Are McMansions Coming Back in Style?

Original Post: http://blogs.wsj.com/developments/2011/06/29/are-mcmansions-coming-back-in-style/

By Wesley Lowery June 29, 2011, 7:00 AM ET

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For a while now, new-home buyers have spurned oversize homes with lavish features in favor of smaller, energy-efficient dwellings. It made sense: With the housing market collapsing, homeowners dropped dreams of big plots with celebrity-caliber amenities in lieu of more functionality. Home theaters were out, replaced by home offices.

But the Home Design Trend Survey, released today by the American Institute of Architects, shows a slight change from previous years on home size and buyer sentiment.

The survey, which has been conducted quarterly since 2005, asks a panel of 500 architectural firms that focus on residential properties what customers are asking for in new developments. The percentage reporting that customers wanted smaller houses has seemingly started to drop.

This year, about 52% of firms surveyed reported a decrease in the square footage of the houses they’re designing this year, down from 57% last year. Today’s numbers also show fewer firms reporting decreases in lot size (down to 22 percent from 32 percent) and lot volume (down to 18 percent from 21 percent).

“Overall, home-and-lot sizes showing signs of increasing slightly indicates that the housing market is stabilizing after being in a downward spiral since 2007,” says Kermit Baker, AIA’s chief economist.

Outdoor space is also more sought after: About 60 percent of firms surveyed reported increases in the number of homes with outdoor living space, up from 56 percent last year. “The features that households are looking for are accessibility, a single-floor design and open space – both indoors and outdoors,” Mr. Baker says.

Even if the trend towards smaller homes is slowing, the McMansion isn’t back just yet.

In January, we reported that the average size of a new single-family home shrunk to 2,377 square feet last year, down 3 percent from 2009, according to the National Association of Home Builders.

And it’s not clear that younger buyers will embrace the McMansion in the same way their parents did. Presenters at the annual NAHB convention in Orlando told Developments in January that large, cookie-cutter suburban homes wouldn’t appeal to the younger generation of home buyers.

“It’s not that we’re going to move back to McMansions anytime soon,” Mr. Baker says. “But I think we’ll start to see house sizes start to edge up a bit.”

• American Institute of Architects,
• National Association of Home Builders

From Schoolhouse Rock to Luxury Home

Once used as a school, this home in the Kalorama neighborhood of Washington, D.C., has been returned to a single-family home. The property includes a 7,000-square-foot main house and a carriage house that is now a guest house

Has Your Home Value Recovered?

The national numbers aren't good, but in some places, the news is better.

By DAVID CROOK

At first glance, you're not likely to see a lot of similarities between stately Cambridge, Mass., and sprawling Denton, Texas.

Cambridge (population about 105,000) was already more than 200 years old when Denton (120,000) was founded in 1857. From the center of Cambridge, it's an easy stroll across the Charles River into Boston. Denton, in contrast, sits where Interstate Highway 35 divides to the west, it's 41 miles to Fort Worth; to the east, 39 miles to Dallas.

But both are college towns. Cambridge is well known as the home of Harvard University and the Massachusetts Institute of Technology. Denton has North Texas State University and Texas Woman's University.

They have something else in common, too. Both have pretty much recovered from the five-year-and-counting housing recession. And both provide invaluable clues for those looking to decipher whether their own markets have seen the worst of the crisis.

Amid the continuing gloom in the U.S. housing market, you can find small pockets of home-price stability -- communities that are actually recovering from the housing bust. WSJ's David Crook talks with Kelsey Hubbard about what those communities can teach today's home buyers and sellers.

According to a statistical analysis performed for The Wall Street Journal by the online real-estate information and search firm Zillow, home values in a handful of communities are where they were just before the most frenzied days of the real-estate bubble. Focusing on communities with sufficient sales activity to produce statistically valid value estimates, Zillow spotted 25 places that are within single-digit percentage points of their home-value peaks. (Zillow found no communities where values have surpassed their high-water marks.) Not bad considering that home values in some major metropolitan areas are at half their bubble-era peaks.

As a result, spotting the factors that have helped those communities get by may allow all homeowners to better gauge what's going on where they live and what the future may hold for their home's value.

Some words of caution.

