As Prices Fall, U.S. Home Buyers Benefit

“It’s absolutely getting better for buyers,” says Phil Hagedorn, who recently purchased a 1920s-era Southern bungalow in Atlanta’s Kirkwood neighborhood for $25,000 below the $325,000 it would have sold at six months ago and with the seller paying the closing costs. “By my math, when housing was extremely affordable in 1998, it was an important reason for the boom that followed,” says Richard DeKaser, the chief economist at National City, a bank holding company in Cleveland. “We’re coming off a relatively unaffordable time, and so we’re looking forward to a subdued housing market in the future.” To make houses more affordable, developers are agreeing to upgrade kitchens free, make the first year of mortgage payments and pay closing costs. Incentives and deals vary around the nation, says Michael Lerner, the president of MCZ/Centrum, a national builder based in Chicago. “In Sarasota, buyers are looking for the best price. In Miami, it’s upgrades to the kitchen and bathroom and help on the closing costs. In Phoenix, prices have been rolled back to 2002 levels to clear out inventory.” In the meantime, the market has turned quite difficult for people who bought homes to renovate and resell them. “You see a lot of houses where they do renovations that are the least expensive,” says Sara Jane Klingaman, part owner of Ten Fingers Unique Restoration in Atlanta. “They use builder-grade everything, and then they find out they can’t sell them because they’re not what people are looking for. So the houses sit and sit until the price drops enough that somebody’s willing to buy it despite the renovation.” (www.csmonitor.com)
Christian Science Monitor (11/7/06); Ron Scherer and Patrik Jonsson

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Support for Any Theory — Latest Home Price Report Has Something for Everyone

The third-quarter report on home prices by the Office of Federal Housing Enterprise Oversight shows real estate heating up, cooling down, headed for a deeper freeze or just hanging in there despite the challenges. In Bend, Ore., for example, house values appreciated at a stunning 30.4% during the 12 months ending Sept. 30, according to the study, which found several dozen hot spots across the country. While there is less hard evidence in the latest statistics of a deep-freeze scenario, there are some sobering trends underway in two categories of real estate markets: those areas where the regional economy has been struggling, such as pockets of the Midwest, and boom-era shooting stars where excess appreciation has burned itself out and prices are now flat at best, such as the markets of California. The most impressively documented scenario is that many large metro markets — including some that experienced high gains during the boom years — are still hanging in there and registering net appreciation, albeit at lower rates. Examples include Fort Lauderdale (a 10.3% annualized gain during the quarter) and Naples, Fla. (10.8%); metro Washington, D.C. (2.8%); New York City and its northern New Jersey suburbs (2.9%); Seattle (14.6%); Miami (14.7%); Chicago (5.2%); Orlando (6.5%); and San Antonio (9.9%). (www.washingtonpost.com)
Washington Post (12/9/06); Kenneth R. Harney

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Toll Brothers Profit Down 44 Percent — Area Housing Markets Appear To Be Stabilizing

Toll Brothers on Dec. 5 reported a 44% drop in quarterly profit but predicted that the slumping U.S. housing market may have hit bottom, particularly in the Washington, D.C. region. The company attributed its results, in part, to a record 585 new buyers canceling the contracts they had signed. But Robert I. Toll, the company’s chairman and chief executive, suggested that the worst may be over. “Fifteen months into the current slowdown, we may be seeing a floor in some markets where deposits [on homes] and traffic, although erratic from week to week, seem to be dancing on the bottom or slightly above,” he said. Toll singled out the Washington market, saying that new home sales in northern Virginia “seem to have stabilized, although at levels much lower than those we have enjoyed over the past few years.” The market also appears to be stabilizing in suburban Maryland, where there are fewer speculative buyers than in other areas, Toll added. For the fiscal year, Toll Brothers said its earnings dropped 15% to $687.2 million, compared with a record $806.1 million in 2005. Looking ahead, it said its 2007 earnings may fall as low as $260 million, although “projecting revenues and earnings results is difficult in the current environment.” (www.washingtonpost.com)
Washington Post (12/5/06); Bill Brubaker

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Where Is the Economy Headed?

The U.S. economy keeps showing strength and weakness, and the conflicting data could be a sign that a mild growth slowdown is about to give way to a harsher downturn, or that the worst news is still coming from businesses involved in housing and automobile production while the rest of the economy is holding up. “No question, housing is in a recession,” said Nariman Behravesh, chief economist for Global Insight, an economic research and forecasting firm. “The big question, and where people part ways, is how much effect is this going to have on consumer spending and business spending?...Yes, there are scary parts of the economy, but there are other parts that are doing okay.” Federal Reserve Chairman Ben. S. Bernanke said recently that he foresees moderate economic growth over the next year. “I don’t think there is going to be a recession next year,” Behravesh said, noting that housing is enough to slow growth significantly but not stop it. On the contrary, he said, consumers are spending more because of low 4.4% unemployment, decent income growth, rising stock wealth and lower fuel prices. And businesses are exporting more goods to faster-growing economies oversees. (www.washingtonpost.com)
Washington Post (12/6/006); Nell Henderson

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Town Can Use Eminent Domain for Open Space Protection, Court Says

The New Jersey Supreme Court held on Dec. 7 that a municipality in the state did not abuse its eminent domain power by condemning 16 acres that had just received final subdivision approval for the construction of homes. Whether the town acted out of a desire to limit development was irrelevant, the court wrote, because that “was not inconsistent with the motive driving the public interest in open space acquisition generally.” Only when MiPro Homes bought the land to build housing, for which the property was zoned, did the town try to acquire the property. Richard Van Osten, executive vice president of the Builders League of South Jersey, said that the decision “strips your right to own your own property.” Labeling it a property rights issue rather than an open space or environmental one, he said that “there is no ability of private parties to rely on the planning laws and statutes in place in New Jersey." The New Jersey Builders Association and NAHB also supported the builder, and MiPro Homes’ lawyer says he will advise his client to petition the U.S. Supreme Court to review the decision. (www.law.com/nj)
New Jersey Law Journal (12/7/06); Mary Pat Gallagher

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The Apartment Atop the Garage Is Back in Vogue

To enable people who would otherwise be priced out of the housing market to live close to their jobs and relatives, hundreds of communities across the country have rewritten their zoning rules in recent years to eliminate longtime bans on apartments in single-family houses and encourage new ones to be built. Once fairly common in large houses but prohibited by zoning ordinances after World War II, accessory apartments in places like garages or attics are now seen as one way to expand the supply of moderately priced rentals. They are intended for older people on fixed incomes, young people starting out and workers needed for essential but relatively low-paying jobs. “The reality is we desperately need the housing in most of the places where people are talking about this,” said Joel Russell, a land use lawyer and planning consultant in Northampton, Mass. “This is the least intrusive way to try to provide it; and the impacts that people are afraid will happen simply don’t happen in most places.” Illegal accessory apartments, unregulated and sometimes unsafe, are believed to be widespread. A 2000 report by AARP, which wants them legalized and encouraged, estimated that 65,000 to 300,000 illegal ones were being created each year. (www.nytimes.com)
New York Times (12/2/06); Janny Scott

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