MHN Blog

The Housing Market's New Year's Resolutions

It's New Year's Eve--almost--and that means it's time for reflections--and resolutions.

We have so many memories from this year. Remember when, in September, residential building hit its lowest spending point since 2003? Or when the mortgage-related credit crisis rocked the world's banks over the course of a few months? Or how about when the dollar became weak--and then weaker?

OK, so maybe 2007 wasn't exactly a collection of warm, fuzzy financial housing moments. But New Year's resolutions are all about turning things around. I'm about to make mine; and I've drawn up five resolutions for the multifamily housing industry.

Feel free to alter, add to these or post your own today, tomorrow--or anytime as we slide into 2008.

Resolutions for the Housing Sector in 2008

5. Move inventory. Before anything happy happens in housing, we need to downsize some of the current housing supply. Today's National Association of Realtors' report indicated the housing supply fell slightly--3.6 percent--but that isn't enough. We still have more than 10 months worth of homes! Developers, offer incentives like a few free months of assessments in condos or reduced parking. Consider contributing money to throw in some free amenities in the kitchens or other areas in new homes.  Do whatever you can to move those new homes that are sitting on the market. And do it before you build more! Which brings us to ...

4. Build wisely. No one is saying we should stop residential building altogether; and its rate has certainly slowed already this year. But before you pick up a pen to sign that next financing deal for a new condo complex--or grab a shovel to start work on a new planned community--do your homework and make sure it's one the market can support.

Condos have fared better than single-family homes in many regional markets during the housing slump because of their targeted appeal: Smaller and cheaper than houses, they appeal to first-time buyers (a strong market--single female homebuyers, for example, increased from 14 percent in 1995 to 21 percent in 2005, according to the National Association of Realtors) and retirees looking to downsize.

Developments that have been built downtown in cities close to public transportation have proved popular as a result. A Joint Center for Housing Studies report that said nearly a quarter of all condos are located in the 20 highest-cost urban areas of the U.S. According to the report, condominium buyers tend to be older singles or retirees with higher incomes.

3. Improve current investments. Revamp outdated apartments. Single-family homeowners, remodel. Invest in the properties you currently own, and prepare to reap the benefits when the market turns around in the coming year. Some contractors are even helping people secure financing for their renovations, according to a Reuters article from today. It's a clever way to encourage more remodeling  activity during the slump--and get more work.

2. Prepare for the next housing boom. It may seems years off, but the last thing we need is a property frenzy like the one that puffed real estate prices and values up so quickly, which in part caused the housing slump. Just recall when, in 2004, Las Vegas homes rose 44 percent in value in the third quarter--Bloomberg reported in September that the area now may be seeing the largest price reductions in the nation.  When things start getting better in the housing market--and they will--remember: Gradual growth is prepared growth.

1. Have hope. This one may be the hardest, after a year (heck, after a month) of particularly dour housing news. But consumer confidence is a crucial thing. Faith in the housing industry influences Americans' perception of how much money they have in general; which helps determine consumer spending; which helps influence the economy's growth and future. Housing is a cyclical industry. It will turn around in 2008. Estimations vary on when--and exactly how--but good things are coming. So MHN's blog would like to wish a sincerely Happy New Year to you all.

We'll see you in '08!

Can Shopping Save Our Economy?

Anticipation about the Commerce Department's housing figures--released today--ran high all week. Some had hoped the data would show the housing decline was turning around; most expected it wouldn't.

Investors were so confident the home sales results would be bad that the dollar fell Thursday against the euro for the fifth consecutive day--its longest period of decline since October, Bloomberg reported.

And sadly, the naysayers were correct. According to the Commerce Department, new home sales not only fell from last month but hit their lowest point in 12 years (12 years!). New home sales have plummeted 34.4 percent over the last 12 months.

All across the country--except for the West, where sales increased 4 percent--home sales declined last month. In the Northeast, they fell 19.3 percent; the Midwest saw a 27.6 percent drop and sales fell 6.4 percent in the South. The median sales price of new homes also dropped.

The news is the latest in a string of disappointing year-end results:

• The Commerce Department reported Thursday that durable goods orders were less than had been forecast in November, The Chicago Tribune reported.

• That paper--and others--also felt the pangs of the housing decline as it continued to drag ad revenue down. The Tribune Company, which owns the Chicago Tribune, recently reported a 40 percent decline in November real estate classified ad revenues.

• The New York Times reported yesterday that housing has also affected statewide growth, hampering states like Nevada and Florida, which had the slowest annual growth since the decade started.

• U.S. mortgage applications have dropped to the lowest level of 2007, according to the Washington-based Mortgage Bankers Association.

Even the typically lucrative Christmas shopping season fell flat. The National Retail Federation has forecast November and December holiday sales will be up 4 percent from last year--growing at the slowest pace since 2002.

However, as consumers trudge to stores to exchange returns, take advantage of year-end sales and use their gift cards (which don't count as a purchase until they are redeemed), retailers could make as much as $60 billion, according to CNNMoney.com. Half of that is expected to be gift card-related.

A stronger-than-expected shopping season could offer a vote of confidence for the U.S. economy--and act as another indication that we aren't headed into a recession, as many have feared.

Or would it just indicate that tapped-out consumers, frustrated by their shrinking home values and the abundance of bad foreclosure, finance and economic news, just feel so hopeless that they no longer care about adding to their debt? If you owe thousands, does adding the cost of a few new outfits even seem to matter--and is that what's giving spending a boost?

Do high consumer spending results indicate a solid economy--or a population that's given up? What do you think?

Reassess This Mess, Please

Homeowners across the country are finding a new way to combat sinking home values--voluntary reassessments.

According to The New York Times, homeowners can request downward assessments, which seem to be most pronounced in areas where the housing decline has had the greatest affect.

Take, for example, Arizona. The state's home market was one of the first to peak, with the Arizona Republic reporting building industry layoffs as early as May 2006. Housing prices in Phoenix dropped 8.8 percent in 2007, according to the S&P/Case-Shiller index.

As a result, in the state's largest county, Maricopa County, a large amount of the 1 million single-family homeowners will see their homes reassessed to lower rates in February, the Times says.

However--even in times when home values are decreasing--reassessments don't necessarily always reflect the fact your home may sell for less. My parents were confused when they received an assessment this year that raised their property taxes--until their city told them several new homes in the neighborhood had pulled everyone's taxes up in the area.

My mother glares at the rebuilt manse two streets over every time she drives by it. But, while somewhat freeing, dirty looks weren't going to provide any kind of tax break, so they inquired about their options, which included hiring a lawyer and filing a document to contest the increase.

