MHN Blog

NAR Home Price Survey Raises Big Questions About the Jumbo Market

The National Association of Realtors released its quarterly home price survey today--and the trade group says median home prices dropped in two-thirds of the cities it surveyed.

• Median prices for pre-existing single-family homes fell in 100 of 149 metropolitan areas in the first quarter, NAR said; 48 urban areas posted price gains.

• One lone metropolitan area had no change.

• The national median home price also fell, dropping 7.7. percent from the January to March 2007 period to $196,300. The former median sales price was $212,600.

NAR has been characteristically optimistic as of late about the housing market improving--let's face it, the group is always pretty upbeat (it doesn't really benefit real estate agents to have the media and general public convinced housing is in an unending downturn and it isn't a good time to either sell or buy a house).

But the first quarter results are anything but cheery. What gives?

According to NAR Chief Economist Lawrence Yun, who always offers a tender word to accompany dour housing news, jumbo loan issues are to blame for the numbers.

As mortgage defaults rose, banks panicked and credit became harder to get; for high-end, expensive properties in costly markets, it became really harder to get.

"These are highly unusual results because there were very few jumbo loan originations in the latest quarter, so sales are much slower in high-cost areas, and at the same time foreclosures related to subprime mortgages rose," Yun said.

Well. OK. We'll agree, that could be an issue. Congress tried to reinvigorate that very market by raising FHA, Fannie Mae and Freddie Mac loan limits in March. Freddie Mac and Fannie Mae's shot up from a $417,000 maximum to $729,750.

That meant more people qualified--but it didn't mean the loans were cheaper.

Jumbo loans rates used to be about no more than 0.25 percentage point higher than conforming-loan rates. However, the difference swelled to more than a percentage point as the credit fallout continued because investors were worried about buying nonguaranteed loans.

The government-backed agencies' new, increased involvement in the jumbo market should have helped--but the San Francisco Chronicle reported today that the rates just now are beginning to come down.

Last week, many lenders cut their jumbo-conforming loans rates by a half a percentage point, which makes the loans as affordable as standard confirming loans below $417,000, according to the Chronicle.

So it's possible Yun and NAR are right: The jumbo market just didn't get the shot in the arm it had expected--at least not in the first quarter.

Yun also said that more than half of all mortgage foreclosures involved subprime mortgages, and severe price drops are happening mostly in areas where subprime loans had been frequently issued.

And it's true, that does describe many jumbo loan markets in the U.S.--California, Las Vegas and more. It's also true that we know we need to start moving homes in stagnant markets such as those to reduce the national housing supply, reignite demand and kick-start residential building again.

But therein lies our problem: Because although those Fannie- and Freddie-backed jumbo loans with the higher limits can potentially help more people, they're not necessarily easier to qualify for.

As the Chronicle points out, Fannie Mae and Freddie Mac generally require better credit scores, more strict income documentation, larger down payments and lower debt-to-income ratios on loans from $417,000 to $729,750. Those borrowers who had subprime loans before just may not make the cut.

And if a borrower with good credit owns a few investment properties--which some do because of jumbo market gains during the real estate boom--the person may not get funding at all.

Freddie Mac issued a bulletin on April 22 to lenders that said it planned to restrict financing to second-home and investment real estate buyers who have "individual or joint ownership" interests in more than one property after August 8, the Washington Post said.

Second-home buyers won't qualify for new Freddie Mac mortgages if they have ownership interest in more than four properties (unless they're paid off). Freddie Mac used to allow investors to own up to 10 rental properties carrying mortgages.

So we wonder: Will the lower jumbo loan rates really help the second quarter results?

Or will the jumbo market remain sluggish--and as Yun said, affect home prices--because it's still hard to qualify for a government-backed loan? Having more money available isn't much help if most people can't get it.

What do you think?

 

Which Gender Is Recession-Proof--And Which is More Likely to Buy One of Your New Condos?

The slowing economy has affected a number of industries in a number of ways--and it's affected women and men differently, too.

According to new data, women are faring better than men:

• From November through April, women in the U.S. age 20 and up added nearly 300,000 jobs, according to the Bureau of Labor Statistics. Two female-concentrated fields, education and health care, are growing, which has helped; some analysts have suggested that women also are a better fit for the knowledge economy because of their sensitivity, intuition and ability to act as a team, BusinessWeek says.

• Men, during the same period, lost almost 700,000 jobs. That's due in part to the fact the two sectors that are doing extremely poorly--construction (which is about 88 percent male) and manufacturing--are male-dominated fields, Seeking Alpha says.

• Women are also winning at the higher education game: They're graduating from college at higher rates than men are, according to BusinessWeek.

However, the extra jobs don't mean women are making more because the pay levels remain inactive.

Thus, because women and men are often sharing household expenses, the lady-driven economy can't sustain its strength for long if the men's side continues to weaken, BusinessWeek says.

That may be true--but it doesn't mean women will lose their buying power.

And when trying to sell housing (or housing repairs), don't underestimate the feminine influence. The National Association of Home Builders says a recent Harvard University study found that women handle 91 percent of home buying and remodeling decisions.

The NAHB's publishing division in January released "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions" to help builders and other housing industry members understand female buyers' motivations and objectives.

“Builders recognize that women have more buying power than ever—single women, in fact, are the second largest and fastest-growing demographic of home buyers,” said Sandy Dunn, first vice president of NAHB and a builder from Point Present, W.Va.

A few interesting finds from the 2006 "Buying For Themselves: An Analysis of Unmarried Female Home Buyers©" survey by Rachel Bogardus Drew, published by Harvard's Joint Center for Housing Studies:

• Don't focus on marketing new buildings to single women. Single women are less likely to choose newer construction than married couples.

• The multifamily market is a popular choice. Because they loved the convenience and security, 15 percent of the single female buyers that the survey studied bought a condo--slightly higher than the 12 percent of unmarried men and a whopping three times more than the 5 percent of married couples who bought condos.

• Women also rely on their agent. Roughly 96.9 percent of single females rated agent communication skills as very important, more than single males or married couples.

The economy's varying effect on men and women is interesting--but the housing decisions men and women make--and why--should be of interest to every industry member.

Knowing what makes women, for example, buy, revamp, remodel and sell homes can help drive design decisions and marketing programs--for agents, builders, developers and more.

Do you know what your potential buyers are looking for?

Want to Restart the Housing Market? Don't Forget About Foreclosures...

Yesterday, the House passed a bill to help prevent foreclosures by urging the mortgage industry to write down the loan's remaining principle in exchange for the Federal Housing Administration offering up a new loan with lower payments.

The plan's future effect--and really, future--is still really questionable (the program still needs to get through the Senate and the president, who has said he will veto it; plus it would be voluntary--and according to today's Wall Street Journal, the mortgage industry isn't exactly doing cartwheels about signing on).

But the current state of the foreclosure market in this country is not--that's actually quite certain. Just last week, new information from RealtyTrac said that the number of U.S. foreclosure filings had gone up for the seventh quarter in a row--rising to 649,917 at the end of March.

Foreclosures, RealtyTrac said, were up an astounding 112 percent from the first quarter of 2007.

The foreclosure market has become its own entity as its has grown. In areas particularly damaged by the housing slump, some real estate agents have begun to specialize in foreclosures, the way one might focus on a certain neighborhood, according to BusinessWeek; some are even offering bus tours of foreclosed homes for prospective buyers.

Take, for example, the Florida real estate agent who bought a church bus and painted "Foreclosure Tours R Us" on the side after noticing about 40 foreclosed properties a day hit the market.

"I'm taking the product off the market that's driving our economy down," Marc Joseph told NPR, "and I'm taking the product that is on the market and putting it in the hands of people who deserve it — [the buyers] who couldn't afford it two and a half years ago."

You can't really fault the guy--it's true, he is selling properties that the market needs to be sold in order to recover.

