For Sale: Malibu's $49 Million Winery Estate

Carole King's Ranch at a 37% Discount

Carole King's ranch has gotten a major price cut to $11.9 million, from $19 million in 2006, a 37% discount. Candace Jackson has details on The News Hub.

Survey Finds Some Homes Underpriced

By NICK TIMIRAOS

Home prices in some of the nation's hardest-hit metro areas have fallen far below pre-bubble levels, stirring concerns that properties in those markets are undervalued.

In a recent analysis, real-estate firm Zillow Inc. studied the correlation between home prices and annual incomes over the 15-year period that ended in 2000, before home prices began to surge.

For decades, price-to-income levels have moved in tandem, with a specific housing market's prices rising or falling in line with local residents' incomes. Many economists say that makes the price-to-income ratio a good gauge for determining whether housing is undervalued or overvalued for a given market.

Zillow found property prices in one-third of nearly 130 housing markets across the nation were undervalued, when compared with residents' current income and the pre-bubble trend.

"At a broad level, it is helpful to understand that if people in certain markets paid three times their average income in housing before the bubble, those markets are probably going to get back to that level," said Stan Humphries, chief economist at Zillow.

The analysis underscores a broader point: While the nation's housing markets largely fell and rose together during the housing boom and bust, they aren't likely to hit bottom and begin recovery at the same time or pace. The Zillow analysis shows that many markets still appear to be overvalued.

For the U.S. as a whole, home prices were around 2.9 times incomes from 1985 to 2000. But during the housing boom, values increased at a much faster rate than incomes. The price-to-income ratio peaked at around 5.1 in 2005. Home prices have since fallen so that on average, nationally, prices are around 3.3 times incomes, or about 14% above the historical trend.

Of course, prices have fallen much faster in certain markets. In Las Vegas, home prices are now 25% below their historic price-to-income trend of 2.7. During the housing bubble, that ratio more than doubled to 5.6. Home prices have been falling for the past five years, and by March, prices were just 2.1 times household incomes.

Home prices are undervalued by 35% in Detroit; by 18% in Modesto, Calif.; and 13% in Fort Myers, Fla.

"Values dropped so far that there are just great bargains," said Dan Elsea, president of brokerage services for Real Estate One in the Detroit area. For years, layoffs in the automobile sector contributed to a "total freeze on activity," he said. But over the past six months, as the industry has recovered, "you have this dam burst of people saying, 'We're ready to buy.'"

Elsewhere, prices are so low that more investors are scooping up foreclosed properties and renting them out. Since March, Ron Leis, a real-estate agent in Sacramento, Calif., has spent about $500,000 to buy four foreclosed properties that have been converted to rentals. Investors can cover their monthly costs and make an 8% to 12% profit "pretty easily," he said. "We haven't seen that in 20 years."

Prices have fallen in some markets that didn't see a big runup in home prices, such as Rochester, N.Y., and Dallas, leaving them slightly below their historic price-to-income levels.

Housing also has grown more affordable thanks to mortgage rates,falling to near their lowest levels since the 1950s. Last week, the 30-year fixed-rate mortgage averaged 4.32%, according to a survey by Freddie Mac.

Aaron Holley hadn't even thought about buying a home until he looked into consolidating his student-loan debts and saw how interest rates and home prices had fallen. "I never actually thought there was going to be the possibility of me owning a home in the state of California," said Mr. Holley, 29, who last month bought a three-bedroom home in Santa Rosa, Calif., for $260,000. He locked in a 4.38% fixed rate on a 30-year mortgage.

Zillow's report shows that home prices in Santa Rosa are around 4.9 times area incomes, down from a peak of 9.4 in 2005 and back to levels not seen since 1999. Prices are still higher than the 1985-2000 average of 4.1 times incomes. The prospect that home prices will decline further "bothers me a little bit," says Mr. Holley, who works as a concept artist for a videogame company. "But at the same time, I feel like I got a good deal."

Some of the most overvalued housing markets, according to the Zillow analysis, include Virginia Beach, Va.; Honolulu; and Charleston, S.C. In Virginia Beach, Va., for example, prices would have to fall by 50% to hit their traditional relationship to incomes.