First: Don't look at these as housing-market "winners," and don't go looking for new places where you can score a killing. That's the thinking that got much of the country in trouble in the first place. Housing isn't an investment like stocks or bonds and shouldn't be approached that way.

Second: Although many of the areas have certain traits in common, most are just nice places to live, places where anyone might want to work and raise a family. Each is special in its own right.

Finally, the biggest reason that most are surviving the downturn is because they never experienced the huge price runups that Florida, Nevada or California did in the first place.

In Denton, Zillow estimates values are down 7.4% from their peak, while values are down about 8.6% in Cambridge. That's about where prices stood in 2004 in both towns. In contrast, the latest Case-Shiller Home Price Index indicates national prices are at 2002 levels.

So what should you look for if you are thinking of selling your home or buying a new one? What does a healthy real-estate market look like today?

Here are three big factors to look for. If your community shares any of these traits, you may already be on the rebound.

Employment

It's the oldest joke in real estate, but with a new punch line:

Q: What are the three most important things to consider when buying a house?

A: Jobs. Jobs. Jobs.

Clearly, the No. 1 factor in determining whether a community has passed through the worst of the housing debacle is its current state of employment. There has always been a connection between the local jobs picture and the local real-estate market, but it's even greater today.

The official U.S. unemployment rate was still a very high 9.2% as the prime home-shopping season began in March. Denton County's unemployment rate was 7.4% in March way up from before the financial crisis but lower than the rate for all of Texas and nearly two points below the national rate. Unemployment in Cambridge's Middlesex County is 2 percentage points below the U.S. average.

Indeed, many of the communities that turned up in the Zillow analysis have big recession-insulated employers like Cambridge's and Denton's universities.

Look at North Carolina, where three communities appear on the Zillow list. Although North Carolina's unemployment rate is higher than the national average, all three communities are lower than the state rate. Jacksonville, where values are just 0.1% below their peak, is the home of the Marine Corps' Camp Lejeune and New River Air Station. Fayetteville has the Army's Fort Bragg and Pope Air Force Base. And Durham is one of the vertices of the Research Triangle conglomeration of universities, state and federal government offices, and government, nonprofit and corporate research facilities.

Rents

Local rents are very strong indicators of real-estate values. Home prices in most communities that have best weathered the downturn tend toward the low-rent end. That is, they have lower price-to-rent multiples, and house hunters will often find it cheaper to buy properties than to rent them.

Look at a typical "rent vs. buy" calculator available on many real-estate or personal-finance websites. Most calculators figure that if prices are more than 15 times annual rents, then a market favors renters; under 15 times, buyers.

Earlier this month, there was a $525-a-month rental two-bedroom, one bath house in Conway, Ark., near the state capital, Little Rock, where home values are down just 5.1% from their peak. But asking prices for comparable houses in the same neighborhood are in the high $60,000s so, using the typical rent-vs.-buy formula, prices are about 11 times rent, a bargain.

That's the same price-to-rent multiple as in college town Champaign, Ill., where a three-bedroom, one-bath house was on the rental market for $850 a month. Albany, N.Y., another state capital, also falls within the affordability range. You can buy a four-bedroom, 1 -bath house for around $200,000, only about eight times the annual rent.

Caveat: Beware the outliers. Extremely low price-to-rent multiples can be warning flags for seriously depressed markets that are glutted with unsold properties. Trulia, another real-estate information site, regularly publishes a rent-to-buy analysis of large metropolitan areas, and the most "affordable" markets are a Where's Where of the real-estate bust: Las Vegas (prices 6 times rents), Phoenix (7), Miami (8). At the opposite end, Trulia's survey says the "least affordable" market is New York City (39), where home values are down just 9.1% from their peak.

Foreclosures

Healthier communities have fewer foreclosed properties pulling down values of other homes.

Just as jobs fuel the local housing engine, foreclosures put on the brakes. Even in good times, one foreclosed property in a neighborhood can bring down the values of every other house around it. And, in bad times, entire metropolitan areas can be swamped by abandoned, foreclosed houses.

