Thursday, June 21, 2007

Home Buying: The Basics

Probably the single most important investment you will ever make is the purchase of a home. Finding the right home for you can be a lengthy and arduous process, using up most of your free time until it's finished.

As the consumer, it's up to you to ask questions, pay attention to details, and keep records about what you've seen -- including photos -- for comparison.

Know Your Wants And Needs

Before embarking on the long journey of house hunting, you must know what your wants and needs are.

Sit down with pen and paper and list all the features you care most about:

  • Looking for a house in a particular city, school district or neighborhood?
  • Exactly how many bedrooms and bathrooms do you need (or want)?
  • How about off-street parking? Do you need a 1-car garage or 2?
  • Are you self-employed? If you have a home-based business, check for restrictions in the area.
  • Are you looking for a finished attic or basement?
  • Would you prefer a 2-story house or ranch style home?
  • Type of heating?
  • Will you need central heating and/or air conditioning?

Equally important, on a new sheet of paper list all the features you absolutely do not want in a house. For example:

  • A house in a high-traffic area.
  • An airport, train station or highway in close proximity.
  • A home in need of a lot of major repairs.

As you look at houses, keep these items in mind. You may find that your lists change from time to time as you do more looking. You'll want to add or remove certain features you can't live with, or perhaps you'll become willing to make compromises on certain items.

Realize that you most likely will not find the "perfect" home. As experienced homebuyers will tell you, perfect homes are not found, they are made perfect through patience and hard work.

Get Your Credit Report In Order

Prior to looking at properties, you must get your finances in order. Now is the time to review your credit report and clean it up, if need be, to maximize your credit score. Many people do not realize that it is important to check your credit report periodically to make sure it is accurate. You should pay in full any past due amounts, or negotiate a settlement price to close the debt.

Perhaps you have a past due credit card debt, for example, that has been entered into collections in the amount of $1,100. The company may be willing to accept a payment of $600 to settle the debt and strike it from your records. Get this agreement in writing, though, before paying any settlement. Keep all receipts for any settled items from your credit report because it may take weeks or even months to get the debt actually removed.

Research Your Home-Buying Options

Decide what kind of property you are interested in. Do you want a HUD property, a foreclosure, real estate, or property for sale by owner?

You can go online for more information about HUD and foreclosures.

A number of web sites list homes according to city, state, or price range. Visit these sites to see pictures of homes, many with virtual tours, and review the listing features.

Get Pre-Approved For A Loan

You're ready now to find a lender and get yourself pre-approved for the loan. Being pre-approved offers a number of advantages. It will clarify what price range you can afford. Also, once you find the home you want, you can place an immediate offer. If you have to wait for a pre-approval, someone else might buy the house right out from under you.

Several special programs are often available from lenders, such as the FHA or Ameri-Dream, that can save you extra money in the closing process. Ask the lender about any special programs and what would work best before you decide on a loan.

Find A Good Real Estate Agent

It is wise for the first time homebuyer to work closely with a real estate agent, no matter what type of property you're looking for. The many helpful tips and suggestions that a knowledgeable real estate agent can give you will make your house-hunting easier. A good real estate agent is usually a good negotiator, and will be able to help you with the complicated paperwork involved in placing an offer on a house or in closing a deal.

It's essential that you have a real estate agent working for you as the buyer, rather than relying on the seller's agent for the house you want to buy. The latter can involve a conflict of interest, and it usually works to the disadvantage of the buyer.

Selecting a real estate agent requires a little more effort than picking a number out of the phone book. You should check with your friends and neighbors for any recommendations they may have. Find an agent you feel comfortable with who is knowledgeable about the area you hope to buy in.

Now You're Ready To Roll

These are just the basics of home buying. You will find many details you need to master as you move forward through the buying process, but having the basics under your belt will give you a head start.

http://www.home-buying-review.com/Home_Buying_The_Basics.html

Pitfalls To Avoid

When Buying A Home

Whether you're looking for a first home, which often establishes the foundation for your future home purchases, or your last home where you'll spend your senior years, following are some mistakes to avoid and suggestions to assist you in making the best choice.

Get Pre-Qualified

Not getting pre-approved or pre-qualified by a bank or lending institution is one of the first mistakes many people make. Sellers are likely to be skeptical of your ability to obtain a mortgage loan if you have not been pre-qualified. When they're choosing between 2 comparable offers, or when considering countering a buyer's offer, a seller will always look more favorably upon a pre-qualified buyer.

Have Your Own Realtor

The services of a realtor are indispensable to help you navigate through the process of buying a home; a process both complicated and fraught with financial hazards. As the buyer, you'll need to have your own realtor who will be committed to representing your best interests. The seller's realtor will often favor the interests of the seller, with an eye to the commission involved.

One of the things your agent should do is a comparative market analysis to establish property values and selling prices of homes in your targeted area.

Take Your Time

Don't be in a hurry! All too frequently people rush into signing a contract to purchase a particular home and then, for any of a number of reasons, regret it. If you enter into a contract to buy a home, your chances of later getting that contract rescinded are very slim. Even though you may find another home you prefer, when you're under contract to make a purchase, you're expected to follow through and buy it.

You can prevent this kind of situation by taking plenty of time to consider any house that interests you.

Don't Over-Spend

Another reason people sometimes try to withdraw from a contract is they realize too late that they've over-purchased. The mere fact that you can qualify to purchase a particular property doesn't mean you can afford it.

It is no fun being "house poor." Putting too large a portion of your earnings into your mortgage payment detracts from your quality of life. Things you used to enjoy, such as vacation trips, dinners out or splurging on an expensive piece of clothing will have to be curtailed, very likely for a long time.

Don't Wait For Utopia

It often happens that people have specific, detailed requirements for their dream home, and they search endlessly for the right house to fulfill them. Unfortunately, they sometimes wait too long.

While pursuing utopia, people can pass up excellent homes that are good bargains and would fulfill a majority of their needs. Meanwhile, market prices and mortgage rates continue to escalate, putting good deals beyond their reach.

Explore Your Financing Options

As a potential buyer, you should be aware that there are many types of mortgages being offered by lenders. Thoroughly explore all of your options before getting yourself "locked in." An interest-only loan will allow the buyer to pay only the interest on their mortgage for a period of up to 5 years. For young buyers who want to establish themselves in a home of their own, but haven't yet reached their full earning potential, this is an attractive option. To benefit from this type of financing, the buyers should be better able to meet full mortgage payments at the end of the prescribed 1- to 5-year period.

A number of other options should also be explored.

Get A Professional Inspection

It is absolutely essential to have a comprehensive home inspection conducted by a professional. Relying on the knowledge of a friend is a penny-wise/pound-foolish thing to do. The comparatively minor expense of a full inspection is well worth the price. A review of the electrical system, the condition of the roof, plumbing, heating and air conditioning, septic system, and water quality, at a minimum, should be included in the inspection. This is a critical process that can save you a lot of anguish down the road.

As a real world example, on my current home I spent $500 for a home inspection. The inspector found several short-comings that neither the seller nor I was aware of. As a result of that objective written appraisal, $14,000 was knocked off of our already agreed upon (but "subject to satisfactory inspection") purchase price.

