End of Year 2008 Housing Update

Housing Starts

Housing starts for November fell 18.9% from a year ago to an annual rate of 625,000 homes. This is very significant. First, let me explain how low this number really is. This is the lowest housing starts numbers since the government started tracking this statistic in 1959. The lowest housing start number in the ‘91 housing recession was 798,000. The lowest housing starts number in the 1981 housing recession was 837,000 homes. The average housing starts over the last 30 years has been 1,514,000 homes. So, we are almost 1/3 of the average right now. The current # is even more significant when you consider how many more people we have living in the US than we did 30 years ago. The US Population is 37% higher now than it was 30 years ago. Keep in mind, housing starts represent about 75% new homes and about 25% replacement of old homes (tear downs) and I would argue that as housing starts decline, the % represented by home replacement goes up. So, of the 625,000 housing starts, only about 469,000 represents new homes. These numbers are awful but here’s the good news . . . a low number is good for everyone except for builders. Why? Because, this means that builders are finally making very significant reductions in new home construction, allowing inventory (of existing and new homes) to be sold off. Housing starts are an indication of Builder Sentiment. So, the lower housing starts are, the more desperate builders are . . . the more desperate builders are, the better deals they are willing to give. This is important for any of your prospects looking to buy a new home and I’ll write more on this later. So, that brings us to inventories.

Home Inventory

First, it is important to recognize that new home inventory has been falling steadily from a peak of 572,000 in July, 2006 to 374,000 in November, 2008 (in other words, it has been declining for 2 ½ years!). The media tends to skew public opinion about inventory by focusing only on “Months of Inventory”. Months of Inventory is basically how many months it will take to sell the existing new home inventory at the current new home sales pace. Of course, when the sales pace is at historically low levels, even modest new home inventory will represent a high Months of Inventory number. The average new home inventory over the last 30 years is 350,000 homes so we are only slightly over the average right now at 374,000 homes . . . so obviously, the new home inventory situation isn’t nearly as bad as the media would like you to believe. Even more important is how quickly the Months of Inventory number could drop when the housing market bottoms and sales starts going up. If we get a 25% increase in homes sales along with a 25% decrease in inventory, the Months of Inventory # would drop by 40%. It’s at 11.5 months now so it would drop to 6.9 months. The point is, in most of the past housing rebounds, home sales have increased rapidly off their bottoms and home inventories have dropped rapidly so it is highly likely that during this coming winter/spring, when I expect home sales to pick up, the Months of Inventory # will improve dramatically.

Sales

There’s not much to say about Sales other than they are low and got even lower in November. I expect December to be similar to November if not slightly higher than November. What really hurt sales in November and December was the Policy Makers leaking the information that they may buy mortgage rates down to 4.5%. All this did is put would-be buyers more firmly on the fence as they wait for 4.5% mortgage rates. I expressed my frustration with this at my Philadelphia Fed Meeting on December 9^th to Charles Plosser, the President of the Philly Fed and a member of the FOMC Committee. I don’t think the Fed realized how damaging this information leak was to sales. Regardless, I believe the low interest rates have created some renewed interest in home buying in the latter half of December so my suspicion is that December home sales (seasonally adjusted) will be a little better than November’s. I do expect that we’ll see a significant improvement in Sales this Winter and Spring, regardless of what the economy does. People are going to realize that the waiting game is over and now is the time to buy that home they’ve been putting off for a few years. Also, more importantly, new home buyers will start coming into the market and stop living with their parents and this will help sales across the board because new homes buyers will buy a home from someone who will finally be able to go out and buy the home they want but couldn’t until they sold their existing home. This will play an especially large role in terms of enabling retirees to buy their retirement home (in Sussex County we hope J).

Why Buying a Home in the Next Three Weeks May Prove to be an Extremely Smart Decision

This is the real reason I wanted to blog this information. In my opinion, buying a home between now and January 20^th (Inauguration) will prove to be the best time to buy a home in our lifetime. Here’s why:

So, there’s no doubt that there is pent-up demand out there and that many people have been patiently “waiting for the bottom” for a couple years now. The media reacts to reported housing numbers (sales & price). Sales always pickup before price and in most prior downturns, sales picks up very quickly. And, one month’s sales are reported about 3 ½ weeks after the end of the month so there is a delay between the actual activity and when the data for that activity is reported. Only when the numbers are published will the media report this data and make predictions based upon it. The point is, if you wait for the media to start reporting about a bottom in home sales, you will already be two or three months late and will miss the bottom. However, even more important, if the sales pace returns with a vengeance like it has in most of the past downturns, builders and existing home sellers will not be willing to offer the great discounts and deals they are now. Once it is common knowledge that the market has bottomed, home sellers will feel as if the pressure is off and will be less desperate and thus less willing to agree to huge discounts or incentives . In other words, the best deals are going to be given to the customers that buy prior to the bottom when sales are very slow because once we have the bottom, sales will pickup and sellers will significantly reduce their willingness to offer incredible deals. Also, sales are always slower during the winter so sellers are even more incentivized right now to offer incredible deals.

Here’s another reason to buy a home very soon. The window of opportunity right now to get a great deal is really only about 3 weeks long . . . here’s why: Obama’s inauguration is on January 20^th. Do you think Obama is going to implement an Economic Stimulus Package very shortly after entering the White House? His economic team has already spent numerous hours working on this package so that it is ready immediately upon his inauguration. This is no secret . . . Obama has been very vocal about this. Do you think Obama’s Stimulus Package is going to have a strong Housing Stimulus component to it? You bet . . . it is becoming more and more accepted by economists that to fix the economy, you have to fix housing. So, in other words, on or shortly after January 20^th, we will have a package in place to seriously kick start housing. Now, ask yourself this . . . once the package is announced and home sellers (Builders & Existing Home Sellers) know that Obama has taken steps to significantly increase demand in housing, what do you think will happen to their willingness to offer incredible deals? I can tell you . . . it will significantly decline. Why would they offer a great deal when they know that they no longer need to since the housing stimulus is going to be all the incentive buyers need? The basic point is this . . . the window of opportunity for would-be home buyers to be offered a special extra incentive or significant discount is only open for 3 more weeks. When Obama takes office, he is going to move quickly and aggressively to fix housing. Once he does this . . . even before we see the results, just knowing what he is going to do will take the pressure off housing and make the market a little less favorable to buyers. Here’s the other good news . . . for buyers who contract before January 20^th but settle after January 20^th, they will very likely be able to benefit from whatever stimulus Obama implements (low rates, tax rebates, etc). So, buying over the next three weeks is a “Two-fer” . . . you get the great discounts associated with the challenging housing market and you’ll most likely also be able to capitalize on whatever incentives are included in Obama’s package.

In fact, you can take this argument even further for new home buyers . . . Obama’s stimulus package is likely to be temporary because only a temporary housing stimulus will create the desired urgency and housing demand. So, Obama may do something like lowering conforming interest rates to 4.5% for 6 months only. If he does this, any new Home Buyer who waits until the package is announced may not benefit from this if their house cannot be built fast enough to settle within 6 months. New Home Buyers who buy now increase their chances of capitalizing on any temporary housing incentives in Obama’s stimulus package.

Anyway, hopefully this all makes sense. I really believe that the peak of home sellers willingness to offer huge discounts or incentives is right now. Waiting until Obama’s Inauguration to see what he’s going to do seems like a logical approach for would-be home buyers but I think it will prove to be a mistake since the certainty of knowing the specifics of his housing stimulus will make home sellers feel more secure and less willing to offer great deals.