And although you may have read a number of things about what a great value foreclosed properties are, recent research shows they might not be as attractive to buyers as you think.

According to a study recently released by Trulia.com, nearly 7 in 10 American adults associate "negative aspects" foreclosed homes, U.S. News and World Report blogger Luke Mullins says.

But it's not because they feel bad about buying someone else's abandoned (or repossessed) home. Sixty-nine percent said they feared hidden costs; 35 percent said they felt it was a risky investment.

And 33 percent fretted the foreclosed home might lose value in the future.

Well. If that's the general feeling, we've got some work to do. As we've said before, reducing the U.S. housing inventory is crucial to reigniting residential building and turning the housing market around--less supply means more demand, which means higher home prices. Everybody wins!

But if buyers see foreclosed homes as being taboo--and a whopping amount of them are making their way to the market each month--we could be a long way from that happening.

How do you think we can encourage buyers to purchase foreclosed homes? And what about getting credit to fund the purchase--should foreclosed homes come with a financial incentive, or are the price reductions enough?

Would you buy one? Have you?

Will the Strong Survive the Slump?

During the housing decline, some markets seemed to be holding steady--avoiding large drops in home value and residential building.

But now, according to some sources, even those resilient markets are feeling the housing slump's effect.

Seattle, Portland, Ore., Charlotte, N.C. and Salt Lake City all had home price increases last year--while more than half of the 150 markets the National Association of Realtors tracks posted declines, CNNMoney.com said.

But those housing markets aren't looking as strong these days.

• Prices in Charlotte declined about 3.4 percent from August 2007 to February, according to the S&P Case/Shiller Home Price Index. And the area's future didn't look too promising: Builders began work on 48 percent fewer new homes in the first quarter of the year, and building permits dropped 45 percent, the Charlotte Observer said.

• Seattle saw a 6.5 percent loss compared to its July high point. In April, the median house price was $440,000, a 2.4 percent drop from March and an 8.3 percent decline from April 2007, according to the Seattle Post-Intelligencer. Condos were especially hard hit: They comprised a smaller percentage of total sales in April.

• Portland prices fell about 5 percent during the same period.

• Although Forbes recently called Salt Lake City one of the most recession-proof cities in America, its local home prices dropped about 7 percent in the fourth quarter of 2007.

The housing market in areas like Miami had gotten so pricey during the boom that a large drop was almost inevitable.

But in areas like Seattle--where homes remained relatively affordable before and during the slump--it seemed like the national housing decline would have an only minor effect.

For one, the cities are highly desirable to live in. Home to several large companies (Bank of America in Charlotte; Microsoft in Seattle, etc.), the areas offer a strong job market, which encourages new residents to move in.

Most of the cities also offer a positive living experience for the non working, CNN.com says. They're similar to other retirement hotspots like Florida, but lack the higher taxes and insurance costs related to the several hurricanes that passed through Florida in recent years.

So many retirees have flooded areas like Charlotte that there's even a term for it--the halfback phenomenon, which refers to the fact retirees are moving partway back to their original home.

Then why are prices falling?

Well, credit it tough to get, no matter where you live. And it's getting harder to obtain--according to the Federal Reserve's recent bank survey, residential mortgages became more difficult to get in the past three months than at any time in the survey's 17-year history.

And--even if your market is doing OK--there is no way to avoid the widespread bad press about the housing market, which is likely inciting fear across the country. People are afraid to buy; they're even more hesitant to sell--all of which can slow down a housing market.

The fact that some previously solid housing markets are hitting hard times is sad news--but chances are, if those markets stayed strong this long, they'll bounce back early on in the recovery period.

But when that will be ... is anybody's guess.               

Whoever Owns the Information Will Seal the Deal

Over the past year, the real estate industry has become more and more concerned about Web sites that offer buyers and sellers new ways of connecting without an agent.

And that concern should be growing because--according to some sources--those sites are about to step up their game.

A recent CNN.com article said that soon, value estimates for almost any home in the U.S. will be available online--for free--on sites like Zillow.com, HomeGain.com and RealEstateABC.com.

The danger, CNN says, is that such sites are free of the financial incentives agents have to push prices up in deals. An agent is working for a commission; a Web site isn't. The site will give you an unbiased home value--in theory.

In markets like the current one--where money is tight and home values are lower--buyers are becoming more nervous about making a profit off the sale of their home.

In some markets, where values have fallen tremendously, that may not be possible--or the profit may be minor, which gives them even more reason for eliminating the typical 6 percent agent fee.

Yes, real estate Web sites don't offer a personal touch; they don't advise you in tricky transactions that involve contingent offers and other stipulations. But they're cheap--and based on today's home selling prices, so are buyers.

Which is why such sites are a concern.

"You go to an agent for information," John Vogel, who teaches economics and real estate at Dartmouth,told CNN. "Free access to it should be a major threat to the brokerage business."

Wired Magazine editor in chief Chris Anderson, agrees.

"Increasingly, services are moving from professional people you pay for to places you go to for free, be it travel agents or stockbrokers or lawyers or accountants--these are all turning into software applications, and once anything becomes digital, it inevitably becomes free," Anderson told the Ottawa Business Journal. "That's simply what digital economics does."

Yes, but, as the Journal pointed out, once that information is free, brokers--stockbrokers or real estate agents--can't charge the same amount for their prized information.

Even if the information isn't as precise as an agent can offer, the perception might be that it is--and that could strike a major blow to the real estate agent industry.

How can the industry fight back? What do you think it should do?

 

Fannie Mae and Freddie Mac's Uncertain Future

Fannie Mae and Freddie Mac have been in the news often lately--and an interesting article in today's New York Times touches on some of the challenges the agencies face that could make headlines in the future.

The article illustrates why the mortgage market needs both companies, and discusses why it's in danger of potentially losing them. (Given today's announcement that Fannie Mae posted a more than $2 billion first quarter loss, that concern is more timely than ever.)

And although the government has relied on both companies to help bail out the mortgage market, its close ties to Fannie and Freddie certainly aren't making anyone feel very comfortable about the prospect of either collapsing.

As the article says, Fannie Mae and Freddie Mac have benefited from their government backing--both were allowed to borrow money at lower interest rates because of it, and their profits soared as a result. From 1990 to 2000, their stock increased more than 500 percent.

But since then, things haven't been as rosy:

• Top executives were replaced; Fannie and Freddie had to pay hundreds of millions in penalties, the Times said.

• Congress-determined affordable housing goals were met by purchasing large amounts of subprime and Alt-A mortgages; but when the housing market went bust, Freddie and Fannie had a $6 billion loss in the fourth quarter of last year.

• Executives were granted the right to increase their investment portfolios last year in exchange for their help stabilizing the market by buying subprime mortgages; in March, they both said they would raise more capital this year, and got an extra $200 billion in purchasing power.

• And in April, because they promised to further assist the housing market, Fannie Mae and Freddie Mac's mortgage cap was increased to $729,000. 

But Fannie Mae and Freddie Mac are dealing with serious issues. They've posted huge losses this year, and may still have as much as $19 billion in additional losses they haven't dealt with, according to analysts.

And, the Times says, they're banking on the housing market turning around in the next year and a half. If it doesn't, and home prices fall further, their losses could increase.

It doesn't sound like a hugely stable situation--yet we need Fannie Mae and Freddie Mac more than ever.

They are the biggest collective source propping up the ailing mortgage market: The agencies handled more than 80 percent of the mortgages investors purchased in the first quarter of this year, according to the Times.

Lose Fannie Mae and Freddie Mac, and the already rocky lending situation--just today, a Federal Reserve report said that the number of banks that had tightened lending requirements for corporate, commercial real estate, home mortgage, credit card and other consumer loans had risen close to historical highs--could go from bad to worse. Home prices could fall further; lending could become even harder to come by.

Which is why some lawmakers are concerned--but not willing to give up on the companies.

