tag:blogger.com,1999:blog-79482422856591022772024-02-08T03:03:14.322-08:00Real Estate and Housing Feature ArticlesReal Estate Articles collection from 2003Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comBlogger137125tag:blogger.com,1999:blog-7948242285659102277.post-46120189794825887232007-06-03T21:06:00.002-07:002007-06-03T21:07:39.745-07:00Cashing out<span class="storytease">Reverse mortgages are becoming more popular with older Americans looking to tap their home equity.</span><br /><span class="timestamp"></span><br /><span class="storybyline">By Sarah Max, CNN/Money senior writer<br /><br /></span><p> <b> SALEM, Ore. (CNN/Money) � "House rich, cash poor" is a common predicament for older Americans whose homes have appreciated in value while their incomes have failed to keep up with rising healthcare costs, property taxes and other living expenses. </b> </p> <!--startclickprintexclude--><!--endclickprintexclude--> <p>Rather than sell their homes, many are taking out reverse mortgages, which allow homeowners age 62 and older to borrow against the equity in their homes in one lump sum, via regular monthly payments or, most commonly, with a line of credit. </p> <!--startclickprintexclude--><!--endclickprintexclude--> <script language="JavaScript"> <!-- var clickExpire = "-1"; //--> </script> <p>Although reverse mortgages still represent a fraction of the mortgage market, the number of loans originated in 2004 was more than double what it was the previous year. </p> <!--startclickprintexclude--><!--endclickprintexclude--> <p>"Demand for information on reverse mortgages has increased exponentially," said Bronwyn Belling, a reverse mortgage specialist for the AARP Foundation. </p> <!--startclickprintexclude--><!--endclickprintexclude--> <p> The advantage of a reverse mortgage over traditional home equity loans is that borrowers don't pay principal or interest on their loans until they sell the home or pass away. The downsides are high upfront fees and compounding interest. </p> <center><b>Reversing 101</b></center> <!--startclickprintexclude--><!--endclickprintexclude--> <p>There are three national providers of reverse mortgages, the Federal Housing Administration, Fannie Mae and the Financial Freedom Senior Funding Corp. The most popular reverse mortgage by far is the FHA's Home Equity Conversion Mortgage (HECM). </p> <!--startclickprintexclude--><!--endclickprintexclude--> <p>To qualify for any kind of reverse mortgage, you must be at least 62 years old and own most of the equity in your home. Loan amounts are determined by your age, the value of your house and current interest rates. </p> <!--startclickprintexclude--><!--endclickprintexclude--> <p>A 75 year old with a $300,000 house could qualify for a $193,000 HECM, for example. A 65 year old with a $200,000 house could borrow about $108,000 against the house. </p> <!--startclickprintexclude--><!--endclickprintexclude--> <p>The FHA caps loans based on the maximum FHA mortgage limit for an area, currently $172,632 to $312,895. Fannie Mae has a slightly higher limit, while Financial Freedom loans are designed for more expensive houses and have virtually no limit. </p> <!--startclickprintexclude--><!--endclickprintexclude--> <p>The interest on the HECM, was recently 4.37 percent for loans adjusted monthly and 5.97 percent for loans adjusted annually, according to Peter Bell, president of the National Reverse Mortgage Lenders Association, while Fannie Mae's HomeKeeper carried an annual rate of about 5.88 percent. The Financial Freedom reverse mortgage, which is tied to the 6-month LIBOR index had a rate of 7.92 percent. </p> <!--startclickprintexclude--><!--endclickprintexclude--> <p>Most borrowers, said Bell, opt for a line of credit, allowing them to borrow money as they need it and pay interest only on the amount they draw down. When borrowers sell their homes or pass away, the principal and interest owed on the house is subtracted from the proceeds of the sale. </p> <!--startclickprintexclude--><!--endclickprintexclude--> <p>The interest can add up pretty quickly. A homeowner who borrows $100,000 from the house at today's annually-adjusted HECM rate would owe $200,000 in interest and principal on that loan 12 years from now, and that's assuming rates don't increase. </p> <!--startclickprintexclude--><!--endclickprintexclude--> <p>If the amount due is greater than value of the house, the loss is absorbed by the lender. But that's not common. "Your home continues to appreciate in value," said Bell. "It's not unusual for borrowers to have substantial equity left in their house." </p> <center><b>High up-front fees</b></center> <!--startclickprintexclude--><!--endclickprintexclude--> <p>If you're not sure how long you think you'll stay in your house, think twice about a reverse mortgage. The reason: Up-front fees for a reverse mortgage can easily add up to $10,000 for a $200,000 loan limit, regardless of how long you keep the loan or how much you borrow. </p> <!--startclickprintexclude--><!--endclickprintexclude--> <p>"This is not a loan you would want to get for the short term," said David Carey, senior product manager for Fannie Mae's HomeKeeper. "If you don't hold this loan for five or 10 years you're going to pay a lot of money for it." </p> <!--startclickprintexclude--><!--endclickprintexclude--> <p> Up-front costs for the HECM include: </p> <!--startclickprintexclude--><!--endclickprintexclude--> <p> </p><ul><li>Origination fee equal to $2,000 or 2 percent of the loan whichever is greater. </li><!--startclickprintexclude--><!--endclickprintexclude--><p> </p><li>Mortgage insurance premium equal to 2 percent of the maximum claim amount or home value, whichever is less. (This up-front insurance is waived only if the all of the loan is used to pay for long-term care insurance.) There also is an ongoing annual premium equal to 0.5 percent of the loan balance. </li><!--startclickprintexclude--><!--endclickprintexclude--><p> </p><li>Other closing costs, such as title insurance, and fees for appraisal, credit reporting, escrow, document preparation and recording vary depending on the size of the loan but $1,700 is typical according to Carey. </li><!--startclickprintexclude--><!--endclickprintexclude--><p> </p><li>Servicing fees of $30 to $35 a month, added to the balance of your loan. </li></ul> <!--startclickprintexclude--><!--endclickprintexclude--> Also keep in mind that because you don't pay down your debt until you sell, move or die, the interest you owe could add up to quite a bit over time. Mandatory mortgage insurance ensures that you (or your heirs) don't end up owing more than the house is worth. But it's entirely possible to drain all or most of your home's equity.Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-19375673260006565852007-06-03T21:06:00.001-07:002007-06-03T21:06:44.943-07:00More students sold on studying real estate<div class="spacer14"> <span class="subhead">Like the market itself, real-estate education is hot. But some experts warn this industry is headed for a decline.</span> <br /> </div> <div class="spacer21"> <span class="byline">By Lisa Leigh Connors </span> <span class="staffline">| Staff writer of The Christian Science Monitor</span> <br /> </div> <span class="text">After watching Chicago real estate explode in the past five years, college senior Jorge Lopera was inspired to learn more about the commercial market. Yet when he started at DePaul University three years ago, there weren't many opportunities for undergraduates.<!-- --> </span> <p class="text"> <span class="text">Much to Mr. Lopera's delight, DePaul is offering a new bachelor of science degree in real estate starting this month.</span></p><p class="text"> <span class="text">Now Lopera has six months to squeeze in all the required credits to graduate in June with a double major in finance and real estate.</span> </p> <p class="text">"With the real estate major, you're seeing the whole investment-analysis side," says Lopera, who is enrolled in real estate law and urban-planning development courses. "I'm getting completely different exposure through these courses."</p> <p class="text">Real-estate education is red hot, thanks to a booming real-estate market nationwide. As a result, colleges everywhere are adding new programs and building on existing ones to keep up with industry and student demand.</p> <p class="text">Some experts warn, however, that the market may have hit its peak - and the field could be headed for a decline.</p> <p class="text">"If you went back to the late 1990s, you probably saw very similar situations with classes in the securities industry for stockbrokers or Internet-related enterprises," says Peter Schiff, president of Euro Pacific Capital, an investment firm based in Newport Beach, Calif.</p> <p class="text">"The real-estate industry is going to be one of the worst industries to be associated with in the next 10 to 20 years. We are in a major bubble."</p> <p class="text">Instead, Mr. Schiff says, students should turn their attention to agriculture, horticulture, engineering, and foreign languages, such as Mandarin.</p> <p class="text">"That's where a lot of trading and wealth is going to be emanating from the world," he says.</p> <p class="text">"The US needs to move back to a wealth-producing, manufacturing, and exporting economy."</p> <p class="text">But as long as people demand space for businesses, there will be a market for leasing and selling, determining value, and issuing loans, says Gerard Mildner, professor of urban studies and planning at Portland State University in Oregon.</p> <p class="text">"There's an old saying about the legal profession - they can make money in good markets and bad markets, either forming new companies or managing bankruptcies," says Professor Mildner.</p> <p class="text">"In some ways, the real estate industry is similarly insulated. There's obviously more money to be made in a strong market where you're developing new properties, but not everybody is developing properties. A fair number are managing properties."</p> <p class="text">Last spring, Portland State started offering an undergraduate degree in real estate finance and a minor in real estate development. Mildner was instrumental in creating the university's Real Estate Center and he also helped set up the graduate certificate program.</p> <p class="text">"Sometimes real estate gets overlooked by business schools and undergrads," says Mildner, "perhaps because it's not as sexy as other parts of corporate America. But one of the things that these degree programs can do for people is to help them see over their small segment and broaden their career horizon."</p> <p class="text">That's why Christopher Magalhaes, a junior economics major at New York University, is working toward a noncredit real estate certificate. He may not pursue real estate as a career, but he feels it's crucial to have a good understanding of as many fields as possible.</p> <p class="text">"It's important because I know that some day I may want to buy a house," says Mr. Magalhaes.</p> <p class="text">"I may also want to try my hand in commercial real estate at some point in my life, so I don't want to limit myself." This year, more than 5,000 students enrolled in NYU's Real Estate Institute - an increase of 500 from 2000.</p> <p class="text">While real estate schools specifically train students to sell houses, most college programs concentrate on the commercial end - appraisals, development, investments, and management.</p> <p class="text">About 10 years ago, only about 30 colleges offered real estate degree programs. Today, that number has more than doubled to 62, according to Don Moliver, director of the Real Estate Institute at Monmouth University in West Long Branch, N.J.</p> <p class="text">At Monmouth, professionals can enroll in an MBA program with a specialization in real estate. The school also plans to add an undergraduate degree in the future. "It's something that is growing," says Mr. Moliver, "and I'm pleased to say that if you look at schools that offer real estate, they really are among the best in the country."</p> <p class="text">Although universities are adding to their programs, they have actually been slow to respond to the real- estate boom, says Moliver, because in some circles, the old perception that it's a trade and not a profession still exists.</p> <p class="text">"In the early days, the genesis of it was primarily women, maybe on a part-time basis who were selling houses and the commercial side was only men," he says.</p> <p class="text">"Today, it's a highly competitive industry and most of the people in the industry got their education by the seat of their pants. What we have is a lot of seasoned folks who are saying, 'Let's take these young people who are joining the industry and send them out for training.' "</p> <p class="text">It's evident there is a demand for educated professionals. In the past year, DePaul has received a record number of job listings in the field, from investment to mortgage lending companies, says Susanne Cannon, director of the university's three-year-old real estate center at DePaul.</p> <p class="text">By the end of this academic year, about 300 students will have taken an introductory real estate analysis course already offered at DePaul, up from 266 the year before. At least 50 students now declare real estate as their major.</p> <p class="text">"As industry has moved from the cowboy developer and the small-shop real estate broker into much larger institutional investors, the demand for qualified professionals in all areas of real estate continues to escalate," says Ms. Cannon.</p> <p class="text">This is welcome news for Lopera. When he hears chatter about the real- estate bubble bursting, he doesn't want to believe it. He hopes to one day invest in Chicago condominiums and to buy land in Arizona and Texas and develop it.</p> <p class="text">"I don't see it bursting, but at the same time, I do see areas of Chicago that might be overdeveloped," says Lopera. But if it doesn't work out as a career, "I'll always be able to use the degree for myself because I will personally want to invest in real estate."</p><p class="text"> </p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-47924248318828039342007-06-03T21:05:00.001-07:002007-06-03T21:05:46.585-07:00In hot real estate market, 'rondos' are new trend<blockquote><h4>Low mortgage rates but pricey single family homes? Rental units turned into condos are another option.</h4></blockquote> By ADRIENNE P. SAMUELS, Times Staff Writer<br /><br /><hr noshade="noshade" size="1"> <p> </p><p> Don Madio used to rent his apartment.</p> <p> Now he owns it.</p> <p> Madio, who lives in the Audubon Condominiums in the Feather Sound area, is one of thousands joining the nationwide trend of buying into "rondos," or rentals converted into condos.</p> <p> Rondos are a cheaper and better located option than single-family homes in Pasco County, said the 72-year-old insurance agent.</p> <p> "The only reason I was thinking about (buying) was because the interest rates were so doggone attractive," said Madio, a 15-year renter. "I have a garage, an end unit with a balcony and a fireplace, two beds, two full baths and my own private entrance overlooking the golf course."</p> <p> He is seconds from Interstate 275, across the street from a Publix, near a hospital and in a community where the developer throws New Year's Eve parties for residents.</p> <p> All for $169,000.</p> <p> Five percent of Tampa's apartment stock and 11 percent of Pinellas' have or are expected to "go rondo." That's about 10,300 conversions since 2003.</p> <p> Like a single family home, a rondo's pull comes down to location, price, amenities and quality. That's why Atlantic American Realty Group snagged the Cloisters apartments (now Fountains at Countryside), just north of Westfield Shoppingtown Countryside. Built in the 1980s, the 168-unit complex has concrete firewalls between some units.</p> <p> Each unit is gutted. All pipes, flooring, air conditioning and kitchen equipment are replaced. A butterfly garden, Pilates room and 11-person jacuzzi are planned.</p> <p> Prices range from $101,500 to $157,000 - far lower than $167,000, the median single family home price for Tampa Bay. Forty-one units sold in three weeks.</p> <p> Villa Sonoma, near Tampa's International Plaza, doesn't offer golf lessons or wine cellars. The location and construction is enough.</p> <p> "We've sold 60 percent in just eight weeks," said Michael Caggiano, sales manager.</p> <p> Some conversions are expensive, depending upon location. At the "15 minutes from downtown Tampa" Waterford Luxury Condominiums in Palm Harbor, 1,000-square-foot one-bedrooms start at $150,000. Other models cost up to $237,900.</p> <p> Renovation and construction prices add to the cost of the home - sometimes. Waterford, formerly the Essex Luxury Apartments, is two years old, so there is no need for new appliances or to upgrade anything, said Jon Preciado, sales manager. Eighty of the 170 "as is" units have been sold.</p> <p> Still, not everyone is convinced rondos are a good investment. For one, the units might flood the market, causing a drop in prices and reverting unsold communities into half-rental/half-owner.</p> <p> Others don't think it's wise to spend upward of $130,000 on a tiny apartment with no garage.</p> <p> "The prices are insane," said John Boitano, 60, one of a handful of renters still living at the Cloisters/Fountains at Countryside. (Conversion developers are required by law to allow existing residents to live out their lease.) "If you're going into the $150,000 range, buy yourself a home and get the land."</p> <p> Some buyers also worry about sounds traveling through walls, inefficient windows and roaches from neighbors.</p> <p> Preciado suggests buyers get a home inspection and read the condo documents - which include maintenance fee information.</p> <p> "In every condo conversion I've seen, ultimately you're at the mercy of the original builder," said Preciado. "We have cinder block and some framing (but) unless you have separation between the walls, you're going to hear something.'"</p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-62541799164994836942007-06-03T21:04:00.000-07:002007-06-03T21:05:07.357-07:00A fine mess<h2>House sharing is all about diplomacy, domesticity, and someone else's dirty dishes</h2> <p class="byline"><span>By Leigh Belanger, Globe Correspondent | </span> <span class="date">January 6, 2005</span></p> <p>The last straw was when the cat started using the tub as a litter box. Until then, Melissa Filgerleski, 25, a downtown paralegal, had tried not to make a big deal out of her roommate's living habits. She and a third roommate would "passive-aggressively not do the dishes in the sink," says Filgerleski, "just to see how long they'd stay there."</p><p>Sometimes weeks would pass before Filgerleski addressed her roommate's messes. But when she found cat feces in the tub one morning before work, Filgerleski shook the woman awake and urged her to clean up the mess. The roommate took the incident personally, says Filgerleski, and it wasn't long before Filgerleski began looking for a new apartment -- and a new person to share it with.</p><p>The situation is common. The average age of Boston residents is 31. Talk to any number of Bostonians around that age and you're likely to hear a roommate horror story. There are tales of stolen rent, rampant mold, illicit drug use, and missing food. The median rent for a two-bedroom apartment in Boston was $1,400 in 2003. With thousands of income-restricted students and recent graduates paying off education loans as they begin their careers, many budgets dictate splitting the rent multiple ways. For many young Bostonians, negotiating households and habits is a fact of life.</p><p>Cleanliness is the most common source of conflict in shared housing. For some, like Sam Phinizy, 27, who shares an apartment in Brookline with four others, mess "isn't a big deal," he says. He describes the household as being "pretty laid-back"; as a result, they live in a pretty messy apartment. The living room smells like snack food and dirty socks, and the floor is a jumble of electrical cords, old newspapers, loose change, and piles of clothing. Empty Coke bottles line a windowsill.</p><p>Luckily for the four men and one woman, ranging in age from 19 to 27, household conflict hasn't arisen. It could be due to the uniform standards of the group. "We did have one girl who moved in for a month and was really anal. She wanted a [cleaning] schedule" says Phinizy. "That didn't work out."</p><p>After that experience, says Phinizy, "we just looked for people with common interests." He says that the friendships in the house help relieve any tension that might arise when dishes are piling in the sink for weeks.</p><p>But while some people are eager to live with friends, others have had relationships dissolve as a result of living together. Kelly Andreoni, 23, and her fiance recently found their own place after living with a friend of theirs from college.</p><p>"In the beginning, we sat down and made what we called the Wheel O' Clean," says Andreoni. "We divided the chores into kitchen, bathroom, and living/dining room, and switched every week," she says. While she and her boyfriend did their chores as they came up, the other roommate never did. "I think he expected me to do everything," she says. After months of tension, Andreoni stopped talking to her roommate. "My boyfriend had to be the liaison," she says. After parting ways, Andreoni says that she and the ex-roommate are no longer friends.</p><p>For some, cleanliness comes before friendship. When the situation with her unclean roommate ended badly, Filgerleski, the paralegal, realized a few things. "I learned you really need to be up front with people," she says. "Now I'll say, 'this is my standard and I can't change it, so can you meet it?' " For Filgerleski, common standards are more important than common interests. "I don't need to be your friend," she says. "I need to be able to live with you."</p><p>And the ability to keep house, while a priority, is just one quality people seek in a housemate, be they friends or strangers. "Respectful" and "sane" are among the other qualities most cited by people looking for roommates on craigslist.org, a widely used online housing resource.</p><p>"We look for no drama," says Emily Shull, 29. In her Somerville household of six, candidates meet with the entire group, and "they usually have to come twice," says Amy Jollymore, 33, another resident. They specifically look for busy men or women over 25. "We don't want people thinking this is the center of their lives and they've just inherited a new bunch of buddies," says Jollymore. But members of the household, whose ages range from 28 to 33, agree that it's important to have someone likeable, who fits in, rather than just someone to fill the room. "If we don't find anyone we like," Jollymore says, "we suck it up and pay the rent."</p>As for cleanliness, this group has it figured out: They recently hired a cleaning service.Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-68969122438159855802007-06-03T21:01:00.000-07:002007-06-03T21:04:01.369-07:00The future of homes and housing<div class="spacer14"> <span class="subhead">20/20 foresight: looking to the future</span> <br /> </div> <span class="text"> <i>As we move further into the 21st century, it's natural to wonder what the future will bring: In what kinds of houses and communities will Americans be living in 2020? What kind of jobs will people hold? Will fewer of us be married? Writers Kim Campbell, Clayton Collins, Marilyn Gardner, and Elizabeth Lund sought answers to these questions - and more - from eight experts whose jobs require them to predict what our lives will be like in 15 years. Read excerpts from those interviews in this section.</i> <!-- --></span> <p class="text"> <span class="text"> <span class="divvy">Where do you think we're going to be living in 2020? Are we going to be more suburban or urban? Who will make up these communities?</span> </span> </p> <p class="text">I think it's a combination of [suburban and urban]. Aging will drive where people live. Some people argue that because urban areas have better healthcare, that means more people will move to the city. That may be right, but I don't think that means they're going to be moving downtown. I don't see us having the traditional suburb; I see more satellite cities, all midsized places [near big cities], where people have a combination of their work, their fun, their recreation, and healthcare. It's like being able to have everything that they want in a big city, but not in large doses.</p><p class="text"> <span class="text">The way I can tell you what's going to happen in a city [in terms of inhabitants] is I pay attention to who serves me French fries.... Who is it that's doing the lawn care in your neighborhood right now? [It] tells you ... who the children are going to be attending the schools. It tells you something about the political systems. It tells you about some of the social and political and economic challenges your community is going to be faced with, and obviously that speaks to demographics. The statistics show that in terms of the large urban areas, whites are moving out, blacks and browns are moving in. That's not always the case; there are a lot of blacks who are moving into the satellite communities as well.</span> </p> <p class="text">Ninety percent of all the growth in the population will be minorities between now and the year 2050; 100 percent of all the growth in the workforce will be minorities. So that impacts all of our cities.</p> <p class="text">Between now and the year 2020, there will be a 74 percent increase in the growth of the number of people who are over the age of 50. Guess what the increase will be for the number of people who are under the age of 50? Only 1 percent. When you think about cities, think about where people will live, we cannot underestimate what impact aging will have. Nobody's ever seen this before. It's going to impact the way taxes are levied; it's going to impact the way we fund public schools.