If you’ve got property for sale, chances are you’re in a bind: Nationwide, prices for existing homes keep on falling and new home constructions started a few years ago continue to roll off the conveyer belt, upping inventory.

On top of that, the fallout from subprime lending, the subsequent tightening of credit and lending standards, and the recent rise in long-term treasury yields has shrunk the pool of eligible buyers. Feel like you can’t catch a break? You’re not alone. Not every market follows national trends and despite the industry’s overall problems, there are still cities where sellers have the upperhand.

The best way to judge a buyer’s vs. a seller’s market is a simple supply vs. demand analysis of housing stock: At the current rate of sales, how long would it take to sell off the inventory whether single family homes or condos? If that measure comes back high, houses sit on the market longer. If it is low, the market is tightening. This is good news for the seller.

The Methodology

To measure inventory glut, we used Moody’s Economy.com and National Association of Realtors data that tracked a market’s current sales rate by projecting the amount of time it would take to sell off the excess housing stock at the current rate of sales.
We also looked at the change in sales rate over the last year to measure the relative tightening or loosening of the market. Finally, a measure of price stability was applied so as to prevent the list from being a rundown of upstart markets.

The measurements left out a few cities that lacked comprehensive data. Seattle, for example, has incredibly strong market fundamentals–the lowest vacancy rate of major metros at 0.9% and is a small geographic area not conducive to overproduction. It is a good seller’s market, but for tracking what we were after, Seattle data was incomplete for our analysis.
Moody’s Economy.com chief economist Mark Zandi points out that the best-performing markets are those that had barriers to over production during the housing boom.

The Top Tier

In the case of San Francisco, which ranked second on our list, it’s an issue of geography: There is little space for growth or new development and the local government doesn’t do much to incentivize new construction.Strong in-migration stemming from local economic strength is another good way to keep up demand here. New houses being built isn’t a problem if there are new people moving to town.

This scenario is also playing out in Raleigh, N.C., the No. 1 city on our list. Moderate growth and disciplined building over the last five years prevented the market from developing a significant glut. Additionally, a strong local economy has helped contribute to the city’s healthy 1.6% vacancy rate.

What’s more, the rate of home sales against home inventory was healthy in Raleigh; in this category, it ranked fifth best of big cities, according to Moody’s metrics. Even though the market has low vacancy to begin with and displayed strong construction restraint during the housing boom, Raleigh still has the eighth best rate of tightening.

Similarly, strong in-migration and local economic pop carried Austin as a seller’s market. It finished fourth overall in sales rate to inventory size and has had the fifth-best home price appreciation figures of the large markets Moody’s measured. Its mediocre 14th best market tightening ranking can be attributed, in large part, to its small inventory excess. A 1.5% vacancy rate, like Austin’s, is where the national average stood during the most recent housing boom. In other words, that low a vacancy rate indicates a housing market at close to full capacity.

While the market isn’t going gangbusters for investment, sellers in these markets are faring much better than their counterparts across the country.

By Matt Woolsey, Forbes.com
June 29, 2007

If you are a member of the so-called “Greatest Generation” or an older baby boomer, I have great news for — you are part of the most affluent group of Americans who have ever lived. The bad news is that everybody knows it, including con artists.

While you earned your comfortable lifestyle the old fashioned way, con artists are determined to take a shortcut to their lifestyle of the rich and famous by fleecing you out of your fortune. My advice? Keep one hand on your wallet, a close eye on your bank account, and a skeptical ear whenever you hear somebody offering you a great deal on a piece of property.

Americans who are affluent enough to afford a second home are particularly attractive targets for a con job I like to refer to as the second home scam. This particular type of scam always involves the purchase (or at least promise) of a second home, but it can take a variety of forms. Here are some of the warning signs:

• Guaranteed appreciation: In real estate, appreciation and profits are never guaranteed. Housing values rise and fall.
• Preconstruction specials: Any offer of special deals, especially cash back, if you BUY NOW raise red flags. When builders are financially strapped for cash, they may be tempted to scam buyers in order to save their business by way of a builder bailout.
• Glitzy advertising: Real estate con artists often try to dazzle their victims with fancy marketing materials so people will hand over their money without looking at the details, the property, or the documents.
• Offers to manage the property: Someone selling you a property, particularly an investment property, may offer to manage everything for you — find renters, collect the rent, pay the mortgage and property taxes, and so on — and then never do it. This type of scam is commonly known as chunking.
• Pressure to buy site unseen: Anyone who discourages you from visiting a property before buying it is probably crooked. They may tell you that the property has renters, and you certainly “don’t want to inconvenience your future tenants.” They don’t want you looking, because you will see the truth.

