I had a client who wanted to look at homes, she was not pre qualified.  I suggested that she get pre qualified before she starts looking. She insisted that she knew what she would qualify for. We find a property she likes and she wants to make an offer, I told her that she has to get pre qualified now because we cannot submit an offer with out a pre-approval letter from a lender. She contacts a bank and finds out that she can not qualify for the amount of the purchase. She qualified $75,000.00 less then she anticipated. She lost her interest in buying a home.

Kellie Clifford

Home prices rose an average of more than 50 percent nationwide in the past five years, which left many people scrambling to play catch up or try and get in on the windfall profits they read about in the papers and saw on the news at night. Unfortunately, as any kid who ever blew a bubble knows, every bubble must burst and what goes up must come down.

But, the good news is that if you are looking to buy a home now, you are presented with huge cost saving opportunities that in effect allow you to turn back the clock on the bubble. Because bubbles come and go, the most recent one is gone, but another will come along and people who purchased during the current downturn will have realized significant asset appreciation in that time.

It isn’t the one that has everything. It’s the one with more of what you want and less of what you don’t. This system can guide you to it.

A home’s four C’s

When I became a real estate agent, I discovered something about home buyers: A lot of them cry. Right in front of you. After a few times I began to understand. This is a high-pressure, extremely emotional decision. No house will ever fully live up to your dreams, and whatever compromises you make (and you’ll have to make some) you’ll be stuck with for years.

I’ve never met anyone who was totally rational about evaluating a home, but the way to get closest, I’ve found, is to break the process into discrete parts. Just as diamond buyers focus on four competing criteria (carats, clarity, color and cut), home buyers need to consider a home’s four Cs: cost, condition, capacity and convenience.

The worksheets on the following pages have helped my clients weigh those factors and make the inevitable tradeoffs with fewer tears; they should work for you too.
A home’s true cost

I see a lot of buyers make a basic mistake: When deciding if a particular house fits their budget, they look only at listed price and their probable mortgage payments.

But to make an honest comparison of the houses on your list, you must consider all the costs you’ll be facing. In addition to mortgage payments, there are maintenance costs, property taxes and homeowners association fees, utilities and insurance.

Your total outlay should be no more than a third of your gross income (ideally, less).

Define ‘acceptable’ condition

Unless you’re buying brand new, expect your home to need some upgrades. Just be sure the issues aren’t structural (such as those under “red light” below, which your home inspector can help you identify). Fixing these could run as much as $30,000, says New Jersey builder Jay Cipriani.

Better to go with a home needing cosmetic work (”green light”) or at least a less extensive overhaul (”yellow light”). The investment you make in resolving these will improve your quality of life while living there and increase the resale value.

RED LIGHTThese problems can be incredible costly. Run away.	YELLOW LIGHTThese issues may be fixable. Consult a pro to determine.	GREEN LIGHTFixing these problems will return at least some of your investment.
Major cracks in the foundation To fix major foundation cracks, the house often needs to be propped up.	Leaking or sagging roof Ask the roofer if you can plop on a new one (cheaper) or if you must strip the old (more costly).	Too few bathrooms A half bath could run $15,000 but it can increase the home’s value by 12%.
Sagging stairs One loose tread is okay, but if the entire staircase bows, you may have foundation problems. It’s a big job - see above.	A 20-year old boiler… A more modern system (which you will likely have to install within a few years), will cost thousands.	Outdated kitchen Revamping a kitchen can return 75% to 100% of your investment on resale.
Leaks or water damage A long-term leak can rot your carpet and your walls, cause mold and require extensive repairs.	Mature trees within 15 feet Roots can grow into pipes causing leaks or sewage backups.	Too-small rooms Adding an archway or moving a non-load bearing wall can open the layout at a cost of around $7,000.
Termites Mud tubes and hollow wood are signs of a serious infestation, particularly worrisome if the house has a wood frame.	High radon levels To mitigate this lung cancer risk, you must install a ventilation system.	Cracked, drafty or warped windows New, energy-efficient windows cost as little as $200 each and can make a big difference in appearance and heating bills.

