Monday, July 09, 2007

Still afloat despite worst housing recession in 15 years

Mortgage market commentary
Monday, July 09, 2007

By Lou Barnes
Inman News

Mortgages have been remarkably stable in the 6.75 percent-6.875 percent area while the all-powerful 10-year T-note has run in a much wider range: 10 days ago touching 5.32 percent, on Tuesday trading briefly at 4.99 percent, and today an early burst to 5.22 percent.

Two lessons here. First, inject volatility into a system, as did the 10-year's rocket in June from 4.6 percent to the levels above and you'll have high volatility for quite a while. By "volatility" I mean true up-and-down action, not the Wall Street standard explanation to a client who has lost his shirt in a straight-line move.

Second, Treasury volatility versus stable mortgages is the signature of market uncertainty about the inflation/growth outlook, and grave concern about credit quality. In this week alone we've gone from strong buying of Treasurys in response to revelations of the magnitude of the mortgage-derivative mess to sell-everything-you've-got on news of a healthy economy.

The economic health is a bit of a puzzle. We've got the worst housing recession in at least 15 years (pending sales in May fell to the lowest level since September '01, a tough month), but its effects are still confined. Mortgage rates jumped a half percent in June, yet applications for mortgages are rock steady. The twin surveys by the purchasing managers' association appeared to be tailing, but both rebounded well in June, manufacturing to 56 from 55, services from 58 to a strong 60.7.

How are we pulling this off with oil at $70? Personal incomes are stagnant, in May a net loser after inflation. One big propellant in the early '00s was home-equity extraction: the Fed's newest numbers show home-equity-line-of-credit balances shrinking in the 1st quarter this year for the first time in modern memory. In Friday's news, June payrolls gained an as-expected and healthy 135,000 jobs, but April and May were revised way up, driving credit-frightened money back out of bonds just bought.

I do not have an answer to the "why" in our still-good economy, except that the globe overall is in the best economic health ever and helping to float our boat.

In the housing-mortgage furball, one of the deep fears for this stage was/is that a rapid retrenchment in credit standards would make a bad situation worse. When the credit pendulum swings all the way to one side, the return move rarely stops on sensible center. However, this time may be a first-ever. Mortgage terms and pricing are tougher than six months ago, and underwriters are running scared (especially in appraisal review), but pretty much everything available then still is today.

If you want a subprime horror, you can still have it: the FICO bar has gone from the 500s to 620-ish, roughly the minimum range that experienced landlords will consider acceptable for a tenant. The off-the-shelf piggybacks are as they were, except the 1st-to-2nd rate spread is about 1 percent wider (2 percent for sub-680 FICOs), causing little damage because the 2nds are so much smaller than the 1sts. "No-Docs" are still out there, spreads to "A" paper about a half-percent wider.

Stated-income, interest-only, "option" ARMs with negative amortization feature -- all unchanged except for FICO-rate relationship at the outer edge of applicant/deal strength. One hundred percent financing in general is harder to find, and pricey, but it should be.

Supply is still good for three reasons. First, most mortgages are good and safe investments. Second, the global credit markets are still desperate for yield and still don't grasp the extent of risk in edgy mortgage product; FICO-rate re-pricing will continue as that risk comes clear.

Third, the regulators, bless them, have failed altogether to tighten standards. Whether wise inaction during pendulum-swing, or near-total ineptitude, the mortgage underwriting "guidances" promulgated in the last year by the Fed (at the head of a puzzled mob: OFHEO, the FDIC, the Comptroller, the Office of Thrift Supervision, the National Credit Union Administration) have been completely ignored by the mortgage industry. A reasonable response, given equally complete lack of enforcement.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.

U.S. Housing Sales to Tumble to Six-Year Low on Rates (Update1)

By Kathleen M. Howley

July 9 (Bloomberg) -- U.S. home sales in 2007 will drop to their lowest level since the start of the five-year housing boom in 2001, as mortgage rates and foreclosures increase, according to a forecast by Freddie Mac.

Sales of new and previously owned homes probably will total 6.28 million, down 7.1 percent from last year, according to the world's second-largest mortgage buyer. It would be the lowest since 6.20 million homes were sold in 2001. Residential lending will drop to $2.75 trillion, the lowest since 2002, the McLean, Virginia-based company said in today's forecast.

Buyers are finding it more difficult to finance purchases because of higher mortgage rates and stricter lending standards, Freddie Mac said. The average U.S. rate for a 30-year fixed rate home loan probably will be 6.7 percent this quarter, according to the forecast. That's the highest level so far this year, and it's half a percentage point above the 6.2 percent average in the first three months of the year.

``Several risks -- the elevated levels of homes for sale, recent increases in mortgage rates, and rising foreclosures of subprime borrowers -- point to continued weakness in the months ahead,'' Freddie Mac Chief Economist Frank Nothaft said in the forecast.

The number of previously owned homes on the market reached a record 4.43 million in May, according to the National Association of Realtors. Sales fell to 5.99 million at an annualized pace, the lowest in four years, the real estate trade group said in a June 25 report.

Foreclosures Rise

The share of all mortgages entering foreclosure rose to 0.58 percent in the first quarter, the highest in a survey that goes back to 1972, the Mortgage Bankers Association said June 14. Subprime loans entering foreclosure rose to a five-year high of 2.43 percent, up from 2 percent, and prime loans rose to a record 0.25 percent.

The average U.S. fixed rate was 6.63 percent last week, up almost half a percentage point from 6.15 percent in early May, according to data from Freddie Mac, whose larger rival is Washington-based Fannie Mae.

U.S. home sales rose to a record 7.46 million in 2005 before dropping to 6.76 million last year, according to Freddie Mac. Demand will begin to rise next year, with about 6.39 million sales in 2008 and 6.63 million in 2009, the mortgage buyer said today.

To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net .

Last Updated: July 9, 2007 15:00 EDT

Friday, July 06, 2007

Strong jobs growth? Thank a tourist

Fri Jul 6, 2007 12:08PM EDT
Power. Price. Service. No Compromises.By Emily Kaiser

WASHINGTON (Reuters) - The housing sector is in a funk, auto sales are weak, and manufacturing jobs are drying up. So why were Friday's employment numbers surprisingly strong?

Merrill Lynch analyst David Rosenberg says at least some of the credit should go to tourists who are flocking to the United States to capitalize on a weak dollar, helping to fill bars and restaurants.

"Where is all the employment being created? Try the leisure-hospitality sector -- the weak dollar has worked its magic in this space," Rosenberg wrote in a note to clients.

Friday's employment report from the Labor Department showed an overall gain of 132,000 jobs in June, beating economists' expectations for 120,000 in a Reuters survey.

Payroll figures for April and May were also revised higher, confirming stronger second-quarter economic growth following a soft start to the year.

Not surprisingly, nearly all the growth came in the services sector, which includes everything from nurses to bartenders and has been the sweet spot in an economy struggling with persistent weakness in manufacturing and housing.

Health care gets most of the attention in the services sector as aging baby boomers drive up demand for nursing, but a closer look at the latest numbers shows that food service and drinking places accounted for 34,600 new jobs in June, outpacing the 29,700 gain in health care employment.

"Foreigners cannot believe how cheap it is now to visit the U.S., with the U.S. dollar down 15 percent year-over-year against the Australian dollar and Thai baht; 10 percent against the (British pound) and 7.5 percent against the euro," Merrill's Rosenberg said.

While the data suggest that consumers were happily eating and drinking, the revelry did not extend to the shopping mall. The retail trade lost some 24,200 jobs, in part due to weakness at car dealerships and building supply stores but also because of declines at clothing and accessories stores.

"The mystery is they're adding folks in the food court and not the stores," said Ken Goldstein, labor economist with The Conference Board in New York.

Goldstein said that although the data is seasonally adjusted, it's not an exact science and the retail job losses may have as much to do with timing as demand.

He said restaurants probably beefed up staffing in response to signs the economy improved in the second quarter, and some people who had worried about a steep decline found reason to celebrate or travel.

Retailers are still a few weeks away from the back-to-school shopping season and will likely add jobs again in July, he said.

© Reuters 2007. All rights reserved.

Thursday, July 05, 2007

Foreclosure Zip Codes: Foreclosures drift to Sun Belt from Rust Belt

A new survey shows foreclosure clusters are on the move from industrial centers to coastal and southern states.
By Les Christie, CNNMoney.com staff writer,

NEW YORK -- For sheer volume, housing foreclosures across the nation appear to be moving from the Rust Belt to the Sun Belt.

A study for CNNMoney.com by RealtyTrac, an online marketer of foreclosure properties, showed that 139 of California's ZIP codes fell within the top 500 for total foreclosure filings in the United States. The next highest count for any state is less than half that at 72 and is in another sun-belt state - Florida.

Top 10 Foreclosure ZIP Codes
Zip City State Total Filings
44105 Cleveland OH 783
30310 Atlanta GA 709
80219 Denver CO 705
48228 Detroit MI 679
95823 Sacramento CA 634
48205 Detroit MI 634
48224 Detroit MI 583
89031 N. Las Vegas NV 575
80239 Denver CO 553
48219 Detroit MI 549

The geographic shift shows up in the mix of properties listed by the auction web site RealtyBid.com, which mainly features foreclosed homes.

RealtyBid spokeswoman, Daphne Shannon, said, "The Midwest has always been very solid for us, but the properties we're seeing are moving across the country - they're from California, Arizona and Nevada."

The number one ZIP code in the nation for foreclosures is still, however, in the Rust Belt. It's Cleveland, 44105, with a total of 784 filings during the three months ended June 15, according to the RealtyTrac study.