To defend yourself against these common second-home scammers, watch out for the warning signs and take the following precautions:

• Don’t buy on impulse. People often get excited about a vacation hot spot, buy there, and then learn that it’s not quite paradise in the off season.
• Spend your time checking out neighborhoods and homes in the area. A second home is not just a purchase decision — it is a lifestyle decision.
• If you are buying the second home as a vacation (seasonal) home, consider renting a place, perhaps in different neighborhoods in the area over an extended period of time. You may rent a different place for two to four weeks every year over the course of two or three years. This helps you determine if you really want to own property in the area and which neighborhood you would find most appealing.
• Wait at least one year after the death of a spouse before purchasing a property or moving. This gives you time to adjust and make more rational decisions.
• Hire a buyer’s agent to look for homes and represent you. Don’t simply contact a builder, talk to the representative in the model home, call the number on a For Sale sign, or contact someone who is selling real estate online. If you do that, you are dealing with the seller’s agent and have nobody representing your interests.
• Don’t trust what you see on the Internet. People can post photographs and online video tours of anything they want to dazzle the eyes and make you believe that they are offering an incredible deal. A con artist can build a million dollar virtual home on the Web in matter of minutes that simply does not exist in the real world.
• Don’t trust home values that you may see online. Some home valuation sites on the Internet are better than others, but they are all susceptible to fraud. Hire an independent appraiser to give you an honest, qualified opinion of a property’s value.
• Don’t buy anything site unseen. No matter what someone tells you, you have to inspect the property with your own two eyes and have it professionally inspected (by an independent home inspector), prior to closing. It’s like buying a car, you have to kick the tires.
• Hire your own people to check it out. Never rely on the seller’s agent, appraiser, inspector, loan officer, or title company to make sure everything is legitimate. If the seller is a con artist, these people are probably accomplices or at least willing to look the other way.
• Never close on a newly constructed property before construction is complete or before your inspector has given it his seal of approval.

A second home can be one of the best investment and lifestyle decisions you will ever make, as long as you do your homework and have the proper people in place to protect your interests. Let down your guard for even a moment, and you become a prime target for a greedy con artist.

Realty Times  Jun 27, 2007, 12:03 pm PDT

Delinquencies jump among riskiest loans; California, Nevada hit hard

As the U.S. housing market continues to slog through a hangover from its post-millennium boom, mortgage foreclosure data released Thursday provide fresh evidence that the slow-motion unwinding of the easy-money mania is still under way. The number of residential mortgages going into foreclosure hit a record in the first quarter of the year, with the biggest increases coming in the so-called “subprime” market of borrowers with weaker credit histories. Foreclosure rates were highest in a handful of states where home prices and sales surged during the boom, including California, Florida, Nevada and Arizona.

The rate of delinquencies, defined as borrowers who are at least 30 days behind on their payments, also rose among subprime borrowers to 15.75 percent. For all mortgages, the delinquency rate dipped a bit compared with last year’s fourth quarter, but remained higher than the comparable year-ago period. The housing industry watches these numbers closely because the delinquency rate is a bellwether for more serious problems down the road, including a default by borrowers who have gotten in over their heads. Unless those borrowers can renegotiate a new loan with more favorable terms, those defaults will likely become foreclosures. While the dip in delinquencies is a positive sign, it’s too soon to say the rate has peaked, said Doug Duncan, chief economist of the Mortgage Bankers Association. “We’re not ready to say one data point is a trend,” he said. “We will probably see modest increases in delinquencies and foreclosures for the next couple of quarters.”A separate report this week by RealtyTrac reported that foreclosures for May were up 19 percent from April and up nearly 90 percent from May 2006. In

Nevada, there was one foreclosure filing for every 166 households last month, nearly four times the national average and the highest rate in the country for the fifth month in a row, according to RealtyTrac.

Some lenders are working to help borrowers who got into trouble. By making concessions, like offering a new loan with a lower interest rate or shifting from an adjustable to a fixed rate, those lenders may lose a little in the short term. But they’re hoping to head off bigger losses if the loan goes to default and the borrower’s home is sold in a foreclosure. “There’s no question that within the industry it’s kind of all hands on deck — let’s work with borrowers,” said

Duncan. “They are aggressively restructuring loans for people who, largely due to circumstances beyond their control, are in some difficulty.”