Consider capacity

To squeeze into a budget, you might have to get a smaller - wait, I’m a real estate agent: cozier - house than you’d like. So forget about square footage, often a misleading number. More important is how that space is allocated. These questions will help you evaluate whether the space in a house fits you.

Does it have enough closet space? Rather than look at the number of closets, measure the length of them (for instance, six feet in the hall, two in the kids’ rooms and so on). Compare the total with that of your current home. Also, take along a hanger to make sure the closets really are deep enough for clothes.

Are there enough bedrooms? One of the most awkward moments for a real estate agent is when the husband counts the bedrooms and says “We’ll all fit,” then the wife gets a gleam in her eye. Ideally, you’ll know your family’s expansion plans before shopping. Since that’s not always possible, consider whether there’s room for surprise long-term guests, be they kids or in-laws. If you can’t afford extra bedrooms, is there an area that could be converted, like an attic or a basement?

Does the kitchen suit my needs? Think about whether there’s space for you, your family and your guests - as well as your cooking gear. (I’ve seen kitchens with cabinets too shallow for a microwave.) Don’t forget about the fridge, which can be costly to replace: A family of four needs at least 22 cubic feet.

Is there a spot to work from home? Is there room for a desk, a computer and files? Even if you don’t need an office, your next buyer might: A work space can add an average of $12,000 to resale value, according to a study done by Remodeling magazine.

Weigh the price of convenience

Cities offer great job and cultural opportunities, but they generally come with high real estate costs. To get more house for your money, you might look along the edge of a hot neighborhood or in a smaller town nearby.

But will you miss the pace? Will you end up with a longer, pricier commute than you’d prefer? Will family and friends ever visit?

To determine whether moving farther out is worth the sacrifice, look at a house in the area you like and a similar one 15 to 30 minutes away. Then consider the factors in the worksheet below.

YOUR DOLLARS WILL GO FARTHER IF YOU DO TOOUse a list like the one below to determine whether moving farther out is worth the sacrifice.
	Closer House	Farther House
Listing price
Length of commute
Gas price
Cost of commute
Cost of child care
Nearest hospital
Nearest supermarket
Nearest pharmacy
Nearest airport
Good schools?

by Alison Rogers
Thursday, August 16, 2007provided by CNNMoney

Alison Rogers is the author of “Diary of a Real Estate Rookie.”

Copyrighted, CNNMoney. All Rights Reserved.

NEW YORK (Reuters) - Countrywide Financial Corp. (CFC.N) shares sank 13 percent, their biggest one-day decline since the 1987 stock market crash, on fears the largest

U.S. mortgage lender could face bankruptcy as liquidity worsens.

“If enough financial pressure is placed on Countrywide or if the market loses confidence in its ability to function properly, then the model can break, leading to an effective insolvency,” Merrill Lynch & Co. analyst Kenneth Bruce wrote. “If liquidations occur in a weak market, then it is possible for Countrywide to go bankrupt.”Countrywide debt prices fell and the perceived risk of owning its bonds rose, suggesting less confidence that the Calabasas, California-based company can pay its bills and fund operations.This helped drag down U.S. stocks, as investors bought safe U.S. government debt to escape clouds enveloping the

U.S. mortgage industry.Bruce downgraded Countrywide to “sell” from “buy” on Wednesday. “The company can survive a period of secondary market instability; however, the steps that it would take to preserve shareholder value would be expensive, likely leading to further share price declines,” he said.Shares of Countrywide closed down $3.17 at $21.29 on the New York Stock Exchange. They have fallen 50 percent this year, and the company’s market capitalization has dropped to about $12.3 billion. Countrywide did not immediately return requests for comment on Wednesday’s share price decline.Bruce’s downgrade suggests deepening problems at Countrywide, which has in the last month tried to assure investors it would thrive once the credit crunch afflicting

