of the year at least, keeping the industry alive and well into the foreseeable future."
Published: January 20, 2006
Friday, January 20, 2006
Santa Clara County Economic Profile
Here is a very informative profile of the economic conditions in Santa Clara County. It includes information on Home Sales, Home Prices, Mortgage Rates, Employment, Taxable Sales, Housing Permits, Vacancy Rates and Population Demographics.
Click Here for the Entire Profile: Santa Clara County Economic Profile - January 2006
Click Here for the Entire Profile: Santa Clara County Economic Profile - January 2006
Thursday, January 19, 2006
Valley real estate: calming down, but still expensive
By Frank Michael Russell
Mercury News Assistant Business Editor
The real estate market in Silicon Valley and the Bay Area slowed significantly in December, according to a report released today by DataQuick Information Systems.
That doesn't mean homes here in the greater San Jose area are actually becoming affordable or anything, but it does mean a break in the frenzied, fiery hot market of the past few years.
``Demand still seems to be there, but the sense of urgency seems to be a thing of the past,'' DataQuick President Marshall Prentice said in a statement. ``We don't expect the market to tumble, but we do expect price increases to level off between now and spring.''
The median price for an existing single-family home in Santa Clara County dropped to $700,000 from $715,000 the month before. However, the December price was still up nearly 15 percent compared with a year ago.
DataQuick noted 2,305 sales of existing single-family homes and condominiums in the valley in December, down 12.4 percent compared with a year ago and down 3.7 percent compared with the month before.
Mercury News Assistant Business Editor
The real estate market in Silicon Valley and the Bay Area slowed significantly in December, according to a report released today by DataQuick Information Systems.
That doesn't mean homes here in the greater San Jose area are actually becoming affordable or anything, but it does mean a break in the frenzied, fiery hot market of the past few years.
``Demand still seems to be there, but the sense of urgency seems to be a thing of the past,'' DataQuick President Marshall Prentice said in a statement. ``We don't expect the market to tumble, but we do expect price increases to level off between now and spring.''
The median price for an existing single-family home in Santa Clara County dropped to $700,000 from $715,000 the month before. However, the December price was still up nearly 15 percent compared with a year ago.
DataQuick noted 2,305 sales of existing single-family homes and condominiums in the valley in December, down 12.4 percent compared with a year ago and down 3.7 percent compared with the month before.
Wednesday, January 18, 2006
Increasing Rates Create Real Estate Investment Opportunities
The last few years have seen record numbers of real estate investment purchases. Now, with increasing interest rates and continued talk of a real estate bubble, many so-called experts are trying to steer people away from investing in real estate. However, almost no true industry expert is warning about a wholesale crash in the real estate market, and increasing interest rates actually create an excellent environment for savvy investors.
Increasing rates result in two market factors that can improve the potential for solid, long-term real estate investing. First, increasing rates drive a perception, especially in the lower end of the market, that buyers and investors may no longer qualify for mortgages. This translates into reduced competition for good rental property. While appreciation of real estate tends to slow, the ability for savvy investors to pick-up prime properties increases, as fewer investors are looking for properties and many would-be-buyers stay on the sidelines.
Sidelined buyers create the second positive market factor, strong rental demand. Most of the would-be-buyers still require housing similar to that which they may have purchased. In times of increasing rental demand, the pool of potential tenants becomes larger, and finding and keeping good tenants becomes easier. Potential competition from major apartments also decreases as apartments drop incentives, and raise lease rates. Property financed, a rental property becomes easier to cash flow.
Increasing rates result in two market factors that can improve the potential for solid, long-term real estate investing. First, increasing rates drive a perception, especially in the lower end of the market, that buyers and investors may no longer qualify for mortgages. This translates into reduced competition for good rental property. While appreciation of real estate tends to slow, the ability for savvy investors to pick-up prime properties increases, as fewer investors are looking for properties and many would-be-buyers stay on the sidelines.
Sidelined buyers create the second positive market factor, strong rental demand. Most of the would-be-buyers still require housing similar to that which they may have purchased. In times of increasing rental demand, the pool of potential tenants becomes larger, and finding and keeping good tenants becomes easier. Potential competition from major apartments also decreases as apartments drop incentives, and raise lease rates. Property financed, a rental property becomes easier to cash flow.
Santa Clara County Inventory Trend
As of January 17, 2006, the inventory in Santa Clara County for single family homes is up to 1,841 and condo/townhomes is up to 670 units. This is up 47 homes and 24 condo/townhomes from last week.
Heading into February, our inventory levels now are about 2-times the amount of inventory this time last year. Our current level of inventory is similar to the amount of homes and condo/townhomes that were for sale in early 2002.
We expect inventory to increase as we head into the summer and buying activity has picked up substantially from November of 2005.
Heading into February, our inventory levels now are about 2-times the amount of inventory this time last year. Our current level of inventory is similar to the amount of homes and condo/townhomes that were for sale in early 2002.
We expect inventory to increase as we head into the summer and buying activity has picked up substantially from November of 2005.
Monday, January 16, 2006
CAR Housing Market Forecast for 2006
C.A.R.'s (California Association of Realtors) Housing Market Forecast for 2006: Moderate price increase, slight cooling in home sales next year.
The rate of home price appreciation will moderate next year following four years of steep increases, while sales in 2006 will decline slightly from this year's record pace, according to the California Association of REALTORS® (C.A.R.) "2006 Housing Market Forecast" that has been released.
The median home price in California will increase 10 percent to $575,500 in 2006 compared with a projected median of $523,150 this year, while sales for 2006 are projected to reach 630,610 units, falling 2 percent compared with 2005.
The double-digit gain in the median price of a home, which California has experienced for most of the past five years, will again be fueled by the continuing shortage of housing across much of the state, according to C.A.R. economists. California typically gains nearly 250,000 new households, yet only will build about 200,000 new housing units this year, creating a shortfall of about 50,000 units.