Those circumstances include a drop in housing prices in many parts of the country, which has left some recent homebuyers holding loans that are bigger than the value of their houses. So far, the biggest problems are cropping up in the relatively small subprime market, where the riskiest lending took place.No one can say for sure when the housing market will hit bottom. The outlook for an overall recovery depends on a variety of factors, including the overall strength of the economy and job market, the direction of future interest moves, and how well borrowers now facing delinquency can get back on their feet.In any case, it will be some time before the dust settles on the mortgage market and any housing turnaround can be confirmed. That’s because the process of working out a delinquent loan — whether through refinancing or foreclosure — can take months to play out. For lenders and investors who bought bad loans, the process will likely extend well into next year.“It can take 12 to 14 months for the loans to go through the foreclosure process and then be sold before a loss might be incurred (by the lender),” said Susan Barnes, head of mortgage-backed securities ratings at Standard & Poor’s.In the meantime, hopes for a buoyant spring season have come and gone for the real estate market with little sign of recovery, especially in regions where the level of unsold new and existing homes remains at historically high levels. “There are large inventories that will have to be worked off in certain sections of the country before we see a recovery take place,” said

Duncan.Meanwhile, lenders have tightened standards for new loans, which has shut some potential buyers out of the market. Rising interest rates have also slowed demand. “Certainly the evidence suggests that the housing recession is getting worse, not better,” said Nouriel Roubini, a former White House economist who is now an economics professor at

New York

University. While the number of foreclosures hit a record, the national average masks strength and weakness in different regions of the country. Markets in California, Florida, Nevada and Arizona, which  saw the biggest boom, are now feeling the most pain — and will likely take the longest to recover. Ohio, Indiana and

Michigan also saw high rates of foreclosures, according to the latest figures. But nearly half the states outside those trouble spots saw a drop in new foreclosures.

So far, it doesn’t appear that the housing recession has spread to the wider

U.S. economy. Though interest rates have bumped higher, they still remain fairly tame by historical standards. Inflation, as measured the by the Producer Price Index, appears to be holding steady, according to figures released Thursday. And despite the pinch of higher gasoline prices, consumer spending has shown little sign of slowing, based on retail sales figures released on Wednesday.

All of which leads some economists to believe that despite the financial hit to the millions of individual borrowers who got in over their heads, the impact on the wider U.S. economy will be limited.

“The U.S. is a massive economy with incredible productivity, and the non-housing (gross domestic product) has been growing over 3 percent in the last year,” said Brian Wesbury, chief economist at First Trust Advisors.

“We can absorb these losses. It’s going to be painful, and there’s still some losses to come. But it’s not the kind of thing that will drag the entire economy down.”

By John W. Schoen
Senior Producer
MSNBC

 

Home prices fall for a record tenth-straight month

 

Sales of existing homes fell for a third straight month in May, dropping to the lowest level in four years as the median sales price declined for a record 10th consecutive month.In a troubling sign for the future, the inventory of unsold homes shot up to the highest level in 15 years, meaning more downward pressure on prices in the months ahead until the inventory glut is reduced.Sales fell by 0.3 percent in May to a seasonally adjusted annual rate of 5.99 million units, the National Association of Realtors reported Monday. Sales now stand 10.3 percent below where they were a year ago.The median price of an existing home sold last month fell to $223,700, down 2.1 percent from a year ago. It marked the 10th straight price decline compared with a year ago, the longest stretch on record.After rising more than 100 points earlier in the day, the Dow Jones industrial average lost those gains to finish down 8.21 points at 13,352.05.The drop in home sales was in line with expectations, providing relief on Wall Street where analysts had been braced for an even worse showing.Economists predicted home prices would likely head lower in the months ahead because of continued troubles in reducing the stockpile of unsold homes, which rose 5 percent in May to 4.43 million units. That was an 8.9 months supply at the May sales pace, a level that has not been seen since July 1992, the last time the country went through a serious housing slump.“The only way we are going to chip away at this Mount Everest-sized pile of inventory is by price cuts and so far, sellers haven’t been aggressive enough,” said Mike Larson, a real estate analyst at Weiss Research. “Don’t look for a lasting bottom in the housing market anytime soon.”The sales decline was led by a 3.4 percent drop in the South. Sales also fell in the West, dropping 0.8 percent. Sales rose by 5.8 percent in the Northeast and 0.7 percent in the