That's an option many frustrated homeowners are choosing. Although Madison, Wis.--which, according to the Federal Financial Institutions Examination Council, has  one of the smallest percentages of subprime loans in the country--hasn't seen an increase this year, assessment challenges in 2006 shot up from 972 to 1,621, the Capital Times reports.

Homeowners in other cities are expressing their dissatisfaction differently. Residents in St. Louis burned fake tax bills two weeks ago to protest what one group estimated was a 22 percent tax hike, the Citizen Journal reported.

As the Times noted, cities have long depended on property tax revenue, so they aren't likely to want to cut taxes or reassess to reflect the lower local home values. However, no matter how much a city may need the tax money, is it really fair to raise property taxes in areas like St. Louis when the St. Louis Association of Realtors recently reported that area home sales last month dropped 6.5 percent compared to November 2006?

“Citizens know the market is slow if not declining,” Anita Lopez, an assessor in Lucas County, Ohio, which has seen 10 times the average reassessment requests this year, told the Times. "They are informed and feel comfortable in challenging their county values. People here can’t sell their homes, they have less money and they don’t understand why the government is asking for more money in a declining housing market.”

Raising taxes as home value declines is a dangerous situation for homeowners. If they can't afford the higher taxes, they may need to sell--only with today's sluggish market and housing climate, that's not a great option, either. Losing money on your largest investment because your taxes became outrageous is a sad state indeed: But for struggling families, retirees on a fixed income and countless other Americans, it's a reality.

It boils down to which party is willing to invest in the other one: Homeowners confident that the value of their homes will again be strong enough to make paying higher taxes for a low-value year or two worth it or cities, who think trimming their budget to give homeowners a tax break until the market turns around is a fair option.

Should cities be able to increase taxes because the housing decline is a temporary situation and home values will again--at some point--rise? Or is it unfair to ask homeowners to pay more when their homes are worth less? Tell us what you think.

U.K. and U.S. Housing Prices--and Markets--Echo Each Other

Two separate studies published this week--one about U.K. house prices and another about prices in the U.S.--painted a bleaker seasonal picture of both markets than many economists would have liked.

In December, U.K. house prices dropped again--for the third month in a row--according to Hometrack, a residential research company based in London. Hometrack also said houses are now sitting on the market longer than ever: an average of eight weeks.

However, Hometrack's monthly report did contain one good piece of year-end news: Overall in 2007, U.K. home prices were up 3 percent.

True, that's because prices were hefty in the first half of the year, but at least the U.K.--while seeing a moderate rise in foreclosures, according to Morningstar--isn't posting the highest foreclosure rate in six decades. (The U.S., according to The Financial Times, hasn't seen its current foreclosure rate since the Depression.)

The Commerce Department reported in late November that the median new home sales price in October 2007 was $217,800--down 8.6 percent from September's $238,400. The most recent Standard & Poor's/Case-Shiller home price index, released today, said U.S. home prices had dropped for the 10th consecutive month in October.

Eleven of the 20 metropolitan areas measured in the index recorded their largest monthly decline on record in October, according to S&P/Case-Shiller.

Housing demand appears to have dropped, too: The Commerce Department's seasonally adjusted estimate of new houses for sale at the end of October was 516,000--an 8.5 month supply.

Does this mean both the U.K. and U.S. housing markets are in serious trouble in 2008--a week before the year even begins?

Maybe. Maybe not. Many are predicting that the U.K.--which has already been served the dangerous economic cocktail of rapidly rising home prices, low interest rates and increasing consumer debt--is starting to show a housing market slowdown similar to the early stages of the U.S. decline, Morningstar reports. People relying on the massive equity their homes have amassed during the boom may be in trouble as home prices and values taper off.

Some--such as Bloomberg News--are reporting the U.S. situation also looks grim. Economists Bloomberg surveyed felt soon-to-be-released November new home sales figures would show homes sold at an annual rate of 718,000 in November, a decline from October's 728,000 rate.

And yet, that new home sale and price data --due from the Commerce Department on Friday--could show a slight improvement in the housing market. We're also still waiting for the final results from the holiday shopping season to see how consumer spending fared.

Both spending and housing will have an unquestionable impact on the economy.  Is a recession in our near future, as many have feared? Or are we on the road to recovery? What do you think?

We want to hear your take--share your thoughts and opinions by posting them on our blog.

Property: Still a Heartfelt Present for Your Financial Future

It's Christmas Eve and, as such, I'm home in the suburb where I grew up--fresh off a conversation with a few of my oldest friends (since 5th grade and counting) about buying property.

Lea, who lives in Washington, D.C., is toying with the idea of buying a condo. I just refinanced mine in Chicago. Colleen is resigning herself to the fact she will never be able to afford San Francisco property.

We used to talk about boys; now it's mortgage brokers.

But--despite numerous reports in recent months of the housing market slumping downward for what seems like an endless period--they recognize that property is a good investment. Like any investment, it's just one that takes time to grow.

And, per Colleen's request, I'm posting the scene from A Charlie Brown Christmas in which Lucy tells Charlie Brown she gets toys and other things she doesn't want for Christmas.

"I never get what I really want," Lucy says. Charlie Brown asks her what that is. "Real estate," Lucy replies mournfully.

As we close out what has been an undeniably bleak year for the housing industry, take note: There is wisdom in Lucy's words.

Real estate--despite declining prices, construction and just about everything else--remains the largest investment most Americans will make in their lifetime. It's one that may take more time to appreciate, true, but it's still a solid way to grow your money.

It is more imperative than ever that homeowners make smart purchases, that developers carefully plan communities for maximum value and appeal, that mortgage brokers cautiously--and conscientiously--steer homeowners into homes they can afford.

The Fed's newly suggested lending guidelines are a positive step toward that happening; let's hope the subprime bailout plan helps the maximum number of homeowners hold on to their largest asset.

But to climb out of the housing slump, we need to turn consumer confidence around (more than one in five homeowners surveyed recently expected their home value to fall next year, according to Reuters. And Bloomberg reported recently that U.S. Homebuilder confidence was at an all-time low.).

We need to motivate the buyers who have the money and the need (like Lea) to buy but are waiting for either further price drops to get a deal or for things to turn around so the market feels less shaky. We need to unload some of that ridiculously large housing inventory.

And we need to wish on a Christmas star--and believe--that housing only feels like it will be down forever. Happy housing days will be here again.

So invest. Retain. Renovate. Reach out if you need help. Refinance.