U.S. mortgage lenders passed.The downgrade came a day after Countrywide said foreclosures and mortgage delinquencies rose in July to their highest levels since at least early 2002. DEBT YIELDS RISEShares of several other companies exposed to mortgages also suffered double-digit percentage declines on Wednesday, including Deerfield Triarc Capital Corp (DFR.N), KKR Financial Holdings LLC (KFN.N) and Scottish Re Group Ltd (SCT.N). The KBW Mortgage Finance Index (.MFX) fell 2.7 percent.The mortgage industry is struggling as defaults rise, investors refuse to buy many home loans, and bankers curtail lending to mortgage providers. Dozens of lenders have quit the industry this year, and several have gone bankrupt.Countrywide spokesman Rick Simon declined to discuss Bruce’s report, but said: “Management is completely focused on running the business in a changing environment.”Reuters obtained a copy of Bruce’s report.Countrywide’s 5.8 percent notes maturing in 2012 fell 1.9 cents on the dollar to 90 cents, yielding 8.37 percent, according to Trace, the Financial Industry Regulatory Authority’s bond pricing service.The perceived risk of owning Countrywide bonds rose. Credit default swaps rose about 100 basis points (1 percentage point) to 500 basis points, or $500,000 per year for five years to insure $10 million of debt, traders said.Countrywide’s unsecured 30-day commercial paper yielded 6 percent to 6.25 percent, according to Deborah Cunningham, chief investment officer for money markets at Federated Investors. DISRUPTIONSBruce said market disruptions have made it difficult for many companies to obtain even short-term financing. He pointed to

Canada’s Coventree Inc. a structured finance firm that on Monday found itself unable to sell its own short-term debt. It said it later found buyers for C$600 million (US$556 million) of the debt. The Countrywide downgrade is “a big deal,” said Blake Howells, director of research at Becker Capital Management in

Portland, Oregon. The disruptions are “an issue for Countrywide and for anyone accessing pretty reliable short-term funding.” Earlier this month, Countrywide said it had access to $186.5 billion of cash as of June 30, including $46.2 billion of “highly reliable” short-term financing. Chief Executive Angelo Mozilo on July 24 said Countrywide expected to add market share, and eventually be among perhaps five lenders to dominate the mortgage market. Countrywide added nearly 7,000 jobs from January to July. Bruce said “we like” Countrywide’s franchise, but industrywide liquidity problems could erode its value.

By Jonathan Stempel  

(Additional reporting by Karen Brettell, Doris Frankel, Chris Sanders, Neil Shah and Dan Wilchins)

WASHINGTON - Sales of existing homes fell in 41 states during the April-June quarter while home prices were down in one-third of the metropolitan areas surveyed, a real estate trade group reported Wednesday. The new figures from the National Association of Realtors underscored the severity of the current housing slump, the worst downturn in 16 years.However, Realtors officials said they saw some glimmers of hope in the data. They noted that existing home prices were up in 97 of the 149 metropolitan areas surveyed compared with the sales prices of a year ago.That represented price gains for 65 percent of the areas surveyed, an improvement from the first quarter of this year when only about 55 percent of the metropolitan areas reported price gains from the same period a year ago. In the fourth quarter of last year, less than half of the metropolitan areas reported price gains.“Although home prices are relatively flat, more metro areas are showing price gains with general improvement since bottoming-out in the fourth quarter of 2006,” said Lawrence Yun, senior economist for the Realtors.The states suffering the biggest drop in sales in the second quarter, compared to the same period a year ago, were Florida, down 41.3 percent, and

Nevada, down 37.5 percent. Other states with big declines were Arizona, down 23.4 percent; Tennessee, down 21.5 percent; Maryland, down 21.1 percent, and

California, down 19.8 percent.Bucking the downward trend, six states actually showed sales increases during the second quarter while one state had unchanged sales and there was incomplete data for two states, the Realtors reported.

Wyoming had the biggest sales increase, a rise of 10.8 percent in the second quarter of this year compared to the second quarter of 2006. Sales were up 4.1 percent in Iowa from a year ago while sales in

North Dakota rose by 2.9 percent, the third strongest gain.Nationwide, sales of existing homes totaled 5.91 million units at an annual rate in the second quarter, down 10.8 percent from the sales pace of the second quarter of 2006.The national median sales price in the second quarter was $223,800, down 1.5 percent from a median price in the spring of 2006.

“Recent mortgage disruptions will hold back sales temporarily, but the fundamental momentum clearly suggests stabilizing price trends in many local markets,” Yun said.