"We expect the fixed mortgage interest rate to rise to 6.4 percent next year, and the adjustable rate to hit 5.1 percent, which will make it more difficult for many families in California to be able to afford a home," said C.A.R. 2005 President Jim Hamilton. "While still near their historic lows, up-ticks in interest rates coupled with the continued increase in the median home price will push affordability in California to a new all-time annual low of 15 percent next year.”
"The economic fundamentals at both the state and national level continue to support a strong housing market in the Golden State for the foreseeable future,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “However, we also expect that the wave of new loan products that have flooded the market over the past several years have injected a higher level of risk into the market, while affordability barriers to homeownership will continue to push residents inland and even out of state.
“Declining affordability will constrain sales in 2006 at a greater rate than we’ve previously experienced, especially in markets where there are higher price points
compared with the state as a whole,” she said. “Not all areas of the state will continue to experience the unprecedented double-digit median price increases of the past five years. Some high-cost areas, especially those in the more costly coastal regions, face a potential leveling off of median price gains compared with the 10 percent gain we expect for the state as a whole.”
Home sales for California in 2005 are expected to reach a record 643,480 units, surpassing the prior sales record of 624,740 set in 2004, according to C.A.R. economists.Leading the Way...® in California real estate for 100 years,the California Association of REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 180,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
The rate of home price appreciation will moderate next year following four years of steep increases, while sales in 2006 will decline slightly from this year's record pace, according to the California Association of REALTORS® (C.A.R.) "2006 Housing Market Forecast" that has been released.
The median home price in California will increase 10 percent to $575,500 in 2006 compared with a projected median of $523,150 this year, while sales for 2006 are projected to reach 630,610 units, falling 2 percent compared with 2005.
The double-digit gain in the median price of a home, which California has experienced for most of the past five years, will again be fueled by the continuing shortage of housing across much of the state, according to C.A.R. economists. California typically gains nearly 250,000 new households, yet only will build about 200,000 new housing units this year, creating a shortfall of about 50,000 units.
"We expect the fixed mortgage interest rate to rise to 6.4 percent next year, and the adjustable rate to hit 5.1 percent, which will make it more difficult for many families in California to be able to afford a home," said C.A.R. 2005 President Jim Hamilton. "While still near their historic lows, up-ticks in interest rates coupled with the continued increase in the median home price will push affordability in California to a new all-time annual low of 15 percent next year.”
"The economic fundamentals at both the state and national level continue to support a strong housing market in the Golden State for the foreseeable future,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “However, we also expect that the wave of new loan products that have flooded the market over the past several years have injected a higher level of risk into the market, while affordability barriers to homeownership will continue to push residents inland and even out of state.
“Declining affordability will constrain sales in 2006 at a greater rate than we’ve previously experienced, especially in markets where there are higher price points
compared with the state as a whole,” she said. “Not all areas of the state will continue to experience the unprecedented double-digit median price increases of the past five years. Some high-cost areas, especially those in the more costly coastal regions, face a potential leveling off of median price gains compared with the 10 percent gain we expect for the state as a whole.”
Home sales for California in 2005 are expected to reach a record 643,480 units, surpassing the prior sales record of 624,740 set in 2004, according to C.A.R. economists.Leading the Way...® in California real estate for 100 years,the California Association of REALTORS® (www.car.org) is one of the largest state trade organizations in the United States, with more than 180,000 members dedicated to the advancement of professionalism in real estate. C.A.R. is headquartered in Los Angeles.
Sunday, January 15, 2006
Mortgage Rates Slip Slightly This Week
Freddie Mac (NYSE:FRE) on January 13, 2005 released the results of its Primary Mortgage Market SurveySM (PMMSSM) in which the 30-year fixed-rate mortgage (FRM) averaged 6.15 percent, with an average 0.6 point, for the week ending January 12, 2006, down from last week's average of 6.21 percent. Last year at this time, the 30-year FRM averaged 5.74 percent.
The average for the 15-year FRM this week is 5.71 percent, with an average 0.6 point, down slightly from last week's average of 5.76 percent. A year ago, the 15-year FRM averaged 5.19 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.76 percent this week, with an average 0.5 point, down very slightly from last week when it averaged 5.78 percent. A year ago, the five-year ARM averaged 5.05 percent.
One-year Treasury-indexed ARMs averaged 5.15 percent this week, with an average 0.6 point, down very slightly from last week when it averaged 5.16 percent. At this time last year, the one-year ARM averaged 4.10 percent.
"Interest rates for long-term mortgages slipped lower this week due to some economic data releases that pointed towards more subdued inflation in the near term," said Frank Nothaft, Freddie Mac vice president and chief economist. "Rates for 30-year fixed-rate mortgages are about the same as they were in late October of 2005. However, shorter-term rates, such as those for adjustable-rate mortgages, were basically unchanged due to market expectations of another rate hike by the Federal Reserve Board at the end of January."
"Our January forecast calls for a gradual rise in long-term rates throughout 2006, ending the year at about 6.5 percent for the 30-year fixed-rate mortgage, while relative rate differences with adjustable-rate mortgages will narrow. This should induce some slowing in housing market activity, but we expect the housing market in 2006 to be strong, nonetheless."
The average for the 15-year FRM this week is 5.71 percent, with an average 0.6 point, down slightly from last week's average of 5.76 percent. A year ago, the 15-year FRM averaged 5.19 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.76 percent this week, with an average 0.5 point, down very slightly from last week when it averaged 5.78 percent. A year ago, the five-year ARM averaged 5.05 percent.
One-year Treasury-indexed ARMs averaged 5.15 percent this week, with an average 0.6 point, down very slightly from last week when it averaged 5.16 percent. At this time last year, the one-year ARM averaged 4.10 percent.
"Interest rates for long-term mortgages slipped lower this week due to some economic data releases that pointed towards more subdued inflation in the near term," said Frank Nothaft, Freddie Mac vice president and chief economist. "Rates for 30-year fixed-rate mortgages are about the same as they were in late October of 2005. However, shorter-term rates, such as those for adjustable-rate mortgages, were basically unchanged due to market expectations of another rate hike by the Federal Reserve Board at the end of January."