And, for those of you racing out today to do that last-minute Christmas shopping, may we suggest picking up a condo or split-level ranch for the loved ones on your list? Just a thought...

How Property Managers Can Maximize (and Work Magic On) Their Budget

As the year draws to a close, many members of the housing industry--developers, brokers, real estate agents--are crafting their budgets for 2008.

Property managers are no exception. And, according to U.S. Census Bureau information, keeping costs down might soon be even more of a pressing concern for residential property managers.

Rent appears to be contributing less to new apartment budgets: The median asking price for all new privately financed, nonsubsidized, unfurnished rental units in buildings with five units or more in the first quarter of the year was roughly $102 lower than the asking price in the previous quarter, the latest Census rental data showed.

There has been speculation that, as foreclosures rise and home mortgages become harder to get because of tighter lending restrictions, renting will be on the rise in the U.S.

However, if oil and energy prices keep increasing and rent falls in 2008, many property managers may find themselves looking to make the most out of every allotted budget dollar--and cut costs wherever possible.

A few suggestions:

• Get the Word Out Wisely. Promoting your property can be challenge when coupled with maintaining and managing it--which is why property managers often find purchasing combined print and Internet ads can save time and reach a solid amount of potential renters.

An August 2007 study by Watertown, Mass.-based marketing firm iProspect found 39 percent of Internet users make a purchase after being driven to Web sites from off-site marketing--print ads and word-of-mouth are the two largest influencers.

Although several national newspapers have recently reported their online and print real estate classifieds aren't selling well, managers may reap benefits from listing rental properties.

Or, at least, that's For Rent Media Solutions' take. For Rent runs the ForRent.com listings Web site and recently launched a print version of its rental guide.

The latest edition includes a region in North Central/Northwest Indiana and Southwest Michigan.

"ForRent.com-The Magazine merges print apartment listings with its Internet listing on ForRent.com," says Anita Williams, ForRent.com-The Magazine regional manager. "Since the magazine's introduction in eight other markets, property managers in these areas have seen phone leads increase by an average of 315 percent, according to our LEADS Management System."

• Cut Costs. Save the World. Many property managers are finding that reducing energy usage can be good for the environment--and for their building's budget.

Consider seeking out events like the roundtable that New York-based US Energy Group, which offers a number of products to control, manage and monitor building energy usage, held for property managers in late November.

Participants discussed ways to reduce energy use and--of course--save money. Covering topics like water usage, HVAC savings and government incentives, the two-hour event brought energy experts and property managers together in Great Neck, N.Y.

• Be Smart About Taxes. Global accounting, tax and business advisory organization Grant Thornton International's Construction, Real Estate and Hospitality Industry Group recently released some tax tips to help property managers prep for 2008.

Among the highlights: Grant Thornton suggests reviewing your deferred compensation plans in light of complex new rules that will affect plans resulting in a compensation deferral. The rules, which should take effect at the end of this year, can speed up taxation to recipients--along with interest and penalties--if violated.

The company also advises property managers to conduct a property tax review to see if any opportunities to lower property tax valuations on real property exist and to make sure all real property is separate from the personal property tax base.

It's worth the time: Potential tax--and other--savings could last for years.

Reduced Housing Ads Claim More Newspaper Victims

Starting Dec. 31, The Washington Post will cost 50 cents--an increase from the 35-cent price it has been sold for since 2001.

The hike doesn't necessarily mean the news is getting more costly to produce--but it does mean yet another U.S. paper is seeing the effects of the housing decline, which has been dragging down classified ad revenue for months.

Citing reduced advertising and circulation, the Post's newspaper operations revenue dropped 1.1 percent to $72.5 million in the third quarter ended Sept. 30. A 22 percent revenue increase at its Kaplan education division was the Post's saving grace, offsetting some of the damage, according to the Washington Business Journal.

Yet the Post is not alone in its ad troubles.

The Chicago Tribune--which is the second largest newspaper publisher in the U.S.--reported last month that its October revenue had fallen 9.3 percent because of lower classified ad sales.

On Tuesday, newspaper publisher Gannett Co. Inc.--the largest newspaper publisher in the country--reported pro forma newspaper advertising revenue dropped 3.9 percent to $420.4 million from $437.6 million in the same period last year, CNNMoney.com reports.

The reason? Lower interest in classified and national advertising sales. Classified revenue was down 11.2 percent compared with November 2006; real estate ad revenue plummeted 17 percent because of the slump, according to CNNMoney.com

Even The New York Times--which reported a slight rise in November continuing operations revenue compared to 2006--saw a drop in ad revenues. They fell 0.2 percent as circulation revenues rose 3.7 percent.

And--predictably--real estate, help-wanted and automotive ad revenues were down.

The company's News Media Group saw ad revenue drop 1.6 percent--classified revenue dropped 19.5 percent, which counteracted national and digital ad growth, CNN reports.

And now, the Post is raising its price for the first time in almost seven years.

Will other papers follow suit? Will papers need to look for a new source of ad funding to supplement real estate listings, which will undoubtedly be low throughout much of next year? Will ad revenues ever return to their previous levels?

The outcome will be big news to consumers--and possibly also to the news industry.

Sluggish Housing Market Gives Auctions a New Identity

Yesterday's news contained an item about a Chicago-area company that had just completed the first phase of its housing auction series. The properties up for bid included single-family homes, unused land, apartments--more types of housing than you might expect.

Although the word "auction" may conjure up images of a 4-H club--or bankruptcy, some of today's housing auctions involve neither.

Of course, RealtyTrac announced today that U.S. home foreclosures had risen 68 percent in November from a year earlier, according to Bloomberg; and so there clearly are bankruptcy-related auctions. (So many, in fact, that one company has launched an auction Web site to handle the sale of pre-foreclosure, post-foreclosure and bank-owned properties.)

But auctions also can be a way to unload extra condo units in a mostly-sold building, unused land and other items that aren't wrapped up in financial turmoil.

Developers around the country have used auctions recently to unload property for a variety of reasons.

• Buena Vista Custom Homes sold 141 homes--generating a total of $65 million--in an auction held last weekend at the Oregon Convention Center. Roughly 2,209 attendees came to bid on the 240 homes, according to the Oregonian.

Buena Vista set reserve prices to mirror cost; the company says 96 percent of the homes sold were sold under the reserve price--as low as $195,000 for a 3 bedroom 2 1/2 bath home in Sandy, Oregon to $510,000 for a 5,073 square foot 4 bedroom 3 bath home in Happy Valley, Oregon.