In 2010, the worst year so far, about 2.23% of all the homes received a foreclosure filing, according to RealtyTrac, an Irvine, Calif., firm that monitors foreclosed properties. In Las Vegas, the poster child of the Sun Belt's real-estate bust, the foreclosure rate was 12%, more than 80% of homes are worth less than their mortgages and values are down more than 50% from their peak.

And what was the foreclosure rate in Utica, the buckle of upstate New York's merciless Snow Belt? Barely a flurry, just 0.04%. And home values are down just 4.2%, helped along by a growing population.

For home owners, the snow looks a lot more inviting than it used to.

Mr. Crook is editor of The Wall Street Journal Sunday and author of The Wall Street Journal Complete Real-Estate Investing Guidebook and The Wall Street Journal Complete Home Owner's Guidebook. He can be reached at
david.crook@wsj.com.

Heiress to Buy 57,000-Sq Foot Spelling Home

Candy Spelling's 57,000-square foot Los Angeles home, which had a $150 million asking price, is in contract to be sold to 22-year-old heiress Petra Ecclestone, daughter of billionaire Formula One racing boss Bernard Ecclestone. WSJ's Juliet Chung and Candace Jackson report.

Why investing in rentals could be a good move - Plus, the top 10 markets for real-estate investors

Original Post: http://www.marketwatch.com/story/why-investing-in-rentals-could-be-a-good-move-2011-06-13

By Amy Hoak, MarketWatch June 13, 2011, 12:01 a.m. EDT

CHICAGO (MarketWatch) — As home prices fall and rents rise, some investors are plunking their money into real estate, chasing the cash flow that comes along with becoming a landlord.

“For the first time in a long time, you can buy that home and can get a cash-on-cash return immediately,” said William King, director of valuation services for Veros Real Estate Solutions, a supplier of housing data to the country’s largest banks, as well as government organizations. “There are a lot of places in the country where an investor can buy a single-family home, rent it, and get a positive cash flow.”

In fact, investors bought 20% of all the homes sold in April, according to the National Association of Realtors. Some of them are buying with cash.

But even if they do finance part of the purchase, they’re able to turn around a profit much quicker than they would have been able to in the past, King said. And the return on rentals can be much better than returns on other investments these days, he added.

In the past, investors would subsidize their monthly payments on a property with the rent they were able to collect, and the big payoff was the price appreciation he or she would accumulate, he said. Now, investors can come in with a 25% or 30% down payment, finance the rest, and the rent they collect often can cover the mortgage payment, taxes and insurance — with additional cash left over, he said.

“Investors are looking at these properties on a monthly income generating basis,” said Alex Villacorta, director of research & analytics at Clear Capital, a firm that provides data for real-estate asset valuation and risk assessment to financial services companies. “They can start to realize instant profit margins, even as the market goes down more.”

“There’s a turning point where the cost of owning a home is less than the cost of renting,” he said. “When that disparity grows … we will see a push from investors to pick up investment properties.”

In general, that investors are beginning to snap up rental properties is a good thing for the stabilization of housing markets, King said. It’s also one of the ways that a floor on real-estate prices can be established; as more investors spot opportunities in residential markets, prices could bottom.

“Once investors come into a community, you’re seeing the beginning of the end of the decline,” King said.

What to look for

Before investing in a rental, make sure you’ve considered the harsh realities of becoming a landlord, said Mike Litzner, broker and owner of Century 21 American Homes, which has locations in Long Island, Queens, Nassau and Suffolk Counties. He’s also a landlord.

“There are some people who think it’s glamorous, but when you get the wrong tenants, it can be a nightmare,” he said. That said, when you get the right tenants and the properties perform as expected, it can be a “tremendous” way to make a buck — and he believes the “smart money” is now working its way into the marketplace.

Before considering any purchase, decide if you have it in you to be a landlord. You have to be willing to set expectations and consequences to ensure rents are paid on time, and you have to ready for the possibility of evicting non-paying tenants, he said. Plus, you’re responsible for the upkeep of the property, no matter how your tenants treat it.

From there, it’s a numbers game. Get a sense of what rents are in the area you’re considering, the vacancy rate, and consider your costs of financing, Villacorta said. Don’t forget the other costs of owning a property, including taxes and upkeep. Some investors may want to enlist the help of a real-estate agent to assist with analyzing the market.

