Real Estate News

Think Small: Getting Started As a Real-Estate Investor

2007-01-23T18:17:00.000-08:00

By David Crook

The real-estate bubble has burst. Get over it. In areas that saw big home-price run-ups in the first half of the decade, prices are stagnant, or worse. New-home inventories are up; new-home builder stocks are down.

A kind of real-estate weariness has set in. Who's the cocktail-party boor? The guy still talking about making a killing on Miami Beach condos.

Smells like a buying opportunity. Probably not right away, because there's still plenty of froth in the markets that saw the biggest price increases. But soon, you'll see the real-estate investors -- property vultures who buy when prices are low and then ride property manias to their crest -- toeing the market again.

Even in today's uncertain climate, novice real-estate investors can make money, especially in smaller properties that are easy to acquire and manage.

Let's explore some options.

In-Law Units

The most basic form of property investment is a so-called in-law unit or guesthouse on the site of your home itself, sometimes attached to the main house, sometimes not. No one has ever gotten rich renting out such properties, but they can significantly reduce the cost of homeownership. Renting out an in-law unit for $400 a month and using that money every month to pay down principal on a $350,000 30-year mortgage will shave 10 years from the mortgage term and reduce total payments by more than $165,000. And you will be able to write off all your costs on your income taxes -- including depreciation on the unit -- up to your actual rental income.

Weekend or Vacation Homes

Just as with an in-law unit, renting out your weekend house is not a way to get rich. Many of the same numbers that applied to in-law units can be applied to your weekend home, although the tax situation is decidedly different.

First, the IRS gives second-home landlords a very nice little present in that it allows two weeks of tax-free rental income a year. Beyond that, however, the accounting can be irksome. The IRS doesn't want people buying second homes and disguising them as rental properties. It has two criteria to determine whether the property is a second home (bad) or a rental (good). It's a second home if you don't rent it out at all or if you personally use it at least two weeks a year or 10% of the number of days the place is available for rental, whichever is longer.

Single-Family Homes

Throughout much of the country, the market for single-family homes is seriously out of whack. As prices fall and inventories rise, that's changing. But, compared with rents, prices are still quite high, outstripping the ability of such properties to cover their mortgage and operating costs.

Avoid this segment of the market unless you have a chance to buy a property at a 30% or 40% discount from its previous price. Don't think this is out of the question. In the late 1980s and early 1990s, when the government liquidated the real-estate loan portfolios of bankrupt savings-and-loans, speculators picked up properties for just dimes on the dollar.

Managing a house that pays for itself is what it's all about. You can do it in one of two ways: Renting or "flipping." Renting is a "buy-and-hold" strategy, while flipping calls for quick turnarounds of fixer-uppers that can be spruced up and sold quickly.

But in the current environment renting is probably the more prudent path, although it can be very difficult to make a house pay for itself at today's prices. That's because if your house carries an 80% or 90% loan, the renter will have to pay more per month to rent the house than he would to buy it.

Look at it this way: There's a handsome three-bedroom, two-bath house in Tampa, Fla., for sale at an asking price of $199,900. If you bought it with 10% down and a 90% loan at 6%, your monthly payment will be about $1,550 (that's PITI -- principal, interest, taxes and insurance). As a landlord, at a minimum, you'll want to budget at least $200 a month in additional expenses. That puts your break-even point at almost $1,800 a month. That's far more than you can reasonably expect to earn where comparable properties in the same neighborhood can be rented for less than $1,300.

But it turns out that there's a similar house available less than a mile away. This other house is roughly the same size. The difference is this one's being taken over by its lender, and the house has a mortgage loan of $110,000.

A buyer with cash can drive a hard bargain and make out very well. And the worse the market, the better for the buyer. But don't get carried away. If you simply take over an existing 90% or 95% note, you won't make any money. Let the lender foreclose and take over the place. Then lowball the lender.

Multiple Units

A housing market that saw the price of single-family homes skyrocket was not quite so generous to smaller two-family or multifamily properties. Because the universe of home buyers expanded so much in the past 10 years, the universe of renters contracted, and the market for smaller rental properties contracted with them.

In Memphis, where two-bedroom apartments in better neighborhoods rent from $500 up to $800 a month, good two-family properties can still be bought for far less than a one bedroom condo on either of the coasts. Recent prices for 40-year-old two-family homes near the University of Memphis main campus ranged from $70,000 to $110,000. Monthly payments, including insurance and maintenance, on an $88,000 mortgage (20% down on the $110,000 property) come to only about $750 a month. So renting both units at the low end of the market would result in a positive after-tax cash flow of more than $100 a month. Upgrade the units, and you can charge top-of-the-market rents of $800 a month.

Good deals on smaller buildings can be found throughout the country, even in some of the hottest markets. In trendy Pasadena, Calif., where even modest homes can sell for $400 to $600 a square foot, two-, three- or four-unit rental buildings can be bought in the $250 to $350 range.

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Shore home prices rebound

2006-11-29T08:15:00.000-08:00

By DAVID P. WILLIS

Gannett New Jersey

After taking a slight dip in the second quarter of 2006, median home sale prices in the region that includes the Shore area rose 7.3 percent in the third quarter, the National Association of Realtors reported Monday.

The median sale price for an existing home in the region that encompasses Monmouth, Ocean, Middlesex and Somerset counties was $415,100, up from $386,900 in the same quarter last year, according to the association. In the second quarter, the median sales price had fallen 0.1 percent to $393,600.

The median means that half the homes in the area sold for more and half for less.

"The fact that it is up rather than down is at least some sort of hint that the area is not suffering greatly, at least yet, from any major price pressures," said Joel Naroff, chief economist at Commerce Bank. "That is not to say that I don't think it might happen."

Other areas of New Jersey saw increases in the third quarter as well. The median price in an area that includes Bergen and Passaic counties was $558,600, up 4.7 percent from $533,600. The median price in Union, Hunterdon, Morris and Essex counties was $455,400, up 1.9 percent from $446,800.

Economist James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University, said the median price increase may indicate that fewer moderate-price homes are selling.

The number of homes on the market remains high, he said.

"It was during the third quarter that there was starting to be a realization that the boom was history, but I think we still have people who refuse to sell at the new prices," Hughes said. "That is why you have a lot of unsold inventory or people actually pulling their houses off the market."

As overpriced homes come off the market, they are being replaced with houses at a more "modest price level," said Albert S. Veltri, president and chief executive officer of Veltri & Associates in Toms River.

"As that transition happens, the market will begin to build up more steam," Veltri said.

So far this year, the average sales price of a single-family house in the Monmouth-Ocean Multiple Listing Service rose 4.2 percent, said Maureen Penta, general sales manager at Diane Turton, Realtors. The average sale price was $486,521, up from $466,878 for the same period last year.

The number of homes sold so far this year has fallen to 9,212, Penta said, citing listing-service figures. That's down 19 percent from 11,339 in the same period last year.

Prices are stabilizing, but some sellers are still reducing prices. "People who have been sitting with their home on the market for an extraordinary period of time obviously are reducing the prices of their houses," said Christina Banasiak, president of the Monmouth County Association of Realtors.

Yet some homes, which are priced correctly, are getting multiple offers, said Banasiak, assistant office manager at Weichert Realtors in Marlboro. "It's happening so if a house is priced right, and it's a good house in decent condition, it's still going to sell."

The key is setting the price correctly when a home is first listed, Veltri said. "Houses that are priced high and start to come down, they actually become invisible to buyers," he said. Potential buyers look for homes that are new to the market, he added.

Toms River resident Doug Frank recently put a house on the market on Old Post Road in Freehold Township after he renovated it. He priced it at $599,000.

"I really want to move it," he said. "With the economy the way it is, I priced it right so it would sell."

www.courierpostonline.com

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Merger Helps Out Members Of Bankrupt Destination Club

2006-11-29T08:14:00.000-08:00

By Michael Corkery and Darren Everson

From The Wall Street Journal Online

The 874 well-heeled people who put up deposits of as much as $1.3 million to join the Tanner & Haley Resorts destination club, which filed for bankruptcy protection this summer, are being offered a consolation prize.