By MARTIN CRUTSINGER, AP Economics Writer

Sales of existing homes fell for the fourth straight month in June, but prices defied the gravitational pull not only in

California, but the nation. The National Association of Realtors reported that the sales of existing homes dropped 3.8 percent in June, the slowest pace in four and a half years. Down from an annual rate of 5.98 million units set in May 2007, the June rate pulled annually adjusted sales down to 5.75 million units.

 It sounds worse when you compare year-over-year. Sales dropped 11.4 percent in June from June 2006.

In California, where one in nine

U.S. residents lives, home sales decreased 24.7 percent in June compared with June 2006.

Yet, the median price of an existing home rose nationally by a meager 0.3 percent in June. Considering sales were slower in May, that’s a 3.3 percent jump in price in one month and the first upswing over same-month prices in a year. And in

California, the median price of an existing home rose 3.2 percent. That’s in a market with a supply of about 10 months of inventory on hand. Six months on hand is considered well balanced for buyers and sellers.

That’s why rising prices don’t make sense when sales are slowing and inventories are building. With more to choose from, buyers tend to negotiate harder.

Nationally, the supply of unsold homes on hand in June dropped 4.2 percent to an 8.8-month supply. That’s still high, but down from the 15-year high set In May.

Economists speculate that one reason that home prices haven’t come down is because market fundamentals such as growing job bases are supporting home prices and that some sellers have pulled their homes from the market to wait for better offers. Others, such as the NAR’s senior economist Lawrence Yun that “it appears that some buyers are looking for more signs of stability before they have enough confidence to make an offer.”

This suggests a classic standoff, and which way it goes is anybody’s guess, but here’s what could happen.  

Both buyers and sellers may begin to look at opportunity costs as well as their actual costs:

· Money’s not going to get better. Currently, mortgage interest rates are lower than they were this time last year, but economists are bullish that rates will go up, due to higher competitive rates being offered by foreign banks such as China and

England. That means that American banks will have to compete to attract foreign investment. If lending rates go up, mortgage rates will too.

· Selection’s not going to get better. If that doesn’t move buyers along, another reason might — home sales are declining and anticipated to decline further, but sellers are proving to be both stubborn and resilient. Unless something induces a panic and more sellers pour into the market, absorption will pick up, inventories will come down, and buyers will find they are paying higher prices for inferior properties.

· Advantage isn’t going to get better. Now’s the time to trade up, while inventories are saturated. When absorption starts, the best properties are picked off first. Buyer competition’s not going to get better. Now is the best opportunity for buyers to find and negotiate for a home while other buyers are still wondering what to do. When they decide to jump in and buy, the competition for homes will get worse. Even so, the NAR forecasts that sales of existing homes will fall by 5.6 percent this year with prices dropping by 1.4 percent. That would mark the first annual price decline on record.

But only if buyers win the standoff.

 

Realty Times

This week the minimum wage increased for the first time in over 10 years, but there are some good reasons why having more money won’t make much difference to homebuyers. The Fair Minimum Wage Act of 2007 raises the minimum wage to $5.85 an hour from $5.15 an hour. Congress plans to phase in more increases every summer until the minimum wage reaches $7.25 an hour in the next two years. According to estimates, about 1.7 million workers earned $5.15 an hour or less in 2006, so by the time wage increases are completed, about 13 million workers will be favorably impacted. Some economists predict that employers will respond by trying to cut personnel, but others say that the minimum wage increase is long overdue. One estimate noted that the minimum wage was at a 52-year low when adjusted for inflation. That’s a lot of time and money to make up, and the new federal wage guidelines do neither. If you are a minimum wage earner and want to buy your first home, you could be looking at paying about $180,500, the median priced home for first-time homebuyers. With a 10 percent downpayment and a fixed-rate loan of 6.67 percent counting private mortgage insurance, your monthly payment would be about $1,045. To qualify for a home in that price range, you’d have to be making an annual income of $50,160. As a minimum wage earner today, you’ll bring home about $12,168. By summer 2009, you’ll earn $15,080. You’ll still need another income or a co-signer, or you’ll need to buy a far less expensive home than the first-time buyer is able to. Other reasons why the wage increase won’t impact housing is that some states have already raised their minimum wage much higher than federal standards. In

Washington, the lowest wage is $7.93. In California, it’s $7.50, and in

Vermont, it’s $7.53.