</p> <p class="text">The one thing that we have going for us is immigration. The thing is you don't need to wait [until 2050] to really start to see the impact of how much diversity we're going to have. You're going to see it in our cities now, in 2010, 2015, 2020. When you walk into a gas station, listen to the music that's being played. This is where you find out how culture is changing. Pay attention to the kinds of combinations of restaurants that are coming up in your community, the sort of Mexican/Italian restaurants.</p> <p class="text">It's about opportunity, [and] people remaking America all over again.</p> <p class="text"> <i>Nat Irvin II is founder and president of Future Focus 2020, an urban-issues think tank, and a professor of future studies at Wake Forest University.</i> </p> <p class="text"> <span class="divvy">What factors will consumers consider as they approach the designing and purchasing of homes in 2020?</span> </p>People are going to recognize that the McMansions ... of today are going to be traded in for something that's more tailored. It will be a little smaller, because people are already really "getting" that square footage doesn't make them feel better.... It's [about] adapting to lifestyles, eliminating rooms we don't use anymore. <p class="text">Technology in the house of the future is going to be beautifully integrated, but it's not going to be the selling point, per se. If you think about some of the things you've seen at Disney World or Disneyland, they always are visions [out] of the Jetsons. But I don't believe that's what's going to happen.</p> <p class="text">The thing that's going to be the most different is the way we go about "delivering" houses. In 10 to 15 years it will be a thing of the past to have a house built on the lot, stud by stud. It will be a more manufactured product. [As with cars] it will be the design quality that will be why people purchase houses. And they will be delivered in component parts that can be assembled, probably within a week. Through the tools of virtual reality, we will actually be able to "try on" our houses as a family before we build them. And there will be ... architect franchises, if you like, that will assist people in selecting the appropriate house for their site.</p> <p class="text">When we think of "manufactured" we think of limitation, but today you can manufacture anything and have a very wide array of options. The problem right now is that there is sameness.</p> <p class="text">In most houses today people are building a floor plan, and extruding [it] up to the ceiling plane. So it's a two-dimensional idea that gets forced through to an eight- or nine- or 10-foot ceiling. What architects do is design the third dimension, so the heights of everything vary, depending on the activity going on below it. You end up with these cozier places that look out into more open, wider spaces. Like a road map, a [traditional] floor plan tells you how to get ... from one place to another, but it doesn't tell you about the shape of the space. For that you need information about the third dimension. The tailoring of three-dimensional space is what's going to distinguish what we're doing tomorrow from what we're doing today.</p> <p class="text"> <i>Sarah Susanka is an award-winning architect and author of the books 'The Not So Big House' and 'Home by Design.'</i> </p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-6707631904523694922007-05-24T02:51:00.000-07:002007-05-24T02:53:22.370-07:00A Turf War for the Lords of Flatbush<span class="deck"> As soaring property values in New York's Brooklyn draw megabrokerages to the area, street-smart local outfits make service their key defense.<br /></span>For increasing numbers of Manhattanites weary of the big-city hustle and bustle, the quiet, tree-lined streets of Brooklyn have become a welcome alternative. The Flatbush neighborhood brownstones that set the backdrop for <em>The Cosby Show</em> -- the actual home in the show's title sequence can still be seen at 10 Leroy Street -- remain a much-sought destination for families in search of space and value. What's changing, however, is the way local real estate agents and much larger newcomers are competing for the district's business.<br />With the new year comes a whole new way of doing business. On Jan. 3, the big Manhattan brokerages that have increasingly staked their claim across the East River instituted MLS, a computerized database that allows them to share listings. For brokers who subscribe, it means access to thousands more listings -- that's the upside. But it also means co-brokering those sales, which halves commissions -- a fundamental change that represents a disproportionate blow to smaller firms moving fewer properties.<br /><br /><span class="leadin">LOCATION, LOCATION...REPUTATION.</span> In this storied section of New York City, most brokerages operate with exclusive listings, with a single agent having sole rights to represent an individual seller for a specified time. That means one commission for the agent, and often more personalized service for the seller. But because those agents don't share listings, it can also mean a lot more legwork for buyers, since no single broker has access to all potential properties in any given area. It's not uncommon for prospective homeowners to work with half a dozen agents before deals close.<br /><br />Critics say the old system was inconvenient for customers. Its defenders argue that a neighborhood benefits from a mosaic of small brokers who know it best. "That's how we've been doing business for almost 20 years," says Ali Young, a sales agent with Cobble Heights Realty, which also operates Heights Berkeley Realty, each with about 10 agents per office. "We have great locations, an established office, and a word-of-mouth reputation within the community."<br /><br />Now a seismic shift is in store for these old-style brokers, who share a unique, small-business culture in one of the last surviving enclaves of independent real-estate brokering in the U.S. Young calls it, "a small, genuine, little brownstone community." These firms are having to adjust as bigger kids move onto the block. Large outfits like Corcoran and Brown Harris Stevens (owned by Terra Holdings) have made a strong push into Brooklyn over the past several years, as the spillover from Manhattan has increased. In the face of takeovers and stepped-up competition, the David-and-Goliath metaphor has become popular in Brooklyn real estate circles.<br /><br /><span class="leadin">CUSTOMER FIRST.</span> The corporate firms say they are simply providing potential buyers with more, easier-at-hand choices, and sellers with a deeper pool of potential customers. "The advantages are not for the brokerage firms -- the advantages are for the consumer," says Pamela Liebman, president and CEO of Corcoran, which has operated in Brooklyn since 1998 and now boasts 144 agents there. "The seller wants to expose his home to the widest audience possible, and the best way to do that is to co-broke. And if you're a customer looking for a place in Brooklyn, you might find it very frustrating to see four or five different brokers."<br /><br />Rather than subscribe to the new listing service and take significant cuts in commission, many smaller firms are ready -- and in some cases, eager -- to defend their niche with personalized service, which they say the heavy hitters have trouble matching.<br /><br />As with many small businesses facing bigger competitors, the customer-driven method has thrived in Brooklyn, with its unique, high-end properties and "upscale bohemian" residents and would-be residents, says Laurie Bleier, owner and president of local portal HelloBrooklyn.com. For potential buyers, small agencies with exclusive listings can mean more traipsing from neighborhood to neighborhood, looking for just the right fit, but independent shops like Cobble Heights say their reputation and long-standing relationships with the community overcome that disadvantage, making for happier buyers and sellers in the end.<br /><br />"If you walk down Carlton Street in Prospect Heights, the perception of older people, the real neighborhood people, is that these larger agencies are opportunists," says Young, who has lived in Brooklyn for years and won't be subscribing to the shared-listing database. "I'm certainly not worried."<br /><span class="leadin">OLD HANDS.</span> While some firms are mulling buyout offers, Warren Lewis Realty Associates' president, Marc Garstein, just finished a major renovation to his 18-year-old office and plans to continue the same personalized customer service that he credits with the referrals that he says have helped to improve his bottom line every year for the past five years. "We're neighborhood people," he says of his nine agents, whose combined experience amounts to some 117 years. "We work this neighborhood." <script language="JavaScript" type="text/javascript"> <!-- if (!window.OAS_sitepage) { var BW_site; // use for new ad site var BW_page = "/smallbiz"; var OAS_listpos; // use to restrict the number of available page positions document.write('<scr' language="JavaScript" type="text/javascript" src="http://www.businessweek.com/common_scripts/oas_logic.js"><\/scr' + 'ipt>'); } //--> </script> <div id="Middle" class="AllAds"> <div class="ad"> <script language="JavaScript" type="text/javascript"> <!-- OAS_AD('Middle'); var printPos = "Middle = pos9, in story(300x250), sb_general_9.htm"; var checkAd = (!adcheck)?false:debug(); //--> </script><script language="JavaScript" type="text/javascript" src="http://oascentral.businessweek.com/RealMedia/ads/adstream_jx.ads/businessweek.com/smallbiz/1566386302@Middle?&RM_Exclude=Airlines,Automobiles"></script><a href="http://oascentral.businessweek.com/RealMedia/ads/click_lx.ads/businessweek.com/smallbiz/1999635147/Middle/default/empty.gif/37636333333730343436353536303330?&RM_Exclude=Airlines,Automobiles" target="_top"><img src="http://a248.e.akamai.net/7/800/14845/0/oasc04.247realmedia.com/RealMedia/ads/Creatives/default/empty.gif" alt="" border="0" height="2" width="2" /></a> <noscript> <a href="http://oascentral.businessweek.com/RealMedia/ads/click_nx.ads/businessweek.com/smallbiz/1745263506@Top,Top1,Top2,TopRight,TopLeft,Top3,Bottom,Bottom1,Bottom2,Bottom3,BottomLeft,BottomRight,Left,Left1,Left2,Left3,Right,Right1,Right2,Right3,Middle,Middle1,Middle2,Middle3,Position1,Position2,Position3,Position4,Frame1,Frame2!Middle" target="_blank"><img src="http://oascentral.businessweek.com/RealMedia/ads/adstream_nx.ads/businessweek.com/smallbiz/1745263506@Top,Top1,Top2,TopRight,TopLeft,Top3,Bottom,Bottom1,Bottom2,Bottom3,BottomLeft,BottomRight,Left,Left1,Left2,Left3,Right,Right1,Right2,Right3,Middle,Middle1,Middle2,Middle3,Position1,Position2,Position3,Position4,Frame1,Frame2!Middle" border="0" alt="" /></a> </noscript> </div> </div> <br /><br />"They may say 'we know the neighborhood better,' but that's a bunch of nonsense," counters Corcoran's Liebman. "The brokers who work for Corcoran in Brooklyn have been there for years."<br /><br />Michael Burke, director of the Downtown Brooklyn Council, a local economic development group, says Brooklyn residents are accustomed to dealing with certain brokerages, and despite the recent influx of Manhattan brokers, "there is still a strong sense of locals promoting locals."<br /><br />At Cobble Heights and Heights Berkeley, Young makes sure that listed clients are on a first-name basis with almost the entire staff, saying that a personal relationship with the professionals who will be leading strangers in and out of the sellers' homes on inspection tours makes the process less disruptive.<br /><br /><span class="leadin">GETTING ALONG.</span> The microculture within the brokerages is also different at smaller agencies. For one, brokers at smaller outfits rely on sharing information and being open about each other's client's, listings, and needs. At larger firms, rife with competition, agents often have to fight to get listings and hold on to clients.<br /><br />"And besides, which agent is going to work harder for you," asks Young "the one who's working for a 5% commission or the one who's working for half of a 5% commission?" According to Young, collaboration is a key aspect of the sales culture in her office.<br /><br />For decades, brownstone Brooklyn has been a boutique business, and at least some smaller firms are committed to keeping it that way. Young admits that the larger agencies may work better in certain cases, and her office sometimes refers clients with specific, hard-to-satisfy needs. "Sometimes you go to Target (TGT ) for a pair of jeans, and sometimes you go to Kiwi to get that special pair," says Young. "They both work." As they adjust to life with a new system and new competition, the small brokerages are hoping there's enough room in Brooklyn for both David and Goliath.Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-79002658239685291142007-05-24T02:50:00.002-07:002007-05-24T02:51:40.112-07:00Buyers Snap Up Country Houses -- In Other Countriestefan Lovgren<br />for National Geographic News<br /> <div class="inlinedate"><br /></div> <p class="intro"> <!-- leave the z-deck alone! --> <!--- startbody --> To experience the Swedish heartland, head down one of the remote roads in Småland, a forested district of southern Sweden. At the end of the road, you may reach a <i>torp,</i> the type of small Swedish summerhouse popularized by <i>Pippi Longstocking</i> author Astrid Lindgren in her children's books. </p> Only these days, the people living there may be German.<br /><p> During the early 1990s southern Sweden was discovered by German second-home buyers. In 1991 there were about 1,500 Germans owning second homes in Sweden. Today they may number more than 10,000. </p><p>Germans are hardly alone in setting up a second life away from their main home. Second-home tourism around the world has exploded in recent decades. While most people still buy second homes in their home countries, an increasing number of people are also venturing abroad. </p><p>Just how many is hard to say. Second homes have been a largely neglected research topic, and there are few reliable figures on the number of second homes around the world. </p><p>But few people doubt that second homes are an integral part of global tourism, especially in rural areas. Although there are social and environmental drawbacks to second-home tourism, most researchers believe its economic and overall impact is largely positive. </p><p> "Second-home tourism forms an important contribution to the local economy," said Michael Hall, co-editor of <i>Tourism, Mobility and Second Homes</i> (Channel View Publications). "However, the local tourism authorities rarely acknowledge this role of second-home tourism and mainly make efforts to attract more high-profile tourists." </p><p> <b>Getting Away</b> </p><p>In Europe a house in the countryside was once an exclusive asset for the nobility. But in the last century second-home ownership spread to groups outside the upper classes. </p><p>In North America second homes were built in wilderness areas, partly as a cultural reminder of frontier development. In Australia many of the first coastal second homes were little more than fishing huts on public land. </p><p>The main increase in second home ownership since 1960, researchers say, can be explained partly by greater personal mobility offered by cars and air travel. As people have become increasingly urban, the appeal of the country home has grown, too. </p><p>While there is no global data on second-home ownership, individual countries maintain some statistics. In 1999 7 percent of Canadian households owned second homes, 77 percent of which were located within Canada. In mainland Spain in the last two decades, growth in second-home ownership has increased 75 percent.</p><p> The reasons for buying a second home are universal. Many people seek a place to relax and escape everyday routine. A second home may also represent a step back to nature. "Most of the Germans I met in Sweden were carrying a rather idyllic image of Sweden and were disappointed, because the Swedish countryside is more modern than they expected," said Dieter Müller, who co-edited the tourism book with Hall.</p><p>However, I think they created their own little Sweden somewhere in the Småland forests," added Müller, who is German and teaches geography at Umeå University in Sweden. </p><p>Many people also buy a second home to retire there. Some southern European countries, like Portugal and Spain, have seen a dramatic influx of retirees from northern European countries, primarily England and Germany. The newcomers are lured by the warm weather, pristine beaches, and abundant golf courses. </p><p>"One of the most interesting aspects about tourism in Portugal is how many people who holiday there then go on to buy a second home or even retire there," Hall, the <i>Tourism, Mobility and Second Homes</i> co-editor, said. </p><p> So large is the English expatriate population in Algarve, in southern Portugal, that many British political parties routinely come to seek donations for political campaigns back in the U.K. </p><p> <b>Some Drawbacks</b> </p><p>There is little doubt that second-home tourism can be a major contributor to local economies, boosting local service supply and keeping local entrepreneurs in business. </p><p>It can also ensure the survival of rural areas by filling vacancies caused by rural out-migration. In Finland the countryside population declined by 31 percent to about 900,000 between 1980 and 2000. At the same time the number of people using second homes had increased by 79 percent to more than 1.8 million. </p><p>However, second homes can also increase the tax burden for the local population. In some areas housing prices may rise beyond the means of locals. </p><p>Sometimes social resentment may also develop toward second-home owners, who may be seen as outsiders or even invaders. Many people who buy second homes in foreign countries do not learn the local language. This is particularly true in places like Portugal and Spain, where some resort communities have been completely taken over by English and German settlers. </p><p> In Ireland's Gaeltacht—the country's seven, historically Irish-speaking regions along its western seaboard—the local tongue, Gaeltacht Irish, is slowly ceding ground to English as the language of daily life, mainly because of the number of non-Irish speakers moving into Gaeltacht communities. </p><p> The environmental effects of second-home tourism may be mixed. </p><p>Second-home owners often use indigenous architecture in restoring buildings that may otherwise fall into disrepair. Many second-home owners are committed to environmental issues, and second-home tourism has, in many places, led to the protection of natural areas and wildlife, some researchers say. </p><p>"The capacity of [popular second-home tourism destinations such as] southern Portugal to host so many people may be greater than some of the more environmentally sensitive areas in the tourists' own countries," Hall said. </p><p>But the demand for development of second homes in previously untouched areas, from the plains of Montana to the north woods of Maine, is also seen as a crisis by many environmental and conservation groups. </p><p> <b>Time-Shares</b> </p><p> Second-home ownership in the United States is less common than it is in Europe. </p><p> "Relatively speaking, this form of tourism is much smaller than other forms, because only a small portion of the U.S. public owns a second home in the traditional form," said Dallen Timothy, a professor at the School of Community Resources and Development at Arizona State University in Tempe. </p><p>Still, second-home ownership in the United States has almost doubled in the past 35 years. In 2001 there were more than 3.5 million second homes in the country. </p><p>Most U.S. second homes developed as a result of people escaping either intense summer heat or bitterly cold winters. Native Americans commonly sought refuge away from their normal abodes. For example, Cape May, New Jersey, was a popular seaside refuge for the Leni Lenape Indians centuries before the beach homes of the 1800s were built there. </p><p>A particularly popular form of second-home ownership in the U.S. is time-shares, where consumers purchase periods of time at a property. Since the late 1970s time-shares have grown between 14 and 17 percent per year. Today the industry is worth more than four billion dollars in the U.S. </p><p>There has also been a strong growth in U.S.-owned homes abroad. Americans have long owned vacation homes in Mexico, particularly around Acapulco and Puerto Vallarta. But today some Americans are settling in more exotic territory, such as the rain forests of Cayo in English-speaking areas of Belize. </p><p>Researchers say that a demographic shift will have a substantial impact on second-home tourism. As of 2000 11 percent of the world's population was 60 years old and above. By 2050 that figure is estimated to rise to 20 percent. </p><p>Particular types of tourism geared toward retirees, such as recreational vehicle cruising, should continue to grow in popularity. But second homes that go on to become permanent retirement homes may also become increasingly important in tourism-development strategies, researchers say. </p> <b><i>Don't Miss a Discovery</i></b><p> </p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-66417087756580911042007-05-24T02:50:00.001-07:002007-05-24T02:50:42.604-07:00Here Comes The Neighborhood<h2>Around Araby Bog, A Suburb Rises From the Ashes</h2> <p> <span style="font-size:85%;"> <!--plsfield:byline--><div id="byline">By Lynne Duke</div> <!--plsfield:credit-->Washington Post Staff Writer<br /><!--plsfield:disp_date-->Tuesday, December 21, 2004; Page C01 </span></p><p> </p> <!--plsfield:description--><p> <nitf>Patricia Stamper's long thin braids swing across her chest as she hikes through mucky soil. She's heading toward the rare magnolia bog she's spent six years fighting to save. </nitf> </p> <p> <nitf>"In the winter, it's not much to look at," she says apologetically. The sweet bay magnolias aren't in bloom. The three-foot-tall cinnamon ferns have gone dormant for the season, along with the panoply of flora that flourishes in this rare pristine ecosystem in rural Charles County known as Araby Bog.<br /></nitf></p><p> <nitf>Stamper, 66, a Navy mathematician, steps gingerly. Her horse, a chestnut named Fancy, kicked her and shattered her right elbow several weeks ago and she is recovering from surgery to repair her arm. She has to be careful not to stumble.</nitf> </p> <p> <nitf>"There's the sphagnum moss," she says suddenly, pointing to a bright green patch growing along the bank of a stream that delivers clean water into Mattawoman Creek and the Potomac River.</nitf> </p> <p> <nitf> And just beyond the stream, up a hill and through the trees deep in these woods near Indian Head, the reasons for this field trip are visible. Stamper wants to show how close to the bog the new houses are being built, and how certain is the bog's ultimate demise. </nitf> </p> <p> <nitf> But far more than the bog is endangered, she believes. With 500 homes set to be built in subdivisions called Hunters Brooke and Falcon Ridge, the new traffic, the new people, the new noise all will conspire to rob this region of its tranquillity, its slow country life. Not to mention lowering the water table, which Stamper fears could affect individual wells like her own. Hunters Brooke is just a couple minutes' drive from the 52 acres where Stamper and her husband, John, live in a small bungalow-style house. She especially bemoans the light pollution that will obscure the stars at night. </nitf> </p> <p> <nitf>"It's heartbreaking, the damage to the community," Stamper says. "A way of life is being destroyed." </nitf> </p> <p> <nitf> Up the hill from the bog, though, the view of this region is different. There, in his brand-new home with its soaring foyer, its 33 windows and its high-end kitchen, Sylvester Kelley putters about, arranging his new life. The Christmas tree is up, the houseplants set in the windows, the family photos arrayed on a shelf. </nitf> </p> <p> <nitf>Kelley's doing what suburbanites do everywhere. When he moved in on Nov. 30, he staked his claim in an area sure to grow and sure to appreciate in value once commercial development catches up with the residential. </nitf> </p> <p> <nitf>Kelley, 56, doesn't know Stamper. In fact he knew virtually nothing about the region or its environmental controversy -- until the fires of Hunters Brooke put this obscure community in the national news and exposed the clash of values between the region's old-timers and its newcomers. </nitf> </p> <p> <nitf>The old-timers' frustrations are understandable, says Kelley, an information technology specialist for a defense contractor. </nitf> </p> <p> <nitf>"They have a cause to fight," he says.</nitf> </p> <p> <nitf>Trouble is, "It's a juggernaut effect," he says with a slow drawl. "You can fight all you want, but you're going to get bowled over. . . . It's a way of life. That's just the way it is. Money has power."</nitf> </p> And the bog, he says, isn't something he's given any thought to<p> </p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-13130632560861670512007-05-24T02:49:00.000-07:002007-05-24T02:50:07.397-07:00The Condemned<span class="section">News:</span> In Ohio, and across the country, homeowners are battling cities and developers conspiring to seize their property. <!--end deck--> <p class="byline"> <!--byline--> <strong> <script type="text/javascript" language="Javascript"> <!-- byline_title_by_url('/news/feature/2005/01/'); //--> </script> By Gary Greenberg<span style="text-decoration: underline;"><br /></span></strong></p><p>From his office at the top of Rookwood Tower, the seven-story, glass-and-steel building that his family’s real estate company built, Jeffrey Robert Anderson Jr., or J.R. as he is known here in Norwood, Ohio, can easily survey his empire. Directly below the tower and its 185,000 square feet of professional and financial services offices is Rookwood Pavilion, 23 acres of shopping and eating. A little farther to the left is Rookwood Commons -- not, Anderson advises me, a shopping plaza, but a "lifestyle center" containing a Gap, Ann Taylor, and 46 of the other usual suspects. This former brownfield, abandoned when a machine tool factory left Norwood, is now the premier shopping destination in Greater Cincinnati, if not all of Ohio, according to anyone around here that you ask. It’s an impressive sight, and perched high up in his well-appointed office with its sculptures and paintings and enormous glass-topped table, you might believe that this tall and fit 32-year-old with flaxen hair and bright blue eyes rules over all that he sees, or at least all that lies this side of the interstate.