Ultimate Resort -- an Orlando, Fla., rival -- has agreed to buy the club's real-estate assets for $98 million, and is extending new memberships to Tanner & Haley members.

Under the asset purchase agreement, which was announced yesterday, Tanner & Haley members will be able to join Ultimate Resort without having to pay the club's upfront deposit -- which ranges from $120,000 to $215,000. But they will face a number of restrictions on how often they can travel to Ultimate's properties.

Unlike most other destination clubs, Tanner & Haley had very few restrictions on when members could travel. Its business model ultimately proved unsustainable, as the company was forced to rent out homes at high costs to keep up with their members' demands. All Tanner & Haley members -- whether they chose to join Ultimate or not -- will remain unsecured creditors in the bankruptcy case. But they aren't expected to recoup much of their original deposits.

"I think most members are realistic," says Joel Lawson III, chairman of the unsecured creditors committee, which represents many Tanner & Haley club members in the bankruptcy proceedings. "This is an outstanding opportunity for members of Tanner & Haley to continue to do what they wanted to do when they joined, which is to travel."

The deal needs to be approved by a bankruptcy judge, who is expected to review the agreement on Dec. 19.

Destination clubs are a twist on the time-share concept for high-net-worth travelers. The clubs buy homes in desirable locations around the world, then charge membership fees for access to them. The model is more akin to a country club than a time-share. In most cases, members own no property at all; they just have the right to use an array of homes for a set amount of time each year. There are now more than 20 such destination clubs; the largest is the Denver-based Exclusive Resorts LLC.

Tanner & Haley, whose founder, Rob McGrath, pioneered the destination-club concept in 1998, filed for Chapter 11 bankruptcy protection on July 23, sending shock waves through the loosely regulated industry about the financial transparency and viability of some of the other clubs.

The problems at Tanner & Haley sparked calls for tighter regulation of the industry after it was revealed that many of the club's members could lose most of their deposits -- which started at about $85,000 for early members and went up to about $1.3 million for more recent ones.

Holly Etlin, Tanner & Haley's chief restructuring officer, says only about $10 million to $15 million will be available to pay back the membership and other creditor claims, which total roughly $350 million. Membership claims alone are estimated at $308 million. The bulk of the sale's proceeds will cover loans that allowed Tanner & Haley to operate under bankruptcy protection, and to pay for administrative and legal fees.

Ms. Etlin says the company is also setting aside some of the money to pursue possible litigation against "certain former officers and directors" and other parties. She says the company and the creditors committee are continuing a forensic investigation of the company's books "to see whether some money paid to those parties might be recovered."

While acknowledging that members may be frustrated with having to swallow lost deposit money, Ms. Etlin says the deal with Ultimate Resort is the best outcome for members who wish to continue using the company's homes. The details were still being finalized late yesterday, but under one proposal, Tanner & Haley members would be able to join Ultimate without having to pay a deposit, but would pay annual dues between $11,000 and $16,000, Ms. Etlin says.

That would entitle them to travel for two to three weeks a year. Members would have the option of staying at the homes for more time, depending on what package they choose.

It's unclear what would happen if a Tanner & Haley member chooses to join Ultimate and then cancel his membership. "There is no refund available if they join Ultimate," Ms. Etlin says. "There might be one in the future under certain circumstances."

Selling Tanner & Haley members on joining Ultimate is critical to the deal. The purchase agreement requires that at least 400 Tanner & Haley members join Ultimate, Ms. Etlin says.

"I'm relatively sure I'd opt to stay in the new club," says John Harvey of Oklahoma City, who's listed in the Tanner & Haley bankruptcy filing as having a $1.3 million claim. "For a lot of us, we don't relish the thought of joining a new club and coming up with new dues. It's either this or liquidate the club for pennies on the dollar."

The purchase of Tanner & Haley's homes greatly expands Ultimate's current portfolio of 10 properties, located in 10 destinations, including Lake Tahoe, Nev.; Steamboat Springs, Colo.; and New York City. The club currently has 90 members.

Under the agreement, Ultimate will purchase roughly 60 of the properties that Tanner & Haley owns world-wide. That represents the bulk of Tanner & Haley's properties, which were appraised at about $130 million. Ms. Etlin says Ultimate would also agree to take over many of Tanner & Haley's 80 long-term leases.

Ultimate Chief Executive Officer Jim Tousignant says that unlike Tanner & Haley, his club will not have to lease properties in order to keep up with demand. He says Ultimate plans on "taking on some additional properties" as a transition strategy over the first four to six months. Ultimately, the new Ultimate will have over 100 properties in 24 destinations, Mr. Tousignant says.

The destination-club industry has been consolidating rapidly. Also this week, two small clubs -- called Solstice and Parallel -- announced that they are merging. The new club will have 80 members and 10 properties in places such as Aspen, Colo.; St. Barth's; and Napa Valley, Calif. The new club will operate under the name Solstice.

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What to Do in a Market That Is Headed for a Falloff

2006-11-29T08:13:00.000-08:00

By Matthew Heimer

From The Wall Street Journal Online

After hurtling along for years, the nationwide real-estate boom has come to a screeching halt. In 2005, home prices in the U.S. rose more than 12%; this year, the National Association of Realtors expects appreciation to reach just 1.9% -- the lowest gain since 1992.

Rising mortgage rates and selloffs by skittish real-estate investors have helped depress housing prices in many metropolitan areas. But there's another factor that many observers miss: the relationship between home prices and incomes.

When the cost of housing in a given area grows far faster than local wages and salaries, the pool of potential buyers shrinks, and prices are much more likely to sink.

For the past five years, SmartMoney magazine has worked with Ingo Winzer, president of the consulting firm Local Market Monitor, evaluating home-sale prices against local income to determine whether a given market is overvalued, undervalued or fairly valued. Mr. Winzer relies on more than 15 years of housing and income statistics to find out where prices are headed.

According to Mr. Winzer, any market that's more than 30% overvalued is due for a correction. In the fall of 2003, only eight markets on the list of 152 fit that description; on this year's list, 37 did. Sure enough, price decreases are beginning to pop up in many of the markets that have shown up year after year as the most overvalued -- especially in Florida and California.

What to do if you're in a falling market? Obviously, that's a promising climate for a bargain-hunting buyer. A savvy real-estate agent can help you craft a bid that's low enough to save you money, but realistic enough to be accepted. When one of Frank Borges LLosa's clients finds an appealing home, the Northern Virginia broker searches the history of the selling agent -- data not available to consumers -- on the local multiple listing service. If the agent frequently sells below the asking price, Mr. LLosa knows he can be aggressive.

Listing archives can also help buyers figure out the right bidding range. Ask your agent to comb the MLS for "pending sales," deals that are in contract but haven't yet closed, to get an up-to-date sense of price ranges in your market.

In an ideal world, you wouldn't sell a house at all while prices were falling. But if you must, experts agree that it's best to act quickly, before prices slide further.

Often, that means gritting your teeth and offering the best price to get potential buyers in the door. Here again, getting your agent to tap pending-sales data can pay off. Pay attention to the pricing per square foot for homes similar to yours, and set your asking price at the bottom of, or even below, that range.

South Florida broker Mike Morgan recommends that his clients take 1% to 3% off the price every week until they get an offer.

Another way to motivate a potential buyer: Motivate his broker. In a typical sale, a commission of 6% is split evenly between the buyer's and seller's agents. But you can ask that a higher percentage go to the buyer's agent, or even offer extra money out of your own pocket, so that she'll steer customers your way.

David Lereah, chief economist of the National Association of Realtors, expects that nationwide prices will bounce back in 2007.