How's The Neighborhood?

Don't forget when selecting a home that your quality of life will also be affected by the surrounding community. No matter how beautiful your new home is, if it's in a rundown neighborhood and populated with neighbors you don't want to know, you aren't going to be happy.

Check out the school system and be sure that it meets with your approval. Inquire about the crime rate and consider the quality of the stores and services available in the vicinity.

Consider Resale Value

When you're focused on now, it can be hard to consider the future. However, resale value is one of the primary considerations in the decision to buy a home. Of course, this isn't the final consideration, but when touring your prospective new home keep an eye out for things that would be a deterrent to another buyer. If the problems you see are all minor and/or repairable, then your worries will be few.

Research Community Restrictions

Last but not least, before you sign the contract, become aware of any restrictions imposed by your new community association. Restrictions might include: certain landscaping requirements, parking restrictions, no RVs or boats in the yard, certain occupancy restrictions, and fencing guidelines, as well. Investing in a heavily restricted community without first doing your research is a mistake, and a very common one.

Do Your Homework

This is by no means an exhaustive list of the common home buying hazards to beware. Purchasing a home is a big undertaking, which should be done carefully and systematically.

Reputable realtors offer checklists that can be very useful throughout the searching and home buying process. Avoiding the pitfalls enumerated here should make your search for a new home both easier and more rewarding

http://www.home-buying-review.com/Home_Buying_Pitfalls.html

Things The First Time

Home Buyer Must Know

Purchasing a new home is exciting and a little daunting. There are many hurdles that could happen along the way unless you insure that they do not. When you finally own your own home, nothing compares to the feeling. .

Here are some things you should take do to make things go smoother.

Talk To Your Agent

The most important first step is finding a real estate agent that you trust to help you through the system. Only when you find someone that you trust should you sign any paper work.

When finding an agent, use those referred to you by friends, not necessarily the most prolific lister out there. You want someone who is going to serve your needs, not just someone who does what they have to and nothing more.

Money: Where’s Yours?

Next, take the time to get your finances in order. Get a copy of your credit report and insure that it is correct. Make sure to dispute any problems that you find. Also, make sure that you have as few bad marks as possible. You may want to wait a few months and pay some bills to help increase a bad score.

The Mortgage Industry

Learn as much as you can about mortgages. For example, do you know what a debt to income ratio is? Do you know if you should go with an adjustable rate mortgage or a fixed rate? All the information that you need is available to you throughout the web.

Once you know what you are looking for, take the time to find the right loan. See how much you are pre qualified to own. Get your paperwork in so that you can become pre-approved. Only after you are pre-approved should you move to the next phase of looking for the home you want.

Remember to shop around for who has the very best mortgage rates available too. Not all mortgage companies are the same.

The Home Buying Process

You should take the time to determine the things that you want and those that you need in a home. Do you need 2 bedrooms, but 3 would be nice? Think about size, area, amenities as well as how much you can afford. Nearly 80% of people expect to own more out of a home than they can afford.

Make sure that you have a good understanding of how the home buying process works. here are many types of homes on the market. Realize that if you purchase homes for sale by owner, your agent may not be able to help you and then you are on your own for insuring that the process goes well. Also, if you look into foreclosed homes, you may have to pay liens on the home as well as pay for the necessary repairs if needed.

Once you have a home that you would like to purchase, you should have the home inspected. This will help you to know the condition of the main features such as the roof, windows, air conditioning, and furnace. They will help you notice problems such as a wet basement of problems with the foundation. Don’t sign any papers until you have a good idea of what is happening with the home.

Use the tools that you have to get your answers solved. If you do not understand what you should be doing, ask your real estate agent for help. If you are wondering what is happening with your loan, talk to your mortgage loan officer. All of these things can go well when you plan for them. You can be living in a comfortable home within a matter of months if you start right from the beginning.

http://www.home-buying-review.com/Home_Buyer_Suggestions.html

Know The Resale Value Before You Even Buy A Home

Not only is your house a home, it is also an investment. No matter how long you live there, at some point you may decide to leave. Suddenly resale value becomes uppermost in your mind. But you actually should have considered what the resale value of the home potentially is before you even bought it.

The resale value of your house depends on many things. What is most important to consider is your own plans for that home. Do you plan to be there for 5 years or 50? Do you plan to purchase and then resell it right away to make a profit? No matter what, there are several things that will affect your home's resale value.

Location

What is a good location now is not necessarily what will be good years later. However, several things are likely to stay the same. For example, the amount of land the home is on is important because land rarely decreases in value. Things like sidewalks, mature trees and proximity to schools all figure into the value no matter what the trend is. Also, consider the population and economic growth of the area. These can help you predict what could happen to the home down the road.

Who’s Living There?

One of the things that affects resale value are the demographics. For example, if there are many baby boomers in the area, their homes may be more accessible to older individuals. While this is true now, in 10 years, these homes may not be as marketable with the same qualities -- if there are fewer buyers looking for them. Is the city young and growing? This type of planning can help you to see what the area will be like in the future.

What Features Does It Have?

You can learn what characteristics are important to current home buyers by looking at selling prices with various features. For example, how much difference does an extra bathroom make? What about new, energy efficient windows? Homes that are older may not keep increasing in value, especially if their features are becoming old or out of style.

But, realize too that there may be many individuals looking for the purchase of a home for these very qualities, as well as buyers who intend to renovate.

Get A Home Inspection

A home inspection can help you know what work needs to be done to a home within the next few years. This will help you determine the life span of the important factors of the home. What if you plan to sell in 3 years and the roof, furnace and the windows will need to be replaced during that time period? This will lower the resale value unless you update these features.

Sure, you are looking for a home to purchase for your needs today. But, think of your home purchase as not just a place to live, but that it is the most costly investment you are likely to undertake in your life. Each aspect, including the resale value is important to take note of before you make that purchase.

http://www.home-buying-review.com/Home_Resale_Value.html

Should You Buy A Fixer Upper?

Many individuals set out to purchase a fixer upper. The idea behind it is that the bad qualities of the home will lower the price of it. The buyer can then invest the savings in transforming the house into their dream home. But there are different levels of fixer uppers. Its important to know when you should consider a house and when you should run from it.

You should take your time when looking into all of the repairs that are needed. Otherwise a great bargain may instead become a money pit.

House Hunting

If you are after a fixer upper, you can find them, in most cases, the same way that you would other homes. Just ask your real estate agent to help you, since they have access to all homes on the market. Remember, what the property looks like on paper is not necessarily what it will be like in reality.

Reality Strikes

Don't make the mistake of thinking that a low end price is one that necessarily means a great deal. You need to factor in what is wrong with the house. You should have a home inspector help you go through the home to find out what the real problems are, as well as how much it will cost to repair them. Get a professional appraisal of the home as well.

Don't rely on what the seller is telling you. Or let the seller pressure you. Don't agree to purchase until you are sure of the full scope of repairs needed. A pushy seller can be a sign of trouble! You need to allow time to consider how much work, time and money it will take before committing to a house. Take the time to really crunch the numbers and see how much you will actually be investing.