</p> <p>And he would, were it not for the 13-acre, triangular spit of land directly below the tower. There, under the spruce and maple trees, are the asphalt-shingled roofs of a tidy neighborhood of modest houses. Bounded by the Cincinnati city line to the east and Rookwood to the south, and cut off from the rest of Norwood by an interstate highway, these 97 homes and small businesses are glaringly out of place, a mid-20th-century remnant amid all this 21st-century glitz. They’re also in Anderson's way. He wants to expand the Rookwood complex, but he has to buy and raze all these houses first, and while most property owners have eagerly accepted his offer to buy their houses at a premium price, five have refused. And so the $125 million-plus project, known as Rookwood Exchange, slated to be under construction by now, is at a dead standstill.</p> <p>But Anderson has an ace up his sleeve. At his behest, and using his money, the city of Norwood has invoked its powers of eminent domain -- the right, granted by the Takings Clause of the Fifth Amendment to the Constitution, of a government to seize private property and turn it to public use -- to condemn a neighborhood and order residents out of their homes. Norwood is not the first city to act as a real estate broker whose offer can’t be refused, nor is Anderson the first businessman to benefit from this kind of largesse. A 1954 Supreme Court decision stating that the economic benefits of private development are a legitimate "public use" has forged an unholy alliance between cities strapped for cash and entrepreneurs promising economic bounty. (Anderson, for example, forecasts that Rookwood Exchange will net Norwood, a city with an annual budget of $18 million, between $1.5 and $3 million in annual taxes.) Struggling cities have placed their urban renewal hopes in the hands of developers like Anderson, who in turn rely on governments to assemble the parcels for their projects.</p> <p>According to the Institute for Justice (IJ), a public-interest law firm, this is a growing trend. The institute analyzed eminent domain cases between 1998 and 2002 and found more than 10,000 instances where local governments had attempted to use a power once reserved for indisputably public projects like highways and railroads to obtain properties for private development projects such as box stores and golf courses.</p> <p>No properties are off-limits -- working-class communities, ski chalets, and one-tenth of San Jose, California, have all been targets of condemnation proceedings on behalf of enterprises as varied as casinos, Costco, and the New York Times -- and no one has yet been able to thwart this newly privatized version of eminent domain. But by litigating against what it calls "eminent domain abuse," the IJ has succeeded in creating enough disarray in state courts to achieve its ultimate goal: convincing the Supreme Court to revisit the issue. This spring, for the first time in 50 years, the court will address the parameters of eminent domain, and the institute hopes the justices will rein in the private use of what the court itself once called government’s "despotic power."</p> <br /><p>"It was the day before Mother’s Day in 2002," Joy Gamble says. "They said they were going to build this fabulous project, and we were going to be gone. The roof fell in." The Gambles, who have lived in Norwood their entire lives, made an immediate decision. They weren’t selling, no matter what price Anderson was paying. "And start life all over again?" Carl adds. "We started here, we raised two kids here, we finish up here."</p> <p>"Here" is the Gambles' two-story stucco home a few doors up tree-lined Atlantic Avenue from its terminus at the I-71 off-ramp. An American flag is planted by the brick front stairs, next to a hand-lettered sign that says, "IF YOU WANT THIS PROPERTY YOU SHOULD HAVE BOUGHT IT IN 1969." Inside, a hunting supply catalog sits on the coffee table, a Ronald Reagan calendar hangs from the kitchen wall, and vivid tapestries and paintings of stags and partridges give the overall effect of <i>Field & Stream</i> on acid. The Gambles, who won’t give their ages ("I forgot," says Carl; "I don’t tell," says Joy), appear to be in their 70s, and they speak in clipped sentences inflected with the local twang. "The first time we had contact with these people," Joy tells me, "[Anderson] wanted to meet with us. I said, 'We don’t want to sell.' He said, 'Thank you.' I said, 'You're welcome.' I hung up. Very nice." Joy goes on to list several other unsuccessful attempts, noting that Anderson’s people were always extremely polite.</p> <p>But what the Gambles didn't know was that in January 2002, before he called them or any of their neighbors, Anderson had asked the City Council to undertake an urban renewal study, the prerequisite to condemning properties. "I figured we wouldn’t have to go through with it," Anderson says. "Just pass the urban renewal study and get things rolling." When he built Rookwood Tower back in 1997, Anderson had easily convinced the city to authorize such a study -- although he was ultimately able to assemble the necessary properties on his own. But in 2003, three years after he was indicted for corruption, the longtime mayor -- whom Anderson had given $23,000 in campaign contributions ("an astronomical sum around here," says one city official) and an undisclosed amount toward legal fees -- resigned. The council, perhaps eager to seem less cozy with its largest private taxpayer, had earlier told Anderson "to go out and pound the doors, go assemble as many houses as possible," he says. "Once I’m completely at a stalemate, then come back and discuss urban renewal."</p> <p>While Anderson was going door to door in the early summer of 2002, so was Joe Horney, a 35-year-old construction manager. Sitting on the Gambles' couch, bouncing his two-year-old daughter on his lap, Horney proudly recounts how he used an inheritance to buy a two-family house across from the Gambles when he was 21. When he heard the news, he says, "I decided to go out and meet the neighbors. I found out from a lot of people that they were perfectly happy here, they'd like to stay. So we started a petition." At first, about half of the homeowners vowed not to sell. But in September, Anderson and his partners announced their terms: They'd buy everyone's house at a 35 percent premium over its fair market value, but only if they had all the neighbors under contract. If any residents held out, the developers would ask the city to condemn those properties, and a jury would decide the price. Throughout the fall, many of Horney's erstwhile allies signed contracts. In the meantime, Anderson eliminated from his plans a 28-house section of the neighborhood in which resistance was most concentrated, and by year’s end, with 5 of the remaining 69 owners still refusing to sell, Anderson had his stalemate -- in no small part, as it turns out, because condemnation had been in the air all along. "Where I made my decision is when eminent domain was threatened from day one," says Horney. "Once they threatened my rights, my decision was made."</p> <p>The City Council authorized the urban renewal study, which Anderson paid for, in April 2003. Citing certain facts -- small driveways, narrow streets, lots that don't conform to current zoning regulations, houses that are more than 40 years old, a neighborhood subject to all the light and noise and traffic that progress (much of it Rookwood-related) has brought -- the study declared the neighborhood blighted and thus eligible to be seized, emptied, and razed.</p> <p>Standing in the Gambles' tranquil back yard, with its lilacs and bird feeders, it's hard to understand how anyone could think this property was blighted. Horney points out that by the study's criteria, nearly anyone's home could be taken by the government. "You could call the White House blighted because it's over 40 years old, it's got a lack of parking, it's surrounded by commercial development. I'm sure there is noise. If you tore it down and put in a big office building, certainly it would generate more taxes than Mr. Bush living there." The City Council proceeded to condemn the five properties not under contract with Anderson. According to Mayor Tom Williams, they took this action reluctantly, partly to secure tax revenues for the city. "I was a cop for 34 years, got shot once and shot people twice," Williams says. "It's the same with this thing. You hate to pull the trigger, but sometimes it’s a necessity."</p><p>When Institute for Justice lawyers Scott Bullock and Dana Berliner first visited Norwood in December 2002, they were pleased with what they saw: "a classic mixed-use neighborhood, in perfectly fine condition," as Bullock puts it. That boded well for the institute -- which Bullock describes as an "unabashedly libertarian" organization and which gets much of its funding from wealthy opponents of big government like energy magnates David and Charles Koch -- and its overall goal of reversing what it sees as a disastrous half-century of eminent domain jurisprudence.</p> <p>Governments have always taken land on behalf of private interests; owners of mines and railroads relied heavily on condemnations for their rights of way, which were granted because, as one Pennsylvania court put it, "the necessities of a great public industry, which although in the hands of a private corporation, [serve] a great public interest." But in <i>Berman v. Parker</i>, a 1954 case, the Supreme Court ruled that the District of Columbia could seize a fully functional store in a blighted neighborhood on the grounds that, as Justice William O. Douglas wrote in the unanimous opinion, "It is within the power of the legislature to determine that the community should be beautiful as well as healthy, spacious as well as clean, well-balanced as well as carefully patrolled." It was not up to the courts to insist "that public ownership is the sole method of promoting the public purposes of community redevelopment projects." Legislatures, in other words, were free to determine -- as the Norwood City Council did -- that one private use of a property was better for the overall community than another, and to use eminent domain to enforce this finding.</p><p> </p><p>According to the IJ’s Berliner, the <i>Berman</i> decision has devolved into a license for cities to "rent out" their eminent domain powers to private developers, with bogus blight designations providing the legal cover. But Jason Jordan, a government affairs director at the American Planning Association, sees the decision as underpinning the "hottest" trend in urban renewal: replacing economically obsolete neighborhoods with large-scale, tax-generating developments like Rookwood Exchange. "Eminent domain is an important tool for communities interested in revitalizing themselves," Jordan told me, and, according to Jeffrey Finkle, head of the International Economic Development Council, it's also a needed tool for reducing sprawl. "Unless we want to pave over all the land outside cities, we have to be able to do these projects inside the urban ring. How can we reposition cities if they don’t have the power to acquire private land?" The ability to team up with developers is indispensable to this agenda, Finkle adds. "Communities have to respond to market opportunities," he says. "If you have a developer willing to invest millions of dollars, it’s important to make that happen."</p> <p>Rick Dettmer, who runs Norwood’s one-man municipal development office out of the basement of City Hall, says this is precisely why Norwood couldn't turn Anderson away. "The reality is that you need to rely on developer interest in order to facilitate projects. We're not paying for this party." If he were, Dettmer says he might throw it elsewhere -- perhaps in Norwood's decaying downtown, less than a mile from the Rookwood complex. But Norwood, which has suffered two decades of factory closings, and which has a $1.5 million budget deficit, desperately needs this party, wherever it is held.</p> <p>Many American cities are in a similar predicament, and in the wake of <i>Berman</i> and related state and federal court decisions, cities and entrepreneurs have worked out an elaborate courting ritual in which local governments offer up their eminent domain authority while developers tout the economic benefits of their projects to the electorate. "All the developer has to do," says the IJ’s Bullock, "is to convince the city that it’s good for them and that he will pay for it, and the city will start taking away people’s property." He adds that cities often offer more than condemnations. "Eminent domain is part of a whole set of incentives -- tax breaks and deferrals and other public subsidies -- that add up to massive corporate welfare. Often the numbers fail to live up to expectations. Jobs don't materialize or the economic benefits don’t outweigh the subsidies or the drain on public services that the development creates." When this happens, Bullock says, cities are left holding the bag.</p> <p>The IJ took on its first eminent domain case in 1996, winning a favorable ruling for an elderly homeowner who refused to sell her Atlantic City property for a Donald Trump casino. "After that decision, we were swamped with phone calls," Bullock recalls, "and we started to think that courts might be willing to revisit this issue." The IJ has since taken on several cases nationwide, and saw Norwood -- with its unblighted neighborhood, its developer-driven condemnations, and its questionable public use -- as another opportunity to illustrate to a court how wrongheaded the private use of eminent domain is. An Ohio judge, however, was unswayed, ruling in June that although the neighborhood was not blighted, it was "deteriorating," and on these grounds, Norwood could go ahead and condemn the holdouts' properties; they are appealing.</p> <p>In the meantime, a series of jury trials will decide the value of the five condemned properties. (In September, in the first of these trials, Horney’s house was valued at $233,000, money that, he says, "I hope I never see.") But developments elsewhere might make these trials irrelevant. In August 2004, the Michigan Supreme Court invalidated its 1981 landmark <i>Poletown v. Detroit</i> decision, which had determined that "one entity's profit maximization contributed to the health of the general economy." Stating that "<i>Poletown</i>'s 'economic benefit' rationale would validate practically any exercise of the power of eminent domain on behalf of a private entity," the court refused to allow Wayne County to condemn land for an industrial park. "State courts from Nevada to Connecticut have relied on <i>Poletown</i> in upholding condemnations," Berliner said. "Now the same case will work for our side."</p> <p>Add this case to those roiling communities across the country (see "Doing Developers' Dirty Work," page 44), and you have the kind of confusion in lower courts that begs for clarification from the U.S. Supreme Court. And indeed, shortly after the <i>Poletown</i> decision, the court agreed to hear another IJ case, in which the city of New London, Connecticut, condemned an unblighted neighborhood in order to make way for a hotel and condominium complex. Bullock hopes the Supreme Court will revisit the scope of the <i>Berman</i> decision, and rein in the privatization of eminent domain.</p><p>Out here on Edwards road, yellow signs bearing messages like "HELD HOSTAGE" and "WE SUPPORT ROOKWOOD EXCHANGE" sprout like dandelions from front lawns, and a king-size bedsheet banner hanging from Sandy Dittoe's pink stucco one-story declares, "64 OF 65 RESIDENTS WANT OUT. I AM ONE OF THEM." Dittoe bought her house for $82,000 seven years ago, and she's almost completely rehabbed it since. In 2002, speculating on Anderson's plans, she bought a house around the corner, which she rents out. When Anderson offered her $175,000 for each property, "it was a godsend," she told me. "I was thrilled." She began to make plans to move and to pay off the loan for her Northern Kentucky nightclub. But she has to wait for Anderson to make deals with all her neighbors before she'll receive a penny.</p> <p>In the meantime, Dittoe's in limbo -- a maddening situation that she blames on her holdout neighbors. "Sure I'm pissed. They're screwing everybody. I've been stuck in a house for two years. There's no point in putting any more money into it, but I still have to live here," she says, pointing out the unfinished trim in her kitchen and the place where she left off putting purple paint on a bedroom ceiling. Her neighbor, Bill Pierani, a part-time security guard for the Cincinnati Reds, agrees. "We'd have been out of here years ago if it wasn’t for them."</p> <p>Pierani and Dittoe are glad to show me evidence of "blight": the streaks of grime in eaves; an overgrown back yard, home to rats and snakes; the foundations cracked, they say, by the heavy truck traffic; the "foot traffic" and the "element" it brings in; the guys -- "I won’t tell you what color they were," Pierani says -- who broke into someone's house. They point out the oil change place and the muffler shop down the street and describe how they've long wanted to get away from these nuisances -- although there's little evidence that they or their neighbors tried to sell their homes or otherwise flee the neighborhood before Rookwood Exchange came along. Pierani compares the neighborhood, in which he has lived for nearly all of his life, to the cancer he once had. "The job is to go in and cut it off completely. Not to keep hacking at it."</p> <p>At a meeting the previous night, the residents' impatience turned on Anderson's lawyer, who assured them that the end was in sight. This statement left resident Walter Sims hopping mad. "That lawyer pissed me off because he stood up there and misled these people," Sims, who is settled into his rocker on the front porch, says in his Kentucky drawl. "He knows these people" -- he points to a holdout's house next door -- "ain’t gonna ever sell to him. But he’s relying on the city to do it for him in court. And he knows that until all these appeals are resolved, they can't do nothing. You know how slow the judicial system is? It takes them months to wipe their ass."</p> <p>But the residents reserve most of their seething fury for the holdouts, and when Pierani says, "Twenty-five years ago, there would have been a homicide by this point," it's not clear if he's nostalgic or relieved. When Sims says, "I think people are mad and disgusted because they ain't got their money. Why haven't you done something by now to get us the money?" you feel how ugly things might get. And when a man smoking a cigarette on his porch first refuses to talk to you because "the papers always get this story wrong," and then calls you back to say, "Wait a minute. You can quote me on this. Fuck the Gambles. Yeah. Fuck the Gambles, and throw Joe Horney in there, too," you're pretty sure things already have.</p> <p>In this kind of atmosphere, it's no surprise that the residents don't believe that the Gambles and the others are standing on principle. Explanations vary -- some think that they're angling for a better price, others that they're just stubborn -- but most people seem to agree with Dittoe's assessment that "this project is going to benefit everyone, all the residents here and the whole city." She adds, "There's more to it than just what these people want." But whatever NIMBY concerns may have motivated the holdouts in the first place, they have become galvanized by the large-scale implications of their battle. "What I want to protect is not just myself, but virtually everyone else in the USA from having their constitutional rights undermined," says Horney. "I mean, this is the land of the free and the home of the brave. We're allowed to go out and buy property, and that's being taken away." As they dig in for the appeals, it's clear that these folks are in it for the long haul, that, even with his rented eminent domain powers, Anderson has a lengthy wait before he can extend his empire into this neighborhood. "He can have the house when we're on our deathbed," says Carl Gamble. "Not a minute before."</p><p class="byline"><strong><span style="text-decoration: underline;"></span></strong> <!--end byline--> </p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-78198089310873864982007-05-24T02:41:00.000-07:002007-05-24T02:48:52.960-07:00When property lines run through the front door<h2>The slowly shifting ground in the Berkeley hills area means the land that's yours today may be your neighbor's tomorrow</h2> <p class="byline">Patrick Hoge, Chronicle Staff Writer</p><p class="byline"><span id="bodytext" class="georgia md"><p>The land under Robert Mathews' house in the Berkeley hills has slid about 20 feet since the structure was built in 1916. But property lines do not move, which means that today half of his house seems to sit on his neighbor's land. </p><p>"I figure the property line runs right through the middle of the front doorway,'' he said. </p><p>Three major landslides in Berkeley and neighboring Kensington are creating a dilemma for residents who, like Mathews, live in the well-populated neighborhoods. </p><p>When a home, or a driveway or a deck, slips onto a neighbor's land, does it become the neighbor's property? </p><p>Public officials in the East Bay have tried to stay out of the disputes, some of which have landed in court, but experts say they are likely to face increasing pressure to decide whether property lines should be redrawn when the stuff inside them moves. </p><p>Mathews didn't worry about the issue when he purchased his home at 1062 Keith Ave. in 1999. The area on his side of the street is part of the Keith Slide, which affects scores of neighboring properties. </p><p>But Mathews learned recently of two bitter property-line disputes just blocks away that city records show are in a landslide hazard area. In one case, an arbitrator ruled that although the land had moved, a survey determined ownership -- and thus a couple of feet of disputed earth belonged to the downhill neighbor. </p><p>"Now I'm worried,'' said Mathews. "What is that going to do to my (home's) resale value?'' </p><p>Scientists have mapped and studied slow-moving slides in California for decades, and there are thousands in the Bay Area, said Richard Pike of the U.S. Geological Survey. Most move only as a result of moisture or disturbance. </p><p>In June, an international team including UC Berkeley scientists reported that large tracts of East Bay land typically move between 5 and 38 millimeters a year. </p><p>Land movement in Berkeley has wrecked home foundations, cracked walls and sidewalks, buckled streets and fences and frequently ruptured water lines. Some homes stand abandoned, and others have been rebuilt with massive and deep foundations. </p><p>But the impacts on property lines in urban neighborhoods have been discussed very little, Pike said. </p><p>"I'm surprised nobody figured this out earlier,'' he said. "As more people build in the hills, you're going to see this problem get larger and larger and larger.'' </p><p>Howard Brunner, a consultant to the state agency that regulates land surveyors, said there is no state law specifically designed to address property-line disputes where the ground is slowly moving. </p><p>"Sooner or later, they're probably going to come up with some law for this situation, but not as yet, that I'm aware of anyway,'' he said. </p><p>According to Alan Kropp, a Berkeley geotechnical engineer, there are two major slides in Berkeley -- the Keith Slide and the Thousand Oaks Slide -- and one to the north in Kensington called the Blakemont Slide. Hundreds of homes are in the slide zones, which straddle the Hayward Fault. </p><p>In Kensington, Laurence Ellam said his neighbor in 2002 removed a gate, two trees and part of a brick walkway that his father built when he was 5 years old, and then built a new walkway based on the results of a new survey. </p><p>Ellam, 58, who with his mother lives at 1 Kerr Ave. on a slope with a stunning view of the Bay, said he spent $10,000 consulting an attorney who said there was little he could do. </p><p>Other residents in the area, which was developed primarily in the 1950s and 1960s, tell similar stories of changing lot boundaries. </p><p>Everett Moran, a veteran land surveyor in Berkeley, showed two decades ago that numerous houses in the Keith Slide area were crossing property lines. </p><p>In an attempt to facilitate the redrawing of boundaries, Moran in 1983 commissioned aerial photographs and superimposed property lines, and the result was dramatic. But getting agreement among all the property owners proved impossible. Richard Schwarzmann inquired about getting a survey of his property on the Keith Slide at 1170 Arch St. before he bought it in 1988, but a surveyor told him it wouldn't do any good because the structures had probably moved. </p><p>Schwarzmann shrugged it off and built a house on one end of the property and consolidated and modernized two early 20th-century cabins at the other end. </p><p>In 1996, Peter and Ann Coney of Walnut Creek bought the two-flat apartment building next door and applied to the city to add significantly to the back of the building. </p><p>Schwarzmann objected, but the Coneys won approval from the City Council. Along the way, neighbors started arguing over the location of Schwarzmann's southern property line, and whether two of his structures were over the line. </p><p>After several heated exchanges that included police being called, Schwarzmann sued the Coneys, seeking a court ruling that the land was his. It didn't go that way. </p><p>In binding arbitration, retired Contra Costa County Judge Richard Patsey in October ruled that a 2003 lot-line survey marked the edge of Schwarzmann's land, ordering him to pay nearly $41,000 to help build a new retaining wall and fence, among other things. </p><p>"I think the whole thing is absurd,'' said Schwarzmann. "The judge said I should go to my uphill neighbor to get my property from them. I don't want to do that.'' </p><p>The Coneys and their attorneys could not be reached for comment. </p><p>A nearby resident, Howard Menashe, built a partial fence down the middle of a driveway that crosses his land -- even though his uphill neighbors, Linda Aurichio and Ruth Ellen Pearce, claim they have a deeded right to use the driveway to reach a back lot. </p><p>Aurichio and Pearce contend in court documents that Menashe built the fence and a concrete barrier in 2003 to block their access after a survey showed that the land had moved significantly downhill -- 5 feet since 1946 alone. </p><p>Menashe's attorney said the dispute has nothing to do with land movement, but Aurichio and Pearce's lawyer said that is exactly the issue. </p><p>Philip Daunt, Schwarzmann's attorney, tried to argue that such cases should be decided using the Cullen Earthquake Act, a state law passed in 1972 to allow redrawing of property lines. The law was enacted after an earthquake shifted numerous lot boundaries simultaneously in the San Fernando Valley. </p><p>The Coneys successfully argued, however, that while the act specifically mentions landsides, it was written to address large, sudden disasters,' not individual disputes arising out of continuous, ongoing occurrences like a slow- moving landslide. </p><p>In the past two years, Berkeley officials have started routinely requesting lot surveys from residents seeking to do additions or other modifications to their homes. </p><p>City planning director Dan Marks said it was unlikely that officials would allow modifications to a structure that crossed a lot boundary, or allow such a structure to be rebuilt on the same footprint if it is destroyed. </p><p>Schwarzmann and others wish that the city or some other government entity would craft an overarching solution to the problem of slow-moving land. Although the arbitrator's decision settled the dispute involving his property for now, the land continues to slide. </p><p>Assistant City Attorney Zach Cowan said the city has no authority over property line issues. </p><p>But retired Alameda County Superior Court Judge Roderic Duncan, who lives two doors down from Mathews on Keith Avenue, said he has contacted a friend who works for a committee in the state Legislature in hopes that someone there will get interested. </p><p>"It's a giant problem,'' Duncan said. </p></span></p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-71739150160966614182007-05-18T18:16:00.000-07:002007-05-18T18:17:46.271-07:00Loophole Pays Off on Upscale Buildings<span style="font-size:85%;"><div id="byline">By Joe Stephens</div> <!