Bright Spots: Why Some Homes Are Able to Inspire Bidding Wars in a Slow Market
Some real estate agents in Washington, D.C. say that, despite key statistics that show the slowest housing market in years, they are seeing cases of multiple bids and rising prices as sellers adjust prices to reflect a more reasonable market than the upward price spiral of previous years. “I think the market is soft if you don’t price it right,” said Jane Fairweather of Coldwell Banker. “You’re now seeing probably 10% to 15% of the sellers out there who are going to see multiple contracts,” down from 40% to 50% of the market two years ago and 60% the year before that. Peter Morici, an economist and business professor at the University of Maryland, sees a sign of a healthier market. “It indicates while we don’t have a high-volume market, we have a market that has some stability. Fundamentally [prices] are not a lot lower than they were at the peak,” he said. But Dean Baker, co-director of the Center for Economic and Policy Research in Washington, said that he thinks the market is still weak and that real estate agents are often setting prices low to get the asking price or more.” Expecting a third child in Alexandria, Va., Jim and Shane Fagan wanted a bigger home and a yard, so they recently put their three-bedroom townhouse up for sale for $599,900. They paid $325,000 six years ago. They got $616,000. Around the same time, they bought a four-bedroom house a mile away for $879,000, about $40,000 under the asking price. “We were definitely pleased with how it turned out,” Shane Fagan said. (www.washingtonpost.com)
Washington Post (5/19/07); Allan Lengel
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Greenspan Speaks in Atlanta
Former Federal Reserve chief Alan Greenspan told metro Atlanta executives that the economy now faces an unprecedented challenge: the decline of the residential real estate market, which had been a critical component of growth during the past decade. The number of unsold homes has increased dramatically in the past year, he noted. “We are going to get a significant weakness in new home construction for a while.” Addressing the subject of the housing market at about the same time, Ben Bernanke, Greenspan’s successor at the Fed, said that despite its troubles, housing is not enough to yank the economy off the rails. For his part, Greenspan declined the chance to make a prediction. “I can’t say how it will come out because we have never been through anything like this before,” he said. “So I’m going to pass on the short-term forecast.” Asked about the near-term direction of the economy, Greenspan said it is easer to see the distance. “You can forecast far better 20 years out than you can 20 months out.” (www.ajc.com)
Atlanta Journal Constitution (5/18/07); Michael E. Kanell
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Mortgage Fraud Is Up, But Not in Their Backyards
For the first time since 2002, Georgia fell from being the top state in the country for mortgage fraud to the fourth, according to a report by the Mortgage Asset Research Institute, and community-based efforts are credited with making a difference. As the housing market cools and lenders, particularly those that made loans to people with riskier, or subprime, credit scores, take a much closer look at the mortgages they underwrote, evidence of mortgage fraud is growing nationwide. Warning that it might take three to five years to uncover the full extent of fraud that occurred in loans made last year, the institute said reports of mortgage fraud rose 30% for loans made in 2006 compared with those made in 2005. Also, the number of fraud cases reported to the FBI soared to 35,000 last year, from 7,000 in 2003. From coast to coast, the fraud often involves buyers gaining control of properties at a low price and then selling them quickly at a big profit, rigging the game every step of the way by procuring bogus property appraisals and using false or stolen identities to obtain mortgages. While the scam artists profit in these flipping schemes, the lenders are ultimately the losers, left holding the bag when the loan on the home ultimately defaults. Mortgage fraud can have a similar impact on a poor and a wealthy neighborhood, inflating appraisals and causing tax assessments to skyrocket and at the same time leaving many houses vacant and in disrepair and causing property values to plunge. (www.nytimes.com)
New York Times (5/21/07); Julie Creswell
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76-Story Condo Tower Planned for Downtown L.A.