"I want these companies to help with affordable housing, to help low-income families get loans and to help clean up this subprime mess," Representative Barney Frank, a Massachusetts Democrat and the chairman of the House Financial Services Committee. "Otherwise, why should they exist?"

Good point ... but the more pressing question is, can they continue to exist?

Switching Gears From a Residential For-Sale Property to a Rental: Part Two

On Friday, we touched on why some new condos are transforming into rental buildings. Can single-family homes make a similar switch?

Yes--and no. If a new single-family home doesn't sell, turning it into a rental can be difficult. They're just not quite as versatile, for a number of reasons:

• It could be costly, thanks to extra fees. Single-family homeowners don't want a large number of rental properties on their street because rentals often aren't maintained as well as owned homes--which can drive property values down for an entire area.

Yet the foreclosure rate has caused that to happen in a number of U.S. neighborhoods.

Some cities are responding to the change. In February, Minneapolis instituted a $1,000 fee when a home is changed into a rental property, the Minneapolis Star-Tribune reports.

• And renters may not want to live in a single-family home. Phoenix, for example, is suffering from an oversupply of single-family homes, according to MSNBC; the city received roughly twice the amount of new homes it could accommodate between 2005 and 2007, many of which were bought as investment properties.

But home values in the area are down--and those homes aren't selling.

To cover the monthly mortgage payment, many owners are renting their investment properties out, a practice that has created a "shadow market" that is competing with the city's apartment rentals, MSNBC said.

Yet the costs for renting a single-family home or an apartment just don't match up.

Given today's 5.72 percent average 30-year fixed mortgage rate, for a buyer taking out a $165,000 loan, the monthly payments would be $959.75, Bankrate says.

Or more--the National Association of Realtors' March median single-family home price was $200,700. Depending on how much of a down payment the buyer put down, the monthly payments easily could be higher than $959.

Rents have risen, too--but they're still at more affordable levels.

Because of bankruptcies and other issues, U.S renter households grew by almost 1 million last year--four times the pace of renter growth from 2003 to 2006, according to a recent Harvard University's Joint Center for Housing study.

The higher demand has driven average U.S. rents up to $775 a month, the Wall Street Journal recently reported.

• Yet condos are a slightly different story. The median existing condo price in March was $219,400, according to NAR, making condo prices more competitive with luxury apartment prices, which in most markets will rent for more than the $775 average.
  
  Thus renting a brand-new condo--comparable in many cases to a luxury rental unit in terms of amenities and appearance--for $100 or $150 more than the average apartment rent isn't so unlikely. It may, in fact, actually be the same cost as renting a luxury apartment, depending on the area.
  

In the end, though, price may not even be the deciding factor.

The cost of renting a house in many areas will be higher than renting a condo or apartment; but in some markets where single-family home prices have fallen considerably and/or the market is really overloaded with inventory, the cost of renting a single-family home could possibly be close to the cost of renting a condo.

But that doesn't mean people will want to. Renters have different needs--and ones looking to live in an apartment may not want the responsibility of renting a home, which involves upkeep. (Getting more space is one thing; having to mow a lawn that isn't really yours is another.)

A condo, however, is likely to include general maintenance. It is also more likely than a house to provide a location closer to public transportation or an urban setting--which, for work or social needs, renters may prefer.

More units, more versatility: That could be one big reason for the Commerce Department's March multifamily permit increase.

What do you think? Is the multifamily market be benefiting from its various moneymaking opportunities--ones that extend beyond basic unit sales?

Rental Conversions, Condos and the Future of the Housing Market

As overall residential building declines, the multifamily and single-family housing markets are having two very separate experiences: Although both were down in March, they were down in varying amounts, and for different reasons.

And that's painting an interesting picture of how each may start to recover as we tentatively try to claw out of the housing slump.

Thursday's news showed that building in general has slowed considerably: Total housing starts fell 34.5 percent to 1.035 million in the first quarter.

They'll probably remain under 1 million until the middle of 2009, according to The Wall Street Journal.

But single-family starts fell 5.7 percent in March. Multifamily unit starts declined much more--24.6 percent.

Permits for single-family homes dropped 6.2 percent in the month; but multifamily permits only fell 5 percent, according to government data released in mid-April.

Why the difference?

Consider the new $20 million, 75-unit condo building in Charlotte, N.C.

Condo sales began in November; since home sales have slowed nationally and lending standards have become stricter, risk has risen--which caused the project's developers to radically alter their plans.

They've stopped selling units--and are officially becoming a rental property, according to the Charlotte Observer.

"We are returning deposits and releasing buyers from their contracts," Terrence Llewellyn, whose company is developing the project with Dean Kiriluk of Kirco, told the paper.

In some places, like Miami, luxury real estate helped keep the condo market going during the housing slump--at least for awhile.

As condo prices in the rest of the state fell 25 percent or more, Miami prices grew by 6 percent in 2007, according to the Florida Association of Realtors--but in January, the median condo price dropped by $32,000. Sales fell 30 percent.

That shift is causing some developers, like Llewellyn, to switch gears--and change their for-sale projects into rental ones.

Which may explain why multifamily starts would be down in March, but multifamily permits--indicative of future construction activity--would show an increase that the single-family home market did not.

More profitability options; more faith in the industry--and more funding.

But why? Is changing a multifamily unit into a rental property really more profitable than converting a single-family home into one?

Join us Monday for the answer--and part two of our look at how condos may be able to recover sooner, even if foreclosures continue to rise  ...

March Construction Numbers Are Out--But February's Hold More Insight

The Commerce Department said today that construction spending dropped in March--but the news was offset by a surprise revision to February's numbers.

The revision showed an 0.4 percent increase in construction in February--a vast difference from the original 0.3 percent decline that had been reported.

And yet, spending fell 1.1 percent in March from the month before; total construction spending is down 3.4 percent from last year, MarketWatch reports.

Residential spending didn't do so well in March, either.

• Private residential construction declined 4.6 percent from February to March--hitting its lowest level since the department began calculating these statistics in 1993, according to Forbes.

• For the year, residential project spending is down 19.9 percent.

However, February's residential building numbers were revised to show a 0.2 percent increase--not the originally estimated 0.9 percent drop.

We're used to news of residential project spending declining--and it's hard to say that a blip on the radar is a sign that the market is improving.

But still, February's revisions are intriguing.

According to AP, residential construction had declined for 23 straight months before the small increase in February--and yes, construction declined again in March, but could the February growth be a sign that recovery is near?

Private, nonresidential project spending is up--by 1.9 percent, and up 15.4 percent from last year--thanks to communications and lodgings projects.

Yep, that's right: Lodgings. A sector that includes hotels, motels, resorts and cabins.

If temporary housing can grow, couldn't residential building be ready for an increase? And could February's revision be an early indicator that one is coming? Will April's numbers show residential growth?
 
It's a possibility. After all, why should the hotel industry have all the fun?

The Fed Rate Cut May Mark the End of An Era--But Will It Help?

The Fed announced a quarter percentage point reduction of its key interest rate today--which may be the last rate cut for awhile.

The federal funds rate is now 2 percent.

The Fed's statement mentioned--as previous ones had--that rate cuts were meant to invigorate the economy.

However, because the statement did not include the phrase "downside risks to growth remain," which had been present in previous statements, and also said that "uncertainty about the inflation outlook remains high," some sources, including CNNMoney.com, are forecasting the aggressive rate cut era is over.

And maybe that's best, since some sources, including Forbes, reported earlier that the Fed was expected to cut its target overnight interbank loan rate from 2.25 percent to 2 percent--but that more cuts may not be enough to heal the weakened economy.

Since September, the Fed has cut the federal funds target rate by three percentage points--it was 5.25 percent. But the effect has been questionable.

Just today, the Commerce Department said that we're facing a slowing economy.

The economy didn't stop in the first quarter--export sales and inventory helped offset housing and other issues and let the gross domestic product increase at a 0.6 percent annual rate. But concern about its future remains.