So, the workers most impacted will be those who live in states that follow the federal wage guidelines. That means housing affordability is still going to be a problem for many low-wage earners, and that keeps the pressure on first-time homebuyers and move-up homebuyers. 

Realty Times July 25th, 2007

A new report projects home-price declines for the next two years. The riskiest markets are in Florida, California, Nevada and

Arizona. Here’s how to ride out the hard times.  

As if the housing market isn’t bleak enough. The Standard & Poors’ Case-Shiller Home Price Index reported in late June that home prices dropped more in the first quarter of this year than at any other quarter in the last 17 years. Now, a report from PMI Mortgage Insurance says home values could decline across much of the country for at least two more years. There’s a 34.6% chance on average that home prices will drop in the nation’s top 50 markets in the next couple of years, according to PMI Mortgage Insurance’s new U.S. Market Risk Index, which heavily factors in recent price volatility.How far and how fast prices actually fall remains to be seen. But the report underscores the fact that today’s market is decidedly different from that of recent years, when homeowners could bank on rapid home-value appreciation.  Headed for decline Not surprisingly, the riskiest markets identified by the index are located in areas that saw rapid price appreciation, a reduction in affordability followed by a rapid decrease in the rate of price appreciation. Of the 15 biggest cities with the greatest risk for price decline — with more than a 50% chance of lower home values by mid-2009 — five were in California and four were in

Florida.

At the highest end of the spectrum, the following major markets all have a greater than 60% chance of declines, according to PMI:

• Riverside-San Bernardino-Ontario, Calif. (65.2%);

• Phoenix-Mesa-Scottsdale, Ariz. (64.6%);

• Las Vegas-Paradise, Nev. (61.4%);

• West Palm Beach-Boca Raton-Boynton Beach, Fla. (60.7%).

 “There’s no question that our housing prices are declining here,” says Jay Thompson, an agent with Century 21 Aware near

Phoenix. “Our appreciation rate was 54% average at one point in mid-2005-2006, so it is no surprise to anybody here … that prices were going to go down.”

The inventory numbers tell the story: In January 2005, Thompson’s multiple listing service showed 3,500 homes for sale. Today: about 54,000.Also at risk for dropping valuesThe next-riskiest top 50 metro areas on the PMI index, with a 50% or greater chance of dropping values in two years, are:

• Los Angeles-Long Beach- Glendale, Calif. (58.6%);

• Santa Ana-Anaheim-Irvine, Calif. (57.7%);

• Oakland-Fremont-Hayward, Calif. (57.2%);

• Orlando-Kissimmee, Fla. (56.3%);

• Sacramento-Arden-Arcade-Roseville, Calif. (56.0%);

• San Diego-Carlsbad-San Marcos, Calif. (55.5%);

• Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla. (54.2%);

• Miami-Miami Beach-Kendall, Fla. (52.4%);

• Tampa-St. Petersburg-Clearwater, Fla. (50.6%);

• Boston-Quincy, Mass. (50.1%);\

• Washington, D.C.-Arlington-Alexandria, Va.-W.Va. (50%).

 Even where PMI found relatively low risk for dropping prices, sales have slowed way down. In

Everett, Wash., in the Seattle-Bellevue-Everett region with a 34.3% risk of lower prices in two years, homes are sitting on the market an average of 59 days before selling, says Susan Funk, agent with Keller Williams Realty. “Last year, you knew you were overpriced if you did not have offers within the first 10 to 14 days,” Funk says.

Rust belt less riskyYou might expect the list of high-risk regions to include Midwestern industrial cities like

Detroit, where prices fell 9.3% in the last year and foreclosures rose 140% between May 2006 and May 2007, according to RealtyTrac. But

Detroit hasn’t had much volatility, just steadily falling prices and a huge backlog of properties for sale. There’s less risk there because prices already have fallen a good deal, says Mark Milner, chief risk officer at PMI Mortgage Insurance. “Simply put, prices can’t fall forever,” PMI’s report says. “The more volatile it is, the more likely it will be volatile in the future,” says Milner, explaining how risk is calculated.