Homes offered at auction ranged from 1,113 to 5,073 square feet and were located in some of the areas of highest demand around the Portland metropolitan area.

Buena Vista also is donating a portion of each home sold--more than $250,000--to 19 area charities.

• Before last year, most homes that had been seized due to mortgage defaults in the Mesa, Ariz.-area were sold at trustee auctions at the Maricopa County courthouse, the Arizona Republic reports. But now, because the value of many of those properties has dropped--and yet a significant amount is still owed on them--buyer interest has waned.

The solution: Auction firm Hudson & Marshall recently held an auction in Mesa which the Republic is calling the potential start of a new trend. Homes in the auction, which had been repossessed by large U.S. lenders, ranged in value from $100,000 to $600,000. And yet, more than 75 percent of the properties sold for prices from $75,000 to $465,000.

The home buyers got a deal--but in truth, the large banks who would probably rather recoup some costs by unloading foreclosed homes--rather than paying for and dealing with their upkeep--did, too.

And yet, in some very depressed home markets, buyer interest--no matter how great the deal--may just be too low to support an auction system.

In California--which saw some of the biggest home value jumps before the bust and some of the biggest falls after--just 17 of the 1,336 homes in foreclosure offered up for auction in Modesto, Merced and Stockton last month actually sold, according to the San Jose Mercury News.

To buy a new home, unless you're a first-time homebuyer, you have to maintain some belief that you can sell your current residence.

And in places like West Virginia--in which some areas are seeing homes sit on the market almost two months more than last year, according to the Times West Virginian--and California, that's an iffy prospect these days. Home shopping may not seem like a good idea, no matter how big the deals are.

But, for developers with unsold portions or deals that fell through as financing got harder to come by, auctions can be a way to bid yourself back to being in the black.

Stopping the Housing Decline from Squeezing School Budgets

School funding, which is traditionally based on property tax revenue, has taken a hit as the housing industry has declined.

A big hit. Nearly half of all property tax revenue is used for public elementary and secondary education, according to the Lincoln Institute of Land Policy.

Decreased residential building and increased mortgage loan defaults have meant less money for schools than they might have hoped this year. Take, for example, Lee County in Florida. Recent numbers indicate school impact fee collections fell by more than $23 million this year--which won't be easy to replace.

Foreclosures, which have hit a high in the U.S., haven't helped; and while a foreclosure doesn't mean a property's taxes will never be paid, it does mean they will be paid later, most likely when the property is sold.

Schools, then, will get their money later than they had budgeted for it, which, in the world of annual academic planning, can result in reduced or eliminated programs and services for this year and possibly next year as well.

The schools still need the money. So if our homes can't fund them, what will?

In many cases, states will need to step up. Utah's House Republicans said this week that they want to give public school teachers a $2,500 raise next year. They also would like to award a $15 million property tax cut in 2008 for the general public, the Deseret Morning News reports.

Seems contradictory--but the state says it will assume some expenses, like the school district's paycheck for a $30 million early reading program.

In Ohio--a state whose Supreme Court decided years ago was relying too heavily on property taxes to fund schools--Sen. Kirk Schuring Schuring has a new idea.

Schuring proposed lessening the property tax burden by funding schools by juggling around current taxes--allotting 59.6 percent of income taxes, 71.2 percent of sales- and use-tax receipts, 70 percent of the commercial activity tax and 25.4 percent of the kilowatt-hour tax be given to education.

Yet not all agree. A report released today by the Lincoln Institute of Land Policy suggests reducing property tax's contributions on school funding may not work; the institute also feels increasing state aid to pay for education won't solve the problem.

Instead, the Property Tax–School Funding Dilemma policy report says states should focus on distributing state aid for public education to the most in-need school districts, schools and students--not on establishing a set percentage for the state's share of K-12 funding.

Lincoln also suggests giving taxpayers help by using circuit breakers--a program that can adjust property tax bills for homeowners who are paying taxes too high for their income--meaning residents who don't make much would essentially get a rebate.

Does tackling funding for the most financially challenged school districts first leave other districts out in the cold? Should new taxes be added to make up for any declines in property tax value? Or is there another way to help fund schools in the wake of the housing crisis? Tell us what you think.

The Housing Supply: Where Recovery Really Starts

Jerry Howard, chief executive of the National Association of Home Builders, told CNNMoney.com last week that overbuilding was a key reason for the current housing decline--and he's not kidding.

At the end of October, there were 191,000 finished homes hanging out on the market, 14 percent more than last year, according to government data.

The number swells to 500,000 if you include new homes about to be built. That gives us a housing supply of more than eight months--and a declining home price.

As the housing supply grew, demand shrunk, and new home median price fell a record 13 percent in October.

And what about the plan announced two weeks ago to rescue Americans in mortgage trouble? It's been touted for keeping a large crop of homes from being foreclosed upon and added to the housing inventory--but many say it won't be enough to spur sales of homes that are already just sitting there.

"At best, [the plan] may stop some of the hemorrhaging of the housing market, but it doesn't necessarily turn things around,'' Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies in Cambridge, Mass. told Bloomberg. "The fundamental problem with housing is oversupply.''

Because of the excessive supply, CNNMoney.com reports that many of the big publicly traded builders--like Lennar, which announced at the end of last month it would sell 11,000 properties to Morgan Stanley for 40 percent of the value--have seen their homes' value decline.

However, while Howard says price drops may continue, he doesn't expect homes to sell for 50 or 60 percent of their asking price.

That's good news for the industry. But how can we reduce the housing supply without slashing prices--which would further drag down already weak U.S. home values?

• Developers Can Lower Cost Without Lowering Price. According to Jon Boyd, president of the National Association of Exclusive Buyer Agents, developers want the recorded price of each home they sell to remain as high as they can get it because they have more just like it on the market to sell. They are, of course, thinking about the big picture--they have to.

CNNMoney.com suggests buyers can gain from that need by asking for money for closing costs and other home buying expenses like condo association fees and even mortgage payments.

The cost of buying a home will seem lower to them--but the home's selling price won't seem lower to the company that built it. Developers can structure deals to include those added-value extras, which might woo some of the hesitant buyers who are waiting for the big deals they think are coming in the months ahead.

Developers concerned about potentially outlandish requests, take note: If you're trying to move inventory without cursing what's left, make sure buyers know that Fannie Mae and Freddie Mac have set limits about how many incentives can be included in deals. Getting greedy can reduce the amount they can borrow--and ultimately, could block them from buying at all.