A few reasons analysts are questioning the rate cuts:

• Since the Federal Open Market Committee's March meeting, the cost of acquiring funds has risen by 0.33 percentage points. Banks remain nervous to lend to each other, Bloomberg says.

• Adjustable-rate mortgages--more tied to the federal funds rate than fixed-rate loans--have fallen just a half a percentage point since September; according to U.S. News and World Report, investors are still leery about buying into the foreclosure-plagued mortgage market, so rates needed to rise to attract buyers.

Higher rates don't help homeowners struggling to make their payments. But U.S. News and World Report says the Fed's cuts have had some influence.

"The truth is that if [the Fed] hadn't cut [the federal funds rate], adjustable rates would be even higher...and the problems would be much more severe," Gus Faucher, the director of macroeconomics at Moody's Economy.com, said in the article.

Maybe. Maybe not. Do you think that's true?

Tell us what you think by posting below...

Rent This Apartment: No Pets, No Cigarettes

Companies and entire cities--such as Chicago, which banned all indoor smoking, starting on January 1, 2008--are encouraging smokers to put out their cigarettes. Could apartment owners be next?

Maybe. Citywide smoking bans in places like New York and Chicago have been successful--just last week, Chicago Health Commissioner Dr. Terry Mason said the ban, which is not even six months old, had been accepted across the city.

Companies are also trying to get smokers to quit because it reduces their health insurance costs--although for some companies, it's a touchy subject.

Last week, the 16,000-strong Tribune Company recently rescinded on a plan to charge its 600 smokers an additional $100 a month for insurance, according to the Los Angeles Times.

The Tribune Company is now considering a program that would offer employees benefits for stopping smoking. And it's not alone.

More than half of 453 large employers surveyed in a report by the National Business Group on Health and consulting firm Watson Wyatt Worldwide are offering financial incentives to help employees be more healthy; that includes incentives to quit smoking, Newsweek says.

Twenty-four percent more employers say they'll offer health improvement bonuses in 2009.

And now, apartments may be getting in on the anti-smoking action. According to ABC News, California is considering making all its rental housing smoke-free.

• New legislation being considered by a state senate committee that would allow rental housing owners to ban smoking on all or part of their property.

• The bill--proposed by State Senator Alex Padilla--would let renters smoke within their units until the lease they signed prior to the bill's passing expired.

And then: No more puffing.

If renters do, it would be considered a breach of the agreement--and they could be evicted.

Regulating unit use if it affects the unit--i.e., no repainting walls, no knocking them downs--is one thing, but should property owners and managers have the right to regulate what residents do inside the unit with their body?

Perhaps. Smoking can discolor walls, leave an odor and require repainting, which adds an expense for the owner.

But a large part of the restaurant smoking ban opposition has revolved around personal rights--and when a renter is paying to reside in a unit for a given amount of time, do we have the right to limit what they do in that unit (within reason)?

What do you think--would a smoking ban for rental properties be fair, or wouldn't it?

Housing Slump Hasn't Hurt the Gaming Market

Back in March, we reported that the prolonged housing decline hadn't affected the popularity of home improvement shows--in fact, TLC was coming out with six new ones this season.

And now, the Chicago Tribune says that while consumers may not want to buy homes, we still want to play with them.

Take for example, "Build-a-lot," a video game that presents players with home-building challenges including balancing cash flow to meeting the mayor's demands to ordering supplies.

Created for the Windows set by HipSoft, the game was released late last year--when the slump was in full effect. It has since been tweaked for Mac users like myself and has become one of the most downloaded games on Apple's site, according to the Trib.

It's funny. Last week, information from the National Association of Realtors indicated that we sure don't want to buy homes--sales of condos and existing single-family homes fell by 2 percent in March to a seasonally adjusted annual rate of 4.93 million units.

According to the Commerce Department, new home sales dropped to their lowest level in 16 years last month.

And we're not building them either: U.S. homebuilder starts fell 11.9 percent to their lowest rate since 1991 in March, the Commerce Department said this month.

But that's the real world. Give us a virtual version, and suddenly we're all about building again. Does that imply we're really land developer-lovers at heart?

Maybe; maybe not. Consider Hasbro, maker of the legendary property sale-and-swap game Monopoly. The company's first-quarter net income increased 14 percent; revenue was up 13 percent to $704.2 million.

But, according to The Wall Street Journal, that's due largely to Hasbro's international market success; like much of the housing market, the company's global operations have helped offset domestic losses.

U.S. and Canadian earnings, in fact, dropped 18 percent. Then again, Monopoly could be considered a commercial real estate-based game: But are high-priced residential property sites like Park Place feeling just a little too realistic for U.S. consumers right now? 

Perhaps that's why they seem to prefer the physical task of constructing a residence, via virtual games like Build-a-lot, to the riskier prospect of snatching up investment property land ...

After the Housing Slump Subsides, State Budget Shortfalls Could Be Here to Stay

Forget concern about the U.S. sliding into a recession. According to a survey of all 50 state fiscal directors, many states are already in a recession--and as the July 1 fiscal year approaches, the situation may get worse, the New York Times says.

The National Conference of State Legislatures report, released Friday, said that "whether or not the national economy is in recession-- a subject of ongoing debate -- is almost beside the point for some states."

The funding shortfalls are so severe in some areas of the country, it looks like--even once the housing slump does noticeably improve--states may be dealing with the housing market fallout for years to come.

Housing has already taken a toll on the economy (which has, in turn, taken a toll on housing): Because home equity is dropping, many homeowners don't want to invest in their home, so furniture and appliance sales are declining.

At the same time, people are spending less in general because higher gas and food costs are eating up their cash. 

And the slowed economy is hurting tax revenue--some states are really suffering, such as:

• Delaware: The state's funding has a $69 million gap this year.

• California: The report predicted California would have a $16 billion budget shortfall over the next two years.

Florida, too, doesn't expect its revenue situation to improve quickly because of how long its housing slump has been going on, the Times says.

And Florida is not alone. Sixteen states reported budget shortages because taxes had come in less than earlier estimates by mid-April; that's twice the number of states that posted a deficit six months prior.

And the upcoming fiscal year may not be much better. Twenty-three states are currently reporting a total of $26 billion in budget shortages, according to the NCSL--more than two-thirds say they're worried about budgets for next year.

With good reason: The Center on Budget and Policy Priorities said last week that 27 states are reporting projected budget shortfalls equaling at least $39 billion next year.

We've been so focused on improving the housing market, it's possible we've lost sight of its far-reaching effects--but make no mistake, dealing with sharply reduced state budgets on the heels of a prolonged housing slump is not going to make life easy.

In fact, as the economy slows and we try to climb out of a housing decline--and potential national recession--we're going to need those state programs and aid more than ever.

No one wants to see education or other necessary programs suffer. But there are even more pressing problems, such as shelter. The rising number of foreclosures in the U.S. alone are going to increase the need for housing--some of it will need to be affordable or aid-based.

So what can we do now to help buffer the housing decline's effect on state funding? Is it time to reconfigure and trim budgets know, anticipating a further decline in tax revenue? Or should the Fed be addressing the problem and increasing state financial allocations?

What do you think?

Less Home Sales--And Less Starbucks

The government's new home sales and price results are in--and they don't seem to indicate that the housing slump might finally be ending.

According to the Commerce Department, new home sales fell in March to their lowest level in 16 years--and median home prices fell by the biggest amount in almost 40 years.

• New home sales declined by 8.5 percent last month to a seasonally adjusted annual rate of 526,000 units. That's the slowest new home sales pace since 1991.

• Sales were down last month in all regions--most prominently in the Northeast, where they fell 19.4 percent. In the West, sales dropped by 12.9 percent; in the Midwest, they fell by 12.5 percent. In the South, sales fell by 4.6 percent.