The hardest hit ZIP in California was Sacramento, 95823, where there were 634 default notices, repossessions and auction notices. It had the sixth most foreclosure filings for any zip code in the nation.

California boasts a vibrant economy and a fast growing population. According to Doug Duncan, chief economist for the Mortgage Bankers Association (MBA), foreclosures, overwhelmingly, used to come courtesy of serious underlying economic problems such as job layoffs or plant closings.

But the California foreclosure spike, as well as those in Florida, Arizona and Nevada, was set up by runaway appreciation that boosted home prices beyond affordability.

Double-digit price increases had attracted hordes of investors, who added to swiftly rising values. Developers bid up land prices in a scramble to get product to market. When markets cooled, speculators added to downward price pressure by unloading their properties onto already lengthening inventories.

"In many of these markets," said Duncan, "prices fell below what investors paid. Many have simply walked into their banks' offices and handed in their keys."

Many Sun-Belt buyers bought their high-priced houses using 2/28 adjustable rate mortgages (ARMs) which featured very low initial, or "teaser," rates that reset much higher after the first two years of fixed payments.

But ARMs are best used, according to Duncan, as credit-repair products. They're set up for borrowers to show they can keep up mortgage payments and then refinance out into affordable fixed-rate loans after two years.

Many buyers used ARMs to get into a house with little regard for whether they could afford the payments, betting that rising prices could build enough home equity they could tap for cash.

When prices stabilized or fell, that safety valve disappeared. Owners couldn't pay monthly bills, and they had no equity to draw on.

In the Rust Belt, it was the ripple effects of a dying industrial economy instead of rampant speculation that crushed the finances of many borrowers in states like Michigan, Ohio and Indiana.

Neighborhoods of Cleveland 44105 were once filled with Eastern European immigrants and their descendents. Residents worked in nearby woolen factories and steel mills.

Today it's a mixed-race area with lower than average income, higher than average unemployment and a large stock of older, single-family homes. Many of them sell for less than $100,000, some for under $30,000.

According to Cleveland city councilman, Tony Branchatelli, who represents the district, more than 600 homes in the neighborhood are vacant and boarded up. Many have little value because the rehabilitation costs would exceed their selling prices. Some have had their plumbing, wiring and other hardware stripped.

In Sacramento, 95823, by contrast, residents depend more on government jobs and service industries for employment, although wages are still below average for the state.

Homes there are more modern and more valuable than in 44105; even modest three-bed/two bath houses go for several hundred thousand dollars.

Neither the Rust Belt nor Sun Belt are likely to see easier conditions any time soon. In the Sun Belt, the subprime mortgage mess will take many months to work through as the many borrowers who took out 2/28 and 3/27 ARMs during 2005 and 2006 will hit their reset points this year and next.

And the rust belt appears likely to endure more economic trouble before conditions turn around in heavy industry.

"Delinquencies," said Duncan, "will probably peak by the end of the year and foreclosures in 2008."

© 2007 Cable News Network LP, LLLP. A Time Warner Company ALL RIGHTS RESERVED.

Real Estate Sees the Best of Times and the Worst of Times

TradingMarkets.com
Thursday July 5, 8:55 am ET
By TradingMarkets Research


Cheap debt and a boom in private equity have been key drivers for equities this year, even as the U.S. economy faces a stiff headwind from the deflation of the housing bubble. But all good things must come to an end. The outlook for deal flow is dimming as it gets harder for underwriters to place high-yield debt. Subprime problems at Bear Stearns (NYSE:BSC - News) have soured investors on high-yield debt, and the latest casualty came on July 5. A private equity firm had to resort to a bridge loan for $1.1 billion in financing for the leveraged buyout of ServiceMaster Co. (NYSE:SVM - News). This is a troubling sign, since U.S. equities will suffer if

Since real estate has been the key driver of this credit cycle, this week we look at REITs, which represent a broad range of subsectors. Even a cursory glance shows that real estate in America is now a tale of two cities, with boom times for downtown office space even as the suburbs go bust.

With apologies to Dickens, you could say that it is the best of times and the worst of times for U.S. real estate. Residential real estate continues to sag after peaking in 2005, while commercial real estate is hitting new highs. Office space on Park Avenue in Manhattan sold this week for $510 million, which comes to $1,600 per square foot. That is a record for commercial space in the U.S. Meanwhile, delinquencies on residential mortgages climbed to an 18-month high in the first quarter, and housing prices continue to decline.

The PowerRatings for REIT industries reflects this bifurcated outlook. The REIT industries with higher ratings are in Healthcare and Office space, both of which have bright fundamental outlooks. Pulling up the rear are Residential REITs. This group has a PowerRating of 2, which makes it one of our Industries to Avoid. Hotel/Motel REITs also have high exposure to the U.S. consumer, and it has a PowerRating (for Industries) of 2. In the short run, however, the Hotel/Motel industry got a boost on July 5 when Blackstone Group (NYSE:BX - News) announced a deal for Hilton Hotel (NYSE:HLT - News).

For investors who insist on exposure to real estate, it makes sense to stick with REITs that have the highest PowerRatings (for Industries). Right now this means commercial REITs such as Offices or Healthcare Facilities. Granted, these industries don't have high PowerRatings on an absolute basis. But they make better alternatives than the consumer-driven REITs at the bottom of our industry ratings. Our quantitative data from 1995 through 1996 have shown that PowerRatings do an excellent job for investors who seek high annualized returns over the next three months.

Unwinding Big Positions

Credit problems take a long time to fully emerge. Weaker borrowers suffer first, and then the problem spreads to stronger borrowers. And many mortgage derivatives are complex products, so it takes a while for credit defaults to show up in more complex products. That may be why subprime lending problems originally showed up at HSBC in February, yet it took until June for the hedge funds at Bear Stearns to take a hit.

Another issue is scale. Many bond investors have placed huge directional bets. High leverage is common in fixed income, and some hedge funds have levered their bond portfolios 10-to-1 or even 20-to-1. This means that even tiny declines in bond prices can have a devastating effect on capital.

This is a combustible situation. Bonds are less liquid than stocks, especially when prices are falling. Many of the more exotic bonds are not regularly priced, and portfolio managers don't want to create "fire sale" conditions that force them to mark to market at the worst possible time. This is another reason that it will take investors quite a while to fully unwind their positions.

Sticky Downward

There is yet one more reason that it takes a long time for real estate cycles to turn. People hate taking losses on their homes, so they just take them off the market. This makes real estate prices "sticky downward," which is how Keynes described wages (people don't like pay cuts, either). So the combination of forces is going to make this real estate cycle a protracted, messy affair. Real estate was the engine that drove the U.S. economy for many years. The engine stalled last year, and now it has become a slow-motion train wreck with no caboose in sight.

Rob Martorana, CFA, is Director of Content for PowerRatings.net.

Rob was most recently at TheStreet.com as the Director of Content for Professional Products. Rob has spent 22 years on Wall Street, and was a portfolio manager and head of U.S. equity research at Barclays Private Bank. Robert also managed small-cap stocks at Schroder Capital Management International, was an equity analyst at Vontobel USA, and was an editor and senior industry analyst for The Value Line Investment Survey.

Friday, June 29, 2007

Legends and tales taking blame for housing downturn

Mortgage market commentary
Friday, June 29, 2007

By Lou Barnes
Inman News

The 10-year T-note fell this week all the way to 5.05 percent from its 5.26 percent top two weeks ago. Long-term mortgage rates have settled today near 6.75 percent.

The interest rate decline has had several contributors. In approximate order of importance: fear of default on widening classes of ill-advised debt has pushed money to high-quality paper; a "retracement" from the crest of a big move is normal; and gradually improving inflation data are tilting the Fed from a tight stance toward balanced.

Lastly, regarding an accelerating U.S. economy: wait a minute fellas. Home sales are still falling, and unsold inventories are up to 8.9 months' supply, a 15-year record. Weakness in both consumer confidence and orders for durable goods put the second half of 2007 in question for anything much beyond 2 percent GDP growth.

Everyone is trying to form a housing forecast: how long, how deep, how bad will the collateral damage be? That is, everyone except for those who participated in the Great Derivatized Mortgage Train Robbery, who are doing their level best to keep everyone confused.

The forecasters have run out of metaphors. I'm waiting for these headlines: "Canary Found Dead in Iceberg," followed by "Tip of Coal Mine Feared." Meanwhile, the cover-uppers are selling a variety of urban legends and Tales of The West.

Legend Number One: Loosened standards in late 2005 and 2006 are responsible for the subprime damage, which will be limited to those loans. This is nonsense. We (and all other retailers) were offered the first suicide loans back in 2000, which then and now fall into two generic groups: 100 percent loan-to-value ratio in any form, with or without borrower documentation, and adjustable-rate mortgages with last-cigarette adjustment structure. The roll-out of these loans coincided exactly with Wall Street's discovery of "credit derivatives."

The ultimate foreclosure damage was masked by a decline in interest rates to a 50-year low, and a roaring, self-reinforcing run-up in home prices.

Legend Number Two: Fraud by Main Street lenders has been the main problem. It is a problem; it has always been a problem, and its depth is always discovered when home prices go flat. In today's parade of mortgage horrors, fraud is not even a secondary cause. Rather, the authentic causes (back to those two generic loan types) are: if you have no equity at purchase, and prices go flat, and anything goes wrong in your household, you're cooked. Prices went flat in 2005; that's the problem in '05-'06 loans, not easier credit.