"Our January forecast calls for a gradual rise in long-term rates throughout 2006, ending the year at about 6.5 percent for the 30-year fixed-rate mortgage, while relative rate differences with adjustable-rate mortgages will narrow. This should induce some slowing in housing market activity, but we expect the housing market in 2006 to be strong, nonetheless."
Friday, January 13, 2006
Ways to Improve a Credit Score
With identity theft on the rise, consumers are becoming increasingly aware of the importance of reviewing their credit reports. However, their thoughts about credit and its long-term impact upon their financial future typically end there until it's time to apply for a home loan. A credit score is used to evaluate how likely a borrower is to repay their loan. There are several actions a person can take to impact their score. Here are a few to keep in mind.
If someone has a credit card which has a high balance, while their remaining credit cards have low or zero balances, it's best to distribute the debt across the cards in order to change the ratio of debt to available credit. Many consumers believe that they should close an existing credit card account if the card is inactive. It's better to keep the account open and use it periodically in order to take advantage of its contribution to their long-term credit history.
With the flood of credit card offers that come in the mail, it may be tempting to open new accounts. However, these "pre-approved" offers are not approved until the companies run a credit report which will temporarily impact the applicant's credit score. In addition, experts recommend that a person maintain between two to five credit card accounts, total, so it's best to avoid accumulating too many.
There are several factors that contribute to a credit score. But by observing the tips above, as well as making payments on time and keeping balances as low as possible, a consumer is sure to achieve superior results.
If someone has a credit card which has a high balance, while their remaining credit cards have low or zero balances, it's best to distribute the debt across the cards in order to change the ratio of debt to available credit. Many consumers believe that they should close an existing credit card account if the card is inactive. It's better to keep the account open and use it periodically in order to take advantage of its contribution to their long-term credit history.
With the flood of credit card offers that come in the mail, it may be tempting to open new accounts. However, these "pre-approved" offers are not approved until the companies run a credit report which will temporarily impact the applicant's credit score. In addition, experts recommend that a person maintain between two to five credit card accounts, total, so it's best to avoid accumulating too many.
There are several factors that contribute to a credit score. But by observing the tips above, as well as making payments on time and keeping balances as low as possible, a consumer is sure to achieve superior results.
Thursday, January 12, 2006
Housing Market to "Normalize" in 2006
The key word for the housing market in 2006 is balance, with a return to a more normal rate of price growth, according to the National Association of Realtors®.
David Lereah, NAR’s chief economist, said current trends in the housing sector are healthy. “We don’t need to break a record every year for the housing market to be good – in fact, cooling sales are necessary for the long-term health of this vital sector,” Lereah said. “A modest slowdown in home sales, coupled with improvements in housing inventory, means the market is in the process of normalization. That will help to bring balance between home buyers and sellers, yet sales will remain historically strong.”
After setting a fifth consecutive annual record, projected to 7.10 million units for 2005, existing-home sales are forecast to ease by 4.4 percent to 6.79 million this year, which would be the second highest on record. New-home sales, which should be a record 1.29 million for 2005, are expected to decline 6.0 percent to 1.21 million in 2006 – that also would be the second best year in history. Total housing starts for 2005 are seen at 2.07 million units – the highest since setting a record 1972 – with a 6.6 percent slowing to 1.94 million this year.
“A lot of demand has been met over the last five years, and a modest rise in mortgage interest rates is causing some market cooling. Along with regulatory tightening on nontraditional mortgages, there will be fewer investors in the market this year,” Lereah said. The 30-year fixed-rate mortgage is likely to trend up gradually to 6.7 percent during the second half of the year. “This will preserve generally favorable affordability conditions and keep the housing market at a more sustainable sales pace.”
NAR President Thomas M. Stevens from Vienna, Va., said price appreciation should be at more normal levels across most of the country. “Buyers are no longer competing for a tight supply,” said Stevens, senior vice president of NRT Inc. “That means home prices generally will rise much closer to long-term norms, which is the overall rate of inflation plus one or two percentage points. Lower price appreciation will keep the door open to first-time buyers while preserving the investment advantages of homeownership for sellers.
The national median existing-home price for all housing types, projected to jump 12.9 percent to $209,100 for 2005, is forecast to rise 5.1 percent to $219,700 this year. The median new-home price, which should be up 4.6 percent to $231,300 for 2005, is expected to increase 6.0 percent this year to $245,200.Inflation as measured by the Consumer Price Index is projected to rise 3.4 percent for 2005 and 3.0 percent in 2006.
Inflation-adjusted disposable personal income is forecast to increase 1.3 percent for 2005 and 4.6 percent this year.Growth in the U.S. gross domestic product is likely to be 3.6 percent for 2005, with GDP seen at 4.0 percent this year.
The unemployment rate is expected to drop to 4.8 percent by the end of the year.
Existing-home sales data for December, including 2005 totals, will be released January 25; the next forecast is scheduled for February 7, and the Pending Home Sales Index will be February 1.
David Lereah, NAR’s chief economist, said current trends in the housing sector are healthy. “We don’t need to break a record every year for the housing market to be good – in fact, cooling sales are necessary for the long-term health of this vital sector,” Lereah said. “A modest slowdown in home sales, coupled with improvements in housing inventory, means the market is in the process of normalization. That will help to bring balance between home buyers and sellers, yet sales will remain historically strong.”
After setting a fifth consecutive annual record, projected to 7.10 million units for 2005, existing-home sales are forecast to ease by 4.4 percent to 6.79 million this year, which would be the second highest on record. New-home sales, which should be a record 1.29 million for 2005, are expected to decline 6.0 percent to 1.21 million in 2006 – that also would be the second best year in history. Total housing starts for 2005 are seen at 2.07 million units – the highest since setting a record 1972 – with a 6.6 percent slowing to 1.94 million this year.
“A lot of demand has been met over the last five years, and a modest rise in mortgage interest rates is causing some market cooling. Along with regulatory tightening on nontraditional mortgages, there will be fewer investors in the market this year,” Lereah said. The 30-year fixed-rate mortgage is likely to trend up gradually to 6.7 percent during the second half of the year. “This will preserve generally favorable affordability conditions and keep the housing market at a more sustainable sales pace.”