Other areas where price-to-income levels show that housing is still overvalued, such as Washington, D.C., may not see prices fall further due to structural changes in the economy. Second-home markets that have more out-of-market homebuyers also tend to have more volatile price-to-income levels.
 

Write to Nick Timiraos at nick.timiraos@wsj.com

Top 10 Best Places to Live

The strength of the local job market is a key factor in a study that details the Top 10 best places to live, says MarketWatch's Amy Hoak. She tells Stacey Delo that more people are moving for work. Plus: Mortgage rates are staying low, for now.

Vacation Homes: Why It May Be Time to Buy

By JESSICA SILVER-GREENBERG  for WSJ.com  WEEKEND INVESTOR July 23, 2011

The clouds hanging over upscale vacation-home markets are starting to lift. While prices are still falling in most regions, the luxury segment is picking up, and brokers are reporting more inquiries than they have had in years.

The upshot: If you have the money and plan on staying put for the long term, now may be a good time to buy.

Five years after housing's peak, markets that once were out of sight even for well-heeled buyers are now in range. On Hilton Head Island, S.C., a three-bedroom home nestled between the Atlantic Ocean and Calibogue Sound changed hands in April for $750,000, after having sold for $1.2 million in June 2006. In Vail, Colo., a three-bedroom home that fetched $3.3 million in 2008 sold in February for $2.5 million.

Overall, the median second-home price was $150,000 in 2010, down 11% from 2009 and roughly 25% from 2006, according to the National Association of Realtors. That isn't pretty, but it is only slightly worse than the 22% drop for the overall housing market. The higher end of the market—homes in the $5 million-plus range—has held up better, says Douglas Duncan, chief economist at Fannie Mae. "At the top of the market, particularly luxury homes, prices have proven very elastic, and have sprung upward quickly," he says.

Buyers are taking heed. On Palm Beach Island, Fla., sales were up 50% in the year ending June 30. Transactions in the Hamptons, on New York's Long Island, jumped 59% in the second quarter from a year earlier. In Aspen, Colo., sales for the year ending May 31 were up 10%.

The number of people looking at properties is up as well: In Vail, Hilton Head and Palm Beach, foot traffic has jumped by at least 30% this year, according to local real-estate agents. "People have frugality fatigue," says John Burns, president of John Burns Real Estate Consulting Inc. in Irvine, Calif.

This isn't to suggest the boom is back. In general, properties situated in prime locations—on the water or near a ski slope—are selling well, but homes in less desirable spots are languishing on the market. Banks are increasingly wary of making second-home mortgages, particularly "jumbo" loans above federally guaranteed limits; 10% of banks raised their standards on such loans last year, according to the Federal Reserve. And the tax deduction for mortgage interest on second homes is at risk of being cut back.

Geography is the best guide to today's vacation markets: In some places prices are holding up, while in others they are still tanking.

The blue-chip market consists of a handful of spots where prices have stabilized and could soon rebound as sales pick up. Some, such as Hilton Head, have benefitted from tough restrictions on building, which kept inventories manageable during the bust. Prices there have risen by 4% during the past year.

The other market is still very much in crash mode. In places like Miami, Fla. and even Martha's Vineyard, Mass., prices have continued to drop as foreclosed properties flood the market. But bargains abound as sellers cut their asking prices or accept less to unload properties. In March, for example, a three-bedroom home on Palm Beach Island, Fla., listed for $4.6 million sold for just $2.5 million.

With the broader housing market still so sick, it might seem the height of folly to jump into such unpredictable investments now. Even in blue-chip markets there isn't a guarantee of price appreciation anytime soon. Indeed, over time vacation-home markets don't do noticeably better than primary-home markets. Homes on Martha's Vineyard appreciated by 40.9% over the past 10 years, edging out Boston's 40.5%. But Hilton Head's 15% gain was trounced by nearby Charleston, S.C.'s 25.4% rise.

Then again, most vacation-home buyers aren't looking to make big investment profits. More than 80% of second-home buyers surveyed by the National Association of Realtors in May reported that they bought for consumption reasons—to live in the house and enjoy it.