Then there are the ARM-structure effects. In 2006, the Fed took short-term rates from the 1 perent bottom in 2002-2004 to 5.25 percent. ARM indices follow the Fed: in 2002-2004 a subprime borrower adjusting to 5 percent over Libor at the end of year two or three (the despicable "2/28s and 3/27s") only went to a 6 percent or 7 percent pay rate. Now, it's to 10 percent or 11 percent, a disaster having nothing to do with "eased standards" in 2005 and 2006 originations.

Tales of The West

Tale Number One: Housing will bottom out when home sellers finally reduce their prices enough. We better hope not because that would extinguish the equity in another 15 percent of households beyond the 15 percent that have little or none now.

Tale Number Two: Workouts, or negotiated loan modifications, will control the foreclosures. Foreclosure hotlines and counseling are doing excellent work, saving many families, but there is little negotiating room. One classic workout: add delinquent payments to the mortgage. It works if there is equity, but without any, the borrower is toast. Another is rate-reduction, which worked beautifully in the '80s (the FHA and VA "streamline refi") to rewrite 14-15 percent loans down to 8-9 percent. However, rate-reduction requires a lower market-rate world; today, rates are far higher than when the suicides were assisted. It may be possible to rewrite sky-high ARM adjustments, but only at the cost of deepening panic in the credit markets and cash flow collapsing. Take your poison, indolent regulators.

The next canary to hit the iceberg: S&P and Moody's are soon to be exposed in the worst systemic rating error ever. They are going to have to re-rate hundreds of billions of new-age mortgage paper, forcing institutions to acknowledge losses beyond estimation, and in doing so will admit their own fiduciary failure: fee for blindness.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.

***

Thursday, June 28, 2007

Big Apple, Southern cities tops in growth

USA'S LARGEST CITIES

City Population Change 2000-06

New York 8,214,426 205,750

Los Angeles 3,849,378 154,884

Chicago 2,833,321 -62,700

Houston 2,144,491 172,936

Phoenix 1,512,986 191,314

Philadelphia 1,448,394 -69,156

San Antonio 1,296,682 136,738

San Diego 1,256,951 33,535

Dallas 1,232,940 44,317

San Jose 929,936 34,619

Source: Census Bureau


By Dennis Cauchon and Paul Overberg, USA TODAY

The century-long quest of Americans to live in perpetual sunshine and far from snow shows no signs of letting up as surging growth infuses Sun Belt cities with new residents.

The Census Bureau reports today that seven of the 10 most populous U.S. cities are within 500 miles of Mexico. In 1910, all 10 of the biggest cities were within 500 miles of the Canadian border. The once-dominant industrial cities of Cleveland, Pittsburgh and Buffalo find themselves smaller than Mesa, Ariz., and Fresno.

The big exception to the smaller gains outside the Sun Belt is the Big Apple. New York City ranks No. 1 in attracting new residents since 2000, adding nearly 206,000 people. That's more than Phoenix, Houston or Los Angeles gained. Of the 35 cities that added the most population, New York is the only one not located in the South or West.

Economic prosperity and the arrival of new immigrants, who have higher birth rates than the overall population, are driving the city's growth. "It's written into the DNA of New York that immigrants are welcome," says Warren Brown of the Cornell Institute for Social and Economic Research.

FIND MORE STORIES IN: Phoenix | Manhattan | Getty Images | Sun Belt | Gilbert | Big Apple | Empire State Building | Stan Honda
In a change more symbolic of national population trends, Phoenix has supplanted Philadelphia as the nation's fifth-largest city, according to Census estimates for July 1, 2006.

"It's hard to think of the cradle of liberty being overtaken by a rough-and-tumble, independent Western town, but that tells you something about the nature of our country," says Brookings Institution demographer William Frey. "We're a country that's always seeking new horizons."

The explosive growth in parts of the South and West has created boom cities that many people have never heard of. Gilbert, Ariz., a Phoenix suburb, has been adding more than 1,000 people a month for five years and had a population of 191,517 last year.

"It's fun. It's exciting to be growing this fast," says Gilbert Mayor Steve Berman, who moved to town in 1981 when the population was 4,000. "We're creating the coolest place to live."

By contrast, Green Bay, Wis., (100,353) has been losing population.

"We don't want to fall below 100,000," says Green Bay City Council President Chad Fradette. "That has a little prestige with it."

Other findings:

•Hurricane Katrina. New Orleans lost 261,286 residents from 2005 to 2006, dropping its population to 223,388 after Katrina. Gulfport, Miss., lost 7,988 residents to drop to 64,316.

•Suburbanization. Only 27% of Americans live in cities of 100,000 people or more, down from 27.5% in 2000, according to a USA TODAY analysis.

Wednesday, June 27, 2007

Home loan apps in 2-week slide

Real Estate Articles from Inman News

Index that tracks house purchases hit hardest
Wednesday, June 27, 2007

Declining interest rates weren't enough to inspire home purchases or refinancings last week, the Mortgage Bankers Association reported today, as loan applications were down again.

The market composite index, which measures total home loan volume, fell 3.9 percent on a seasonally adjusted basis from the week before.

Home purchases saw the steepest drop-off in activity, as the purchase index sank 4.9 percent from the week before, following a 3 percent decline at mid-month. The index that tracks refinancings was down 2.5 percent last week, following a 4.2 percent drop two weeks ago.

The large decrease in purchase loans boosted the refinance share of mortgage applications to 38.7 percent last week and hiked the adjustable-rate mortgage (ARM) share to 20.4 percent.

Borrowing costs were either static or lower in the latest survey, with the average contract interest rate on 30-year fixed-rate mortgages holding at 6.6 percent, the average rate on the 15-year fixed-rate loan sinking to 6.24 percent from 6.28 percent, and the one-year ARM diving to 5.51 percent from 5.7 percent.

Points, or loan-processing fees expressed as a percent of the total loan amount, averaged 1.54 on the 30-year loans, 1.41 on the 15-year, and 1.14 on one-year ARMs. These points include the origination fee and are based on loan-to-value ratios of 80 percent.

The Mortgage Bankers Association survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.

***

Tuesday, June 26, 2007

New home sales fell 1.6 percent in May

By Patrick Rucker

WASHINGTON (Reuters) - Sales of new U.S. homes fell 1.6 percent in May to a lower-than-expected level while prices climbed from April, according to a government report on Tuesday that continued to point to weakness in the housing sector.

New single-family home sales fell to an annual rate of 915,000 from a downwardly revised rate of 930,000 in April, the Commerce Department said.

Analysts polled by Reuters were expecting May sales to fall to a 925,000 unit pace from a previously reported rate of 981,000 units in April.

In May, the median sales price of a new home rose 1.5 percent to $236,100 from $232,700 in April. Last month, new homes prices took a record tumble while sales rose strongly.

There were 536,000 new homes for sale in May, a fall from the 542,000 reported in April. It would take 7.1 months to clear that inventory at the current sales pace, more than the 7.0 months recorded in April.

U.S. Treasury debt prices and the dollar were little changed after a mixed batch of data, which in addition to the new homes report included news consumer confidence fell to a 10-month low in June while a manufacturing index of the Richmond Federal Reserve rose sharply in June from May.

Federal funds rate futures showed perceived chances of a Fed rate cut by year-end were slightly trimmed after the reports.

Tuesday's data came a day after another key report that measures the pace of existing home sales -- which represents 85 percent of the housing market. May home resales slipped to their lowest level in four years while the overstock of homes rose and prices dropped from their year-ago level for the 10th straight month.

New home sales were mixed across the regions, with the Midwest reporting the largest gain of 31 percent while the Northeast saw an 11 percent drop. The South saw a 7.3 percent drop while the West saw a decline of 1.9 percent.

Thursday, June 21, 2007

Americans still confident in home values: survey

Thu Jun 21, 2007 5:43PM EDT
By Mary Childs

WASHINGTON (Reuters) - Although existing homes are selling at their slowest pace in four years, most Americans are confident their homes are worth more now than they were a year ago, according to a survey released on Thursday.

A poll conducted by the Boston Consulting Group found that 55 percent of Americans believe their house would sell for more money now than last year, compared with 59 percent who felt the same way last summer. Eighty-five percent expect their home to be worth even more in five years than it is now.

"It's a reasonable expectation. Markets neither boom nor bust forever," said David Berson, the chief economist with mortgage finance company Fannie Mae. "We're in a down period now, and I don't think it's going to end any time soon, but it will end long before five years is up."

Homeowners remain optimistic even though existing home sales last month hit their lowest rate since June 2003.

National surveys of home prices seem to bear out at least a degree of optimism, showing prices still rising, if only slowly.

According to the Office of Federal Housing Enterprise Oversight, the average U.S. home price rose 4.3 percent over the year ended in the first quarter, the smallest gain in nearly a decade.

While record rates of homes entering foreclosures and weak sales figures have troubled analysts, 63 percent of the 1,007 homeowners surveyed still see real estate as a solid investment.

The softening housing market also appears to have had little impact on spending behavior. Seventy-six percent of participants in the nationwide telephone survey say it hasn't affected their spending at all.

"Talk of declining average values of homes is not forcing a cutback in spending," Michael Silverstein, senior partner at Boston Consulting, said in a statement. "It's just not translated into the American psyche."

Still, the survey, which was conducted between May 31 and June 3, showed concern among nearly half the participants that declining housing prices are hurting the national economy.

Most predict the slump will last two years. Even so, 69 percent of homeowners interviewed anticipate renovating their nest-egg in the next year.