NAR President Thomas M. Stevens from Vienna, Va., said price appreciation should be at more normal levels across most of the country. “Buyers are no longer competing for a tight supply,” said Stevens, senior vice president of NRT Inc. “That means home prices generally will rise much closer to long-term norms, which is the overall rate of inflation plus one or two percentage points. Lower price appreciation will keep the door open to first-time buyers while preserving the investment advantages of homeownership for sellers.
The national median existing-home price for all housing types, projected to jump 12.9 percent to $209,100 for 2005, is forecast to rise 5.1 percent to $219,700 this year. The median new-home price, which should be up 4.6 percent to $231,300 for 2005, is expected to increase 6.0 percent this year to $245,200.Inflation as measured by the Consumer Price Index is projected to rise 3.4 percent for 2005 and 3.0 percent in 2006.
Inflation-adjusted disposable personal income is forecast to increase 1.3 percent for 2005 and 4.6 percent this year.Growth in the U.S. gross domestic product is likely to be 3.6 percent for 2005, with GDP seen at 4.0 percent this year.
The unemployment rate is expected to drop to 4.8 percent by the end of the year.
Existing-home sales data for December, including 2005 totals, will be released January 25; the next forecast is scheduled for February 7, and the Pending Home Sales Index will be February 1.
Why it’s smarter to buy than rent
The tax benefits help somewhat, but it’s the long-term gain in value that’s crucial to building real wealth.
Yup, the cliché is true: Buying a home is one of the smartest financial decisions most people will ever make.Don’t take my word for it. Take the Federal Reserve’s. Its Survey of Consumer Finances has consistently found a huge gap between the wealth piled up by homeowners and that accumulated by renters.
Read More
Yup, the cliché is true: Buying a home is one of the smartest financial decisions most people will ever make.Don’t take my word for it. Take the Federal Reserve’s. Its Survey of Consumer Finances has consistently found a huge gap between the wealth piled up by homeowners and that accumulated by renters.
Read More
Resale Values after Remodeling
A home is the most significant asset many people own, and remodeling can considerably affect its resale value. To prevent homeowners from accidentally destroying value, the National Association of Realtors has queried its vast network of realty agents to find out what remodeling projects add the most value to homes.
Remodeling magazine crunched the data and released its annual "Cost versus Value Report." Even if you have no immediate plans to move, the report provides valuable insights into how remodeling might alter the resale value of your home. The report covers 58 regional markets and discusses various improvements from kitchen remodeling to deck additions.
"Our members' experience and familiarity with the communities in which they work make them valuable resources," says NAR President Thomas Stevens. "They understand what makes a good investment, whether their clients are buying, selling or remodeling." Stevens hopes the report will help homeowners choose the projects that increase home value while avoiding those that lose money. In West Coast states, for example, kitchen upgrades return an average of 112 percent of costs when homeowners sell their home. By contrast, kitchen projects typically recoup only 85 percent of their costs in the Midwest. For their part, Midwesterners place a premium on exterior siding.
Even within regions, important distinctions in value emerge. "The desirability of certain home features varies by neighborhood and is heavily influenced by buyers' expectations in a given area," said Stevens. For example, if homes in a neighborhood typically have two bathrooms, then adding a second to a one-bathroom home does little to distinguish that home. Instead, a wiser choice might be converting an attic into a bedroom.
The one consistent trend across regions is that home offices do little to increase value. (Yet another reason not to work from home.)
Read More
Remodeling magazine crunched the data and released its annual "Cost versus Value Report." Even if you have no immediate plans to move, the report provides valuable insights into how remodeling might alter the resale value of your home. The report covers 58 regional markets and discusses various improvements from kitchen remodeling to deck additions.
"Our members' experience and familiarity with the communities in which they work make them valuable resources," says NAR President Thomas Stevens. "They understand what makes a good investment, whether their clients are buying, selling or remodeling." Stevens hopes the report will help homeowners choose the projects that increase home value while avoiding those that lose money. In West Coast states, for example, kitchen upgrades return an average of 112 percent of costs when homeowners sell their home. By contrast, kitchen projects typically recoup only 85 percent of their costs in the Midwest. For their part, Midwesterners place a premium on exterior siding.
Even within regions, important distinctions in value emerge. "The desirability of certain home features varies by neighborhood and is heavily influenced by buyers' expectations in a given area," said Stevens. For example, if homes in a neighborhood typically have two bathrooms, then adding a second to a one-bathroom home does little to distinguish that home. Instead, a wiser choice might be converting an attic into a bedroom.
The one consistent trend across regions is that home offices do little to increase value. (Yet another reason not to work from home.)
Read More
When mold takes hold
Discovering that your house has been slimed by mold can be a shocker. Find out why it happens - and how to prevent it.
It can happen in the midst of a home improvement project, an archaeological expedition to the basement or attic, or even during a pre-sale home inspection.
That's when you can unearth the shocking truth: You've got mold.
Discovering a streak of black, green or reddish crud growing behind your drywall, spreading beneath your basement carpet or lurking on a wall behind the bedroom bureau can be disconcerting, to say the least.
But armed with the right information, you can learn how to eradicate mold growth, and even prevent it from coming back.
IT'S A NATURAL
The first thing you should know about mold is that it's everywhere. There are thousands of species of molds. So it's not feasible to try to rid your home of every trace of mold. But you can keep its presence at a minimum.
Neither plant nor animal, mold is classified as part of the fungi world - a world also populated by mushrooms, yeast and mildew.
Out in the forest, mold plays an important role in the ecosystem. Molds chow down on dead leaves and other plant matter, assisting in the decomposition process. A few molds have been domesticated, yoked into service to produce cheese or antibiotics.
But when mold invades our homes, it can cause health problems. The most common molds found indoors, according to the Centers for Disease Control and Prevention, are Cladosporium, Penicillium, Aspergillus and Alternaria.
Mold can grow on cellulose in building materials, on cloth, leather, wood or any other organic material that can serve as food. If you see it in the shower, it's most likely settled into the grout between tiles. There, it can feed on collected dead skin cells left over from your last shower.