Remember, often the best investment is a home you wouldn’t necessarily buy to live in yourself, Litzner said. These days, foreclosures can be snapped up at bargain prices, and as long as you have the means to make required repairs, they can represent good opportunities.

“Don’t buy the most expensive house in the neighborhood,” King said, “and look at the broader community. Where are the renters going to come from, and what do they do?” Areas near colleges and military installations can be good places to invest; and think about what renters typically look for, including access to public transportation, he said.

Some of the houses bought in the worst conditions ended up being the best investments for Litzner, who was able to put some sweat equity into the homes before renting them out. It’s also important that investors have multiyear plans for the properties they buy, planning the financials at least 5 years into the future, he said.

Best markets

Many investors sink their money into properties not far from where they live. Those are likely the communities they’re most familiar with, and from a management perspective, you’re never far from the tenants you’re dealing with.

But some markets are better than others to invest in right now.

A recent report from Inman News, an online real-estate industry publication, named the 10 best markets for home investors. These are markets with traits including high affordability, low prices, high share of foreclosure sales, high population growth, improving unemployment rate, and high return on investment in the next 10 years.

The following are their top 10 markets:

1. Indianapolis-Carmel, Ind.
2. Winchester, Va.-W.Va.
3. Gainesville, Fla.
4. Tucson, Ariz.
5. Tallahassee, Fla.
6. Hagerstown-Martinsburg, Md.-W.Va.
7. Salt Lake City
8. Richmond, Va.
9. Gainesville, Ga.
10. Winston-Salem, N.C.

Amy Hoak is a MarketWatch reporter based in Chicago.

Where Real Estate Listings Fail

Original Post: http://www.smartmoney.com/spend/real-estate/where-real-estate-listings-fail-1307483593158/

By ANNAMARIA ANDRIOTIS SMARTMONEY  JUNE 8, 2011, 11:27 A.M. ET

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As buyers wade back into the market, there's plenty of information to be found online. And that may be more trouble than it's worth.

Earlier this year, a client asked Troy Deierling, a realtor in Sedona, Ariz., to set up appointments for three homes he'd seen online. Those viewings never happened: In spite of their supposedly current listings, Deierling discovered the properties had already sold. One had been off the market for three months.

As home buyers cautiously re-enter the market, they're arming themselves with information found online far more than existed pre-housing crash. A record nine out of 10 house-hunters searched online last year, according to the National Association of Realtors; around 15 million people now visit 6-year-old listings site Trulia.com each month. But with this great migration online has come a new set of obstacles, including errors, out-of-date information, and properties that are listed on the web but aren't actually for sale all of which can add up to a handicap for buyers. "You're probably going to get exposed to inaccurate information," says H. Pike Oliver, executive director for industry outreach at Cornell University's Program in Real Estate. "There's no real assurance."

The most common problems are simply errors -- listings that advertise gas heating when in fact the house runs on electric heat or a price cut that hasn't been updated online. But in some cases, "mistakes" may be intentionally misleading, such as touting a partly-finished basement as fully redone, or describing a kitchen as "eat-in" but only "if you were standing [up] with your plate," says New Jersey real estate broker Paul Howard. These discrepancies often appear on the listings that are posted on the Multiple Listing Service, an online database that listing agents are expected to keep current, he says. Separately, around 21% of the data realtors individually submit for posting on real estate web sites is not updated when changes are made to the price or when the property is sold, according to a report released last month by Trulia.

Of course, online misinformation is hardly unique to real estate listings. But because many of the online services are relatively new, and people buy houses so infrequently, home buyers may be less attuned to misinformation than, say, online daters. In general, it requires much more skepticism and diligence by buyers, experts say. For example, some real estate agents keep listings on their personal web sites long after they've sold; when home buyers contact the agent inquiring about the property, they're instead pitched new properties that might not meet their criteria, says Leonard Baron, principal of real estate consulting firm LPB Services and a lecturer at San Diego State University. Such lagging information is more common with smaller firms' web sites and could be a function of real estate agents simply forgetting to update those listings, says a spokesman for the National Association of Realtors. Either way, for buyers, it's a waste of time.