10 Signs to the Bottom of Real Estate Markets

The bottom of each real estate market in America won’t occur with much fanfare. In fact, few people will realize that it’s even happening when they do, and they’re usually only recognized after the bottom has already hit.

The search for the elusive bottom to any real estate market is akin to finding the proverbial needle in a hay stack. Once they’re fully realized, the elevator is usually on the way up and higher prices follow.

Bottoms to real estate markets are a lot like trying to determine when stocks in financial markets are at their lowest price. Veteran investors say it’s a fool’s game to try to find the bottom to make a buying decision because as you wait, study and calculate the tendency is to over analyze as the market makes its own moves and often leaves you in the lurch.
In these increasingly complicated financial times, troubled by the credit crunch finding a market’s elusive bottom is no easy task. But here are 10 signs to ponder on whether the bottom of your market is near:

1- The inventory of listings is reducing as properties come off the market, especially those over priced places that have been sitting on the market rotting. Noticing fewer for sale signs in that neighborhood you’re interested in buying a home or condo in these days?

2- The Mass Media spurs interest with talk of a bottom. Newspapers and television reporters speculate and ask the experts if a bottom is occurring like it’s a national real estate market trend when all markets have their own local bottoms and are scattered over time.

3- Sales volume begins to pick up, slowly at first as pent up buyer demand results in more showings.

4- People are less fearful of the market.

5- People begin to talk about how much money there is to be made investing in real estate again.

6- Increasing telephone calls to realty offices on listings and for sale by owners.

7- The Fed finishes tinkering with interest rates at least for a while, trying to get a handle on how the markets are moving.

8- People commonly talk about the bottom occurring like it’s a thing of the past with increasing consumer confidence.

9- Prices finally seem to stop dropping.

10- Financing becomes easier to obtain.

There aren’t hard and fast rules to insuring that your real estate market is at the bottom. All bottoms are different after all, but one thing’s sure. The bottom of markets have historically been for a much shorter duration than the top, which is one reason why most property owners are secure in their positions. Statistically, very few real estate buyers make their purchases at the bottom or the top. Most buy some where in between.

By Mike Colpitts
http://www.housingpredictor.com/bottom.html

Sussex County, Delaware Home Sales - as of December 22, 2008

Happy Holidays! Looks like a lot of people will be getting a new house at the beach in Delaware for Hannukah or Christmas this year! There have been 59 new closed transactions in the past week, which is a good sign that the market is still moving and shaking, despite the current economy. Here is a breakdown of what has sold.

Single Family - 1,545 (compared to 1,514 on 12/15)
Condo / Townhome - 611 (compared to 598 on 12/15)
Mobile - 281 (compared to 276 on 12/15)
Multi-Family - 4 (no change)
Lots / Land - 332 (compared to 323 on 12/15)
Farms - 8 (compared to 7 on 12/15)
Commercial - 58 (no change)

The total for closed real estate transactions for 2008 thus far is 2,839. The average list price, as of November 30, 2008, is $369,586, with an average sales price of $343,742. Listings are selling at 93% of list price, and averaging 190 day on the market.

Sussex County, Delaware Home Sales - as of Dec 14, 2008

The holidays are fast approaching, and homes are selling. Why not consider buying a new home for your honey! Here is a breakdown of what has been moving!

Single - 1,514 (compared to 1,493 on 12/8)

Condo / Town Home - 598 (compared to 597 on 12/8)

Mobile - 276 (compared to 274 on 12/8)

Multi - 4 (no change)

Lots / Land - 323 (compared to 319 on 12/8)

Farms - 7 (no change)

Commercial - 58 (compared to 57 on 12/8)

The total closed real estate transactions for 2008 thus far is 2,780. The average list price, as of November 30, 2008, is $369,586, and the average sales price is $343,742. Listings are selling at 93% of list price, and averaging 190 day on the market.

8 Bailout Questions Answered

CNN viewers asked us about the proposed rescue of the auto industry. Here's what you need to know.

Give the money to us instead of them

Why doesn't the government just give us all a large amount of money, and we can buy their cars, and that should help out the car companies? --John

Given the amount of money needed to keep the Big Three automakers afloat, it's a lot more efficient to simply lend them the money rather than to spur sales through an incentive program.

American consumers also don't like to be told what to buy. A rebate program would have to specify that they purchase a vehicle from General Motors, Ford or Chrysler, limiting their choices to the Big Three. Consumers and foreign-based manufacturers would likely pressure the program to open up to at least all cars made in the United States.

Also keep in mind that the government isn't giving money to the automakers - it's lending it to them, with the intention of getting it back in a few years. Rebates are not loans, and consumers could not be expected to pay them back.

Bankruptcy and employees' retirement

What would happen to the employees' pensions and 401(k)s if the auto companies were to file bankruptcy? --Dave

The pension funds of the Big Three are in relatively good shape, so it's not likely that the government will be stuck with a large unfunded obligation.

But some workers, who retired from the automakers in their 50s, could see their benefits cuts if the pensions are taken over by a federal agency. The government doesn't promise to pay the same level of benefits for those who retire before 60.

It's not certain they'd see a benefit cut - it will depend upon the value of the pension fund assets and obligations when the government takes over the pension funds. But a benefit cut is possible.

Joining forces

Maybe they should all merge into one big company. Good idea? --Kevin

Very few experts expect Chrysler to survive as an independent company. As the weakest link of the Big Three, it could use help in some very specific areas of the business.

First, Chrysler doesn't have as much of an overseas presence as GM or Ford, so its health is more reliant on the U.S. market.

It could also use help making competitive small cars. Chrysler's strength is in trucks, vans and big cars. It's already formed alliances with other manufacturers: Chrysler has a deal with Nissan, which will build a small car for it. In return, Chrysler will build a truck for Nissan. Chrysler is also building a minivan for Volkswagen.

The benefits of GM or Ford merging with another company are less obvious. Both are international in scope, which have helped buffer the impact of market share losses at home, at least until recently.

Like Chrysler, GM and Ford could use assistance building a stronger line-up of small cars, but merging with a domestic automaker with the same problem wouldn't help that much. Besides, Ford and GM already have plans to sell some of their European small cars here.

One real benefit of a domestic merger would be to reduce each company's output to its current market share without having to go out of business. It would result in a "controlled contraction." This would also give the combined company greater power in negotiating new contracts with unions and suppliers for additional cost savings.

But closing excess factories and car dealerships takes a lot of cash up front. So any kind merger in the short term is less likely because of the current credit crisis.

Deja vu all over again

The automotive industry is a cornerstone of America; how can we make sure this won't happen again? --James

You can't. There is no way to make absolutely certain that a crisis like this will never happen again. But what can be done is to help the industry change so that it can better compete against foreign automakers who have lower costs.

That will likely mean painful sacrifices for industry stakeholders like auto workers, retirees and auto dealers, not to mention those at the auto executives themselves. But an industry failure would be far worse.

Still, there is a chance we will face this decision - whether to bail out the auto industry - again. But some economists argue that even the cost of repeatedly bailing out the industry will be less than the overall cost of allowing it to collapse.

Pink slip for the corner office

If the big three CEO's have dug this hole for themselves and the industry, why do they get to keep their jobs? --Paul

They may not, at least, not all of them.