And that wasn't the only dour economic news today:

• In March, big-ticket manufactured goods orders to factories dropped for the third consecutive month--the longest straight period of decline since the 2001 recession, according to the New York Times.

• Yet unemployment benefit applications dropped by 33,000 to 342,000.

The fact that demand for durable goods fell by 0.3 percent last month reinforced the general feeling that the softening economy is starting to really hurt manufacturers.

It also reinforced the belief that the U.S. economy is headed for a recession: Orders haven't declined for three months in a row since early 2001--when the U.S. was entering its last recession, the Times said.

But wait! Another news item today indicated things are far, far worse than any durable goods or housing news might imply: People are starting to forgo their daily Starbucks fix.

The Seattle-based coffee retailer forecast its first decline in annual profits in eight years. And if you don't see a connection between that and housing, Starbucks CEO Howard Schultz does: Calling this economic environment "the weakest in our company's history," Schultz said that Starbucks' California and Florida markets--which account for one third of its revenue in the U.S.--especially suffered, according to BBCNews.

Those are, of course, also two of the states hardest hit in the housing slump--and, thus, Starbucks markets that "have been especially impacted by the effects of the downturn in the housing market," the company said.

The company is trying some new things to correct the situation, which the CEO said will show results in the future--such as the introduction of the new Pike Place Roast coffee. (Which would explain why I was handed a card to get free cups each Wednesday for the next month the last time I was in a Starbucks--along with a card for a friend.)

But seriously, even Starbucks? This is the chain that, in the past year, doubled its number of stores to more than 15,000 in 44 countries, according to the Times?

Starbucks is a lifestyle for some consumers--a daily ritual. Or was.

According to Schultz, ..."our customers are reducing the frequency of their visits to our stores--due to the economic pressures they are feeling."

First we got saddled with a high foreclosure rate; now less cash for creamy lattes? If that's not a sign of a recession, what is?

 

Affordable Housing Grows--With a Little Guidance

Single-family homes may be taking a beating--but multifamily affordable housing isn't.

Just ask Fannie Mae. According to The Wall Street Journal, Fannie Mae and Freddie Mac are working to make up for the lenders who have pulled back from project funding, especially in the multifamily affordable housing market.

A spokesman for Fannie Mae said that the multifamily market's low delinquency rates--a scant one-tenth of 1 percent in January--makes it a good bet for the government-backed agency, according to the Journal.

Fannie and Freddie aren't the only ones working to increase affordable housing. As the subprime housing crisis continues, states--including New York--are spending more money on affordable housing programs.

In fact, most New York housing programs will receive an infusion next year, according to Newsday, including:

• Access to Home, an organization that gives property owners funds to increase disabled residents' accessibility options, is slated to get $14 million. Last year, it received $5 million.

• A public benefit corporation created in 1985 called the Affordable Housing Corporation will receive $45 million to help low- to moderate-income residents get homes--a $20 million increase from what it got last year.

• The Housing Trust Fund Corporation, which last year received $29 million, will get $73 million for programs that sponsor new construction and pre-existing housing rehabilitation for affordable housing. (Developers interested in applying for the funds can here.)

However, not all states are making a push to fund affordable living. It's not that they're against it; but at least one state--Massachusetts--is on the verge of changing the way it's done.

The state could soon pass an amendment that would require large affordable housing builders to pay construction workers higher wages--raising overall construction costs on some projects, the Boston Globe reported recently.

Developers would have to pay workers a "prevailing wage"--which means the Massachusetts Department of Labor determines minimum hourly rates on projects involving 75 or more units or projects with $25 million or more in overall development costs. Those rates can be twice as high as a project's nonunion worker hourly rates.

Government projects already require the prevailing wage. Projects during 2002 to 2006 that paid the wage spent 34 percent more--roughly $60,000--on each unit, according to a 2007 study by the Massachusetts Housing Partnership.

As the economy sinks, higher wages will likely help builders; but it could cost the community by reducing the amount of housing being built.

One wonders if Massachusetts has really thought the wage hike through. Residential construction employment has declined in the past year--so will making higher construction costs mandatory for large affordable housing projects really help workers in the long run?

It's a delicate balance--workers are battling the same higher food and gas costs affordable housing recipients are--but overprice our projects, and they'll be out of work...

Do NAR, OFHEO Reports Mean Housing is Ready to Recover?

New information from the National Association of Realtors and the Office of Federal Housing Enterprise Oversight released today provides a fresh look at the housing crisis--but not necessarily a clear one.

The OFHEO said today that home prices grew 0.6 percent from January to February.

• In the 12-month period ending in February, prices fell 2.4 percent.

• Prices increased 2.2 percent a seasonally adjusted basis in New England, rose 0.3 percent in the Pacific region and fell 0.6 percent In the Mountain region.

NAR found that existing home sales fell slightly in March and prices increased a little compared to the month before--but were still lower than last year's levels.

• The national median existing-home price sunk 7.7 percent from a year ago--the second largest year-to-year drop.

• The average March home sale price increased slightly--to $200,700--from February's $195,600 median price.

• Sales of condominiums and existing single-family homes dropped by 2 percent in March to a seasonally adjusted annual rate of 4.93 million units.

• Compared with 2007, sales were down 19.3 percent.

NAR chief economist Lawrence Yun is still saying sales should rise in the second half of the year--but he isn't sounding quite as confident about how much these results proved that will be the case.

According to NAR's press release, the market is performing "unevenly." 

“Though mortgage rates are at historically low levels, some borrowers are facing restrictive lending practices in declining markets,” Yun said.  “At the same time, many buyers continue to bide their time with a large number of homes to choose from, while other potential buyers remain on the sidelines.”

What do you think? Will the housing market really start to turnaround--and remain in a recovery--as early as this summer? Or will it take much longer?

New York: An Owner's Market, Not a Renter's One

It's spring, which according to the New York Times, means thousands of recent college grads will soon be hitting the rental market looking for an apartment ... and many will be in for a shock.

There is no rental market quite like New York City. As a result, there's no landlord like a New York City landlord.

In some markets, rental property owners may be having a hard time filling units as the economy slows. Vacant units have caused foreclosures in some markets, such as Boston, where multifamily foreclosures rose 27 percent from February 2007 to 2008, according to the Boston Herald.

But New York's rental market remains strong.

With $3,000 average monthly rents in some neighborhoods, its market is pricey--and also large. Because home selling prices are so high in New York, 75 percent of the city's housing stock are rental properties.

Perhaps that's why the rental market is so strong: Vacancy rates in New York City hovered around 1 percent for the third consecutive year in 2007, according to real estate broker Citi Habitats.

The tight apartment supply caused rents to rise 5.5 percent on the most expensive residential market in the U.S., Bloomberg said.

With that kind of demand, landlords can call all the shots--and do:

• Qualifying for an apartment can be tricky. New York landlords only want tenants who make 40 times the monthly rent amount, according to the Times--which, for a $2,000 apartment, would be an $80,000 annual salary. The average 2006 recent grad salary? According to census data, $35,6000.

• Roommates may not even help. Many renters take on roommates to help buffer the high rent cost--but while some landlords will take the combined incomes of several roommates, some won't.

• Co-signer requirements are even stricter. If a renter doesn't make 40 times their rent, a guarantor--such as a parent--needs to step in. The guarantor must make 80 times the monthly rent amount.
  

Once you qualify, getting into the unit isn't cheap. First, there's a security deposit, which can be the first and last month's rent--which in New York, can be $6,000 for that $3,000-a-month place we mentioned earlier.

Many renters also must pay a broker’s fee; it can cost more than $10,000 just to get inside your new unit.

Some landlords and apartment brokers may find the market is changing due to sites like Craigslist, which offers no-fee and fee-based broker listings. But Alicia Schwartz, director of howtorentinnyc.com, doesn't think the broker system will become obsolete.

“At the height of the rental season, landlord listings change from hour to hour,” she told the Times. “And the only ones who talk to landlords hour to hour are brokers, not listing services.”