--plsfield:credit-->Washington Post Staff Writer<br /><!--plsfield:disp_date--><br /></span><p> </p><div id="article_body"> <!--plsfield:description--><p> <nitf> <i> First of two parts</i> </nitf> </p> <p> <nitf> Two years ago, after leaving her job as Vice President Cheney's spokeswoman to join a lobbying firm, Juleanna Glover Weiss bought a new house. Weiss and her husband, lobbyist Jeffrey Weiss, settled on a century-old, 10-bedroom home sandwiched between foreign embassies in Kalorama. Today it is one of the most prominent party venues in Washington.</nitf> </p> <p> <nitf> The Georgian-style mansion came with 11-foot ceilings, vintage chandeliers, inlaid hardwood floors -- and a $1.5 million price tag.</nitf></p><p> <nitf>After closing on the house, the Weisses signed papers promising that they would not alter its outward appearance without first obtaining permission. They "donated" that pledge, known as a historic facade easement, to a nonprofit preservation trust. That allowed the Weisses to seek a federal income tax write-off for the estimated cash value of the gift.</nitf> </p> <p> <nitf>Easement donors in D.C. usually write off about 11 percent of the value of their homes. That means owners of a $1.5 million mansion can claim tax breaks of $165,000 or more.</nitf> </p> <p> <nitf>Such tax deductions are increasingly common although the District already bars unapproved and historically inaccurate changes in the facades of homes in the city's many historic districts. As a result, easement donors largely are agreeing not to change something that they cannot change anyway.</nitf> </p> <p> <nitf>"It really is money from the taxpayer for nothing," said lawyer John D. Echeverria, director of the Georgetown Environmental Law and Policy Institute. "People are absolutely delighted -- and astounded -- that the federal government would send them $50,000 and more for doing nothing."</nitf> </p> <p> <nitf>The Weisses are among hundreds of affluent Washingtonians who have taken part in the once obscure but rapidly growing program, created by Congress 28 years ago with the goal of preventing developers from ravaging historic streetscapes across the nation.</nitf> </p> <p> <nitf>Before they bought their home, the Weisses already were well acquainted with the facade program. Records show that in 2000 they donated an easement on their previous home, which they purchased for $480,000.</nitf> </p> <p> <nitf>Glover Weiss declined to comment, other than to say, "Washington is a beautiful, historic town, and I would like very much to have it remain that way for my children and grandchildren."</nitf> </p> <p> <nitf>The tax deductions are supposed to represent the decrease in value of the property caused by the easement restrictions. Increasingly, though, the easements have become a way for owners of expensive houses to reap a windfall.</nitf> </p> <p> <nitf>An analysis by The Washington Post of federal and local government data identified about 900 residential facade easements in Washington covering a total of 1,400 homes and condo units. Nationwide, the number of easement donations has been increasing rapidly, hitting about 700 last year.</nitf> </p> <p> <nitf>Today, the average assessed value of residential structures covered by facade easements in the District is more than $1 million, the analysis showed.</nitf> </p> <p> <nitf>The homes tend to be clustered in affluent neighborhoods in Capitol Hill, Dupont Circle and Georgetown. Most display brass plaques, many of them round and bearing a star, identifying the trust that holds the easement.</nitf> </p> <p> <nitf>Homes enrolled in the program need not be architecturally striking. The houses also need not be especially antique -- homes built as recently as 1950 may qualify. And many preservationists say the easements may increase a building's value -- making the tax breaks unwarranted.</nitf> </p> <p> <nitf>"They are giving up absolutely nothing," said former Treasury official Daniel Halperin, now a nonprofit tax specialist at Harvard Law School. J. Peter Byrne, a historic preservation specialist at Georgetown University Law Center, called the donations "bogus gifts" that have been supplying homeowners with "free money."</nitf> </p> <p> <nitf>The increase in easements has been driven by the emergence of for-profit "facilitators" -- businesses that market the program and process the paperwork for homeowners, making the procedure quick and painless. In recent years, such companies and the nonprofit preservation groups that hold the easements have taken in millions of dollars for processing paperwork and monitoring the easements.</nitf> </p> <p> <nitf>All those payments are underwritten by the tax breaks.</nitf> </p> <p> <nitf>"Taxpayers are taking improperly large deductions for facade easements," Steven T. Miller, commissioner of the tax-exempt entities division of the Internal Revenue Service, warned appraisers meeting Oct. 22 in Washington. "The taxpayer can't give up a right to change the facade of a building if he or she doesn't hold that right in the first place."</nitf> </p> <p> <nitf> <span style="font-family:Arial,Helvetica;font-size:-1;color:#000000;"><b>'Perfectly Legitimate'<br /></b></span><br />The rich, the famous and the merely well-to-do are joining the program in swelling numbers. Easement donors in recent years have included Sen. Christopher J. Dodd (D-Conn.), Sen. Kent Conrad (D-N.D.), film producer Sidney Ganis, Public Citizen President Joan Claybrook, National Public Radio host Steve Inskeep and New Yorker magazine investigative reporter Seymour Hersh.</nitf> </p> <p> <nitf>"In my neighborhood, almost everybody has one," Hersh said. "If I remember, there was much hooting at us for <i>not </i>doing it."</nitf> </p> <p> <nitf> Although public records do not establish whether donors actually took a deduction, tax specialists said it would be unusual to forgo the benefits. All donors who agreed to be interviewed acknowledged taking the tax breaks or planning to take them soon.</nitf> </p> <p> <nitf>The exception was Dodd, who with his wife owns a three-story brick townhouse on Capitol Hill, assessed at more than $700,000. Dodd planned to take the deduction this tax season but is rethinking that decision after being contacted by The Post.</nitf> </p> <p> <nitf> "We were using the best guidance of attorneys and accountants," said Jackie Clegg, Dodd's wife and a former vice chairman of the U.S. Export-Import Bank. "We'll reconsider and do the most appropriate thing."</nitf> </p> <p> <nitf>Officials at nonprofit preservation groups contend that the easements serve a valuable purpose. Some are donated in areas where preservation laws are nonexistent or weak and enforcement spotty, the officials said. In cities with strict laws and enforcement, such as Washington and New York, easements act as an insurance policy, in case ordinances change or authorities fail to enforce existing law.</nitf> </p> <p> <nitf>Not all the donations are identical. Some easements go beyond local ordinances by restricting changes to interior spaces and barring development on adjacent land. The easements also often restrict changes in subtle details, such as exterior paint colors, that are unaddressed or laxly enforced by local authorities.</nitf> </p> <p> <nitf>"This is a perfectly legitimate program," said James M. Kearns, president of the National Architectural Trust, the nation's fastest-growing easement organization. "We are doing historic preservation and doing it extremely well, in my opinion."</nitf> </p> <p> <nitf>Nonetheless, some homeowners who have profited from the program describe the tax write-offs as a waste of government funds. They asked not to be identified, for fear of attracting an IRS audit.</nitf> </p> <p> <nitf>One homeowner, who is claiming a six-figure write-off for his Capitol Hill townhouse, described the program as "a boondoggle." Another, who is claiming a similar-size tax break on his Logan Circle home, said he had difficulty understanding why the "stupid" program exists. </nitf> </p> <p> <nitf>"I was giving up nothing and getting a considerable amount of money in return," the homeowner said. "The government shouldn't allow it."</nitf> </p> <p> <nitf>Last year, The Post began publishing articles examining tax deductions taken for donations of conservation easements -- deed restrictions added to land to preserve scenic vistas and wildlife habitat. The articles sparked investigations by the IRS and the Senate Finance Committee. More recently, their attention has turned to facade easements.</nitf> </p> <p> <nitf>"The facade tax break itself makes it too easy for people to take a big tax deduction they don't deserve," Finance Committee Chairman Charles E. Grassley (R-Iowa) said in a statement to The Post. "I intend to take strong steps in the next Congress to end the abuses."</nitf> </p> <p> <nitf>Also serving on the Finance Committee is Conrad, who lives nine blocks from the U.S. Capitol in a 96-year-old red brick house assessed at $597,000. In December 2000, Conrad donated a facade easement on his four-bedroom home to a trust in the District, property records show.</nitf> </p> <p> <nitf>Conrad said through his spokesman, Chris Thorne, that although he could not recall exact figures, he believed his easement was appraised at 10 percent of the value of his townhouse at the time. After he was told of The Post's findings, Conrad said he believes the Senate should consider lowering the percentage donors may claim, perhaps to 5 percent. In view of the federal budget deficit, he said, lawmakers also should consider capping the amount that donors may deduct.</nitf> </p> <p> <nitf>"The senator continues to believe there is strong support across the country for preserving historic properties, but it needs to be reformed," Thorne said.</nitf> </p> <p> <nitf>Conrad is among many high-profile figures whose donations have helped make Washington the nation's leading city for such easements. At The Post, participants include Book World Editor Marie Arana and her husband, Pulitzer Prize-winning book critic Jonathan Yardley. </nitf> </p> <p> <nitf> "In D.C., virtually the Who's Who has done this," real estate appraiser James D. Donnelly said. "Their lawyers and accountants are all looking at this, and they are all saying 'My goodness, it is for real.' "</nitf> </p> <p> <nitf>There is no comprehensive list of homes with easements. But The Post's study shows that Capitol Hill has about 340, followed by Dupont Circle (290), Georgetown (250) and Cleveland Park (90).</nitf> </p> <p> <nitf>Hersh, a Pulitzer Prize winner best known for his reporting on the My Lai massacre and the Abu Ghraib prison abuse scandal, said he donated an easement three years ago. He called the restrictions a "minimal intrusion" that did not affect how he used his Cleveland Park house, built in 1910 and assessed this year at $985,000.</nitf> </p> <p> <nitf>Hersh said he made the donation primarily for the tax write-offs. There was "nothing illegal" about the deduction, Hersh stressed, or his accountant would have waved him off -- particularly given that he was audited repeatedly during the Nixon administration. Hersh said he could not recall how much he saved but described it as "a nice benefit to have."</nitf> </p> <p> <nitf>"Of course," he added, "it isn't helping the Treasury."</nitf> </p> <p> <nitf>Ganis, who splits his time between Hollywood and his native New York, said he donated an easement on his circa 1825 Federalist townhouse in west Greenwich Village. Ganis has worked as a senior executive at Sony, Columbia and Paramount Pictures, and has produced such films as the Adam Sandler vehicles "Mr. Deeds" and "Big Daddy."</nitf> </p> <p> <nitf> Even though Ganis said his easement is no more restrictive than local New York preservation ordinances, "we get a nice, healthy tax deduction."</nitf> </p> <p> <nitf> "It really is a good business decision," he said. "There aren't that many good, solid tax incentives these days, and this happened to be one of them. Lucky for us."</nitf> </p> <p> <nitf> <span style="font-family:Arial,Helvetica;font-size:-1;color:#000000;"><b>'It's a Paper Concept'<br /></b></span><br />The tax breaks are available to owners of residential and commercial structures in designated historic districts or individually listed on the National Register of Historic Places.</nitf> </p> <p> <nitf> The owner must find a nonprofit organization willing to accept the easement as a charitable donation. The nonprofit becomes responsible for monitoring the facade, approving changes and suing if it finds violations. The easements are attached to property deeds and remain there in perpetuity.</nitf> </p> <p> <nitf>Property owners who live in historic districts generally begin the donation process by asking the National Park Service to certify their buildings as historic. Since 1996, the Park Service has received 1,632 such applications nationwide, according to federal data analyzed by The Post. All but eight requests were granted.</nitf> </p> <p> <nitf> Although national in scope, the 28-year-old program first found traction in Washington, where preservationists mobilized in the late 1970s to protect the capital's rich architectural history.</nitf> </p> <p> <nitf>One of the first local nonprofits to accept facade donations was the Foundation for the Preservation of Historic Georgetown, whose directors have included such prominent figures as former secretary of state Dean Acheson, former White House counsel C. Boyden Gray and Carolyn A. Fortas, wife of former Supreme Court justice Abe Fortas. </nitf> </p> <p> <nitf>Following the Georgetown group into the business were the L'Enfant Trust, in 1978, and the Preservation Trust, in 1980. The organizations charged each donor a fee, which they described as a charitable contribution. The money was meant to establish endowments and underwrite the cost of annual facade inspections.</nitf> </p> <p> <nitf>Beginning in 1998, facade easement donations increased dramatically. That surge coincided with the rise of for-profit facilitators, such as the Capitol Preservation Alliance. In Washington, the facilitators found lots of opportunity: 25 residential historic districts encompassing about 23,500 structures and 17 percent of the city's land area.</nitf> </p> <p> <nitf>The program has proved popular because it provides money to everyone involved -- the facilitators, the nonprofits that accept the donations and the homeowners.</nitf> </p> <p> <nitf>The size of the tax deduction is determined by appraisers who estimate how much the property value has dropped because of the easement restrictions. Owners generally may write off the value of their donation over as many as six years, offsetting as much as 30 percent of their annual income.</nitf> </p> <p> <nitf>Homeowners typically claim tax deductions of 10 to 15 percent of their home's value, according to preservationists. Until earlier this year, an IRS guide suggested that easement valuations "should" fall in that range.</nitf> </p> <p> <nitf>In Washington, easement promoter Tim Maywalt said, "I have never seen an appraisal come in at anything but 11 percent -- and I have seen 350 appraisals."</nitf> </p> <p> <nitf>Maywalt and other easement promoters said courts in the late 1980s confirmed that such large write-offs are permissible. "That's just as crystal clear as can be," said Kearns, of the National Architectural Trust.</nitf> </p> <p> <nitf> Some analysts, however, described the court rulings as contradictory, narrow and dated.</nitf> </p> <p> <nitf>In one U.S. Tax Court case often cited as authorizing today's large deductions, the judges' ruling specifically warned donors that they were not automatically entitled to substantial write-offs.</nitf> </p> <p> <nitf>"By this decision we do not mean to imply that a general '10-percent rule' has been established with respect to facade donations," the judges wrote in the 1988 case, <i>Nicoladis v. Commissioner of Internal Revenue</i>. "Valuation itself is still a question of facts and circumstances."</nitf> </p> <p> <nitf>Halperin, the former Treasury official now teaching at Harvard, described the large tax breaks routinely taken today as "just crazy." He estimated the true value of the average donation as "pretty close to zero."</nitf> </p> <p> <nitf>In fact, in pitches to prospective clients, some promoters of the tax deductions have undercut the argument supporting the large write-offs by stressing that the easements add few meaningful restrictions that would decrease market value. Those promoters include Maywalt, a contractor for the Washington-based Capitol Preservation Alliance. </nitf> </p> <p> <nitf>At a seminar in January of this year in Washington, Maywalt emphasized in a talk to prospective donors that "prior approval of facade changes are already restricted in exactly the same way by the city's historic preservation review board." A tape recording of Maywalt's talk was provided to The Post by a participant.</nitf> </p> <p> <nitf>The only difference, he said, is that the easements allow the trusts to review color changes and prohibit homeowners from allowing their houses to "fall down" from neglect.</nitf> </p> <p> <nitf>Maywalt also told the property owners they would receive tax breaks for a drop in their property values but stressed that there would be no actual decline.</nitf> </p> <p> <nitf>"It's a paper concept," he stressed on the tape recording. "The reality of it is that the property is going to continue to accrue in value. . . . Properties with easements have turned over one, two, three, four, five times. We have not seen any decrease in value."</nitf> </p> <p> <nitf>Tom Branham, chief tax assessor for Washington, said his office has searched in vain for evidence of lost value, to determine whether property taxes should be reduced for the donors.</nitf> </p> <p> <nitf>"We don't see any difference in value here between the homes that have the facade easements and the ones that don't," Branham said.</nitf> </p> <p> <nitf>Writing last year in the Journal of Financial Planning, Steven McClain, co-founder of the National Architectural Trust, asserted that "the presence or absence of an easement is only a minor factor in the buying decisions of future purchasers."</nitf> </p> <p> <nitf>Interviews with donors show the vast majority have no interest in altering the look of their homes, even if they could.</nitf> </p> <p> <nitf>"I can't imagine anybody who would ever want this house would ever want to alter the facade," said Paul Sherrill, who donated an easement on the brick and limestone exterior of his Georgian Revival townhouse, off Dupont Circle. The home, assessed at $1.1 million, was featured in an eight-page photo spread in the September issue of Architectural Digest.</nitf> </p> <p> <nitf>Some preservationists argue that the easements <i>increase</i> property values, by making neighborhoods well preserved and even more exclusive. </nitf> </p> <p> <nitf>"The property generally becomes more valuable with the easement because buyers place a premium on the architectural integrity of all such properties in the community," Maywalt wrote in January in a Washington-based newsletter for financial planners.</nitf> </p> <p> <nitf>The fact that easements are lucrative and painless puzzles potential donors. Kearns wrote recently in a newsletter for accountants that homeowners' initial reaction to the program was skepticism, "because the opportunity sounds 'too good to be true.' "</nitf> </p> <p> <nitf>Kearns said in an interview that he knew of one easement that recently was valued at $1 million. In another recent case, he said, an easement on a New York commercial building was valued at $150 million; the tax benefits went to a partnership of about 35 people. He would not identify the owners.</nitf> </p> <p> <nitf>Recent data on abuses in the program are scarce. But a 1984 IRS study examined 42 deductions taken for easement donations and determined that all but one appeared inflated, resulting in overvaluations totaling nearly $32 million. The study found that property owners generally overvalued their easement deductions by an average of 220 percent.</nitf> </p> <p> <nitf>The report also found that the tax benefits had largely gone to "higher income" people and companies. Low-income families have difficulty paying for appraisals and coming up with the cash demanded by trusts, preservationists said.</nitf> </p> <p> <nitf>"These tax deductions are only useful to people of great wealth or great income," George Mason University professor James D. Riggle said. He dismisses the write-offs as "tax deals for rich guys."</nitf> </p><p> </p></div>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-6211248462746939612007-05-18T18:15:00.000-07:002007-05-18T18:16:50.271-07:00Advocates put familiar faces on housing need<h2>Next generation, local workers cannot stay</h2> <p class="byline"><span>By Emily Shartin, Globe Staff </span><span class="date"></span></p> <p>Bonnie Sims was running out of options.</p><p>The single mother of two wanted to stay in her hometown of Northborough. The town's high cost of housing had forced her to move in with her parents, but she knew that arrangement couldn't last forever.</p><p>''I like Northborough," said Sims, 35, who works as an office manager for her father's company. ''It's the town I grew up in."</p><p>''This is where all their friends are," she added, referring to her children.</p><p>Last year, a new housing development called Sunnyside Estates on Route 135 offered Sims what she was looking for -- a chance to own a home in Northborough at a price she could afford. Under a state law that aims to increase affordable housing by allowing builders to sidestep zoning restrictions if a quarter of the units are offered at below-market rates, four of the condominiums in the 16-unit development were sold for $125,000 apiece. Through a lottery, Sims was selected to buy one of them.</p><p>Local housing advocates are hoping people like Sims will help put a familiar face on the need for affordable homes in Boston's western suburbs, where the median price of a home in 2003 was $380,000.</p><p>Affordable housing advocates have teamed up with leaders in the economic development and building communities to hold a series of meetings throughout the region aimed at debunking what they call persistent misconceptions about affordable housing, and to show how a lack of affordable homes can affect the whole community. The next meeting will be held at 7:30 tonight at Bolton Town Hall. Another is scheduled for 4 p.m. next Thursday at Franklin Town Hall.</p><p>Sims is one of several local residents and officials featured in a video that will be shown at the meetings. The campaign has been organized primarily by the 495/MetroWest Corridor Partnership, an economic development organization based in Westborough, and the Boston-based Citizens Housing and Planning Association, which hopes to channel public awareness into the creation of 13,000 new homes across the area by 2010.