Chrysler's Bob Nardelli and Ford's Alan Mulally really can't be blamed for any serious hole-digging. They've only been on the job for a couple of years and the problems were pretty serious before they arrived. Mulally even deserves some credit for the fact that Ford says it isn't in imminent danger of collapse and probably won't need to tap the bail-out line of credit it is requesting.

GM CEO Rick Wagoner may be asked to leave his job as part of a loan package. But the industry's fundamental problems predate his 2000 promotion to the top job. GM has made changes in recent years to move away from over-dependence on SUVs and trucks, and it has also negotiated new union contracts that will bring the company's labor costs more in line with those of foreign-based competitors. But Wagoner could be blamed for not making these changes soon enough.

Given GM's untenable costs and increasing foreign competition, some argue that Wagoner was like a mutual fund manager in a bear market. Success may have been too much to expect. He could be credited for keeping the company alive prior to the recent collapse of the nation's overall economy. But, with calls for someone's head coming from Congress, Wagoner's neck seems to fit the guillotine best. It may be time to see if someone else could do this difficult job better.

Union concessions

Has anyone asked these employees whether they would do the same job for substantially less pay and/or fewer benefits in order to be able to keep the plant open? --Jackie

They get asked that question every time there's a new round of union negotiations. Up until recently, the answer was usually "No, we won't." In 2007 negotiations, the union agreed to major concessions and just recently, it said it was willing to consider more.

But the real problem for carmakers isn't the workers in the factories. It's the retirees. Before the 2007 negotiations, domestic automakers paid more than twice as much per worker hour in labor costs than Japanese competitors making cars here. But the actual hourly pay for workers was very nearly the same.

Domestic manufacturers have been making cars here much longer. That means they have many more retirees. The cost of health care for them is a big part of what drives up the overall hourly cost. And having been here longer, the Big Three have more experienced workers who command the top pay range.

In the 2007 round of contract negotiations, retiree health-care costs were shifted to an outside fund so that after 2010, those costs will not be reflected on the automakers' books. Carmakers are now also allowed to pay new workers a lower hourly rate than current workers. That will save substantial costs in the future, with more future savings with further concessions.

Warranty protection

I just purchased a new GM car, and I am worried if GM fails, what will happen with my warranty, and extended warranty? -Michael

If a Detroit automaker does go out of business, it's likely there will be some kind of warranty coverage for people who bought one of their cars in the past or who buy the remaining inventory. But the nature of that warranty is not certain.

This is a key argument for why bankruptcy wouldn't work. Even if the automakers give assurances that warranties will be covered by a third party, consumers will be nervous, making it more attractive to buy from a strong foreign automaker that can still stand behind its cars.

Installing safeguards

What sort of conditions are likely to be put on the bailout money? Can we at least demand that the automakers produce electric cars or cars with gas mileage we specify? -Shaleen

The bailout plan contains provisions for government oversight. Whoever oversees the companies that borrow money will have powers similar to a bankruptcy judge with the ability to negotiate conditions on outside creditors, unions and other parties. That could spark some painful but necessary changes for long-term survival.

Regarding electric cars, new Corporate Average Fuel Economy rules have already been passed that call for big overall fuel economy increases for all manufacturers. GM, Chrysler and Ford are working on new hybrid and electric cars in part to comply with those future requirements, but also to change the public's impression that they are technologically lagging.

When we're talking about business survival, though, it's important to remember that hybrid and electric cars are unlikely to be very profitable, or profitable at all, for years to come.

By Peter Valdes-Dapena and Chris Isidore, CNNMoney.com senior writers

http://money.cnn.com/galleries/2008/autos/0812/gallery.auto_bailout_questions/index.html

Foreclosure Activity Drops to June Levels

WASHINGTON (AP) - The number of American homeowners dragged into the housing crisis fell last month to the lowest level since June as new state laws lengthened the foreclosure process, RealtyTrac reported Thursday.

"We're going to have a pretty significant spike in January," said Rick Sharga, RealtyTrac's vice president for marketing. Plus, as job losses mount, "increases in foreclosure activity follow that pretty directly," he added.

Nationwide, more than 259,000 homes received at least one foreclosure-related notice in November, down 7 percent from October, but 28 percent higher than a year ago, RealtyTrac said.

The report comes as Democrats, including President-elect Barack Obama, insist that the government must use some of the bailout funds to halt rising foreclosures.

Last week, the Mortgage Bankers Association reported that a record one in 10 American homeowners with a mortgage was either at least one month behind on their payments or in foreclosure at the end of September.

RealtyTrac monitors default notices, auction sale notices and bank repossessions. More than 78,000 properties were repossessed by lenders last month, said the Irvine, Calif.-based company.

The worst recession in decades, falling home values and stricter lending standards have ensnared millions of U.S. households. The Federal Reserve predicts that new foreclosures this year will reach about 2.25 million, more than double pre-crisis levels.

In RealtyTrac's report, Nevada, Florida and Arizona had the nation's top foreclosure rates. In Nevada, one in every 76 homes received a foreclosure filing last month. Florida saw one in every 173 properties receive a foreclosure filing, and in Arizona it was one in every 198 homes. Rounding out the top 10 were California, Michigan, Georgia, Ohio, Colorado, Utah and Idaho.

Among metro areas, the Cape Coral-Fort Myers area in Florida was first, with one in every 59 housing units receiving a foreclosure filing. It was followed by Las Vegas, and the California cities of Merced, Modesto and Stockton.

December 11, 2008 9:55 AM ET, reported by the Associated Press news

http://news.moneycentral.msn.com/category/topicarticle.aspx?feed=AP&Date=20081211&ID=9442804&topic=TOPIC_ECONOMIC_INDICATORS&isub=3

Average House Prices Don't Tell the Real Story

Samuel Clemens, better known as Mark Twain, wrote that "figures don't lie, but liars figure." He also credited Benjamin Disraeli with the quote: "There are three kinds of lies: lies, damned lies and statistics."

Canada's housing market statistics have been making headlines this year, as the number of sales and average house prices have declined for the first time in many years. The drop in average home prices, in particular, are making dramatic headlines, worrying Canadians that a full-scale housing crash is underway. But on the front lines, real estate leaders say the market isn't as bad as the media makes it sound.

Part of the problem may be those lying statistics.

Average house prices reported in Canada are based on sales through the Multiple Listings Service, which is operated locally by real estate boards across the country. National numbers are compiled and reported each month by the Canadian Real Estate Association (CREA).

The system is flawed because it doesn't include private and most new home sales, but it's the most accurate reflection of house prices that's available. The numbers are used by most economists and by Canada Mortgage and Housing Corp. as a major economic indicator.

Recently two banks announced they were introducing new indexes to present a more accurate picture of house prices. First off the mark was TD Bank Financial Group, which unveiled the TD Home Price Index (TD HPI) in November.

TD says that the problem with using average MLS prices is seen when markets are fluctuating significantly. "Such is the case in Canada at the moment," say TD economists Pascal Gauthier and Grant Bishop in a special report . "As at Oct. 08, sales were down 50 per cent British Columbia, for example. Since average prices in British Columbia are the highest in the nation, the drop in sales tends to overstate the extent of price declines when applied to a simple national average."

The new TD HPI weights the markets by the outstanding stock of homes within each market. "This will help control for price volatility related solely to shifts in sales volumes – which arguably distort national figures," says Gauthier.