He adds that one-third of the country is primed for growth -- a claim that Mr. Winzer's research supports. And if you don't have to sell your home, the short-term turmoil underscores the point that it seldom makes sense to obsess over your home's value the way you'd obsess over, say, your Google shares. Better to sit back, enjoy your mortgage-interest tax deduction, and wait for better days.

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Home Builders, Developers See Light at the End of the Tunnel

2006-11-29T08:10:00.000-08:00

By Rex Nutting

From The Wall Street Journal Online

Home builders' confidence in the U.S. market improved for a second straight month in November, an industry trade group said Thursday.

The housing market index improved to 33 in November from 31 in October, the National Association of Home Builders reported. The index had fallen for eight months in a row to a 15-year low of 30 in September.

The index shows that about one-third of builders are optimistic about the housing market. A year ago, the index was at 61 and it peaked at 72 in June 2005.

Economists surveyed by MarketWatch had been predicting the index would remain at 31. See Economic Calendar.

"More and more builders are seeing light at the end of the tunnel," said David Pressly, president of the NAHB and a builder based in Statesville, N.C. "Our members are telling us that the market is steadying after a significant downward correction. We look for sales to stabilize and gradually move up in the coming months."

"The data tell us that the worst of housing is behind us," said Robert Brusca, chief economist for FAO Economics. Realtors also see "signs of recovery."

"It is still too soon to definitively confirm" that a bottom has been reached, wrote Brian Carey, an economist for Moody's Economy.com.

The report comes one day before the Commerce Department discloses data on U.S. home construction for October. Economists are looking for a 4.5% decline in housing starts to a seasonally adjusted annual rate of 1.69 million.

All three components of the NAHB index moved higher in November:

The single-family sales index rose to 33 from 32.
The future sales index rose to 46 from 42.
The traffic of prospective buyers' index rose to 26 from 23.

The index improved in two of four regions, and it fell in the other two.

Specifically, builder confidence in the Northeast improved to a reading of 37 from 35, while the index rose to 40 from 38 in the South. Confidence fell to a cyclical low of 34 in the West and matched a cycle low of 16 in the Midwest

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New Home-Building Activity Falls to Lowest Level in 6 Years

2006-11-29T07:49:00.000-08:00

By Jeff Bater

From The Wall Street Journal Online

New home-building activity in the U.S. resumed its decline in October, tumbling to its lowest level in six years as builders dealt with bloated inventories of unsold property.

Housing starts decreased by 14.6% to a seasonally adjusted 1.486 million annual rate, the Commerce Department said Friday. Building permits, an indicator of future building activity, fell a ninth consecutive time.

The government also lowered its original estimate for September starts, a number some economists considered a fluke. Construction rose 4.9% to 1.740 million in September, revised from an originally reported 5.9% climb to 1.772 million. Starts fell 5.7% in August, 4% during July, and 6.1% in June. Construction rose 6.6% in May.

Economists had expected a less-severe drop in October. The median estimate of 22 economists surveyed by Dow Jones Newswires was a 5.6% fall to a 1.672 million annual rate. The 14.6% decline was the largest since 16.1% in March 2005, and it carried starts to their lowest since 1.463 million in July 2000.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the housing data were a "sharp poke in the eye" for those who had argued that September's jump in housing starts was a sign that the housing-market slump was nearly over.

The slowdown in housing this year stands in stark contrast to the past five years, when the lowest mortgage rates in four decades had powered a housing boom that pushed sales of both new and existing homes to five consecutive records.

In a sign that starts will likely continue to fall, October building permits dropped 6.3% to an annual rate of 1.535 million; the last month permits rose was January. Economists expected permits would be up by 0.1% to 1.640 million. Permits decreased a revised 5.2% last month to 1.638 million, compared with an earlier estimated 6.3% drop to 1.619 million.

Despite the worse-than-expected drop in the headline number, Mr. Shepherdson sees a rebound in the next month, based on the less-volatile building-permits data. "The key point though," Mr. Shepherdson wrote in a note to clients, "is that housing is set to be a big drag on fourth-quarter gross domestic product, more than in the third quarter's -1.1%. It's not over."

The housing weakness trimmed a full percentage point off economic growth in the July-September quarter, when the economy expanded at a tepid 1.6% rate. Housing is expected to continue acting as a drag over the next year but analysts believe the adverse effects of falling sales and construction cutbacks will not be enough to pull the country into a recession.

And, even as there were signs that the housing slump isn't over, there were some glimmers of hope that the slide may be beginning to level off. The monthly survey of builder sentiment edged up slightly in early November following another small increase in October. It marked the first back-to-back improvements in builder sentiment since June 2005.

Regionally, housing starts fell 11.7% to 242,000 units in the Midwest, 26.4% to 705,000 in the South, and 2.1% to 374,000 units in the West. The only region showing an increase in building activity was the Northeast, where starts jumped 31% to 165,000 units.

Breaking down the rate of 1.486 million overall U.S. starts in October, single-family housing fell 15.9% to 1.177 million units. Construction of housing with two or more units decreased by 9.1% to 309,000; within that category, groundbreakings of homes with five or more units -- or multifamily -- fell 14.7% to 266,000 units.

An estimated 131,300 houses were actually started in October based on figures unadjusted for seasonal factors. An estimated 130,400 building permits were issued last month, also based on unadjusted figures.

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Blackstone Reaches Pact to Buy Largest Office-Building Owner

2006-11-29T07:46:00.000-08:00

By Dennis K. Berkman and Jennifer S. Forsyth and Ryan Chittum

From The Wall Street Journal Online

The real-estate arm of private-equity firm Blackstone Group last night reached a $20 billion deal to acquire Equity Office Properties Trust, the nation's largest office-building owner and manager, as Wall Street wrapped up at least $52 billion of deals on one its biggest deal-making days ever.

If completed, the deal to take Equity Office Properties private would be the largest such transaction in history -- and possibly the largest real-estate deal ever -- after factoring in the company's $16 billion in debt.

Even so, it was just one of a parade of multibillion-dollar deals expected to be announced by this morning. They include a $25.9 billion takeover of mining concern Phelps Dodge Corp. by Freeport-McMoRan Copper & Gold Inc.; a $3.3 billion takeover of U.S. Trust, the private-banking arm of Charles Schwab Corp., by Bank of America Corp.; and a $2.5 billion agreement by Russian steelmaker Evraz Group SA's to acquire Oregon Steel Mills Inc. Last night, Wall Street bankers were discussing the possibility of still more major deal announcements today.

The continuing boom in deal making stems from several factors, including a world-wide glut of capital. Having restructured after the stock-market meltdown earlier in the decade, corporations have built up massive war chests they can use for acquisitions. Interest rates are also near historic lows, giving buyers ample access to the credit they need to pull off massive transactions. Meanwhile, private-equity firms, which seek to acquire companies and resell them at a profit, have been showered with tens of billions of dollars by investors including pension funds, state retirement plans and wealthy individuals.

Merger expectations across all sectors of the economy have helped drive up the bellwether Dow Jones Industrial Average by 15% this year, a run-up that has in turn inspired more deal making. Meanwhile, the stigma of botched marriages, such as America Online Inc.'s $160 billion merger with Time Warner Inc., appears to have retreated for the time being.

Blackstone will pay $48.50 for each share of Chicago-based Equity Office Properties. That represents about an 8.5% premium to the company's closing price of $44.72, down 13 cents, in 4 p.m. New York Stock Exchange composite trading. The deal is expected to close in the first quarter of next year.

The deal, if completed, would break the record for "take private" transactions set earlier this year by the recently completed buyout of hospital operator HCA Inc. for $21.3 billion, plus $11.7 billion in debt, by a group of buyout firms and the company's founding family. The record could be eclipsed again by year end as private-equity firms, with their massive war chests, take aim at publicly traded companies once considered too big or too independent-minded to be takeover targets.

Over the past year, big corporations have mostly sat on the sidelines of the acquisition game, but yesterday's deal making suggested they may be becoming more active. Flush with years of accumulated cash and driven by investors eager for growth opportunities, they are uncorking a slew of largely cash transactions.