</p><p>For many suburban residents, their introduction to the debate on affordable housing has often been a specific -- and controversial -- proposal for a development in their community. Sunnyside Estates, for example, was attacked by residents who were concerned about the development's density and potential traffic problems. But organizers of the new campaign say they hope people will begin to think about the issue of housing in newer, broader ways.</p><p>Lynn Sand, chief executive of the 495/MetroWest Corridor Partnership, said she prefers to think of affordable housing as ''workforce housing," because many of the people who are struggling with the region's home prices are teachers, police officers, or firefighters.</p>Westborough, for example, used to require that all firefighters live in town, said Chief Walter Perron, who also is featured in the video. When the town's housing prices started to increase, the rule was modified to include a ring of contiguous towns such as Shrewsbury and Northborough. When that rule, too, became difficult to abide by, it was expanded to include an additional ring of communities, Perron said in an interview. Westborough has lost applicants for firefighting positions once candidates learned about the residency requirement, Perron said.<br />'The housing market out here is just completely out of sight," he said. ''I don't think there's really a whole lot the town can do about it."<p>In the private sector, too, many employers have identified the high cost of housing in Massachusetts as a barrier to recruiting job candidates. That could ultimately force a company to relocate, Sand said, which would mean a loss of revenue to the town. It could also force established homeowners to face moving or losing their jobs.</p><p>''The haves can become the have-nots," Sand said.</p><p>Along with concrete hurdles such as the high cost of land and the lack of helpful zoning laws, housing advocates have said they are hamstrung by public misconceptions about what affordable housing is and for whom it is meant. The bleak image of a high-rise apartment is what many people conjure, they said, rather than the neatly appointed villages of condominiums that have been built recently in many communities.</p><p>Helen Lemoine, a former Framingham Planning Board member who is helping to organize the local meetings, said it is difficult for residents to recognize the need for more housing when they have been comfortable in their own homes for so long.</p><p>''The feeling has been that the need for affordable housing is overblown," Lemoine said. She came face-to-face with the realities of the local housing market when her daughter, a teacher in Framingham, had to move back home while searching for housing she could afford.</p><p>Under state guidelines, 10 percent of a community's total housing stock is supposed to sell or rent at below-market rates, and several communities in the region are still far from that goal. Less than 1 percent of Dover's housing is considered affordable, according to the state Department of Housing and Community Development. In Boylston, the number is 1.5 percent; in Sherborn, 2.35 percent.</p><p>But many communities are making progress toward the goal. Locally, both Westborough and Framingham have achieved the 10 percent mark, according to the state. Franklin is over 9 percent, and Lincoln and Marlborough are both over 8 percent. The community meetings will include some discussion of what communities are doing to increase their affordable housing stock.</p><p>''There's some good news out there," said Aaron Gornstein, executive director of the housing and planning association.</p><p>Bolton, Lincoln, Shrewsbury, and Stow are among about 25 communities that have state-approved affordable housing plans, which are intended to map out housing production.</p><p>Bolton is about to open a 28-unit apartment complex for residents 55 and older that will rent almost entirely at below-market rates, said Doug Storey, a member of the Planning Board and chairman of the town's affordable housing partnership. The town also has been presented with several proposals under the state's Chapter 40B law, Storey said.</p><p>Although residents have had concerns about some of those proposals, he believes Bolton has been proactive in raising awareness about the need for affordable housing.</p><br /><p><br /></p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-43861942060047804342007-05-18T18:14:00.000-07:002007-05-18T18:15:00.795-07:00Last hurrah?<span class="storytease">Home prices can't keep going up at double-digit rates, but that doesn't mean 2005 will be a bust.</span><br /> <span class="timestamp">December 7, 2004: 5:29 PM EST </span><br /><span class="storybyline">By Jon Birger, MONEY Magazine</span><br /> <!--startclickprintexclude--> <br /> <!--endclickprintexclude--> <p> <b> NEW YORK (MONEY Magazine) - If you live in a hot real estate market and you're buying or selling a home, or just perusing the Sunday classifieds and quickly tallying your growing net worth, you have to wonder: Can real estate keep going, or is this Nasdaq 5000 all over again? Our forecast: It'll keep going, albeit at a tempered pace. </b> </p> <p>Don't bet on further 20 percent gains in 2005. But don't bet on a collapse either. If price declines do occur, they may well happen where you'd least expect. </p> <script language="JavaScript"> <!-- var clickExpire = "-1"; //--> </script> <p>Even the housing bulls are no longer raging. The perennially optimistic National Association of Realtors predicts 5 percent gains on average this year.<br /></p><p> Among the bears, count Yale University economist Robert Shiller, who foretold the March 2000 bursting of the stock market bubble in his book "Irrational Exuberance." "This is the biggest real estate bubble we've ever seen," says Shiller. </p> <p>He expects widespread declines in home values, maybe not in 2005 but soon enough, because prices have become untethered from incomes: Median home prices are up 35 percent since 2000, while wages are up just 8 percent. Shiller is particularly worried about Southern California, where prices have doubled in three years. </p> <center><b>Crazy expectations?</b></center> <p>The biggest red flag may be homeowners' expectations. When Shiller and his research partner, Karl Case of Wellesley College, surveyed markets in Boston, L.A., Milwaukee and San Francisco in 2003, they found that the typical homeowner expected his property to appreciate 14.7 percent a year over the next 10 years. Now that's irrational exuberance. </p> <p>But that doesn't mean the gains of recent years were nuts. They were simply the result of a long-term decline in interest rates that made home ownership more affordable. That brought into the market new buyers who in turn bid up prices.<br /></p><p> The typical family today spends just 19 percent of household income on mortgage payments. That compares with 22 percent in 1990 and 31 percent in 1980 -- when mortgage rates averaged nearly 14 percent. Yes, mortgage rates are moving up from their historical lows, but not as much as bears had feared. And the outlook is for modest interest-rate increases at most. </p> <p>Case, in contrast to his partner, doubts that home prices will fall. The major markets are overpriced and demand will soften, he concedes, but he thinks the correction will take the form of a long period of flat prices, not declines. </p> <p>His rationale? "Sellers hold out." If you're sitting on a 5.5 percent mortgage at a time when new mortgages cost 7 percent, waiting out the market makes sense if you're not under pressure to move. </p> <p> "Of course," says Case, "all bets are off if things get rocky on the economic side." </p> <center><b>Unemployment is the real risk factor</b></center> <p>As Case sees it, unemployment, not overexuberance, is real estate's biggest risk factor. What doomed Houston 20 years ago wasn't so much wild speculation -- though there was plenty of that -- but the cratering of the Texas oil industry. In California, the 13 percent decline in home prices between 1990 and 1995 coincided with a 35 percent jump in the unemployment rate.<br /></p><p> All this is why Freddie Mac economist Frank Nothaft thinks today's most vulnerable markets are not in high-priced coastal areas but in states like Ohio and Michigan, which are losing manufacturing jobs. </p> Bottom line: Don't buy if you're just looking for a big score. But don't be paralyzed by fear of a crash. The real estate market is no Nasdaq. And your house is no Net stock.Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-30949736682621036642007-05-18T18:13:00.001-07:002007-05-18T18:13:59.021-07:00Subprime loan market grows despite troubles<div class="by-line">By Sue Kirchhoff and Sandra Block, USA TODAY</div> <div class="intro-copy">WASHINGTON — Bad credit is good business.</div> <p class="inside-copy">Subprime lending — higher-interest loans to consumers with impaired or non-existent credit histories — has been the fastest-growing part of the mortgage industry. </p> Subprime mortgage activity grew an average 25% a year from 1994 to 2003, outpacing the rate of growth for prime mortgages. The industry accounted for about $330 billion, or 9%, of U.S. mortgages in 2003, up from $35 billion a decade earlier.<br /><p class="inside-copy">The growth has attracted accolades and controversy. Federal Reserve Governor Edward Gramlich has said subprime lenders helped push homeownership to record levels, making it possible for a growing number of minorities to buy homes. But he also raises questions about high delinquency rates. </p> <p class="inside-copy">And dozens of states have passed laws since 1999 to crack down on predatory lending — loans with high fees, excessive interest or other unaffordable provisions — clustered in the subprime sector.</p> <p class="inside-copy">Still, there's no doubt subprime lending is now a Main Street, mainstream business with sophisticated marketing that promises to deliver the American dream of homeownership, or lower the monthly burden of all-too-American consumer debt.</p><p class="inside-copy">• Ameriquest, one of the nation's biggest subprime lenders, is paying an estimated $15 million to sponsor February's Super Bowl halftime show and became a season-long NFL sponsor. The California-based firm has naming rights to the Texas Rangers' baseball stadium, Ameriquest Field. The efforts are part of a broader move to expand into prime financing.</p> <p class="inside-copy">• Home 123, a subsidiary of New Century Financial, has home improvement guru Bob Vila as a spokesman. New Century Financial's total revenue was up 87% in the third quarter from a year ago. The company expects $40 billion or more in loan volume this year. </p> <p class="inside-copy">• Citigroup, Wells Fargo and H&R Block are among old-line companies that have subprime entities. Major bond firms including Morgan Stanley and Lehman Bros. have a stake in the industry. That's because the bulk of subprime mortgages are packaged into bonds that are resold to investors.</p> <table align="left" cellpadding="0" cellspacing="0"> <tbody><tr> <td> <table border="0" cellpadding="0" cellspacing="0" width="190"> <tbody><tr> <td rowspan="3" class="notch_header" width="1"><img src="http://www.usatoday.com/_common/_images/clear.gif" border="0" height="10" width="1" /></td> <td class="notch_header" width="180"> SUBPRIMES FLOURISHING</td> <td rowspan="3" class="notch_header" width="1"><img src="http://www.usatoday.com/_common/_images/clear.gif" border="0" height="10" width="1" /></td> <td rowspan="3"><img src="http://www.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="10" /></td> </tr> <tr> <td> <table border="0" cellpadding="2" cellspacing="0" width="100%"> <tbody><tr> <td valign="top"> <table border="0" cellpadding="2" cellspacing="0" width="99%"> <tbody><tr> <td class="sidebar" valign="top"> <table border="0" cellpadding="3" cellspacing="1" width="180"> <tbody><tr> <td colspan="2" class="notch_medium">Subprime loans are increasing in volume and value, particularly in densely-populated states like California and New York. Nationwide, subprimes account for about 10% of all mortages. Share of mortgage loans in 2003 that are subprime: </td> </tr> <tr> <td class="notch_light">Rhode Island</td> <td class="notch_light"> <div align="center"><b>14%</b></div> </td> </tr> <tr> <td class="notch_white">California</td> <td class="notch_white"> <div align="center"><b>13.3%</b></div> </td> </tr> <tr> <td class="notch_light">Nevada</td> <td class="notch_light"> <div align="center"><b>12.9%</b></div> </td> </tr> <tr> <td class="notch_white">Florida</td> <td class="notch_white"> <div align="center"><b>12.8%</b></div> </td> </tr> <tr> <td class="notch_light">Tennessee</td> <td class="notch_light"> <div align="center"><b>12.6%</b></div> </td> </tr> <tr> <td class="notch_white">Texas</td> <td class="notch_white"> <div align="center"><b>12.3%</b></div> </td> </tr> <tr> <td class="notch_light">Utah</td> <td class="notch_light"> <div align="center"><b>12.2%</b></div> </td> </tr> <tr> <td class="notch_white">New York</td> <td class="notch_white"> <div align="center"><b>11.5%</b></div> </td> </tr> <tr> <td class="notch_light">Oklahoma</td> <td class="notch_light"> <div align="center"><b>11.2%</b></div> </td> </tr> <tr> <td class="notch_white">Maine</td> <td class="notch_white"> <div align="center"><b>10.6%</b></div> </td> </tr> <tr> <td class="notch_light">Delaware</td> <td class="notch_light"> <div align="center"><b>10.5%</b></div> </td> </tr> <tr> <td class="notch_white">Connecticut</td> <td class="notch_white"> <div align="center"><b>10.2%</b></div> </td> </tr> <tr> <td class="notch_light">Mississippi</td> <td class="notch_light"> <div align="center"><b>10.2%</b></div> </td> </tr> <tr> <td class="notch_white">Alabama</td> <td class="notch_white"> <div align="center"><b>9.9%</b></div> </td> </tr> <tr> <td class="notch_light">Arizona</td> <td class="notch_light"> <div align="center"><b>9.9%</b></div> </td> </tr> <tr> <td class="notch_white">Nation</td> <td class="notch_white"> <div align="center"><b>9.9%</b></div> </td> </tr> <tr> <td class="notch_light">New Hampshire</td> <td class="notch_light"> <div align="center"><b>9.6%</b></div> </td> </tr> <tr> <td class="notch_white">Missouri</td> <td class="notch_white"> <div align="center"><b>9.5%</b></div> </td> </tr> <tr> <td class="notch_light">Ohio</td> <td class="notch_light"> <div align="center"><b>9.5%</b></div> </td> </tr> <tr> <td class="notch_white">South Carolina</td> <td class="notch_white"> <div align="center"><b>9.3%</b></div> </td> </tr> <tr> <td class="notch_light">Indiana</td> <td class="notch_light"> <div align="center"><b>9.1%</b></div> </td> </tr> <tr> <td class="notch_white">North Carolina</td> <td class="notch_white"> <div align="center"><b>9.1%</b></div> </td> </tr> <tr> <td class="notch_light">Louisiana</td> <td class="notch_light"> <div align="center"><b>9.0%</b></div> </td> </tr> <tr> <td class="notch_white">Oregon</td> <td class="notch_white"> <div align="center"><b>9.0%</b></div> </td> </tr> <tr> <td class="notch_light">Colorado</td> <td class="notch_light"> <div align="center"><b>8.9%</b></div> </td> </tr> <tr> <td class="notch_white">Georgia</td> <td class="notch_white"> <div align="center"><b>8.9%</b></div> </td> </tr> <tr> <td class="notch_light">Kentucky</td> <td class="notch_light"> <div align="center"><b>8.9%</b></div> </td> </tr> <tr> <td class="notch_white">Hawaii</td> <td class="notch_white"> <div align="center"><b>8.7%</b></div> </td> </tr> <tr> <td class="notch_light">Illinois</td> <td class="notch_light"> <div align="center"><b>8.4%</b></div> </td> </tr> <tr> <td class="notch_white">Kansas</td> <td class="notch_white"> <div align="center"><b>8.3%</b></div> </td> </tr> <tr> <td class="notch_light">Michigan</td> <td class="notch_light"> <div align="center"><b>8.3%</b></div> </td> </tr> <tr> <td class="notch_white">Pennsylvania</td> <td class="notch_white"> <div align="center"><b>8.2%</b></div> </td> </tr> <tr> <td class="notch_light">Maryland</td> <td class="notch_light"> <div align="center"><b>8.1%</b></div> </td> </tr> <tr> <td class="notch_white">New Mexico</td> <td class="notch_white"> <div align="center"><b>8.1%</b></div> </td> </tr> <tr> <td class="notch_light">Massachusetts</td> <td class="notch_light"> <div align="center"><b>8.0%</b></div> </td> </tr> <tr> <td class="notch_white">Minnesota</td> <td class="notch_white"> <div align="center"><b>8.0%</b></div> </td> </tr> <tr> <td class="notch_light">Nebraska</td> <td class="notch_light"> <div align="center"><b>8.0%</b></div> </td> </tr> <tr> <td class="notch_white">New Jersey</td> <td class="notch_white"> <div align="center"><b>7.9%</b></div> </td> </tr> <tr> <td class="notch_light">Idaho</td> <td class="notch_light"> <div align="center"><b>7.7%</b></div> </td> </tr> <tr> <td class="notch_white">Washington</td> <td class="notch_white"> <div align="center"><b>7.7%</b></div> </td> </tr> <tr> <td class="notch_light">Wyoming</td> <td class="notch_light"> <div align="center"><b>7.5%</b></div> </td> </tr> <tr> <td class="notch_white">Iowa</td> <td class="notch_white"> <div align="center"><b>7.2%</b></div> </td> </tr> <tr> <td class="notch_light">Virginia</td> <td class="notch_light"> <div align="center"><b>7.2%</b></div> </td> </tr> <tr> <td class="notch_white">Montana</td> <td class="notch_white"> <div align="center"><b>7.1%</b></div> </td> </tr> <tr> <td class="notch_light">West Virginia</td> <td class="notch_light"> <div align="center"><b>6.6%</b></div> </td> </tr> <tr> <td class="notch_white">Arkansas</td> <td class="notch_white"> <div align="center"><b>6.4%</b></div> </td> </tr> <tr> <td class="notch_light">South Dakota</td> <td class="notch_light"> <div align="center"><b>5.3%</b></div> </td> </tr> <tr> <td class="notch_white">North Dakota</td> <td class="notch_white"> <div align="center"><b>5.2%</b></div> </td> </tr> <tr> <td class="notch_light">Wisconsin</td> <td class="notch_light"> <div align="center"><b>4.6%</b></div> </td> </tr> <tr> <td class="notch_white">Alaska</td> <td class="notch_white"> <div align="center"><b>4.5%</b></div> </td> </tr> <tr> <td class="notch_light">District of Columbia</td> <td class="notch_light"> <div align="center"><b>4.5%</b></div> </td> </tr> <tr> <td class="notch_white">Vermont</td> <td class="notch_white"> <div align="center"><b>4.5%</b></div> </td> </tr> <tr> <td class="notch_light">Puerto Rico</td> <td class="notch_light"> <div align="center"><b>2.8%</b></div> </td> </tr> <tr> <td class="notch_white" colspan="2">Source: Mortgage Bankers Association</td> </tr> </tbody></table> </td> </tr> </tbody></table> </td> </tr> <tr class="sidebar"> <td height="21" valign="top"><img src="http://www.usatoday.com/_common/_images/clear.gif" border="0" height="10" width="1" /></td> </tr> </tbody></table> </td> </tr> <tr> <td class="notch_header" height="1" width="180"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="10" /></td> </tr></tbody></table> </td> </tr> </tbody></table> <p class="inside-copy">Amerisave, an online mortgage lender, moved into subprime lending about a year ago, after rising interest rates reduced demand for refinancing among borrowers who qualify for prime mortgage rates.</p> <p class="inside-copy">"We found there was a huge opportunity still in the subprime or less-than-perfect credit area," says David Herpers, chief marketing officer for Amerisave. "Many of these consumers were not able to take advantage of the low rates in the last few years. Our estimates are a third of U.S. citizens fall into this category."</p> <p class="inside-copy">Amerisave has 30 loan officers dedicated to subprime lending. They plan to increase that number to 200 by the end of next year. Amerisave estimates subprime loans will account for at least 50% of the company's total revenue within the next six to 12 months. </p> <p class="inside-copy">Subprime lenders are expected to fare better than the prime lenders as interest rates rise, because their borrowers tend to be less rate sensitive.</p> <p class="inside-copy"><b>Higher-priced products </b></p> <p class="inside-copy">Even as they push states to pass tougher predatory-lending laws, some consumer groups are working with subprime lenders to deliver credit to borrowers who otherwise could not get financing. And the industry is adopting best lending practices or funding consumer awareness and education campaigns.</p> <p class="inside-copy">Some remain concerned, however, that the industry is selling people higher-priced loans they may not need or be able to handle. </p> <p class="inside-copy">"There are a lot of these people who got the subprime who, if they had shopped more aggressively, would have gotten the prime loans," says Jim Campen, a research associate at the University of Massachusetts Gastón Institute, who works with the Massachusetts Community and Banking Council.</p> <p class="inside-copy">Subprime clients are increasingly being marketed products — zero-down loans, interest-only financing and home equity loans as high as 125% of a home's appraised value — that allow them to buy or borrow, but at an elevated risk.</p> <p class="inside-copy">Like the credit card industry, mortgage companies are pushing their product through television advertising, pop-up ads on the Internet and mailings. While the industry touts its efforts at consumer education, a message of its sales pitch is speed. </p> <p class="inside-copy">"Even if other banks may have turned you down. We don't care — we want to get to know you," says a mailing from Home 123. "We'll get your loan application processed instantly, privately and anonymously over the Internet."</p> <p class="inside-copy">The default rate for subprime loans historically has been well above that of prime loans. The Mortgage Bankers Association says the numbers are improving, with 2.4% of prime loans past due in mid-2004, compared with 10.04% of subprime loans. Those subprime past-due figures are down from 15.67% in mid-2002. Still, 4.61% of subprime loans were in foreclosure in mid-2004, above the 0.49% prime figure. </p> <p class="inside-copy"><b>Growth of the industry </b></p> <p class="inside-copy">The subprime market has grown for a number of reasons. </p> <p class="inside-copy">Deregulation allowed cross-fertilization between banks and financial service firms, while the federal government in the 1980s lifted mortgage interest ceilings. Congress in 1986 ended the deductibility of consumer debt, such as credit card payments, though still letting filers deduct mortgage interest. The change provided incentives for refinancing. Even rates for subprime loans at 3 percentage points above prime loans, or about 8% to 9% now, are lower than many 18% credit card rates.</p> <p class="inside-copy">Advances in risk modeling have produced standardization. The bond market for subprime loans has provided cash.</p> <p class="inside-copy">The majority of subprime mortgages are now sold by the initial lenders, bundled into bonds and offered to individual and institutional investors. In 1994, $11 billion of subprime mortgages were sold on the secondary market; in 2003, it was more than $200 billion.</p> <p class="inside-copy">"Done right, subprime lending provides an important source of mortgage financing for families with imperfect financial or credit histories," Fannie Mae CEO Franklin Raines said in a recent speech. "Done wrong, subprime lending is a huge rip-off that siphons wealth — and hope — from people who have very little to begin with." </p> <p class="inside-copy">Like the prime mortgage sector, subprime lending is becoming increasingly concentrated, partly because of bankruptcies in the late 1990s when some companies became overextended.</p> <p class="inside-copy">The top 25 lenders made nearly 90% of loans in 2002, nearly double their 1990 market share, according to the Harvard Joint Center for Housing Studies. Ameriquest, New Century Mortgage and National City are among industry leaders. Mainstream lenders are entering the market, but the vast majority of business is done by mortgage firms, thrifts and other entities. </p> <p class="inside-copy">"For a small start-up shop ... it would be harder today to come into this business. In the past you could make a lot of mistakes, and there were very wide spreads. That has gone away," says Laura Swartz, senior vice president of American Mortgage Network, a wholesale firm that sells to mortgage brokers.</p> <p class="inside-copy">The industry is increasingly offering purchase mortgages, though subprime lending is heavily concentrated in refinancing and home equity loans. Firms are targeting potential clients with credit scores and incomes just at the margin needed to easily qualify for a prime loan. They sometimes compete with prime lenders for such loans. </p> <p class="inside-copy">The Fed's Gramlich in a May speech said borrowers with credit scores below 620 are generally viewed as higher risk, unable to get a prime loan without a large down payment. About half of subprime borrowers had credit scores above that threshold, Gramlich noted, indicating "a good credit history alone does not guarantee prime status."</p> <p class="inside-copy">Swartz says borrowers with credit scores of 620 to 640 are the "sweet spot" for the subprime industry. </p> <p class="inside-copy"><b>Consumer groups </b></p> <p class="inside-copy">The rise of subprime lending presents something of a dilemma for community and consumer groups. Even while they fight for tougher laws against predatory lending, and accuse some firms of reverse red-lining — targeting minority neighborhoods — they are forming partnerships with subprime lenders.</p> <p class="inside-copy">In September, Acorn, a community organization representing low- and moderate-income families, announced an agreement with Citigroup to create an affordable lending program for home buyers, with a special focus on immigrants.</p> <p class="inside-copy">"The partnership with Citigroup had less to do with subprime lending, predatory lending, and more to do with our interest in working with Citigroup and other lenders to extend credit broadly," says Steve Kest, executive director of Acorn. "We see thousands of families who have staked their whole future in this country, have jobs, (but have) only been able to access subprime credit through pretty shady lenders."</p> <p class="inside-copy">Ameriquest, working with consumer groups, is among subprime lenders that have developed best practices for loans, including no loan "flipping" — refinancing at high fees that strip out equity.