• Agents Can Work on Selling Pre-Existing Homes. It may take time for new home sales to pick up. But last week, the National Association of Realtors' announced that its Pending Home Sale Index had risen slightly in October.

Could it be an overly optimistic take--or a sign that things may finally be turning around? NAR thinks so.

"Now that mortgage conditions have improved, some postponed activity should turn up in existing-home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels," NAR Chief Economist Lawrence Yun said.

Looking to capitalize on the new-home feel when selling existing homes? Add new siding or a deck to the outside of the house. The 2007 Remodeling Cost vs. Value Report, produced by Hanley Wood, LLC in cooperation with REALTOR Magazine, found exterior upgrades were the highest national percentage of costs recouped this year.

Whatever we do to reduce the housing supply, it's important to remember not to get overexcited and overbuild when the market picks up again.

In the Netherlands, the Central Planning Bureau (CPB) has studied the prices of the Dutch housing supply for 35 years. Its findings are telling--there, a 10 percent home price increase in a year only increases new home building by 0.4 percent.

In the U.S., a 10 percent price jump causes new home construction to rise 40 percent--100 times more than in the Netherlands, according to Netherlands Info Services.

Just ask Karen Ward, chief UK economist at HSBC, who has studied housing.

'In my research I didn't find a genuine balance between supply and demand in the property market," Ward told the Observer "A lot of the demand has been speculative, driven by people expecting big capital gains on their properties. As people realize the rapid gains they were expecting aren't going to materialize, a lot of that demand will drop off."

Sounds familiar. Let's just hope that next time, we can control the supply of U.S.homes before it drops.

The Great Online and In-Person Real Estate Debate

According to a press release issued this week by ForSaleByOwner.com, real estate agents and brokers will collect $55 billion in commissions during 2007--a $19 billion increase from 2000.

Really? During the housing slump?

Well, housing figures always need to be looked at twice if they're compared to numbers from several years ago--and 2000 predates the residential boom that we're currently seeing a correction from. So perhaps, yes, agents and brokers are up in comparison.

But you'd be hard-pressed to say they're doing well. (Believe me--I just refinanced my mortgage, and if I even so much as made eye contact with a broker on the street, they called me about 90 times "just to chat." Times are tough out there.)

And ForSaleByOwner.com does stand to benefit if frustrated consumers believe their already-hard-to-sell-home is going to reap a real estate agent huge benefits, because homeowners are then more likely to use online selling tools. Like  ForSaleByOwner.com. We've come full circle.

Not that the other side is touting online sales sites' success. In November, the National Association of Realtors reported that the level of for-sale-by-owner (not involving the site) transactions was at a record low. And, of course, NAR would likely rather you buy or sell your home using an agent because that's who makes up the NAR's membership.

And, given the group in October said at a Senate Finance Committee hearing that 30 percent of its members lack health insurance--an astounding 84 percent of which because they just can't afford it--I don't expect any press releases soon from NAR rejoicing over this year's high real estate agent revenues. (I could understand some agents opting out of getting insurance on their own, but 84 percent can't actually afford a couple of hundred a month for something as important as health care? That is not a good sign.)

So why all this subtle, press release bickering between the online sales folks and the in-person groups? With a shrinking number of buyers, competition is fierce--and, according to a New York Times article from June, the two groups may be struggling to prove one provides better services than the other.

Homes sold on FSBOMadison.com, a Madison, Wis. for-sale-by-owner Web site, netted an average price of $175,068, according to a study based on homes sales from 1998 to 2004 in Madison, Wis. Ones sold on a real estate agent-type multiple listing service went for an average price of $173,205--when taking into account the study’s margin of error, roughly the same amount the Times said.

So who wins? For now, no one. But I'm sure, as more studies are done and more items released on the newswires, the debate will rage on.

Big Apple is a Big Spender in Largest Real Estate Deals of 2007

Forbes has released its list of the biggest home sales of the year--and the top five were all in New York City.

It's been an unusual year for housing, but an even more unusual year for housing in New York. As the rest of the nation saw home prices and values drop, New York's real estate market stayed stable and strong.

According to ABC News, 2007 was a record-setting real estate year for Manhattan.

• Developer Harry Macklowe bought an entire floor in the Plaza Hotel (except for one apartment) during its conversion to private housing for $60 million, the new top apartment sales record.

• Despite the fact a building's top floor almost always outprices all other units, Macklowe's pricey pad cost so much that it pushed the Plaza's 9,200 square foot penthouse to No. 2 on the top real estate deals list. The penthouse was bought by an unnamed London buyer.
  

• Former Citigroup chairman Sanford Weill set a new price-per-square foot high this year with his $42.4 million 15 Central Park West buy--which averaged $6,287 per interior square foot.

As more and more banks sheepishly announce writedowns and the subprime mortgage market continues to implode, it may seem unlikely a city known for its financial wealth is seeing property prosper.

But, in New York, despite losses, top executives are still making hefty salaries--and receiving big bonuses, Forbes says.

And those bonuses are thought to be flowing to the real estate market--either directly as down payments or to other expenses, thereby freeing up other cash for new property purchases.

Aside from wealthy Wall Streeters, who else is buying these million-dollar manses?

According to some sources, the world--which may, ironically, may have Wall Street to thank.

"The one benefit to the credit crisis and a slowing economy is that the dollar isn't going to get stronger against these other currencies," Gregory Heym, chief economist at New York-based real estate brokerage Brown Harris Stevens told Forbes. "Foreign buyers are essentially getting huge discounts."

And, as the International Herald-Tribune reported, residential wasn't the only big buy in Manhattan this year. Foreign investors spent more in the first three quarters of 2007 on Manhattan commercial properties than in all of 2006, according to New York real estate research company Real Capital Analytics.

So even if Wall Street does start seeing smaller bonuses and paychecks, the real estate industry may have a new source of support--provided U.S. property proves as popular to outside investors in 2008.

Fed Decision Leaves Many Disappointed

The Fed lowered its target Tuesday for the federal funds rate 25 basis points to 4.25 percent. The discount rate, what banks pay to borrow from the Fed, was also cut by a quarter-point to 4.75 percent.

The Fed hopes its actions will boost the economy. But yesterday morning, many people were hoping something else--that the Fed would do more.

The industry has been speculating for weeks about what the Fed would do at its December meeting. For awhile, a big cut seemed almost certain. And then, a rush of recently-released economic reports threw some uncertainty into the mix.

• Government results showed home prices were rising; other analytical reports disagreed.

• Last week's Labor Department report showed construction and real estate job weakness, which proved the housing slump was still in effect--but the report also found that overall, jobs had been added in the month, indicating the economy might be slowing, but not stopping. (Which doesn't sound very positive, but that's generally how the news was received.)