And many second-home buyers are wealthy enough to pay in cash, sidestepping the restrictive and time-consuming mortgage process. Last year, 36% of vacation-home transactions were all-cash deals, up from 29% in 2009, according to the National Association of Realtors. "If you have cash right now, you are in unique position," says Paul Dales, senior U.S economist with research firm Capital Economics.

If you are thinking of taking the plunge, here is a look at some prominent markets across the country.

Blue Chips

These markets are stabilizing and, in some, prices already have started to rise.

Santa Barbara, Calif.

Median home price: $695,000
Median home price five years ago: $1,000,000

Market Snapshot: Situated roughly halfway between San Francisco and Los Angeles, Santa Barbara is starting to reel in wealthier buyers again, says Ken Switzer, a real-estate agent with Prudential California Realty. While prices have plunged since the peak, they have steadied out over the past two years, and sales are starting to jump, according to Paul Suding, president of Santa Barbara's Association of Realtors. Strict zoning and scarce available land helped protect Santa Barbara from the overbuilding that swept much of California, he says.

Who's Buying: With interest rates near record lows, restaurant owners Dave and Leah Larson decided it was time to buy. In June, they picked up a four-bedroom ranch-style home for $1.39 million. The couple says the property seems like a great investment because it is on a street where homes recently sold for about $2 million. "We're very happy and we get the tax savings on the second home," says Mr. Larson, 39 years old.

Aspen, Colo.

Median home price: $781,000
Median home price five years ago: $802,000

Market Snapshot: Housing economists look to Aspen as a luxury-market bellwether. Dotted with upscale boutiques and four-star restaurants, the ski town is welcoming buyers with ample cash on hand, says Steven Shane of SDS Real Estate, a local real-estate broker. Sales of $1 million-and-above are on the rise—especially on the higher end. So far this year, 18 properties priced at $5 million or above have sold, up from 14 in the same period last year.

Who's Buying: Laura Stovitz, a Los Angeles lawyer, already had a second home in Aspen but couldn't resist the opportunity to trade up. In April, she sold her town house for $3 million and purchased a $6.5 million home with three bedrooms, an office, gym and adjacent guest house. She says she isn't worried about falling prices because the posh ski town seems so "European in its appeal and will likely be insulated from the domestic market's doldrums."

The Hamptons, N.Y.

Median home price: $680,000
Median home price five years ago: $1,100,000

Market Snapshot: Prices have fallen 42% since their peak, but sales are picking up, say real-estate agents. That's thanks, in part, to the return of Wall Street bonuses, says David Adamo, chief executive of Luxury Mortgage Corp. in Stamford, Conn. Despite booming sales, prices have fallen in the past year, creating opportunities for buyers, according to Clear Capital, a Truckee, Calif.-based research firm. The best deals, of course, can be found away from the water, where inventories are high and properties are sitting for longer.

Who's Buying: Jeffrey Ponzo, a retail executive, is still marveling at the deal he got on his ranch-style home with a pool and tennis court in East Quogue, N.Y. The 45-year old New Yorker closed this month on the $950,000 home; a year earlier, it was listed for $1.1 million, he says. "The return on a quality-of-life aspect far exceeds any money I might have saved if I waited for prices to fall further," he says.

Hilton Head, S.C.

Median home price: $307,000
Median home price five years ago: $574,000

Market Snapshot: Sales are up 17% for the year ending June 30, according to Jim Keilor, a real-estate agent with Hilton Head-based Alliance Group, while prices are ticking up. The vacation spot, famous for its golfing and lush beaches, didn't see the overbuilding found in places like Phoenix and Las Vegas. "We were insulated from much of the pain elsewhere because we are an island," Mr. Keilor says. Interest from buyers is back to 2006 levels, says Randy Smith, a real-estate agent on the island.

Who's Buying: Steve Race, 52, purchased a two-bedroom oceanfront home in April. The former Lockheed Martin executive, who took a buyout in February, wanted a sunny spot at a good price, but didn't want to brave the "softness" of the foreclosure-scarred Florida markets. He watched prices fall for more than two years, he says, before deciding that even if they fell further he was scoring a good deal on the two-bedroom house he bought for $500,000. Given the uncertainty of the stock market right now, he says, he would rather have his "money invested in a home with real value."