Bank of America is expected to say it is paying $3.3 billion for U.S. Trust, according to people familiar with the situation. The deal would vault the giant consumer bank from also-ran status in the increasingly lucrative business of managing rich people's money to the top tier of private banks. While Bank of America is a colossus in retail and corporate banking, it has been unable to top rivals J.P. Morgan Chase & Co. and Citigroup Inc. in private banking.

Freeport-McMoRan Copper & Gold's cash-and-stock agreement to acquire rival Phelps Dodge, which would create North America's largest copper producer, marks a huge long-term bet that metals prices will remain strong. Freeport, which is based in New Orleans, said it pursued the deal to gain the scale it needs to compete among other miners for equipment and prospects amid increased Chinese demand for commodities and high prices. The combination continues a recent streak of big-ticket mining deals, as the industry scrambles to secure new production and mine developments.

Russian steelmaker Evraz Group SA, meanwhile, is near a deal to acquire Oregon Steel Mills, the latest step in the global consolidation that is transforming the once-moribund industry. Russian metals companies have long wanted to play a larger role in the industry's consolidation. Highlighting those ambitions was an agreement by Russia's OAO Severstal earlier this year to acquire Arcelor SA of Luxembourg, the world's second-largest steelmaker by output, which was fighting off a hostile bid by larger rival Mittal Steel Co. Mittal eventually topped Severstal and forged a friendly deal with Arcelor.

This year's huge deals have been good news for the Wall Street bankers who arrange the transactions and expect to enjoy what may be the largest pool of year-end bonus payments in the history of U.S. finance. Amid their euphoria, however, there are signs the three-year-old wave of mergers could be headed for some trouble.

Banks, for instance, are willing to finance ever-larger deals with less-stringent terms and covenants. Companies are pursuing increasingly complicated transactions, such as CVS Corp.'s $21.3 billion agreement to purchase pharmacy manager Caremark Rx Inc. Holders have sent shares in both companies down since the two announced their deal on Nov. 1. And the prices paid by private-equity acquirers lately have been significantly higher than over the past three years.

The real-estate sector -- which has been home this year to $264 billion worth of deals, up nearly 50% from 2005, according to data from Thomson Financial -- has been one of the most fertile for acquisitions.

Blackstone has emerged as the sector's most formidable investor in recent years, purchasing six publicly traded hotel groups and three commercial real-estate firms. The private-equity firm's investment thesis for office buildings has been relatively simple: Take comfort in the fact that office locations are expensive to replace, and expect that corporate rents will rise as part of general economic growth nationwide.

Its latest target, Equity Office Properties, either on its own or through partnerships, owns more than 590 office buildings in 25 markets. Among its more notable properties are the AIG SunAmerica Center in Century City, Calif., the Civic Opera building in Chicago and the Rowes Wharf building in Boston. The property company is organized as a real-estate investment trust, or REIT. REITs are public companies that acquire and manage real estate and pay no corporate income taxes if they pay out 90% of their net income as dividends.

Speculation about Equity Office Properties' prospects for going private has simmered since founder Samuel Zell admitted to a "flirtation" with the California Public Employees Retirement System last spring. But some investment bankers and analysts discounted the speculation, believing Equity Office's debt load was too high. Even as the company has worked to reduce debt and reduce its holdings in weaker markets, Michael Knott, an analyst with Green Street Advisers, a real-estate research and trading firm, placed the chances of Equity Office being bought at only 20% as recently as two weeks ago.

Mr. Zell isn't expected to remain an active part of the company, people familiar with the matter said. Equity Office said last night that neither management nor its trustees are participants in the buying group. And the sale could reduce Mr. Zell's influence in the REIT business. Equity Office Properties was the first real-estate company in the Standard & Poor's 500-stock index.

That Equity Office Properties would turn its back on the equity markets is in itself momentous, as Mr. Zell had championed the concept of publicly traded real-estate companies. He evangelized for the REIT structure as a way to make real-estate a liquid investment and increase transparency in what had been a notoriously behind-closed-doors business.

That lack of disclosure helped contribute to a broad industry collapse in the late 1980s and early 1990s, costing the government billions of dollars to bail out crippled savings and loans and helping tip the economy into recession. Mr. Zell argued that making real estate public would help the boom-and-bust industry moderate its cycles. More crucially, Mr. Zell also promoted REITs as a better way to gain access to capital financing, the life-blood of real-estate owners and developers, than private deals.

But with the massive amounts of private capital that are available to real-estate developers and the alternative financing methods, such as commercial mortgage-backed securities, that have boomed in the last five years, real-estate companies have become less enamored of public markets.

Equity Office Properties, which went public in 1997, has been the most prominent office-building REIT, but hasn't been much loved by Wall Street analysts. For years, the company argued that a big REIT could benefit from economies of scale across a nationwide market, even as some smaller REITs outperformed it by exploiting a more intimate knowledge of just a few markets. Over the past five years, Equity Office Properties has underperformed its office peers and the real-estate sector as a whole. Its five-year return, including dividends, is 108.6%, compared with 149.5% for all office REITs, according to SNL Financial. The average for all REITs is 182.8%.

In an interview last summer, Mr. Zell pointed out that Equity Office Properties had no barriers such as a shareholder rights plan -- or so-called poison pill -- to prevent it from being sold, and that he would consider any offer at any time. "We are very shareholder friendly. We always do whatever is in the best interest of shareholders," the REIT's chief executive, Richard Kincaid, said in a conference call with analysts last month, in response to a question about the possibility of a takeover.

In the past few years, Mr. Zell, though remaining chairman, has ceded day-to-day responsibility for running the company to Mr. Kincaid. And much of his interest and time has been more focused on his private pursuits, particularly his international investments. Nonetheless, he remained the face of the company and was in great demand at REIT industry functions, where a younger generation of real-estate moguls waited to hear his latest ideas about the state of the industry. As of September, Forbes ranked him as the 52nd richest American, with a net worth of $4.5 billion.

Merrill Lynch & Co., and law firm Sidley Austin are advising Equity Office. Goldman, Sachs Group Inc., Bank of America, Bear Stearns Cos., Blackstone Corporate Advisory, Morgan Stanley and law firm Simpson Thacher & Bartlett are advising Blackstone. Goldman, Bank of America and Bear Stearns are leading the financing.

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ERA® International Collection

2006-09-19T07:50:00.000-07:00

Where do you find luxury? It is not uncommon to find it reflected in the affluence of a magnificent home. In today’s real estate market, finding just the right luxury home in a gracious neighborhood can seem like a challenge. If you are looking for a luxurious home, then it is crucial to choose a sales professional who specializes in the high-end market.

ERA^®International Collection^sm home specialists are trained and certified to provide customers the best quality service, project just the right image, and utilize unique marketing, advertising and communication skills essential to the buying and selling of luxury real estate.

High-end buyers are individuals, each looking for a certain home that is suited to his or her own impeccable style and taste. International Collection^sm sales professionals mirror their customers’ appreciation of a broad range of architectural tastes, historical styles, and selective home criteria. To make finding these homes less tedious, the International Collection^sm provides customers an exclusive Web site that puts cutting-edge technology at their fingertips, to search for real estate listed in the $1 million scale and above, as well as properties in the top 10 percent of their respective marketplaces. The International Collection^sm also specializes in historic properties. Our real estate professionals are certified with a special designation from the National Trust for Historic Preservation. Those not buying a high-end home, but selling one, can count on such resources to speed up their sale as well.

Consumers can enter the Web site directly by visiting www.ic.ERA.com, or link to it from the home page of www.ERA.com by clicking on the International Collection^sm logo. A photo and description of the property appears, and consumers can click on the listing for additional information. Moreover, most properties on www.ic.ERA.com contain virtual tours of rooms and outside views of the architectural landscape.