Wednesday, June 20, 2007

We should prepare now for dangerous global cooling

Let's interject a little rational thought into the climate change discussion:

"Read the sunspots

The mud at the bottom of B.C. fjords reveals that solar output drives climate change - and that we should prepare now for dangerous global cooling

R. TIMOTHY PATTERSON, Financial Post
Published: Wednesday, June 20, 2007

Politicians and environmentalists these days convey the impression that climate-change research is an exceptionally dull field with little left to discover. We are assured by everyone from David Suzuki to Al Gore to Prime Minister Stephen Harper that "the science is settled." At the recent G8 summit, German Chancellor Angela Merkel even attempted to convince world leaders to play God by restricting carbon-dioxide emissions to a level that would magically limit the rise in world temperatures to 2C.

Forget warming, beware the new ice age

The fact that science is many years away from properly understanding global climate doesn't seem to bother our leaders at all. Inviting testimony only from those who don't question political orthodoxy on the issue, parliamentarians are charging ahead with the impossible and expensive goal of "stopping global climate change." Liberal MP Ralph Goodale's June 11 House of Commons assertion that Parliament should have "a real good discussion about the potential for carbon capture and sequestration in dealing with carbon dioxide, which has tremendous potential for improving the climate, not only here in Canada but around the world," would be humorous were he, and even the current government, not deadly serious about devoting vast resources to this hopeless crusade.

Climate stability has never been a feature of planet Earth. The only constant about climate is change; it changes continually and, at times, quite rapidly. Many times in the past, temperatures were far higher than today, and occasionally, temperatures were colder. As recently as 6,000 years ago, it was about 3C warmer than now. Ten thousand years ago, while the world was coming out of the thou-sand-year-long "Younger Dryas" cold episode, temperatures rose as much as 6C in a decade -- 100 times faster than the past century's 0.6C warming that has so upset environmentalists.

Climate-change research is now literally exploding with new findings. Since the 1997 Kyoto Protocol, the field has had more research than in all previous years combined and the discoveries are completely shattering the myths. For example, I and the first-class scientists I work with are consistently finding excellent correlations between the regular fluctuations in the brightness of the sun and earthly climate. This is not surprising. The sun and the stars are the ultimate source of all energy on the planet.

My interest in the current climate-change debate was triggered in 1998, when I was funded by a Natural Sciences and Engineering Research Council strategic project grant to determine if there were regular cycles in West Coast fish productivity. As a result of wide swings in the populations of anchovies, herring and other commercially important West Coast fish stock, fisheries managers were having a very difficult time establishing appropriate fishing quotas. One season there would be abundant stock and broad harvesting would be acceptable; the very next year the fisheries would collapse. No one really knew why or how to predict the future health of this crucially important resource.

Although climate was suspected to play a significant role in marine productivity, only since the beginning of the 20th century have accurate fishing and temperature records been kept in this region of the northeast Pacific. We needed indicators of fish productivity over thousands of years to see whether there were recurring cycles in populations and what phenomena may be driving the changes.

My research team began to collect and analyze core samples from the bottom of deep Western Canadian fjords. The regions in which we chose to conduct our research, Effingham Inlet on the West Coast of Vancouver Island, and in 2001, sounds in the Belize-Seymour Inlet complex on the mainland coast of British Columbia, were perfect for this sort of work. The topography of these fjords is such that they contain deep basins that are subject to little water transfer from the open ocean and so water near the bottom is relatively stagnant and very low in oxygen content. As a consequence, the floors of these basins are mostly lifeless and sediment layers build up year after year, undisturbed over millennia.

Using various coring technologies, we have been able to collect more than 5,000 years' worth of mud in these basins, with the oldest layers coming from a depth of about 11 metres below the fjord floor. Clearly visible in our mud cores are annual changes that record the different seasons: corresponding to the cool, rainy winter seasons, we see dark layers composed mostly of dirt washed into the fjord from the land; in the warm summer months we see abundant fossilized fish scales and diatoms (the most common form of phytoplankton, or single-celled ocean plants) that have fallen to the fjord floor from nutrient-rich surface waters. In years when warm summers dominated climate in the region, we clearly see far thicker layers of diatoms and fish scales than we do in cooler years. Ours is one of the highest-quality climate records available anywhere today and in it we see obvious confirmation that natural climate change can be dramatic. For example, in the middle of a 62-year slice of the record at about 4,400 years ago, there was a shift in climate in only a couple of seasons from warm, dry and sunny conditions to one that was mostly cold and rainy for several decades.

Using computers to conduct what is referred to as a "time series analysis" on the colouration and thickness of the annual layers, we have discovered repeated cycles in marine productivity in this, a region larger than Europe. Specifically, we find a very strong and consistent 11-year cycle throughout the whole record in the sediments and diatom remains. This correlates closely to the well-known 11-year "Schwabe" sunspot cycle, during which the output of the sun varies by about 0.1%. Sunspots, violent storms on the surface of the sun, have the effect of increasing solar output, so, by counting the spots visible on the surface of our star, we have an indirect measure of its varying brightness. Such records have been kept for many centuries and match very well with the changes in marine productivity we are observing.

In the sediment, diatom and fish-scale records, we also see longer period cycles, all correlating closely with other well-known regular solar variations. In particular, we see marine productivity cycles that match well with the sun's 75-90-year "Gleissberg Cycle," the 200-500-year "Suess Cycle" and the 1,100-1,500-year "Bond Cycle." The strength of these cycles is seen to vary over time, fading in and out over the millennia. The variation in the sun's brightness over these longer cycles may be many times greater in magnitude than that measured over the short Schwabe cycle and so are seen to impact marine productivity even more significantly.

Our finding of a direct correlation between variations in the brightness of the sun and earthly climate indicators (called "proxies") is not unique. Hundreds of other studies, using proxies from tree rings in Russia's Kola Peninsula to water levels of the Nile, show exactly the same thing: The sun appears to drive climate change.

However, there was a problem. Despite this clear and repeated correlation, the measured variations in incoming solar energy were, on their own, not sufficient to cause the climate changes we have observed in our proxies. In addition, even though the sun is brighter now than at any time in the past 8,000 years, the increase in direct solar input is not calculated to be sufficient to cause the past century's modest warming on its own. There had to be an amplifier of some sort for the sun to be a primary driver of climate change.

Indeed, that is precisely what has been discovered. In a series of groundbreaking scientific papers starting in 2002, Veizer, Shaviv, Carslaw, and most recently Svensmark et al., have collectively demonstrated that as the output of the sun varies, and with it, our star's protective solar wind, varying amounts of galactic cosmic rays from deep space are able to enter our solar system and penetrate the Earth's atmosphere. These cosmic rays enhance cloud formation which, overall, has a cooling effect on the planet. When the sun's energy output is greater, not only does the Earth warm slightly due to direct solar heating, but the stronger solar wind generated during these "high sun" periods blocks many of the cosmic rays from entering our atmosphere. Cloud cover decreases and the Earth warms still more.

The opposite occurs when the sun is less bright. More cosmic rays are able to get through to Earth's atmosphere, more clouds form, and the planet cools more than would otherwise be the case due to direct solar effects alone. This is precisely what happened from the middle of the 17th century into the early 18th century, when the solar energy input to our atmosphere, as indicated by the number of sunspots, was at a minimum and the planet was stuck in the Little Ice Age. These new findings suggest that changes in the output of the sun caused the most recent climate change. By comparison, CO2 variations show little correlation with our planet's climate on long, medium and even short time scales.

In some fields the science is indeed "settled." For example, plate tectonics, once highly controversial, is now so well-established that we rarely see papers on the subject at all. But the science of global climate change is still in its infancy, with many thousands of papers published every year. In a 2003 poll conducted by German environmental researchers Dennis Bray and Hans von Storch, two-thirds of more than 530 climate scientists from 27 countries surveyed did not believe that "the current state of scientific knowledge is developed well enough to allow for a reasonable assessment of the effects of greenhouse gases." About half of those polled stated that the science of climate change was not sufficiently settled to pass the issue over to policymakers at all.

Solar scientists predict that, by 2020, the sun will be starting into its weakest Schwabe solar cycle of the past two centuries, likely leading to unusually cool conditions on Earth. Beginning to plan for adaptation to such a cool period, one which may continue well beyond one 11-year cycle, as did the Little Ice Age, should be a priority for governments. It is global cooling, not warming, that is the major climate threat to the world, especially Canada. As a country at the northern limit to agriculture in the world, it would take very little cooling to destroy much of our food crops, while a warming would only require that we adopt farming techniques practiced to the south of us.

Meantime, we need to continue research into this, the most complex field of science ever tackled, and immediately halt wasted expenditures on the King Canute-like task of "stopping climate change."

R. Timothy Patterson is professor and director of the Ottawa-Carleton Geoscience Centre, Department of Earth Sciences, Carleton University."

Home loan apps decline

Wednesday, June 20, 2007

Inman News

Fewer borrowers chose to take out loans for home purchases and refinancings last week even as long-term mortgage rates ended a monthlong climb, the Mortgage Bankers Association reported today.

The drop-off in activity pushed the market composite index -- a measure of mortgage application volume -- down 3.4 percent on a seasonally adjusted basis from the week before.

Applications for refinancings declined 4.2 percent from the first week of June, and the index that tracks home purchases was down 3 percent.

Borrowing costs on long-term loans were fairly calm in the latest survey, with the average contract interest rate for 30-year fixed-rate mortgages dipping to 6.6 percent from 6.61 percent a week earlier and the average rate on the 15-year fixed holding at 6.28 percent.