The Area

Like any home that you purchase, you should take into consideration the area in which the home is located. This is important especially when it comes to other homes in the area that have been renovated. In some areas, home values can be depreciating.

Only after you have considered everything that this fixer upper will need from you can you make a decision about whether it is a good buy or not.

Finally, if you plan to use a mortgage to pay for it, you may need to have the bank sign off on the fact that it is a fixer upper.

http://www.home-buying-review.com/Buy_Fixer_Upper.html

How To Get The Most

Out Of House Hunting

There are many things that you can do to make your house hunting trip better and less stressful. Let's examine a few.

Determine Locations

The very first step in house hunting is to chose one or more areas to focus on. Here are some location factors to consider:

* Schools and their quality

* Shopping centers, medical facilities, recreational public transportation and other nearby businesses.

* The neighborhood itself and its curb appeal.

* How far from your employment is the home?

* What's the crime rate?

* What are the people like?

All of these things contribute to finding the best location for your home.

The Home You Want

Now that you know where in general you want to live, you can begin to work on what the house should be like.

* First and foremost make sure to know how much of a house you can afford. There is no sense in looking at homes that you can not get a loan for. Become pre-qualified with your mortgage lender and then provide this information to your real estate agent, so that they can help you find homes within your price range.

* Now look at your needs: bedrooms, baths, home size, garage.

* Then look at the things that you would like to have, but are not essential: large backyard, fireplace, and jacuzzi are examples.

Planning Is Key

It is important to work with your real estate agent to schedule examining the many houses that are available. But do not schedule more than a few homes for the same day because they will begin to blend together. Also make sure you take effective notes on each home while you are in it. Use a camera to help you to remember important features about each home.

Make sure that you dress comfortably and that you plan to be out for a long while.

Chosen an effective real estate agent, not the agent listed on the sign in the front yard of the home. Find someone that you know and trust to have your best interests at heart.

Taking the time to be prepared for your days of house hunting will help you get the most out of it. If you take the time to look at many homes in an effective manner, you may have several good options to choose from.

http://www.home-buying-review.com/House_Hunting.html

Negotiate Your Home

Buying Contract Professionally

You are ready to make the big decision and buy a home. There are several things that you need to do in order to get the contract -- and the house -- the way that you want it.

Negotiation Goals

Negotiations take place between the buyer and the seller. If you are a good negotiator, you can expect to get what is rightfully yours, but also have to work with the seller to get the contract signed. Working together to solve problems is a crucial mindset.

Your goal is to get the best total price on the home, as well as getting into it in the right time period. The seller's goals are to get the most money OUT of the house and to move on HIS schedule.

While you may think that a home is worth less than the asking price, the seller usually thinks his home is worth more than it actually is. The fun thing is finding the right middle ground.

Negotiation Tips

1. If you feel that the home is not worth the price, and you have reasons to justify it, let your real estate agent know. Your agent will talk with the other agent about these blemishes. You should bid on the home at a lower price because of the imperfections, but do not insult the seller with an outrageously low rate. That's the perfect way to get them not accepting your offers at all.

2. Be prepared to solve any repair, title, survey or loan problems fairly and quickly to prevent future problems at closing. Determine who will make repairs and what the price of the home will be as a result.

3. Don't get emotional. In the offering and counter offering steps, the seller can walk out at any time if you make negative comments or become angry with them. Instead, work together to come to an agreement.

4. Don't respond too quickly. Carefully consider the sellers' arguments or statements -- first understand them, then delve deeper to examine motives, finally express your well considered response.

5. Listen and understand what the seller says -- he will often give you the clue that brings everything together. I once saved several thousand dollars because the seller was stuck on getting a certain price for his house -- I simply got him to agree to pay all closing costs instead of the customary half. He was happy because he "got his price," and I was happy because I saved money.

6. Find out the seller's needs. The buyer must be able to appeal to the seller's concerns.

7. Make sure to have any unclear portions of the proposals clarified completely.

8. Never discuss your personal issues that indicate a vulnerability, such as an urgency to move in or a financial problem.

9. Try to find a common ground with the seller. This can be a very powerful tool used to the buyers' advantage in the event of multiple offers. Often a seller may select a buyers' contract for sentimental reasons, for example if the buyers remind the sellers of themselves when they were a young couple.

10. Convey an appreciation for some aspect of the house that reflects the seller's taste. For example the decorating.

11. Respond to counter offers within a reasonable time frame.

12. Look for leverage points. One example is if the house has been on the market for over 300 days, the buyer will have a lot more leverage than they would have with a brand new listing.

13. Work with your agent to find the right terms for the negotiation.

14. Get help when it comes to making that first offer. Make sure that you ask your agent what the value of the home seems to be, based on appraisals and the home inspection. Most buyers will offer less than the asking price in the hopes of getting the home to come down in price some. Don't go too low though, as you could offend the homeowner and cause them to refuse to deal with you altogether.

By working with the seller throughout this process and offering the right amount, you will soon have the home of your dreams, without going through a nightmare to get it.

http://www.home-buying-review.com/Home_Buying_Negotiation.html

Things You Should Ask Your Real Estate Agent

The home buying process can be overwhelming, so make sure you use every resource available to you. Your real estate agent is one of the best, but only if you ask the right questions when it comes to choosing a home. It is up to you to insure that they provide you with all the important information about the home you are considering.

One thing to remember is that the seller's agent is responsible for having the owners sign a disclosure form for the house. This form will list any known problems with the home. Your real estate agent will gather this information for you, so that you will know what the problems are before you purchase it. Still, there are some things to think about here.

A good real estate agent will tirelessly help you gather all of the information to find the right home. Although they have a sales position, they are out there to not only get you into a home, but to make it the right home. They want you to speak well about them to your friends to secure future business for them, so it's important to them to do well for you. If you feel that your agent is not doing this, talk to them about it.

Problems With The Home

There are potential problems in every home. All are important to know about ahead of time. Some of the more common ones are:

* Pests
* water damage
* plumbing
* electrical system
* foundation

One thing that your real estate agent will provide for you is help in finding a certified home inspector. Everyone who plans to purchase a home needs to have a home inspection done. This will help you know if there are hidden issues with it.

Look Around

Don't assume that your agent will find every house that might interest you. For one reason or another, they may not get to the right one. So use the internet to help you find additional homes that you can investigate. Your agent will not likely present to you homes that are for sale by owner. This is due to the fact that they would not make any money on the sale. If you choose to look at these homes, you will more than likely be on your own. Therefore, you may need to do a little more work.

Price Ranges

When it comes to finding houses in your price range, there are several things to consider. First, tell your agent how much you are pre-approved to purchase. This amount of money is their goal to target. Be honest, so that if you have a few extra thousand, you may find a really great home.

One thing that your agent may have you do is to look at several homes that are slightly higher than what you said you wanted to spend. If you should decide on that home, you can always make an offer just below the asking price and come in at your price. Or, you may be able to realize that there is a big difference in the qualities of homes for just slightly more. If possible, you should take the time to look at homes representing the highest and lowest amounts that you plan to spend.