Effective communication puts motivated buyers and sellers together to sharpen the search for the most serious prospects. ERA^® International Collection^sm sales professionals have access to a national network of experts who can help them locate the kind of distinctive properties desired by those in the luxury market. Their approach is customized for the unique characteristics of each location in which the customer is looking.

Ensuring that luxury homes are showcased in appropriate style, specialized International Collection^sm yard signs are available through your ERA^®sales professional. A selection of prominent brochures, informational sheets, postcards, stationery and note cards are also available to present the homes in a manner which they deserve.

You deserve the finest service when buying or selling your home. Consider the benefits of the ERA^®International Collection^sm .

Trust ERA. Always There for You^.®

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The New Urban Neighborhood: Brownfield of Dreams?

2006-09-19T07:49:00.000-07:00

By: Rivka Yablonsky

A house in the country will always have its appeal. But lately more homebuyers are preferring the city, for reasons ranging from the sheer excitement of the surroundings, to the rescue of impoverished areas and the preservation of shrinking green space.

One prime area of urban housing growth is the type of site known as “brownfields.” These are often-abandoned commercial and industrial spaces that have outlived their original uses but, with the right environmental cleanup, can be converted to housing or even entire neighborhoods. Older suburban homes and large new developments have lost none of their popularity, but for the right buyer the urban option is one worth exploring.

Clearly, urban living is not for everyone – it usually attracts single professionals and couples without children. But the lifestyle has aspects that would appeal to anyone. Two major attractions are cutting down on a long daily commute to city employment, and taking advantage of the area’s cultural scene.

Convenience like this coincides with the environmental interests of both city and suburban officials: having a population within a few public transit stops or even in walking distance of work and recreation reduces automotive pollution and traffic hazards. And placing new housing in established urban buildings can slow suburban sprawl, with one study showing that, given factors such as pre-existing architecture and infrastructure, every hectare (about two and a half acres) of brownfields that is redeveloped spares 4.5 hectares of green space. Many of today’s homeowners are happy to be part of such preservation, as they enjoy the more personal oasis of abundant room and spectacular views that the modern loft offers.

Of course, the same residents are concerned about the city environment itself. Brownfields can often have unresolved health and safety issues from their former uses. But new grants and other incentives to find and mitigate these problems are promising to accelerate the process of urban revival and put sellers’, buyers’ and lenders’ minds at rest.

Even now, these spaces have proven so popular that developers are applying the term “loft” to structures they have only just built, and buyers are flocking to them. The rush is by no means unanimous – the U.S Census has indicated that three homes are still built in the suburbs for every one built in the cities. But the urban frontier is holding more appeal every day.

Your local real estate professionalno doubt knows of such properties that may have been passed over by many suburban customers but could be perfect for you. Think about what you’re seeking from a home – and from the all-important element of its location – and then speak with a real estate professional about whether the big city should be your next neighborhood.

Author: Rivka Yablonsky is the owner or ERA Othello Realty and a licensed real estate broker/ agent.

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Paying It Forward: How Renters Become Buyers

2006-09-19T07:47:00.000-07:00

By: Rivka Yablonsky

Nothing compares to the feeling of having a place to call home. At one time or another, however, most of us have felt frustration at seeing hard-earned money go into rent every month rather than a more permanent house payment. Renting is most people’s first step toward homeownership, but what do you need to do to realize the dream of owning a home?

Sometimes, it’s not the regular rent-money obligations but other expenses that are the main obstacle in saving. A whole debt-counseling industry has arisen to guide consumers in getting out from under what they owe. Smart saving – not depriving yourself, just ensuring stability and enjoyment over the longest term – involves many moves both major and simple, and can help prepare you for that first down payment.

On the simple end, rediscovering home cooking (and enjoying the leftovers as brownbag lunches) can amount to significant savings as compared to regularly dining out. On a higher level of financial planning, establishing a household budget and sticking to it – including a specific amount set aside for savings every month – can get you to your home-affording goals sooner than you might have imagined.

You may also want to meet with a counselor who can negotiate a lower rate and set a sensible structure for your repayments on credit cards – while advising you how to ease dependence on them. (This not only gets you on your own financial feet, but helps keep your credit rating intact for the very home loan you hope to someday secure.)

There are additional ways to start working toward homeownership. Some sellers will enter into a “rent-to- buy” agreement, in which part of the regular rent is considered an installment of the home’s down payment, which, once built up, can help you obtain financing. Low-income renters may also qualify for federal “Section 8” vouchers which are paid to the landlord, subsidizing your rental expenses and helping you save for a permanent home.

Just as some renting options allow you to set funds aside, some types of purchases can help defray your costs even as you fulfill the stepped-up obligations of homeownership. Pooling resources with other buyers to occupy a two-family home could be one; buying such a home by yourself and renting one half of it could be another.

Even if your economics remain challenging, there are low-down-payment mortgages, and other forms of financing for special circumstances, available to buyers who meet the right criteria. Your local real estate professional can help you navigate through these options (accessing such resources as ERA Mortgage). He or she can also identify what government help might be available, and generally counsel you on your readiness to be a buyer – and on what else you might need to do to get there. If you consult the right sources and seek common-sense strategies, then your every move in the renter’s world can be pointing you home.

Author: Rivka Yablonsky is the owner of ERA Othello Realty and a licensed real estate agent and broker.

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Making Your (Dog) House a Home: Moving With Less Stress for Your Pets

2006-09-19T07:45:00.000-07:00

By Rivka Yablonsky

Anyone who has ever moved knows that there are seemingly a million and one tasks to remember, from selecting a moving company to switching off utilities. All of the adjustments and changes involved in moving to a new home can be even more challenging when you have a pet. But there are ways to prepare to minimize the stress to your furred, feathered and finned friends.

The preparation process can be as crucial a stage as the move itself – familiar settings are disrupted as furniture gets moved and belongings packed away. A cat or dog will wonder who all these strangers are (potential buyers, inspectors, movers, etc.) and what’s happening to the pet’s familiar “territory” (changed location of litter boxes, favorite sleeping places, etc.) – which is how an animal sees your home.

For that reason, it’s actually a good idea to change the “landscape” a little more – on the animal’s behalf. Designate a room to remain just for your pet while the move proceeds around them, with their familiar toys, food and water bowls, sandbox (for cats), and so forth. This way they’ll have a reassuring (if rearranged) space to spend the moving process in. It will also minimize the chance of escape by anxious animals while people are coming and going from your house more than usual, and reduce the danger of a scared cat hiding itself in the moving boxes with potentially tragic results.

Such precautions help calm your pet for the developments ahead – the move itself is stressful for pets and people alike, though this too can be minimized. If you’re flying, check ahead to see which airlines allow pets as “carry-ons.” The cargo bay is a possibility, but will isolate and possibly frighten your pet. In either case, anxiety and exposure to the elements will be lessened if you can book a direct flight.

If you drive, make sure you know where to find hotels that allow pets rather than leaving them in the vehicle (never a good idea in terms of safety or exposure to changing temperatures), and, especially with a dog, schedule frequent “rest stops” for both animal and owner. For birds, rodents and fish, “homes away from home” can work well – transport your bird or hamster in its cage, and your fish in a plastic container of water, roomy enough for the number of fish and changed regularly for long trips.

It’s always a useful idea to consult a veterinarian for all the fine points, and a qualified real estate professional to help with all the questions a house-move poses; pet-compatible services are one of many matters a real estate sales associate can look into for you. With some advance planning and help from local experts, Fido’s longest walk can have a happy destination.

Author: Rivka Yablonsky is the owner of ERA Othello Realty and a licensed real estate broker/agent.

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Getting It Right the Second Time: To Remodel or Not to Remodel

2006-09-19T07:33:00.000-07:00

By: Rivka Yablonsky

Sometimes the house that was once your dream home is challenged by the changing realities in your life. Then it’s time to decide whether to change the house you’re in, or just change houses.