Depressed Markets

These areas are still suffering—but bargains abound.

Martha's Vineyard, Mass.

Median home price: $403,000
Median home price five years ago: $638,000

Market Snapshot: Even though this exclusive northeastern island sidestepped overbuilding during the boom, buyers still seem reluctant, says Sean Federowicz of Coldwell Banker Landmarks, a broker on the island. The problem: Martha's Vineyard is made up of six different communities, some of which have had waves of foreclosures, says Carol Shore, a real-estate agent on the island. "Even though the $22 million waterfront properties are selling, the lower-end properties are dragging down much of the rest of the market," she says.

Who's Buying: In February, Brian Roach and his wife snapped up a three-bedroom house in Oak Bluffs for $740,000, roughly 35% below the asking price. The 53-year-old financial-services executive is comforted by the island's cachet, which he believes will help prices appreciate down the road. "At some point, you see such low interest rates and good prices and you don't want to wait anymore," he says.

Vail, Colo.

Median home price: $385,000
Median home price five years ago: $562,000

Market Snapshot: Unlike its nearby resort cousin, Aspen, Vail experienced a wave of development just as the market crashed, says Josh Lautenberg, owner of Sonnenalp Real Estate in Vail. Since the peak, available inventory has shot up by 40%, he says. Although sales started picking up in 2010, there has been another dip in activity while people "wait to see if the other shoe is going to drop."

Who's Buying: Falling prices didn't discourage Peter Tempkins, a 56-year-old insurance executive, from buying a $370,000 three-bedroom home in May. "My gut feeling is that we didn't buy at the bottom, we bought one step from the bottom, and for us it was just a great time to buy a place we love," he says.

Miami, Fla.

Median home price: $130,000
Median home price five years ago: $302,000

Market Snapshot: Miami was among the biggest casualties of the housing crash, in part because a wave of speculative building swept through the market. Prices have fallen 57% percent since 2006, reports Clear Capital, and 10% from last year. But bargains are beginning to attract more foreigners—particularly wealthy Venezuelans looking for a safe haven from President Hugo Chavez, says Michael Internosia, vice president of sales for Pordis Residential, a Miami based real-estate firm, who notes that such buyers made up 35% of his sales so far this year.

Who's Buying: Sam Mandel considers himself something of a second-home veteran. Last year, the 78-year-old retired physician bought a Hamptons home in Shinnecock Bay, N.Y. In February, he purchased a home in Miami Beach's Canyon Ranch development for $985,000. The two-bedroom condominium with beach views caught his eye because it was "distinctive and will be easy to resell if need be," he says.

Palm Beach, Fla.

Median home price: $254,000
Median home price five years ago: $758,000

Market Snapshot: A condo binge during the boom has led to a glut—and shoppers are swarming on low-priced units, says Alex Villacorta, director of research and analytics for Clear Capital. That is presenting bargains at the higher end, says David Fite, owner of real-estate agency Fite Shavell & Associates. Sales are on the rise: there were 29 transactions in the first quarter, typically the busiest selling season, up from 6 in 2009 and 26 last year, says Christine Franks, president of real-estate broker Wilshire International Realty.

Who's Buying: John Reid, a 57-year-old retired financial-services executive, and his sister are taking advantage of plunging prices. The siblings earlier this month purchased a $4.75 million four-bedroom home near the ocean, in an all-cash deal. "I got the sense that prices were nearing the bottom," Mr. Reid says. "If we wanted a good deal on a fabulous home, we had to act quickly."

Write to Jessica Silver-Greenberg at jessica.silver-greenberg@wsj.com

Corrections & Amplifications
Santa Barbara, Calif., is an example of a "blue chip" residential real-estate market where prices have stabilized. An earlier version of this article incorrectly labeled the section on Santa Barbara as Santa Monica, Calif.

Time to Buy: Housing Recovery Is Under Way

Housing affordability is at its best level in 30 years, according to Ken Rosen of U.C. Berkeley's Fisher Center for Real Estate, who says now is the time to buy and that mortgage rates will be much higher in five years. Stacey Delo reports. Image courtesy of Getty Images.