Midwest.Economists predicted further sales declines in coming months as housing is affected by recent troubles in subprime mortgages, which have caused banks and other lenders to raise their qualification standards, making it harder for potential buyers to obtain financing. Rising mortgage defaults also mean more homes dumped on a glutted market.Some analysts said they believed the once high-flying housing market was going through a crisis of confidence. Sales of both new and existing homes set records for five-straight years, prompting what many believe was a speculative bubble in some parts of the country as investors rushed in to buy properties in hopes of a quick resale to take advantage of home prices that were climbing at double-digit rates.Lawrence Yun, senior economist for the Realtors, noted that household formation had slowed. He said that implied many people had decided to put off buying a home and were doubling-up in rental units or moving back home with parents.“It appears some buyers are simply waiting for more signs of stability before they get serious about getting into the market,” he said. “The lack of buyers’ confidence is a major factor in the lower sales.”He said activity in the existing home sales market, which accounts for about 86 percent of annual sales, would continue to suffer until builders were more successful in trimming their production levels for new homes, which make up the other 14 percent of annual home sales.The National Association of Home Builders reported earlier this month that builder sentiment dropped in June to the lowest reading since February 1991, reflecting the spreading troubles with subprime mortgages, which go to borrowers with weak credit histories.Trimming their forecasts, the Realtors now expect existing home sales will fall by 4.6 percent this year, down from a previous forecast of a 2.9 percent drop. They expect the median price of a home to fall by 1.3 percent this year, which would be the first annual price decline on record.Adding to the problems in housing, mortgage rates have recently begun to rise, although they remain well below their historic averages. According to Freddie Mac, the average commitment rate for 30-year mortgages was 6.26 percent in May, up from 6.18 percent in April.

Prices have hit bottom in some cities and are heading back up, but recovery rates vary. Here are the places with the best prospects. 

When it comes to real estate, the questions on everyone’s lips are: How low is low, and when’s the perfect time to buy back in? That moment has passed in Seattle and in

Charlotte, N.C. Both metro areas hit bottom in the first quarter of 2006 and have since posted price gains of 12.3% and 6.3%, respectively, according to National Association of Realtors (NAR) data. Ripe for investment? Philadelphia and

New Orleans. Based on housing inventory and local economic conditions, both should hit price troughs by year’s end and bounce back with moderate gains of around 4% in 2008.In markets expected to recover more slowly, such as Boston and

Denver, low buyer confidence coupled with a surplus of housing stock has lengthened the slump. NAR chief economist Lawrence Yun points out that buyers are looking for clear signs of a market bottom and are content to wait on the sidelines until then. It’s easy to see why. Most of the country’s real-estate markets are feeling the effects of overproduction. A strong market hovers near a 1.5% vacancy rate, but the national average currently stands at 2.8%, and in cities such as Miami, Atlanta and

Denver, figures hang around 3.5%. In addition, every nugget of good news (like the May Commerce Department report that said new-home sales are at a 14-year high) comes with bad news (median price growth is at a 10-year low).

More on MSN and Forbes.com

So which other metro area markets stand the best chance of recovery, and when will that upturn occur? Behind the numbers Market corrections follow three basic recovery patterns: a V-shaped recovery where a market experiences a sharp, fast decline but comes out strong once it hits bottom; a U-shaped recovery, where prices decline gradually and recover slowly; and an L-shaped pattern, a hard, fast fall with a paltry price bounce-back after the market trough.The differences between a V-shaped market and a U-shaped one have to do with barriers to growth. High vacancy rates and high investor share can hurt a market, but if the local economy remains strong and housing stock affordable, it’s only a matter of how long it takes to absorb the excess inventory. Tampa, Fla., is a perfect candidate for a V-shaped recovery, according to research from Moody’s Economy.com, an economic analysis, forecasting and credit risk firm in

West Chester, Pa. The local economy remains strong, and subprime lending is relatively low.