Costs on the one-year ARM, however, jumped from 5.48 percent to 5.7 percent during the period, boosting the ARM share of total applications to 20.3 percent from 18.7 percent a week earlier. The refi share of activity held at 38 percent, MBA reported.

Points, or loan-processing fees expressed as a percent of the total loan amount, averaged 1.58 on the 30-year loans, 1.42 on the 15-year, and 1.16 on one-year ARMs. Statistics, which include the origination fee, are based on loan-to-value ratios of 80 percent.

The Mortgage Bankers Association survey covers approximately 50 percent of all U.S. retail residential mortgage originations, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.

***

Expand Your Living Space ... Outdoors

(Courtesy of AOL)

Jun 15th 2007 12:34PM

Everyone seems to be into home makeovers. How could you not after watching an episode of the tear-jerking 'Extreme Makeover: Home Edition'? And do you remember 'Trading Spaces'? Is that show still on?

It seems like now the trend is all about outdoor living. One of the latest home catalogs that I received features an outdoor kitchen, complete with stainless steel grill and other cooking appliances. Of course, there's an outdoor wet bar and a beautiful dining set overlooking the lush garden and fountain. Maybe that's great if you live in California. But the East Coast humidity may just kill the fun of cooking and dining outside.

Regardless of how I feel, I can't deny that expanding living space outdoors is hot right now. Just look at the list of top searched outdoor living, the term "outdoor kitchens" is tops on our list. This definitely piques my curiosity and maybe I'll stop throwing away that outdoor living catalog!

So what have you done to expand your living space outdoors? Any tips and pointers?

This month's top searched outdoor living terms on AOL Search:
1) Patio furniture
2) Hot tubs
3) Patio umbrellas
4) Outdoor kitchens
5) Outdoor lighting
6) Swimming pool
7) Outdoor rugs
8) Patio cushions
9) Patio doors
10) Grill

To check out more outdoor living ideas, go to AOL Shopping and for more tips and ideas, search for outdoor living spaces on AOL Search.
Posted by Mia

Tuesday, June 19, 2007

Economist expects U.S. home prices to fall 10%

Forecast says no recession, but 'certainly close'
Tuesday, June 19, 2007

By Glenn Roberts Jr.
Inman News

Turbulence.

That is the one-word title for the latest U.S. economic forecast by David Shulman of the Anderson Forecast at the University of California, Los Angeles.

"This is not a recession, but it is certainly close," Shulman writes in the forecast, released today. "If our forecast is close to the mark, the period from the second quarter of 2006 to the first quarter of 2008 will mark a historically anomalous long period of below-trend growth."

Shulman's previous quarterly forecast report, released in April, was titled, "A Long Runway for the Soft Landing."

His latest forecast anticipates a 10 percent peak-to-trough price decline in U.S. housing prices "that will likely extend into 2009."

In an interview this week with Inman News, Shulman said the current real estate downturn is "completely different from anything we've previously experienced," adding that the only comparable period may be the Great Depression.

"We've never had the run-up in house prices we saw between 2000 and 2005," and the housing-market slump is likely to be similarly unprecedented, he said.

A rise in foreclosures and the withering of the subprime lending market are still "in the early innings," he said, and foreclosure outlook is expected to get worse "well into 2008."

There may be statistical errors with U.S. gross domestic product numbers, the report notes, and recent real GDP growth may have been understated.

While some economists expected the Federal Reserve to cut the federal funds rate to prop up the ailing housing market, worries about inflation risks have perhaps taken precedent, Shulman noted in his report.

"We do not expect much help from monetary policy until the fourth quarter," Shulman stated in his report, and this "delay will push back the housing recovery until well until 2008."

His forecast calls for the Federal Reserve to cut the federal funds rate from a current level of 5.25 percent to 4.5 percent, with the reductions beginning in fourth-quarter 2007.

The rate of housing starts is expected to average 1.35 million units in 2007 and 1.43 million in 2008, according to the report.

Weakness in the housing market "is finally spilling over into consumption spending," the report states, and the U.S. economy has transitioned from "locomotive" to "caboose" among global economies.

"Today, Europe and Japan are strong and the U.S. is lagging. With the Euro-area expected to grow at 2.6 percent, the United Kingdom at 2.7 percent and Japan at 2.4 percent, our estimate of 1.8 percent (for the United States) is the laggard.

"Furthermore, China continues to grow at a blistering double-digit pace and India is not too far behind," the report states, and the global economy "is powering the stock market to new highs."

U.S. export growth, growth in business investment and especially commercial structures, and continued spending by wealthy consumers "will keep the U.S. out of recession in 2007," Shulman expects. The housing decline should be behind us by mid-2008, he states.

In a separate report focused on California, economist Ryan Ratcliff stated, "So far, 2007 has been a bit of a puzzle in the California economy. Falling sales, weak prices and rising foreclosures have continued to rule the local housing markets, and both national and state measures of construction activity suggest that real estate has been a drag on economic growth for close to a year now.

"But in spite of all this bad news from real estate, the wider California economy is mostly unfazed: job growth has slowed only slightly and we've seen only a minor uptick in unemployment."

About 27 percent of all job creation in the state from 2003-05 was from the construction sector, compared with about 11 percent from 1990-2005, the report states.

While previous forecasts anticipated "significant job loss" for the construction sector, Ratcliff notes in his report that construction has remained flat since early 2006, while the real estate finance sector "has lost enough jobs in 2006 to bring growth in financial activities to a halt."

Mortgage-related industries have seen significant job losses in the past 12 months, the report states.

Strength of the commercial building industry may have served to buoy construction employment during this residential decline, the report suggests.

Shulman also said that there may be an issue with immigrant workers in the construction industry "getting paid off the books."

Ratcliff's report expects a combination of job losses in construction and real estate finance to hit home during the rest of this year and in early 2008, pulling down overall payroll job growth in the state to less than 1 percent for the next five quarters. The report also expects a rise in unemployment to 5.5 percent.

Ratcliff states that there are some mixed signals for real estate in California, such as a decline in median sales price of about 10 percent in some counties over the past year, "but some counties have actually seen appreciation accelerate in the last six months, and median sales prices for larger geographies are universally higher."

The median sales price in the state hit an all-time high of $484,000 in April, he noted, while a home-price gauge by a government agency fell for two consecutive quarters.

Homes that have moved all the way through a foreclosure process "are rapidly approaching highs not seen since the 1990s, and several counties have surpassed their previous highs." But despite surging foreclosure sales, "resale prices have been largely unfazed," the report states.

Ratcliff expects that, based on the lengthy pipeline of mortgage resets, the state's housing market may not return to normal until mid-2009. And that return to normalcy could come as soon as mid-2008, based on historical building-cycle data, he states.

"Unfortunately, both of these perspectives argue that things in the housing market will get worse before they get better. While we don't see any calamitous implosion of home prices in the near future, this patter of flat to slight falling prices and weak sales volumes will be the norm for some time to come."

***

Send tips or a Letter to the Editor to glenn@inman.com, or call (510) 658-9252, ext. 137.

Copyright 2007 Inman News

U.S. Economy: Housing Starts Drop; Slump May Persist (Update5)

By Bob Willis

June 19 (Bloomberg) -- Home starts in the U.S. fell for the first time in four months in May as interest rates rose, suggesting the worst housing recession in 16 years will persist.

Builders broke ground on new houses at an annual rate of 1.474 million, down 2.1 percent from the prior month, the Commerce Department said today in Washington. Building permits increased 3 percent to 1.501 million.

The slump, which has lasted almost two years, is restraining economic growth even as inflation is too high for the comfort of Federal Reserve officials. Meanwhile, the average rate on a 30-year fixed mortgage has jumped to the highest in more than a year, putting pressure on first-time buyers and raising the prospect of additional defaults.

``There is still some more downside to the housing market,'' said Nariman Behravesh, chief economist at Global Insight Inc. in New York. ``Mortgage rates started up again and there is still a shakeout going on in subprime.''

Behravesh came closest to predicting the drop in starts among 68 economists surveyed by Bloomberg News. The median forecast was for a decline to a 1.472 million pace.

The housing industry is also wrestling with soaring foreclosures among subprime borrowers -- those with poor or incomplete credit histories. Lower prices and more incentives have failed to spur interest as buyers wait for bigger bargains.

Yields on Treasury notes fell and stocks were little changed. The yield on the benchmark 10-year note was 5.08 percent at 2 p.m. in New York. A six-week rout pushed the yield to a five-year high of 5.32 percent on June 13.

Weakness in West

The drop in starts was led by a 20 percent slump in the West. Construction also fell 1.6 percent in the South. Starts rose 16 percent in both the Northeast and Midwest.

Housing's recession cut 0.9 percentage point from growth in the first quarter after detracting 1.2 percentage points in the second half of 2006.

The drop in homebuilding slowed economic growth to a 0.6 percent annual rate in the first quarter, the weakest in four years. Economists surveyed by Bloomberg forecast the economy will grow 2.1 percent this year, compared with an average of 3.1 percent over the last three decades.

Borrowing Costs

The average rate on a 30-year fixed rate mortgage rose to 6.74 percent last week, according to figures from Freddie Mac, the No.2 buyer of U.S. mortgages. The increase reflected expectations of faster global growth and fears inflation would accelerate. The rate averaged 6.22 percent last month and 6.18 percent in April.

Starts were down 24 percent in the 12 months ended in May.

``The trend down is still intact,'' said Kevin Logan, senior market economist at Dresdner Kleinwort in New York, who forecast a fall to 1.47 million units. ``The housing contraction is going to be a drag for the rest of the year.''