Phoenix, the second-riskiest city, saw a precipitous drop in the rate of home appreciation — from 37.3% in the first quarter of 2006 to 4.52% in the first quarter of 2007. Affordability — how much of your income is eaten up by housing — is another component of the risk scores. To arrive at risk scores, the PMI economists use a formula that includes data on house sales (including prices, volatility, acceleration and deceleration), affordability (including per-capita income, appreciation and mortgage rates) and employment.One encouraging note: In most markets where price reductions are predicted there are strong local economies and low unemployment. Nationally, “on average, employment is very strong,” says LaVaughn Henry, PMI’s director of economic analysis.The least-risky areasThe major metros with the least risk of price decline by 2009 were in Texas and the

Midwest, stable markets largely untouched by the real estate boom:

• Cincinnati-Middletown, Ohio- Ky. (9.7%);

• Columbus, Ohio (9.3%);

• Indianapolis-Carmel, Ind. (8.4%);

• Houston-Sugar Land-Baytown, Texas (7.9%);

• Dallas-Plano-Irvington, Texas (7.5%);

• Fort Worth-Arlington, Texas (7.4%);

• Pittsburgh (6.4%).

Lessons from a changed marketWhat does all this mean to buyers and sellers? In short, says one agent, forget what you thought you knew about real estate.For buyers

• Consider whether and where to leap. For buyers, the changing market may mean it’s time to think about buying if homeownership previously was too costly. “Yes, there are affordability problems in California, the Southwest and Florida,” says PMI’s Milner. “But there are also huge swaths of the country where housing is still very affordable, and in some cases more affordable (in percentage of income spent on housing) than it was 10 years ago.” The most affordable regions are the South and
  Midwest. Just be certain you can weather the storm if home values drop after you buy.

• Realize it’s a home, not a cash machine. Think of your home as a place to live, not as a way to make quick money. “Instead of a stock, which is just a piece of paper, you get to consume shelter,” says Milner. Your home probably will appreciate, but slowly. Historically, homes appreciate at a rate of about 4% to 6% a year, on average, over any given 10-year period, he says.

• Choose a mortgage by interest rate, not payment amount. Proceed cautiously when shopping for a mortgage. Consider a traditional fixed-rate loan so you’ll know exactly what your payment will be for the entire life of the loan. You may find adjustable-rate mortgages (ARM) with lower payments that later adjust up, but don’t gamble that you can make a higher payment when the introductory period is over or when interest rates rise, as they are likely to do.

• Don’t bet on house appreciation. Don’t make financial plans or take on debts that bank on the near-term rising value of real estate. In the post-bubble world, the risk to your financial stability is just too great. A number of the 176,137 foreclosures filed in May — a 90% increase from last year at this time, according to RealtyTrac — were by borrowers who’d gambled they could refinance a risky mortgage once their home had appreciated. Buyers “are going to need to be very prudent because they are not going to be bailed out by an appreciating home,” says Milner.

 For sellers

• Sweeten a sale by helping a buyer with closing costs. Potential buyers may be sitting on the sidelines because, although they can make monthly payments, they haven’t got a down payment saved up, says Steven Schafer, an agent with Boca Executive Realty in Boca Raton, Fla., one of the riskiest markets identified by the PMI study. Consider contributing up to 3% of closing costs. (Just be aware that states and lenders often limit seller contributions.)

• Exploit the Internet. Open houses, while still an important sales tool, are being eclipsed by the Internet. Buyers now use Web research to learn what’s for sale locally before stepping a foot out of their homes. With scads of homes on the market, you must figure out how to distinguish your home from others like it on the Internet. Schafer and Thompson, the Phoenix-area agents, create a Web site for each house they represent, usually using the home’s address as the site address. If your agent can’t register the link for you, do it yourself. You can also set up a Web page yourself with a modicum of computer skills or pay a Web site creation company to do it for around $30, says Schafer.

• Load your listing with pictures. Schafer advises “visually communicating” with buyers by choosing an agent with an outstanding Web site and contributing plenty of great photos of the house.

• Use a “virtual” tour. Sophisticated real-estate sites use panoramic photo features or streaming video so buyers can get a 360-degree view of the property from a single vantage. With virtual tours, buyers in other states and other countries can get a good feel for your home without actually stepping foot inside.