Your real estate agent is required to provide you with accurate and true information. They can not promise you that the home will be worth more in 10 years. But they can tell you that in the last 10 years home values have risen 20%. They can not tell you that the school system in the area is good because this is opinion, but they can tell you that the school system received an excellent rating from the state. A good agent will try to sell the home to you, no doubt, but they will not try to push a house on you that you do not want either.

When you take the time to choose an agent based on how well they serve your needs as well as how well they work with you, you will have no problem getting the information that they have about the homes and the areas where you are looking. An agent is a salesperson, but they are YOUR salesperson.

http://www.home-buying-review.com/Real_Estate_Agent_Role.html

How To Find The Best Location For Your Home

Having the right location for your home is quite an important feature. Not only does it need to provide you with what you want, but it shouldn’t provide you with things that you do not want like excess noise or businesses you do not want to be near. The combination of the right home in the right area is essential.

Learning About The Neighborhood

For some things, you will know when you see the home if it is right for you. Others, you will need to learn how to find them out. Doing this now will save you countless worries later.

Your first concern will likely be the area surrounding the house. Do you like the street and the neighbors' homes? If there is an unsightly mess in the neighbor's front yard, you may want to look elsewhere.

In addition to the factors about the house that you can immediately see, there are others to be concerned with.

Crime Rate

Take the time to know about the city and the area's crime rate. You can get help with this by talking with the local police station. Also, you may want to ask about the response times to these incidents. How many officers are on duty?

Where Is It?

Is your potential new home close to your place of employment? If the drive is too far, you will be spending more of your time away from home. But perhaps it may be worth the drive to you.

How busy are the streets in the neighborhood? Are they safe for children to play near (if you have children)?

Schools And Kids

One of the most important aspects of the area to most families are the schools. To find out if the schools are good, you can contact your local superintendent and ask about the school's grading that is provided by the state. You should also know if the class to teacher ratio is acceptable.

Also, find out where the best locations are for your child to play near your home. Keeping kids entertained is important to keeping them out of trouble.

Shopping

Is there adequate shopping in the area? Do they provide the foods and quality that you want? Is the area open and welcoming?

Also check into the community services in the area. A good hospital with an emergency room in the immediate vicinity is a huge plus. How about parks and a library?

Finally you should find out what the area is like at all times of the day. Take the time to drive out and look at the area in the day, at night and even on the weekends. Getting a sense of what the home is like at all times of the day is essential.

All of these things should be taken into account. You can find most of the information that you need online at the community's website. Gathering this information is a great way to feel comfortable about the home selection process.

http://www.home-buying-review.com/Find_Good_Home_Location.html




Home Economics

Edward L. Glaeser grew up on the East Side of Manhattan, went to school in Princeton, N.J., and Chicago, lived for a time in Cambridge, Mass., and Palo Alto, Calif., and recently moved with his wife and young son to a house on six and a half acres in the affluent suburb of Weston, Mass. To Glaeser, this last move has been a big adjustment. For one thing, he is not a good driver, and the new commute has prompted him to leave his house by 6 a.m. so as not to get ensnared in the morning rush hour. For another, Glaeser and the suburbs are clearly an unholy marriage of sensibilities, especially since his new house is bordered by about 600 acres of conservation land. "I wake up every day, thinking, My goodness, how many units of housing could you build here?" he says. Glaeser is a creature of density. An economist at Harvard, he has spent almost his entire professional life walking around, and thinking about, cities — seeking explanations why some metropolitan areas thrive and some suffer and what factors make some places pricey and some cheap. He is just 38. In the years since earning his Ph.D. at the University of Chicago, though, he has been prolific and provocative in a way that has left many of his colleagues awestruck. "I think he's a genius," says George Akerlof, an economist at the University of California, Berkeley, who was awarded a Nobel Prize in 2001. Gary Becker, an economist at the University of Chicago and a Nobel laureate, notes that before Glaeser came along, "urban economics was dried up. No one had come up with some new ways to look at cities." David Cutler, Glaeser's Harvard colleague and an academic star in his own right, puts it this way: "I think Ed is probably the most exciting urban researcher in half a century, if not longer."

In addition to teaching classes, Glaeser has recently taken over the Taubman Center at the John F. Kennedy School of Government, which finances studies on local and state governments, as well as the university's Rappaport Institute, which tries to link Harvard faculty members with Boston-related projects. As a result, Glaeser now divides his time between doing his personal research and serving as a dashing public advocate for urbanism. And he does make an effort to be dashing. Glaeser is not heir to the tweedy, harrumphing, bad-haircut tradition of academics. He radiates a confidence that to some fellow economists borders on arrogance. He has a tendency to speak quickly and in paragraphs rather than sentences, while projecting an Old World decorousness more reminiscent of Edith Wharton's New York than of today's Boston. He is tall, broad-shouldered and patrician in his bearing; he began wearing three-piece suits 23 years ago, back when he was in prep school, he says. One afternoon last December in his Cambridge office, Glaeser sported a bespoke pinstriped get-up and a pale blue silk tie, which he had tucked into a matching, fully buttoned pinstripe vest draped with the gold fob from his pocket watch. His shoes shone. He seemed to have stepped from a hansom cab, missing only a top hat. As he began to explain some of his recent work on housing prices, his large silver cuff links clinked against the table.

Unlike that of most other housing economists, Glaeser's recent work on real estate addresses the issues of supply rather than of demand. He is far more interested in the forces shaping land development and residential building in the United States than in the forces shaping buyers' motivations and actions. He views supply as crucial to appreciating what has happened to the U.S. real-estate market over the past 30 years. A few months ago, he traveled from his Harvard office to the Massachusetts State House, near Boston Common, to discuss with the leaders of the State Legislature a research project he had just completed on the local housing market. Between 1980 and 2000, four of the five cities in the U.S. with the fastest-growing housing prices were in Boston's metropolitan area: Cambridge, Somerville, Newton and Boston itself. (Palo Alto had the second-fastest-rising prices over that time.) Glaeser and several colleagues considered two explanations. First, the possibility that builders in the metro area were running out of land and that home prices reflected that scarcity. The second hypothesis was that building permits were scarce, not land. Had the 187 townships in the metro area created a web of regulations that hindered building to such a degree that demand far outstripped supply, driving prices up?

Almost as a rule, Glaeser is skeptical of the lack-of-land argument. He has previously noted (with a collaborator, Matthew Kahn) that 95 percent of the United States remains undeveloped and that if every American were given a house on a quarter acre, so that every family of four had a full acre, that distribution would not use up half the land in Texas. Most of Boston's metro area, he concluded, wasn't particularly dense, and even in places where it was, like the centers of Boston and Cambridge, there was ample opportunity to construct higher buildings with more housing units.

So, after sorting through a mountain of data, Glaeser decided that the housing crisis was man-made. The region's zoning regulations — which were enacted by locales in the first half of the 20th century to separate residential land from commercial and industrial land and which generally promoted the orderly growth of suburbs — had become so various and complex in the second half of the 20th century that they were limiting growth. Land-use rules of the 1920's were meant to assure homeowners that their neighbors wouldn't raise hogs in their backyards, throw up a shack on a sliver of land nearby or build a factory next door, but the zoning rules of the 1970's and 1980's were different in nature and effect. Regulations in Glaeser's new hometown of Weston, for instance, made extremely large lot sizes mandatory in some neighborhoods and placed high environmental hurdles (some reasonable, others not, in Glaeser's view) in front of developers. Other towns passed ordinances governing sidewalks, street widths, the shape of lots, septic lines and so on — all with the result, in Glaeser's analysis, of curtailing the supply of housing. The same phenomenon, he says, has inflated prices in metro areas all along the East and West Coasts.