Tampa’s problem? A high investor share that led to high vacancy rates. When the market turned sour in 2005, more than 25% of

Tampa homes were owned as investment properties. Investors are quicker to flee during a downturn, thus creating a glut of available housing stock. In

Tampa’s case, vacancy rates now stand at 3.5%. “As investors exit, the market revives,” says Mark Zandi, chief economist at Moody’s Economy.com, as fewer speculative buyers result in a more stable market. “

Tampa’s a pretty affordable market, and first-time buyers can come in once prices fall.”Based on Moody’s Economy projections,

Tampa should burn off its excess inventory and hit a price trough in the first quarter of 2008, at which point prices are expected to increase by 10.6% the following year.These projections take into account housing affordability, vacancy rates, the strength of the local economy and job market, investor share in 2005 and the share of subprime mortgages. Data are from Moody’s, the Bureau of Labor Statistics and the Federal Reserve. Predicting the bottom of any asset market, especially real estate, is a difficult thing. While these projections are based on sound data and advanced modeling by Moody’s, no one can predict futures markets with absolute certainty.Other bounces Like Tampa,

Phoenix is afflicted by high investor share (26.1%), and it has a vacancy rate of more than 3%. Good affordability rates and a surging job market suggest that once

Phoenix bottoms out, price growth will be strong. Moody’s projection model has

Phoenix reaching its price trough in the fourth quarter of 2008 and then growing by 7.7% the following year. Slower recovery rates are expected in markets such as Minneapolis and

Boston, where a slumping local economy, slow job growth and negative migration numbers hamper long-term prospects. Along with other U-shaped markets, like Sacramento, that have double-digit subprime lending share, Zandi says it’s going to be harder for these markets to get going again.That doesn’t necessarily mean V-shaped markets are in the clear. The labor markets in cities such as Las Vegas, Phoenix and

San Diego, whose future economic success will be critical to recovery, are heavily in housing-related industries, according to Moody’s. So long as those economies can weather their respective corrections, they should be all right.“These markets are going to experience more substantial declines in the coming year,” says Zandi. “Gauging the bottom is a very intrepid affair, and the job market is very important to recovery.” Real-estate markets with the best prospects for recovery

Rank	Market	Expected market bottom	Est. price appreciation after bottom
1	Tampa, Fla.	Q1 2008	10.60%
2	Phoenix	Q4 2008	7.70%
3	Las Vegas	Q2 2009	7.20%
4	San Diego	Q2 2008	5.30%
5	New Orleans	Q3 2007	4.30%

 

By Matt Woolsey, Forbes.com

Yes, if you know how — literally — to play the game. But, as in real life, only a few are really good at it.

 

Perhaps you’ve heard of the land baroness named Anshe Chung. No? Maybe that’s because Chung only exists in the virtual reality game Second Life. Chung, or rather, her real-life counterpart, Ailin Graef, has gained attention — and a BusinessWeek cover — as the first person to reportedly become a real-world millionaire from her virtual-world business.

How’d she do it? By buying, developing and selling virtual real estate. While much of her wealth is still tied up in Second Life’s currency,

Linden dollars, those can be sold for genuine U.S. dollars. Graef reportedly makes upward of $150,000 annually.

Second Life is one of several massively multiplayer online role-playing games that are, literally, their own worlds. Julian Dibbell, author of “Play Money: Or How I Quit My Day Job and Made Millions Trading Virtual Loot,” estimates the market for virtual items across games such as Second Life and Ultima Online has hit the $1 billion mark. “I think it’s safe to say that it’s at least $1 billion now,” he says. 

Such numbers — along with success stories like Graef’s — show there’s real scratch to be made from online dirt. But just how much depends on a number of factors, of which only a handful are under your control. Here’s how the virtual real estate game is played.

A Second Life land primer

In Second Life, users customize digital alter-egos called “avatars” that can walk down streets, gamble in casinos, do distance learning for university degrees, cavort in strip clubs, fly over Second Life’s varied landscapes, you name it. And when users want a place to roost, people often buy or rent virtual property.

In early May, 5,400 residents were selling 30,500 parcels. “Real-estate speculation offers such attractive opportunities that almost everyone dabbles in it, and many Second Life people make it a permanent side occupation that delivers a steady stream of profits,” writes Catherine Winters in her new book, “Second Life: The Official Guide.”

There are a few ways to acquire land in Second Life:

• You can buy land from another resident.

• You can buy land at an auction, using real or Linden dollars (the exchange rate hovers at about 270 to 1 U.S. dollar).