"We weigh each major market by its share of housing stock (as per cent of total) using the number of dwellings from Census data, interpolated as needed between Census years. To remain agnostic about post-2006 Census developments, weights are fixed after the 2006 Census until we get the next Census from 2011."

Using this example, the CREA sales-weighted average price for major markets in October was down 10.9 per cent from last year, while the TD HPI stock-weighted measure shows a decline of just 4.6 per cent.

National Bank Financial Group and Teranet have also launched a house price index, which they call "the first independent representation of the rate of change of Canadian single-family home prices based on 'repeat sale methodology'."

Monthly indices for six metropolitan areas – Calgary, Halifax, Ottawa, Montreal, Toronto and Vancouver – will be combined to form a Canadian Composite Index. The measurements are based on the records of public land registries. In Ontario, Teranet operates the province's Electronic Land Registration System.

Similar to the house price benchmark in the United States, the Teranet - National Bank index compares the values of properties that have been sold at least twice. The two prices are used to measure the increase or decrease in property value between the two periods of measurement. The index is published on the last Wednesday of each month at housepriceindex.ca .

"As an independent benchmark, the index will be used to sell financial products connected to the housing market while giving investors access to the residential real estate market as an asset class," says the National Bank and Teranet in a news release.

As a further example of how numbers can present a distorted picture of what's going on the market, Toronto Realtor John Pasalis has been explaining on his blog (www.realosophy.com) how the city's price declines have been exaggerated recently.

In October 2007, the City of Toronto approved a new land transfer tax that took effect in early 2008. The move created a rush to close home sales before the new tax kicked in, and affected mid- to upper-priced homes the most, because first-time buyers are exempt from the tax.

Pasalis says that although real estate sales usually decline in the fourth quarter of the year, in 2007 sales surged. Prices rose by an average of 17 per cent during the last quarter of the year, and were 28 per cent higher in December 2007 than in December 2006. "Did every house in Toronto appreciate by 28 per cent in December 2007 or were more people buying expensive homes in order to avoid the land transfer tax?" says Pasalis.

He says a disproportionate number of homes priced at more than $1 million (131 versus 47 the year before) skewed the average prices up in 2007.

"Even if actual house values remain unchanged during the last quarter of 2008, we will still see a significant decline in average prices because we anticipate fewer sales of $1 million this quarter. Thus, any decline in average prices during the final quarter of 2008 will be exaggerated by the inflated prices of 2007. This will make Toronto's real estate market appear to be depreciating at a much faster rate than it really is."

Pascalis recently interviewed Bishop, the TD economist, about the bank's new price index. The interview explains more about the reasoning behind the new index, and its methodology. For information about the Teranet – National Bank index, a 17-page section on the website explains how the number crunching works.

by Jim Adair - Mon, Dec 8, 2008
http://realestate.yahoo.com/info/news/average-house-prices-dont-tell-the-real-story;_ylt=Ait67SeiNZQm9XbdK5ASDM6kF7kF

October pending home sales slip 1%

Despite unprecedented economic turmoil, pending sales came in much stronger than the 3% drop economists had forecast.

NEW YORK (CNNMoney.com) -- Despite a meltdown in financial markets, a credit freeze and soaring unemployment, housing markets fared better than expected in October.

The number of homes under contract to be sold fell by just 1% year over year according to a report out today from the National Association of Realtors (NAR), and were down 0.7% from September. Analysts surveyed by Briefing.com had expected pending sales to slip by 3.6% year over year, and by 3% from September.

The condition of the housing market varies considerably around the country, according to NAR.

Many of the one-time bubble markets in Florida and California are now showing substantial sale gains from their depressed levels over the past couple of years. Sharp price declines in these markets have attracted bargain hunting buyers.

"Despite the turmoil in the economy, the overall level of pending home sales has been remarkably stable over the past year, holding in a generally narrow range (of about 5 million in annualized sales)," said Lawrence Yun, chief economist for NAR.

"We did see a spike in August when mortgage conditions temporarily improved, which underscores two things - there is a pent-up demand, and access to safe, affordable mortgages will bring more buyers into the market," he said.

One bright spot

The flat home sales report was unexpected good news, according to real estate analyst Pat Newport of HIS Global Insight.

"I was expecting big drops - 5% to 7% - because of the credit crunch," he said. "[The better report] was probably because of what's happening in the West where there are a lot of distressed sales."

Distressed sales include sales of foreclosed properties as well as short sales, which is when troubled mortgage borrowers sell their homes for less than what they owe on their mortgage, with lender approval.

"Lower prices - almost irresistible bargains - and low mortgage rates are drawing some buyers out of the woodwork," said Mike Larson, a real estate analyst for Weiss Research. "You see distressed properties being sold at fire-sale prices."

For example, Larson notes that a condo near his southern Florida home is now on the market for $64,000 - just $1,000 more than what it was originally sold for back in 1984.

At the same time, however, the economic crisis is hurting sales. Unemployed people don't buy houses.

"These two economic forces will be duking it out over the next few months, leading to very choppy sales," said Larson.

NAR found that sales in the West climbed 17.4% in October, compared with a year ago. Northeast sales plunged 14.1% year-over-year; Midwest sales dropped 6.8%; and sales in the South inched down 2.9%.

Yun is forecasting a very slow housing market recovery. He expects sales of existing homes to total about 4.96 million this year, and then increase to 5.19 million in 2009 and 5.55 million in 2010. He said new home sales will be 486,000 this year, but will fall in 2009 to 393,000 and then rebound in 2010 to 446,000.

Current economic trends are worrisome, according to Yun. He's forecasting a rise in unemployment to more than 8% by the first quarter of 2009, and expects to see a contraction in the gross domestic product of 5.2% in the current quarter compared with a year ago.

By Les Christie, CNNMoney.com staff writer

Last Updated: December 9, 2008: 11:22 AM ET
http://money.cnn.com/2008/12/09/real_estate/October_home_sales_slump/index.htm?postversion=2008120910

Appraising the Home Appraisers

They're supposed to be the market's gatekeepers. But who are they really working for?

Why are home appraisals so crucial to the home-buying process? Real estate is the most important asset in terms of share of worldwide assets. It's the largest asset class. But real estate is unlike other assets that trade continuously, such as stocks, which can be priced from the market. Real estate is local, and properties are idiosyncratic. You're not going to learn what the price is from the market. Besides, a property may not have traded for several years. You need to have judgment in the valuation process.

What part did appraisers play in the most recent housing debacle? There's always pressure for appraisers to "hit the number," but in this past cycle it became extreme. There are many stories of appraisers pressured to certify that the price a buyer was willing to pay for a particular property was what the property was actually worth.

Isn't it? Appraisers shouldn't simply rely on whatever a buyer is willing to pay. They have to look at comparables -- genuinely comparable properties -- that show that the price a borrower is willing to pay isn't an outlier. But then there's the question of what is a comparable. When a wave of low-cost financing comes to a neighborhood suddenly, you have a lot of comparables. That's the limitation of appraisals.

Have reforms been put in place to ensure that appraisals are on the up and up? This isn't the first time a real estate bubble brought the system down. After the savings-and-loan crisis, appraisers were required to be licensed, and uniform standards were adopted. One problem is that the response to a violation might be to take an appraiser's license away -- that's very draconian, so appraisers are hesitant to penalize their own. Self-regulation can't be the entire solution. Banks and mortgage brokers must have an incentive not to push deals that don't work in the long run.