It is rather unlikely that Glaeser is calling attention to the evolution of zoning to make an ideological argument or to pin the blame on local officials for any sort of housing bubble. "He doesn't wake up in the morning and say, 'My agenda is to fight government,"' says his Harvard colleague Martin Feldstein, an economist long in favor of privatizing Social Security and who, you might argue, knows what it's like to wake up with that agenda. While Glaeser admits to a libertarian bent, with a preference for market solutions over government solutions (he calls rent control "bad, bad, bad"), his inconsistencies are such that his colleagues disagree over whether he comes from the political center or the right. Certainly no one accuses him of being a lefty. But Glaeser has many admirers, and several research collaborators, on the liberal end of the spectrum; he likewise displays an odd enthusiasm for progressive efforts like those by London's mayor, Ken Livingstone (Glaeser affectionately calls him by his popular nickname, Red Ken), who imposed a stringent "traffic tax" on vehicles in the center city to reduce congestion.

Glaeser's goal seems less to further a particular philosophy than to explain the interplay of housing and human behavior. His desire to provide a persuasive, data-driven explanation for elevated home prices fits into a decade of research that he says he hopes will ultimately provide a broad and ambitious framework to explain the function and evolution of America's cities. His view is that the life of the city cannot (and should not) be separated from its real-estate market. "They mutually cause each other," he says. "Housing supply determines to a certain extent what goes on with the economic life of the city; and the economic life of the city is intimately related to the demand for housing. And you cannot possibly understand that if you're going to try and treat them as being separate." Put another way, we shape cities; cities shape real estate; real estate shapes cities. And cities shape us too.


Cities, Glaeser often says, should be thought of as "the absence of physical space between people and firms." This sounds like a poetic definition of urbanism, but it is actually more than that. To Glaeser, the concentration of people and business puts us close enough to share one another's company, culture and ideas. That goes not only for a densely packed place like Manhattan but also for car-based areas like Silicon Valley. As David Cutler points out, almost all of Glaeser's work is about social interaction and space, about seeing cities as places where all kinds of important transactions occur in "the union of everything." It is not a coincidence that one of Glaeser's great heroes is the writer Jane Jacobs, a keen, street-level observer of cities who celebrated the freedom and vitality of urban neighborhoods; he keeps an autographed copy of her book "The Death and Life of Great American Cities" on his bookshelf. In economic jargon, city living creates what Glaeser calls "spillovers." Some urban spillovers are not so good, like the pollution and congestion from so many people and cars. But others are the very essence of civilized life — the decency of community, the spread of ideas, the possibility of sublime inspiration. If there is a common theme to his work, Glaeser says, it is that "people are changed by the people around them." And it is the absence of physical distance, more than anything else, that makes that happen.

Much of Glaeser's outlook derives from his own experience. Growing up in Manhattan, where his father was an architectural historian and a curator at the Museum of Modern Art, he found it difficult not to get swept up in the city's density and energy. He traces the origins of his career in economics to his mother, who worked for the John D. Rockefeller 3rd Foundation dispensing grants to artists. "She went back to get her M.B.A. when I was 10," he says, "and I would occasionally go with her to classes when I was on vacation." Some adults remember fondly the first time they went to a major-league baseball game. Glaeser recalls a revelatory experience as a youngster when his mother sat him down and explained marginal cost pricing. In high school thereafter, and as an undergraduate at Princeton, he spent most of his time on math, economics and history. The physical sciences were a bore, he says: "How the sun works? I just didn't care. But I did care about people and man's interaction in his environment."

The University of Chicago gave Glaeser the opportunity to study at what was arguably, at the time, the best economics department in the United States, a stellar lineup of soon-to-be Nobel laureates like Gary Becker and Robert Lucas. In the regular seminars where members of the faculty typically sat at a central table and graduate students were on the classroom's periphery, Glaeser would sit at the faculty table, recalls his friend Matthew Kahn, now an economics professor at Tufts University. "So at a very early stage he saw the academics as a peer group," Kahn says. "At the time, it seemed audacious to me, but now it makes perfect sense." If there were two seminal moments for Glaeser at Chicago, the first was reading through a paper by Robert Lucas, "On the Mechanics of Economic Development," that looked at forces that spur economic growth around the world. Deep in Lucas's paper, there is a glancing mention of the role that human capital — the term economists use for the skills and knowledge that people possess — might play with respect to cities. Glaeser began to mull on that. In the meantime, he began working with his thesis adviser, the Brazilian economist Jose Scheinkman, on a study that considered whether it is better for a city to be focused on one particular industry, like textiles or finance, or whether a city with diverse industries is healthier and richer. Glaeser's and Scheinkman's paper came to the conclusion, surprising at the time, that given the choice, any city that wanted to grow should pursue commercial diversity rather than specificity. In economic circles, the paper made Glaeser famous in his mid-20's. Harvard invited him to join its faculty in 1992.


One day this January, Glaeser took the lectern in Midtown Manhattan to deliver a lecture, sponsored by the Manhattan Institute, titled "Why Are Skilled Cities Getting More Skilled?" He didn't answer this question right away. In the years since coming to Harvard — and in the years that have preceded his current work on real estate — Glaeser has methodically examined how transportation, education, crime, weather and sprawl affect the fortunes of America's cities, as if turning over tarot cards one by one. He isn't the only economist to look at these subjects, but he is arguably the most original in assimilating careful and highly mathematical economic research. His lecture, given to an audience of about 90 people, first discussed the historical trends that have shaped urban growth. Until recently, cities existed to economize on transportation costs — hence their locations near industries or agriculture to reduce the expense of shipping products by sea or by train. Yet because transport (mainly trucking) costs dropped significantly during the 20th century, location has become irrelevant. In Glaeser's view, cities now exist so that people can have face-to-face interactions or be entertained or consume products and services. For businesses, cities are a place to benefit from a spillover in ideas and to reduce costs by being near other companies.

This evolution, of course, has coincided with a vast American migration toward regions of sun and sprawl. Glaeser likes to point out the close correlation between a city's average January temperature and its urban growth; he also notes that cars per capita in 1990 is among the best indicators of how well a city has fared over the past 15 years. The more cars, the better — a conclusion that seems perfectly logical to Glaeser. Car-based cities enable residents to buy cheaper, bigger houses. And commuters in car-based cities tend to get to work faster than commuters in cities that rely on public transit. (The average car commute is about 24 minutes; on public transportation, it is around 48 minutes.) While many of his academic peers were looking at, and denigrating, how the majority of Americans have chosen to live, Glaeser (though no fan of the aesthetics of sprawl himself) didn't think an economist should allow taste to affect judgment. "You shouldn't go around thinking that all these people are just jackasses for deciding to drive an automobile," he says.