Most people know mold when they see it. But if it's growing somewhere hidden, you might recognize it by its smell, which is usually described as musty, earthy or even stinky.
Mold spores - the "seeds" by which molds reproduce - are natural substances that travel through the air like pollen. All they need to take hold are a source of food, the right temperature and - most important - a steady moisture source.
You might assume that our rainy Northwest corner of the country has more than its fair share of mold. But in fact, the humidity level and temperatures are often lower here than in places like Florida or Texas, where mold growth is an even bigger problem. And the preponderance of wood structures, as opposed to stucco or brick, makes a difference as well.
"Wood is very forgiving - if you don't dump mass quantities of water on it," says Ed Keith, senior engineer with the Tacoma-based APA-Engineered Wood Association (formerly the American Plywood Association).
PUT A HOLD ON MOLD
Plugging leaks, ensuring proper drainage outside your home and making sure there's effective air ventilation inside are three of the most important ways you can prevent mold growth.
Keith says there are some common mistakes that can lead to mold problems. Among them:
* Errors in home construction, repair or maintenance. Improperly installed chimney flashing, roof shingles, windows or doors can let water leak in and lead to mold growth. Covering basement walls or floors without installing a proper vapor barrier or vent space can also lead to problems. (In fact, some experts say you should avoid carpeting in the basement altogether.) Keith reminds homeowners that caulking around windows and doors is not permanent. He advises a reapplication every few years.
* Too much moist air inside the house. Condensation on windows is a clue to this problem. Some homeowners vent their clothes dryer so that warm, moist air flows inside instead of outside. Keith says it's a misguided attempt to conserve heat, but will only end up causing too much moisture in the house.
* Venting the bathroom or kitchen fan into the attic instead of outside can promote mold growth in the attic.
* Airtight construction. Designed to save energy by preventing heat loss, newer construction methods can also lead to mold problems, unless windows are vented or there's a forced-air ventilation system in the house. In the absence of a built-in home ventilation system, you need to open doors or crack windows to create a cross flow of air.
* Poor drainage around the foundation, downspouts that release rain too close to the house, even clogged gutters that send water cascading down the foundation: All can lead to damp basements - and mold.
MOLD-RELATED ILLNESS
A few years ago, a particular type of mold known as Stachybotrys got a lot of bad press. News stories reported cases of homeowners driven from their houses by what was described as "toxic mold" or "black mold." Some reports linked the mold, called stachy for short, to a type of pulmonary hemorrhage in infants. But the CDC says that the link has not been proved, and instead urges more study of the disease.
Other reports fingered mold as the culprit in chronic fatigue, memory loss and other conditions. Health officials say that these links have not been proved, either.
What is known is this: Some people are sensitive to mold, and they can experience allergic reactions. These include a stuffy nose, itchy, watery or red eyes, wheezing or skin irritation. Inhaling or touching mold spores can prompt an allergic reaction in some people. Allergic reactions to mold are common, according to the Environmental Protection Agency.
Mold can also provoke asthma attacks.
A certain type of pneumonialike disease is caused by chronic exposure to mold, usually in a work environment.
Finally, molds pose a grave danger to people with compromised immune systems.
The CDC says fretting over what type of mold you have in your house isn't necessary. Rather, the agency says, all molds should be treated the same with respect to potential health risks and removal.
It can happen in the midst of a home improvement project, an archaeological expedition to the basement or attic, or even during a pre-sale home inspection.
That's when you can unearth the shocking truth: You've got mold.
Discovering a streak of black, green or reddish crud growing behind your drywall, spreading beneath your basement carpet or lurking on a wall behind the bedroom bureau can be disconcerting, to say the least.
But armed with the right information, you can learn how to eradicate mold growth, and even prevent it from coming back.
IT'S A NATURAL
The first thing you should know about mold is that it's everywhere. There are thousands of species of molds. So it's not feasible to try to rid your home of every trace of mold. But you can keep its presence at a minimum.
Neither plant nor animal, mold is classified as part of the fungi world - a world also populated by mushrooms, yeast and mildew.
Out in the forest, mold plays an important role in the ecosystem. Molds chow down on dead leaves and other plant matter, assisting in the decomposition process. A few molds have been domesticated, yoked into service to produce cheese or antibiotics.
But when mold invades our homes, it can cause health problems. The most common molds found indoors, according to the Centers for Disease Control and Prevention, are Cladosporium, Penicillium, Aspergillus and Alternaria.
Mold can grow on cellulose in building materials, on cloth, leather, wood or any other organic material that can serve as food. If you see it in the shower, it's most likely settled into the grout between tiles. There, it can feed on collected dead skin cells left over from your last shower.
Most people know mold when they see it. But if it's growing somewhere hidden, you might recognize it by its smell, which is usually described as musty, earthy or even stinky.
Mold spores - the "seeds" by which molds reproduce - are natural substances that travel through the air like pollen. All they need to take hold are a source of food, the right temperature and - most important - a steady moisture source.
You might assume that our rainy Northwest corner of the country has more than its fair share of mold. But in fact, the humidity level and temperatures are often lower here than in places like Florida or Texas, where mold growth is an even bigger problem. And the preponderance of wood structures, as opposed to stucco or brick, makes a difference as well.
"Wood is very forgiving - if you don't dump mass quantities of water on it," says Ed Keith, senior engineer with the Tacoma-based APA-Engineered Wood Association (formerly the American Plywood Association).
PUT A HOLD ON MOLD
Plugging leaks, ensuring proper drainage outside your home and making sure there's effective air ventilation inside are three of the most important ways you can prevent mold growth.
Keith says there are some common mistakes that can lead to mold problems. Among them:
* Errors in home construction, repair or maintenance. Improperly installed chimney flashing, roof shingles, windows or doors can let water leak in and lead to mold growth. Covering basement walls or floors without installing a proper vapor barrier or vent space can also lead to problems. (In fact, some experts say you should avoid carpeting in the basement altogether.) Keith reminds homeowners that caulking around windows and doors is not permanent. He advises a reapplication every few years.