By Marilyn Lewis

It’s not just the cost, it’s the upkeep. That old saw holds true in homebuying and maintenance. Repair and replacement costs mount each decade of a home’s life, and each generation of homes has its own frailties. Understanding home life cycles is key to making informed buying and remodeling decisions. Census data put the median age of

U.S. homes at 32 years. Wood decks, garage doors, faucets and some appliances start showing their age at 10 to 15 years or even earlier. Other parts of a home — such as wood floors, some kinds of doors, insulation, fiberglass and toilets — can last more than 35 years or the life of a house, according to a National Association of Home Builders study. These are only averages, however. To find out how a particular home is aging, and whether its diet and exercise regimen (repair and maintenance plan) is working, homebuyers can turn to experts. An experienced home inspector can alert them to looming repair needs and a timeline for ongoing maintenance. Learn What You Have A general inspection of the entire home should be the first order of business for buyers, says Max Curtis, a home inspector working in the

East San Francisco Bay area. “We’re kind of the general practitioner,” he said. “If we see problems, we may send them to a specialist.” Waterworks woes might warrant calling in a plumbing inspector, for example. Costs for comprehensive inspections vary around the country. Curtis says he charges $200 to $250 for what’s typically a three- or four-hour visit. He advises buyers to get an inspection even if the house is new or almost new. It’s important because shoddy construction or installation issues can cause unexpected problems down the road. The expected issues are enough to cope with. Here’s a rundown on how long home components last: Eight to 10 years: Some appliances age rapidly, the NAHB study found. Trash compactors have the shortest average life span at just six years. Small refrigerators and humidifiers also have a relatively short life span at eight years on average, followed by dishwashers and microwave ovens at nine years. Out in the real world, remodeling contractors and inspectors say they see problems with thermal pane windows, sometimes in a home’s first decade. Fogging between the panes is the most common issue, Curtis says. “It’s almost routine,” he said, and “hard to pick up because they change hourly.” Eleven to 20 years: In this age group, homeowners can expect to replace some appliances and they’ll want to look closely at the roof and any wood decks or balconies, paint and siding. Also, lighting and electrical panels should be evaluated. Even buyers of younger homes are adding home theaters, spa tubs and smart-home features (lighting, heat and other controls), and these usually require updating the electrical system, says Greg Johnson, co-owner of remodeling firm Lee Kimball in

Winchester, Mass. Twenty to 35 years-plus: At 20 years and older, the roof needs a thorough inspection and probably some work, if not replacement. Whole house systems — plumbing (including faucets), electrical, heating and venting — need to be inspected and maybe updated. The furnace could need replacement, and some flooring (carpets, vinyl, wood floors) likewise. Homes built in the 1950s usually need wiring and plumbing updates, says Scott Gregor, president of Master Plan Remodeling in

Portland, Ore. One electrical panel used in the 1950s and ’60s, Federal Pacific Brand, was faulty; John Fryer, a home inspector in

Berkeley, Calif., says to replace it when found in a home. Exterior Insulation Finish Systems’ (EIFS) stucco is a synthetic stucco that leaks if not properly sealed and installed, says Fryer. Curtis says synthetic shake roofs need to be looked at closely — failures of these roofs have led to many lawsuits. Also, in the mid-1980s some plumbers used defective ABS pipe, Curtis says. Root Of Big Problems One very costly issue with homes 15 years and older is trouble with sewer lateral lines, which connect homes to the public sewer system. In Northern California, problems have been so prevalent that nine cities now require a sewer pipe certification when homes 15 to 25 years and older are sold, says Pamela Vivion-Brooks, co-owner of Pipe Cams in

Livermore, Calif. She says even newer sewer lines in areas with many trees should get inspections. In Arizona, older homes have cast-iron sewer lines now needing replacement, says Rocky Dunn, owner of Greenwood Contracting in

Phoenix.

Some problems are due to pipe degradation. In

California, older pipes of clay and Orangeburg (wood fiber with pitch) are the troublemakers. But overall, 59% of problems are tree-root related, says Vivion-Brooks. Trees can start messing with pipes after just a few years, especially with newer ABS pipe that hasn’t been properly glued.

Kathleen Doler

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