Your family may not be the same one that originally moved in – kids arrive, or people start to work more at home, and the house suddenly seems smaller or unsuited to new needs. Or maybe your new-home search has just been taking too long, and you’ve decided to try and make your current one “new” instead.

This is a major undertaking that calls for serious consideration before moving forward. Are you so happy with your current neighborhood that you’d like to do as much as possible to avoid moving, or are you ready for a change of area? Can your family take the strain, and your business the disruption, of a project that will demand a significant shift of routine and even displacement of living arrangements?

There are practical considerations to add to these emotional and financial ones. You’ll want to find out if the changes you have in mind are compatible with local planning, zoning and building rules. And you’ll want to consult with designers and architects as to the feasibility – and approximate cost – of those changes. A related and crucial consideration is the future value of your house for resale if you remodel but still later wish to move. This is important because increasing your home’s resale value through renovation is not necessarily a given.

The reason is not just that remodeling can compromise a home’s aesthetics and efficiency – though this is a significant concern; rather than buying another home to suit new needs, remaking one forces you to work around existing systems (such as plumbing) and can lead to eccentric and unwieldy spaces. The consequences of the renovation working “too well” could be equally disadvantageous to you: a house that is much bigger than others near it, or otherwise uncommon in its neighborhood, can disrupt its location and be priced beyond what anyone looking in that area is willing to pay.

To make sure all of your domestic dreams are good ones, do some planning and consider consulting a real estate professional (who can help with everything from architect referrals to advice on what renovations are right for your market). This will make all the difference between building to a problem and modeling homeownership happiness.

Author: Rivka Yablonsky is the owner of ERA Othello Realty and a licensed real estate broker/agent.

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What Is A Real Estate Purchase Option?

2006-06-22T09:40:00.000-07:00

by Gregory Walding

A real estate purchase option is a document that gives someone the right to purchase a piece of property at a fixed price during the term that the real estate purchase option is in effect. During the option period, the owner can not sell the property to anyone else and must sell the property to the purchaser of the option if the purchaser desires the property. The purchaser has the right, but not the obligation, to purchase the property. The purchaser can let the option expire without purchasing the property. Your only lose, in this case, would be the price you paid for the real estate purchase option.

There are three things you must determine at the time that the option is created for the property.

1. How much will you pay for the property if you decide to purchase it? It does not matter if the value of the property goes up or down during the option term, you will be able to purchase the property for the price agreed upon in the option. If the value goes up, you win, but if the value goes down, you should let the option expire and just purchase it for the going value at the time. Your maximum loss is the amount you paid the owner for the real estate purchase option.

2. How long is the term of the option? The term is a fixed amount of time and depends on what you and the owner will agreed upon. Most option contracts have a one or two year term but it can be any amount of time that you agree.

3. How much are you willing to pay for the option? You must purchase the option from the owner of the property. This money belongs to the owner no matter if you decide to purchase the property or let the option expire.

To prevent the owner from selling the property while the option is in effect, you can record the real estate purchase option with the county courthouse. However, you may want to consider the consequences of this action as some mortgage companies will call the loan due if they see a purchase option for the property as they consider it a sale. You should use your judgment for this.

Once you own a real estate purchase option, you control the property. Also, the real estate purchase option is also an asset that may be sold, or assigned to another person if you wish. Look for the next article to see what you can do with your property now that you have secured the purchase option.

About the Author

Greg Walding owns W & P Property Management and has a gained alot of knowledge in the area of securing property with very little money down. check out some of the information he has gathered at http://www.extremepersonalfinance.com.

Softer Housing Sector Is Seen, But Data Don't Point to Collapse

2006-06-22T09:36:00.000-07:00

By Christopher Conkey and Michael Corkery
From The Wall Street Journal Online

U.S. home builders stepped up the pace of new construction in May after three months of declines, a sign that the housing market is softening but not collapsing.

The Commerce Department said housing starts rose 5% last month from April to an annual rate of 1.96 million units, but were down 3.8% from a year earlier. Building permits, an indicator of future trends in new residential construction, fell 2.1% last month and were running 8.5% lower than a year earlier.

The faster pace of new-home building in May is confirmation that the housing market is experiencing what Federal Reserve Chairman Ben Bernanke recently described as an "orderly and moderate" correction following last year's peak. That bodes well for the economy, though analysts anticipate more weakness in the housing market during the rest of the year.

"Housing starts surprised to the upside, but May's rebound is almost certainly a temporary pause in the downward trend," said Haseeb Ahmed, U.S. economist at J.P. Morgan Chase & Co. Other economists were puzzled about why builders would keep ramping up the supply of new homes when demand is on the wane. Daniel Oppenheim, an analyst at Bank of America Securities, said the gap between starts and sales traffic was at the "highest level in at least the past 20 years," a development that would lead to "even higher inventory and more pricing pressure."

There are proliferating signs that builders are responding to widespread expectations that the housing boom is ending. Robert Toll, chief executive of Toll Brothers Inc., the luxury-home builder based in Horsham, Pa., said the industry also faces an increasingly negative psychology among prospective buyers, despite historically low interest rates and a relatively strong economy. He attributes some of that negativity to media reports about the housing slowdown. "If you go to a party and tell people that you bought a new house, people look at you like you are crazy," he said.

Toll Brothers last month reported that orders for new homes fell 32% in the latest quarter. On Monday, KB Home, the big Los Angeles builder, said it had laid off some 7% of its workers.

In May, starts of single-family homes rose 2.1% from April, but were 7.6% lower than a year earlier, with the declines particularly pronounced in the Midwest. The South is the only region where the rate of new-home construction is up from a year earlier.

One bright spot for builders has been the construction of apartment buildings. Housing starts for residential structures with five or more units leapt 25.4% in May and were nearly 15% higher than a year earlier.

Land Prices Increasingly Drive Housing Markets, Fed Study Says

2006-06-22T09:35:00.000-07:00

By Campion Walsh
From The Wall Street Journal Online

WASHINGTON -- Housing prices in big U.S. cities have increasingly reflected underlying land value rather than building value since the mid-1980s, and that trend is likely to continue, according to a Federal Reserve study released Tuesday.

In the 46 biggest metro housing markets, land's share of property prices increased on average to 51% in 2004 from 32% in 1984, according to the study authored by Michael Palumbo, chief economist in the Fed's flow of funds section, and Morris Davis, a former Fed economist now at the University of Wisconsin.

The increase was especially sharp during the 1998-2004 housing boom, when land's share of property values gained 11 percentage points, the study said.

"With residential land having appreciated so significantly over the past 20 years around the country, the future course of land prices is expected to play an even more important role in governing home prices -- in terms of average appreciation rates and volatility -- in the next two decades," according to the study.

The report concludes that land's increased share of property values "could mean faster home-price appreciation, on average, and possibly larger swings in home prices."

Even if land appreciation returns to the slower pace seen before the 1998-2004 boom, cumulative gains in land value mean that house prices might rise more quickly on average than they did before the boom, it said.

Regionally, relatively expensive housing markets have seen somewhat bigger increases in land's share of prices in the 1998-2004 period, but the current housing boom has been marked by rapid appreciation of residential land "just about everywhere," according to the report.

The Fed study also found that at some point since 1984 most large U.S. cities have gone through one pronounced price cycle in which residential land lost value for several years, usually after several years of rapid appreciation.

"In real terms, land prices have generally taken several years to go from peak to trough, and the subsequent recovery from these price declines has generally occurred at a more gradual pace," the study said.

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Fee-Based Consultants Gain A Foothold in Home Sales

2006-06-22T09:34:00.000-07:00

By Thomas Kostigen
From Marketwatch

There's a new breed of real estate agent in town, agents who are marketing themselves as consultants. They boast that they do not take commissions and that they offer services for savvy consumers.

It's an interesting concept in today's real estate market where agents are slashing commissions to garner new business. Volume picks up the slack in lost income for agents willing to shave a percentage off their commission, or so they hope.