• Or, if you want a big spread, either for yourself or to divide and later resell as smaller parcels, you can buy a customizable, 16-acre island of land known as a “sim” from Linden Lab, Second Life’s creator. A sim costs $1,675 U.S., plus a $295 monthly fee, called a “tier.” (Linden Lab makes most of its money off such land sales.)

Bane Darrow, who, like several people in Second Life, asked that his real name not be used, falls into this last group of buyers. Darrow co-owns and operates Darrow Estates, which offers residentially zoned properties in Second Life with community covenants.

“I started it about three or four months ago” as a part-time hobby, says Darrow, who is a Seattle-area computer programmer.

Darrow and his partner buy sims from Linden Lab, choose some basic topography and then customize the new land before dividing it into 16 parcels for resale.

“We spend a week or two just getting the sim ready — adjusting the land heights where we want them, putting in trees; we have a lake in both of our sims, streams, waterfalls, rocks, particle effects that kind of looks like splashing.”

The parcels are advertised on Darrow’s Web site, where people can buy a parcel and pay for it with PayPal. Darrow Estates even advertises on Google.

The bottom line

If you want to buy a 4,096-square-meter parcel in Darrow Estates’ first development, “Blueberry,” a lush region with a lake and waterfall, it costs $20 to set up, and $26 per month ever after. “We are sitting at 90% to 95% capacity,” Darrow says, not unproudly.

At that occupancy rate, he’s bringing in about $390 per month from the monthly fees on each sim; the initial $20 fee per parcel adds a one-time bump of about $300 per sim, which Darrow says helps pay for his Google ads. He sees the $1,675 as a capital investment since he can resell the entire sim. But it’s clear this is not a huge moneymaker for Darrow. The monthly fees from his buyers leave him just about $95 per month, meaning it takes at least 17 months to recoup the initial $1,675 investment. Even ignoring advertising costs and including the initial $20 fees, it would still take a good 14 months before he would be in the black.

Home Affordability Calculator
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The number of users making smallish amounts — just $10 to $50 monthly — with a Second Life virtual business was about 9,500 in April, or nearly triple that of November. “There’s a lot of people with a self-sustaining hobby that generates drinks money on the side,” says Adam Frisby, a 22-year-old computer science student and entrepreneur from Perth, Australia, who’s co-founder of Second Life’s

Azure Islands. Meanwhile, the number of “in-world” business owners who are making more than $5,000 per month was only 139 as of April, estimates Linden Lab. Though that’s up from an estimated 58 in November, it’s still a tiny fraction of the more than 7 million users. No one can say for sure how many of those are in virtual real estate. But several Second Life pros agree that big-time real-estate players number maybe a half dozen.

Hitting online pay dirt

Those who are doing well in Second Life real estate aren’t just selling land; they’ve figured out how to provide some value or a service that users want to buy into, says author Winters. “It’s all about coming up with a reason to be in this community versus that community,” Winters says.

Alliez Mysterio (again, her Second Life name), seems to have excelled at this. Mysterio, a woman in the Lake George area of

New York, runs dAlliez Private Estates with a partner. With 53 estates, each a sim in size, and well over 200 renters, dAlliez is one of the largest real-estate developers in Second Life.

“We have a few themed estates and also just plain land for the people to use,” Mysterio says. One of the themed estates is “the Rue d’Alliez,” a French marketplace-type milieu complete with a cabaret.

With people often renting one-quarter sim from dAlliez and paying $75 to $100 each, Mysterio and her partner likely bring in somewhere north of $17,000 a month. “We have reinvested our money in setting up more estates from Linden Lab. So (we) actually don’t take out much money yet,” she says, though she acknowledges she makes enough in Second Life that she doesn’t have to leave her home to work elsewhere.

“There is money to be made if people are not greedy,” Mysterio adds. “I have seen too many people come in, buy estates and not have one up and paying for itself before they buy another. This is a way of life, and as such, I put my customers first and they know that.”

How virtual land is — and isn’t — like real-world real estate

Whether you have your sights set on Second Life as a source of fun or profit — or both — there are some basic things to keep in mind about how the virtual real-estate world differs from real real estate.

Realtors undercutting FSBOs. There’s not such an obvious role for real-estate agents in Second Life, users say, in large part because the users have free access to all the search tools. Yet that hasn’t stopped real world real-estate behemoth Coldwell Banker from getting into the act — part of a larger influx of real companies into the virtual world. In March, the company put up for sale more than 500 homes in Second Life, at about $20 each including the land — and they’ll toss in home furnishings as a closing gift. “My understanding — and it’s just my understanding — is the average land baron would sell the average plot of land for $60US,” says Charlie Young, senior vice president for marketing.