New York's housing market has fared better than much of the country; although some of the boroughs recently saw price declines, across the city, home prices rose 28 percent earlier this year, according to the Real Estate Board of New York.

But the city isn't immune to the national credit crisis. As mortgages become harder to get and less residents are able to buy, the city's rental market is likely to strengthen--and space will always be at a premium in Manhattan.

True, New York is a unique rental housing example; but are there things we all could learn from the way its property owners and managers do business?

New Head for HUD, But Questions Linger About Former Chief

The rumors were true: President Bush today nominated the head of the Small Business Administration, Steve Preston, to lead the Department of Housing and Urban Development.

And the media had a ton to say about it: The Associated Press, New York Times and Bloomberg all covered the news almost as soon as it broke.

John Kerry (D-Mass.), chairman of the Committee on Small Business and Entrepreneurship, also reacted quickly to the news.

"I've worked with Steven Preston as the SBA Administrator for almost two years now and I'll be sorry to see him go," Kerry said in a statement. "Mr. Preston inherited an agency in disarray, and he's worked hard to right its course and to improve relationships with Congress. We may have some differences on policy, but he's always been professional, responsive, and dedicated to the mission."

But what about former HUD chief Alphonso R. Jackson?

Jackson stepped down voluntarily in March amid allegations he had used favoritism in his position.

The New York Times reports that an Atlanta developer--whose company has paid Jackson more than $250,000 in fees since 2001 for work, which the company's lawyer says he did before joining the government--received a $127 million contract in 2007 as part of a joint venture to rebuild a New Orleans public housing project.

So Jackson is out; a new chief is in. But what's next?

Jackson is planning "a few months of rest and relaxation," according to a HUD spokesman. The federal government, on the other hand, is planning to investigate Jackson.

And we'll be watching to see what it finds. With the current state of housing--not good--it's more important than ever that answers to questions of possible deal-cutting and favoritism charges be found quickly.

HUD has taken on a bigger role as the slump continued--so we need it to be working up to its fullest potential. And we need it to keep doing more.

Let's hope Preston is up for the challenge...

Economic News Offers Little Hope

Two news items today indicate the economy is in real trouble--and may be approaching an even tougher time in the near future.

• The Fed's Beige Book indicates the economy is getting worse. The Fed said that "economic conditions have weakened since the last report." Nine districts reported a lesser economic pace; the other three said activity was "mixed or steady."

The culprit? Housing: According to Bloomberg, because of the "worst housing contraction in a quarter century," growth declined to a 0.6 annual pace from October to December--a reduction from a 4.9 percent pace during the three prior months.

• Merrill Lynch lost $1.96 billion in the first quarter. Cringe-worthy news from Merrill--one of the firms that has been hardest hit by housing issues--included it posting $1.5 billion in collateralized debt obligation-linked writedowns and $3.1 billion in Alt-A residential mortgage-related writedowns.

That brings Merrill's writedown total to $27.4 billion for three quarters in a row.

And it's causing Merrill to cut about 10 percent of its workforce--which fits right in with the Labor Department's announcement today that it appears unemployment is rising. In the week ended April 12, unemployment benefit claims rose by 17,000.

In all: Not a great snapshot of a healthy economy, is it?

Speculation still exists about whether or not the country is headed toward a recession--some say we're already in one--and things are not looking good.

If firms like Merrill Lynch aren't through with seeing mortgage-related writedowns, unemployment is rising and the overall economy is slowing in more areas than it isn't, can we still pull out of the tailspin to avoid a recession?

Those economic stimulus checks should be on their way soon ... will that provide enough of a burst to consumer spending to save the day?

Or are we doomed to stand by and watch while our economy contracts further--and further--until it is officially declared as being in a recession?

Share your opinion by posting below ...

Do Low Housing Starts Indicate the Slump Won't End This Year?

Disappointing news from the Commerce Department today--housing starts hit their lowest level in 17 years last month.

Let's just take a moment to mull that over: Seventeen years. And that wasn't the report's only low point:

• U.S. homebuilder starts dropped to the lowest rate since 1991, falling 11.9 percent to a seasonally adjusted annual rate of 947,000. That's 36.5 percent less than a year ago.

• Building permits also dropped to 927,000 last month--a 5.8 percent decline and 40.9 percent drop from March 2007.

• Multifamily unit starts also fell in March by 24.6 percent. The future doesn't look much brighter--multifamily permits fell 5 percent.

The fact that new home completions hit their lowest level since December 1995 wasn't a shock; we knew things were rocky in recent months.

However, the building permit news is particularly troubling because it indicates--as the low National Association of Homebuilders/Wells Fargo Housing Market index showed Monday--that the housing slump is far from over. (The NAHB index found that homebuilder confidence in the industry was lingering at a near-record low for the third consecutive month.)

The problem seems to be more widespread than ever, too: Starts declined in all four regions. In two--the Midwest and the South--housing starts reached their lowest level in years (the lowest since 1982 in the Midwest and lowest since 1993 in the South).

Most sources are in agreement: Today's news indicates we're still knee-deep in the housing slump.

But will this month's round of negative reports prompt some sources--such as the National Association of Realtors, whose March existing home sales report is due next Tuesday--to revise their predictions that the slump will turn around in the second half of the year?

On April 8, NAR said in its housing forecast that sales would increase in the second half of the year--the later part of it, but still, the group is sticking to its second-half prediction.

But given today's news, could that really happen? The start of the year's second half, after all, is just a few months away ...

What do you think?

Preparing Your Property--and Renters--for the Risk of Foreclosure

Some renters who thought they'd wait out the housing decline before buying may find the slump is landing at their doorstep anyway--and it could leave them homeless.

That's according to an article today in the New York Times that highlighted some of the problems renters are experiencing as landlords default on their loans.

From declining service to flat-out evictions, renters are feeling the subprime sting--and they often get little notice their living situation is about to change.

Rental properties are now involved in 38 percent of U.S. foreclosures--168,000 households, CBS estimates.

The hardest hit areas are ones that have experienced tough housing times since the decline began, according to CBS--Nevada, New York and the other usual suspects.

• New York has no shortage of rental units: In 2006, they were about 65.6 percent of all New York City; nationally, rental units comprise 32.7 percent of housing.
  

It makes sense that New York would be a concern. The more pricey the real estate market (click here for Forbes' recent list of the most expensive rental cities), the more danger renters are in: Refinancing expensive homes is tougher in today's market, and as money becomes tighter, in many cases, owners with find larger mortgage payments will have a harder time making their monthly obligation than ones who own less expensive properties.

• In Massachusetts, 23 percent of all foreclosure petitions in February involved two- and three-family homes: And those make up just 11 percent of the housing in the state, according to the Warren Group.

As a property owner, avoiding foreclosure is an obvious goal--but in today's tough market, it's important to recognize that things happen, and having a few plans in place can help ease a foreclosure or close-to-foreclosure situation:

• Be ready for vacancies. According to the Greater Lowell Landlords Association, a regional landlord advocacy group in Massachusetts, the main reason landlords in the state are defaulting is because of a lack of funds. "You have to be able to handle a vacancy," Dick Macdonald, president of the association, said. "This is a tough business, and right now there is a shortage of tenants. A lot of good ones bought condos."

• Be vigilant about keeping current with utility and other bills. You do not want the country to put a lien on the property because of unpaid taxes, water or other bills. Warning should be given, but be aware that lenders and municipalities are nervous these days because of the hefty amount of defaults and foreclosures.

• Consider moving in. If you own a multifamily property as a business investment, unloading your primary residence (if you can, at a decent price) and filling a vacancy yourself could help your overall budget.

• Wait things out. With home values falling, selling your building now may not be wise--and although the home price market is trending downward, it's creating a number of new renters, which means more business in the future.

• Help out your renters if things sour. If your property does enter into foreclosure, you may have very little negotiating power with the lender, but suggesting they give renters some time to get out doesn't hurt.