</p> <p class="inside-copy">While consumer groups and subprime firms have joint interests, disagreements remain. Consumer activists say too many subprime customers are not told they could qualify for prime financing.</p> <p class="inside-copy">New Century, one of the biggest subprime lenders, in testimony to Congress laid out its own internal numbers, which it says underscore that the industry does not overcharge for loans or target minorities. But they also appear to bolster the contention that good credit alone does not guarantee a prime rate.</p> <p class="inside-copy">The firm said slightly more than 19% of its borrowers had credit scores 660 or higher, which lending experts say could easily qualify borrowers for a prime loan, including more than 30% of Asian/Pacific Islander borrowers, 23% of Hispanics, 12% of blacks and 19% of whites. An additional 22% had scores between 620 and 660, which could also qualify them for prime rates, depending on their income, collateral and other financial data, including the ability to make a down payment. </p> <p class="inside-copy">A slight majority of borrowers were white, and on average, New Century clients were under age 50 with annual family income of about $72,000. </p> <p class="inside-copy">Terry Theologides, executive vice president for corporate affairs at New Century, says credit scores tell only part of the story. </p> <p class="inside-copy">"The products that we offer to our highest-credit-grade borrowers are competitive with prime (rates). The spread becomes extremely compressed when you get to those folks," he said, adding the company offered loans with interest rates near 5% to 6% — competitive with prime rates. </p> <p class="inside-copy">The federal Office of the Comptroller of the Currency in a 2002 study said pricing in the industry did not seem out of line with its higher risk. But even a small difference in rates means a big jump in payments. The Harvard Joint Center says a 2 percentage-point difference on an $85,000 loan, a common size for many first-time buyers, adds up to $18,000 halfway into paying off a conventional 30-year mortgage. </p> <p class="inside-copy">Subprime borrowers are far more likely than those in the prime market to take out adjustable-rate loans, and could take a hit as interest rates rise.</p> <p class="inside-copy">Subprime lenders offer products from fixed-rate mortgages to interest-only loans, where borrowers pay just the interest for a set number of years, or 80-20 loans, in which borrowers finance a home with an 80% mortgage at one rate and the remaining 20% through a second loan. Prime lenders also offer such products.</p> <p class="inside-copy">Interest-only products are "very appropriate for a sophisticated borrower, but are they appropriate for a first-time home buyer who has not amassed a lot of equity?" asks Jim Carey, vice president of marketing for AmeriDream, a Maryland non-profit for low-income buyers.</p> <p class="inside-copy">Industry officials say they carefully screen clients to make appropriate loans and avoid defaults that cost the industry money and hurt its reputation.</p> <p class="inside-copy">"If you owned a bank, would you rather be Jimmy Stewart or Mr. Potter sitting in the wheelchair?" asks Mitch Feinstein, National Home Equity Mortgage Association, referring to banker Henry Potter, the villain in the classic movie <i>It's A Wonderful Life</i>.</p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-39542105343099821092007-05-18T18:12:00.000-07:002007-05-18T18:13:01.013-07:00Borrowing patterns fall along racial lines<div class="by-line">By Sue Kirchhoff, USA TODAY </div> <div class="intro-copy">WASHINGTON — Do subprime lenders target minorities?</div> <p class="inside-copy">Consider this: Well-off African-Americans who refinanced their homes in the greater Boston area in 2002 were more than six times as likely as well-off whites to take out a higher-cost, subprime loan. </p> <p class="inside-copy">But well-off blacks, defined as those with annual incomes $90,000 or above, were also three times as likely as low-income whites, those with incomes up to $38,000, to turn to the subprime market, according a study for the Massachusetts Community & Banking Council, a coalition of community groups and banks.</p> <p class="inside-copy">The data do not prove discrimination. High levels of subprime borrowing in minority neighborhoods and among minority buyers, however, do indicate they are more likely to be targeted by unscrupulous lenders.</p> <p class="inside-copy">"There are a lot of folks out there who are convinced their credit is not good enough to get a conventional loan. Some of that has to do with aggressive marketing of these subprime lenders," says Tom Callahan, executive director of the Massachusetts Affordable Housing Alliance. "If you're lower-income minority, (you've) been told for years that sometimes traditional lenders don't want to deal with people that look like you."</p> <p class="inside-copy">Jim Campen, a research associate at the University of Massachusetts Gastón Institute, a Latino public policy institute, who wrote the Boston study, says the data could reflect legitimate lending decisions based on lower credit scores of some minorities. But he points to years of research showing minorities are denied prime loans more often than whites, even with equivalent credit records.</p> <p class="inside-copy">"The way the subprime industry works, it's not about denying blacks more often. It's about making loans, too many high-cost loans, to blacks," Campen says.</p> <p class="inside-copy">Subprime lending, as a share of overall refinancing, was nearly six times higher in the predominantly minority neighborhoods of Boston than in white areas. Overall, subprime refinance activity rose 41.8% in 2002. Similar racial patterns were found in seven other Massachusetts cities. In Boston, subprime lending was highest in neighborhoods such as Mattapan, Roxbury, Dorchester and Hyde Park.</p> <p class="inside-copy">The Boston data track studies in other cities that show concentrated subprime lending in minority neighborhoods and higher foreclosure rates in such areas. A March report on Chicago neighborhoods by the non-profit Woodstock Institute found that for every 100 additional subprime loans from 1996 to 2001 there were an additional nine foreclosures in 2002 compared with the average in Chicago neighborhoods.</p> <p class="inside-copy">The lending industry points to economic data that show Hispanics and blacks have lower incomes and wealth than whites. Immigrants are more likely to have impaired or incomplete credit ratings or lack documented income. Prospective borrowers may have a sparse credit history because they lack consumer education or access to mainstream banks. Some upper-income borrowers may prefer low document or no down-payment loans.</p> <p class="inside-copy">Terry Theologides, executive vice president of corporate affairs at New Century Mortgage, a national subprime lender, disputes charges of minority targeting. "Our pricing is automated, is absolutely colorblind," Theologides says. "The program they (minorities) are offered is identical to the program that would be offered if they were white and lived in the suburbs."</p> <p class="inside-copy">Theologides says New Century's internal statistics do not show an over-concentration in minority markets. Nationally, 52% of New Century borrowers in 2003 were white, 20% Hispanic, 16% black and 4% Asian/Pacific Islander. That includes purchase and refinance loans.</p> <p class="inside-copy">Geoff Smith, project director at the Woodstock Institute, says research finds a high concentration of subprime lending in minority areas, even after controlling for such factors as income and earnings. "I think it is an example of subprime lenders targeting minority neighborhoods and borrowers," he says.</p> <p class="inside-copy">Evidence of racial patterns in lending, and much of the data about the subprime market, comes from the Home Mortgage Disclosure Act. The law requires many lenders to report data about loans, including race of borrowers. Mortgages are classified prime or subprime depending on whether they are offered by a firm that makes predominantly subprime or conventional loans. That has the effect of classifying some prime loans as subprime and vice versa. </p> <p class="inside-copy">Glenn Canner, senior adviser to the Federal Reserve Board, which oversees the law, says reporting probably picks up about 80% of subprime lending. The Fed has tightened the rules so that data for 2004, to be released in 2005, will pick up more data about loan price as well as more subprime firms. The effect will be more data allowing researchers to link race and price. </p> <p class="inside-copy">"The data is supposed to be effective as a screen to identify potential problems, it's not supposed to be evidence of a problem," says Canner.</p> <p class="inside-copy">Subprime lenders worry the change will damage reputations and even destroy the subprime sector. They say the data will not show factors that determine creditworthiness and pricing.</p> <p class="inside-copy">The American Financial Services Association (AFSA), which represents lenders, including subprime mortgage firms, in May asked the Fed to add a disclaimer to the data indicating it does not include factors integral to loan pricing. </p> <p class="inside-copy">"Potential misperception should not be permitted to destroy the subprime mortgage market," the group said. "Looking at race and price without additional context may lead to a wide-based perception that race correlates to cost. It does not."</p> <p class="inside-copy">AFSA officials have not heard back from the Fed and are considering options to get their message out.</p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-21160275719374820542007-05-18T18:10:00.000-07:002007-05-18T18:12:32.474-07:00More U.S. home buyers fall prey to predatory lenders<div class="by-line">By Sue Kirchhoff, USA TODAY</div> <div class="intro-copy">WASHINGTON — After Martha Lawler lost her job at Bell Atlantic in 1993, she fell behind on her house payments. Then her troubles really started. </div>Desperate to hang on to her Brooklyn, N.Y., home, Lawler, 55, took out a new mortgage with a local finance company that carried an 18.25% interest rate, big fees that were rolled into her balance and a "balloon" payoff due in five years. Unable to make the higher monthly payments, Lawler refinanced into what she thought was a more affordable loan. <p class="inside-copy">The pattern continued through six lenders, 10 years and thousands of dollars of dubious charges that eroded her home equity and pushed her mortgage balance from $50,000 to $198,000.</p> <p class="inside-copy">"For 10 years I've been going in a circle, robbing Peter to pay Paul, trying to keep this mortgage up," Lawler said. "No fly clothes. No new car. My mortgage is my life."</p> <p class="inside-copy">Lawler got caught up in a problem that has drawn increasing concern and action from state and federal regulators: predatory lending, loosely defined as loans with excessively high interest rates, fees or other provisions that can make them extremely difficult to repay.</p><p class="inside-copy">The focus on predatory lending has coincided with the heady growth of the so-called subprime mortgage market. Subprime lenders offer higher-interest loans to people with troubled or non-existent credit ratings. While most subprime loans are not predatory, consumer advocates caution that all predatory loans are subprime. </p> <p class="inside-copy">More than 25 states and a host of towns and cities have passed predatory-lending restrictions since 1999. Looking ahead, predatory home lending is expected to be a continuing financial and political issue for several reasons:</p> <p class="inside-copy">•<b>The rise of subprime.</b> Subprime mortgage lending grew an average of 25% a year from 1994 to 2003 and now is a more-than-$330-billion-a-year industry that provides about 1 in 9 U.S. mortgages. The growth has helped broaden homeownership — nearly 70% of American homes are occupied by their owners — and given a boost to minority home buying.</p> <p class="inside-copy">Subprime lenders provide mortgages or home equity loans to people, including high-income borrowers, who don't qualify for conventional financing. Such lenders accept credit scores below the 620-660 threshold generally needed for prime financing and require less-stringent income documentation. </p> <p class="inside-copy">But critics say many of the subprime lenders' clients could qualify for conventional loans. Subprime lenders offer mortgage rates that sometimes range into double digits, though they can be as low as 6% to 7% for those with near-prime credit. Costs rise, often steeply, as credit scores fall.</p> <p class="inside-copy">•<b>Changing demographics. </b> Recent immigrants and minorities, who will make up the bulk of new households and about half of first-time home buyers in coming decades, are far more likely than whites to take out subprime loans — and appear more likely to be victimized by predatory lending. Federal data show even affluent minorities are more likely than whites to take out subprime loans, and some consumer groups say minorities are unfairly diverted to the subprime market. </p> <p class="inside-copy">The elderly population, too, is growing and may be vulnerable to predatory lending, because older homeowners have built up years of equity. AARP has a major initiative to combat predatory lending through education and litigation. </p> <p class="inside-copy">"Most of our clients don't go looking for loans," says Jean Constantine-Davis, an AARP attorney in Washington, D.C. "It very often starts out with a home-improvement loan. ... People think they're getting a loan for a chimney, (but) they've refinanced the house, rolled credit cards into it."</p> <p class="inside-copy">In Memphis, consumer advocates say predatory lenders, including firms owned by blacks, have targeted African-American neighborhoods, resulting in a rash of foreclosures. Data from Boston and Chicago also show concentrated subprime lending in minority neighborhoods. </p> <p class="inside-copy">•<b>The growth of the secondary market. </b>More than $200 billion in subprime mortgages were resold, bundled into bonds and offered to investors as mortgage-backed securities in 2003. Mainline entities such as Lehman Bros. or mortgage giant Fannie Mae are major players in the market. </p> <p class="inside-copy">•<b>Uneven regulation.</b> Mortgage brokers, middlemen who match buyers with lenders, now originate 50% of subprime mortgage loans — about the same as for regular mortgages — but are lightly licensed and monitored by states. The number of mortgage brokerage firms has climbed to 44,000 last year from 7,000 in 1987. State laws on predatory loans don't govern national banks, which are exempted under a ruling by the federal Office of the Comptroller of the Currency. The banks fall under less-restrictive federal rules.</p> <p class="inside-copy"><b>A turning point? </b></p> <p class="inside-copy">The debate over subprime lending may be at a turning point. Banks and brokerages with a stake in the booming subprime market complain legislatures have gone too far, creating a confusing patchwork of laws that hurt legitimate business and prevent consumers from getting loans. Many want federal legislation overriding state statutes.</p> <p class="inside-copy">"You err on the side of letting people try to live the American dream if they want to buy a house," says Wright Andrews, a Washington, D.C., attorney who represents subprime lenders. </p> <p class="inside-copy">Congress is poised to take up the issue next year, though legislation is far from a sure thing. State governors and attorneys general, already opposed to the Office of the Comptroller ruling, fear a federal power grab. Consumer groups, which had pushed for a federal law, worry about losing state protections.</p> <p class="inside-copy">"A lot of people have been victimized. Not just poor people — middle-class, professional people, people of every stripe," says Allen Fishbein, director of housing and credit policy for the Consumer Federation of America.</p> <p class="inside-copy"><b>Predatory-lending restrictions </b></p> <p class="inside-copy">What is a predatory loan? There's no official definition. Both sides say the issue is akin to a Supreme Court justice's description of pornography: You know it when you see it. </p> <table align="left" cellpadding="0" cellspacing="0"> <tbody><tr> <td> <table border="0" cellpadding="0" cellspacing="0" width="190"> <tbody><tr> <td rowspan="3" class="notch_header" width="1"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="10" width="1" /></td> <td class="notch_header" width="180"> SUBPRIME MARKET</td> <td rowspan="3" class="notch_header" width="1"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="10" width="1" /></td> <td rowspan="3"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="10" /></td> </tr> <tr> <td> <table border="0" cellpadding="2" cellspacing="0" width="100%"> <tbody><tr class="sidebar"> <td valign="top"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="10" width="180" /></td> </tr> <tr> <td valign="top"> <table border="0" cellpadding="2" cellspacing="0" width="99%"> <tbody><tr> <td class="sidebar" valign="top"> <p>Subprime loans are more common among people of lower income, minorities and people moving to low-income areas and areas with a greater composition of minorities. Subprime share of loans by:</p> <table border="0" cellpadding="3" cellspacing="1" width="250"> <tbody><tr> <td rowspan="2" class="notch_medium" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" />Borrower income<sup>1</sup> </td> <td class="notch_medium"><img src="http://www.usatoday.com/money/_common/_images/greenbar.gif" height="10" width="10" /> Home purchase loans</td> </tr> <tr> <td class="notch_medium"><img src="http://www.usatoday.com/money/_common/_images/redbar.gif" height="10" width="10" /> Home equity loans</td> </tr> <tr> <td rowspan="2" class="notch_light" valign="bottom">Lower</td> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/greenbar.gif" height="10" width="55" />10.9% </td> </tr> <tr> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/redbar.gif" height="10" width="72" />14.4%</td> </tr> <tr> <td colspan="2" class="notch_white" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" /></td> </tr> <tr> <td rowspan="2" class="notch_light" valign="bottom">Middle</td> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/greenbar.gif" height="10" width="56" /> 11.2%</td> </tr> <tr> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/redbar.gif" height="10" width="53" /> 10.5%</td> </tr> <tr> <td colspan="2" class="notch_white" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" /></td> </tr> <tr> <td rowspan="2" class="notch_light" valign="bottom">Higher</td> <td class="notch_light" height="21"><img src="http://www.usatoday.com/money/_common/_images/greenbar.gif" height="10" width="45" /> 9%</td> </tr> <tr> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/redbar.gif" height="10" width="34" /> 6.7%</td> </tr> <tr> <td colspan="2" class="notch_white" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" /></td> </tr> <tr> <td colspan="2" class="notch_medium" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" />Neighborhood income </td> </tr> <tr> <td rowspan="2" class="notch_light" valign="bottom">Lower</td> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/greenbar.gif" height="10" width="82" /> 16.4%</td> </tr> <tr> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/redbar.gif" height="10" width="89" /> 17.8%</td> </tr> <tr> <td colspan="2" class="notch_white" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" /></td> </tr> <tr> <td rowspan="2" class="notch_light" valign="bottom">Middle</td> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/greenbar.gif" height="10" width="54" /> 10.7%</td> </tr> <tr> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/redbar.gif" height="10" width="49" /> 9.8%</td> </tr> <tr> <td colspan="2" class="notch_white" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" /></td> </tr> <tr> <td rowspan="2" class="notch_light" valign="bottom">Higher</td> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/greenbar.gif" height="10" width="39" /> 7.7%</td> </tr> <tr> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/redbar.gif" height="10" width="30" /> 6.1%</td> </tr> <tr> <td colspan="2" class="notch_white" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" /></td> </tr> <tr> <td colspan="2" class="notch_medium" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" />Race of borrower</td> </tr> <tr> <td rowspan="2" class="notch_light" valign="bottom">White</td> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/greenbar.gif" height="10" width="37" /> 7.4%</td> </tr> <tr> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/redbar.gif" height="10" width="24" /> 5.7%</td> </tr> <tr> <td colspan="2" class="notch_white" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" /></td> </tr> <tr> <td rowspan="2" class="notch_light" valign="bottom">Asian/Pac. Islander</td> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/greenbar.gif" height="10" width="47" /> 9.4%</td> </tr> <tr> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/redbar.gif" height="10" width="24" /> 5.7%</td> </tr> <tr> <td colspan="2" class="notch_white" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" /></td> </tr> <tr> <td rowspan="2" class="notch_light" valign="bottom">Native Amer.</td> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/greenbar.gif" height="10" width="80" /> 16%</td> </tr> <tr> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/redbar.gif" height="10" width="68" /> 13.6%</td> </tr> <tr> <td colspan="2" class="notch_white" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" /></td> </tr> <tr> <td rowspan="2" class="notch_light" valign="bottom">Hispanic</td> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/greenbar.gif" height="10" width="98" /> 19.6%</td> </tr> <tr> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/redbar.gif" height="10" width="73" /> 14.5%</td> </tr> <tr> <td colspan="2" class="notch_white" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" /></td> </tr> <tr> <td rowspan="2" class="notch_light" valign="bottom">Black</td> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/greenbar.gif" height="10" width="135" /> 27%</td> </tr> <tr> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/redbar.gif" height="10" width="104" /> 20.8%</td> </tr> <tr> <td colspan="2" class="notch_white" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" /></td> </tr> <tr> <td colspan="2" class="notch_medium" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" />Neighborhood race composition</td> </tr> <tr> <td rowspan="2" class="notch_light" valign="bottom">Less than 10% minority</td> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/greenbar.gif" height="10" width="35" /> 6.9%</td> </tr> <tr> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/redbar.gif" height="10" width="34" /> 6.8%</td> </tr> <tr> <td colspan="2" class="notch_white" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" /></td> </tr> <tr> <td rowspan="2" class="notch_light" valign="bottom">10-49% minority</td> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/greenbar.gif" height="10" width="60" /> 12%</td> </tr> <tr> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/redbar.gif" height="10" width="50" /> 10%</td> </tr> <tr> <td colspan="2" class="notch_white" valign="bottom"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="1" /></td> </tr> <tr> <td rowspan="2" class="notch_light" valign="bottom">More than 50% minority</td> <td class="notch_light"><img src="http://www.usatoday.com/money/_common/_images/greenbar.gif" height="10" width="104" /> 20.8%</td> </tr> <tr> <td class="notch_light"><img src="http://images.usatoday.com/money/_common/_images/redbar.gif" height="10" width="104" /> 20.8%</td> </tr> <tr> <td colspan="2" class="notch_white"> <p>1-Lower income: borrower's income is less than 80% of median family income; middle: 80% to 119%; higher: 120% or more.</p> <p>Source: Experian, Federal Reserve Board, Inside MBS & ABS, Federal Home Loan Mortgage, AARP, Loan Performance, Harvard Joint Center for Housing Studies, February 2004 paper "Bringing Subprime Mortgages to Market" by Ira Goldstein, Mortgage Bankers Association, USA TODAY research by Kelly Barry</p> </td> </tr> </tbody></table> </td> </tr> </tbody></table> </td> </tr> <tr class="sidebar"> <td valign="top"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="10" width="1" /></td> </tr> </tbody></table> </td> </tr> <tr> <td class="notch_header" height="1" width="180"><img src="http://images.usatoday.com/_common/_images/clear.gif" border="0" height="1" width="10" /></td> </tr></tbody></table> </td> </tr> </tbody></table> <p class="inside-copy">States that have cracked down generally bar or limit these practices: loans that carry excessive interest and fees, exceed a borrower's ability to pay, include big balloon, or lump-sum, payments or penalties for early payoff or are subject to "flipping" — repeated refinancing with fees that strip out home equity. </p> <p class="inside-copy">"We were spending all our time trying to help people become homeowners, but two, three or five years down the road, they were going to get flipped into a loan with high fees and interest. We were building wealth so that it could be stolen," says Mark Pearce, president of the Center for Responsible Lending in North Carolina, a non-profit focusing on homeownership. </p> <p class="inside-copy">North Carolina's 1999 law started the move toward predatory-lending restrictions.