What can home buyers do to ensure a fair valuation? The appraisal is not meant to identify the right price for the borrower. The appraiser's responsibility is to tell the lender whether to make the loan. Buyers should do their own due diligence and find comparables in the local market.

By Anne Kates Smith, Senior Associate Editor

From Kiplinger's Personal Finance magazine, November 2008

Susan Wachter is a professor of real estate at the Wharton School of the University of Pennsylvania.

http://www.kiplinger.com/magazine/archives/2008/11/interview_home_appraisers.html

Sussex County, Delaware Housing Update

Below are graphs and information about the current real estate market, as of Dec 5, 2008.

As you can see, we’re lower than we’ve ever been for as far back as the data goes (1970). In fact, from 1982 until now, only one month (Jan ’91) had lower new homes sales than in October. I still believe and am actually becoming more and more convinced that the bottom in sales will be either October or November. Again, I see this is as a good thing . . . even though sales are dismal . . . I have a hard time believing they can go much lower which means they really must bottom soon. All we need to have is a couple months with better sales than the previous month and hopefully the media will do a 180 and switch to the “Housing has Bottomed” camp. In regards to prices, on a National level, homes have never been more affordable . . . I don’t care what the media is saying . . . the math doesn’t lie. When you take today’s median home price (existing homes, not new), combined with today’s interest rates and household income, the % of income needed to make the mortgage payments on the median priced home has never been lower. See chart below:

Right now, only 25% of the median household income is needed to pay for the Median priced home using today’s 30 yr fixed rates (5.53%). So, I really don’t buy the “Houses still aren’t affordable” argument. If anything, I think prices

have overshot on the downside (similar to what’s going on with oil). Also, I think this past month will prove to be the peak of negativity. Even though the employment news today was ugly, employment is very much a lagging indicator and reflects

the economic conditions of several months prior. So, employment will be one of the last things to bottom during the recovery. Home sales will probably be one of the first things to bottom. The moves the gov’t is taking to help housing should also help. They already announced the plan to by $600 billion in mortgage backed securities (from Fannie and Freddie) to bring down interest rates. Now, as I’m sure you already know, they are talking about taking additional steps to bring conforming loan rates down to 4.5%. With a 4.5% rate and prices where they are, anyone with money to do so would be crazy not to be buying real estate. I am confident that the next few months will prove to be one of the best times in history to invest in real estate.

Also, I think the stock market bottomed on November 21^st and I think that bottom will hold (especially after seeing how the market today completely shrugged off the dismal job numbers). Again, the quickest way to an improvement in consumer sentiment is a rising stock market. Another encouraging sign for housing is how much the Builder Stocks have skyrocketed since November 21^st. Check out the chart below of the Philly Housing Sector Index:

It’s up 50% from its lows. That’s an encouraging sign.

Remember, don’t believe everything you read . . . at every single major market bottom in history, the news reports were horrible and all calling for the end of the world as we know it. The world didn’t end then and it’s not going to end now.

Beauty without utility bills

When a Hawaii couple had to replace their roof, they seized the chance to become energy independent.

(Money Magazine) -- Few homeowners can get excited about a costly maintenance project. But when John and Anne Harrison needed to put a new roof on their 50-year-old Oahu, Hawaii home four years ago, they saw an opportunity.

Working with architect Paul Noborikawa, they raised the roof over the dark living room, added more windows and enclosed an outdoor lanai, giving them a bigger and lighter space that seemingly merges with the surrounding dense woods and garden.

But John had even loftier ideas: installing solar water heating and photovoltaic power to take advantage of their hometown's 325 sunny days a year. Now roof panels generate the home's electricity and heat its water.

The couple's electric bill has gone from more than $150 a month to $16, the cost of being connected to Oahu's power grid. Over the course of the year they produce about 300 more kilowatt-hours than they use, feeding the excess back into the grid.

"A lot of my motivation has to do with being an educator," says John, the retired director of the University of Hawaii's environmental center. "People learn by example."

From gloom to glow
The low ceiling made the living room dark, so the Harrisons raised the roof by three feet.
New windows ($13,500) give them a wide view of the foliage around the house, and two Pella 15-pane French doors ($2,000) bring in more fresh air. Low-voltage halogen fixtures and task lighting ($5,500) illuminate the room from all angles.

The floors that replaced the carpet are made from spotted gum ($32,000), an Australian wood that's considered environmentally friendly because of its abundance.

Where did the money go?
The new living room, roof and solar power systems ate up about 30% of the total costs. The rest went toward landscaping, a new driveway and the conversion of an unusable Japanese bathhouse into a guesthouse.

"They've done some really terrific things," says Nancy Metcalf, a local realtor with Coldwell Banker Pacific Properties. "They opened up the area so that it brings in the greenery from the yard, and although the house is surrounded by trees, you don't feel darkness. It's what people shopping in the neighborhood are looking for."

Energy-producing estate
With a solar hot-water heater ($3,750) and a photovoltaic power system ($56,000), the Harrisons produce more electricity than they consume.

Good airflow, ceiling fans and strategic landscaping mean no need for AC. When temperatures dip, the great room's fireplace (not shown) provides the heat they need.

Dos and Don'ts for an eco-friendly great room

DO rely on plate glass to connect the outside and inside visually, and set windows high to bring natural light into narrow, deep spaces.

DON'T create large expanses of glass if you live in a cold climate. At best, glass is a tenth as effective as an insulated wall for keeping in heat.

DO install low built-ins below large windows. They will give you maximum storage space - but won't compete with your views.

DON'T choose walls of glass without extending the eaves out by at least a foot. An overhang cuts down on glare, unwanted heat and window wear.

DO put in wood floors for the greatest durability. (But add rugs, upholstery and curtains to reduce the echo from hard surfaces and high ceilings.)

DON'T use plywood on windowsills or top surfaces. Solid wood costs more ($20 per running foot) but also holds up better to the sun's rays.

DO spend extra on ceiling insulation (40% more for materials). Heated air is lost through the roof; cooled air is warmed. So a hot attic strains the AC.

DON'T neglect reversible ceiling fans, which pull cool air in when it's hot outside and push warm air down when it's not ($500 to $1,000 each, installed).

DO use track lighting to illuminate a large space for less. But spend $500 per track for an extra circuit so you can light different zones separately.

DON'T place any fixtures tight to high ceilings. That's wasted light so far above your head. And lights directly over a fan create a strobe effect.

--Do's and Dont's from Money Magazine contributing writer Duo Dickinson, who is an architect in Madison, Conn.
By Kate Ashford, Money Magazine contributing writer
November 25, 2008: 10:06 AM ET

Half of modified mortgages in default again

Data raises questions if government funds might be better spent on job creation.

WASHINGTON (AP) -- More than half of all homeowners who had their loans modified to make the payments more affordable in the first half of the year are already in default again, banking regulators said Monday.

The new data raise questions about whether government money may be better spent on creating jobs, rather than averting foreclosures, said John Reich, director of the federal Office of Thrift Supervision office at a housing industry forum sponsored by his agency.

"I do have concerns about allocating federal resources" Reich said.

However, many experts claim the bulk of loan modifications don't actually provide much financial relief for borrowers.