In addition, some banks are offering displaced renters a "cash for keys" option, where renters receive a little financial assistance to move.

Stress that it could be worth their while: About half of all foreclosed properties are handed over to the bank with considerable damage, according to a national survey of 1,500 real estate agents by Washington, D.C.-based marketing and research firm Campbell Communications.

And--considering residential properties that aren't damaged are losing value left and right these days--that's a situation nobody wants to happen.

U.S. Housing Disaster--Unfortunately--Likes to Travel

An article in today's New York Times discussed the impact that the U.S. housing crisis has had on the world--and it's not a good one.

In countries like the U.K. and Spain, housing is starting to suffer.

• Much has been written in recent months about British housing woes, and Ireland is experiencing a correction, as well.

Almost a year ago to the day, Bloomberg reported that residential real estate in Northern Ireland--after years or unrest--was finally catching up to the rest of the kingdom, with home prices increasing at one of the fastest rates in Europe.

Not so anymore. Britain's biggest mortgage lender, Halifax, said last week that home prices had dropped by the largest amount since the early 1990s, when Britain experience a property crash, according to the Times Online.

However, the correction isn't limited to Europe.

• China and India are also seeing lower housing prices after a period of steady increases: The Chinese market was growing so fast that the government had to institute lending curbs to cool it off. (That successfully brought home price increases down to 10.9 percent in February from 11.3 percent in January.)

But--as in the U.S.--those astronomical gains were to be followed by big drops. And now, fear is rising that several countries could be in for the same housing market decline as the U.S.--if not worse.

A string of housing market collapses could cause a number of problems. For one, we've seen how devastating a true housing market implosion can be on a country's individual economic growth. It reduces personal wealth, then hurts consumer spending, which in turn slows the economy and could (and may already have) cause a recession.

But a housing market ripple effect could hurt more than just individual economies--it also could damage general global economic growth.

Part of the reason areas like the U.K. and China are experiencing a correction is because prices got just too darn high; but they've also felt the effect of the U.S. housing decline via our financial markets. Other countries had invested in items tied to or backed by our mortgages; and we do the same.

And what about our building material companies? Strong growth overseas has helped them offset the impact of the U.S. housing slump--but that's another industry looking at some serious trouble if the U.K., Spain or other economies fall into housing disarray.

More housing market issues are likely to have a huge effect on all kinds of sectors--including private companies.

Just ask Ikea. The U.K. is its fourth biggest market. Its 17 U.K. stores accounted for almost 10 percent of the largest home-furnishings retailer's euros 19.8 billion of sales in 2007; on Wednesday Chief Executive Officer Anders Dahlvig said that the U.S. housing crisis had reduced Ikea's global growth "quite a lot."

Could it do the same for other economies around the world? We certainly hope not...

Vacant Homes Flame Fears of Neighborhood Fires

In Brockton, Mass.--and in other U.S. areas experiencing foreclosures--vacant homes have caused another concern: Foreclosure fires.

Vacant homes already have been blamed for inviting crime to many neighborhoods.

• According to a report by the Georgia Institute of Technology and Geoff Smith of Woodstock Institute, a one percentage point increase in the foreclosure rate brings neighborhood violent crime up 2.33 percent.

• And the trend isn't limited to urban areas: Even middle-class, new neighborhoods aren't safe, according to a November MSNBC report. Nor is it limited to Massachusetts. With the highest foreclosure rate in the nation, California has had similar fears, according to a recent NPR report.

Vacant homes have also killed property values in areas with a high concentration of them: According to a 2001 Temple University study in Philadelphia, being within just 150 feet of an abandoned home can cut $7,600 from a home's value.

Plus empty homes can cost cities tax revenue--in addition to money to keep the property up. If a lender just walks away from a home after foreclosing, it can take years for the city to gain ownership for unpaid taxes, MSNBC says.

But now, some officials are worried that empty properties will spark arson fires--which were a problem in Massachusetts during the 1990s real estate slump, according to Boston's ABC affiliate.

At least six houses burned down in Brockton, Mass., over the winter; state Fire Marshal Stephen Coan fears there will be more if the foreclosure rate doesn't improve--so he's joining banking regulators with real estate industry members to work on a solution.

Intentional insurance fires aren't the only concern.

Banks aren't watching their foreclosed properties in detail, according to Modesto, Calif., Police Chief Roy Wasden."As it gets colder, (squatters) will start building fires in these structures and it's quite dangerous," he told MSNBC in fall.

Winter may be almost over, but squatters living in empty houses or vacant units need a heat source to cook or warm the electricity-free home until summer fully arrives. (Hey, I turned my heat on twice this week.)

And, for obvious reasons, empty homes on fire--especially in a multifamily setting--are a huge risk to the  surrounding properties.

But how do we police bankrupt homes if banks won't? Given the amount that are falling into foreclosure currently, it would be a taxing task for any local government or agency.

However, the risks of letting vacant homes affect our neighborhoods are high. What would you suggest doing?

Multi-Housing Forum Gives Industry Members an In-Depth Look at Building Challenges, Financing Options

Multi-Housing News' parent company, Nielsen Business Media, sponsored an event in Chicago today called Multi-Housing Forum, featuring sessions on branding, debt and more.

I attended the forum's very compelling 2 p.m. session, "The 2008 Multifamily Debt Update," which was an interesting look at how GSEs are navigating the current market--a hot topic for the multifamily sector.

During the hour-long session, moderator Glenn Housman, Senior Vice President, Richard Ellis Inc., took questions and chatted about financing options and advice along with Freddie Mac Senior Producer Laura Cathlina and Jimmy Mayfield, managing director of Greystone Servicing Corp.

A few highlights:

• 125 on they way: Starting May 1, the new 125 percent regulation goes into effect at Fannie Mae--and Housman advised audience members looking at a refi to get their items in order "lickety-split." (Freddie Mac has yet to confirm its participation, Mayfield said.)

• Rate locks are working "very fast" these days, according to Cathlina. And with Freddie Mac, the deal is a deal when the lock is in place. "Once we rate lock, we're rate locked," she said. "If something comes up in the marketplace, we're not going to come back and change it."

• Price saver tip: Points are negotiable from lender to lender, as are processing fees and all other "nickle-and-dime issues," Housman said, pointing out that with a Freddie Mac loan, "Laura is controlling the deal--but not all costs."

• Shopping around: Housman advised participants to keep in mind that to an extent, you can get different quotes from different lenders. However, he reminded the crowd that there are limitations to that rule. "Once it's in Laura's system, you can't [cancel it] until you write a letter and say 'I want to switch,'" he said.
  

• Looking to get in and out of a deal in a few years? Consider Freddie Mac's ARM program, rolled out five years ago. "If you know you want to purchase a property and be out of it in five years, that's the best program for you," Housman said.

• Know your schedule. A 365 schedule compared to an actual 360 is not "apples to apples," Housman said. One is based on 365 days, the other--which is quoted more often--is based on 12 30-day months. A 360 will include more days, but usually offers a better interest rate, Housman said.

• Size limits? Call Fannie Mae, which is set up to handle them efficiently. "No deal is too big," Housman said. "A billion, $2 billion, they can do it." According to Mayfield, Fannie defines a small loans as "$3 million or less in most markets. In larger markets such as Chicago, $5 million or less."

Aside from helpful tips and GSE news, the session contained one other general theme: Fannie and Freddie are doing just what they're supposed to, according to Cathlina.

"Fannie Mae and Freddie Mac are both publicly held," she said. "Our first obligation is to our investors."

That said, they were formed to add liquidity to the market--and have. "In the past nine months, we have been doing just that," she said. "Exactly what we were created to do."

The agencies have both come under fire in recent month for various reasons--but they've also been given more lending power to help troubled homeowners. And their influence in the multifamily market can't be denied: Last year, both GSEs provided $60 billion collectively just to the apartment market, Housman said.