Georgia Estate With Private Golf Course

The current owner is asking $20 million for this Georgia estate, which features an 18-hole golf course, six guest houses and was designed by country music legend Kenny Rogers.

Even In a Struggling Market, You Can Still Sell Your House

Published: Tuesday, 12 Jul 2011 | 3:43 PM ET By: Mark Koba

Source: Openhouseok.com

Kerry Tramel's home in Moore, Oklahoma was on the market for two years before it sold.

It took two years, but Kerry Tramel and his wife Vy finally sold their four bedroom home in Moore, Oklahoma last December.

In the process, Tramel learned a lot about how to sell—and buy—a house in a devastated real estate market.

"We paid $350,000 for it and that's what we sold if for," says Tramel, who heads a local mattress manufacturer. "I was going to do everything I could not to lose on it."

The two-story house with 3,300 square feet was originally offered at $379,000. Tramel admits he could have sold the home right away if he was willing to take less money.

"I passed up an offer of $350,000 one month after it was listed by the agent," says Tramel, who has two young children. "I thought we might be able to get more, but we didn't."

As the housing market struggles to punch its way out of an economic collapse, selling a home these days might seem like an impossible task. But some houses, like Tramel's, can be sold. It just takes patience, a little luck, and a willingness to lower your price.

Even then, it's not always under your control. A key factor still appears to be that time-worn principle—location.

"It's really based on where foreclosures and falling prices haven't hit too hard," says Mary Cassidy, a real estate agent with Bronxville/Ley Real Estate in Westchester County, New York. "Housing's hurting, but there is activity."

Areas that saw the biggest gains from the housing boom are still the slowest to recover.

"For places like Las Vegas, and Phoenix where foreclosures are still happening, home sales are going to take a long time to recover," says Bob Walters, chief economist at QuickenLoans.com. "Other areas of the U.S. have OK sales, like the middle of the country or the East Coast."

While waiting for a buyer for their house, Tramel says he and Vy became "professional house shoppers" and learned how to be a buyer as well. They saw more than 90 properties.

"We were doing both at the same time, buying and selling," Tramel says.

In the process, Tramel picked up a lot about the local real estate market.

"I noticed we didn't have the runup in homes prices that other areas of the country did and we didn't have a lot of foreclosures," Tramel adds. "Home prices haven't had that far to fall, at least from what I can see."

Eventually, Tramel found a buyer. They were renting out their current home and looking for another place to live.

"They had been looking for a long time and knew it was a buyer's market," Tramel says. "But once they knew my price was at the lowest it was going to be, we negotiated on other items such as what may stay in the house. That's how we worked things out."

That allowed Tramel and his family to find for a new home themselves.

"We found a house just a few miles away in Norman that I really loved and we put in a low bid. We put in another offer but nothing happened."

Tramel used Halloween to break the impasse.

"I purposely took my two boys to the neighborhood for trick-or-treating and I saw the owner on the porch of the house we wanted," Tramel says. "I said, 'I'm trying to buy your house' and he said 'We'd love to sell it to you. Why don't you call and we'll work it out.' So that's what we did. The real estate agents still got their commissions and we got what we wanted."

What Tramel got was a 3,900 square foot house for $475,000 that included a home entertainment theatre. It had been on the market for just two months. Tramel says the owner took a loss but was willing to do that in order to move. After both parties came to an agreement, it was just a matter of closing the deal.

"I put 20 percent down and had to go through requirements for the loan with a local mortgage banker, but it was not really that bad a process," Tramel says. "The people that bought my house got a VA loan without any down payment. Not sure how that will work out, but I intend to stay in my house for a long time. I hate moving."

While Tramel was able to move up in price and space, other sellers are looking for a way to downsize.

Cape Cod Second Home

For Judy and Vinny Capraro, selling their vacation home in Cape Cod, Massachusetts this past May was a way to cut out a long drive from their house in New Jersey—and save money.

Photo: trulia.com

The Capraro home on Cape Cod was sold after being listed for just two weeks.