The government's data don't include enough detail about the types of the loan modifications that were made, said Sheila Bair, chairman of the Federal Deposit Insurance Corp. "The quality of the [modifications] are not what they should be," she said.

The U.S. economic picture has darkened over the past month. One in 10 Americans with a mortgage is either behind or in foreclosure, and more than 500,000 jobs were lost in November.

Unemployment stands at 6.7%, and the worldwide credit markets have only improved modestly from the freeze that led Congress to approve a $700 billion bailout before the election.

Discussion on Monday's focused on how broad the government's intervention should be, rather than whether the government should play any role at all. The U.S. is on track for 2.25 million foreclosures this year.

"We need a bottom-up approach, in my view, by modifying people's mortgages and helping them stay in their homes," said New Jersey Gov. Jon Corzine.

Corzine called for a three to six month halt to foreclosures while the government works out a more aggressive plan.
Mark Zandi, chief economist at Moody's Economy.com, said the public is likely to be more sympathetic to efforts to assist troubled borrowers, because the link between the foreclosure crisis and the sinking economy is increasingly clear to most Americans.

"It's now in every corner of the country," Zandi said. "I think that people understand that this is a broader issue."

During an interview that aired Sunday on NBC's "Meet the Press," President-elect Barack Obama declined to say how large an economic stimulus plan he envisions. He said his blueprint for recovery will include help for homeowners facing foreclosure on their mortgages if President George W. Bush has not already acted when Obama takes office next month.

For nearly a year, some consumer advocates, lawmakers and think tanks have advocated a dramatic government response. The effort, they say, should be similar to created the Home Owners' Loan Corp. in 1933 to help borrowers refinance troubled home loans during the Great Depression.

The Bush administration has focused mainly on voluntary industry efforts to modify loans, and those have not stopped the surge in foreclosures.

Cartoon of the Day!

Sussex County, Delaware Home Sales - as of December 7, 2008

Real estate in Sussex County, Delaware has not slowed down. The market is moving, at a fairly reasonable pace, too! Local professionals and REALTORS predict we may have indeed hit the bottom of the market. Only time and statistics will tell. Here is a breakdown of what has sold so far this year.

Single Family - 1,493 (compared to 1.462 on 12/1)
Condo / Town Home - 591 (compared to 584 on 12/1)
Mobile - 274 (compared to 269 on 12/1)
Multi - 4 (no change)
Lots / Land - 319 (compared to 312 on 12/1)
Farms - 7 (no change)
Commercial - 57 (compared to 56 on 12/1)

A total of 51 real estate transactions closed in the past week, bringing the total for the year thus far to 2,745. The average list price, as of October 31, 2008*, was $374,225, with an average sales price of $348,199. Homes are selling at 93% of list price and are averaging 190 on the market.

*November stats should be released and available by mid week. If you would like to know those figures immediately, please comment on this post. Otherwise, check back next Monday for the latest figures. Thank you.

Bailout Efforts Now Focus On Main Street, Not Banks

Attention Santa Claus: The financial bailout has a new address—It's Main Street, not Wall Street.

Having thrown trillions of dollars at Wall Street and the financial sector, Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson now appear ready to do the same for Main Street, with a spate of proposals to help homeowners and the housing market.

In what seemed like a well-choreographed, one-two punch this week, Paulson floated a trial balloon for a plan to ease mortgage rates to stimulate new home buying while Bernanke offered a number of proposals to address soaring home foreclosures.

“It looks like they're finally getting serious about doing something, which is important,” says Robert Brusca, chief economist Fact & Opinion Economics. "There are different remedies for different circumstance and enough programs out there for enough people. I’m encouraged.”

Brusca is among the many analysts who have criticized the Bush administration—and Paulson in particular—for doing too little for homeowners struggling with a housing recession and a credit crunch, while aggressively bailing out banks, brokerages and financial institutions such as Citigroup [C 7.71 0.31 (+4.19%) ] and AIG [AIG 1.94 0.10 (+5.43%) ] at great expense.

That crisis management focus, however, has changed recently, perhaps because of pressure from the Democratic Party following its overwhelming general election victory and a worsening foreclosures rate that is making a bad economy even worse.

The new effort also undescores policymakers' frustration and apparent failure to lower borrowing costs and spur lending, despite a variety of unusual moves, which has included policy reversals.

“This really is the gang that couldn’t shoot straight,” says NYU professor Lawrence White, who previously served as a White House economist and savings and loan regulator.

Managing Mortgages
Criticism and second-guessing aside, the heightened efforts—which began with the Fed’s announcement last week that it would buy some $600-billion in mortgage-backed securities—has already helped the mortgage market by lowering rates.

“Absolutely. For the first time in a long time we are seeing the market reacting to the issues,” says a somewhat ecstatic Melissa Cohn, CEO of the Manhattan Mortgage Company. “Borrowing costs in general are just too high, even as real estate prices have come down.”

Cohn says customer call volume is up 300 percent since the Fed announcement last week.
For the first time this year, the average rate on a 30-year mortgage appears to be safely and solidly below 6 percent m—and headed lower.

As CNBC first reported, the Treasury plan under consideration would buy securities underpinning loans guaranteed by Fannie Mae and Freddie Mac with the goal of pushing rates to as low as 4.50 percent.

For many in the industry, that appears to be a magic and powerful number.

The National Association of Realtors estimates that a drop from 6 percent to 4.50 percent will result in the purchase of 750,000 new homes, on top of what’s now a 5-million annual pace.
On a $200,000 house, bought with a 10-percent down payment, the difference in monthly payments is $912 vs. $1079.

“Buyers will jump in if affordability improves,” says the group’s chief economist Lawrence Yun. “The first step is to stabilize prices and absorb the inventory. As long as home price continue to decline there's very little chance of any recovery.”

Fighting Foreclosures
Any recovery is also dependent on stemming the tide of foreclosures, say industry players and analysts, which is what makes the government’s new two-prong approach promising.

Previous measures to address foreclosures through loan modification and other kinds of forbearance, such as the Hope for Homeowners program, have been largely ineffective, according to observers in both the private sector and government.

Another obstacle to modification has been the vast securitization of mortgages, creating a multi-party dynamic to negotiation and modification.

Bernanke's proposals Thursday addressed that and touched on other key concepts such as the government purchase and refinancing of troubled mortgages in bulk, increasing the affordability of monthly payments—which might include the government assuming some of the cost of the write down—and offering more attractive inducements to lenders and firms that service the loans.

“The government becomes the lender and restructures the loan to make them sustainable,” says the American Enterprise Institute’s Alex Pollock, who was CEO of the Chicago Home Loan Bank for about a decade and recently advised Congress on the housing issue.

“Step by step, it looks like we're getting back to the 1930s’ Home Owners Loan Corporation,” he adds, referring to the government’s Depression-era entity that wound up with about 20 percent of the country’s mortgages on its books but still managed to show a profit at the time it was shut down.

Second Guessing
Though the recent measures were generally well received, there's no certainty they'll be implemented. What's more, the probable cost is unknown.

More generally, government involvement of that scale worries some for both economic and ethical reasons.

Skeptics say lower rates alone won't be effective , given the deteriorating condition of the economy.

And, as with the financial sector’s bailout, such measures put too much taxpayer money at risk while rewarding excessive risk-taking by borrowers and lenders. That could anger responsible taxpayers and homeowners, especially since the government's latest proposals lack any provisions for refinancing sound mortgages.