• And, of course, there is the mortgage rescue plan, also announced last week, which--although widely panned--also could be interpreted as a sign of recovery to come.

So, going into this week, no one was really sure what the Fed would do. Wall Street echoed the sentiment Monday, when U.S. stocks were flat as the market waited for the possible rate cut announcement, Reuters reported.

And, once the Fed made that announcement, stocks promptly fell. Much analysis of the drop indicated it was due to market disappointment. Many expected a cut--but they were hoping for a bigger half-point cut.

So what was the Fed thinking? Did it not read our economy's Christmas list?

Or perhaps it did. Some sources have speculated the Fed only offered a quarter-point cut precisely because they are aware of each of our Christmas lists--and the fact holiday shoppers are currently out in stores, trying to fulfill them.

But it depends who--and what data--you listen to.

Data released today from MasterCard Advisors' data service show sales, excluding cars (which I know I'm not getting for Christmas), rose 0.8 percent last month. In October, sales increased only 0.2 percent: So that's good news.

And, according to Reuters, when you exclude gasoline  (which, since I'm not getting that new car, I can), sales were actually up 1 percent.

Yet other research, released yesterday by the International Council of Shopping Centers, paints a less rosy retail picture. The ICSC report said chain-store sales increased a disappointing 0.2 percent for the week ending Dec. 8; their sales had been down by 2 percent the week before.

In addition, the National Retail Federation this week predicted holiday sales for 2007 will be up just 4 percent--the smallest holiday sales growth since 2002, CNNMoney.com reports.

So it's unclear whether or not consumer spending will be able to bolster the economy. Fears of a recession still abound. What a big Bah, Humbug for the financial system.

However, the holiday is still around two weeks away. In past years, sales numbers have been slow until closer to Christmas, indicating shoppers often delay purchasing--which could mean spending might make a comeback.

Or spending very possibly could decline. And, although low consumer spending is a scenario unlikely to end up on anyone's seasonal wish list, it might actually be a gift: Because more negative economic news is the most likely catalyst to push the Fed into making another, larger rate cut when it meets in January.

The Mortgage Fix: Who Won't Be Helped

Yesterday, we touched on what mortgage bailout plan criticisms many economists, politicians and industry members have expressed. Much of the concern surrounds the plan's scope and schedule, which some say won't help enough homeowners in enough time.

And now, three days after the initial announcement, some confusion still surrounds who exactly will benefit from the rate freeze and other plan breaks.

But the bigger question is: Who won't?

• Interest-only loan holders. Borrowers with 2-28 and 3-27 loans, in which typically just the interest is paid for the first two or three years before switching to paying principal and interest for what's left of the 30-year term, often see gigantic rate rises, according to CNNMoney.com. Also, 80-20 loans, which combine two mortgages to pay for a home and are often used to avoid paying mortgage insurance, are in danger--the second loan especially.

• Low equity homeowners. People who own investment properties are out of luck--homeowner occupation is a requirement. Homeowners must have at least 3 percent equity in their property, according to Bloomberg, which rules out troubled borrowers who did not put any or much money down.

• Those who don't qualify for FHA loans. In President Bush's radio address to the nation Friday, he discussed FHA Secure, an initiative that will give the Federal Housing Administration more flexibility in offering homeowners with good credit history refinancing options. According to Bush, the FHA has helped 35,000 people refi in three months, and it expects to help more than 300,000 in the coming year.

But the FHA loans aren't going to be for everybody--and a lot of people in this country have bad credit.

Information released Friday by the Federal Reserve showed that revolving credit, which includes credit card debt, grew at a rate of 8.3 percent in October, after a gain of 6 percent in September and 10.6 percent in August.

Credit card debt has been on the rise in the past few months as home refinancings have declined: People who were used to pulling money out of their home equity for needs now have to borrow however they can, including using credit, the Associated Press reported.

• And .... all of us. Another possible victim: homeowners who can't avoid their resets, who may have to help absorb the cost of the freeze losses. But they aren't the only ones! Homeowners paying less on their mortgage loans means financial losses for Wall Street, pension funds, mutual funds: In short, everyone could be affected, according to BusinessWeek.

Still have questions?
This article, from MarketWatch, lays out the plan in a simple Q&A format.

Criticism and (Some) Praise for the Mortgage Rescue Plan

Late last week, President Bush announced a new proposal to help troubled homeowners, which included halting increases on many of the adjustable rate mortgages due to reset soon.

The housing crisis is ongoing--and could, if foreclosures keep increasing, greatly affect spending and the national economy. It is clear something needed to be done: But is the mortgage plan the right solution?

Not everyone thinks so. In a letter to Congress last week, 61 economists said they oppose the plan and basically told the government to leave the housing situation alone, Bloomberg reports.

Many members of the government aren't too keen on the plan, either. BusinessWeek reported that reaction to the proposal was mixed; Democrats felt it fell short, and Republicans saw it as unnecessary meddling in the private sector.

And yet, many mortgage industry members were glad that it was something. Anything. Please.

Given that the mortgage delinquency rate hit a 20-year high last week, according to the Mortgage Bankers Association, one wonders if something, anything, please isn't just what we need.

Complaints about the plan include:

• It Won't Help Enough People. To be eligible for the freeze, you must have received your loan between Jan. 1, 2005 and July 31, 2007, and it must be due to reset between Jan. 1, 2008 and July 31, 2010.

Wall Street analysts, according to San Diego Union Tribune columnist Dean Calbreath, estimate that just 7 percent to 20 percent of in-need borrowers will qualify--which means 80 percent won't. That's roughly 1.6 million borrowers, enough to still potentially wreak major havoc on the economy.

• It's Delaying the Problem. The scope of the plan wasn't Calbreath's only criticism. Perhaps because San Diego ranks 16th highest out of the country's top 100 metropolitan areas for defaults and foreclosures, he acutely points out that the plan seems to pause the problem more than stop it. "For the borrowers who do qualify, Bush's key solution to their subprime mortgage problems is to keep them in subprime mortgages!" Calbreath says. "Once the freeze is over, they'll have to cope with rising adjustable rates, switch to a fixed rate if they qualify, sell their home or let it be foreclosed upon, which could lead to a second round of the mortgage battle."

• It's Too Late. Some critics have questioned the plan's mandate that homeowners who are already in trouble be less than 60 days behind in their payments, saying it will leave too many recent defaulters out in the cold (possibly literally).