 

"We had a mortgage and we didn't see any equity building in the home," says 69 year old Judy Capraro, a retired public school teacher who lives in Middletown, New Jersey.

"Even though it's a very nice neighborhood, we were 'underwater ' and owed more on the home than it was worth. Home prices have fallen somewhat," Capraro goes on to say. "It was enough at least for us to sell."

The Capraro's bought the three bedroom, two bath house in West Hyannis 14 years ago for $142,000.

Renovations and rebuilding kept costs rising, Capraro says. Even with a fixed mortgage, the monthly payment of about $2,600 didn't seem worth it to Capraro and 72 year old Vinny, who retired five years ago as superintendent of schools in Edison, New Jersey.

"It's a lot different for people in their 30s and 40s and waiting out the next twenty years for the values to go up," says Judy Capraro, who gives music lessons to supplement the couple's income. "We just didn't see that happening."

The home sold for $375,000 after being on the market for just two weeks. The original asking price was $399,000. Like Tramel, the Capraro's didn't want to lose money, but the couple got an eye opening moment they didn't expect.

"The new owner, a woman in her 40s, came in with cash for the whole deal and that made up somewhat for the difference in price," Judy explains. "We wanted to get more money and we didn't really make that much, but in a way we were lucky to sell it."

With three grown children, Capraro says she and her husband are now content with just owning their senior residence condominium.

"We have a mortgage on this place and we'll be staying here for some time," Capraro adds. "They'll have to carry me out of here."

As for Cape Cod, selling their second home doesn't rule out a return.

"We can certainly go back there and rent another house during summer months," Capraro goes on to say. "We used to rent our own house sometimes. But now we don't have to worry about cleaning up, fixing things that are broken, and worrying about the place."

For both Tramel and Capraro, selling a home in today's market came with surprises and lessons learned.

"Everybody has to give a little to sell a house," Tramel goes on to say. "You also have to be patient, if you can. Also, know what you can live with in terms of price.

"I really thought it would take a while to sell," Capraro adds. "We're glad it didn't. My advice? I'd say get a good agent who knows the area. Our agent was right down the street and had customers waiting. It's a buyer's market for sure. Just be prepared to negotiate. Being flexible helps in the end."

The Top Markets for Rental-Home Investors

By Nick Timiraos July 11, 2011, 11:53 AM ET

Associated Press

Housing markets that have seen the biggest plunges on home values have topped a new ranking of the best markets for rental-property investors.

Las Vegas, where home prices are down by more than 50% from their market peak, offers the best returns on homes maintained as rental properties, according to the report from HomeVestors of America, a property-investment firm, and Local Market Monitor, a real-estate data firm.

The ranking takes into account the potential home-price appreciation and gross rents to forecast the performance of rental properties, specifically single-family homes that are rented out.

Rounding out the top five markets are perennial economic trouble-spots Detroit and Warren, Mich. along with housing boom-to-bust cities Orlando, Fla., and Bakersfield, Calif. Home prices in those markets have fallen below their 2000 levels, creating opportunities for investors to compete with existing housing stock.

But those markets also carry sizeable risks for investors, including the prospect of continued home price weakness. Vacancies are also high—rental vacancies are at 12% in Las Vegas at 19% in Detroit—underscoring the need for job growth to pick up.

The survey comes amid fresh signs that the rental investor is increasingly dominating hard-hit markets. Home price declines first began attracting big investor activity two years ago. Many buyers looked to buy distressed homes at a discount in foreclosure auctions from banks before fixing them up and reselling them quickly.

But faced with increased competition from other home flippers, investors have increasingly turned to buying homes that they can rent out for a few years. Those sales are far more sensitive to price, requiring deeper discounts to ensure that the rental income can cover the cost of property upkeep.

Total Las Vegas home sales hit a five-year high in May, according to DataQuick, a real-estate data firm, with the market fueled by low-priced homes that can most easily be converted to rentals. Around four in 10 sales went for less than $100,000, up from three in 10 sales last year.

According to DataQuick, home re-sales activity hit a six-year high for the month of May in Phoenix, which ranked as the seventh best rental-return market in the HomeVestors analysis. Like Las Vegas, nearly 40% of sales went for less than $100,000, and absentee buyers accounted for around 45% of all purchases.