</p> <p class="inside-copy">Mortgage giants Fannie Mae and Freddie Mac have set national standards for subprime loans that they purchase or package into securities with a guarantee for payment of principal and interest. Fannie, for instance, requires mortgages be based on ability to repay, not on home equity. It recently said it would not buy subprime loans that included mandatory arbitration clauses, which bar lawsuits. The industry, tarnished by a rash of legal settlements, has begun setting best practices, internal standards that govern lending activities. </p> <p class="inside-copy">How do consumers become victims? One of the biggest reasons is simple lack of education. Freddie Mac and the Department of Housing and Urban Development (HUD) have been reaching out to minority home buyers, saying many consumers don't understand how to get a loan or what they could qualify for. They may not have access to mainstream banks or they may lack a credit history or the proof of income needed for financing.</p> <p class="inside-copy">Fannie Mae CEO Franklin Raines, citing HUD research, says subprime lending is three times as likely in minority neighborhoods. Other research suggests as many as half of those taking out subprime loans could qualify for conventional financing — and would pay lower interest. Subprime lenders hotly dispute those figures. </p> <p class="inside-copy">Pamela Caudill of Dayton, Ohio, is a first-time home buyer who purchased her house from her brother three years ago with a $52,000 adjustable-rate mortgage from a local firm. Though there were no major blemishes on her credit record, she was given an initial rate of 13.25%. In 2001, adjustable-rate mortgages nationally were carrying average initial rates of 5.8%.</p> <p class="inside-copy">After missing a payment because of job troubles, Caudill was put into an expensive catch-up plan. The servicer who bought her loan did not post some payments. Because of the way the lender calculated Caudill's rate, her loan climbed near 15% from 2001 to 2004, as interest rates were falling nationally.</p> <p class="inside-copy">"I was told one thing, and yet the opposite would happen," says Caudill. The National Community Reinvestment Coalition (NCRC), which bought her loan and financed a cheaper one, said Caudill could have qualified for cheaper financing if she had shopped around. The NCRC runs a national consumer rescue fund for victims of predatory lending.</p> <p class="inside-copy">Memphis Area Legal Services lawyers cite the case of Edgar McDaniel, a 68-year-old with a psychiatric disability and minimal reading ability, who in 2003 owed $4,800 on his home, and whose income was a monthly $756 Social Security check. </p> <p class="inside-copy">After being contacted by a door-to-door salesman in summer 2003, McDaniel contracted for $16,500 of home improvements. To finance the project, lender American General Financial Services lent McDaniel nearly $34,691 at 12.81% interest, for payments totaling $78,789.32 over 15 years. Payments were $433, more than half his monthly income.</p> <p class="inside-copy">According to the lawsuit against the lender and contractor, the contractor was paid $22,000, or $5,500 more than the agreed-to price, even though less than $7,500 in work was done, while thousands of dollars in other dubious payments were made. American General is fighting the charges, saying that McDaniel misrepresented his income, that lawyers overlooked missed documented payments and that it pressed the contractor to complete work.</p> <p class="inside-copy">Elzenia Pitchford, 77, also of Memphis, contracted for $20,000 in repairs to her home but, according to a lawsuit, was fraudulently sold a bill consolidation loan, with high upfront fees and monthly payments that were more than 88% of her Social Security income.</p> <p class="inside-copy">She says she was promised new siding for her home, but the contractor did nothing to close up the many holes in the house's exterior.</p> <p class="inside-copy">Now, she says, rats come and go through the house. And the heating system was left in such a mess that the fire inspector will not allow her to turn on the heat. She and an 11-year-old grandson who lives with her use the stove and small heaters to stay warm. </p> <p class="inside-copy"><b>Vulnerable victims </b></p> <p class="inside-copy">Borrowers can also get into trouble when they are forced to take out loans at stressful points in their lives — a bout of unemployment or an expensive illness that erodes their credit score, even as it increases their need for cash. </p> <p class="inside-copy">Priscilla White, 54, of Peabody, Mass., refinanced her 7% mortgage in 2002 to pay off $20,000 in debt tangled up in divorce proceedings. Her divorce attorney referred her to a mortgage broker, who offered to set her up with financing at a 6% interest rate. At closing, she discovered the rate was 11.25% but signed out of fear she'd be in legal trouble if the debts weren't paid. </p> <p class="inside-copy">Six months later, White tried to refinance, only to discover the initial appraisal inflated the value of her house. Her income had been overstated in loan documents, with monthly payments exceeding her net income. Unable to get an equivalent mortgage, White, a secretary in a large law firm, started investigating. She settled out of court with the company and refinanced through NCRC with a 30-year mortgage at 7%.</p> <p class="inside-copy">"He was my divorce attorney. I thought he was going to be good for me," White says. "The documents were immense and a lot of the (fraudulent) stuff they put in the back. ... By the time you got to the good stuff, you were exhausted."</p> <p class="inside-copy">Robert Armbruster, president of the National Association of Mortgage Brokers, says while most mortgage brokers are ethical, some engage in unscrupulous lending. "There are probably some bad apples out there. There are bad apples everywhere," he says.</p> <p class="inside-copy">Armbruster would like to see a national registry of mortgage brokers and wants Congress to give states seed money to prosecute bad brokers. </p> <p class="inside-copy">The Center for Responsible Lending estimated in a 2001 study that predatory loans cost consumers at least $9.1 billion a year. Lenders call those figures grossly inflated. </p> <p class="inside-copy">There are no comprehensive data on predatory lending, but there are clear signs it has been a problem: </p> <p class="inside-copy">• Household International, now HSBC, in 2002 agreed to change its practices and pay up to $484 million in consumer restitution for alleged predatory-lending practices in the subprime market. Household now funds the NCRC rescue fund. </p> <p class="inside-copy">• Citigroup in 2002 agreed to pay $240 million to resolve abusive-lending charges against its subprime subsidiaries, which the Federal Trade Commission says lured borrowers into high-cost loans through false statements.</p> <p class="inside-copy">• First Alliance Mortgage in 2002 agreed to a $60 million settlement with the FTC and six states. </p> <p class="inside-copy">"When the market expanded rapidly, there were excesses, and excesses created problems," says Mitch Feinstein of the National Home Equity Mortgage Association, a trade group for non-prime lenders. "We believe the market has responded very favorably by companies imposing much higher standards and fraud-reduction efforts."</p> <p class="inside-copy">Still, the legal cases continue churning. </p> <p class="inside-copy">"When I first started ... I wasn't in big trouble. I was running along smooth. But then I got jammed up, and I never could get out of it," says Allen Winston, 64, a Natchez, Miss., mechanic who was part of a lawsuit against lender Beneficial Mississippi. </p> <p class="inside-copy">Winston and his wife, Mary, in 1987 took out a home equity loan to consolidate $18,000 in debts. The couple paid $3,300 in fees, and according to their law firm, was required to buy $2,261 of special insurance to pay off the mortgage if they died. Premiums for single-premium insurance, which some state laws bar, are collected upfront and added to a loan balance. </p> <p class="inside-copy">After closing the deal, the Winstons were deluged with offers for more loans. Lenders sent letters pegged to Christmas or other expensive times of the year. After cashing a "check" that came with a solicitation, the Winstons found themselves in yet another loan. </p> <p class="inside-copy">Allen Winston, who left school after the eighth grade, and Mary, who attended through sixth grade, saw their original $22,500 loan gradually rise above $66,000, including $23,000 for insurance. </p> <p class="inside-copy">Montgomery, Ala., law firm Beasley Allen Crow Methvin Portis & Miles represent the Winstons in arbitration with the lenders. Officials of HSBC, which now owns Beneficial, say they do not have permission from the firm to talk about the case. They note it dates before 2002, defend their lending record and add, "In light of our contract with the Winstons, arbitration is an appropriate way of resolving their concerns."</p> <p class="inside-copy">Tom Methvin, managing shareholder for Beasley Allen, which has cases around the Southeast, says 90% of its predatory-lending clients are black.</p> <p class="inside-copy"><b>'Paying ... the rest of my life' </b></p> <p class="inside-copy">Meanwhile, Lawler, the Brooklyn woman who signed multiple refinance loans, has gotten on with her life. The NCRC bought her mortgage in August, refinancing her into a 5%, 30-year fixed-rate loan. But she remains saddled with a high balance.</p> <p class="inside-copy">"Renovations? Forget it. Whatever falls down, forget it. I'll just leave it until I have the money," Lawler says. "I'll be paying for it the rest of my life."</p> <p class="inside-copy">Contributing: Sandra Block</p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-15689585855217390712007-05-18T18:09:00.000-07:002007-05-18T18:10:48.834-07:00Should You Buy in the Blazing Hot U.S. Home Market?: John Wasik<span class="style5"> <p>With home prices generally glowing brighter than holiday window displays, does it make sense to buy in the hottest residential markets? </p> <p> The bull market in home prices continues unabated, sporting the best gains in a quarter century. U.S. home prices rose almost 13 percent from last year's third quarter through Sept. 30, reports the Office of Federal Housing Enterprise and Oversight (OFHEO), a mortgage enterprise agency. </p> <p> The dicey ``to buy or not to buy'' question need not involve timing the market, though. It's important to focus on building equity and achieving investment goals while exercising caution in choosing financing. </p> <p> The news on the home front is still cheery for most of the U.S., where prices gained an average 4.6 percent in the third quarter. Of the top-20 metropolitan areas tracked by OFHEO, 11 were in California, four in Florida and two in Nevada. Hawaii showed the highest appreciation of any state with a 28 percent annual gain, followed by California with a 27 percent increase. Atlantic City, New Jersey, rounded out the list of top metropolitan areas with a 24 percent jump. </p> <p> Soft Landing? </p> <p> Are home prices headed for a soft landing or a crash? That's certainly on the minds of property buyers in Las Vegas, the fastest-growing U.S. area, where prices climbed 42 percent annually for a nearly 80 percent gain in five years. </p> <p> In California, areas like Los Angeles, Riverside-San Bernardino, San Diego, Ventura (including Oxnard and Thousand Oaks), have seen home prices more than double during the last half-decade. </p> <p> Even less-frothy markets like New Jersey and New York have experienced five-year gains of 74 percent and 68 percent, respectively. </p> <p> How long will the gains continue? There are convincing points on both sides of the question of whether a bubble exists on the East and West coasts. One of the strongest economic indicators supporting bubble conditions is that home prices are dramatically outpacing income growth. </p> <p> Ingo Winzer of Wellesley, Massachusetts, publishes a ``Local Market Monitor'' ( http://www.localmarketmonitor.com ) research report for several U.S. markets. He says that comparing per- capita income growth to residential price increases shows several major coastal markets are at risk for price declines. </p> <p> Highest-Risk Areas </p> <p> Some of the highest-risk areas in Winzer's top-25 list of overpriced markets include Orange County, Ventura and San Diego, California; Atlantic/Cape May, Bergen-Passaic, Monmouth-Ocean and Newark, New Jersey; New York City; Boston; and Miami, Ft. Lauderdale and West Palm Beach, Florida. </p> <p> ``For prices to come down in those (overpriced) markets, you'd have to have some pretty stiff local recessions,'' says Winzer. ``Prices wouldn't come down rapidly but decline about 20 percent over the next several years.'' </p> <p> Most residential property observers from Federal Reserve Chairman Alan Greenspan to the real estate trade group National Association of Realtors deny the existence of a bubble. </p> <p> The confluence of mortgage rates less than 6 percent, buyers eschewing mediocre returns in stocks and bonds, and baby boomers surging into housing may be pivotal factors. </p> <p> What to Avoid </p> <p> In Orange County, California, for example, where Winzer calculates that home prices are almost 60 percent overvalued (leading his list of overpriced markets), demand has exceeded supply for almost four years. </p> <p> Anil Puri, dean of the California State University-Fullerton Business School, sees moderation on the horizon for that county, yet denies that a bubble is present. </p> <p> ``Home prices could drop 20 percent over the next two years,'' Puri says. ``But it would be gradual. I don't see a collapse.'' </p> <p> The conventional wisdom is that consumer price inflation will eventually boost mortgage rates another point or so in a year's time. That may slow demand and trigger a decline in home prices. </p> <p> Keeping that likelihood in mind, buyers banking on automatic appreciation should avoid adjustable, interest-only loans and no- money-down loans. </p> <p> The Right Financing </p> <p> ``Some recent buyers of starter homes borrow with no-to-low equity down with adjustable terms at basement-level interest rates,'' reports ``Emerging Trends in Real Estate,'' a new study by the Urban Land Institute and PricewaterhouseCoopers LLP. </p> <p> ``These folks -- stretched to the limit on car payments and family bills -- count on property values to keep escalating. But higher interest rates and rising mortgage payments make them particularly vulnerable to default,'' the report states. </p> <p> The simplest rule of thumb when buying in this market is to choose the financing that suits your ability to pay and still build up funds for retirement, college and emergencies. </p> <p> Don't worry about market movements if you plan to stay in a house, co-operative or condominium for five years or more. </p> <p> If you need to buy in an overpriced market, consider renting, particularly if you plan to stay in a home less than three years. You may get a better deal on monthly payments. </p> <p> No-money-down and interest-only loans sound great if you are cash challenged, but they may give you no equity upfront. If appreciation doesn't materialize, you don't have much equity to show for your investment. Building equity is an often-neglected part of wealth-building plans. </p> <p> Build Equity </p> <p> Remember that if you eventually move to a less expensive house, the net proceeds are yours to keep tax-free. Generally, you need to stay in your principal home at least two out of the last five years to qualify for this break, although some exceptions apply. </p> <p> Home equity also can be employed in college financing (for loans or cash outs) and is exempted from most financial aid formulae. </p> <p> ``I think that building equity is really important,'' says Randy Johnson, a mortgage broker with Independence Mortgage Company in Newport Beach, California, and author of ``How to Save Thousands of Dollars on Your Home Mortgage.'' </p> <p> ``Assuming you want to sell the house in the future, it will cost you 7 percent (of the purchase price) to do so,'' Johnson says. ``That means if you only have 7 percent for equity, you have zip for down payment for the next home.'' </p> <p> To contact the writer of this column: John F. Wasik in Chicago at jwasik@bloomberg.net . </p> </span>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-14356143165203302432007-05-12T17:45:00.001-07:002007-05-12T17:45:39.573-07:00Bubble BustingBy <span>DANIEL KADLEC; BOB TOLL<br /></span><p> Home prices have shown signs of sluggishness in Las Vegas and a handful of other markets, fueling the debate over whether we are in a dangerous housing bubble. TIME senior writer DANIEL KADLEC talked with Bob Toll, CEO of Toll Bros., one of the nation's largest luxury-home builders, who insists that any talk of a slowdown is premature.</p><p> TIME Let's start with the question you must be sick of: Is it a bubble?</p><p> BOB TOLL You're right. I am sick of it. No, we're not in a bubble. Prices have gone up because there has been tremendous constriction in supply along with tremendous immigration and increases in income for baby boomers. We're on track to see the cost of housing as a percentage of income come to the same place as it is in the U.K. and much of Europe, where they pay up to 45% of income for housing.</p><p> TIME Then how do you square soaring home prices with relatively stagnant personal income?</p><p> TOLL You can't square it. The polarization of wealth in the past 20 years has been extreme. The number of families making $100,000 a year has grown six times as fast as the population. The rich are getting richer and buying bigger houses. Meanwhile, as an industry, we're only building the same number of homes each year as 20 years ago, even as the population grows.</p><p> TIME But babies don't buy houses.</p><p> TOLL No, but immigrants do, especially the kind that Uncle Sam is letting into the country these days. They must have jobs and income. Immigrants are two-thirds of our population growth.</p><p> TIME There has been some evidence of a housing bust in Las Vegas. Will the trouble spread?</p><p> TOLL Las Vegas still has good margins for us. You're asking me if I've stopped beating my wife. Well, I never started.</p><p> TIME No slowdown at all?</p><p> TOLL There's been a leveling off. We can't raise prices as rapidly as we had been. But we can still raise them.</p><p> TIME Are any markets overbuilt?</p><p> TOLL Our cancellation rate is below 5%, where it almost always is. There are some softer markets, like Austin, Dallas, Raleigh, Hilton Head, Columbus. Charlotte was soft but is coming back. But New York, Chicago, Washington and almost every other market we're in are on fire.</p><p> TIME If mortgage rates increased 2% in a year, how would it affect the value of my home?</p><p> TOLL It depends on the neighborhood and price of the home. If it's in the $200,000 range and not in a particularly fresh neighborhood, you could see a drop of 7% to 10%. Buyers of these houses are on a budget, and higher rates eliminate a lot of buyers. But if you are in a $600,000 home, which is our range at Toll Bros., all you'll witness is cocktail talk.</p><p> TIME Homebuilder stocks have doubled in less than two years. But now short interest is on the rise [a bet by hedge funds that builder stocks will fall]. Is it really practical to buy these stocks today?</p><p> TOLL The shorts are going to get slaughtered. They are making a huge mistake.</p><p> TIME What's the next housing trend?</p> TOLL In the past couple of years we've begun dense suburban developments, and we're back in the cities with low-, mid- and high-rises. There just isn't enough ground left in the suburbs, and you have a whole new thrust from boomers and young hip-hoppers who want to be back in urban areas. Urban developments are less than 5% of our business, heading to 10%. It's definitely caught on. Look at New York. You could have bought the entire meat-packing district for $4. Now you can't get an apartment there for under $1 million.Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-44323366454428462322007-05-12T17:44:00.001-07:002007-05-12T17:44:34.035-07:00Terms a borrower may need to know<div class="intro-copy">Here are terms referred to in mortgage lending and the debate over predatory loans:</div> <p class="inside-copy"><b>Points:</b> An upfront fee separate from interest. A point is equal to 1% of loan principal. Three points on a $100,000 mortgage equal $3,000.</p> <p class="inside-copy"><b>Equity:</b> Ownership interest in a home. An owner with a house worth $100,000 and an $80,000 mortgage has $20,000 in equity.</p> <p class="inside-copy"><b>Home equity loan:</b> Fixed- or adjustable-rate loan secured by the equity in a home. Can be used for home improvement, to pay off high-cost debt or free up money for investment. </p> <p class="inside-copy"><b>Refinancing:</b> A new loan replacing existing financing. Refinancing activity has been heavy in the past several years as interest rates have fallen. Homeowners who were holding mortgages at 8% interest may have been able to refinance into a 5% loan.</p> <p class="inside-copy"><b>Prime rate:</b> The interest rate banks charge their best customers. </p> <p class="inside-copy"><b>Loan-to-value ratio:</b> Calculated by dividing the total amount of a loan by the appraised value of a property. </p> <p class="inside-copy"><b>Adjustable vs. fixed rate:</b> In a fixed-rate mortgage, the interest rate stays the same over the life of the loan. In an adjustable-rate product, the loan rate — after a set period — can move up or down. Adjustable-rate mortgages are usually pegged to some type of rate index.</p> <p class="inside-copy"><b>Mortgage broker:</b> An individual or firm that matches borrowers with lenders but does not originate or service mortgages. Brokers, who work with a variety of financiers, are charged with finding the best deal for the borrower. </p> <p class="inside-copy"><b>Loan flipping:</b> Repeatedly refinancing a mortgage without benefit to the borrower. Firms that do so profit from high origination fees and closing costs, points and other charges that strip away home equity. Excessive fees and interest rates on single loans, rather than repeated refinancing, can also be considered predatory.</p> <p class="inside-copy"><b>Asset-based lending:</b> Federal law bars "a pattern or practice" of mortgage loans that are based on the value of the property and do not take into account a borrowers' ability to meet loan payments.</p> <p class="inside-copy"><b>Single-premium insurance:</b> Insurance products that are supposed to pay off remaining mortgage debt in the event a borrower dies or becomes incapacitated. In "single premium" policies, premiums are collected upfront and added to the loan balance, increasing the interest and cost. </p> <p class="inside-copy"><b>Prepayment penalties:</b> Fees imposed on borrowers who pay off loans before the set 10-, 15-, 30-year or other loan period. Prepayment penalties are not inherently predatory, but they can be set so high that borrowers cannot refinance into lower-rate products. </p> <p class="inside-copy"><b>Balloon payment:</b> Loans can be structured with lower monthly payments but with a large lump sum due down the line. Some borrowers may not be informed that balloon payments lurk ahead. In other cases, the payments are so large that borrowers cannot meet them.</p> <p class="inside-copy"><b>Mandatory arbitration:</b> Written into some loan documents, it requires borrowers to resolve disputes through arbitration, not legal action. Consumer groups say such clauses put borrowers at a disadvantage, particularly in cases where lenders pick the arbitrator.</p> <p class="inside-copy"><b>Financing points and fees:</b> Rolling points and fees into a loan balance can disguise the true cost of the loan. Consumer advocates want such costs reflected in the quoted interest rate for the financing.</p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-51586991083723495842007-05-12T17:43:00.001-07:002007-05-12T17:43:52.096-07:00How to Reduce the Risk Of Buyers Backing Out<p> <b>By James R. Hagerty</b><br />Special to RealEstateJournal </p> <p><b> Question:</b> I was due to close on the sale of my home in Port Richey, Fla., on Oct. 1, but the last of the four hurricanes that came through Florida hit here the day before the closing. My Florida room was totally destroyed and about 40% to 50% of the main roof on the house was ruined. The buyer saw the damage and backed out of the deal. She had made a $2,000 deposit to be held in escrow by an attorney and her title company.</p> <p>I told the woman the damage would be fixed and paid for by my insurance, but she still refused to complete the sale. I have been waiting to see whether the attorney will release the deposit to me because the buyer has refused to complete the sale. The attorney has sent the buyer notices about the deposit, but the buyer is not responding to her mail and the attorney can't release the money unless the buyer responds. Can this deposit be given to me now? I think the buyer is ignoring the situation so the deposit can't be released.</p> <p><i>-- Marie, Port Richey, Fla.</i></p> <p><b> Marie:</b> The attorney must determine whether there is a dispute between the two parties over the deposit, according to Joe Boyd, a real-estate lawyer at Boyd, Lindsey & Sliger in Tallahassee, Fla. Typically, the attorney would write to both parties to ask them for their positions on the matter. If there is a dispute, he says, the attorney would make a filing with a local court and the two parties would have to "duke it out" there. Legal fees would eat up much of the money in your case.</p> <p>If the other party doesn't object to your claim of the deposit, the attorney can award it to you. If the other party doesn't respond to the attorney's letter within a reasonable time, the attorney may conclude that the other party isn't disputing your claim. Mr. Boyd says there is no statutory definition of how much time the parties have to respond, so that would be a matter of judgment.</p> <p>More and more people are backing out of purchases, real-estate agents say. How can sellers reduce the risk of being jilted on the eve of the closing?