The average commission for a real estate agent on residential sale is 5%, a full percentage point lower than a decade ago. Some agencies offer discounted commissions as low as 3%. And now this: pay as you go service, or a la carte real estate consulting.

Ryan & Associates Realty in San Francisco says "with a consultant, you pay for just the services or expertise you need, and it's a customized set of services for each consumer. Some consumers may choose to work with a real estate consultant by the hour, some would like to choose a la carte services, and others would like to bundle a few tasks/services together. It's possible the consumer will complete some tasks on his or her own. The biggest plus in consulting services is that the consumer now has choices."

The agency is quick to note that the commission-based system as practiced by most Realtors may be less expensive. But it all depends on the consumer and his or her needs. A for-sale-by-owner scenario that needs a little marketing support may end up saving the seller thousands of dollars, especially in markets where multiple offers are common.

Fee-for-service, as these real estate consultants call their practice, isn't discounting. They say discounters depend on volume and mass production, not quality or service, on which they pride themselves.

These are the services Ryan & Associates says it provides: first visit, listing appointment, installing sign and/or lock-boxes, photography, brokers' tours, advertising preparation and placements, preparation of brochures and flyers, Internet advertising, graphics, weekly communications, scheduling appointments, follow-up on showings, negotiations, meeting with inspectors and appraisers, reviewing settlement papers and closing. In other words, exactly the services most commission-based real estate agents provide.

The total estimated cost for all this is about $7,000, or the price of a traditional commission on $140,000 house.

The fee-based firm also offers a menu of services for buyers: traditional commission, an hourly fee with 100% rebate or a "risk-sharing plan" that entails a $1,000 retainer, another $2,000 due upon purchase and sales agreement and when more than 20 hours of professional services is billed, $100 per hour and is due at closing with the balance of the real estate commission is rebated.

That scheme could add up to far less than what a traditional commission would be on a home sale -- but real estate professionals say an attorney would most certainly have to also be hired to review the maze of closing documents anyone who has bought or sold a house knows come with a sale. And that legal fee could push costs up dramatically.

What counts most?

Real estate professionals are conflicted about the fee versus commission proposition. Some say it's about the person, and others say it's about the numbers.

Davis Paris, a former Morgan Stanley real estate executive and now a private developer as principal of ParisWest in Venice, Calif., says on the one hand "you want somebody who can get you that crazy price," yet on the other hand, the "market determines much of the price."

He points to the widely followed Multiple Listing Service), which features home sale price information and is generally available to the public. "The information is all there," he says, "but sometimes you need someone who understands more."

Whether fee or commission then really doesn't matter; it's the real estate professional and service you get that counts, if indeed an intermediary is needed at all.

Wall Street has been struggling with this same fee versus commission debate. According to Boston-based Financial Research Corp, 50% of stock brokers' compensation comes from commissions on trades, the rest from fees. And a Rydex Advisor Benchmarking Research study says, "the share of income generated by commissions is shrinking."

Fee-based financial advisers have always been associated with wealthy clients. Wealthy clients with more money know they can command lower fees and/or discounts.

With home prices soaring, it looks like the same power is being handed to real estate buyers and sellers. The question is whether they'll choose to use it.

http://www.realestatejournal.com/

Housing Starts Went Up in May, Indicating a Moderate Slowdown

2006-06-22T09:30:00.000-07:00

By Brian Blackstone
From The Wall Street Journal Online

Housing starts increased for the first time since January last month, suggesting that the U.S. housing sector, though moderating, is doing so in an orderly fashion despite rising interest rates.

"Although we believe the housing market has clearly peaked, we expect a moderation in activity rather than a sharp decline, and we view this report as supporting this thesis," Bear Stearns U.S. Economics said in a research note.

May housing starts rose 5% to a seasonally adjusted 1.957 million annual rate, the Commerce Department said Tuesday. Housing starts in April dropped 5.5% to a 1.863 million rate, which was revised up from an original estimate of a 7.4% decline to 1.849 million.

May building permits, which are seen as an indicator of future activity, fell slightly. Housing starts were down 3.8% from May 2005 levels. Building permits were 8.5% lower from a year earlier.

Last month's housing starts data were well above Wall Street expectations. The median estimate of 15 economists surveyed by Dow Jones and CNBC had housing starts up 1.7% to a 1.88 million annual rate.

Tuesday's housing figures come on the heels of data showing building sentiment continues to wane.

The latest National Association of Home Builders confidence index fell four points to an 11-year low in June. NAHB expects single-family housing starts in 2006 to decline about 9% versus 2005.

According to the Federal Reserve's latest studies of regional economies, known as the "beige book" reports, "residential real estate markets continued to cool across much of the country -- with most districts reporting slower homebuilding and sales of existing homes."

With core inflation rising and economic figures showing continued growth, Fed officials are widely expected to raise interest rates a 17th-straight time, to 5.25%, when it meets in late June.

Tuesday's government report on housing starts showed permits for future building dropped by 2.1% in May to a 1.932 million annual rate. Permits had been projected by economists to fall 2% to 1.933 million.

Regionally, home construction last month rose 8.5% to 960,000 in the South and jumped 15.8% to 520,000 units in the West. Starts climbed by 1.7% to 183,000 units in the Northeast and dropped 15.8% to 294,000 units in the Midwest.

Breaking down the rate of 1.957 million overall U.S. starts in May, single-family housing rose 2.1% to a rate of 1.586 million units, while starts of housing with two or more units increased by 19.7% to 371,000 units. Within that category of two or more units, groundbreakings of homes with five or more units -- or multi-family -- increased 25.4% to 321,000 units.

Nationwide, an estimated 189,300 houses were started in May based on figures unadjusted for seasonal factors. An estimated 182,700 building permits were issued last month, also based on unadjusted figures.

Sell Your Home Faster With A Pre-Listing Home Inspection

2006-06-06T14:39:00.000-07:00

By George Scott

The reports abound about a slow down in the real estate market. Homes are sitting on the market for longer periods of time, and sellers are finding that buyers are more concerned with the condition of the home. With more homes on the market to choose from, buyers can afford to walk away from a deal, if the conditions of the home are not to their satisfaction.

How well do you know YOUR home?

Why wait for a buyers Home Inspector to uncover hidden problems, after you have already accepted an offer that could end up costing you thousands in a lower negotiated selling price?

A Professional Sellers Pre-Listing Home Inspection can help you identify critical areas of concern up-front.

You decide whether to perform repairs or disclose during initial negotiations.

Pre-listing Home Inspection Benefits

There are many benefits to having your home inspected before listing. With a pre-listing inspection your home could sell faster and for more money without any renegotiations because results of the inspection will be presented ahead of time. Your potential buyer will be reassured about the condition of the home from the detailed inspection report. A pre-inspected listing will also give you the ability to fix any problems and deal with any issues ahead of time, so there wont be any surprises.

1. Home could sell faster!
2. Home could sell for more money!
3. No more buyers walking away because they think there is a problem with the house.
4. No deal-killing home inspector picking your home apart after the deal is done.
5. No 11th hour renegotiations based on the inspector's findings.
6. No helpless feelings that an inspector has raised an issue that is not a big problem.
7. No more buyers getting cold feet when they find out the home is not perfect.
8. No more buyers walking away because they don't have time for an inspection.
9. No more parade of inspectors through your home before a multiple-offer situation.
10. You choose the inspector based on reputation and credentials.
11. You resolve any differences of opinion before the house goes on the market.
12. You fix any problems you like or recognize the problem and reflect it in the purchase price - take it off the table as a negotiating tool against you.
13. Inspection Report can be made available as an HTML web page link, to be included on your listing agents web site. That way, prospective buyers can see the report in advance.

Many inspectors will come back to re-inspect fixes

If you fix or improve areas noted in the report, many home inspectors will return to the home, to update the report to reflect the current status. This can be a big selling advantage, in particular in a slower market, where buyers are more concerned with condition and value.