Construction of single-family homes fell 3.4 percent last month to a 1.17 million rate. Work on multifamily homes, such as townhouses and apartment buildings, increased 3.1 percent to an annual rate of 304,000, the most this year.

The increase in permits was led by a jump in multifamily authorizations. Permits for single-family homes dropped 1.8 percent to a 1.05 million annual pace, the lowest since July 1997.

``We continue to see a deterioration in demand for single- family homes, and so it looks like there's more downside to go for the housing market,'' said Tim McGee, chief economist at U.S. Trust Corp. in New York.

Unsold Homes

Record levels of unsold homes suggest the slump is far from over. Fed policy makers now acknowledge the housing recession may linger longer than previously forecast.

``The adjustment in the housing sector is still ongoing, and the slowdown in residential construction now appears likely to remain a drag on economic growth for somewhat longer than previously expected,'' Chairman Ben S. Bernanke said June 5.

A record number of Americans were at risk of losing their homes last quarter because they couldn't make payments as interest rates rose and growth slowed, according to a report last week from the Mortgage Bankers Association. The share of all mortgages entering foreclosure rose to 0.58 percent from 0.54 percent in the fourth quarter.

The failure of at least 50 subprime lenders, who make loans to consumers with poor or limited credit history, combined with the increase in foreclosures has raised concern more homes will be thrown back on the market.

Subprime

Some banks have made it more difficult for borrowers to qualify for a mortgage in the wake of the subprime debacle. Add the jump in rates, and affordability has taken a hit.

Declines in sales, construction and prices this year are going to be steeper than previously thought, the National Association of Realtors said June 6, in its fourth forecast revision this year. Housing starts are likely to fall 21 percent to 1.43 million from 1.8 million last year, the group said.

Sales of previously owned homes probably will tumble 4.6 percent to 6.18 million and the median price likely will fall 1.3 percent to $219,100, the Chicago-based trade group said. A month earlier, the association projected 2007 home sales to decline 2.9 percent. Sales of new homes will fall to 860,000 from 1.05 million last year, the group said.

A report yesterday showed builders turned more pessimistic this month. The National Association of Home Builders/Wells Fargo sentiment index dropped to 28, a 16-year low, from 30 in May. Readings below 50 mean most respondents view conditions as poor.

`Really Worried'

``Builders are really worried now, not only by the credit tightening in the mortgage market, but now all of a sudden by an increase in the fundamental mortgages as well,'' David Seiders, chief economist at the National Association of Homebuilders, said in an interview yesterday.

Hovnanian Enterprises Inc., New Jersey's largest homebuilder, last month reported its third consecutive quarterly loss as it cut prices and wrote off land options while sales continued to plummet.

``Without a doubt, things have slowed since about March,'' said Ara Hovnanian, the builder's chief executive officer in an interview yesterday. ``There is not a recovery that is about to happen.''

To contact the reporter on this story: Bob Willis in Washington bwillis@bloomberg.net

Last Updated: June 19, 2007 15:19 EDT

Top Searched States for Real Estate

(Courtesy of Mia at AOL)

Jun 18th 2007 3:06PM

I have lived in the Washington, D.C., metro area for almost 10 years. That is an eternity for me! I used to move every four to five years. So once in a while, I get the itch to look at other cities and states to see what's out there. But for one reason or another, I always end up staying here.

I was curious to see what states people search for when they're looking to move. It's no surprise that Florida real estate and North Carolina real estate are at the top. The warm weather and low cost of living certainly help. It could also be people looking for a second home. However, I was surprised to see that Maine real estate made it second on the list -- is there something about Maine that I don't know about?

For now, I think I'll stay in the D.C. area since it is a nice place to live. The humidity doesn't bother me and there are plenty of good restaurants around. People are generally friendly -- probably those Southerners who moved up north (although technically Washington, D.C., is in the south). Most importantly, my family and friends are in the area, and that's a huge incentive to stick around here.

How about you? Do you constantly look at real estate in other states? If you recently moved out of state, why did you move? Or, maybe you have your own list of states you're checking out ... if so, please share!

Top searched states for real estate on AOL Search:
1) Florida real estate
2) Maine real estate
3) North Carolina real estate
4) Arkansas real estate
5) Hawaii real estate
6) Tennessee real estate
7) Texas real estate
8) Delaware real estate
9) Utah real estate
10) Arizona real estate

Tuesday, May 15, 2007

Wanted: 250 to 400 tillable acres within a one hour radius of Columbus, Ohio

I have a client that is interested in finding 250 to 400 acres of tillable farm land for agricultural purposes. The acerage does not need to be contiguous parcels of land, but the parcels should be in relatively close proximity to each other. The acerage should be no further that a one hour drive from central Columbus.

Please contact me directly if you have any properties that meet the criteria listed above:

Vito Boscaino
Owner / Realtor / MBA
Help-U-Sell North High Realty
4485 North High Street
Columbus, OH 43214

614.447.3050 (office)
614.571.9054 (mobile)
614.447.3051 (facsimile)

email: northhighrealty@helpusell.com

Tuesday, April 24, 2007

Don't let your ARM break you

See that adjustable-rate mortgage pain coming and plan accordingly

By Jennifer Openshaw
Last Update: 7:49 PM ET Apr 24, 2007

LOS ANGELES (MarketWatch) -- You went a little large with that 2005 home purchase. It felt good. You bit off a lot in the form of a large adjustable-rate mortgage to get there, but you made it happen. The low 3.75% intro rate really helped. You knew it would eventually go higher, but hey -- home prices would go higher, and so would your income.

The problem is, it didn't happen.

Well, your income did rise, but so did your expenses: higher energy costs, growing family, rising taxes. Now about those home prices -- you know the rest of that story. See how home prices are flagging.

Now what? The honeymoon is about to end, and you're bracing yourself and your family for the inevitable. Your mortgage payment is about to go up, maybe by hundreds of dollars. And now is not a good time to join the stampede of foreclosures, preforeclosures, short sales and other forms of dire and unintended consequences.

What do you do?

Coverage of home buying and selling, housing prices, mortgage information and home improvement.

Panic? Probably not. Sure, it's a financial setback to see any cost go up a lot. But the secret to weathering any storm is to see it coming -- and plan accordingly. A lot of energy has recently gone into helping underwater homeowners avoid or deal with impending foreclosures.

Foreclosures? I'm guessing many of you will feel the pain or rising payments, but aren't in foreclosure land. You're not a subprime borrower. With a little planning and some modest sacrifices, you'll get over the hump. Here's how:

Know where you stand

The first step is to pick up the phone (or go in person) to your lender for exact figures. How big is the adjustment, when is it coming, and what will the next one be? Don't be reluctant. Human nature tells us to stick our heads in the sand when something bad happens financially. But know that lenders want you to plan and may even help.

Also, understand the full impact. Worst case, you might be looking at an extra $500 in interest payments after the reset. But for most it's tax deductible; the "net" impact is less.

If you plan far enough in advance, you may be able to save enough to get you over the hump. A $500/month adjustment is $6,000 a year. Not chump change, but not and an enormous sum, especially after tax effects are considered (in a 30% federal/state bracket, that $6,000 only costs you $4,200). If you could save enough to buy the home in the first place, you can probably save a good part of that $4,200 if you put your mind to it.

Find additional income sources

Obviously, if your costs go up, one solution to the problem is to expand your income. One way is to rent a room to a friend, relative, or insider. Not forever -- just until you can get your budget balanced again.

Or, find a small second job. Even a part-time retail job can pull $500 a month for about 15 hours a week. That goes a long way towards the reset, and you'll get a nice store discount besides (but don't spend it all!)

Refinance

I'm normally not a big advocate of bill consolidation loans, mainly because once smaller debts are wiped clean they have a way of reappearing. But consolidation can be a good way to offset a reset.

Why? Because reduced interest costs on credit-card and other high-cost debt can cancel out the increase in ARM interest, keeping your total interest costs relatively unchanged. This approach has risk, but makes sense with discipline.

The best idea, according to Eric Margolias, CEO of mortgage broker Source4HomeLoans, is to refinance into a fixed loan if at all possible. Fixed rates have stayed relatively constant, and with the ARM you remain exposed to rate increases. Prepare by fixing your credit, shopping at places like LendingTree.com and keep in mind that the percentage of fixed-rate applications being rejected is on the rise.

But for peace of mind -- and future financial prosperity -- "fixed" is probably where you should be anyway. Get there if you can.

Keep it in perspective

Margolias is adamant about looking at the bright side. Don't look at your ARM as a loan that got more expensive, but rather one that gave you a healthy discount in the beginning. You saved $6,000 a year initially on that $300,000 loan.

Tax implications aside, that's a big number -- where else can you get a discount large enough to buy a late model used car? It probably helped you get the home in the first place.

And finally, even if you don't successfully escape your ARM, history shows you're still in great shape. Two decades ago any mortgage under 10% seemed like a bargain. Today's interest rates -- even at the high end -- are among the lowest in history.

And that, as I see it, is the real bargain.

Jennifer Openshaw, author of the upcoming book, "The Millionaire Zone," is CEO of winningadvice.com. She is also host of ABC Radio's "Winning Advice with Jennifer Openshaw" and appears frequently on such shows as the CBS Early Show and Good Morning America. E-mail her at Openshaw@winningadvice.com.

Article courtesy of MarketWatch 04.24.07

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Thursday, April 19, 2007

Spruce Up Your Home To Sell

By Mary Dalrymple
April 19, 2007

This article is part of our Subprime Survival Guide.