Their role will undoubtedly grow as the market increases--and lenders continue to tighten restrictions. Have you considered Fannie or Freddie financing options? It may be time to ...

What Cities Offer the Best--and Worst--Rental Markets?

Landlords, rejoice: Mortgage applications dropped to their lowest level in a year last month, and the sketchy real estate market is producing more renters as the housing slump continues.

Home ownership isn't for everybody; and with today's stricter lending standards--not to mention the cash-poor economy we're experiencing--it's really not for everybody.

Just ask New York City and San Francisco landlords. According to Forbes, tenants pay the highest rents in the U.S. in those cities. (Not suprisingly, both areas front some of the top U.S. home purchase prices.)

In New York, a tenant renting a median-level apartment in one of the five boroughs will pay $2,922 a month in 2008--a 6.6 percent increase from last year.

In San Francisco, it's possible to leave your heart, but not a good a idea to leave your wallet, because rent will cost you 7.8 percent more than it did last year--$1,904 a month, the biggest increase in the U.S., Forbes says.

The magazine recently ranked the top 10 Best and Worst Cities for renters; the deals--which the Midwest dominates--include:

• Columbus, Ohio. With an average rent of $626, fairly hefty vacancy rates and a 300 percent increase in residential rental unit construction should keep the market stable.

• Houston. The median monthly rent--$707--is close to what Houston residents pay for a monthly mortgage payment, but since the city has the highest vacancy rate in the country, renters can get great units--and rents are only forecast to increase 3 percent this year.

Cities with more pricey rental properties include:

• Boston. With an average rent of $1,658, the city will have a 41 percent reduction in construction in 2008, which should cut into its otherwise OK 5.9 percent vacancy rate.

• Chicago. The city of Chicago--where I live--has an average rent of $1,010, according to Forbes; that's due in part to the fact Chicago is second only to New York in financial service jobs and overall rising employment. Last year, the rental market saw almost no new construction, giving it a low vacancy rate--and a price increase prediction of 3.2 percent for the year.

Curious about the other high- and low-rent rollers? Check out Forbes list of the Most Expensive and Least Expensive Cities for Renters.

England's Housing Slump Echoes U.S. Fallout

The American Revolution may have split the U.S. and Britain, but when it comes to housing, both countries are looking lately like they're joined at the hip.

The U.K. housing market of recent years in many ways echoed the U.S. market: Prices skyrocketed, purchases increased, the economy benefited.

And then, the U.S. subprime collapse began. Sales plummeted, prices fell--and talk of a recession started.

One of the few housing strongholds: New York City, our metropolitan hub, whose market actually increased. And what a market that is: According to the Forbes list of the biggest home sales of the year, the top five in 2007 were in New York City.

The U.K.'s housing market rise and fall--although lagging months behind the U.S. decline--has been very similar.

• After months of big increases, in January, the Royal Institute of Chartered Surveyors (RICS) said that British property prices were declining at their fastest rate since the early 1990s.

• Even the typically strong London market--the country's biggest urban area--took a hit, starting in December.

Because the Bank of England closely watches RICS data and considers it a sign of future home prices, the news was met with concern. But it wasn't the last rough housing news for the U.K.

As home prices dipped, the credit crunch rolled its way across the globe--and the U.K. began to experience some of the same problems as the U.S.:

• Soon the subprime market was in doubt: More than half of the foreclosure orders in the U.K. involve subprime borrower-owned homes, a BBC News report said in mid-February.

• And now, British banks are tightening up lending--and requiring borrowers to put some money down. Today, Reuters reports that another British Bank--Abbey--said it will stop giving out 100 percent mortgages this week. Abbey's competitors already have stopped issuing full-finance mortgages.

That's a move U.S. banks have largely already made; more changes may be on the way, depending on how the presidential election goes. If Republican nominee John McCain wins, lending may get even stricter, given that he suggested in late March that lenders not only do away with no down payment programs, but also set a minimum downpayment amount for mortgage loans.

So is the housing slump over yet for either country? Probably not.

Some have said that U.S. prices will still fall further. The National Association of Realtors' data released today--showing sluggish future home sale activity--indicate that could be the case.

It seems home prices in the U.K. have a bit to drop as well.Even though the U.K.'s biggest lender, HBOS, said today that the average home cost in Britain dropped 2.5 percent from February, home prices in the U.K. have still risen 171 percent in the past decade, Bloomberg said.

But will the U.K. housing situation play out exactly as the U.S. one has? That remains to be seen. One thing is certain: We'll be watching to see if it does ...

Keeping Future Financial Issues Close to Home

Blame for the housing bust has been attributed to a number of factors and groups--but former Fed Chairman Alan Greenspan says the Fed isn't at fault.

So who is?

Well, according to the Financial Times, Greenspan points to a global "dramatic fall in real long term interest rates," which he thinks was prompted by abundant worldwide savings.

And he's confused about why the Fed is catching so much heat for its role in the housing crisis.

Greenspan does have a point: The Fed can't fix everything. And other global economies with central banks saw big housing price increases in recent years:

• London, for example, has seen skyrocketing prices in recent years; yet just last week, Bloomberg reported that luxury home prices in the world's most expensive city for prime real estate grew at the slowest rate in four months in March.

• And just recently, the International Monetary Fund said that Irish house prices still may be 30 percent too high.

Plus the U.S. isn't the only country who has had to help out its banks. Both Germany and the U.K. bailed out four U.S. subprime mortgage-crippled domestic banks,  including Northern Rock and IKB Deutsche Industriebank AG.

Looking at the housing situation that way, the U.S. and global perspective seems very similar--except for one big difference: We started the problem.

And then it spread. At least 34 European Union banks have posted more than $77 billion of losses and writedowns in connection with rising U.S. subprime mortgage defaults, according to Bloomberg.

So now, everyone's talking about reform--on a global level.

Bloomberg reported today that the EU approved a new accord to work together in financial crises; there was no decision about who would fund a rescue if a multinational bank needs one, but the accord came out of a general agreement that something was needed to contain massive financial situations before they spread internationally.

The U.K. Treasury already has said that it wants "concrete action" to improve financial market regulation after next week's Group of Seven finance ministers and central bankers meeting; to do its part, Britain has requested regulators meet more often and is encouraging its banks to disclose losses faster than before.

And the U.S. is working to prevent further economic plagues from spreading. According to the Chicago Tribune, the Fed and Treasury Department stepped in to help Bear Stearns from falling apart--an unusual move for the Fed--because its collapse could have hurt financial companies around the world.

The Bear Stearns bailout could be a good start to further methods of prevention--ones that, in moderation, Greenspan might even agree with. He says a lack of regulation isn't even really the issue--how much of the subprime mortgage fallout  we expected regulators to be able to ward off is.

"Doubtless each individual housing bubble has its own idiosyncratic characteristics, and some point to Fed monetary policy complicity in the U.S. bubble," he wrote in a response to the Times' Economists' Forum. "But the U.S. bubble was close to median world experience and the evidence of monetary policy adding to the bubble is statistically very fragile."

Do you agree?

 

Will the Builder Tax Break Go Through?

As the bipartisan tax bill zooms its way to a vote--some estimates have said the decision could come as early as next week--a new focus has fallen on its provisions for homebuilders struggling under the pressure of the housing decline.

Debate on the bill began Thursday--and by day's end, lawmakers had already killed one of the portions, which would have rewritten bankruptcy laws to allow judges more power to alter mortgage terms.

And that wasn't exactly a huge surprise: Republicans had previously expressed dissatisfaction about that provision and said they wouldn't approve it.

But what of the $6 billion in tax breaks being included to help the home building industry? According to today's Los Angeles Times, it's now come under fire.

For one, it's the largest monetary provision in the bill. And the bill is by no means a cheap suggestion: Its cost could eventually exceed $15 billion.

The provision would let builders write off losses this and next year against taxes previously paid in the past four years--a