* Too much moist air inside the house. Condensation on windows is a clue to this problem. Some homeowners vent their clothes dryer so that warm, moist air flows inside instead of outside. Keith says it's a misguided attempt to conserve heat, but will only end up causing too much moisture in the house.
* Venting the bathroom or kitchen fan into the attic instead of outside can promote mold growth in the attic.
* Airtight construction. Designed to save energy by preventing heat loss, newer construction methods can also lead to mold problems, unless windows are vented or there's a forced-air ventilation system in the house. In the absence of a built-in home ventilation system, you need to open doors or crack windows to create a cross flow of air.
* Poor drainage around the foundation, downspouts that release rain too close to the house, even clogged gutters that send water cascading down the foundation: All can lead to damp basements - and mold.
MOLD-RELATED ILLNESS
A few years ago, a particular type of mold known as Stachybotrys got a lot of bad press. News stories reported cases of homeowners driven from their houses by what was described as "toxic mold" or "black mold." Some reports linked the mold, called stachy for short, to a type of pulmonary hemorrhage in infants. But the CDC says that the link has not been proved, and instead urges more study of the disease.
Other reports fingered mold as the culprit in chronic fatigue, memory loss and other conditions. Health officials say that these links have not been proved, either.
What is known is this: Some people are sensitive to mold, and they can experience allergic reactions. These include a stuffy nose, itchy, watery or red eyes, wheezing or skin irritation. Inhaling or touching mold spores can prompt an allergic reaction in some people. Allergic reactions to mold are common, according to the Environmental Protection Agency.
Mold can also provoke asthma attacks.
A certain type of pneumonialike disease is caused by chronic exposure to mold, usually in a work environment.
Finally, molds pose a grave danger to people with compromised immune systems.
The CDC says fretting over what type of mold you have in your house isn't necessary. Rather, the agency says, all molds should be treated the same with respect to potential health risks and removal.
Wednesday, January 11, 2006
JANUARY MARKET FLASH
Statewide
The median resale price of a single-family detached home in California for November was $548,400, an increase of 1.8% from October and 16.2% over November 2004. Unsold resale inventory in November was sufficient for 3.9 months, up from 2.8 months (according to CAR) a year earlier; median number of days until sale was 39, which CAR notes is a three day annual increase.
Top Ten-Plus List
The ten California communities with the highest median home prices in November were: Manhattan Beach, $1,803,000; Newport Beach, $1,474,500; Laguna Beach, $1,360,000; Palos Verdes Estates, $1,350,000; Burlingame, $1,277,250; Los Gatos, $1,260,000; Rancho Palos Verdes, $1,197,500; Calabasas, $1,195,000; Danville, $1,096,500; Cupertino, $923,000. Four in the top ten and fifth as our highest, but if we move the sales cut to ten from thirty, the results are quite different. (Northern California communities that would have made the price cut had they posted thirty sales: Los Altos with 26 at $1,502,500; Saratoga with 28 at $1,386,000; Alamo with 25 at $1,250,000; Mill Valley with 27 at $1,185,000; Orinda with 18 at $1,050,000; Woodside with 29 at $1,000,000; Lafayette with 19 at $995,000; and Palo Alto with 28 at $953,750.)
Bay Area
November median price, at $723,080, is up half a percent for the month and 9.4% from the November 2004 figure. The Santa Clara County median price of $745,000 has gained 0.5% for the month and 14.8% – or nearly $100,000 – for the year; Santa Cruz County at $789,500 is even stronger. The Bay Area overall, by most metrics, has posted its highest November medians on record.
Sacramento/Capitol Region
Prices are up about 10% year-over-year.
Interest Rates
The current consensus is that core rates have been managed in masterly fashion for the last year and a half to two years, but Greg McBride of Bankrate.com now speaks of “a growing chorus that says the Fed is going too far.” Most rates will probably bounce between high fives and low sixes for a while, but adjustable rates are now almost identical to the lower fixed rates.
Inventory: Obviously attractive. Our intuition says that inventory has almost ceased to be a factor in prospective buyers’ calculations; you of course, as always, can make generous inventory work to your advantage by showing your prospects the most compelling available properties.
News Media
“Homes for sale hit 19-year high,” trumpeted USA Today on December 30, and they were talking about the whole country. It’s a useful reminder that, while Northern California may generate extreme numbers and percentages because of our prices, sales activity is softening and inventory is growing nationwide. Most of the pundits now seem satisfied that, rather than a popping bubble or series of popping bubbles, what we’re in for is a very slow, very broad, and comparatively painless correction; the vogue term of the last month is “soft landing.”
Overall Assessment
Economic fundamentals are still jangled by Katrina and Rita, and inflation would look a lot better if we were able to correct high energy prices, but overall consumer confidence remains more robust than some people might think. The tools are at hand – and being used – to help the residential market lose some excess pressure without collapsing. Higher prices and larger inventories may imply longer negotiations with more affluent prospects, but people are still buying houses, which means you can still sell them.
The median resale price of a single-family detached home in California for November was $548,400, an increase of 1.8% from October and 16.2% over November 2004. Unsold resale inventory in November was sufficient for 3.9 months, up from 2.8 months (according to CAR) a year earlier; median number of days until sale was 39, which CAR notes is a three day annual increase.
Top Ten-Plus List
The ten California communities with the highest median home prices in November were: Manhattan Beach, $1,803,000; Newport Beach, $1,474,500; Laguna Beach, $1,360,000; Palos Verdes Estates, $1,350,000; Burlingame, $1,277,250; Los Gatos, $1,260,000; Rancho Palos Verdes, $1,197,500; Calabasas, $1,195,000; Danville, $1,096,500; Cupertino, $923,000. Four in the top ten and fifth as our highest, but if we move the sales cut to ten from thirty, the results are quite different. (Northern California communities that would have made the price cut had they posted thirty sales: Los Altos with 26 at $1,502,500; Saratoga with 28 at $1,386,000; Alamo with 25 at $1,250,000; Mill Valley with 27 at $1,185,000; Orinda with 18 at $1,050,000; Woodside with 29 at $1,000,000; Lafayette with 19 at $995,000; and Palo Alto with 28 at $953,750.)