Online listings also seem to level the playing field when it comes time to make an offer, by including sales history and the number of days on the market information most buyers could previously get only from an agent. But "there are a lot of games that are played with 'days on the market'," says Mark Weiss, director of business development at Trulia.com. Properties that are listed for months can get removed from listing sites only to reappear as a new property for sale a few weeks later. That could be because a new listing agent has taken it over, says Baron; in some cases, a realtor can make a listing look new by taking the house off the market for a few weeks.

Popular real estate listing web sites say they try to update information often and they're on constant lookout for errors, but many sites rely on a feed from the MLS, which means it's largely the responsibility of individual realtors to update their listings. On Realtor.com, listings are revised daily as properties' status change, says the NAR spokesman. Trulia.com, which is where Deierling says his client found outdated listings, says it receives seven to eight million listings every day and it prioritizes information that arrives directly from franchises, brokers or MLS feeds. And like Trulia, Zillow says its goal is to give buyers easy access to a lot of information about nearby home values and market trends that can better inform buyer decisions.

For their faults, these web sites still offer home buyers more information than what was available even a few years ago. And that can help them make a more informed decision and eventually, an offer on a property. The point, consumer advocates say, is not to put too much faith in the information contained in a listing. The old shoe-leather tactics like talking to neighbors, getting crime reports from the local police, and asking a real estate agent to pull recent sales prices of similar homes nearby will trump most of the data in an online listing. "It's a reasonable way to start the search but not to finish it," says Barry Zigas, director of housing policy at the Consumer Federation of America, a consumer advocacy organization.

Billy Joel Cuts Price of Hamptons Home

Billy Joel's Sagaponack, N.Y. home has had another price cut and can now be your for just $16.75 million. Plus, a California mansion at less than half price and what $8 million will buy you in Patagonia. Candace Jackson and Juliet Chung have details.

Martha Stewart Posts ‘For Sale’ Sign

Original Post: http://blogs.forbes.com/marketshare/2011/06/01/martha-stewart-posts-for-sale-sign/

Posted by Robert Passikoff for Forbes.com

No matter how tastefully they tried to do it, Martha Stewart Living Omnimedia hired the Blackstone Group last week to try and sell the company. Oh, and “explore other opportunities.” That’s a good thing, because even talk of a sale doubled the current share price. That brought it up to $10, or a valuation at around $550 million. Which is less than a third of the $1.9 billion at which the company was valued before Martha ended up serving 5 months in prison, 6 months of house arrest, and the stock plummeted 88%. So not such a good thing.

Back then, when Martha the Human Brand was found guilty on all counts, the brand lost a good deal of trust among her then-loyal customer base. At that time, according to our Brand Loyalty Index, the brand rated lower than Enron, although to be fair, it’s easier to “hate” a Human Brand than just some faceless corporation, no matter how dreadfully it behaved. It took nearly half a decade for the brand just to edge back to break-even loyalty levels, and it’s hovered at there ever since. The brand has not managed to return to the early-21st century levels, when the brand was rated the highest of every brand we tracked. Definitely not a good thing.

Martha’s company and brand has since failed to migrate the brand to a new generation of consumers. The namesake magazines only generated $2.7 million in operating income. NBC dropped all her shows, relegating them to the void that is the Hallmark Channel, and broadcast lost $1.6 million. Not a good thing.

“Martha Stewart” has turned into a default brand – well-known and a lot easier for retailers to add to their product mix than trying to create a new brand on their own, but not much more. So successful merchandising efforts – even in the face of the Kmart non-renewal – with the likes of Macy’s and Home Depot, selling paint, pillows, and plates have provided $25 million in profit. And that’s a very good thing.

Stewart turns 70 this year, gets to rejoin to her Board after her five-year banishment, and has hired Lisa Gersh to fill the long-vacant CEO spot. Martha owns all of the Class B shares and controls 90% of the total voting rights and it’s been reported that while an offer for the entire company has not been proffered, Stewart does not regard an outright sale as such good thing.

Attracting more consumers and being more profitable requires more than just being known or even well known. It requires being seen as better meeting – even exceeding – expectations consumer hold for the category in which the brand competes. If you can do that you end up with more highly engaged customers, more sales, and a better bottom line. Oh, and far more attractive to prospective acquisition or investment partners.

And those are very good things.