With housing sales slumping in many parts of the country, anyone forced to move at this less-than-opportune moment faces a challenge -- how do you get the best price for your humble abode when buyers can afford to be pickier than a diva in a shoe store?

One trick to making your home seem more attractive than all the rest is to, well, make it more attractive than all the rest. The experts call this staging. You can hire a professional to do the job for you, or you can do much of the work yourself.

Start with some criticism

If you have a few opinionated friends (and who doesn't) and a couple of free weekends, you can make major improvements without shelling out a lot of money. It could be just like one of those home and garden television shows, but without the chummy banter among the thin, well-dressed designers. Start by asking your opinionated friends to come over and walk through the house as though they were potential buyers. Ask them to point out anything that might turn off a home shopper. Don't take their comments personally. Everyone who comes to look at your home will walk through a critic. Better to hear the bad news now than suffer the consequences by settling for a lower price, or by watching your house sit on the market too long.

With your friends' list of complaints in hand, tackle the job. Next, get rid of clutter. We all have it, and we get used to looking at it. It's time to banish it. Think in terms of making your home look like the picture-perfect rooms in those glossy magazines. What makes them so alluring? To begin with, your husband's shoes aren't strewn all over the floor, and the dining room's not piled high with junk mail and dusty knick-knacks.

Empty it out

Remove things that overwhelm visitors with your personality. We know your collection of porcelain dalmatian dogs is charming, but it may interfere with buyers trying to imagine themselves living in the house. Along these lines, experts recommend you remove all your family photos. It's my humble opinion that one or two well-placed snapshots give the warm impression that your home made your family happy and can do the same for others.

Consider removing some furniture if your house is stuffed to the gills. To keep costs low, resist the urge to put everything in self-storage. Give away or sell anything you know you won't use in your new home. Don't pile it all into the basement or into a closet. Buyers will look in your closets, your kitchen cabinets, your garage, your basement, and probably even your underwear drawer. Almost nothing's off limits.

Scrub-a-dub-dub

Then, clean. Clean like you've never cleaned before. Pretend Martha Stewart and your mother-in-law will stop by at the same time to inspect for cobwebs in the corners, dust on the mini-blinds, and streaks on the windows. Your potential buyers will consider your house well maintained if it looks sparkling. Even old kitchens and bathrooms can look newer if they're scrubbed to a shine.

Also, go through your home with a bloodhound's nose. Now is the time to eliminate the musty odor in the bathroom and eradicate any scent suggesting that Misty the cat likes to hang out in the basement. I recently found myself charmed by a house for sale in my neighborhood for no other good reason than the scent of freshly baked chocolate chip cookies hanging in the air.

Freshen it up

If you've been to many local open houses, you've probably realized that first impressions count, and that means your front yard and front door should be inviting. Even if you're not a green thumb, planting a few colorful annuals can cheer up an entrance. (Just pull them out if you can't keep them looking healthy.)

Anything, including the front door, can look fresher with a new coat of paint. Even urbane city dwellers who know a screwdriver only as a drink with orange juice can usually manage to paint. If you're not that handy, this can be one of the less expensive jobs for a professional. Make your priority any room that has decor you can date. Take note if your opinionated friends say something like, "That's so mid-1980s country kitchen."

Now is also the time to fix all the "quirks" that make your house your home. Fix the leaky faucets and running toilets, the broken stair rail, the loose doorknobs, and all the other little things that buyers won't want to do themselves.

Watch your budget

Like many household improvements, this one can get expensive quickly if you let it. Before you know it, you could be thinking about buying that new sofa you've been eying and upgrading all your kitchen appliances.

But remember -- you don't want to give all your extra home profits to Lowe's (NYSE: LOW) or Home Depot (NYSE: HD). Don't get carried away if you don't want to spend a lot of money on this project. Put some elbow grease into the job -- by cleaning and getting rid of clutter -- before you start the projects that cost you money. Then set a budget and do whatever gives you the most bang for your buck. Put repair jobs for obvious problems and paint at the top of the list. Flip through some of those glossy magazines for inspiration, and if you need some help, visit the Fools on the Building & Maintaining a Home discussion board. You can also learn to Be a Smart Owner from the Home and Mortgage center.

If you're contemplating more extensive repairs or renovations, check out these other Foolish articles:

Fool contributor Mary Dalrymple hopes to avoid all that cleaning by never moving, and she welcomes your feedback. Home Depot is an Inside Value recommendation. The Motley Fool has a disclosure policy.

Wednesday, April 18, 2007

Columbus - March 2007 Home Sale Statistics from the Columbus Board of Realtors


March 2007 Home Sales

Finally, home prices inching up

(April 18, 2007) After nine consecutive months of negative home price appreciation, central Ohio home prices are again headed in the right direction. The average price of a home sold in March was $168,586, up 2.3 percent from one year ago according to the Columbus Board of REALTORS®.

"The average price of a home was up 2.0 percent in February and now 2.3% in March," said Brad Bennett, President of the Columbus Board of REALTORS®. "As 2006 was the only year on record where the average home price appreciation fell, the turnaround is a welcome relief to all home owners."

Although January home sales were up 12.2 percent, February sales fell almost two percent and March sales followed up with a drop of 16.1 percent from last year. Year to date, there have been 5,101 home sales in the first quarter, down 4.6 percent from 2006.

"We anticipated the drop in closings for March," says Bennett. "It's a direct reflection of the record low temperatures and snow emergencies we experienced back in January and early February which kept most of us indoors as much as possible. As a result, home showing activity and consequently offers to purchase homes dropped significantly."

There were 5,200 homes listed in March, up almost one percent from last year. This puts the number of residential homes for sale at 17,699 which is 10.7 percent higher than were on the market at the end of first quarter 2006.

According to Bennett, "we added over 52 percent more homes to the market in March as compared to February. This is partly due to the traditional 'coming out' season, but also due again to the weather in February which put the chill on listing activity as well."

"Now is definitely a great time to buy a home. There is an excellent selection of homes to choose from and interest rates are still very competitive. And real estate is unquestionably the best long term investment," adds Bennett.

Featured Listing - 88 Deland Avenue, Clintonville, OH 43214

Featured Listing - 677 E. Weisheimer, Clintonville, OH 43214

Monday, April 16, 2007

Featured Listing - 237 Halligan Avenue, Worthington, OH 43085

Friday, April 13, 2007

Featured Listing

Featured Listing

Scratch-free hardwood floors possible

Tips on sanding, staining, applying finish
Friday, April 13, 2007 By Paul Bianchina Inman News

Q: I have older hardwood floors, and I want to remove scratches and lighten the color. I would also like to redo the paneling in my den. Do you have any ideas on how to do this? --Marsha H., via e-mail.

A: Removing the scratches and changing the color of your hardwood floor will require that the floors be sanded and refinished. The basic process is as follows: All of the furniture is removed; the floors are sanded down far enough to remove the scratches and the original stain color; the sanded wood is thoroughly vacuumed and wiped to remove dust; new stain is applied and allowed to dry (the wood can also be left its natural color, with no stain); then two to three coats of clear finish are built up, allowing each coat to dry before applying the next one.

For the least hassle and the best overall results, I would recommend that you have a pro come and do the refinishing. However, if you're patient and ambitious, you can certainly do the work yourself. All of the sanding equipment you need can be rented at any rental center, and the stain and finish materials are available from any good paint store or home center. If you want to take a shot at this yourself, I would suggest that you check out your local bookstore or library for a book containing complete, step-by-step instructions.

As far as the paneling is concerned, you have several options. You can remove the old material and replace it with new paneling; you can lightly sand the old paneling, then prime and paint it; you can apply new paneling or new drywall directly over the old paneling; or you can cover the old paneling with a base sheet and then wallpaper over it. A lot depends on the condition of the old paneling, how it was installed, lights, outlets, windows and other obstacles that need to be worked around, and what the final result is you want to achieve.

Q: I bought a newly built home in 2003 that has central heating and cooling, with all of the ducts in the attic. In the winter, it is hot upstairs and cold downstairs, while in the summer the upper story does not get cool while the downstairs is freezing. The builder said there are baffles in the ducts so the warm and cold air could be proportionately distributed, but I have been unable to locate these baffles. I currently have to open and close different registers depending on the season. Do you have any other suggestions for balancing the system? --Karen L., via e-mail.

A: Warm air will naturally rise and cold air will naturally fall, so having all of the ducts located in the attic can cause the problems you're referring to. As warm air is produced, it will want to naturally stay in the upper floor, leaving the lower floor colder. The opposite is true when cold air is produced. For that reason, a better configuration is to have a balance of ducts in both the attic and under the floor.

You mentioned that you have spoken to the builder. I would call him again and ask that he come over and show you exactly where these baffles are and how to operate them. You might also ask who the original HVAC contractor was, and have them come out, explain the baffles and rebalance the system for you. Other factors that might help would be relocating the thermostat and/or the return air duct, but both of those might be difficult to do at this point.

If rebalancing the system doesn't help -- and given the configuration of the ducts, it probably won't -- I would suggest that you install one or more reversible, ceiling-mounted paddle fans.

The fans will help with air circulation, pushing warm air down from upstairs and, when reversed, pulling cold air up from below.

Q: What exactly is HVAC? I have heard the term a lot, but I don't really know what it means. --Wyndye F., via e-mail.

A: HVAC is an acronym for Heating, Ventilating and Air Conditioning. It refers to the systems that handle all of the building's heating needs, including the furnace and duct work; air conditioning, including all of the air conditioning equipment and related ducts; ventilation, including fans, kitchen ventilation and ducts; and all of the related exhaust vents for any equipment that requires them. An HVAC contractor is one who installs, services, or otherwise works with any or all of these systems.