Coldwell Banker also opened a virtual real-estate office that’s staffed with a few agents. This isn’t a way for Coldwell Banker to cash in on virtual real estate, says Young, but to find new ways to reach some of the estimated 80 million Echo Boomers and make them familiar with the Coldwell Banker brand. If more real-world brokers begin using Second Life to extend their brand, this could bring added pressure on Second Life land prices.

No housing bubble. In contrast to real-world real estate, prices in Second Life have been relatively stable for the past nine months or so, a long time in Second Life’s short life span, says a Linden Lab spokesman. But when price jumps come, they are more abrupt and, at least with sims, are generally at the whim of Linden Lab. Linden increased the price for a sim several months ago from $1,600 to $1,675 — almost 5% — and the monthly tier for new purchasers rose a much steeper 51%, from $195 per month to $295 per month. 

Land is virtually in endless supply: As Second Life’s popularity increases (today, it has 7.2 million registered users), Linden Lab simply grows the land size of its virtual world. Were it laid out in real life, Second Life would cover nearly 600 square kilometers — a tripling in the past six months. That’s nearly seven times the size of

Manhattan.

The eternal mortgage. In Second Life, you never actually own a piece of land, free and clear. Though you may pay an initial fee to gain control of a piece of land, you forever have to pay that monthly bill. As one virtual landowner put it, “You never don’t pay rent.”

Eviction? Yup, it’s here, too. What happens if you stop paying that monthly fee — either to Linden Lab, or to a landowner that you’ve “bought” a plot from? You could be barred from accessing your land until you do pay — or have your land taken from you entirely. (Interestingly, A Pennsylvania man recently brought a real-world lawsuit against

Linden when his Second Life land holdings were confiscated. Read more here.) 

Virtual lending. As yet, there don’t seem to be virtual banks in Second Life to fund real-estate purchases, so you’ll need all the money up front (or enough credit available on your real-world credit card).

You can’t escape real-world taxes. Real-world money made in the virtual world is taxable. And now the U.S. government is even mulling whether online money made, and kept, in online currency like

Linden dollars is also taxable. A

U.S. congressional committee is starting to look at the issue.

The future may be bright — but it’s also hazy

Finally, you need to ask yourself: Is it wise for you to sink a lot of time and money into a relatively untested virtual world, where the odds of making a mint aren’t with you? And then there’s the other big question: What if Second Life’s popularity wanes? Many with dreams of becoming that next Anshe Chung could come away empty-handed.

Players like Darrow don’t seem particularly worried. He says there are other, nonmonetary reasons to invest in online real estate. “It’s kind of like the game within the game,” he says. “I’m running a business. That’s how I play the game.”

That mirrors author Winters’ advice to prospective players. It’s better to come to Second Life to socialize and create, rather than expecting to make a fortune, she says. You’ll enjoy yourself much more. “Most people are going there not to make money,” she says. “Virtually nobody.”

5 tips for real success in virtual real estate

• People come to virtual reality to explore possibilities. Ask yourself, “What can I offer that’s unique, that Second Life users couldn’t build or haven’t dreamed up themselves?” Winters advises.

• Make your first sim stand on its own and pay for itself before you buy another, Darrow advises.

• Some things never change: Customer service must be No. 1, Mysterio says.

• As with gambling, don’t invest more than you can afford to lose, Frisby cautions.

• It’s easy to be just a blip in the ever-growing Second Life world. Market yourself, in both worlds, by advertising online in the real world, and with a listing on Second Life, when people search for “land.”