Park Fifth, a planned $1-billion 76-story condominium complex overlooking Pershing Square park in downtown Los Angeles, would be the tallest residential building in the country west of Chicago, and construction could start as early as 2008. A burst of residential development in recent years has added thousands of apartments and condominiums downtown, and billions of dollars worth of entertainment, shopping and hotel construction is underway or scheduled to start this year. After decades of blacklisting the area, lenders are again making loans for downtown developments. But adding downtown housing is a risk, market observers said. “There is a huge supply that far exceeds demand” at the moment, said real estate broker Stephen May of Downtown Residential Real Estate, who estimates that more than 400 units are for sale. Prices are holding level, he said, but may come down in future months as more units hit the market and create competition. “People wonder if this is the right time” to announce a large housing development, said economist Jack Kyser of the Los Angeles County Economic Development Corp. “Downtown is overbuilt and some other projects are grinding to a halt.” But the housing market could be thriving again by 2010, he said. Park Fifth would produce 732 condo units and 218 hotel rooms. (www.latimes.com)
Los Angeles Times (4/8/07); Roger Vincent
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Eyes on a New Age; Builders Are Taking a Second Look at Buyers in Their 20s and 30s
Because aging baby boomers are not moving as much anymore, builders are starting to shift their attention to young buyers in their 20s and 30s — members of Generation X born between 1966 and 1976 and Generation Y born between 1977 and 1994. “This age group will accept higher density housing in mixed-use developments,” said Steve Hovany, president of Strategy Planning Associates, a firm that tracks housing in the Chicago area. “They are more socially interactive and don’t want to go to the edge of the Earth to live,” he said. While the boomers are financially able to buy bigger homes, “young people don’t have the desire or money for bigger. This whole population is happy to live in 1,400 square feet,” Hovany said. “They prefer a more gritty, urban location. They are buying condos in suburban downtowns near train stations.” As the result of the attitudes of such young buyers, the size of the average house may start to decline, he predicted, and smaller lot sizes will result. Technology is a way of life for these young buyers, according to Helen Velas, owner of Eleni Interiors. “They’re comfortable with it and expect it. They want wireless, iPods, X-Box gadgets. There must be a place in the family room for the plasma TV. They’re always on the computer or cell phone. Everything is about multitasking.” At the same time, she said, “they don’t want to waste time on maintenance. Their time is more valuable. They’ll pay to have it done. So an easy-to-clean, low-maintenance, one-piece plastic tub and shower is fine with them.” (www.chicagotribune.com)
Chicago Tribune (5/18/07); John Handley
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Animal House Meets the Empty Nest
In Nashville, Tenn., Bristol Development Group is pitching its Velocity project to 20- and 30-something professionals willing to trade space (as little as 535 square feet) for affordability (as low as $165,000) and a chance to live in a hot urban neighborhood. Developers all across the U.S. are appealing to young buyers — many of them single, almost all without children — with buildings that promise not just an affordable home but also a great social life with amenities like video game lounges and outdoor fire pits, rooftop soaking tubs, on-site bars and poolside drinks. But it’s not so easy to control demographics in the open market, and some of the buildings are drawing unexpected buyers: people old enough to be the parents of the kids down the hall. In Denver, about half of the units in the recently completed Glass House sold to empty-nesters, despite youth-oriented amenities. In New York, even a hot tub above the lobby and a provocative marketing campaign couldn’t keep boomers away from William Beaver House, slated to open next year. And when Viridian opened last October, along with young buyers looking for a chance to live downtown, it also attracted people like Julie Lammel, a speech pathologist in her early 50s who moved from a suburb where most of her neighbors were in her own age group. Lammel says the atmosphere at Viridian has been largely cordial, but cliques have formed and there have been some tensions; she describes the pool scene as an “animal house.” To combat the 20-somethings monopolizing the pool she and some of her cohorts have planned a covered-dish pool party. “Anyone is welcome,” she says in a Southern drawl, “but we’ll see who shows up.” (www.wsj.com)
Wall Street Journal (5/18/07); Ben Casselman
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