In any case, Glaeser discovered that there can be more to urban success than cars and palm trees. For a city without warm weather and a car-friendly environment, skills are destiny. That is why New York and Minneapolis, with vast numbers of college graduates, have done so well. "Boston would be just another declining, cold, manufacturing city if it weren't for its preponderance of human capital," Glaeser says. And his studies suggest that the more skilled a city's population, the more skilled it is becoming, as entrepreneurs attract skilled workers who in turn attract entrepreneurs. Americans, as a result, are sorting themselves through education and geography more and more with each passing year.

The process yields losers as well as winners. Late last year, Glaeser wrote a controversial article that made a case against rebuilding New Orleans. He has since become an intellectual leader to a tiny, unsentimental, let's-not-rebuild-the-city faction. "There's some small core of the city that should be there," he says, "but the city itself has been in decline for 50 years and in relative decline for 150 years relative to the U.S. population as a whole. It's not a great spot to have a city; it's incredibly expensive to build the infrastructure to keep it there. You can't possibly argue that New Orleans has been doing a good job of taking care of its poor residents, either economically or socially. And surely some of the residents are better off by being given checks and being allowed to move elsewhere." Glaeser admits that many critics have responded to his views with shock, asserting that he is unfairly attacking the city at a moment of terrible vulnerability. "No one has accused me of hating the poor or being racist," he says. "But I have been accused of not having a heart."

It's a familiar complaint. A few years ago, in an article Glaeser wrote about poverty for Harvard's alumni magazine, he suggested eliminating public housing in the U.S. in favor of housing vouchers. His argument was attacked for being coldblooded as well as impractical. Chris Mayer, a housing economist at Columbia Business School and a frequent admirer of Glaeser's research, says that Glaeser's perspective on things tends to attract controversy and incite debate. "I think Ed does care a lot about helping the poor and about social equality," Mayer says, "but his view of how to get there is a different view than other people."

Glaeser, for his part, says he feels the same about New Orleans as he does about many cities of the Rust Belt. "I believe very strongly that our obligation is to people, not places, and I think we certainly have an obligation — ethical, economic, what have you — to the residents of Detroit," he told me. But he sees no economic or geographic reason to have a large city there anymore, and he views the prospects for any rebound as dim. (Detroit ranks last among cities with more than 500,000 residents in percentage of college graduates.) The city produced the cars that produced the sprawl that helped destroy the city; such tragedy might have been lessened had it produced more universities too. "There are no reasons why it can't, and shouldn't, decline," Glaeser says. "And I would say that for many other cities. There's no reason not to let decline go forward." The greatness of America is dependent in part upon regional evolutions and migrations, he adds. "Places decline and places grow. We shouldn't stand in the way of that."


Glaeser first began to think about how real estate fit into this urban order a few years ago, after he spent some time looking at the effects of skills and sprawl on cities. While Glaeser seems able to turn out academic papers at an astonishing pace — he almost always writes at home, so he can smoke cigars while he types — it sometimes takes years for him and his collaborators to assemble the data and equations used to support his ideas. In addition to his urban research, Glaeser has written on voting behavior, hatred, poverty and public health; a few years ago, with David Cutler, he wrote a widely discussed paper that looked at why Americans are becoming so obese. (They attributed it partly to the microwave oven.) Yet urban subjects have consumed most of Glaeser's time and attention. In the late 1990's, he began thinking less about incorporeal forces like human capital and consumerism and more about the physical nature of places — buildings, roads, buses — and what kind of effect that had on a metropolitan area.

In 2000, Glaeser took a sabbatical from Harvard and began to spend a few days a week in Philadelphia working with Joseph Gyourko, a real-estate economist at the Wharton School of the University of Pennsylvania. Glaeser had already been thinking about the relationship between housing and urban poverty when one day he and Gyourko began to discuss why cities like Philadelphia and Detroit — places with poor future prospects, both economists believed — weren't doing even worse in terms of population. Why didn't everyone leave, Gyourko wondered, and go to a place like Charlotte, N.C., that had a fast-growing economy? This question addresses a puzzle of urban economics. Cities (think of Las Vegas or Phoenix) can grow at a very fast rate, exploding overnight with businesses and residents. Some can increase in population by 50 or even 60 percent in a decade. But cities lose their residents very slowly and almost never at a pace of more than 10 percent in a decade. What's more, when cities grow, they expand significantly in population, but housing prices tend to rise slowly; even as Las Vegas grew by leaps and bounds in the 1990's, for instance, the average home there cost well under $200,000. When cities decline, however, the trends get flipped around. Population diminishes slowly, but housing prices tend to drop markedly.

Glaeser and Gyourko determined that the durable nature of housing itself explains this phenomenon. People can flee, but houses can take a century or more to finally fall to pieces. "These places still exist," Glaeser says of Detroit and St. Louis, "because the housing is permanent. And if you want to understand why they're poor, it's actually also in part because the housing is permanent." For Glaeser, this is the story not only of these two places but also of Buffalo, Baltimore, Cleveland, Philadelphia and Pittsburgh — the powerhouse cities of America in 1950 that consistently and inexorably lost population over the next 50 years. It is not just that there were poor people and the jobs left and the poor people were stuck there. "Thousands of poor come to Detroit each year and live in places that are cheaper than any other place to live in part because they've got durable housing still around," Glaeser says. The net population of Detroit usually decreases each year, in other words, but the city still attracts plenty of people drawn by its extreme affordability. As Gyourko points out, in the year 2000 the median house price in Philadelphia was $59,700; in Detroit, it was $63,600. Those prices are well below the actual construction costs of the homes. "To build them new, it would cost at least $80,000," Gyourko says, "so there's no builder who would build those today. And as long as those houses remain, the people remain."

The resulting paper, "Urban Decline and Durable Housing," caused a stir among urban economists even before its publication last year. (It was initially circulated with a subtitle along the lines of "Why Does Anyone Still Live in Detroit?" until the authors, thinking it politically insensitive, removed it.) In addition to illuminating some of the forces shaping our poorest cities, the research proved to Glaeser that it is impossible to think about urban economies without thinking of urban buildings at the same time. Meanwhile, it demonstrated to him how useful it can be to consider the relationship between actual construction costs and the market price of homes. That lesson seemed to apply not only to declining cities but also to places with extraordinary price appreciation, like the San Francisco or Boston metro areas. How could homes in these places be priced so much higher than construction costs? And why did the prices keep going up?

Glaeser has come to believe that changes in zoning regulations may be the most important transformation in the American real-estate market since the mass acceptance of the automobile. In his view, these regulations have essentially created a "zoning tax" that has pushed prices far above construction costs. Very, very far above construction costs. It is not a perspective shared by all housing analysts; some economists have been far more inclined to blame high prices on high demand (spurred by low interest rates) or on rampant speculation. Others agree with Glaeser in emphasizing supply but not necessarily fixing on zoning. Karl Case, for instance, an economist at Wellesley College who counts himself a fan of Glaeser's, agrees that lack of supply has led to steep prices in the Boston area, but he attributes the housing shortage not just to zoning but also to the nature of the construction business and the scarcity of large desirable tracts of land. Still, among the half-dozen leading economists who study housing supply, there seems to be wide agreement that regulations have had a tremendous effect on prices. "I think the evidence is overwhelming," says John Quigley, an urban economist at Berkeley who has looked specifically at the effects of regulation on the California market.