By Christopher Solomon 

Some of the nation’s most overheated housing markets may be cooling off to more reasonable levels following their unprecedented run-up in the first half of the decade. According to a report from the financial service companies, National City Corp and Global Insight, the number of single-family homes they judged overvalued in the

United States fell from 17 percent in the last quarter of 2006 to 14 percent in the quarter ended March 31. Of the 317 metro areas covered by the survey, 157 of them, experienced price declines during the quarter. That - combined with wage gains and steady interest rates - reduced widespread overvaluation of homes. The report’s authors determined proper home values based on population density, relative income levels, interest rates and historically observed market premiums or discounts. They compared them to actual selling prices to arrive at overvaluations or undervaluations. The figures are important to investors and home buyers because highly overvalued markets are the ones most in danger of future price declines. The latest price declines were mostly clustered in areas that had seen big price run-ups during the boom, with California, Florida, New York and

Massachusetts taking hits. James Diffley, managing director of Global Insight’s Regional Services Group, said in a statement, “The price declines we are seeing today in California, Florida, and New England were predicted two years ago when we identified them as the most extremely overvalued markets in the nation.” Most overvalued areas are on the coasts while the heartland tends to have more fairly valued, even undervalued properties. But economic problems in manufacturing states like Michigan and

Ohio caused price drops in those states as well. The report identified

Bend, Oregon as the most overvalued metro area in the nation. The median single-family house price there is more than $324,000, almost twice what it sold for four years earlier and 78.7 percent over the survey’s valuation price. Bend took over first place from

Naples, Florida, which had led the pack for several years. Price declines in

Naples enabled it to slip into third place at 63.4 percent overvalued. In second place was

Prescott, Arizona, at 64.6 percent. The most undervalued market, according to the survey, is

Dallas, where homes sell for 24.9 percent below their proper price.

Texas boasts the four most undervalued metro markets in the report. The metro areas facing the greatest threat of future price drops are in

California, according to Diffley. He blamed it on a, “huge glut of new and existing homes for sale on the market, and the tightening of credit standards in light of the subprime mortgage troubles [that] will continue to exert downward pressure on prices for some time.”

By Les Christie, CNNMoney.com staff writer

Fair Isaac Corp., the company behind FICO credit scores, is shutting down a fast track to a better credit rating.Starting in September, consumers who are added as an authorized user on someone else’s credit card will no longer be able to benefit from that card’s credit history. The change reverses the current practice, known as piggybacking, which treats all authorized users the same as the cardholder. Here’s how it works: Say a mother has a gold card with a $10,000 credit limit and a typical $1,000 balance that she’s paid on time since 2000. If she added her 18-year-old son as an authorized user today, his credit score would get a quick boost, because it would look like he, too, had a card with 90% of the credit line free and a perfect seven-year history.Credit scores improve when a person keeps balances low relative to limits and pays bills on time for long periods.In an interview last year, a Fair Isaac spokesman said the company allowed the quirk because it didn’t have any proof that people were gaming the system to lenders’ detriment. But after researching the market and discovering a number of companies that sell the right to become an authorized user on complete strangers’ credit accounts, Fair Isaac decided it was time to close the loophole, according to Ron Totaro, vice president of global scoring solutions at the Minneapolis-based company.Seasonedtrades.com and Instantcreditbuilders.com, which sell the right to be an authorized user, didn’t respond to requests for comment about how the decision would affect their operations. Such services have been known to charge customers $1,000 to $3,000 and to promise to boost scores by as much as 200 points. (FICO scores range from 300 to 850.)Fair Isaac estimates roughly 1% of consumers will be affected by the change. The decision is part of a broader overhaul to the model used to generate FICO scores. The company plans to introduce its new product, FICO 08, to one of the major credit bureaus — Equifax, Experian or TransUnion — in September and to roll it out at the remaining two early next year.Fair Isaac, which fine-tunes scoring models every couple of years, says the FICO 08 model will heighten lenders’ abilities to make predictions about people with scant credit histories.Families who employ piggybacking to help children or new spouses jump-start their credit have other ways of achieving their goal. Mr. Totaro says joint users on an account, like authorized users, get the benefit of the card’s entire history, but joint users are accountable for the debt on the card while authorized users are not. Additionally, family members with good histories can cosign loans to help loved ones secure credit.

by Jaclyne Badal
provided by Wall Street Journal

Retirement can be the saddest or happiest day of your life. This pre-retirement calculator will help you determine how well you have prepared and what you can do to improve your retirement outlook. It is important that you re-evaluate your preparedness on an ongoing basis. Changes in economic climate, inflation, achievable returns, and in your personal situation will impact your plan.

I was at my sons soccer game and received a voice message from one of my agents that was in the process of setting up a showing for a property in Minnesota.   He left me an email say “Is this funny or what”  A house on the market with snow in the front yard.  I have to think:  It’s almost July? Is the agent that is listing the property that lazy to update the picture? Do the home owners know the main picture on the Minneapolis MLS has snow in it? What do you think?