Bay Area
November median price, at $723,080, is up half a percent for the month and 9.4% from the November 2004 figure. The Santa Clara County median price of $745,000 has gained 0.5% for the month and 14.8% – or nearly $100,000 – for the year; Santa Cruz County at $789,500 is even stronger. The Bay Area overall, by most metrics, has posted its highest November medians on record.
Sacramento/Capitol Region
Prices are up about 10% year-over-year.
Interest Rates
The current consensus is that core rates have been managed in masterly fashion for the last year and a half to two years, but Greg McBride of Bankrate.com now speaks of “a growing chorus that says the Fed is going too far.” Most rates will probably bounce between high fives and low sixes for a while, but adjustable rates are now almost identical to the lower fixed rates.
Inventory: Obviously attractive. Our intuition says that inventory has almost ceased to be a factor in prospective buyers’ calculations; you of course, as always, can make generous inventory work to your advantage by showing your prospects the most compelling available properties.
News Media
“Homes for sale hit 19-year high,” trumpeted USA Today on December 30, and they were talking about the whole country. It’s a useful reminder that, while Northern California may generate extreme numbers and percentages because of our prices, sales activity is softening and inventory is growing nationwide. Most of the pundits now seem satisfied that, rather than a popping bubble or series of popping bubbles, what we’re in for is a very slow, very broad, and comparatively painless correction; the vogue term of the last month is “soft landing.”
Overall Assessment
Economic fundamentals are still jangled by Katrina and Rita, and inflation would look a lot better if we were able to correct high energy prices, but overall consumer confidence remains more robust than some people might think. The tools are at hand – and being used – to help the residential market lose some excess pressure without collapsing. Higher prices and larger inventories may imply longer negotiations with more affluent prospects, but people are still buying houses, which means you can still sell them.
Tuesday, January 10, 2006
10 mistakes to avoid in real estate in 2006
Those who don't learn from history are doomed to repeat it, the old proverb goes, so as the real estate market marks time before firing up again in the spring, it's a good time to mull over some of the more common things "not-to-do" to clear a trail for a happy home sale or purchase.
Here are my picks for 10 mistakes to avoid in 2006:
Not understanding the length of the buying/selling process
You know what happens when you make decisions based on optimism, time-on-the-market averages and generous promises from agents -- ye old Murphy's law kicks in. The home-selling process is often more extensive than you think, from the early planning stages to protracted negotiations to oft-delayed closings. Sellers can take months before they formally accept a buyer's offer. Financing can get held up, buyers have tough time selling their old house, rough edges discovered in the final walk-through must be smoothed, etc. Give yourself a couple extra months to complete the deal.
Exposing your hand
Never let love for a house cloud your vision. Try to contain your enthusiasm. Otherwise, the sellers and (or) their agent will know they've hooked a live one and assume you may forgive certain flaws because you know the place is right for you. You can scream "yes!" when you get back out in your car.
Skipping the loan pre-approval step
For buyers, getting pre-approved for a mortgage gives you a clear idea of how much you can safely borrow, plus it addresses credit-rating issues and kick-starts other financial paperwork. What's more, it identifies you as a serious buyer. Sellers with a hot property should demand nothing less than proof of pre-approval from the potential buyer's financial institution. No sense in wasting time on time-wasters.
Assuming the appraisal equals actual value
In theory, appraisals are objective estimates of value. But several different appraisals can yield several different numbers. For example, an appraisal that's been done for a possible refinance may have been slightly inflated to encourage that refinance. So sellers, before you put your home on the market, have an agent do a comparative market analysis to better indicate the home's worth. And buyers, get similar "comps" from your agent. But realize the true value of a house is what someone is willing to pay for it.
Timing the bubble "burst"
Thousands of apprehensive sellers and buyers have been playing this game since the late 1990s, trying to time their sale to either beat the "pop" and gain optimal profits, or to swoop in and pluck up cheap property after a burst. In almost all sections of the country, the bubble remains "intact." For the most part, real estate bubbles don't pop, they just slowly deflate and the market levels off then surges again in the near future. Always take the approach that real estate is a long-term investment.
Hiring the wrong agent
Buyers and sellers should interview several agents, small and large. Get references and success stories. You may not benefit by opting for an agency's top-volume seller. That top-producing agent may have listed 40 homes last year and sold 30, but another agent may have listed 15 and sold 14. Opting for a friend or family member who is an agent doesn't assure you of results either. It could cause a rift. And choosing the agent who suggests the highest listing price is not a recipe for success either -- nor is opting for the agent who charges the lowest commission. Remember the "SEED" qualities in an agent: Smart, Empathic, Experienced and Dedicated will usually get the job done right.
Missing the big picture
Opting for a dream house that will otherwise create negative quality-of-life challenges such as longer commutes, distant schools, limited access to services, higher taxes, more stringent deed restrictions, stricter homeowner associations and other chronic headache-makers can cause buyers to question their decisions after a few months. Make sure your that dream house is grounded in reality.
Not knowing what you're signing
The sales contract is a legally binding document. Review it as if your legal well-being is at stake. It should address all your concerns and the concerns of the other party, such as who will pay what for closing costs and repair expenses. A poorly written or incomplete contract can cost you lots of time, money and emotional energy and tie up your deal for weeks or months. If there have been any verbal commitments, they should be put in writing. If you're not using an attorney, make sure your agent is proactive in the construction and interpretation of the contract before you sign it or make concessions.
Poor timing
How many stories have you heard about people drowning under the weight of two mortgages because they committed to a new house before selling their old one? The most important transaction in the "buying-one-and-selling-one scenario" is the sale. Sometimes, you have little choice in the matter, but when you do, secure the sale of the old house before signing on the dotted line for the new one. Sure, you hate to miss out on that rare find and you might have to find an interim rental, but that's better than spending time in financial limbo and biting your fingernails to the quick.