Others worry about the potential for fraud and exploitation, as well as the unintended—and negative—consequences of government intervention in the free markets, particularly at a time when some say there are signs individual real estate markets may be nearing or even at a bottom.

“To what extent does this prolong deflation of the housing bubble,” says independent banking analyst Bert Ely. “It’s one of the things I find troubling about a lot of these programs.”
The answer to that question, of course, as well as the overall effectiveness of the measures won’t be known for some time.

People like mortgage broker Cohn, who’ve seen their business trampled by the credit crunch, are ready to make a leap of faith.

“Everyone is looking for stabilizing factors in the economy,” she says. “The way to save the economy is by saving Main Street.”

By Albert Bozzo, Senior Features Editor 04 Dec 2008 04:17 PM ET http://www.cnbc.com/id/28055285/

Treasury Plan to Revive Housing Market?

Wacky Sales Tactics!

1 in 10 Americans are in Mortgage Crisis

Home Renovations on Sale

Materials costs are plunging, and contractors are begging for work. Suddenly that long-postponed remodel is looking like a smart idea.

(Money Magazine) -- If you're struggling to see a silver lining in the beaten-down real estate market, consider this one: It may be a rotten moment to sell your house, but if you've postponed a much needed renovation project on your home - replacing a rotting deck, repairing a leaky roof or updating an antiquated bathroom - now just might be the best time in years to tackle that task.

The reason: Costs are starting to drop - in some cases, sharply - on everything from building materials to contractors' fees as the economy weakens and housing prices tumble.

In fact, consumer spending on home improvements is off by 12% since peaking last year, according to Harvard's Joint Center for Housing Studies - and that works to the advantage of anyone willing and able to remodel now.

"It's hard for homeowners to think about spending on their houses when real estate values are falling," says Kermit Baker, a senior research fellow at Harvard who tracks remodeling trends. "But with contractors hungrier for business, you'll be able to negotiate better prices, win other concessions and hire better-quality contractors than you could a year or two ago."

Overall, experts say, you can expect to save at least 10% on the cost of a renovation and possibly a lot more, depending on where you live and the project you choose. And if prices on many remodeling materials continue to decline as projected over the next few months, the cost of home improvements should fall even further.

Yet another benefit: Putting money into needed repairs and updates now should help your home maintain its value even as other house prices keep falling.

Of course, not all renovations are created equal. Adding a home office or a swimming pool might be on your wish list, but these days neither is likely to give you much of a return on your investment.

With home prices still in a free fall, it's more critical than ever to understand which projects will return the most on your investment and how to negotiate the best deal with the pros you hire to do the job. The following strategies should help.

Cherry-pick your project

Understand this from the outset: No matter what kind of repair or renovation you undertake, you can't count on the payback you'd have gotten a few years ago when home prices were rising steadily.

According to a new study by Remodeling magazine, these days you can expect to recoup about two-thirds of your costs on a typical home improvement if you sell your home within a year after completing the job, compared with 87% in 2005, when home values were at their peak.

That means you have to be especially careful in choosing which jobs to do, considering the urgency of the need (if that roof is leaking, you really have to fix it now) as well as what you'll pay in material costs, how much of the total bill you may recover and any extra benefits you may get.

To the extent you have a choice, focus on projects with better-than-average returns that may yield additional savings in other ways. For example, installing new windows will cost $10,000 to $20,000 on average but return 75% to 80% of your investment (see "Payback time" above and to the right for the six projects with the best return).

And those improvements have the added benefit of making your home more energy-efficient, so you'll also save on your electricity and heating bills. Plus, you may qualify for tax credits that will further offset the cost of making the changes. A host of home improvement tax credits for windows, doors, insulation and roofing were added or extended in the recent bailout bill; for the complete list, go to energystar.gov.

Some exterior improvements also make a lot of sense right now thanks to sharply lower oil prices. That's because many petroleum-based products, such as asphalt and vinyl, are the core material in these renovations.

The costs of these products had soared recently along with the price of oil but have started to drop, making this the best time in a while to replace your aging roof, repave your driveway or redo your vinyl siding. (See "Building blocks at a discount" above and to the right for a look at recent price changes in key remodeling materials.)

Also think about limiting the scope of the project, since minor upgrades rather than major additions give you more bang for your buck today. For instance, if you modernize your bathroom, you can expect to recover about 75% of what you spent, but adding an entirely new bathroom will pay back only 64% of the cost of the job.

Press for a price break...

These days you'll find a glut of construction professionals vying for your business - a far cry from the situation a few years ago when it was impossible to get a reputable contractor to return your call and a six-month wait to start a kitchen remodel was the norm.

How low can you ask remodeling pros to go? According to a new survey by the contractor referral site Angie's List, 70% of home builders and remodelers are willing to drop prices at least 10%, and 30% say they'll give even steeper discounts.

"There's a larger pool of professionals fighting for these jobs, so a little negotiation may go a long way to get the best possible price for your project," says Angie Hicks, founder of Angie's List, which charges a monthly fee of $6 for access to customer reviews and references.

You'll have the most leverage in the areas that have been hit hardest by the housing slump. But no matter where you live, you should be able to strike a bargain (for tips, see "Hiring a Contractor" above and to the right).

Get bids from at least three remodelers, and insist that their quotes spell out all costs, including labor as well as materials (brand-name products where possible).

Let each pro know up front that you are comparison shopping and that price, in addition to quality craftsmanship, will play a key role in deciding whom you will work with. With the bids in hand, you can then compare prices and start negotiating.

Shopping around really paid off for Nancy Boris, who saved $2,800 on the cost of replacing the back patio of her 2,400-square-foot, three-bedroom home in Roseville, Calif.

Boris, a nurse case manager, got bids ranging from $2,400 (from a contractor who didn't have insurance or references) to $5,800. The highest bidder eventually came down $2,000 in price to $3,800, but Boris ended up going with a pro who had better references for $3,000.

...but be wary of super-low bids

As Boris discovered, it doesn't always pay to just reflexively choose the contractor who comes in with the lowest quote.

In their eagerness (or perhaps desperation) to win business in these tight economic times, some less than scrupulous remodelers may cut corners to come up with that low bid or else leave off charges that they may tack on later, making the actual cost of the project higher than it seemed initially.

Carefully scrutinize any bid that comes in significantly lower than the rest. Ask the contractor, politely but point-blank, how he manages to undercut his competition.

Does he have a general liability policy and workers' compensation? If not, should one of the crew get injured on your property, you'll be liable. Is he using low-quality materials? Is everything you need to get the job done included in the bid?

Then follow up by asking for references from previous clients and checking out his reputation and work history. To do so, go to contractorcheck.com, where for a fee of $13 you can get information about licensing and insurance as well as any legal actions taken. Sites like ContractorsFromHell.com and AngiesList.com can also provide valuable insights.

Wring out extra concessions

In addition to price breaks, ask for other perks while you're negotiating, like a faster completion or a more convenient schedule for work to be done, advises Sal Alfano, editorial director of Remodeling.

Remember, homeowners nowadays are in the driver's seat. "With contractors working on fewer projects, you can expect better service," he says. "Even if in the end you don't get a significantly better price on your project, you should at least get better work done."

For local work in Sussex County, Delaware visit www.yourhoneydoman.com.

Take a bite out of closing costs

Hold the fees please. How to save if you're buying a new home or just refinancing.