And what of the borrowers who just plain got in over their heads? Is this really going to be able to buy them a few years? “We were selling $300,000 homes to people who could only afford $175,000 homes,” Jason Bosch, president of Home Center Realty in California’s hard-hit Riverside County, told The New York Times. “Even if you freeze their payments, they still can’t handle it.”

• It's  Unclear When It Will Start. About 5,000 Iowa homeowners could get help under the plan; 3,100 of them have already called the homeowner help hotline Iowa Attorney General Tom Miller set up three months ago, according to the Des Moines Register.

However, Miller told the paper last week as the plan was announced that it would be weeks before anyone in the state knew who would meet the requirements for it--prompting him to say it is "a good proposal ... but it will only be part of the solution."

No one is arguing the current case-by-case basis system of working things out is fast--but even if setting some guidelines does give lenders a handy process to refer to, since the private sector is running this thing, it's up to the private sector to get it going--and to embrace the program.

Which is why U.S. Treasury Secretary Henry Paulson said the Fed hopes "that these guidelines will be adopted as reasonable and customary standard practice across the entire servicing industry," according to BusinessWeek.

Yet not everyone dislikes the freeze plan. A New York Times article published Friday cited one reason the proposal has gained some support: Even if the plan ends up delaying the problem for another five years, some building industry members are delighted that it will keep more foreclosed homes from being added to the already bloated housing inventory.

The head of the National Association of Home Builders agrees.

"It's not a panacea but it's a step in the right direction," Jerry Howard, NAHB chief executive, told the Chicago Tribune. "From our perspective, keeping 1.2 million homes off the inventory list [of homes for sale] is a major accomplishment."

And for now, in lieu of anything else, we'll take it.

Three Factors That Will Influence the Fed's Decision Next Week

The past two weeks have provided us with a dizzying array of economic information--new job data, construction spending results, forecasts from Fannie Mae and Moody's.

And it's all fueled the ongoing speculation about whether or not the Fed will change the interest rate next week when it meets.

Last week, it looked like that was a strong possibility; and now, economists aren't so sure.

It is, of course, impossible to know what the Fed will decide. But we can predict some of the key information they'll likely consider:

• Home Prices. The housing slump will undoubtedly influence the Fed's decision, even though it will consider housing along with other government reports and data--and gauge its own housing data against that of the private sector.

The government index "has continued to rise" while other home price data showed a decline, as BusinessWeek.com reports. Therefore, the source of the housing information that the Fed considers will be extremely important.

The federal government index is a national index--and yet, does not include higher-priced homes and homes financed via riskier mortgages, according to BusinessWeek.

A strong possibility for the Fed's consideration: The Standard & Poor's/Case-Shiller nationwide housing index. Based mainly on major metropolitan areas and including an array of property prices, the index reported a 4.5 percent price drop in the third quarter from 2006.

The Fed is more likely to use the S&P index than one from an association or other industry analysts such as the National Association of Realtors because the Case-Shiller index tracks price changes for the same properties over time, BusinessWeek says.

Others, like the NAR's, calculate data using different houses sold during a particular month or quarter.

• Today's Labor Department job report. According to the report, weak performance in the construction, real estate and financial services industries indicated the housing slump is raging on, but the fact the U.S. again added jobs last month--coupled with the unchanged unemployment rate, which economists had expected to rise--showed signs growth might not be crippled by the decline.

Since unemployment greatly influences consumer spending, which has a huge influence on the economy and its growth, the results are important.

However, the employment report could be considered even more influential because it's the last piece of economic information to be released before the Fed's meeting. There won't be anything else to indicate other factors are effecting the economy or to influence interpretation of the results. This is it.

• The proposed interest rate freeze plan. Speculation that the Fed would again cut rates had increased as more negative housing results poured in during November. However, the Bush Administration's announcement yesterday--outlining a plan to possibly help 1.2 million Americans with adjustable-rate mortgages due for a high reset--may provide the shot of hope the Fed feels the economy needs (in place of a rate cut.)

Federal Reserve Chairman Ben Bernanke expressed support for the plan on Thursday, calling it "a welcome step," according to Reuters.

And the news has already given the stock market a boost. The Dow Jones industrial average was up 1.3 percent Thursday due to the announcement, which market analysts feel could drive stocks up further because it's a sign the U.S. is addressing the global credit crisis, according to Newsday.

We'll find out next week how the Fed feels.

Government-Backed Mortgage Rescue Plan Announced

President Bush today announced the highly anticipated interest rate freeze program, designed to help prevent further waves of home foreclosures.

The voluntary, private-sector arrangement involves no government funding and will only affect mortgages for owner-occupied homes. You can't have missed any payments, and the loan has to have been taken out between 2005 and July 30, 2007 and be set to reset in 2008 or 2009, according to MSNBC.

“There is no perfect solution,” President Bush said during the announcement. “The homeowners deserve our help. The steps I’ve outlined today are a sensible response to a serious challenge.” (Watch the announcement here and news coverage about it here.)

The steps include:

• Buying homeowners with good credit extra time. The FHA now has more flexibility help homeowners with good credit histories refinance, which could help 300,000 families.

• Changing lending standards. The Federal Reserve will announce stronger lending standards this month. The Housing and Urban Development Department and federal banking regulators are working to increase disclosure requirements.

• Freezing some rates. Introductory “teaser” rates that were offered on select subprime mortgages will be frozen so that rates can't rapidly increase up for five years.

Reactions, as the Chicago Tribune reported, to the plan were mixed. Some said investors would never buy into it. Others felt it was just what the industry needed because solving the problem on a case-by-case basis was simply too impractical.

The plan is supposed to give the housing market a chance to rebound so that homeowners can refinance their current ARMs into fixed-rate loans with more reasonable monthly payments.

And, of course, once again, it was made very clear that the government is *not* doing this to bail out any flippers, lenders or poor planners. Bush stressed the plan was designed to help " responsible homeowners who could avoid foreclosure with some assistance.”

The 1.2 million people who the government said could qualify for the plan might agree. And the others? They're being redirected to their lenders to refinance and switch to loans secured by the Federal Housing Administration--which may prove easier said than done.

They've set up a new hot line for troubled homeowners--1-888-995-HOPE (which Bush first gave the incorrect number for, and was later corrected, so if you were watching the newscast but turned the channel, write the above number down.)

According to the Bush administration, there are 2 million subprime mortgage holders due for trouble in the next few years--so even if all 1.2 million people who the plan could help make use of it, many U.S. homeowners will still default and fall into foreclosure.