As Glaeser says: "It's so easy to forget the world that we were living in around 1970, when basically almost all of the value of houses was in the physical infrastructure. That was actually the cost. There was some land, and it was worth something, but it wasn't worth more than 20 percent of the value of the house." Even in New York City, Glaeser says, the price of an apartment back then was essentially the cost of building the next floor. In researching New York City's housing prices, in fact, Glaeser and Gyourko discovered that over the past 30 years, the average height of new residential buildings in Manhattan decreased in size. "That's crazy," he insists, especially in light of how much the demand to live in New York has increased. "You know, if prices in Manhattan are skyrocketing, you should be building more and more at 50 stories, rather than at 30. Not the reverse." So is it his contention that Manhattan could build far more than it has recently? "Oh, for sure," he says. "Technologically? Certainly. No reason why you couldn't."

Let's go back to Manhattan in the 1920's, Glaeser says. "New York in the 1920's is a pretty developed place, a pretty mature place. But they're producing a hundred thousand units a year. They're tearing up swaths of Manhattan and building higher buildings." That would be legally and politically impossible today, but as he and Gyourko see things, it is precisely those legal and political roadblocks to "tearing up" the city that have made the place so expensive. Actually, in 2004, the two men took a close look at Manhattan and estimated that one half or more of the value of condominiums in the borough could be thought of as arising from some type of regulatory constraint preventing the construction of new housing. The data for co-ops (because of their ownership structure) was more difficult to interpret, but Glaeser and Gyourko suspect that their estimates probably apply to the Manhattan market as a whole.

Glaeser has little doubt that there are regular cycles in real-estate markets; the recent slowdown may perhaps be evidence of one of those cycles. But he says he doesn't think that the supply issues are something that will disappear, even if the demand for housing levels off or drops over the next few years. "We will never go back to a world in which developers in Massachusetts or California or New York are able to do what they want with their property unimpeded by their neighbors," he says. And what surprises him is that the changes in how we have treated property rights for the last 40 years — who gets permission to build, the size and location of what owners are permitted to build — have been the subject of virtually no national dialogue, even as the effects on prices, in his view, have been extraordinary.

This is not to suggest that Glaeser wants New York or Boston to become another Houston or Phoenix, where developers build without hindrance and housing, as a result, stays cheap. "I'm pretty sure that Boston and California have gone too far to one extreme," he says. "But I'm not sure that Texas hasn't gone too far to the other extreme." He says he tends to think that officials in the Boston and New York metro areas need to allow for more housing when the market gets tighter again. At the very least, he says, officials should discuss the long-term effects of restricting home building. And there is a bigger point here anyway, he says. Zoning and housing supply ultimately determine not only who lives in a city but also the very nature of these places. Boston, San Francisco and Manhattan are obviously becoming rarefied destinations, mostly for America's elites (Glaeser calls the cities "luxury goods"), with housing floating beyond the reach of the young and the middle class. These cities' economies are in the process of becoming boutique, too, accommodating only the most skilled and privileged. Their desire to limit construction and grow not in buildings and population but in prices has, in effect, begun to shape their destiny. "A healthy city is one that has a healthy mix of demographic groups," Glaeser says. "Shutting out your 25-to-40 year-olds? That feels like a bad strategy for urban innovation."

But economists, like any social scientists, often discover that the leap from conducting research to making policy can be enormously difficult. It can take years, perhaps decades — and that's when it happens at all. Glaeser is fortunate in that he already has the ear of mayors and state legislators who at least took notice of his recent work on regulations in the Boston metro area. Still, he admits it will be difficult to go against the current momentum. "I'm not in any sense trying to suggest that we want a developer's paradise where you can build anything, anywhere," he says. "But I sure as heck think the current situation happened by happenstance, happened by changing the legal norms, which in no sense is guaranteed to yield a socially desirable outcome." Homeowners, he points out, have a strong incentive to stop new development, both because it can be an inconvenience and also because, like any monopolist, stopping supply drives up the price of their own homes. "Lack of affordable housing isn't a problem to homeowners," Glaeser says; that's exactly what they want. "The thing you want most is to make sure that your home is not affordable if you own it. And for that reason, there's absolutely no reason to think that little suburban communities with no businesses that are run essentially by their homeowners will make the right decisions for the state as a whole, for the business in the area, for the country as a whole."

As a matter of fact, Glaeser long ago became convinced that there is a lot riding on supply. "The welfare of the world is shaped in part by our urban form, by the way that we live, the way our communities are constructed," he says. "These things like growth controls have changed the way communities are developed." Joseph Gyourko shares the view that where we live, and why we sort ourselves into those places, have profound effects on society, culture, politics and business. "It's important," he says of the sorting process. "It's not an innocent thing." Thus, the two academics have resumed their real-estate research, taking on two projects. The first, closer to completion, is an attempt to explain the occurrence of housing cycles. So far, the preliminary data have led Glaeser to believe that the past decade's run-up in prices is probably caused by factors beyond the restrictions on supply; the home-appreciation numbers appear to be so high that they suggest that prices in coastal cities have some psychological component too. (In his view, the supply shortage greatly magnifies the effect of any sort of "irrational exuberance.") Glaeser is the kind of economist who is reluctant to make predictions. Yet, he says, "I'm comfortable with the notion that we're going to have a substantial correction over the next five years."

His other project is both more ambitious and more difficult. He and Gyourko say they know that the country's regulatory environment, and thus the supply of housing, began to change around 1975. But they don't know why it changed. So along with a third researcher, Raven Saks, they have begun to track building permits from hundreds of cities around the country over the past four decades to investigate the nature of the evolution. Glaeser speculates that there may be a viral phenomenon whereby once housing prices reach a certain level, residents become aware of high home values and agitate for restrictions; another possibility is that judges have become much more sympathetic to blocking development for environmental reasons. Still another thought: that homeowners, utilizing skills learned during the civil rights movement and political protests of the 1960's and 1970's, became much more adept at organizing against developers. (There appears to be a reasonable correlation between liberal enclaves, zoning regulations and high housing prices.) In any event, Glaeser says, he doesn't know the answer yet, and it may take years to find out.

He was explaining this one afternoon in January as he sat in a club chair on a third-floor landing at the Harvard Club in Midtown Manhattan. Glaeser visits urban neighborhoods all around the U.S., but his teaching schedule often restricts his observation of the American landscape to data and algebraic models. When it was time to go, he seemed relieved to step onto the concrete sidewalk, into the city he once called the country's "urban colossus." Waiting for the light to change at 44th Street and Fifth Avenue, the defender of sprawl, the explainer of human capital and the avenger of zoning regulations — and the wearer of a splendid beige cashmere overcoat — didn't seem much suited for the suburbs of Boston. Here on the street, disappearing into a crowd of people, he seemed right at home.

http://blog.bradvisors.com/blog/_archives/2006/5/10/1946538.html

Second Quarter State Existing-Home Sales Soften

WASHINGTON (August 15, 2006) – Existing-home sales, including single-family and condo, were down in the second quarter in contrast with a record set in the same period in 2005. Despite the overall decline, 20 states showed increases in sales activity from a year ago, according to the National Association of Realtors®.