BEND, Ore. (CNN/Money) - With mortgage rates still as low as they are, financing a house is dirt cheap these days, right?

Not if you pay a fortune in closing costs.

As anyone who has shopped around for a mortgage knows, it's extremely difficult to compare one lender's offering to with that of another lender because the up-front fees vary so much and are not guaranteed. Lenders and their venders can, and sometimes do, add or inflate fees in the eleventh hour of a transaction.

The U.S. Department of Housing and Urban Development (HUD) has been working on regulations that promise to simplify the mortgage process and save consumers as much as $1,000 off a typical mortgage transaction. When such rules will be rolled out, if ever, is still anyone's guess.

With no regulation in sight, borrowers should consider these strategies for keeping their closing costs in check.

Get friendly with your current lender

If you're looking into refinancing, the first call you should make is to your existing lender, who already has critical information about you and your house on file, said Keith Gumbinger, vice president for HSH Associates.

Since you have an existing relationship, a "streamlined" process might be possible. That can save you a lot of extra paperwork and money on everything from application fees to appraisal fees.

Fee-ed Up? Here are just some of the costs of closing on a mortgage. Fee Average cost* Application $272 Appraisal $310 Credit report $28 Document preparation $206 Processing $288 Recording $86 Underwriting $236 *Based on a $100,000 loan. Not every lender surveyed charges all of these fees. Source: HSH Associates December 2003 survey of lenders

Although fees for title search and title insurance are not determined by the lender, you may also get a break there. If you recently refinanced or took out a loan, you can save as much as 50 percent on title insurance by asking for a reissue rate, which your lender can request on your behalf.

If you're a homeowner shopping for a new house, you should also try giving your existing lender first dibs on the new business. Assuming you've been a good client and your lender originates the kind of mortgage you're interested in, it's possible to get a better-than-market deal, according to Gumbinger.

Get nitpicky about fees...

There are more than a dozen kinds of fees that could show up on your final closing statement, including credit report fees, appraisal fees, document preparation fees, title fees, recording fees and underwriting fees.

All told, fees on a $200,000 mortgage could add up to anywhere from $1,000 to $3,000 – that's not including any "discount" points you pay up front to get the best interest rate. (A "point" is a fee that equals 1 percent of the loan amount.)

Lenders are required to give you a good-faith estimate of your closing costs within three days after you apply for a loan. Some will give you such an estimate even before you apply if you ask for one. Even if it is no guarantee, this written estimate will give you an idea of what kind of fees you can expect to pay, as well as an opportunity to negotiate for a better deal.

"If you're a good credit borrower you can challenge fees if they seem excessive," said Gumbinger, noting that lenders don't control many fees that show up on your statement.

Keep in mind that the good faith estimate doesn't include such out-of-pocket costs as state mortgage taxes, homeowners insurance and property taxes, which you may be expected to pay at the time of closing. In fact, your total tab at closing could be several times more than originally estimated, said Gumbinger.

... but keep the big picture in view

Closing costs are certainly a consideration for both new loans and refinancing. But it's important to not lose sight of what should be your first priority – getting the lowest rate possible.

Indeed, the difference between paying, say, 6 percent and 5.5 percent on a new loan adds up to nearly $23,000 in total interest on a $200,000 30-year loan. If you have to pay a few hundred dollars in closing costs to get that rate, you can rest assured that it is a worthy investment.

It may even be worth it to pay a point or so up front in order to lock in the lowest rates. Let's say that you'll knock your rate down to 5 percent on that $200,000 loan by paying an extra point ($2,000) up front. Considering that you'll cut $62 off your monthly payment and about $22,000 from total interest by going from 6 percent to 5.5 percent, it makes sense as long as you plan to stay in the house long enough to recoup those up front costs.

In fact, if you're short on cash you might even consider rolling the closing costs into your loan, if that is an option. You'll want to consider how much more you'll pay each month as well as in interest over the life of a loan.

If you roll $2,000 in finance costs into a loan with a 5.5 percent rate, for example, you'll pay an extra $11 a month and about $2,000 extra in total interest. In this case you're still better off than if you had not refinanced at all.

Treasury Mulls Plan to Lower Mortgage Rates to 4.5%

Move would help homeowners and buyers with good credit, but would do little for troubled borrowers, experts said.

NEW YORK (CNNMoney.com) -- Lobbyists are pushing the Treasury Department to consider a plan to purchase mortgage-backed securities in the hopes of driving mortgage rates to as low as 4.5%, an industry source said.

Similar to an effort unveiled last week by the Federal Reserve, the proposal calls for Treasury to buy securities backed by 30-year fixed-rate mortgages from Fannie Mae and Freddie Mac. Details on the plan remain sketchy, but an announcement could come as early as next week, the source said.

The increased demand for mortgage-backed securities would prompt mortgage rates to drop. That, in turn, would enable homeowners to refinance into lower-cost loans and make it cheaper for potential homebuyers to get into the market.

Spokeswomen from Treasury and the Federal Housing Finance Agency, which oversees Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), declined to comment.

Last week's Fed move drove mortgage rates down to 5.5%, from 6.06% a week earlier. The Fed said on Nov. 26 that it would purchase up to $500 billion in mortgage-backed securities from Fannie, Freddie and Ginnie Mae, and that it would buy another $100 billion in direct debt issued by those firms.

Mortgage applications more than doubled as a result, the Mortgage Bankers Association said Wednesday. Much of the activity stemmed from homeowners looking to refinance.

Industry groups have been pressuring President-elect Barack Obama and lawmakers to lend a helping hand to the housing market. The National Association of Realtors, for instance, has called for Treasury to buy mortgage-backed securities.

Meanwhile, a coalition of industry groups have banded together under the "Fix Housing First" banner to call for measures including tax credits of up to $22,000 and the creation of a 30-year mortgage, carrying rates as low as 2.99%.

Experts see both pros and cons

Experts, however, had mixed views on how much a new Treasury initiative would help homeowners and the economy. Some felt lower rates would help stabilize the housing market by bringing in new buyers and would give those who refinance more money to spend.

"If it gets people buying homes and spending, it will help reverse the economy and get us out of this recession," said Scott Talbot, senior vice president of the Financial Services Roundtable, which is pushing the measure.

While it takes time to entice new buyers into the market, low rates accelerate that process, said Greg McBride, senior financial analyst at Bankrate.com.

"It is clearly designed to bring buyers into the marketplace and soak the inventory of unsold homes," he said.

But others questioned whether rates would remain low and, even if they did, only a narrow slice of credit-worthy borrowers would benefit.

Rates are already inching up, hitting 5.75% on Wednesday, said Keith Gumbinger, vice president of HSH Associates. Several government attempts to lower mortgage rates this year have failed to have a lasting effect.

Also, the proposal would do little to help troubled borrowers who have fallen behind on their payments, have no equity in their homes or have lost their jobs. With credit standards still high, these homeowners would not be able to refinance and take advantage of the lower rates, he said.

Finally, super-low rates could keep private investors out of the mortgage-backed securities market, forcing the government to remain the primary buyer of such investments, Gumbinger said. Rates have not fallen below 5.37% in more than 45 years.

"I can't imagine there will be a significantly active marketplace of people who want to buy at these low rates," he said.

By Tami Luhby, CNNMoney.com senior writer

Last Updated: December 4, 2008: 7:52 AM ET