Was today's plan enough of a fix? Or do we need a better solution to reach out to those who have fallen behind on payments already and may not have good credit?

Is it fair to penalize and push aside those who, possibly due to our slowing economy, can't keep up financially with their home payments as they are about to really not be able to keep up with home payments? What are your thoughts?

Rental Market May Reap Benefits from the Housing Slump

Today's multi-housingnews.com news included an item about California affordable housing builder AMCAL focusing efforts on market-value apartments.

The company plans to build two this year. Why? According to Sid Paul, AMCAL Equities' Vice President of For-Sale Housing, mortgage restrictions and dwindling loan options in California--which saw some of the greatest increases in property values before the housing slump and some of the biggest declines during it--are prompting more and more residents to rent.

"We're seeing a void for workforce earners who may not be low wage earners, but who may have a need for rental properties," Paul told multi-housingnews.com.

Although the Wall Street Journal reported this week that U.S. home ownership has declined just a touch in recent years--it was 68.2 percent in the second quarter of 2007, down from a record 69.2 percent in 2004--the rental market, it seems, stands to benefit as the housing decline drags on.

Put simply:

• Less buyers also means less housing demand. Reversions, which are condo buildings that have been changed back into rental units, exceeded condo conversions in the second quarter of 2007, according to New York-based research company Real Capital Analytics. That's the first time that has happened since the 1980s.

• Less buyers also means more renters. The current lending restrictions could wipe out 25 percent of the national housing demand, which will up the rental market, according to Todd Sinai, an associate professor of real estate at the University of Pennsylvania's Wharton School. "One-time homebuyers will be relegated to renters because young households will have an even harder time amassing a down payment," Sinai told Fortune Small Business.

• Which is why more people are renting. Rents have risen 4 percent on average in the past year, according to the Bureau of Labor Statistics. That's become clear in areas like Houston, where demand has driven rents up considerably. Last year, Houston renters were paying an average of $659 a month; this October, the average rate was $681, according to the Houston Chronicle.

Rising rents are often a big incentive to buy; but even if home prices are down, giving buyers a better deal, getting financing isn't easy. Credit issues, low cash reserves and other factors can block potential buyers from getting a loan; the options just aren't there for everybody as lenders tighten their regulations in the wake of the subprime crisis.

Bad news for home builders, but potentially positive news for rental property developers and owners--which may just be the first residential sector to benefit from the housing decline.

How Newspapers Have Been Hurt by the Housing Decline

Read all about it--the housing slump has taken a new victim.

This time, newspapers are feeling the burn of the housing boom bust. (And--somewhat sadly, yet logically--they're also the ones to report the news of their lower revenues.)

Print periodicals may seem like an unlikely byproduct of the decline in home prices, values, sales--and just about everything else--but two major publishers reported serious ad revenue losses due to the slump last week.

• As we reported last week, The Chicago Tribune, the second largest newspaper publisher in the U.S., announced last Tuesday that its October revenue dropped 9.3 percent due to lower classified ad sales.

Lower consumer spending helped, too, but the housing slump was mainly blamed for the blow to the Tribune's advertising, which was down 4 percent. The company's earnings were 7 percent lower than those in the third quarter 2006.

As a result, consolidated revenue for the period ending Oct. 28 fell from $422 million a year ago to $383 million. Ouch.

• In London, McClatchy Newspapers Inc. said consolidated advertising revenue had fallen 9.9 percent in October compared to October 2006, according to MarketWatch.

The U.K. housing market also exhibited some troubling signs recently--the Nationwide Building Society announced last week that U.K. house prices hit their lowest level in 12 years and mortgage approvals were at their lowest since February 2005 --but McClatchy is blaming the drop on its California and Florida newspapers, two of the areas hardest hit by the housing decline. Less real estate to sell meant less listings--and less revenue.

We were just getting used to reports of home improvement retailers and material manufacturers reporting lower revenues due to the U.S. housing decline.

Many of the losses were large, and some are ongoing: Building Materials Holding Corporation saw its third quarter net income drop from $35.3 million in 2006 to $4.2 million this year; just today, Home Depot announced it would be closing its Brandon, Fla. call center and laying off 750 employees.

But our daily coffee companion? The newspaper?

Given that newspaper revenues were flat last year--and pre-tax earnings were down a hefty 8 percent, according to the Project for Excellence in Journalism's The State of the News Media 2007 report--that can't be good news for the journalistic community.

Subprime Aid Plan Speculation Starts Off the Week

Today's news contained a number of stories speculating on what the proposed bailout system would be (and it should be noted almost all stressed no government official feels this is a true bailout--those able to afford higher payments and homeowners seriously at risk likely won't be helped.)

Here's what we knew this morning about the plan:

• It Has Tentative Support. Office of Thrift Supervision Director John Reich said on Monday that U.S. banking regulators are in agreement about a plan to modify subprime mortgages, Reuters reports. Reich said he's up for freezing the rates for at least three years.

• The Government Backs It, But Not Financially. The Bush Administration is now behind such a plan, AP reports. The mortgage industry will finalize the plan and the government isn't paying for it, according to the LA Times.

• Not Everybody Will Be Helped. Who will get the rate break? Details haven't been released, but certainly not everybody. We did know the proposal has been targeted to help owner-occupied homes and not flippers or other investors. You must also be current with your payments to qualify--those already defaulting may be out of luck.

Treasury Secretary Henry Paulson, speaking this morning at the Office of Thrift Supervision conference, revealed a bit more about the plan. It would affect borrowers "with steady incomes and relatively clean payment histories."

Paulson also suggested giving state and local governments a temporary exemption on taxes on bonds issued to help refinance subprime borrowers, according to Bloomberg.

Interestingly, the plan isn't the only thing under debate. The number of people in trouble due to mortgage resets is also unclear: Accounts vary from 1 to more than 2 million. According to the Federal Reserve, 500,000 are in danger of losing their homes, Reuters reported Monday. (Paulson wouldn't comment on the amount.)

One million or two million, it's more than enough to cause havoc (well, more havoc) in our economy--and more than enough reason to address the issue before the foreclosure rate gets any higher. We've read in recent weeks about crime increasing in suburban neighborhoods with high foreclosure-induced vacancy rates and about banks becoming unwilling owners of far too many properties to quickly sell. Waiting to see what the next bad byproduct of the housing decline will be is not an advisable position.

The only real question left to ask isn't whether or not we need to try to correct the subprime situation--it's when this plan will be announced.

Many are speculating that will happen this week, possibly Thursday. Stay tuned to Out and About for full coverage this week.