Not completing your due diligence with a criminal search
In many states, agents are not obliged to tell you if there is a sex offender or other unsavory resident in a neighborhood you're eyeing unless you ask. Do so. They tell you to do your own research. Do so. Check with your area law-enforcement agency about how to access sex-offender lists and other criminal databases for this crucial information.
Here are my picks for 10 mistakes to avoid in 2006:
Not understanding the length of the buying/selling process
You know what happens when you make decisions based on optimism, time-on-the-market averages and generous promises from agents -- ye old Murphy's law kicks in. The home-selling process is often more extensive than you think, from the early planning stages to protracted negotiations to oft-delayed closings. Sellers can take months before they formally accept a buyer's offer. Financing can get held up, buyers have tough time selling their old house, rough edges discovered in the final walk-through must be smoothed, etc. Give yourself a couple extra months to complete the deal.
Exposing your hand
Never let love for a house cloud your vision. Try to contain your enthusiasm. Otherwise, the sellers and (or) their agent will know they've hooked a live one and assume you may forgive certain flaws because you know the place is right for you. You can scream "yes!" when you get back out in your car.
Skipping the loan pre-approval step
For buyers, getting pre-approved for a mortgage gives you a clear idea of how much you can safely borrow, plus it addresses credit-rating issues and kick-starts other financial paperwork. What's more, it identifies you as a serious buyer. Sellers with a hot property should demand nothing less than proof of pre-approval from the potential buyer's financial institution. No sense in wasting time on time-wasters.
Assuming the appraisal equals actual value
In theory, appraisals are objective estimates of value. But several different appraisals can yield several different numbers. For example, an appraisal that's been done for a possible refinance may have been slightly inflated to encourage that refinance. So sellers, before you put your home on the market, have an agent do a comparative market analysis to better indicate the home's worth. And buyers, get similar "comps" from your agent. But realize the true value of a house is what someone is willing to pay for it.
Timing the bubble "burst"
Thousands of apprehensive sellers and buyers have been playing this game since the late 1990s, trying to time their sale to either beat the "pop" and gain optimal profits, or to swoop in and pluck up cheap property after a burst. In almost all sections of the country, the bubble remains "intact." For the most part, real estate bubbles don't pop, they just slowly deflate and the market levels off then surges again in the near future. Always take the approach that real estate is a long-term investment.
Hiring the wrong agent
Buyers and sellers should interview several agents, small and large. Get references and success stories. You may not benefit by opting for an agency's top-volume seller. That top-producing agent may have listed 40 homes last year and sold 30, but another agent may have listed 15 and sold 14. Opting for a friend or family member who is an agent doesn't assure you of results either. It could cause a rift. And choosing the agent who suggests the highest listing price is not a recipe for success either -- nor is opting for the agent who charges the lowest commission. Remember the "SEED" qualities in an agent: Smart, Empathic, Experienced and Dedicated will usually get the job done right.
Missing the big picture
Opting for a dream house that will otherwise create negative quality-of-life challenges such as longer commutes, distant schools, limited access to services, higher taxes, more stringent deed restrictions, stricter homeowner associations and other chronic headache-makers can cause buyers to question their decisions after a few months. Make sure your that dream house is grounded in reality.
Not knowing what you're signing
The sales contract is a legally binding document. Review it as if your legal well-being is at stake. It should address all your concerns and the concerns of the other party, such as who will pay what for closing costs and repair expenses. A poorly written or incomplete contract can cost you lots of time, money and emotional energy and tie up your deal for weeks or months. If there have been any verbal commitments, they should be put in writing. If you're not using an attorney, make sure your agent is proactive in the construction and interpretation of the contract before you sign it or make concessions.
Poor timing
How many stories have you heard about people drowning under the weight of two mortgages because they committed to a new house before selling their old one? The most important transaction in the "buying-one-and-selling-one scenario" is the sale. Sometimes, you have little choice in the matter, but when you do, secure the sale of the old house before signing on the dotted line for the new one. Sure, you hate to miss out on that rare find and you might have to find an interim rental, but that's better than spending time in financial limbo and biting your fingernails to the quick.
Not completing your due diligence with a criminal search
In many states, agents are not obliged to tell you if there is a sex offender or other unsavory resident in a neighborhood you're eyeing unless you ask. Do so. They tell you to do your own research. Do so. Check with your area law-enforcement agency about how to access sex-offender lists and other criminal databases for this crucial information.
Monday, January 09, 2006
Completion of a 1031 Tax Deferred Exchange
The IRS Code Section 1031 states that the replacement property must be acquired on or before the following dates:
- 180 days from the date of the transfer of the relinquished property, or
- The filing date the tax return is due for the tax year in which the relinquished property is transferred, typically April 15th (the taxpayer has the right to request an extension-not to exceed 180 days.)
For example, the taxpayer closed the relinquished property on Nov. 30th which caused a taxable event for that tax year. The replacement property must be acquired by the income tax filing due date (April 15). This would give the taxpayer only 135 days to complete the exchange.
So what does the taxpayer do?
If the taxpayer has not acquired the replacement property by the filing due date for the tax return (April 15), he must file an extension using the Form 4868 which extends the due date for the tax return until August 15th. This will enable the taxpayer, who began the exchange late in the tax year, the full 180 days allowed by the IRS to complete the exchange.
When filing an extension to complete the exchange, estimated income tax on the extended tax return should be paid with the extension. The IRS can deny any extension to a taxpayer who does not pay the estimated tax liability by the due date of the return, not the extension due date. This would invalidate the 1031 tax deferred exchange transaction not completed by the due date.
This author cannot and does not provide advice regarding specific tax consequences. Investors considering a 1031 Tax Deferred Exchange should seek the counsel of their accountant and attorney to obtain professional tax and legal advice.
Friday, January 06, 2006
Fed Signals Bode Well for Housing
The Federal Reserve hinted that it's close to ending its campaign to raise interest rates, which would be good news for homeowners, home buyers and stock market investors.
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2006 Economic Outlook: Good News for Real Estate
Storms and other shocks have done little to derail the resilient U.S. economy, which is poised to give real estate practitioners in residential and commercial markets another robust year, despite signs of cooling.
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