</p> <p>There is no way to eliminate the risk that buyers will flee, but "you can make it painful for them to do so," says Valerie Torelli, who owns Torelli Realty in Costa Mesa, Calif. </p> <p>Here are some tips from Ms. Torelli and other experienced real-estate agents:</p> <ul><li>Be frank from the beginning about any problems with the house or the neighborhood that might worry potential buyers. Reduce the possibility for last-minute surprises and disputes.</li><li>Don't waste your time negotiating with a buyer unless he or she seems genuinely excited about the home. If someone seems hesitant, "go on to the next buyer," advises Ms. Torelli. A good real-estate agent should be able to help you pick up the indecisive signals emitted by a buyer prone to second and third thoughts. One obvious clue: They're still looking at other homes.</li><li>If you have a choice of buyers, go with the one who is better financed and more determined to get the deal done, even if that means accepting a slightly lower price.</li><li>Ask for a substantial deposit to be placed in escrow. Ms. Torelli likes to see at least 3% of the purchase price. Ruth Golley, associate broker at RE/MAX Executives in Decatur, Ga., says 1% is more common in her area, though some sellers seek 2%. </li><li>Limit the time available for an inspection and other information-gathering. In California, 17 days is the typical limit, Ms. Torelli says. Diane Saatchi, a regional vice president for the Corcoran Group in East Hampton, N.Y., goes further. She advises sellers not to sign a sales contract until the potential buyer has done the inspection and lined up financing. Making a deal contingent on the buyer's ability to get a mortgage is a "totally bizarre concept," Ms. Saatchi says. "Why should I take a risk on your finances when you know your finances and I don't?"</li><li>Stipulate in the contract that a certain portion of the deposit automatically will be paid to the seller on a nonrefundable basis once certain contingencies, such as the inspection, are removed. </li></ul> <p><i><b>Note to readers:</b> For a forthcoming article, I'd like to talk to people who have used LendingTree.com or other online services that offer a monetary incentive if you use an agent or broker recommended by them. Please email me at bob.hagerty@wsj.com.</i></p> <p><i>-- Mr. Hagerty is a staff reporter for The Wall Street Journal. His "House Talk" column appears most Fridays on RealEstateJournal.com. E-mail him your questions about the residential real-estate market. Please include your first name and city and state. If your question is answered and posted, we will show your first name and city. Due to volume of mail received, we regret that we cannot answer every question.</i></p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-50829112841119349492007-05-12T17:42:00.000-07:002007-05-12T17:43:10.823-07:00What to consider when mulling over mortgage options<div class="spacer21"> <span class="byline">By Steve Dinnen</span> <br /> </div> <span class="text"> <b>Q: I just bought a home using two loans; a 30-year mortgage fixed for five years at 5.25 percent and a second, 15-year mortgage fixed at 8.75 percent with a balloon payment of $29,000 in 15 years. I plan to refinance at least the second mortgage to get rid of the balloon payment, but I'm overwhelmed by the choices. Any thoughts on how to time this to get the best deal? How can I learn more about mortgages?</b> <br /> <b>W.M., Los Angeles</b> <!-- --></span> <p class="text"> <span class="text"> <b>A:</b> Susan Shute, a mortgage specialist at Bryn Mawr Trust Co., Bryn Mawr, Pa., teamed with Dodie Theune, a certified financial planner there, to handle your question.</span></p><p class="text"> <span class="text">Assuming that the loan does not exceed the home's value, they recommend refinancing the two loans into one mortgage at today's rate of 4.25 percent fixed for five years, or a 30-year fixed rate loan at 6 percent depending on how long you plan to live in the home.</span> </p> <p class="text">Rates, of course, are subject to change at any time. Closing costs such as title insurance and appraisal fees can be added to the loan balance or paid by you at settlement. A loan officer can determine these costs and tell you how long it will take to recoup them as a result of the savings from your reduced monthly payment.</p> <p class="text">The best way to understand your options, in their opinion, is to consult with an experienced loan officer from a reputable lending institution. You also might call a local junior college or some lenders that offer courses on home buying and financing.</p> <p class="text"> <b>Q: Are the tax ramifications the same if I remove money from my IRA or cash in a life-insurance policy? I'm over 65 and retired.</b> <br /> <b>G.P., via e-mail</b> </p> <p class="text"> <b>A:</b> It depends. First, if you take money out of your IRA after you turn age 59-1/2, you'll owe ordinary income-tax rates on the withdrawal. Very simple.</p> <p class="text">But with a life-insurance policy, things can get interesting, says Brian Jones, a certified financial planner in Fairfax, Va. He wants to know if you are borrowing against the cash value of the policy or canceling it outright and</p> <p class="text">taking its cash value.</p> <p class="text">If you have a whole-life policy and there is cash value that you choose to borrow against, this is not a taxable withdrawal, but a loan.</p> <p class="text">But be careful. If you were to cancel a policy with an outstanding loan against the cash value, the loan could become a taxable distribution, subject to ordinary income-tax rates.</p> <p class="text">Mr. Jones says that if you were to cancel a whole-life policy outright and take the cash value, the difference in what you paid into the policy in terms of premiums - your cost basis - minus any gains in the cash value is taxable to you in the year of distribution. Just like an IRA, this gain is taxed at ordinary income-tax rates.</p> <p class="text">Either way, consult with a tax adviser before executing this strategy.</p> • Questions about finances? We're prepared to help you find answers. Write: Work & Money Q&A The Christian Science Monitor 1 Norway Street Boston, MA 02115 <p class="text"> </p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-61889202315729988652007-05-12T17:41:00.000-07:002007-05-12T17:42:08.151-07:00Sell Your Home — Fast<p> <strong>IN THIS SLUGGISH HOUSING MARKET,</strong> selling your home in a matter of weeks rather than months is a serious success story. Long gone are the days when you could simply stuff a sign into your front lawn and soon get offers for your house. Nope, today you need to work for it. Here are four tips: </p><p> <span class="smBigBold">1. Hire a Home Stager</span><br />A well-decorated home will sell faster and for more money than one that looks frumpy. That's why more sellers are hiring home stagers to do everything from rearrange furniture and paint walls a neutral color to rent artwork. This service can cost anywhere from a few hundred dollars for a small job to several thousand dollars for high-end properties, says Patricia Dugan, a realtor with The Corcoran Group. </p><p>And keep in mind, a lovely décor will get you only so far. To really get buyers champing at the bit, you need to highlight your home's storage space as well. That means everything should be clean and organized — closets, bathroom vanities, the garage and basement. It might sound trivial, but your home's sale really could rest on whether your linen closets can comfortably store your towels. </p><p> <span class="smBigBold">2. Hire a Photographer</span><br />Up to 80% of home buyers start their search online, according to the National Association of Realtors. Indeed, the Web has become such an important marketing tool that all the realtors we spoke with encourage their clients to hire a professional photographer, which can cost as little as $100, for their online snapshots. Think of it this way: If someone doesn't like how your home looks on the Web, he or she won't bother to make an appointment to see the property in person. Is that a risk you're willing to take? </p>While putting photographs online isn't exactly new, there are some emerging trends. Several years ago it was OK to have one outside shot of the house, says Tara Rogers, director of marketing for Real Living, a Columbus, Ohio-based real-estate firm. Now, some potential buyers want to see up to a 10-picture slideshow detailing multiple rooms before they commit to a walk-through, she says. Post small, grainy pictures, and you risk having little foot traffic in your home. <p> <span class="smBigBold">3. Try Marketing Gimmicks</span><br />With housing prices flat across much of the country, now is the time to sweeten the pot a little with added incentives. Rather than slash the asking price, a condo owner could offer to pay the maintenance fees for a full year, or ask home owners to provide buyers with a cash rebate that's marketed as a decorating allowance. Nine times out of 10, such gimmicks cost less than it would to drop the asking price enough to attract a buyer with a smaller budget, says Nelson Zide, co-owner of ERA Key Realty Services, a Framingham, Mass.-based real-estate brokerage. </p><p> <span class="smBigBold">4. Hold Open Houses</span><br />The benefits of an open house are debatable. Industry experts agree that they tend to benefit realtors more than home owners. (After all, it's a great way for realtors to get new clients.) But that doesn't mean that they can't work. The key is to hold them at various times of the day and week so that folks with busy schedules can squeeze in a viewing. Real Living's Rogers says her company's agents make sure to schedule open houses on Saturdays, as well as in the evenings so people can stop by after work. </p><p> Another technique more people are implementing is to hold open houses at the time of day when their house shows the best. If you have a beautiful garden, show it off during the morning before the flowers start to wilt. If you have a stunning view of the sunset, make sure people get to see the late-afternoon light. In other words, if there's one thing that you love most about your home, be sure to share it with potential buyers. </p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-18574827876702051842007-05-12T17:40:00.000-07:002007-05-12T17:41:11.834-07:00Is Investing in Florida A Risky Proposition?<p> <b>By James R. Hagerty</b><br />Special to RealEstateJournal </p> <p><b>Question:</b> I purchased a two-bedroom, waterfront condo in the Florida Keys in 1998 for $170,000 and sold it for close to $400,000 in 2002. That same unit is now selling for close to $700,000. This in a building that is more than 30 years old with what can only be described as shoddy construction. The same story is being repeated all throughout the Keys. Prices in Florida have generally skyrocketed, but in the Keys they have become insane. I think it's a classic bubble waiting to burst.</p> <p>This past hurricane season brought home the fact that the Keys are nothing more than barrier islands that will sustain horrific damage in the event of a major hurricane. According to forecasters, we can expect extremely active hurricane seasons for the next 10 years due to a shift in weather patterns.</p> <p>All of this means that investing in the Keys is a risky proposition, made even riskier by the speculation of the last few years. What is your opinion about buying in this area?</p> <p><i>-- Henry, Miami</i></p> <p><b>Henry:</b> What's happening in the Keys appears to be an extreme version of what has happened in the rest of Florida and all along the country's East and West coasts: A surge in demand, propelled by low interest rates, has smacked into a shortage of homes. It's hard to find space or secure permits to build homes in most coastal areas, but it's particularly hard in the Keys. The islands are considered such environmentally sensitive jewels that the state government severely restricts building there. In most places, local governments decide on such issues. But the state government decides how many permits can be doled out each year in the Keys.</p> <p>The average sales price in the first half of 2004 for properties in the Keys, from Key Largo to Key West, was $548,000, says Eileen M. Albury, a broker-associate at Coldwell Banker Schmitt Real Estate, Islamorada, Fla. The average was up 32% from a year earlier.</p> <p>Is that insane?</p> <p>"We're an island," explains Ms. Albury, who knows about such things because she has been selling real estate in the Keys for 20 years. "They're not making any more of them." Indeed, she says the Keys are still a bargain compared with the coastal areas around Miami or Tampa Bay. Now is the time to buy the Keys, she says: "It's a perfect opportunity for people to get in before it gets absolutely obscene."</p> <p>What about the hurricanes? "That's what you have insurance for," says Ms. Albury.</p> <p>Aren't ordinary mortals being priced out of the market? "Paradise ain't cheap," she says.</p> <p>OK, you might expect Realtors to predict rising real-estate prices, whether they're in Key Largo or Khartoum. What about the dismal scientists? One economist who studies the Florida market closely is Henry Fishkind, who runs a consulting firm, Fishkind & Associates, in Orlando. Dr. Fishkind takes a much more cautious view of the Florida market as a whole. "The era of rapid appreciation has clearly peaked out already," he says. The Florida Association of Realtors reported that median prices in the third quarter were up 18% from a year ago. But Dr. Fishkind, a former economics professor at the University of Florida, says that pent-up demand for housing already has been satisfied and that interest rates are heading up.</p> <p>He doesn't believe there will be any general drop in prices. But he does warn that values of midpriced condos may fall modestly in some areas because large amounts of new supply are hitting the market. </p> <p>Dr. Fishkind's advice: Don't buy homes in Florida if you're counting on rapid price appreciation. Buy only if you need a place to live and plan to hang around for a while.</p> <p><i>-- Mr. Hagerty is a staff reporter for The Wall Street Journal. His "House Talk" column appears most Fridays on RealEstateJournal.com. E-mail him your questions about the residential real-estate market. Please include your first name and city and state. If your question is answered and posted, we will show your first name and city. Due to volume of mail received, we regret that we cannot answer every question.</i></p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-45058930226773901622007-05-12T17:35:00.000-07:002007-05-12T17:40:24.751-07:00Pessimists will have to wait, as housing boom rolls on<div class="spacer21"> <span class="byline">By Alexandra Marks </span> <span class="staffline">| Staff writer of The Christian Science Monitor</span> <br /> </div> <span class="dateline">NEW YORK</span> – <span class="text">Remember that great real estate bubble? <!-- --></span> <p class="text"> <span class="text">It appears almost as buoyant as ever, despite the Federal Reserve's decision to raise interest rates for the fourth time since June.</span></p><p class="text"> <span class="text">In some areas like the Midwest, the housing boom has settled down to a steady, reliable hum as demand has begun to level off. But in many other parts of the country, housing is still very hot.</span> </p> <p class="text">Builders in New Jersey are having trouble finding enough land to meet the demand. In Silicon Valley - the heart of the dotcom bust - the shortage of available housing has meant double-digit increases in prices. And bidding wars for apartments in New York City, long cited as one of the most inflated real estate markets in the country, are still common.</p> <p class="text">"It's hard to imagine it getting any better than it is now, but I don't see much of a threat of a real slump either," says Michael Carliner, an economist with the National Association of Home Builders in Washington. "A lot of the things that we've had in the past that led to a big downturn in the market are now absent, such as a lot of speculative building and a large inventory of unsold houses."</p> <p class="text">Indeed, the supply of available houses is at a historic low, according to measures used by the National Association of Realtors.</p> <p class="text">Currently, it estimates there are 4.4 months of available housing inventory on the market. That's down from 4.7 months last year, and it's almost half of the eight-to-nine months' supply back in 1989, when the real estate market took a serious dive.</p> <p class="text">The current limited supply has led many experts to predict the housing market will staystrong well into 2005.</p> <p class="text">"We'll see continued home-price growth, perhaps less strongly than we've been accustomed to," says Lawrence Yun, senior economist with the National Association of Realtors in Washington. "But even with the rate hike, we expect prices to continue to grow."</p> <p class="text">Another explanation has to do with the difference between long-term and short-term interest rates. The Fed is ratcheting up short-term interest rates with small, regular hikes. But long-term interest rates, to which mortgages are tied, have moderated and even gone down despite those increases. That's not expected to change because inflation pressures are moderating.</p> <p class="text">"The Fed is very concerned about housing prices. It's on their radar screens, and I think that explains a lot about why they're being so measured in their approaches to interest rates," says Timothy Riddiough, director of the Center for Real Estate at the University of Wisconsin-Madison. "They're letting the air out very, very slowly and so far have been successful."</p> <p class="text">At the same time, the seemingly few people who haven't taken advantage of low rates to either refinance or buy a home are expected to jump in now, which could also fuel the market for the next few months.</p> <p class="text">Then there's the stock market. Some people are still skeptical about investing in it after its downturn. Many investors instead are still apt to plunk down their cash in real estate. But if the market continues to rally, it could negatively impact house prices. Some experts are already seeing signs of big-money investors hedging their bets.</p> <p class="text">"Big-ticket properties, the likes of which I've never seen before, are in the paper - like islands you didn't know existed with four houses on them selling for $4 [million] or $5 million," says Amy Johnston, author of "What the Experts May Not Tell You About Building or Renovating Your Home." "It feels like people are beginning to cash out at what they fear may be the peak."</p> <p class="text">Other experts note that over the past five years there's been a pretty substantial run-up in housing prices. "That can't sustain itself for any period of time. We learned that lesson in the '70s," says Stephen Thode, director of the Goodman Center for Real Estate Studies at Lehigh University in Bethlehem, Pa. "I'm not predicting any collapse in the real estate market, but what goes on in the next six to nine months may not be sustainable for the next three to five years."</p> <p class="text">Indeed, he says, barring any unexpected jolts in the economy, don't expect any signs of a major change in the housing market until the cherry blossoms bloom next spring.</p><p class="text"> </p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.comtag:blogger.com,1999:blog-7948242285659102277.post-40110272770122548502007-05-09T03:11:00.000-07:002007-05-09T03:12:36.720-07:00Condo Pandemonium<h2>Bidders Vie for Family's Ill-Gotten Digs</h2> <p> <span style="font-size:85%;"> <!--plsfield:byline--><div id="byline">By David Segal</div> <!--plsfield:credit-->Washington Post Staff Writer<br /><!--plsfield:disp_date--><br /></span></p><p> </p> <!--plsfield:description--><p> <nitf>NEW YORK, Nov. 10 -- Nothing makes New Yorkers pant like a luxury apartment, so when the city announced a few months ago that it would auction off seven high-end condos, a crowd was expected. But the crowd proved larger than expected. Which is why if you showed up at 11 a.m. Wednesday at the Sheriff's Office on Broadway -- the originally scheduled venue -- you were greeted by a sign sending you to a far larger room in a building around the corner.</nitf> </p> <p> <nitf>Which by noon was packed. At least 200 bidders and a few dozen gawkers were milling around an oak-paneled room on the fifth floor of the Surrogate's Courthouse, near TriBeCa, at lunchtime. On the block: the booty of a now-notorious spending spree by a family of Turkish businessmen, found liable in a massive international fraud.</nitf></p><p> <nitf>And God bless these infamous characters, wherever they are. (Two are on the lam.) When they spent their ill-gotten gains, they didn't just snatch up yachts and jets, though they did that, too. They gobbled up some of the poshest square feet in New York, including two apartments in nouveau riche central, Trump World Tower on the East Side.</nitf> </p> <p> <nitf>But the back story can wait. For now, let's figure out who is here. And ask a more important question: Is this any way to buy a home?</nitf> </p> <p> <nitf>"Probably not," says Fred Golden, a salesman with Manhattan Realty Corp., chatting while waiting for the action to start. He represents a client interested in buying Apartment 59D in Trump World Tower, but he's proceeding with caution. "For all we know, there are seven people in Turkey who think they own these apartments. You need to do a bit of work before you come to one of these things."</nitf> </p> <p> <nitf>By 12:30, the mood in the room hovers somewhere between heated anticipation and outright hostility. These people are tired of waiting and they share the annoying sense that they'll never land a deal with this many bidders in the mix. But they want action. Either they're going to buy a condo or punch someone.</nitf> </p> <p> <nitf>"Let's buy some real estate!" shouts one from the back of the room.</nitf> </p> <p> <nitf>But a burly guy with a badge has to explain the rules first: Win the bidding and you must walk to the front and plunk down at least 10 percent of the purchase price, on the spot -- cash or bank checks, thank you very much. Then you have until Tuesday to cough up the rest of the dough. Oh, and you're on the hook for any back taxes that might be owed to the city. And for all the fees that are in arrears -- monthly maintenance fees, late fees, legal fees. By the way, the maintenance fees are at least $1,200 a month. Some are a lot higher.</nitf> </p> <p> <nitf>Any questions?</nitf> </p> <p> <nitf>Many, actually. The crowd, which is filled with professionals, peppers Badge Man and reps from the buildings, and the gist of every answer is the same. You have the right to bid, and if you bid the most you have the right to march up here and hand over some cash. Now let's go!</nitf> </p> <p> <nitf>"Opening bid of $1.5 million. Any bidders?"</nitf> </p> <p> <nitf>It took some mighty impressive flimflamming to get us to this moment. All credit, if that's the right word, to the Uzans, a colorful clan, who persuaded cell phone giants Motorola and Nokia to loan them nearly $3 billion, to build a mobile phone network in Turkey. The Uzans really did own the license for this venture but they apparently pumped buckets of borrowed money into a worldwide shopping spree, which unfolded at a game-show pace. When the Uzans failed to repay their loans on time, they blamed an economic downturn and earthquakes. Motorola and Nokia didn't buy it and they sued. The Uzans have maintained that the United States doesn't have jurisdiction in the matter and didn't fight in court. But a federal judge concluded in August of last year that the family had told "an almost endless series of lies," and a fire sale of the Uzans' holdings here has begun. </nitf> </p> <p> <nitf>"We've already sold a couple jets," says attorney Steven Davidson, a lawyer with Steptoe & Johnson, which represents Motorola. "The more expensive one went for $36 million."</nitf> </p> <p> <nitf>The prices never reached that level at Wednesday's auction, but buyers weren't exactly scared off by the prospect of back taxes or liens. The first apartment up for sale was 59D, a 2,000-square-foot gem. Killer views. Massive doors. High ceilings. The works.</nitf> </p> <p> <nitf>"All right, we have one point five," mumbles the auctioneer, a gray-haired guy in an argyle sweater. "One point five, now one million six, now one million six, now seven, one million seven, now eight, one million eight. One million seven now eight. Eight, nine, eight, nine. One million eight now nine."</nitf> </p> <p> <nitf>On it went, until someone gave up and the apartment went for $2.2 mil. A fortyish-looking guy named David Vogel had made the winning bid. In the hallway, after he settled up, he sounded giddy.</nitf> </p> <p> <nitf>"I was motivated by divine intervention," he says in a thick Brooklyn accent. Then he tells his story: On Sunday he went on a date with a woman named Sherri -- "a very young, very beautiful woman who happens to be a brainiac" -- who took him to a real estate seminar at the Learning Annex. You think for a moment that Vogel is pulling your leg. But his eyes roll into the back of his head when he talks and you can't fake that. At the class, he learned about buying real estate at what he called "knockdown prices." He was working on Monday and Tuesday but Wednesday morning he and Sherri did some research on the properties up for sale. Instant due diligence. And then at 11 a.m., a client of his agreed to put up the necessary money.</nitf> </p> <p> <nitf>"I was ready to walk away if the price went too high, but sometimes a businessman has to act fast," he explains, looking elated. As the auctions went on, a few pros in the place quietly stewed about amateurs in the audience wrecking the party, bidding with their emotions instead of their heads. Altogether, more than $11 million was raised, a pittance compared with the sum that's evaporated, but a start. And for Vogel, maybe it's the beginning of a beautiful romance. </nitf> </p> <p class="lastPar"> <nitf>"If you could," he says, leaning in, "say something nice about Sherri."</nitf> </p><p> </p>Laluvirtualhttp://www.blogger.com/profile/01225370351668189972noreply@blogger.com