The
quarterly report on total state existing-home sales shows that the seasonally adjusted annual rate* was 6.69 million units in the second quarter, down 7.0 percent from the record 7.19 million-unit level in the second quarter of 2005.

The biggest increase was in Alaska, where existing-home sales rose 48.6 percent from the second quarter of 2005. In Arkansas the second-quarter resale pace rose 17.9 percent from a year earlier, while Texas experienced the third strongest gain, up 11.3 percent. Twenty-eight states and the District of Columbia experienced declines. Complete data for two states was not available.


David Lereah, NAR’s chief economist, said two sets of market conditions are apparent in the report. “When you look at states with high housing costs or that have experienced a prolonged period of rapid price gains, you typically see slower home sales,” he said. “By contrast, states with moderately priced areas that have experienced healthy job creation are seeing sales gains – the economic backdrop remains favorable for the housing market, which is helping home sales to level out.”


According to Freddie Mac, the national average commitment rate on a 30-year conventional fixed-rate mortgage was 6.60 percent in the second quarter, up from 6.24 percent in the first quarter; it was 5.72 percent in the second quarter of 2005.


NAR President Thomas M. Stevens from Vienna, Va., said interest rates have been trending down in recent weeks. “This is good news for buyers who have been on the sidelines; now there is a window of opportunity in the market,” said Stevens, senior vice president of NRT Inc. “In most of the country, buyers can take their time to make an informed decision. We advise buyers to consult a professional in negotiating the buying process, and to cautiously review mortgage options – especially on non-traditional loan products.”


Last week, Freddie Mac, reported that the 30-year conventional fixed-rate mortgage was down to 6.55 percent.


Regionally, the South reported an existing-home sales pace of 2.60 million units in the second quarter, down 4.2 percent from a year ago. After Arkansas and Texas, the next strongest increase in the South was in North Carolina, up 11.0 percent from the second quarter of 2005, while resales in South Carolina rose 9.0 percent; six other Southern states also posted sales gains.


In the Midwest, existing-home sales declined 4.7 percent to a 1.54 million-unit annual sales level from the second quarter of 2005. The strongest increase in the region was in Indiana, up 4.8 percent from a year earlier, followed by Iowa, up 3.8 percent, and Missouri, with an increase of 0.8 percent.


The Northeast saw an existing-home sales pace of 1.15 million units in the second quarter, which was 5.2 percent below a year earlier. Sales activity in Vermont rose 9.1 percent from the second quarter of 2005, while Maine increased 1.5 percent.


In the West, the existing-home sales level of 1.41 million units was 14.7 percent lower than the second quarter of 2005.
After Alaska, the best performance the region was in New Mexico where existing-home sales rose 6.2 percent from a year earlier; Wyoming sales increased 5.7 percent while Montana rose 5.2 percent.

The National Association of Realtors
®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

* The seasonally adjusted annual rate for a particular quarter represents what the total number of actual sales for a year would be if the relative sales pace for that quarter was maintained for four consecutive quarters. Total home sales include single family, townhomes, condominiums and co-operative housing. NAR began tracking the state sales series in 1981.

Seasonally adjusted rates are used in reporting quarterly data to factor out seasonal variations in resale activity. For example, sales volume normally is higher in the summer and relatively light in winter, primarily because of differences in the weather and household buying patterns.


Tables of state resale rates, percent changes and some historic data are available at the site below under Research – click on Housing Statistics, then scroll down the center to State Existing-Home Sales.

http://blog.bradvisors.com/blog/_archives/2006/8/16/2236071.html

Home buying 'frenzy' may be leveling off

Significant price decreases are unlikely, experts say

Seattle home prices fell last month from their July level and posted the lowest year-to-year increase in 18 months, according to new statistics released Tuesday.

August prices fell 3.8 percent from July and were up 8 percent from August 2005, according to the Northwest Multiple Listing Service. Prices have dipped month to month several times in the past year, but the year-to-year increase was the first in the single digits since April 2005 and the lowest since February 2005.

The numbers also showed a continued increase in inventory and slight decline in sales in August, compared with the same month last year.

Local housing executives and experts welcomed the slowing price growth as evidence of the market easing back from a frenzy to a solid level it can maintain.

"Double-digit appreciations scare me, because I don't believe that they can be sustained," said Matthew Gardner, a local land-use economist. "Incomes have a tough time keeping up with that."

"I think that it's good to have it level off a little bit," Windermere Real Estate President Jill Jacobi Wood said. "I think they kind of need to so people can still get into houses."

Nationally, home prices are decreasing in some areas; the National Association of Realtors has said high inventory could cause prices to fall nationally for the first time since 1993.

Talk of a housing bubble has prompted some prospective buyers to wait.

"I'm a firm believer that there's a bubble nationally and there's a bubble in Seattle as well," recent New York City-transplant John Bitzer said Sunday after looking at a $1.05 million Seward Park home.

"I think that prices are going to fall quite substantially," he said, adding that he planned to wait.

Gardner said some homes and areas locally might see price declines, but he and other local observers do not expect citywide prices to go down year over year. They point to strong job growth and low interest rates and say Seattle hasn't attracted as many speculators or seen prices shoot as high as some other places.

"It's still a strong market," Gardner said.

A more temperate market may shock sellers accustomed to the hot times of recent years, experts said. Gardner said the increasing number of homes on the market might be a sign that sellers are not willing to budge on asking prices.

"Everybody could just throw numbers on these houses, and they would sell (before)," Jacobi Wood said. "Now I think everybody needs to get the price right."

"Price reduced" signs have become a more prominent feature of the Seattle landscape in recent weeks. A half-mile from the home Bitzer toured, the owners of a house that has been on the market for more than three months cut their asking price from $989,000 to $895,000, and Windermere Real Estate agent Carole Alexander was telling all comers to make an offer.

But Jacobi Wood said her agents still are getting multiple offers on well-priced homes, even in the higher end of the market. In a news release accompanying the new statistics, Northwest MLS Director Mike Skahen said homes in close-in Seattle neighborhoods still were selling well.

"Good houses in high-demand neighborhoods are still in very short supply in all price ranges with no shortage of buyers," said Skahen, the broker at Lake & Co.

J. Lennox Scott, chairman and chief executive of John L. Scott Real Estate, said in a statement that the situation has gone from a "frenzy" to "more typical for a strong market."

When prices start coming down, buyers tend to buy better houses, rather than spending less, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.

But potential buyers who wait might still be disappointed, even if prices do fall, he cautioned.

"It is very conceivable that even though prices will come down, (increasing) interest rates will eat up much of the differential," he said. "Are you going to be better off having managed to save on the purchase price? Maybe. Maybe not."

Back in the Seward Park house where Bitzer espoused his bubble theory, Windermere agent Carolyn Mollot expressed her own caution about the market.

"I told my own daughter to wait a little bit," she said.

http://seattlepi.nwsource.com/local/284894_realestate13.html