Remodeling and repair questions? E-mail Paul at paul2887@hughes.net.

Saturday, April 07, 2007

When to Call a Listing Agent

If you’ve ever bought or sold a home, you know that being a successful real estate agent is a full-time job — and then some.

In fact, between the preliminary research, evening and weekend showings, and post-sale paperwork, some agents are essentially on call 24/7.

Most real estate agents would probably suggest you call as soon as you’ve decided to sell your home. That way they can offer advice about pricing, home improvements, and other pertinent matters. And, for some home sellers, that may be the best way to go.

DIY to a Point - However, it is possible to make some decisions before you dial — especially if you’re thinking of doing some of the work yourself. Depending on your skills and sense of adventure, here are some of the tasks you might consider doing in advance of contacting an agent:

Preparation: Are you handy or do you know someone who is? Cleaning, de-cluttering, and simple touch-ups can add new shine to even the oldest homes. (Your agent won't really help with this — it's your elbow grease!)

Valuation: Check out your Zestimate and compare it to the listing prices of other homes for sale in your neighborhood.

Exploration: Real estate types call it " pre-marketing," and it refers to gauging the interest in your home before you list it. Mention you’re selling at parties or the local grocery store. You never know who might be looking. If you find a buyer this way, you might save money in agent commissions.

Presentation: Are you willing to show the house yourself or would you rather someone else handled it?

Negotiation: If you’re comfortable dealing with offers, counter-offers, etc., you may only need assistance once you’ve accepted an offer.

Then there’s probably the most important question of all: How much time are you willing (and able) to spend on the above? Some sellers have both the time and the inclination to do a lot of the work themselves; some have one but not the other; and others would rather pay somebody else to do it all.

There are no right or wrong answers, of course, and the idea isn’t necessarily to bypass real estate agents. Rather, it’s to determine the point at which you’d be better off having one. Depending on how you respond, you may want to call an agent from the get-go, somewhere down the line, or not at all.

(Article courtesy of Zillow)

Friday, April 06, 2007

The Facts About FSBO's

"A close look at "For-Sale-By-Owner" (FSBO) data from NAR's 2006 Profile of Home Buyers and Sellers.

Each year a small army of home sellers throw caution to the wind and “go it alone” — without the assistance of a licensed real estate professional. This ever-decreasing band of risk-takers, ventures into the land of pricing, marketing, screening, scheduling, showing and paperwork, with the goal of saving some money. It's often an experience they find less than rewarding.

The numbers (if not the sellers) tell the story. In 2006, just 12 percent of sellers chose the FSBO (“For Sale By Owner”) route, down from 13 percent the previous year, according to NAR’s 2006 Profile of Home Buyers and Sellers. This is down from about 20 percent in 1987. But more telling than the decline in FSBOs is the fact that 40 percent of all FSBOs sold their homes to someone they knew prior to the transaction. This means that only 7 percent of all home sales are open market FSBO transactions. The rest are simply unrepresented sellers in private transactions.

From NAR's 2006 Profile of Home Buyers and Sellers

Eighteen percent of FSBO sellers indicated that preparing the home for sale was the most difficult task when selling without the assistance of an agent, followed closely by understanding and performing paperwork (16 percent) and selling within their desired time frame (15 percent). As for profit — after all is said and done, FSBOs don’t always come out with fatter wallets.

Again, the numbers tell the truth. Homes sold with the help of a real estate professional in 2006 sold on average for 32 percent more than FSBO sales. The median FSBO selling price in 2006 was $187,200, compared with $247,000 for agent-assisted transactions. "

If you currently have your home for sale, on a For Sale By Owner basis (FSBO), or are considering doing so, please call me for a no obligation discussion on how our marketing system can help to sell your home faster while potentially saving you thousands versus a standard 6% real estate transaction.

The best of both worlds: Lower costs and a faster property sale. We maximize your ability to retain and liquidate the equity in your property. Help-U-Sell real estate and marketing professionals get the job done.

Vito Boscaino
Help-U-Sell North High Realty
Owner / Realtor / MBA

Wednesday, April 04, 2007

Why home-ownership shortcuts will lead to longer recovery

The following article includes what I believe are some very valid concepts that help to explain why the current sub-prime mortgage mess will lead to a significant increase in foreclosure activity, and why this will also cause a much slower recovery in the housing market, than what many "experts", including the National Association of Realtors, would like consumers to believe.

For those of us in Central Ohio, the ultimate impact will be far more dire than many would like to admit. With low to non-existent new job creation in the state, coupled with the continued loss of existing manufacturing jobs related to the automotive industry, capped with excessive sub-prime loan origination over the past several years, I would posit that Ohio can expect of wave of foreclosures of "tsunami like proportions" over the next two to three years. This will undermine property valuations in every community in the state. It will not be a question of how much can I expect my property to appreciate over the next several years? But the exact contra of that, in that the question will be how much will the property values depreciate and for how long?

This will in the near term trigger a cyclical series of movements by home owners who will not have considered selling otherwise, but well might consider selling "now" in order to cap the downside risk of diminishing property values over the next three to five years. This "added" inventory will further soften the market. The only realistic way out of this impending disaster is for the government to reduce the tax burden on businesses and consumers and to create incentives for existing businesses to move into the state, or for entrepreneurs to start companies. Unfortunately, the new governor has already started trying to raise taxes which will only further fuel the number of jobs that are fleeing the state.

As an added downward risk, unless government, at all levels, takes significant "cost" our of the bureaucratic infrastructure, many government entitities will find themselves loosing significant revenues from property taxes as the assessed value bases will decline, and those in foreclosure, when not paying mortgages, will most certainly not be paying taxes as well. Of course, the government, at all levels will have an initial knee-jerk reaction to fill the gap by increasing taxes on the rest of us. This will only further increase the exodus of jobs and constitutents to more tax friendly environments.

While this appears to be an "overly dark" assessment of the near-term real estate and economic climate in the State of Ohio, I firmly believe that what we can expect to see down the road will look more like this scenario, rather than less.

Vito Boscaino
Owner/ Realtor / MBA
Help-U-Sell North High Realty

"Guest perspective: An insider's view on the subprime mess
Wednesday, April 04, 2007By Steven Krystofiak

Editor's note: Steven Krystofiak offers an insider's take on what's been unfolding in the subprime mortgage industry. But he is no industry apologist. Stay tuned for a series of articles from Krystofiak on Inman News in coming weeks.

Every year there is a natural progression of future first-time home buyers, usually consisting of people in their late 20s to mid-30s. These people have obtained financial stability with savings and steady employment, which is a healthy precursor to buying a first home.

In recent years far too many people took popular shortcuts to obtain their homes. These shortcuts are in stark contrast to healthy real estate practices that have a long, traditional, proven track record.

In many cases, these new highly popular loan products were the only way for first-time home buyers to obtain a home. These shortcuts were misnamed "affordability products" and would have been better described as "obtain-ability products." Long-term affordability, which should be a goal for both consumer and lender, is not associated with these toxic shortcuts.

The home-obtainer-ship shortcuts included "stated-income loans" (which encouraged consumers to lie about their income on mortgage applications), zero down payments, negatively amortized loans, interest-only loans, and short-term suicide loans where the fixed loan period is only two or three years commonly tacked on with an equally long prepayment penalty. Many times the menu of these options would be coupled together.

People who took shortcuts should have waited, and were only able to obtain a home because of the risky loans that will be the culprit of their foreclosures in the coming months and years to follow. Many people facing foreclosure should have waited one, two or even three years before starting the home-buying process.

Communities, the media and industry insiders built up the courage to the would-be home buyers with such rhetoric as, "If you don't buy now you will be priced out forever," and "Real estate prices only go up," and "You can't afford not to buy a home," and "If you buy one property you can make $50K a year, so why not buy two, three or four more properties and
make even more?"

Lastly, I end with my favorite quote that came from a winner in a real estate game show: "This (market) is not a bubble; bubbles are for bathtubs."

The hype and hysteria we have seen for the past few years gave comfort to people wanting to take out these loans. But with foreclosures sure to happen in droves just around the corner, these people otherwise would have been the ones helping us get out of the future impending home debacle we will continue to experience in 2008, 2009 and 2010.

With these recently foreclosed people now out of the real estate market in 2009, where will that natural progression of home buyers come from? With foreclosure or bankruptcy on their records there will be a lack of qualified candidates to become first-time home buyers in the future. This will cause the future recovery to take longer than in previous real estate corrective cycles.

First-time home buyers are the key to a good real estate market. An old rule of thumb is that with every first-time home buyer entering the market there is a filtering up, which creates three more transactions. A large reason the real estate cycle of the last five years has been so successful is because banks have been able to provide toxic mortgages to first-time home buyers. This has kept the succession of real estate sales going and going like the Energizer bunny.

But as many of you are now thinking, "I haven't seen that bunny on TV for years." There lies the problem -- this market can't keep going.

The market needs more first-time home buyers for it to be successful. Without them, in coming years the real estate market will go the way of the Energizer bunny. In the future, you will think back just like with that commercial and say to yourself, "Oh yeah, I haven't seen home-price appreciation in years."

Steven Krystofiak is a mortgage broker based in California. He is president of the Mortgage Broker Association for Responsible Lending, an advocacy group.

(Read Krystofiak's previous articles, "What is a subprime loan? It depends on whom you ask," and "High-risk loans enable buyers to obtain, not afford homes.")"