As real estate market conditions continue to soften, you need every advantage possible to help your home sell. Dont wait with your fingers crossed, hoping the buyers home inspector doesnt find any problems. Consider a pre-listing home inspection to put you in the drivers seat and to present your home in the proper light.

About the Author:
Scott Home Inspection - A Colorado Professional Home Inspection company serving Denver, Boulder, Fort Collins, Greeley and surrounding areas, including Radon testing, Mold inspector. http://www.scotthomeinspection.com/

Tips on Selling Your Home

2006-06-06T14:35:00.000-07:00

by Khieng Chho

If you had finally decided to move your family into a new place because your new job is asking for it, it may come to a term that you will sell your house. By applying several simple techniques and tips, you can actually sell your home without the help of a real state agent. Since you're moving with your family, selling your home can help in finding and purchasing a new house.

However, in selling your house, it will take hard work and commitment from you. Precisely, you can't always find buyers in an instant. So, you must take the right strategies in order to increase the chances in getting your home to be sold.

Here are helpful tips that can help you in each way:

* You must understand the status of real estate market.

Getting the current situation of real estate status is a great start. You must determine what kind of decisions you will make that can affect the sale of your house. If needed, you ask from real estate agents for considerable guidance.

* Timing .

Timing is one thing that you can't take for granted in the estate market since it comes with its high and lows. If you're not in a hurry to sell your home, you can wait for the right buyer to arrive.

* You can form a team of professionals.

Even if you know how to handle things in selling your house, it is advantageous to have specialized knowledge from sales agents as well as from real estate lawyers. They can help you on matters pertaining to selling and buying agreements.

* Determining the selling price of your home.

The perfect way to determine the right selling price of your home is through a professional real estate appraiser.

* Preparing your house to be sold.

You can set open house days to possible interested buyers. The house must be thoroughly cleaned.

* Spread the news.

You can put a sign board in your front yard that can call attention from passersby. You can also make highlight sheets in outlining key features of your house so that you can distribute those to friends.

* Learn some negotiating skills.

In negotiating, you and the buyer keep on exchanging offers. In discussing the price, it's advised that you know the proper calculations of numbers are correct. If done right, you have the position to negotiate in a firm manner.

* If all fails, go and ask from realtors.

If you didn't get what you're hoping for, you can list your house to any multiple listing services. It will cost you some fee however your house will be exposed to thousands of buyers across the country.

These helpful tips can give you the flexibility you always wanted in selling your home in such a way it could save or make thousands of dollars in your account.

About the Author

Khieng 'Ken' Chho - Online Home Selling Resources. For related articles and other resources, visit Ken's website: http://sell-home.onew3b.net/

http://www.goarticles.com/index.html

Things to keep in mind while buying a home!

2006-06-06T14:32:00.000-07:00

Author: Alex Tonel

Buying a home is really exciting. But before buying there are certain things you must look for and here are they to help you out.

Whenever you are looking to buy a house get a pre-approval document. A pre approval document is needed by the real estate agent to show that you are ready and serious about buying a house. It will add on to the advantages and will empower you to negotiate a better offer to buy the home of your dream.
What are the things you will require to get a pre approval? Just read on:

You should get a copy of you FICO score. Most of the people start looking for a home then applying for a home loan only to find out later that there is something wrong with their credit. Do not let this happen to you. So get a report before finding a home. A FICO report is a tally of your credit score aggregated from the three major reporting credit bureaus. Any negative information such as collections, late payments and bankruptcies can tarnish your score. However you can fix your credit score by paying off the collection accounts, pay your bills on time and paying down any credit cards to lower 40% the maximum limit. In a few months you can raise your FICO score by as much as 20 to 100 points. This means better loans term when applying for a loan. So do not forget to get your FICO score before buying a home.

There are costs in buying and selling a home. If you sell a house prematurely it may prove to be disadvantageous to you. The right alternative can be refinancing. So buy a house for a longer period at least two to three years.

You must aim for a house that you think can afford to buy making the monthly payments. Do not buy a house that is unnecessarily expensive. You should buy a house that is right for you. As house purchase can prove to be your biggest investment you make, hence you would prefer to get a good return in future.

You have to live in the house you are buying so buy it at a location that is convenient to you. When looking for right locations consider good future equity appreciation, safety, a good school district and a nearby freeway access.

Always compare the price of the houses you are going to buy with you neighborhood. Once you have found the house of your choice you must compare its prices with the other houses in that area the price should not differ more than 5 percent than the average cost of the houses in that area.

You must also get a house inspection done before making a deal. This inspection can help you find the damages that may need certain repairing by the seller.

It is always in your hand to crack the best possible deal for yourself. All you need to do is be cautious when making a choice.

Alex Tonel is editor of UK Mortgage Directory and UK Education Director

We have hundreds of listings of homes for sale in your area. If you are interested in buying a house feel free to search through our database. This is a free service and we have a low pressure policy. There is a lot of property for sale in New Jersey.

Home Improvements to Avoid When Selling Your House

2006-06-06T14:27:00.000-07:00

By Amy Hoak

From The Wall Street Journal Online

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

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

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

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

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

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

1. Overexpanding

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

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

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

2. Making your home into something it's not

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

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

3. Changing a room's function

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

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

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

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

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

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

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

5. Underbudgeting

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

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

6. Making unneeded renovations

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

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

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

7. Neglecting maintenance

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

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

Home Prices Up 12.5% in 2005, But Rise Just 2% in First Quarter

2006-06-06T14:24:00.000-07:00

By Rex Nutting

From Marketwatch

U.S. home prices rose at the slowest pace in two years in the first quarter, as some once-hot markets in California saw prices fall.

The Office of Federal Housing Enterprise Oversight said Thursday its home-price index was up 12.5% in the past year and up 2% from the fourth quarter to the first quarter. It was the slowest quarterly gain in prices since the first quarter of 2004. In the fourth quarter, prices were up 13.3% year-over-year and had risen 3.1% quarter to quarter.

"These data show average housing prices still growing stronger than some might have expected," said OFHEO Acting Director James Lockhart. "They do indicate, however, that price growth is moderating in some parts of the country, particularly in areas where prices have been rising the most."

For the first time since 2002, two states -- Iowa and South Dakota -- showed price declines from the fourth quarter to first quarter.

Among 275 metro areas, 53 saw prices decline from the fourth quarter to the first quarter, including some previous hot markets in California.

The fastest price appreciation in the past year has been in Arizona, Florida, Hawaii, Oregon, the District of Columbia, Maryland and Idaho. All saw prices rise more than 20% in the past year. Prices in California were up 19.2% in the past year.

Arizona continued to have the fastest growing prices, but its growth rate fell in half during the first quarter. Prices in Arizona are up 32.8% in the past year. The slowest home price gains were in Michigan, Ohio, Indiana, Nebraska, Kansas and Iowa. All had year-over-year price gains of less than 5%.

In the first quarter, prices in 14 states were rising slower than consumer prices.

Among 275 metro areas, St. George, Utah, had the biggest year-over-year gain at 38.4%. It was followed by Naples, Fla. (37.7%), Fort Myers, Fla. (36.9%), Phoenix (36.5%) and Lakeland, Fla. (35.6%).

Some once-hot California markets cooled. Although prices are still up more than 10% year-over-year, prices declined on a quarterly basis in San Jose, Santa Barbara, Santa Rosa, Sacramento and Salinas.

The smallest annual gains were in Saginaw, Mich. (0.1%), Anderson, Ind. (0.8%), Erie, Pa. (1%), Canton, Ohio (1.2%), and Lafayette, Ind. (1.2%). All five of those cities saw prices falling from the fourth quarter to the first quarter.

The OFEHO home-price index is considered to be the most accurate of such measures because it tracks sales and refinancings of the same property over time, meaning changes in the mix of homes being sold do not skew the reading.

Other home-price indicators also show a marked slowdown. The median price of a new home is up 0.9% in the past year. The median price of an existing home is up 4.2%.

http://www.realestatejournal.com/