Other top rental markets, according to the survey, included Tampa, Fla.; Ft. Lauderdale, Fla.; Rochester, N.Y.; and Stockton, Calif.

Top 10 markets for rental-property investors

1. Las Vegas

2. Detroit, Mich.

3. Warren, Mich.

4. Orlando

5. Bakersfield, Calif.

6. Tampa-St. Petersburg

7. Phoenix

8. Ft. Lauderdale, Fla.

9. Rochester, N.Y.

10. Stockton, Calif.

(Source: HomeVestors/Local Market Monitor)

• HomeVestors of America,
• Local Market Monitor

Seinfeld Lists Telluride Home for $18M

Jerry Seinfeld's Telluride, Colo. home has hit the market for $18.25 million. Plus, a Montana ranch for $12.7 million and a New Jersey home designed by the architect of the Lincoln Memorial lists for $4.3 million. Candace Jackson has details.

Mortgage Aid for Unemployed Expanded

By Nick Timiraos July 7, 2011, 1:34 PM ET

Getty Images

Housing and Urban Development Secretary Shaun Donovan

The Obama administration will require mortgage companies to extend more generous mortgage relief to help certain unemployed borrowers from losing their homes to foreclosure.

Under policy changes announced Thursday, mortgage companies that collect payments on loans backed by the Federal Housing Administration will be required to offer 12 months of forbearance for qualified unemployed borrowers. Currently, out-of-work borrowers with these loans can receive a minimum of four months without mortgage payments.

Firms that participate in the Obama administration’s Home Affordable Modification Program will also be pressed to offer up to 12 months of forbearance for unemployed borrowers, though that effort could be stymied by regulatory or contractual rules.

Housing officials said the changes could help tens of thousands of borrowers. Housing Secretary Shaun Donovan said he hoped it would “push the mortgage industry” to amend their offerings.

The foreclosure crisis was initially driven by adjustable-rate mortgages that were resetting to sharply higher payments, but over the past three years, far more homeowners have faced foreclosure because they have lost their jobs or seen their income fall. Many of those borrowers can’t easily sell their homes if they get in trouble because they owe more than the properties are now worth.

Officials said the change was prompted by a slow economic recovery that has seen longer stretches of unemployment than in past downturns. “We’ve been looking for ways we can go farther to help borrowers,” said Mr. Donovan.

Around 3,500 borrowers with FHA-backed mortgages fall behind on their payments every month due to unemployment, housing officials said, and around 17,000 borrowers last year had been offered some type of forbearance. HAMP offers a three-month break in loan payments for unemployed borrowers and has helped around 10,000 homeowners since the program began last August.

Borrowers who receive loan forbearance, where principal and interest payments are temporarily suspended, will ultimately have to pay back the past-due balance after the forbearance period ends.

At a White House town hall event on Wednesday, President Barack Obama conceded that housing has become the “most stubborn” economic problem facing policy makers. “We’ve had to revamp our housing program several times to try to help people stay in their homes and try to start lifting home values up,” he said.

The program won’t apply to loans backed by housing-finance giants Fannie Mae and Freddie Mac, which are under government control but answer to a separate, independent regulator. The firms offer their own forbearance programs and own or guarantee nearly half of all U.S. home loans. The FHA, by contrast, backs less than 10% of all outstanding mortgages.

The Obama administration has separately committed $7.6 billion in funds from the $700 billion Troubled Asset Relief Program to target housing relief in 18 of the “hardest hit” states. Most states have used some of that money to provide bridge loans so that unemployed borrowers can make mortgage payments.

A separate program, funded with $1 billion through the Dodd-Frank financial-overhaul law, allows unemployed borrowers in 27 other states to receive interest-free loans to help make mortgage payments worth up to $50,000 for up to two years. Applications for that program are due July 22.

• Federal Housing Administration

June's Most Popular Houses

Each week readers vote on their favorite of the homes featured as the House of the day. Tour June's winners, located in Ketchum, Idaho; New Zealand; Naples, Fla.; Winnetka, Ill.; and Belize.

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

Getty Images

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

Getty Images

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.